Tag Archives: Tax

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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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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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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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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IRC 409A After Three Years: It’s Not Just About Tax

Small business need-to-know and news-to-watch.   Accounting and taxes  — financial reporting.

Excerpt:  The best advice is to assume that any valuation report obtained to support stock option issuance (IRC 409A / ASC 718) will be scrutinized someday. There is only a small probability that scrutiny will come from the IRS. But there is a near certainty that scrutiny will come from an audit firm.

So, a company obtaining a valuation report should do three things

Read full article via IRC 409A After Three Years: It’s Not Just About Tax | Proformative.

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Multinationals and the High Cash Holdings Puzzle — The Harvard Law School Forum on Corporate Governance

Small business of in-interest takeaways in the study of reported cash holdings and size – kind of company ratio.

Excerpt: We find that U.S. multinationals held comparable amounts of cash than purely domestic firms in the late 1990s, but now hold significantly more cash than similar purely domestic firms. Since the increase in cash holdings of U.S. firms is concentrated among multinational firms, we investigate why the cash holdings of U.S. multinationals increased so much and whether the increase is explained by the tax treatment of repatriations. Foley, Hartzell, Titman, and Twite (2007) show that the tax treatment of remittances makes it advantageous for multinationals to keep their earnings abroad and they find that firms for which repatriation is more costly hold more cash. Our findings suggest that the tax costs of repatriation are not the whole story for the increase in cash holdings of U.S. multinationals in the 2000s

Read full article via Multinationals and the High Cash Holdings Puzzle — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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Taxing the Transfer of Debts Between Debtors and Creditors

Small business need-to-know.  Don’t forget your best answers are still and always from your chosen CPA!!

Excerpt: When a debtor transfers a debt to a creditor entity it controls, the transaction can be tax free under Sec. 351 and 357(a).

In a liquidation of a subsidiary corporation, the subsidiary recognizes no gain or loss on the transfer of its assets in liquidation to its 80% parent, including distributions in payment of debt owed to the parent corporation.

Transfers by debtor partners to a creditor partnership are subject to disguised sale rules, while those by debtor partnerships to creditor partners fall under Secs. 731 and 752.

Special rules apply to cancellation of debt income in transfers of acquired debt and transfers of installment obligations.

Read full article  via Taxing the Transfer of Debts Between Debtors and Creditors.  From AICPA Tax Advisor

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How to Address the Challenges of Today’s Multistate Market | Taxes

Recommended read for all small business if you are multistate or plan to be.  The tax laws in states are becoming more and more complex with rapid revisions due to state’s economic strategy.

Excerpt: Businesses today face a number of challenges in managing state and local taxes. States are struggling to meet budgets and are aggressively looking to find tax dollars by auditing, asserting nexus (filing requirements), or interpreting statutes/regulations in their favor, creating a risky environment for businesses, says John Trippier, director of multistate tax in the Multistate Tax Practice at McDonald Hopkins LLC. “Businesses are at the highest risk ever of being contacted by state or local governments, yet their tax/ accounting departments are being asked to do more with fewer people,” says Trippier. Smart Business spoke with Trippier about what businesses can do to meet multistate and local tax challenges by focusing on the past, present and future.

Read full article via How to address the challenges of today’s multistate market | Smart Business.

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