MoneyGram Claims Bank Status in Tax Dispute
The IRS and MoneyGram are involved in a tax dispute that revolves around the definition of the word bank. While MoneyGram agrees that the word bank is not part of its name, it should be entitled to tax deductions available to banks because it performs some of the same functions as banks and is regulated in much the same manner in almost 40 states. The dispute has plenty of implications for other financial institutions as well, especially those affected by the asset devaluation of 2008.
You would think the IRS had enough issues on their plate after abusing their power and acting like America is a banana republic by going after people that only want a more simplified tax code. Apparently that is not the case.
MoneyGram, when filing its returns, claimed $900 million as ordinary losses after it sold mortgage backed securities at a loss after 2008. This booking of worthless securities is normally permitted only to banks as they must hold assets against loans. Since the IRS felt that MoneyGram was a service provider that enabled money transfers but was not a bank, it disallowed this deduction.
However, MoneyGram has appealed this decision as it is required to hold the mortgage backed securities in much the same manner as banks and is regulated by the same authorities in 40 states. If MoneyGram succeeds in its appeal the case could have significant implications for other financial institutions that have booked losses in mortgage backed securities.
Complexity of Tax Laws
The tax laws are complex as federal, state, and local governments try to balance the twin needs of making sure Americans pay the right amount of taxes while not attacking a family or a business for making a simple mistake in a tax system that is highly complicated. To this end, they enforce tax laws and also provide for incentives and exemptions based on the laws passed by Congress.
Any business or individual that wants to comply with the tax laws but also reduce their effective tax rate must consult with an experienced tax lawyer who can study their specific requirements and circumstances and suggest the best way of lower the amount paid as taxes.
There are some incentives for investors and businesses so you can simply lower your effective tax rate by consulting with a competent tax lawyer and restructuring the business or investments. For instance, some states provide incentives and exemptions for investments from specific industries (see the states ran by conservatives). By simply locating your new investments in such states or investing in those industries, you will be able to take advantage of the lower taxes applicable. This can increase profits and ensure a surplus for further investments.
Similarly, individual investors too should consult with a tax lawyer who can assess your investment needs, income flows, and other requirements and suggest investment avenues and restructuring of the portfolio to help reduce the tax burden. Depending on your specific circumstances, the number of dependents, age, and risk appetite, the tax lawyer will suggest suitable investment vehicles such as pension funds, trust funds, and REITs, to help reduce the effective tax rate.
This restructuring of your portfolio will ensure that you can pay a lower amount as a tax without having to break any of the complex and myriad of tax laws in the country. The tax lawyer will also be available to help you argue the case if the IRS disputes your tax filing and submission.