Gingrich evades Medicare taxesis using (updated)

Newt Gingrich used loopholes -- a type successfully closed when the IRS attacks them -- to avoid paying Medicare taxes.

Janet Novack reports in Forbes:

Newt Gingrich avoided tens of thousands of dollars in Medicare payroll taxes in 2010 by using a technique the Internal Revenue Service has consistently and successfully attacked.  Republican Presidential candidate Gingrich and his wife, Callista, treated only $444,327 of what they got from Gingrich Holdings. Inc. and Gingrich Productions as compensation to them, while reporting a whopping $2.4 million of their earnings from these corporations as profits or dividends. Medicare taxes are levied at a rate of 2.9% on an unlimited amount of compensation and self-employment income (say, from a consulting contract, speeches or a book) but not on profits from a business.

"It appears that he is not paying his fair share of Medicare tax,'' Robert E. McKenzie, a partner in the Chicago law firm of Arnstein & Lehr LLP concluded, in an email to Forbes, after reviewing Gingrich's 2010 tax return. McKenzie, a past chairman of the Employment Tax Committee of the American Bar Association Tax Section and a member of the IRS' Advisory Council, added:  "There are a multitude of cases where the IRS has successfully challenged the improper tax strategy of this candidate and his accountants."

Former Democratic Senator and Vice-Presidential candidate John Edwards used the same trick to skip paying a lot of Medicare taxes. Apparently, not the only behavior that Edwards and Gingrich have both adopted as their modus operandi.

How would seniors -- had they known about this tax dodge -- treated Gingrich in South Carolina? Will Romney's campaign have enough time to inform Florida voters? How does this square with Gingrich's so-called  straight talk that so many people seem enamored with?

Sadly, older people are often preyed upon by con men.

Update from Ed Lasky:

Reader James Krewson  questioned my use of the term evasion. I used the term "evasion" to describe Newt Gingrich's tax dodge that allowed him to avoid paying a large amount of Medicare taxes.  I did so because this is a technique that the IRS routinely disallowed when they have detected is use. The IRS did so when former Senator John Edwards tried the same method. People are calling for Newt Gingrich's taxes to be audited precisely because this strategy came to light.

Many tax lawyers and accountants are probably familiar with this dodge and hope that the returns are not audited, given the low percentage of returns that are audited. I consider this to be immoral and unprofessional. Medicare is facing fiscal problems given our rapidly aging population. These types of strategies are available to the wealthy while other taxpayers are not able to take advantage of them because they lack the ability to hire experts to find these loopholes.

However, I regret using the term "evasion" if it was perceived to be an accusation that he was breaking the law. I make no such allegation.