PwC Denies Hacker Theft of Romney Tax Returns

BY MICHAEL COHN, ACCOUNTING TODAY

PricewaterhouseCoopers said it is working with the U.S. Secret Service after allegations that the tax returns of client Mitt Romney were stolen.

“We are aware of the allegations that have been made regarding improper access to our systems,” said a statement forwarded by PwC spokesperson Tanja Sullivan. “We are working closely with the United States Secret Service, and at this time there is no evidence that our systems have been compromised or that there was any unauthorized access to the data in question.”

The tax returns of the Republican presidential candidate were reportedly stolen from a PwC office in Franklin, Tenn. The hacker sent anonymous messages to PwC, as well as Romney’s campaign offices demanding a ransom of $1 million in a difficult-to-trace online currency known as Bitcoins for the tax returns, according to the Associated Press. He also reportedly sent packages to local Democratic and Republican campaign offices with a thumb drive containing some of the documents. In addition, he posted a message on a Web site popular with hackers known as Pastebin threatening to disclose the tax returns. Romney has refused to release any tax returns prior to his 2010 taxes, despite pressure from the Obama campaign. READ MORE

Slow US Hiring May Spur Fed

By Conor Dougherty and Damian Paletta

The Wall Street Journal

U.S. job growth slowed in August, signaling a stalling economy that could mute any post-convention momentum for President Barack Obama and spur the Federal Reserve to take further steps to stimulate the economy, according to this afternoon's Wall Street Journal. 

The Labor Department employment report, which draws more than its usual scrutiny as elections approach, said the U.S. added a seasonally adjusted 96,000 jobs last month. That is down from the 141,000 added in July and too few to make headway in putting the nation's 12.5 million unemployed workers back on the job.

The unemployment rate ticked down to 8.1%, from 8.3% in July, but for the wrong reasons. The jobless rate, based on a separate survey from the main job tally, fell as people gave up searching and left the workforce, not because they found positions. READ MORE

AICPA Sees Widespread Problem in Erroneous IRS Letters

BY MICHAEL COHN, ACCOUNTING TODAY

The American Institute of CPAs has written to Internal Revenue Service Commissioner Doug Shulman outlining its concerns with what it sees as a “widespread problem affecting numerous taxpayers”: erroneous letters from the IRS to taxpayers filing foreign trust forms.

In a letter from AICPA Tax Executive Committee chair Patricia Thompson, the Institute urged the IRS to investigate to determine the source of the processing problem so it would stop sending out the erroneous letters. The AICPA also recommended that the IRS should consider issuing an announcement that such erroneous letters do not require a response.

“The letters are inconveniencing taxpayers and causing them to incur unnecessary professional fees when practitioners must respond to the IRS explaining why the IRS letters are incorrect and request an abatement of the penalties,” the AICPA said in letter to the IRS on Tuesday.

The letters with erroneous conclusions are being received by taxpayers who filed Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, for 2010 and earlier years.

The AICPA letter described six specific errors the IRS letters claim taxpayers have made, including filing Form 3520 late when it was actually filed on time.

IRS Streamlines Procedures for Nonresident Taxpayers

BY MICHAEL COHN

The Internal Revenue Service has issued new procedures to help nonresident U.S. taxpayers, including dual Canadian citizens, comply with U.S. tax laws even if they have previously undeclared foreign bank accounts.

The new rules, which were announced last Friday, eliminate civil penalties and make life easier for taxpayers who follow the IRS’s streamlined disclosure process. The program also provides retroactive elections for certain retirement plans and adds relief for Canadian citizens in the U.S.

The streamlined procedure is designed for taxpayers who present what the IRS considers to be a low compliance risk. All submissions will be reviewed, but the intensity of review will vary according to the level of compliance risk presented by the submission. For those taxpayers who present a low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue followup actions. READ MORE

IRS Provide Relief to Isaac Victims

BY JEFF STIMPSON, ACCOUNTING TODAY

Following recent disaster declarations for individual assistance issued by the Federal Emergency Management Agency, the IRS announced that affected taxpayers in Louisiana and Mississippi will receive tax relief. Other locations may be added in coming days based on additional damage assessments by FEMA. 

So far, IRS filing and payment relief applies to Ascension, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, St. Bernard, St. Charles, St. John the Baptist and St. Tammany Parishes in Louisiana, and Hancock, Harrison, Jackson and Pearl counties in Mississippi. 

The tax relief postpones various tax filing and payment deadlines that occurred on or after August 26. Affected individuals and businesses will have until Jan. 11, 2013, to file these returns and pay any taxes due. This includes corporations and businesses that previously obtained an extension until Sept. 17, 2012, to file their 2011 returns, and individuals and businesses that received a similar extension until October 15. It also includes the estimated tax payment for the third quarter of 2012, normally due September 17.

The IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply.

The IRS is also waiving failure-to-deposit penalties for federal employment and excise tax deposits normally due on or after August 26 and before September 10, if the deposits are made by Sept. 10, 2012.

Details on available relief, including information on how to claim a disaster loss by amending a prior-year tax return, can be found on the IRS’s disaster relief page and the disaster recovery page.

The IRS has also issued general taxpayer advice for disaster planning in the new hurricane season.

IRS New Employee Training Criticized

BY MICHAEL COHN, ACCOUNTING TODAY

The experience for new employees at the Internal Revenue Service is not always positive, even though the IRS has taken steps to improve the onboarding process, according to a new report.

The report, by the Treasury Inspector General for Tax Administration, came in response to a request from the IRS for a review of its year-long “onboarding process.” TIGTA’s overall objective was to determine whether the IRS’s onboarding program was appropriately integrating new employees for positions in mission-critical occupations into their workforce to become productive employees as quickly as possible.

While the IRS has taken steps to make the new employee experience positive, managers whom TIGTA interviewed were not following best practices identified in the comprehensive guidance the IRS developed for them. As a result, some best practices that would help new employees feel welcome and help them become more productive were not fully implemented. For example, one-quarter of the new employees TIGTA contacted were not assigned a coach or mentor when they arrived, and approximately 29 percent stated that the onboarding experience did not accelerate their ability to reach full productivity. Read more

Ryan Paid Federal Tax Rate of 20% in 2011 on Income of $323,416

BY BRIAN FALER

BLOOMBERG

(Bloomberg) Republican vice presidential candidate Paul Ryan paid effective federal tax rates of 20 percent in 2011 and 15.9 percent in 2010, tax returns released Friday night show.

Paul Ryan

In 2011, Ryan and his wife, Janna, paid $64,764 in federal taxes on $323,416 of adjusted gross income. In 2010, the Ryans paid $34,233 in taxes on $215,417 of adjusted gross income.

Over the past two years, they have donated a total of about $15,500 to charities, including the Boy Scouts of America and St. John Vianney Parish in Janesville, Wis., their hometown.
Presumed Republican presidential nominee Mitt Romney announced Ryan, a Wisconsin congressman, as his running mate on Aug. 11. The Ryan returns were released by Romney’s campaign.

Romney so far has released only his 2010 returns, which showed he and his wife Ann paid a 13.9 percent effective federal tax rate on more than $21 million in income.

The tax rate paid by the Ryans topped Romney’s for that year, in part because a much larger share of income for the Ryans came from wages, rather than investments taxed at lower rates. The top marginal income tax rate is 35 percent while capital gains are taxed at 15 percent.

In 2011, Ryan reported $153,359 in wages, $33,153 in capital gains and $29,987 in dividends. Another $116,043 came from “rental real estate, royalties, partnerships, S corporations, trusts, etc.” Among the itemized deductions the Ryans claimed in 2011 was $16,143 in mortgage interest.

‘Several’ Years
The previous year, Ryan reported $153,741 in wages as well as $26,052 in dividends and $3,135 in capital gains. Another $39,013 came from “rental real estate, royalties, partnerships, S corporations, trusts, etc.”

Though Ryan said he gave Romney “several” years of tax returns during his vice-presidential vetting process, the filings released Friday night matched the number of returns Romney has said he is willing to make public. The former Massachusetts governor has pledged to release his 2011 return when it is completed, while rejecting calls from Democrats and some Republicans that he release additional years of returns.

Under pressure from Democrats and some Republicans to release more information about his personal finances, Romney said on Aug. 16 that he has reviewed his returns “and over the past 10 years, I never paid less than 13 percent.” He also said that “if you add, in addition, the amount that goes to charity, why, the number gets well above 20 percent.”

Obama Offer
President Barack Obama’s re-election campaign earlier Friday called on Romney to release at least five years of returns, saying it would let the issue rest if he did so.

Romney’s campaign manager, Matt Rhoades, rebuffed the offer, responding that “it is clear that President Obama wants nothing more than to talk about Governor Romney’s tax returns instead of the issues that matter to voters, like putting Americans back to work, fixing the economy and reining in spending.”

The average household paid 17.4 percent in all federal taxes in 2009, according to the nonpartisan Congressional Budget Office. That figure includes all federal levies, such as the Social Security payroll tax.

Obama and his wife, Michelle, paid 20.5 percent in federal taxes on $789,674 in adjusted gross income for 2011.

Vice President Joe Biden and his wife, Jill, reported paying $87,900 in federal taxes for 2011 on $379,035 in adjusted gross income for a 23.2 percent rate.

 Accounting Today

IRS Claims Flavor Flav Owes Nearly $1 Million in Back Taxes

BY MICHAEL COHN

Rap singer and reality TV star Flavor Flav reportedly owes $906,250.56 in unpaid taxes to the Internal Revenue Service.

The IRS has filed liens for unpaid taxes dating back to 2004 against the founding member of the hip-hop group Public Enemy. Flav owes unpaid taxes of $52,243.47 for 2004, $303,035.93 for 2005 and $550,971.16 for 2006, according to TMZ.

The 53-year-old rapper, whose real name is William Jonathan Drayton, Jr., starred in several reality TV series on VH1, including “The Surreal Life” and “Strange Love,” which chronicled his budding romance with actress Brigitte Nielsen, and “Flavor of Love,” in which he searched for romance after his breakup with Nielsen. He is known for his flamboyant outfits, including a gigantic clock that he often wears as a necklace when performing.

Flav has been in legal trouble before, including jail time for robbery and burglary, assaulting his girlfriend, shooting at a neighbor, drug charges, and driving with a suspended license.

Accounting Today 

Ex-IRS Agent Pleads Guilty to Ordering Hit Job on Tax Clients

BY MICHAEL COHN

A former Internal Revenue Service revenue agent and tax preparer has pleaded guilty to charges that he tried to hire a hit man to kill four of his former clients who were scheduled to testify against him in a tax fraud case.

Steven Martinez pleaded guilty August 10 in a federal court in San Diego to criminal charges including murder-for-hire, witness tampering involving attempted murder, solicitation of a crime of violence, mail fraud, filing false tax returns, Social Security fraud, aggravated identity theft, and money laundering. Martinez pled guilty to a total of 12 counts in the superseding indictment.

As part of his guilty plea, Martinez admitted that in late February 2012, he solicited a third party to murder four former clients who were victims of his fraud and were slated to testify against him in his pending criminal tax case. Martinez reportedly directed his limousine driver, Norman Russell Thellmann, to deliver cash to a hit man who had been promised $100,000 to carry out the hit job.

The purported hit man instead contacted the San Diego division of the FBI on Feb. 28 to report the murder-for-hire plot by Martinez. According to the complaint, a subsequent meeting between the third party and Martinez was recorded and videotaped by the FBI.

According to the complaint, Martinez told the would-be assassin “he could make him rich for the rest of his life, $100,000 cash, if he eliminated the lady in Rancho Santa Fe and the lady in La Jolla.” The third party said Martinez “suggested that the former employee use two different pistols for the murders and that he acquire a silencer.”

Martinez admitted in court that he tried to prevent the former clients’ testimony by offering the third party $100,000 to murder them. He admitted he provided the hit man with four written packets of detailed information about the former clients, including photos of the soon-to-be murder victims, their homes and personal information. Martinez admitted that once the murders took place, he would pay the perpetrator $40,000 in cash, followed by the remaining $60,000 in cash within 72 hours of the murders.

In addition, Martinez admitted that he filed false tax returns and defrauded his clients by stealing over $11 million in tax payments. Martinez admitted that he presented his clients with completed tax returns indicating that they owed a significant amount of tax. He requested that his clients write checks payable for the amount of taxes due and owing to an alleged client trust account, instead of directly to the IRS or the California Franchise Tax Board.

Martinez also convinced the same clients to write checks during the tax year for estimated tax payments to the same alleged client trust accounts. Instead of depositing the checks into a true trust account, Martinez admitted that he took the checks and deposited them into several nominee bank accounts. In an attempt to conceal his fraud, Martinez admitted that he filed a different set of false tax returns indicating that his clients owed little or no income tax. Martinez admitted that he converted approximately $11 million in stolen taxpayer funds for his own personal benefit, and used them to make home improvements, purchase real estate, purchase a beach home in Mexico, pay for the use of a private airplane, make investments of more than $2 million in other entities, and make payments of more than $2 million for his personal use credit cards and loans.

As part of his fraudulent tax scheme, Martinez admitted that he committed Social Security fraud and aggravated identity theft by using the Social Security numbers of his clients without authorization when he filed the false tax returns with the IRS. Martinez admitted he committed mail fraud by mailing the false tax returns to the IRS. Martinez also admitted that he laundered approximately $2 million through nominee bank accounts for his own business and personal use. Finally, Martinez admitted that he knowingly and intentionally filed false personal income tax returns for tax years 2004, 2005, 2006 and 2007.

This case is being investigated by Special Agents with the IRS’s Criminal Investigation division, and the Federal Bureau of Investigation. A sentencing hearing has been scheduled for Nov. 30.

From Accounting Today

Parents Get Failing Grade...Again!

BY KEN TYSIAC

Many children aren’t learning much about money from their parents, a new survey shows.

Three in 10 parents never talk to their children about money or have had just one big talk with their children on the subject, according to a U.S. telephone survey conducted for the AICPA by Harris Interactive.

On average, children are 10 years old when their mother or father has their first conversation with them about money, and mothers are more likely to talk with children about money at an earlier age than fathers, the survey showed. Just 13% of parents surveyed talk daily with their children about financial matters.

Sixty-seven percent of parents surveyed strongly agree that they know enough about personal finance to teach their children good habits. Yet parents participating in the survey were more likely to have talked to their children about other important topics, including:

• The importance of good manners (95%).
• The benefits of good eating habits (87%).
• The importance of getting good grades (87%).
• The dangers of drugs and alcohol (84%).
• The risks of smoking (82%)

Read More in the Journal of Accountancy

Tax Strategy and the Health Care Law

Odds have now turned against those hoping that the health care law passed in 2010 will "just go away." The Supreme Court has spoken and legislative repeal seems more remote. On the other hand, President Obama has now indicated a willingness to improve the law and perhaps some of the more controversial provisions will work themselves out ... eventually.
The Treasury, Internal Revenue Service and Department of Health and Human Services also have considerable administrative flexibility in how they interpret and apply many provisions. This may be especially true following the Supreme Court's Mayo decision, which appears to allow agencies more leeway in interpreting statutory requirements. That said, some health care law provisions are already in place and others are set to start in less than five months, beginning in 2013. When faced with these realities, dealing with the law as it now exists, and within the parameters of the limited guidance already released, appears to be an appropriate course of action. Read More in Accounting Today.

Deloitte Overlooked Bank’s Transactions with Iran

Deloitte allegedly provided a bank accused of doing business with the Iranian government with a “watered down” independent report that omitted any mention of the suspicious transactions. Standard Chartered Bank is under investigation by the New York State Department of Financial Services, which accused the London-based bank of scheming with the Iranian government and hiding from regulators roughly 60,000 secret transactions, totaling at least $250 billion, while the bank reaped hundreds of millions of dollars in fees. Read more in Accounting Today.

Corporate Governance Best Practices 10 Years After SOX

BY KEN TYSIAC

Journal of Accountancy

You could hardly go to a Washington hearing related to an accounting or auditing issue this spring without someone singing the praises of the Sarbanes-Oxley Act of 2002 (SOX). At a House subcommittee meeting on accounting and auditing oversight, House Financial Services Committee Chairman Spencer Bachus, R-Ala., said SOX has been successful in preventing some of the challenges it was created to address. At the PCAOB hearings on auditor independence, objectivity, and professional skepticism, experts including audit committee members, audit firm chairmen, and educators talked about the positive effects SOX has had in strengthening business oversight.

"There are a whole host of reforms that Sarbanes-Oxley has put into play that I think have definitely improved audit quality," Center for Audit Quality Executive Director Cindy Fornelli said in a telephone interview.

Read more

Is a Reverse Mortgage Right for You?

BY NICHOLAS C. LYNCH, PH.D. AND CHARLES R. PRYOR, PH.D.
Journal of Accountancy

The recent recession left no age group untouched, but baby boomers were hit especially hard. High unemployment and an uncertain stock market have caused older Americans to realize that their retirement funds might not support their desired lifestyle. Many seniors are facing foreclosure, while others are unable to meet their basic needs, such as paying medical, energy, and other daily living expenses. A reverse mortgage can enable homeowners who are at least 62 years old and have sufficient equity in their homes to receive enough cash to live more comfortably throughout retirement.

A reverse mortgage is a loan against home equity that requires no repayment until the home is sold or the last surviving borrower dies or no longer occupies it as a principal residence. Read more

Penn State Hammered by NCAA - NYT

By PETE THAMEL

INDIANAPOLIS — The N.C.A.A. announced significant penalties against Penn State and its football program Monday, including a $60 million fine and a four-year postseason ban, in the wake of the child sexual abuse scandal involving the former assistant coach Jerry Sandusky.
The N.C.A.A. stopped short of shutting down Penn State’s program, but officials insisted that the breadth and significance of the penalties were nearly as debilitating. It is expected to be almost a decade before Penn State will be in a position to attempt to regain its place as one of the sport’s elite programs.

The punishment also included the loss of 10 scholarships per year for the next four years, with a limit of 65 total scholarship players on the roster, as opposed to the typical 85, by the 2014 season. The university must also vacate all of its victories from 1998 to 2011, meaning that Joe Paterno is no longer the major-college career leader in football wins. Read more

Spanish Bond Yields Soar - NYT

MADRID — Spain’s borrowing costs rose to record levels for a third consecutive trading day on Monday on concerns that a deepening recession and the financing problems of its regions would force the government to seek a full-fledged bailout.
Market regulators in Spain and Italy announced bans on stock short-selling, as Spanish turmoil and fresh concerns about Greece’s status in the euro zone sent European stocks down broadly and sharply.

The yield, or interest rate, on 10-year Spanish government bonds was at 7.4 percent in late afternoon trading on Monday, having breached 7 percent last Thursday — a level that many analysts fear could eventually shut Spain out of public markets and force it to seek a Greek-style bailout. Read More

Courts Extend Legal Protection to Small Firms Whose Accounts Were Hacked

By JOE PALAZZOLO

Small-business owners whose bank accounts have been plundered by cyberthieves until recently had no one to blame but themselves. 

But two recent court rulings are giving those business owners new hope that banks which don't cater to their specific security needs may be held liable for funds stolen by hackers who increasingly have focused on attacking small businesses.

Banks typically are responsible for losses when personal accounts are hacked. But state laws uniformly place the burden on commercial clients to show that banks didn't do enough to protect their money. Read more

The Latest News on Tax Fairness - WSJ

By ARI FLEISCHER

If fairness in paying taxes means the amount you pay is based on the amount you make, then the only group in America paying at least a "fair share" is the top 20%—people who make more than $74,000. For everyone else, the tax code is a bargain.

You wouldn't know this from President Obama's rhetoric, but our tax system, according to a recent report by the Congressional Budget Office (CBO), is incredibly progressive. Consider: The top 1% of income earners pay an average federal tax rate of 28.9%. (See the nearby table.) The average federal tax rate on the top 20% is 23.2%. The 20% of taxpayers earning between $50,100 and $73,999 pay an average 15.1%, and so on down the line. The CBO report includes payroll as well as income taxes paid. Read more

Hunting for higher bank yields? Read on...

By RUTH SIMON

Where's the yield?

That is the question frustrated savers are asking these days, as interest rates hit record lows with depressing regularity.

People who need a pool of cash for emergencies or looming expenses usually look to keep it in banks or credit unions, where deposits are protected by the Federal Deposit Insurance Corp. or the National Credit Union Administration. Yet the yields on certificates of deposit, savings accounts and money-market accounts, on average, are the lowest they have been in at least 50 years, according to research firm Market Rates Insight. Read More

WSJ says 2013 will be a very tough year

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By ARTHUR B. LAFFER AND FORD M. SCUDDER

The United States faces an economic collapse thanks to massive tax increases on Jan. 1, and continued deficit spending for years on end.

Keynesians worry about spending cuts and to some extent the expiration of the temporary 2% payroll tax cut. But the looming expiration of the Bush tax rate cuts along with new levies enacted as part of ObamaCare pose the greatest threat.

The breadth of what will hit the country is extraordinary. The top federal rate on personal income will increase to 39.6% from 35%, with an additional 0.9% increase in the payroll tax for Medicare. The highest federal rate on dividends will increase to 43.4% from 15%, and the tax rate on capital gains will increase to 23.8% from 15%. Read More

A CPA's Insights into the Fed's Finances

What’s at Stake? A CPA’s Insights into the Federal Government’s Finances offers guidance for policy makers and the public on how the US government’s financial statements can be used for greater understanding of the nation’s fiscal health.  Gregory Anton, CPA, CGMA, AICPA Chairman of the Board of Directors, offers a non-partisan and clear analysis into why the financial statements provide a different perspective compared to the annual budget.  With this video, the Institute seeks to raise awareness of this distinction, call attention to how and why the financial sustainability of our country is at stake.  The CPA profession calls on both policymakers and the public to engage in a national dialogue to improve our country’s fiscal health.


See the video here

Capitol Hill Standoff Threatens Bush Tax Cuts

It’s only been a year since Congressional Republicans, bent on cutting spending, manufactured a financial crisis by threatening not to raise the debt ceiling. Now, apparently thinking the public has forgotten that debacle, they’re furious that Democrats have figured out a way to turn the tables. Read More

About Your Money: Big Changes Ahead?

There will be some significant potential consequences on the horizon if Congress allows certain existing tax laws to expire on January 1, 2013. With only a few months left to plan, it’s time for CPAs to be aggressive in educating clients about the decisions they may face.
Several tax changes are now set to occur at the beginning of 2013 if Congress does not act. Among them: Read More

WSJ:China's Economic Growth Slows

BEIJING—China's economic growth decelerated to its slowest pace since the global financial crisis, damping hopes that the world's second largest economy will provide much support for the faltering global outlook and prompting expectations that Beijing will make fresh moves to stimulate growth. Read More

Real Estate Bust is History, WSJ Says

Nearly seven years after the housing bubble burst, most indexes of house prices are bending up. "We finally saw some rising home prices," S&P's David Blitzer said a few weeks ago as he reported the first monthly increase in the slow-moving S&P/Case-Shiller house-price data after seven months of declines. Read More

AICPA Survey: Finances Causing Rifts for American Couples

New York (May 4, 2012) — Financial matters are the most common source of discord among American couples, prompting an average of three arguments per month, according to a national telephone survey conducted for the American Institute of CPAs (AICPA) by Harris Interactive. Read More

Global Economic Forecast is Pessimistic

New York (July 10, 2012) – The world’s CEOs, CFOs and senior management accountants have an increasingly negative outlook for the global economy over the next 12 months, according to the CGMA Global Economic Forecast released today by the American Institute of CPAs - Read More

News of Note - Supreme Court Decision On Obamacare

Supreme Court Decision – the New York Times Opinion
The Times called the decision confusing in an OpEd contributed by Richard Epstein, who said “It is not good for the court or the country that the chief justice’s position in such an important case is confused at its core.” Read more

Supreme Court Decision – the Wall Street Journal Opinion
“It's also hard not to notice that people now extolling Justice Roberts for rescuing the court's integrity are largely the same ones who have been impugning it,” the Journal said. Read more

Supreme Court Decision – the Journal of Accountancy
“Roberts concluded that the individual mandate must be construed as imposing a tax on those who do not have health insurance, if such a construction is reasonable, because "every reasonable construction must be resorted to, in order to save a statute from unconstitutionality," Hooper v. California, 155 U.S. 648 (1895).” Read more

So You Think You Have Problems?

The Tax 'Miseducation' of Lauryn Hill
Singer and actress Lauryn Hill, who captured five Grammy awards for her critically acclaimed 1998 album The Miseducation of Lauryn Hill, has been charged with failing to pay taxes on income totaling $1.8 million. Read more

IRS Prescribes Rules for Health Care FSAs
A new IRS ruling (Notice 2012-40) provides guidance on a pending limit for flexible spending accounts (FSAs). Read more

Is Your Business Headed in the Right Direction? Are You Sure?

If you're like most business owners, your days are filled by efforts to make your company successful. Those tasks might be focused on making a great product, generating sales, or building customer relationships. And you might be great at those things. But how great are you at making money? And how well are you managing your resources? Click here to read more.

Questions? Contact us at Neikirk, Mahoney & Smith CPAs.

Recession might have changed U.S. economic-growth patterns

The recession might have brought about a long-term shift in the parts of the U.S. that enjoy economic growth and those that lag far behind, according to a growing body of research. Areas with the most debt at the peak of the boom in 2006 suffered the severest decline in economic activity when the recession hit and are making a slow comeback, studies found.smartbrief.com

Risk with donor pledges

In the white paper Measurement of Fair Value for Certain Transactions of Not-For-Profit Entities, the AICPA’s Financial Reporting Executive Committee (FinREC) provides guidance to not-for-profits on considering risk when determining the fair value of a donor’s unconditional promise to give. Considerations may include:
  Assess the donor’s ability to pay. Check published credit ratings, financial analysis (such as cash flow and ratio analysis) or credit reports.
  Determine the donor’s commitment to honor the promise. Consider the extent of the donor’s involvement with the not-for-profit; the donor’s history of charitable involvement and giving; the donor’s financial circumstances; and the donor’s personal circumstances such as family situation, age and health.
  Study risk factors that affect certain groups of donors. Examples include economic conditions in certain geographical areas or industries.
 Assess the not-for-profit’s prior experience. Consider the extent to which the not-for-profit has enforced previous promises to give.
 Determine whether the underlying asset is held in an irrevocable trust or escrow. This may reduce default risk.
To account for risk, not-for-profits can use the discount rate adjustment (DRA) method or one of two expected present value (EPV) methods.
DRA discounts the projected cash flows by a risk-adjusted rate derived from rates of return for comparable assets or liabilities traded in the market. FinREC’s guidance for determining the discount rate includes:
  If the donor is an individual, consider using unsecured consumer lending rates. These generally are available from published sources such as major financial institutions. FinREC advises using those rates when the credit characteristics of the donor and borrowers of unsecured debt are similar.
  If the donor is a corporation, consider using the yield on its publicly traded debt. Look to the yield on debt issued by the corporation or by a comparable corporation. FinREC advises using that yield when the promise to give is similar to the publicly traded debt. If the donor is a private foundation, FinREC advises using the yield on publicly traded debt, whether issued by the foundation, a comparable foundation or a comparable corporation.
  Whether the donor is an individual or a corporation, consider factors specific to the promise. This information, including the payment terms and risk of the promise, will help assess the extent to which the promise to give is similar to publicly traded debt.
The EPV methods also account for risk:
  With EPV Method 1, discount the risk-adjusted expected cash flows by the risk-free interest rate. This rate may be indicated by the yield to maturity on U.S. Treasurys. The risk-free interest rate is appropriate because all risk is built into the expected cash flows. EPV Method 1 adjusts the expected cash flows for the systematic risk by subtracting a cash risk premium, resulting in a certainty-equivalent cash flow. Challenges in determining an adjustment for systematic risk can make EPV Method 1 impractical.
  With EPV Method 2, discount the expected cash flows by a risk-adjusted rate. This rate is based on the risk-free interest rate, adjusted for general market risk by adding a risk premium. The risk premium is necessary because not all risk is built into the expected cash flows in EPV Method 2. Journal Of Accountancy

Unemployment rate was flat at 8.3% in February

The unemployment rate held steady in February as 227,000 jobs were added to employer payrolls, the Department of Labor announced today. The unemployment rate is at a three-year low of 8.3%.Smart Brief

2012 Tax Notes

44 days left to file tax returns

• IRS issues 2012 automobile depreciation limitations
  The Internal Revenue Service on Friday released the 2012 inflation-adjusted depreciation limits and lease income inclusion amounts for passenger automobiles, trucks and vans. The 2012 tables include amounts for vehicles placed in service in 2012 for which bonus depreciation applies as well as limits for those for which bonus depreciation does not apply.JournalofAccountancy.com

Today's Accounting News from Neikirk, Mahoney & Company

Fed officials aim to assess economic outlook
Officials at the Federal Reserve are not expected to take any new measures to bolster economic growth, but will try to assess the outlook. The central bank has taken a number of steps in recent months to spur growth. The Wall Street Journal 


CFOs point to risk management as a growing area of concern
Risk management has become a growing responsibility for chief financial officers, with more than half of finance executives responding to CFO's Deep Dive Survey saying their risk management responsibility has gone up over the past two years. Two-thirds of CFOs cite customer demand and profitability as one of their biggest areas of concern. Learn how you can strengthen your company's ERM strategy at this AICPA workshop March 29 in New York City. CFO Magazine 


COSO explores six judgment "traps" and how to avoid them
Failing to consider opposing points of view and improperly defining problems are two key traps that lead to poor business judgment, according to a new white paper by the Committee of Sponsoring Organizations of the Treadway Commission. The paper defines six key judgment "traps" and offers advice on how to avoid them, and also outlines a five-step process for decision making. CGMA Magazine 


AIG is set to raise $6 billion from sale of Asian insurance unit
American International Group, the insurance company bailed out by the U.S. government, said it expects to raise $6 billion from the sale of shares in its AIA Group unit, which sells insurance in Asia. AIG said it will use the proceeds to pay off some of its $182.3 billion debt.Bloomberg (3/5), Reuters (3/5)


- The American Institute of CPAs

Payroll tax cut extension breezes through Congress

The House and Senate quickly approved the payroll tax cut bill on Friday, sending the legislation to the White House for the President's signature.

He has already promised to sign the legislation.

Authorities foil planned suicide bombing attack on Capitol building

By Debbie Siegelbaum - 02/17/12 01:36 PM ET

A potential suicide bombing attack of Congress was thwarted Friday when authorities arrested a suspect on his way to the Capitol.

The suspect has been identified as Amine El Khalifi, a 29 year-old illegal immigrant from Morocco residing in Alexandria, Va.

El Khalifi has been charged with attempting to use a weapon of mass destruction against property that is owned and used by the United States, according to a statement Friday from the Department of Justice.

The DOJ noted that the arrest was the culmination of an investigation of the suspect by the FBI, which included undercover agents posing as members of al Qaeda.

“The complaint filed today alleges that Amine El Khalifi sought to blow himself up in the U.S. Capitol Building,” wrote Neil MacBride, U.S. Attorney for the Eastern District of Virginia, in the DOJ statement.  “El Khalifi allegedly believed he was working with al Qaeda and devised the plot, the targets and the methods on his own.”

The explosives and firearm that El Khalifi allegedly sought and attempted to use had been rendered inoperable by law enforcement and posed no threat to the public, the DOJ added.

The arrest near the Capitol was carried out by the FBI and Capitol Police, wrote Capitol Police spokeswoman Sgt. Kimberly Schneider in a statement.

“This arrest was the culmination of a lengthy and extensive operation during which the individual was closely and carefully monitored,” Schneider wrote. “The U.S. Capitol Police was intimately involved in the investigation for the duration of the operation. At no time was the public or Congressional community in any danger.”

The FBI did not immediately respond to requests for comment, but lawmakers reacted swiftly to the news of the arrest.

The ranking member of the Senate’s Homeland Security and Governmental Affairs Committee, Sen. Susan Collins (R-Maine), said she had been in contact with the FBI about the arrest of El Khalifi.

“The brazen nature of this plot — targeting the U.S. Capitol building with the aim of killing innocent people and desecrating a symbol of our democracy — is disturbing,” she said in a statement.

"While we are still learning details, this plot appears to be yet another example of radicalized extremists attempting to attack Americans from within our borders,” Collins added.

Collins noted the sharp escalation in homegrown terrorist plots in recent years, citing a report by The Congressional Research Service that identified 36 arrests in such cases between 2009 and 2012.

"Today's arrest is a reminder that we must redouble our efforts to confront the threat posed by violent Islamist extremism, while making the clear distinction between a major religion followed by millions of law abiding Americans and a twisted ideology,” Collins concluded.

The chairman of the Committee on House Administration echoed the sentiment.

“Today’s incident serves as an important reminder of the need for constant vigilance to protect this nation and its capital from the threat of those who wish to do us harm,” wrote Rep. Dan Lungren (R-Calif.) in a statement following the arrest.

“I applaud the FBI and the United States Capitol Police in their efforts to protect the U.S. Capitol,” he added. “I thank the dedicated men and women in law enforcement in these and other agencies across the country.”

El Khalifi made his initial court appearance at 4:15 p.m. Friday, according to the DOJ. If convicted, he faces a maximum penalty of life in prison. - The Hill