Monday, October 31, 2011
Increased Fines for Tax Preparers
Hidden in the trade deal with South Korea that was passed last weak were some surprises for tax preparers
. The penalty for failing to exercise "due diligence" when claiming Earned Income Tax Credits for a client was raised from $100 to $500. The penalty can be enforced every time the preparer fails to perform the "due diligence."
There is little doubt that there is a great deal of fraud associated with the Earned Income Tax Credit. But I think the problem is with any refundable credit. If the real goal is to eliminate fraud they should not be refundable. It seems strange that you could have negative taxes.
Additionally, there are provisions that increase the estimated taxes owed by companies with assets of $1 billion or higher during the third calendar quarter of 2012.
Wednesday, October 26, 2011
Hong Kong CPAs
Yesterday we told you how to verify the credentials of your accountant. Today you can also look to Hong Kong for you next CPA. The U.S. International Qualifications Appraisal Board and the Hong Kong Institute of Certified Public Accountants have announced
a five year deal for reciprocity. The agreements provides mutual recognition of credentials. However, the deal is not binding for the 55 state CPA jurisdictions. This is merely a recommendation for adoption.
Labels: CPA, international
Tuesday, October 25, 2011
Verify Your CPA
The National Association of State Boards of Accountancy (NASBA) has made it much easier to verify the credentials of a CPA
. They launched a new website called CPAVerify
. It collects data from 22 states and allow the public to check the credentials of the CPAs in that state. They plan to add more states as the databases become public.
Labels: CPA, NASBA
Friday, October 21, 2011
IRS Issues New Tax Tables
The inflation adjustment for income tax tables and tax credits has been issued by the IRS
. The inflation goes into effect for the 2012 tax year. The new tax table for married filing jointly is now:
Less than $17,400 -- 10% of taxable income
$17,400-$70,700 -- $1,740 plus 15% over $17,400
$70,700-$142,700 -- $9,735 plus 25% over $70,700
$142,700-$217,450 -- $27,735 plus 28% over 142,700
$217,450-$388,350 -- $48,665 plus 33% over $217,450
$388,350+ -- $105,062 plus 35% over 388,350
The increases were greater this year than last when inflation was significantly lower. The IRS also announced new limits
for 401k contributions. The new level is $17,000, up from $16,500.
Labels: tax tables
Wednesday, October 19, 2011
Clarity Project Issues Report
For the last seven years, the AICPA Auditing Standards has worked on a project to clarify Statements on Auditing Standards. They have finally issued new rulings
that should bring some clarity to audits. This is the first overhaul of of GAAP auditing standards since 1972. The new rulings go into effect for periods ending after December 14, 2012.
The project is a completer overhaul but wasn't charged with changing or creating requirements. It was supposed to clarify the existing rules to make is more consistent and simple. However, it will require significant learning from auditors
Labels: audit, audit standard
Tuesday, October 18, 2011
DOD Looks to Improve Accounting
The Department of Defense has vowed to clean up their accounting systems. With an annual budget of $670 billion they are notorious for lack on fiscal control. They have a project underway for a new accounting system but it won't be finished until 2017 and may cost an additional one billion dollars. That is assuming they don't have any more cost overruns or delay. And to expect that is a pipe dream.
In a test audit of the Marine Corps. of just $4 billion in war spending ended very badly. Two billion could not be verified and more was misreported. The Army has spent four billion over the last 15 years on a system call the Global Combat Support System. It was designed to replace outdated accounting systems but is still yet to go online.
It is hard to say if the DOD needs more or less money when it can't account for its current budget. Lets hope that the congressional investigations underway bring some semblance of control to their accounting.
Friday, October 14, 2011
Late Tax Changes Cause Problems
Congress can change the tax code but moving too fast will inevitably lead to problems. In 2008 after the slowdown in the housing market, Congress passed the Homebuyer Credit to stimulate sales. The legislation provided a credit for buying a home in 2009. It was subsequently extended to 2010. The IRS had trouble catching up to the changing laws and tax filers made a significant number of mistakes when claiming the credit.
As a result 5.2 million people incorrectly claimed the credit. Those people were notified that they would have to repay the money. Along with the correct notices, almost twenty eight thousand people were incorrectly notified that they had to return the credit. Another sixty one thousand people should have been notified and were not. These numbers were calculated by the Treasury Inspector General for Tax Administration. [report
To always get the best advice for you taxes talk to your accountant
Wednesday, October 12, 2011
Companies Cash Flow Up
A recent report by the Georgia Tech Financial Analysis Lab shows corporations saw an increase in revenue and cash flow in the second quarter. The report is a sample of 3,000 publicly traded companies in 44 industries. The data is taken from their financial statements
Revenue was up by 15% and cash flow was up 4%. This data goes against the threat of a double dip recession. There was an increase in inventory which suggest the companies expected growing customer demand.
Monday, October 10, 2011
New Tax Holiday Bill
A new bill
has been introduced that would provide a tax break for corporations that repatriate their foreign earnings.The legislation is sponsored by John McCain of Arizona and Kay Hagan of North Carolina. It is estimated that $1 trillion of earning from the subsidiaries of US multinationals could be taxed. The rate for corporations that take part in the program would be 8.75%. This is far less than the current rate for corporate income of 35%. If the company increased their domestic payroll they can bring the rate down even further to 5.25%.
The Obama Administration is not so keen on the idea. They cite the American Job Creation Act of 2004 that aimed to do the same thing. However, most of the repatriated money was only used to pay shareholders and not add to their payrolls.
Thursday, October 6, 2011
IRS to Fine Paper Filers?
The IRS requires all tax prepares that file more than 100 returns a year to do so electronically. In 2012 the requirement covers any preparer that files 10 returns. However, there are no penalties if the preparer fails to do so. The GAO is recommending
that the Tax Code be amended to allow the IRS to start issuing penalties. They currently can asses fines for failing to sign tax returns or provide their Prepaper Tax Identification Number.
One hurdle for tax preparers is that not all forms are available. Lets hope they continue to make all forms available for the electronic filer.
Monday, October 3, 2011
ExpressTax is Closing
H&R Block has announced
that it is going to stop service under the ExpressTax brand. The brand focused on early filers that desired quick refunds. There are 269 ExpressTax franchise offices. Some offices will join the main H&R Block brand. The move is in line with the announcement that they were halting thier refund anticipation loans for the 2011 tax season.
The move will cost the company a pretax charge of $0.02 to $0.03 per share.