Category Archives: Taxes & Audit

A Simple Tax Proposal to Improve Financial Stability — The Harvard Law School Forum on Corporate Governance

Small business of-interest.  The perspective isn’t what is so unusual in this article — in my opinion, it is the definitions insights and solutions put forth.   What do you think?  Cash management

Excerpt:  It is hard to imagine a financial crisis that is not ultimately caused by creditors who had taken on too much debt. Debt is the root cause of most corporate financial failures and, if a snowball effect sets in, the root cause of financial system failure. Of course, debt also has advantages. Without debt, many privately and socially valuable projects could never be undertaken. Still, it is our current tax system that has pushed our economy to be too levered. Now is the time to address the problem—before it will again be too late.

From a creditor’s perspective, the two key advantages of debt are the tax deductibility of interest payments and the ability of lenders to foreclose on non-performing borrowers (which makes it in their interest to extend credit to begin with). Although both factors contribute greatly to the incentives of the borrower to take on debt, there is one important difference between them: the tax deductibility of debt is not socially valuable.

To explain this issue, let’s abstract away from the beneficial real effects of debt and consider only the tax component

Read full article via A Simple Tax Proposal to Improve Financial Stability — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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Affordable Care Act Changes in 2013

Small business need-to-know —  changes becoming effective in 2013.  Human resources management

Excerpt:  The Affordable Care Act was enacted on March 23, 2010 and includes the following important tax provisions that take effect in 2013.

Read full article via Affordable Care Act Changes in 2013 | Intuit News Central.

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Filed under Human Resources & Payroll, Small Business, Taxes & Audit

Looming “Fiscal Cliff” Speeds Mergers

Small business of-interest and need-to-know.

Excerpt:  With capital gains and dividend tax rates set to rise in 2013 barring congressional action, dealmakers are rushing to close merger and acquisition transactions by year-end. Acquirers, especially those in industries that are rapidly consolidating, say the impending changes to the tax code — the end of some business tax breaks and higher rates on capital gains and dividends — have lit a fire under business owners.

Owners of closely held businesses who would record a large individual gain from a sale, in particular, are eager to sell. And the threat to the U.S. economic outlook from the “fiscal cliff” is adding to the pressure.

Read full article fiscal cliff capital gains rate sellers Buffalo Wild Wings Airgas Waste Connections.  From CFO.com

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IRS: Recordkeeping

The IRS wants to help you with compliance recordkeeping and tax document retention.  They have provided this site with topics, links and information.  It might also be good to bookmark the site for future reference.

Check out topic and links Recordkeeping.  From the IRS

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Filed under Accounting, Bookkeeping, GAAP, IFRS, Taxes & Audit

IRS Payroll Tax: Jenkins Dialogue Diaspora Trust Fund Recovery Penalty

Small business heads up — know your responsibility and consequences.

Excerpt:  The case demonstrates that even those CFOs who do not sign the tax returns themselves may become liable for the signer’s failure or inability to pay taxes. In general, responsible corporate officers and counsel who willfully fail to pay payroll taxes become personally liable for the taxes. While many business owners are stuck paying corporate payroll taxes out of their own pockets, a few also wind up going to jail for their failures to pay

Read full article IRS payroll tax Jenkins Dialogue Diaspora Trust Fund Recovery Penalty.  From CFO.com

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PCAOB: Protecting Investors and the Public Interest — The Harvard Law School Forum on Corporate Governance

Small business of-interest, need-to-know and news-to-watch.   Article gives you a good background and review of PCAOB, its charter and works in progress.  Good information and insights.  Recommended for leadership and accounting management.

  Excerpt:  Since the Public Company Accounting Oversight Board was created 10 years ago by the Sarbanes-Oxley Act, the U.S. system of auditor oversight has been fundamentally reformed to better protect investors and the public interest.

In addition to creating the PCAOB, the Act also vested audit committees with expanded oversight of financial reporting and audit processes.

Initially, the Act was seen as an effort to address problems that appeared to be unique to the U.S., but after numerous financial reporting scandals erupted around the world, the U.S. model of audit regulation was adopted in varying forms in many other countries.

Following the recent financial crisis, we find ourselves in an era with new stresses on financial reporting and auditing around the world, and we are once again evaluating how best to protect investors in this environment.

This is what we are working on at the PCAOB. I would like to tell you about a few “hot topics” related to our core mission of protecting investors through audit oversight, including: ….

Read full article via PCAOB: Protecting Investors and the Public Interest — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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Filed under Accounting, Bookkeeping, GAAP, IFRS, Leadership, Operations & Innovation, Management, Small Business, Taxes & Audit

How Small Charity Projects Can Sidestep Complex Tax Rules

Hey, guys …..  here is a good idea or maybe you already know this one.   Nonprofits

Excerpt:   Even if you have a brilliant idea for a new charity, your altruistic intentions could get derailed by a morass of complicated 501(c)3 tax rules and regulations.

There is an alternative, however. Consider piggybacking onto an existing organization’s infrastructure and tax status, a process known as fiscal sponsorship. This allows you do good work, without the tax hassle of running your own organization.

Read full article via How small charity projects can sidestep complex tax rules | Reuters.

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Worldwide Tax Summaries – Corporate Taxes: PwC

Hey guys, look at this, a reference for answers on taxes in whatever country you are doing business.  Great tool

Excerpt:  Worldwide Tax Summaries – Corporate Taxes 2012/13 is a useful reference tool, to help you manage taxes around the world. It offers quick access to information about corporate tax systems in 152 countries worldwide, in an easily digestible format.

Download reference material via Worldwide Tax Summaries – Corporate taxes: PwC.

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Accounting for Revenue Recognition | PwC

How is your understanding of revenue recognition?  In compliance?   Are you ready for the pending changes that are supposed to make this volume(s) topic easier for all to adopt one standard?   Here are some basic small business need-to-know.

Excerpt:  The accounting for revenue recognition is one of the most important and complex challenges facing companies today. Revenue recognition has been and continues to be one of the top accounting and auditing areas of risk. Failure in internal controls over revenue recognition remains one of the most significant causes of material weakness in internal controls over financial reporting.

Many companies offer multiple solutions to their customers’ needs. Those solutions may involve the delivery or performance of multiple products, services, or rights to use assets, and performance may occur at different points in time or over different periods of time. There are many complex rules for recognizing revenue when contracts / arrangements have more than one revenue generating activity. Further, there is increasing complexity of revenue recognition for software; since many products include embedded software, this complexity can apply to a broad range of industries.

While current rules are detailed and rapidly evolving, additional major changes are on the horizon.

Read full article via Accounting for revenue recognition: PwC.

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Filed under Accounting, Bookkeeping, GAAP, IFRS, Small Business, Taxes & Audit

Transfer Pricing and IP Location: Research Reveals the Real Motivators – Knowledge@Australian School of Business

Another good read this morning addressing the today’s environment changes and the search for best practices in this new world of challenges.  Leadership, governance and management

Excerpt:  The change illustrates the increasing importance in the global economy of intangible assets, such as IP. As manufacturing and manufactured goods have become commoditised, ideas are driving wealth creation. “Modern business is based increasingly on the potential, rather than the piecemeal value of assets,” observe Michael Walpole, a professor of taxation at the Australian School of Business, and Nadine Riedel of Oxford University’s Centre for Business Taxation. “As the costs of many tangible assets have declined through mass production and technological innovation, the value of intangible assets has increased and these assets often constitute a significant, if not majority portion of a business’s value,” write the researchers in their paper, The Role of Tax in Choice of Location of Intellectual Property.

Read full article via Transfer Pricing and IP Location: Research Reveals the Real Motivators – Knowledge@Australian School of Business.

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PCAOB Adopts New Audit Standard on Communications with Audit Committees — The Harvard Law School Forum on Corporate Governance

Small business of-interest, need-to-know and news-to-watch.  Accounting and audit

Excerpt:  Auditing Standard No. 16 is the first standard that the PCAOB has adopted following enactment of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, a new PCAOB standard will not apply to audits of “emerging growth companies” (“EGCs”) unless the SEC determines that the application of the standard is “necessary or appropriate in the public interest, after considering the protection of investors and whether the action will promote efficiency, competition, and capital formation.” At its August 15 meeting, the PCAOB expressed its view that the SEC should approve the application of the new standard to EGCs.

Read full article via PCAOB Adopts New Audit Standard on Communications with Audit Committees — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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Filed under Accounting, Bookkeeping, GAAP, IFRS, Taxes & Audit

Tech Tools for Easy Accounting : AMEX

Interviewee’s prediction of what our future holds  —   I think probably a lot of truth here, but would nevertheless venture that the consumer is going to be steps ahead of the accounting industry in adoption of some of these — the accounting industry is governed by compliance regulations and other strictures that make on-the-fly accounting a bit scary at best.

  Excerpt:  “As I look around at new innovations, new venture capital investments and new successes in the market,” Sleeter says, “I’m becoming more and more convinced that over the next few years there will be significant changes for those of us in the business of accounting software consulting (or teaching), bookkeeping, accounting, or tax preparation,”

Read full article via Tech Tools for Easy Accounting : Money :: American Express OPEN Forum.

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The 5 Faces of Accountancy: Eradicating Myths and Sticking to Facts and Figures!

Guest Post by Joyce Del Rosario

Accountancy tends to be a difficult subject for even the savviest of business owners. This is why most small business owners, solo practitioners and even freelancers choose to hire an accountant to manage their finances, which is undoubtedly a good thing.

But, even if you do have an accountant to deal with pesky things like spreadsheets and progress reports, there are a few aspects of your business that you should be familiar with yourself, and understanding terms like income, expenses, assets, liabilities and equity or net worth is crucial if you want to succeed in any industry.

Too many business professionals choose to bury their head in the sand and leave the vague financial stuff for their accountants to deal with. However, no matter how good your financial advisor is, nothing takes the place of being financially literate yourself.

Here are some of the most common myths about accountancy that may be holding you back from being truly successful.

You have to be good at math to understand accounting
This is by far the most common myth about accounting and it is also the main reason that people tend to shy away from accountancy.

Of course, accountants do use math, but so do most other professions and everyone from an engineer to a salesman must have a grasp on numbers if they want their career to go anywhere.

Accounting is more about analytics and research than algebra, and you don’t have to be a mathematician to understand basic accounting principles.

It does involve some basic math like addition, subtraction, multiplication, division and the occasional formula, but you’d be hard pressed to find an accountant who does any of this without a calculator.

The bulk of accounting involves analyzing numbers in order to see what they mean for the current and future financial state of a person or company.

A tax preparer is the same as an accountant
If you think the guy preparing your taxes is the same as an accountant it could have negative repercussions for your business. While most accountants will do taxes as well, most bookkeepers and tax preparers will not maintain your accounts and give you the same financial advice that an accountant could.

Their qualifications are very different from those of an accountant, and confusing the two could cause serious problems down the line. So, just for the record, an accountant is someone who holds a degree in accounting, and nothing else will do when it comes to the future of your business.

Accounting isn’t necessary for small businesses
This is one myth that can have dire consequences for any small business. Many small business owners assume that hiring an accountant is something that only larger companies need to do.

However, thinking you can go without accounting is the same as thinking you don’t need a budget; don’t need to know what your financial state will be like in the future or have no need for any tax advantages.

No matter how small your business is, you need an accountant. You simply cannot run your business properly without knowing the state of your finances or whether or not you will report a loss at the end of the year to reduce your taxes. You also need to know about areas that you are doing poorly in and need to improve in, or your business will continue on a downward spiral.

It’s fine to pay business expenses out-of-pocket
This is a big misconception and can cause you to waste a lot of money. Your business needs its own business bank account and expenses should not be paid out of your own personal account.

Any business expenses that you have paid for from your personal reserve or salary must be noted down accordingly and careful records must be kept. In most cases, any money that you spend out of pocket for your business can be returned to you tax-free.

Without a proper business bank account, you have no way to tell whether or not your business is actually making a profit. All revenues should be paid into the business bank account and all business expenses should be paid from this same account. If you come up short, you can pay out-of-pocket, but you must take care to keep proper records so that you can get that money back.

If you are making a salary, that salary should not be paid into your business account, because it is taxable, which means you may be paying far more on taxes than you should be. Keeping your finances separate can make a huge difference.

You tell how successful your business is without accounting reports
Looks can be deceiving, and just because your business is bustling every single work day does not mean that it is doing well or making a profit. Without accounting reports, you have no way of knowing if your prices are right and whether you need to cut costs in any particular area.

Many business owners think they can focus on the practical side of the business, like keeping customers happy and getting return business, without paying attention to things like costs incurred, waste or loss. But operating in this way means that a potentially successful business can fail before it has even been given a fair chance.

Accounting reports show you where you can save money, which areas are in need of a cleanup and how things can run more efficiently as a whole in order to make the most profit possible.

Author: Joyce Del Rosario is part of the team behind Open Colleges.   It is one of Australia’s pioneer and leading providers of Accounting Courses and Bookkeeping CoursesWhen not working, Joyce enjoys blogging about health and finance.

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Filed under Accounting, Bookkeeping, GAAP, IFRS, Small Business, Taxes & Audit

New Intergovernmental Agreement to Support FATCA

Small business of-interest, need-to-know and news-to-watch.

Excerpt:  Taxpayers with foreign accounts will want to take note of an agreement recently developed by the U.S. and several other countries, including France, Germany and the U.K. The “model intergovernmental agreement” is intended to implement FATCA, or the Foreign Account Tax Compliance Act. FATCA requires foreign financial institutions to report to the IRS information on accounts or insurance or annuity contracts with values above set amounts, and that are held by U.S taxpayers, or by foreign entities in which U.S taxpayers hold a substantial ownership interest.

The goal of FATCA, which was signed into law in 2010, is to reduce the risk that U.S. taxpayers use accounts outside the U.S. to evade taxes. The recent agreement “marks an important step in establishing a common approach to combating tax evasion based on the automatic exchange of information,” the Treasury says.

Read full article via New Intergovernmental Agreement to Support FATCA | Business Finance.

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Ernst & Young Risk Management Internal Audit

Small business takeaways.  Risk management is more than buying insurance, as I am sure everyone is now aware.  Auditors, whether internal or external, need to increase their role in assisting business with the missing and the required — as well as the why.

Excerpt:  As stakeholders inside companies seek more cross-functional coordination on risk, internal audit also has to improve its communications to executive management and other departments. The E&Y survey found that 46% of respondents perform only annual updates or no updates at all to their risk-related audit plans. That can leave a company unprepared for events that arise throughout the year, like new product launches or retirements, new market entry, and litigation.

While audit plans used to be “set in stone,” the trend now is to take periodic “fresh looks” at them, says Schwartz. “Risk profiles change as companies make acquisitions or move into emerging markets,” he points out.

Read full article  ernst & young risk management internal audit erm brian schwartz.  via CFO.com

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