Accounting News


Tuesday, November 29, 2011
Tax Changes Likely to Cause Confusion

The 2008 Emergency Economic Stabilization Act (commonly referred to as TARP) set out new rules for cost-basis reporting. The changes are in three phases with the first starting on 2011 tax filing. Broker-dealers must now send a 1099-B to every client and the IRS for all transactions purchased after January 1, 2011. The form has details on the purchase date, cost basis, holding period, whether it is covered, and any disallowed losses.

Since this is a new form there will be a tremendous amount of confusion for investors. Brokers are gearing up for a rash of questions. Charles Schwab has already written a paper about the new form. The hope is to help investors navigate the new rules.

The first phase sets the default method for calculating cost-basis as first in-first out. The investment can set up the accounting with an alternative method at purchase but it can not be altered at the time of the sale. This will require advisers and investors to consider their tax strategy at the time of purchase.

Next year in phase two, brokers must report cost-basis information for all dividend investment and mutual funds purchased after January 1, 2012. The third phase begins on January 1, 2013 and required cost-basis reporting for fixed income and options investments.

If you have any questions on the new forms you should contact your accountant or broker. The changes are significant and you will need to consider the tax implications when new investments are made.

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Accounting News


Wednesday, November 23, 2011
IRS Certification in Full Swing

The IRS has sent out 21,000 letter to tax preparers that they have identified as having compliance problems. They plan to visit the offices of 2,100 tax preparers who have more serious compliance issues. They are being notified because of traits of the Schedules A,C or E they submitted last year according to the IRS.

As part of the compliance the annual competency test will begin next week. It is a 120 multiple-choice and true-false test. It is timed at two and a half hours. The cost is $116. The test can be take multiple times if you do not receive a passing grade. The test is not required for CPAs, EAs and attorneys because of their existing professional credentials. The same exemption is extended to tax preparers in firms with at least 80% ownership by CPAs, EAs and attorneys.

Accounting News


Thursday, November 17, 2011
Congress Approves Tax Changes

The House of Representatives have approved HR 674 concerning taxes. The bill makes the following changes to the tax code.

  • Repeal of the 3% withholding requirement for government contractors. This was enacted as part of the Tax Increase Prevention and Reconciliation Act of 2005.
  • It creates tax credits for employers that hire military veterans after the date the law is enacted.
  • It allow the IRS to impose a levy on paying vendors of the federal government if they have unpaid federal taxes. The levy can be up to 100%.
  • The Treasury Department is to conduct a survey of tax compliance by government vendors.
  • It changes the definition of gross income for health care benefits as part of the Patient Protection and Affordable Care Act.
The change in the withholding requirement was heavily  lobbied for by the AICPA. The bill now moves on to the president for signature into law.

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Accounting News


Tuesday, November 15, 2011
Revised Revenue Standards Issued

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have issued a revised requirement for recognizing revenue. The revision comes after receiving 1,000 comments from the original proposal. 


The goal is to recognize revenue when the company transfers the promised goods or performs the services based on a contract. The proposal also outlines how to recognize revenue when the goods or services are performed over a period of time. It also allows the company to expense the costs of winning a contract. 


The total proposal is 226 pages long but provides over two dozen examples of the new standards. They are now accepting comments until March 13 before they issue the final ruling.

Accounting News


Friday, November 11, 2011
IRS Ruling on Bonuses

The IRS has issued a new ruling for deducting bonuses paid to employees. The ruling affects businesses using an accrual method. The bonus pool can be deducted even if it has not been determined who will get the bonus. This ruling will be especially helpful to financial firms that pay bonuses at the end of the fiscal year based on calender years. Full ruling.

Accounting News


Thursday, November 10, 2011
Is It Getting Harder to Find Fraud?

Every public company must issue financial statements. This makes the market more efficient by allowing investors to make informed decisions. So a tremendous amount of capital relies on accurate reports. A CPA firm is charged with auditing the financials for accuracy. Forbes posed the question of whether the job is getting harder.

On potential place of fraud is fake invoices. This would show false revenue on the balance sheet. Through a process called confirmation the CPA is charged with checking that the product or service was performed, the invoice is accurate, and the check cleared the bank. It is impossible to check every vendor so they do a sample.

The problem is that the internet makes it easier to set up bogus companies. For very little money a website can be set up and a call forwarded to a call center. The CPA is unlikely to detect that it is just fraud. Which gets back to the old problem, auditors can only do so much when the the management is out to lie to them.

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Accounting News


Tuesday, November 8, 2011
Business is Growing for Accountants

Is the accounting sector starting to grow again? Yes, says Allan Kotlin. In a speech to the Thomson Reuters Users’ Conference for Professional Tax & Accounting Firms the CEO of the Koltin Consulting Group says that things are trending up. He doesn't see the halcyon days of 2007 but it is much better than it was in 2008. He believes that one of every seven businesses are not happy with their accounting firm.

There is always business for good accountants who are out their hustling. No matter how good the times are, and accountant, or any business for that matter, that sits around waiting for someone to come in their door is in for disappointment. If you are an accountant and want to grow your practice then the Accounting Aisle can help. We put you in contact with the fourteen percent of business that are actively looking for an accountant.

Accounting News


Friday, November 4, 2011
Where is Our Virtual Close?

The introduction of better financial systems was supposed to bring about the pinnacle of the finance profession.What CFO wouldn't want faster access to financial statements.This leads to faster and better decisions. The key to achieving this was taking tasks away from people and having them done in software. So why hasn't it happened yet?

According to CFO magazine the increased regulation from SOX and other regulations that have been introduced. Accounting departments dropped the focus on moving forward and spent all their time trying to keep in compliance with new laws.

I think the virtual close is more of a journey than a destination. More and more functions can now be managed by computers. But the exceptions will always bounce out to an accountant. It is like the paperless office. --we are on our way but it is going to be many more years before we are truly where we want to be.

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Accounting News


Wednesday, November 2, 2011
IRS Improves Fraud Detection

The IRS has dramatically improved their detection of fraudulent refunds according to a report from the Treasury Inspector General for Tax Administration. They identified 775.723 fraudulent refunds last year. That represents a 171% increase over the prior year. This is $4.4 billion saved from going to fraud. On source of increase scrutiny were tax returns filed by prisoners. These have a higher rate of fraud than other tax filers. Inspector General J. Russell George praised the IRS for their improved performance.

This report covers fraudulent filing. It did not cover mistakes or errors. It is a good sign that the IRS can now automatically find a large amount of fraud. There will never be enough resources to find all the fraud with just audits.

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