 March 3. 2010 | Stephanie Kelly Infidelity...sometimes it's financial With the economy still feeling the effects of the recession, the number of divorces and shareholder disputes has soared. Unlike what you read in the Hollywood gossip magazines, typical cases do not involve physical infidelity. Oftentimes it is one spouse or shareholder stealing money from the other. In some cases, the disgruntled person has been quietly pocketing money in an undisclosed bank or investment account. Other hiding places are safety deposit boxes where cash or hard commodities (e.g., gold bars) can be placed. Account balances can easily grow to over $1 million. A strategy used to deceive a business partner is to create separate company records to hide receivables so the other partner won’t discover the assets.
In domestic disputes, there are instances of distribution checks coming in from a prior employer that get endorsed over to a third party. In any situation, the assets can go undetected unless you hire a forensic accountant or just get lucky. Your problems may become even worse once you discover the hidden assets and realize you filed a joint tax return with the other person and failed to record the income on your tax return – whether as an individual, a partner, or a corporation. And then what seemed like a simple, uncomplicated dispute has turned into a money laundering, tax fraud, white collar crime nightmare.
We often think we have seen and heard it all. However, just the opposite is true. Each one of our cases in the Forensic Accounting and Dispute Services (FADS) group is different, yet the motive remains the same: greed. Fortunately for our clients, our team consists of a diverse group of former IRS agents, corporate controllers, and fraud specialists. We assist clients in asset discovery, IRS workouts, and innocent spouse defenses. So as we celebrate the month of love, February, and are reminded to eat well and get regular cardiac checkups, it is also a reminder to follow your heart (and gut). If someone you love and/or trust is being deceptive, it might be a good time to hire an investigator.
Happy Belated Valentine’s Day!
Comments (0) »  February 24. 2010 | David Wright More SBA and SDB Proposed Changes from the Obama Administration Last month we covered a few new proposed changes in the Small Business Administration (SBA) and Small Disadvantaged Business (SDB) programs. Since then, the Obama Administration has announced two more lending plans. These temporary initiatives aim to create new jobs and improve access to loans for small businesses.
The first initiative is a commercial real-estate program which will allow small businesses to refinance existing, qualified, owner-occupied, small business commercial mortgages into SBA’s 504 program. The SBA announcement fact sheet specifies that borrowers can finance up to 90% of existing property values through this program.
Temporary expansion of working capital loans is the second initiative. The SBA has received feedback from borrowers and lenders and decided to increase the limit on SBA 7(a) working capital loans from $350,000 to $1 million. These increases will help address liquidity needs.
Will we see even more new SBA initiatives this year? Keep your mouse pointed here for the latest! Comments (0) »  February 17. 2010 | Elizabeth Dunseith XBRL - Are You Ready? By now, you’ve probably heard the term XBRL in at least one conversation with your external or internal auditors, CFO, Controllers, or other financial personnel. XBRL, eXtensible Business Reporting Language, is the new wave in financial reporting. In short, XBRL uses taxonomies to tag information in the financials to enhance the reporting and communication of information. It is important to note that XBRL filing does not affect the US GAAP or SEC financial reporting requirements, but is an additional format for submitting financial information. When companies hear the term “XBRL,” they generally have 3 questions: 1) Does this affect me? 2) When does it affect me? and 3) How much will it cost?
Hopefully Watkins Meegan can answer some of those questions. It affects you if your company is publicly traded. Also, mutual fund companies will be required to report their risk and return summary information using XBRL. There are some additional requirements as to the specific reports that must be filed using XBRL, but these are the general guidelines. When is the next concern for most companies. Certain large accelerated filers have already begun reporting in XBRL. Over the next two years, the remaining filers and mutual fund companies will be required to use XBRL. So if XBRL does affect you, it should be something you are thinking about it now. Just as the deadlines for compliance can vary, so can the cost depending on the software and resources used for implementing.
There are many software applications designed to help with the implementation. They vary in cost and capabilities. Depending on your company needs, one application may be a better fit over another. I recommend you take the time now to review the XBRL software options and get your questions answered earlier rather than later. This can save time and resources down the road. If you need help in your analysis, Watkins Meegan has explored different applications and is available to answer any questions you may have.
XBRL facilitates the comparability of financial information and will probably be used by government agencies (IRS, Treasury), lenders, investors, and others in the future. So non-public companies should stay tuned.
Comments (0) »  February 10. 2010 | Kevin Jones How Well Do You Know Your Return Preparer Currently, anyone may prepare a federal tax return for anyone else and charge a fee. While some preparers are currently licensed by their states or are enrolled to practice before the IRS, many do not have to meet any government or professionally mandated competency requirements before preparing a federal tax return for a fee.
As a result, a few weeks ago the IRS issued proposed new registration, testing, and continuing education requirements for tax return preparers. The proposal recommends a number of steps that the IRS plans to implement for future filing seasons, including:
• Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number (PTIN).
• Requiring competency tests and continuing education for all paid tax return preparers except attorneys, CPAs, and enrolled agents who are active and in good standing with their respective licensing agencies and subject to mandatory continuing education.
• Extending the ethical rules found in Treasury Department Circular 230 to all paid preparers- not just attorneys, CPAs, and enrolled agents.
The initiative will take several years to fully implement and will not be in effect for the current 2010 tax season. Nevertheless, the IRS also announced a new outreach effort to help make sure taxpayers choose a reputable preparer this filing season. That’s particularly important because taxpayers are legally responsible for what is on their tax returns -- even if those returns are prepared by someone else. In order to help taxpayers, the IRS offers the following points for taxpayers to keep in mind when selecting a tax return preparer:
• Be wary of tax preparers who claim they can obtain larger refunds than others.
• Avoid tax preparers who base their fees on a percentage of the refund.
• Use a reputable tax professional who signs the tax return and provides a copy.
Consider whether the individual or firm will be around months or years after the return has been filed to answer questions about the preparation of the tax return.
• Check the person’s credentials. Only attorneys, CPAs, and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection, and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
• Find out if the return preparer is affiliated with a professional organization that provides its members with continuing education and other resources and holds them to a code of ethics.
At Watkins Meegan, we fully support efforts to increase the competency and integrity of professional tax return preparers. More information about choosing a tax return preparer and avoiding fraud can be found at the IRS website in IRS Fact Sheet 2010-03, How to Choose a Tax Preparer and Avoid Tax Fraud.
Comments (0) »  February 4. 2010 | Jason Fleetwood, and Katie Madden Accountant's New Year's Resolutions Each year we all make at least one New Year’s resolution. Whether it is one resolution, five, or even ten, we make a list and promise ourselves that we will stick to it. This year we thought we would share our New Year’s resolutions with you while incorporating some helpful tax advice. Posting them on WaktinsWire will be added incentive for us to follow through on them.
1. Eat Healthier – The next time you are eating a meal, choose a salad instead of the burger and fries, drink water instead of soda, and go organic when possible. (And for you business owners, don’t forget that the amount allowable as a deduction for meal and entertainment expenses is generally limited to 50 percent of such expenses. However, there are exceptions to the 50-Percent limitation rule.)
2. Be More Charitable –Encourage yourself to give a when possible. Whether it is clothing, household items, food, or cash, there are several organizations that can take your donations and help out those in need. (And for you individual taxpayers, don’t forget that you report your charitable contributions on Form 1040, Schedule A when filing your tax return. Don’t forget to keep records of donations and contributions.)
3. Get Out of Debt – It won’t happen overnight, but it is possible to climb out of the $683 billion in revolving credit card debt. Make a list of what you owe and try to pay more than the minimum monthly payment. Create a realistic monthly budget for your expenses and make it a rule that if you can’t pay for it today, you can’t afford it. It is also a good idea to review a copy of your credit report and credit score. (And for you accountants, remember that under current GAAP, the principal amount of long-term debt scheduled to be repaid within the next year should be classified as a current liability on a classified balance sheet. Consequently, the principal balance not scheduled to be repaid within the next year should be classified as a non-current liability. Remember also to disclose the future principal maturities over the next five years.)
4. Learn Something New – Ever wanted to learn how to play the harmonica? Yeah, neither have we. But if we did, we can learn how to, along with just about anything else, visiting utube. The website isn’t just for funny videos of stupid pet tricks or creative wedding dances…it also includes thousands of instructional videos, ranging from cooking lessons to saying hello in Mandarin and some from the IRS. (And for you accountants, don’t forget to read up on how the new International Financial Reporting Standards (IFRS) are going to affect your client’s financial statements in the near future. Because implementation of the standards is expected to be a challenging transition, firms should start preparing now for these “new” standards.)
5. Spend More Time with Family – Chances are that we have all had bad days at the office or in the classroom. Sometimes the best cure for a day like that is an afternoon at the park with your family. Resolve to be home in time for dinner when possible, or schedule a “family night” once a week for group activities such as board games or a movie. (And for you employees out there, remember that, under the Family and Medical Leave Act (FMLA), you may be entitled to up to 12 weeks of unpaid, job-protected leave per year for certain family and medical reasons, including the birth and care of a newborn child, care for an immediate family member with a serious health condition, and when the employee is unable to work because of a serious health condition.) Comments (2) »  January 29. 2010 | John Seek Embracing Opportunity Our communications meeting was by far the best ever. The day was a showcase for the Watkins Meegan talent. The theme “Come Grow With Us” was well conceived and is a motif that is important to our future. Hopefully, we all learned a lot about what the Watkins Meegan Group has to offer. Personally, I learned I am not going to Hollywood (for those of you who watch or know about American Idol), but all is not lost. Before the meeting, I happened to read an Alexander Graham Bell quote, which I will share with you. “When one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us.” Yesterday, the Watkins Meegan door opened for all of us. Embrace the opportunity and don’t focus on any closed doors. We work in a great industry at a great firm with great people. Understanding our strengths, creating new strengths, and hard work will allow all of us to achieve our goals. The Watkins Meegan business development initiative starts with everyone at the firm through a commitment to work quality, development of expertise, and the demonstration of that expertise. Years ago, Watkins Meegan started with a handful of people and yesterday we filled a ballroom. I am certain next year we will be looking for a larger space for the meeting. Comments (0) »  January 26. 2010 | Lorraine Sexton Cash Management- Survive and Thrive Over the course of this past year, nearly all companies have scrutinized their expenditures and implemented cost cutting measures, in an effort to survive during the downturn in the economy. Having enough cash available for operations has been a challenge, as it has become increasingly difficult to qualify for loans. While most businesses have been in the survival mode, companies that properly position themselves and capitalize on shifting circumstances, including cash management opportunities, can emerge as growth companies and thrive despite the adverse economic conditions.
A traditional cash management strategy is to collect early (reduce the order to cash cycle), and minimize aging accounts receivable. However, many companies are not aware of bank services available to help with this process. Some banks offer a setup where a company can post its invoices to a secured site, with its customers being sent an automatic notification of the posting. The customers can then access the site and make payments electronically. The cost for the service is affordable, and may be less expensive than the postage, labor time, etc., the business has been paying internally for generating and mailing the invoices.
Another traditional cash management strategy has been paying late (increasing the procure to pay cycle), and keeping cash on hand as long as possible. However, some companies are finding it more beneficial to do the opposite and pay accounts payable balances timelier, minimizing late payment fees and lost discounts.
There are steps that can be taken to improve a company’s balance sheet and increase the chances of obtaining bank loans. For example, lines of credit are generally meant to be used for short-term cash needs. Many companies remain unaware that having a line of credit balance sitting on their balance sheet for an extended period of time without being paid down can prevent them from qualifying for a loan.
With the current credit crisis, cash management continues to be an issue of primary importance to companies, and these are just a few among numerous strategies worth considering. Watkins Meegan has experienced employees who can assist you with planning for your cash management needs.
Comments (0) »  January 20. 2010 | Jennifer Mavrikes What’s New with the Not So New TAG Program? In October 2008, the FDIC announced a new program - the Transaction Account Guarantee (TAG) Program - and it became quite the talk. The reason this program became so popular? It provided full insurance coverage for non-interest bearing accounts, regardless of the dollar amount, as long as the bank participated in the program.
Over the past year, many of our not-for-profit clients have either considered switching, or have switched, to a fully insured account under this program. With the downturn in the economy, our clients wanted peace of mind that their money was safe and secure and decided the assurance of fully insured accounts takes precedence over higher rates of return.
Now for the new news … effective January 1, 2010, some of the major national banks, as well as other regional banks have announced that they will no longer participate in the TAG program. What this means is that if you have a non-interest bearing account with one of these banks, your account will now be subject to FDIC coverage of $250,000 per depositor, rather than being fully insured.
If you, like many others, decided to participate in the TAG program this past year, the first thing you should do is contact your bank to find out if is still participating in the TAG program. If it is not, talk with your bank and within your organization about your options, and always be aware of the financial condition of your bank. By doing so, you can maintain your peace of mind throughout the years to come.
Comments (0) »  January 13. 2010 | Mary Lou Gervie Employee Misclassification Employee misclassification is a practice that is sometimes used intentionally by employers to reduce their tax burden. Both the Internal Revenue Service and many states are ramping up their investigations to insure that individuals who should be classified as employees are not being hired as independent contractors. This issue has been determined to be a serious threat to workers and also creates an unlevel playing field for businesses.
Statistics published by the Maryland Unemployment Insurance Division, which conducts random audits every year of about 2% of the state’s employers, found that approximately 20% of employers misclassify employees as independent contractors.
The misclassification of employees has significant lost revenue ramifications not only for the federal and state governments, but also to the workers themselves who lose out on potential benefits that are typically granted to employees, such as, minimum hourly wages, overtime pay, safety and health standards, medical leave, antidiscrimination laws and access to unemployment insurance and workers’ compensation. It puts honest employers at a competitive disadvantage due to the higher cost of doing business.
Starting in February 2010, the Internal Revenue Service will start its first Employment Tax National Research Project in 25 years. Examinations from this project will be used to collect data for future audits where it is determined that compliance issues exist. The IRS will randomly select 2,000 taxpayers for the next three years for this National Research Project. There is an underlying understanding that one of the primary issues will be the classification of employees.
Watkins Meegan has ex-IRS employees who are familiar with state and federal audits to assist with any business that is a target of these types of investigations.
Comments (0) »  January 6. 2010 | Justin Reid New proposals to the SBA and SDB Programs If you’re a small business interested in obtaining a small business certification, you may find it worthwhile to hear of proposed changes affecting Small Business Administration (SBA) and Small Disadvantaged Business (SDB) programs. Changes have also been proposed to small business lending through the SBA and other entities.
Current regulations of joint ventures state that each of these entities may not submit more than three proposals over a two-year period. In some cases, this regulation has resulted in the creation of a second joint venture by small businesses, which is a costly undertaking. New proposed changes to the SBA adjust the limit to three contract awards, rather than proposal submissions over the two-year period. A proposed change for five awards is also pending.
Changes to financial statement reporting requirements have also been proposed. Under these revisions, financial statement reviews must be completed when receipts between $2 million and $10 million are collected. Current regulations require reviews when the concern has between $1 million and $5 million of receipts. Financial statement audits must also be completed when receipts of more than $10 million are received. Current regulations require audits when there are $5 million of receipts.
These are just two of the proposed changes and more are in store. Keep your eyes open for the new developments!
Comments (0) »  December 29. 2009 | Bhavesh Vadhani Increasing Need for Assurance - Why? What do organizations that provide services like IT hosting, payroll, benefits processing, credit/debit card processing, automated clearing house, XBRL tagging, accounting, and financial support have in common? The need to provide assurance.
Along with an innovative business model and strong industry expertise, one of the key enablers of a company’s growth is the TRUST that is built with its customers, business partners, employees, and other stakeholders. Trust is an essential element of all successful business models, whether the business processes are online or traditional.
The new economy is changing the nature of the relationships we have with our customers, business partners, suppliers, and competitors. In person meetings are infrequent and new technologies can be both powerful and scary. The business world is not about risk avoidance anymore; it’s about risk exploitation and the opportunity that risk generates. With risk a central concept in the market, an organization’s need to provide assurances to its stakeholders is escalating every day. Companies need to demonstrate that they have good internal controls over processes and supporting systems and they are designed and operating effectively and consistently.
So how can you provide this kind of assurance? Start by making sure that you have the right controls in place to support the services you provide. Then you can seek an independent assessment performed by a third party. Some of the widely accepted and used attestation services are: AICPA’s Statement of Auditing Standards No. 70 (SAS 70), Trust Services (SysTrust and WebTrust), and Payment Card Industry (PCI) compliance. Depending on the services an organization offers to its clients, it should explore one of the above certifications and see which one is right for the company and its partners.
Comments (0) »  December 22. 2009 | Kevin Jones Using the Tax Code to Implement Social Policy Oliver Wendell Holmes, the great Supreme Court Justice, once stated that, one way or another, “taxes are what we pay for a civilized society.” While we all recognize that taxes provide the government with the means to accomplish its mission, we see that, more and more, our system of taxation is used as an instrument to implement social policy.
Currently, the federal tax code provides billions of dollars each year in incentives to encourage socially valued activities. These include incentives to home ownership, charitable contributions, health insurance, education, going green, and countless others. These incentives take one of two forms. First, an incentive may take the form of a deduction from income. This type of incentive links the size of the tax break to the taxpayer’s marginal tax bracket. Second, an incentive may take the form of a tax credit, which may be either refundable or non-refundable. Refundable credits are much more appealing to those with little or no tax liability because they are available regardless of whether the taxpayer actually is required to pay any tax. The benefits of deductions compared with credits will not be resolved anytime soon, but in either case, the tax code is the vehicle used to implement social policy.
In case one wonders why the tax code is used for social policy initiatives, the answer is quite simple…politics. Incentives of this type are nothing more than another form of government spending program. This is not to indicate any agreement or disagreement with this method of financing government operations. That is for you to decide. Nevertheless, this type of program is often preferred by Congress to typical spending programs because spending programs are much more visible and, thus, more subject to public scrutiny. Tax preferences, on the other hand, can more easily be concealed within the complexity of the federal tax code.
In this sense, it is much more efficient for legislators and more palatable for the public to create a new incentive program rather than a new spending program. This is particularly true in these times of increased federal deficits. Is this smoke and mirrors? Maybe it is, but countering the benefits legislators enjoy by using the tax code in this manner is the clear fact that by using the tax code to achieve social goals beyond raising revenue for necessary government programs, it may be impossible to achieve true tax simplification.
My personal views notwithstanding, as a tax professional, I certainly don’t mind all the complexity. It may be true that the only things certain are death and taxes, but running closely behind are: (a) the ingenuity of governments in taxing their citizens, and (b) the creativity of the people in avoiding them. Because of that, there will always be a need for those that can find creative solutions to taxing problems. Comments (0) »  December 16. 2009 | Jason Fleetwood Impaired or Not Impaired…That is the Question You cannot open a newspaper, read online, or watch the evening news without hearing about the current recession and the troubles our economy is facing. This recent economic downturn has had a huge impact on the residential and commercial real estate markets. Businesses involved in these markets continue to post lackluster performances, as they have had to deal with impairment charges related to a variety of issues – the decline in home and land values, abandoned projects and developments, deals that have fallen through, etc.
Impairment is defined as “the condition that exists when the carrying amount of a long-lived asset (asset group) exceeds its fair value.” Events or changes can occur to a particular asset’s circumstances that raise doubt about the asset’s carrying amount being fully recoverable. Such events or changes may include significant adverse changes in business climate, decreases in an asset’s market value, use, or condition, and/or adverse legal factors. An asset is considered impaired when a company determines that the carrying amount of the asset is not fully recoverable. When this occurs, the asset should be written down to its fair value. To complicate matters, the accounting for asset impairment further depends on whether a company intends to hold and use the asset or dispose of it. (OK…you may be thinking -”How do you apply all this technical jargon to a real-life example?”…bear with me, I’ll get there.)
U.S. Generally Accepted Accounting Principles (GAAP) use a two-step test in determining impairment. The first step is to determine the undiscounted cash flows expected from the use and disposition of the asset. If the sum of these cash flows is less than the carrying amount of the asset, it is considered impaired. If there is impairment, the second step is to determine the impairment loss by taking the carrying amount of the asset and subtracting the fair value. Once an impairment loss is recognized, it may not be reversed in a following year. (So let’s get to the example…if you have lived in the DC area long enough, you don’t have to be a rabid sports fan to understand how impairment would be applied to the area’s sports franchises…the Washington Redskins = Impaired – losses continue to mount and fan frustration continues to grow; the Washington Capitals = Not Impaired – with the world’s best player surrounded by young talent, this team is on the cusp of great things; the Washington Wizards = Get out your cash flow models and run some scenarios because this team could go either way; the Washington Nationals = Fully written off in previous years...)
My example may not have been what you were looking for, but with another calendar year end approaching, it is prudent for businesses to assess asset impairment and ensure they are accurately reporting asset values on their financial statements. As a final note, I hope everyone has a wonderful holiday season and a happy and healthy 2010!
(Now you are thinking- “I thought this guy was done”…but I just wanted to point out that in an earlier blog written by Brian Linville on November 11, 2009, he talked about the convergence project with GAAP and IFRS (International Financial Reporting Standards). Asset Impairment is an issue where GAAP and IFRS differ, with a significant difference being how impairment losses are handled – IFRS allows for the reversal of an impairment loss if certain criteria are met.) Comments (0) »  December 9. 2009 | Bruce Hall The Burden of Tax Compliance It’s that time of year again. The holidays are looming, a chill is in the air… and your government is working hard to pass legislation before year end.
At the recent AICPA National Tax Conference, the Commissioner of the IRS and the IRS Taxpayer Advocate both admitted that the IRS is overwhelmed by routine activities. One of the metrics used to measure success is whether the phone is answered more than 70 percent of the time. We can only hope this is coupled with metrics measuring the resolution of taxpayer issues. The feeling that many taxpayers get is that stacks of correspondence go unanswered, while erroneous underpayment notices, often in duplicate and triplicate, get mailed.
In the midst of the most dramatic economic downturn in generations, the IRS is allocating significant resources to enforcement issues. Perhaps similar resources should be distributed to ensure that refunds are made timely and unnecessary underpayment notices, which can frighten taxpayers, are sent less frequently, thereby saving both time and money. It appears that the government is attacking on all fronts.
State tax departments are operating in a similar fashion to the IRS. Notice after notice is generated, responses by taxpayers or their representatives are sent multiple times by multiple modes of communication, and phone call after phone call results in mounting frustration. One common error I have encountered with some states involves the withholding tax that pass-through entities are required to pay on behalf of nonresident owners. When the owner later files their tax return properly claiming the withholding as a credit against their tax, the state is ignoring the withholding even when documentation is attached to the returns. Not only did the states hold the refunds, they actually issue bills even though the taxpayer is owed money. I wonder how many taxpayers are incorrectly paying these bills.
These problems have not stopped the wheels of our government from grinding along. There are at least four bills winding their way through Congress, all of which potentially have significant tax provisions, and some of which will affect the current year. Perhaps a little more attention to relieving the burdens of tax compliance should be the focus. Most Americans don’t mind paying their taxes as much as having to deal with the taxing authority.
No one is sure where we will end up, but the certainties of death and taxes are likely to be joined by increased regulation and more government oversight. Comments (0) »  December 2. 2009 | Ed Rodriguez Budgets Are Increasing at the IRS - What Does That Mean For You? The Obama administration has approved an increase of $400 million in the Internal Revenue Service budget for 2010 and the IRS plans to use that increased budget to hire about 4,500 additional employees for its enforcement division and to enhance its tax compliance/collections efforts. While this means job opportunities for some, what does it mean for the American public?
Allow me to break it down for you. The new IRS employees are likely to be more tech savvy and collections improvements will mean better technology and an increased number of audits. Already the IRS is looking at obtaining a database that collects public information on an international scale to combat the rise of offshore tax evasion. Taxpayers should be more cautious and guard themselves against a potential IRS adjustment, which can trigger penalties that exceed 75 percent of the tax due.
Now let’s take a look inside the Department of Justice’s Tax Division, which includes the attorneys who prosecute criminal tax activity. During FY 2009, criminal tax investigations and prosecutions ranged from 1,300 to 1,800. Improving voluntary compliance and maintaining fair and uniform enforcement of tax law are primary objectives of the DOJ Tax Division, as well as the IRS’s Criminal Investigations (CI) team.
As such, both the IRS CI and the DOJ have been focused on stopping the spread of tax shelters and tracking down owners of unreported offshore bank accounts, as shown by cases like that against Swiss bank UBS. While you may think the IRS CI is only focusing on larger financial taxpayers, I’ve heard from inside sources that mom-and-pop foreign bank accounts are also being targeted. DOJ is negotiating a new income tax treaty with Malta and a new Tax Information Exchange Agreement (TIEA) with Liechtenstein.
One thing for sure is that taxpayers’ rights should not be violated. But taxpayers facing an IRS audit must make sure that the books and records they submit to the IRS auditor are in an organized fashion. These records can build credibility between the taxpayer and the auditor. Credibility can go a long way in the relationship and may limit the audit from expanding into other years. However, if there is a serious issue with the tax return, such as unsubstantiated expenses or unreported income, it might be time to hire an accountant to navigate through the audit and to help ensure a referral is not made to the IRS CI. Comments (1) »  November 24. 2009 | Daniel O'Shea Thanks-Giving is Upon Us Notice the hyphen above? No, it is not a typo, but rather a theme. In a couple days, turkey, football, and family will be here. It is truly a time for giving thanks. It should also be a time for giving.
As I write this, we are halfway through the fourth quarter of the calendar year - typically the strongest time of the year for charities to receive contributions. To almost no one’s surprise, the economy, while it has stopped declining, has not yet turned upward. As a result, many charities are simply trying to hold on through this fourth quarter in the hopes that 2010 will again see contribution patterns return to some degree of normalcy.
Several national surveys have shown contributions are down 10 percent for the year. Based on my observations and inquiries of clients and other charity leaders here in the Washington area, the decline locally appears to be closer to 15 percent. I have the privilege of working with many of the best charities in the Washington area, and one thing is clear - it doesn’t seem to matter what the charity’s mission is, funding is down.
As funding from federal, state, and local government has declined, charities have been left with some difficult decisions as they scramble to maintain their programs. Charities shouldn’t be looking for government funding to increase any time soon. Tax revenues, which provide the basis for government funding, are way down. Thus, it is up to the public to make a difference.
Give what you can to your favorite charities this holiday season. Giving does not have to be financial. Giving includes volunteering or donating clothing and food. Every bit can make a difference. Encourage your children to participate. My daughter recently attended a birthday party where guests were encouraged to make a contribution to the birthday girl’s favorite charity rather than bring a gift. What a great idea and life lesson!
It is my hope that contribution activity increases throughout the rest of the year. As you know, it’s not just the charity that suffers, but those served by the charity. Every bit can, and does, make a difference.
Happy Thanks-Giving to all!
Comments (0) »  November 18. 2009 | Christine Williamson Prepare Yourself for Limitations of Pass-Through Charges and Rising Indirect Rates As a government contractor you’re in line for a number of regulatory and economic changes in the near future. The Obama administration has been focusing on revamping the government contracting industry, as well as the ongoing reviews at DCAA and other federal agencies. Some specific changes to note are as follows:
Last month, the Federal Acquisition Regulation councils delivered an interim rule that limits the pass-through charges allowed by prime contractors and subcontractors. This rule was issued to “minimize excessive pass-through charges by contractors from subcontractors, or from tiers of subcontractors, that add no or negligible value," according to the Federal Register. While the rule was considered effective October 14, you have until December 14 to submit comments before a final rule is established.
In addition, increasing unemployment taxes in Maryland and Virginia could impact your indirect rate costs for 2010. Rising unemployment rates decreased the two states' unemployment trust funds, resulting in the increase. According to an article in the Washington Business Journal, Maryland's unemployment insurance taxes are set to rise from an annual minimum of $51 per employee to $187 per employee, while Virginia will increase from $95 to $171.
We believe more changes are on the horizon….so stay tuned! Comments (0) »  November 11. 2009 | Brian Linville The IFRS (International Financial Reporting Standards) Struggle Once companies understand what IFRS is, they need to stay in the loop of what will happen next and how it affects them.
Our Director of Quality Control, Brian Linville, just attended a two-day conference held jointly by the International Accounting Standards Board (IASB) Foundation and the American Institute of Certified Public Accountants in which a few of the topics and presenters tried to help attendees determine what steps to take next. Presenters included standard setters from the Financial Accounting Standards Board (FASB) and the IASB, the U.S. Securities and Exchange Commission (SEC), the Public Company Accounting Oversight Board (PCAOB), and several companies who had already gone through the switch.
The most anticipated section was the presentation by SEC Chief Accountant James Kroeker. Everyone was hoping to hear a decision on whether the SEC would stick to its current roadmap to require public companies to transition to IFRS in 2014. While we did not get an answer to that question, Mr. Kroeker indicated that we should not wait for the SEC to make a decision; rather, we should continue with our (FASB and IASB) conversion project. Mr. Kroeker did indicate we would hear more on the roadmap this fall from the SEC.
On the previous day, FASB and IASB had just announced that they would hold monthly meetings to meet their 2011 convergence goal. They realized that the meetings had a dramatic impact in coming to agreements faster. After all that, the questions still remain. Should you start training people? Should you analyze the potential effects of switching to IFRS? Everyone is struggling with what to do and when to do it. Academia and CPA firms are also feeling the pains and trying to decide what to do.
Whatever you determine your answer to be, keep up with the current standards (GAAP). There are several significant standards that may change as a result of the convergence project, but keeping up with GAAP should minimize the effects of switching to IFRS as the convergence project moves forward. Comments (0) » November 4. 2009 | Kevin Jones 'Tis the Season for Tax Planning As the year begins to wind down, many of us begin to focus our attention on the activities of the new seasons that are upon us. Most of those are rather obvious…starting with the Fall season with its cooler weather and beautiful colors, leading into Thanksgiving, Christmas, and finally, the New Year. This time of year also brings us full swing into the baseball playoffs, college and NFL football seasons and the fun of tailgating and cheering for our favorite teams. However, not to be lost in all the hoopla of this time of year is another season…one that we don’t often think about and, in fact, probably don’t want to think about…tax planning season.
That’s right, tax planning season. Yes, I know, some of you just finished filing your 2008 tax returns at the October 15 final deadline. You were thinking that once your return was filed that you would have a break from the unpleasant thought of taxes for at least six months. But with all the federal tax law changes enacted over the past year and all the tax proposals pending, including tax provisions of health care reform and the Obama Administration’s other tax proposals, it is hard to keep up with which provisions are in and which are out. One thing is sure though, year-end tax planning is more important than ever in 2009.
Tax planning is completed near the end of the year for strategic reasons. First, it’s relatively easy to know where you stand currently and where you will end up in terms of your income and allowable deductions. With this information in hand, the impact of different alternatives and strategies can be quantified and the best course chosen. Second, almost all strategies for minimizing your 2009 tax bill must be implemented prior to the end of the year.
Just to give one simple example, for many taxpayers, it is advantageous to pay the 4th quarter state estimated tax payment prior to December 31, 2009, even though it is not due until January 15 of next year. The reason is that, if paid before the end of the year, it is deductible as an itemized deduction on the 2009 tax return. On the other hand, for taxpayers subject to the alternative minimum tax (AMT), there is no tax benefit to making the payment prior to the end of the year because state income taxes are not deductible in determining the AMT. The point is, without proper planning prior to the end of the year, there is no way to know what strategy makes sense in your particular situation and the ability to take advantage of most opportunities will be lost. This is just as true for your business as it is for you individually.
For clients of Watkins Meegan, a booklet will be sent shortly providing the tools needed to get organized to properly conduct year-end planning. The booklet also discusses some of the more relevant planning techniques and opportunities. For others, I urge you to contact your tax advisor to explore ways to minimize your taxes in 2009. When done properly, the unpleasant task of focusing on taxes now can reap substantial benefits next year when you file your 2009 tax return.
So yes…’tis the season… Comments (0) »  October 29. 2009 | Sean Roddy Accounting in the Web 2.0 World
We began this process the same way we begin any new engagement - by educating ourselves. This began when we invited the Maryland Association of Certified Public Accountants’ Executive Director Tom Hood to speak to us about his experience with Web 2.0 technologies. After hearing Tom speak, we did additional research, which helped us develop our objectives and establish a plan for maximizing the firm’s use of these technologies.
Our goals were to enhance our name recognition, bring our experience and knowledge to the web and improve our communications, both internally and externally. We have worked very hard over the past 10 months on these efforts and like most large projects there were a lot of talented people participating in the process. It is with a degree of pride that we can say we have successfully changed our name, our logo, our website and our collateral materials. We have also instituted our blog, Watkins Wire, and we have developed and begun to deploy our CRM system, allowing us to better manage and keep in contact with our clients and prospects. Additionally we’re in the process of launching an e-mail newsletter, which will provide valuable and timely news and information about the accounting industry.
We have also established a presence on LinkedIn, Facebook and Twitter. We hope these platforms will help strengthen our brand and showcase the knowledge of our staff. The enhanced communication will also provide value to our clients, employees, and the communities in which we live and work. We encourage you to follow us on these sites and provide us with your feedback on Watkins Meegan’s presence in the Web 2.0 world. Comments (0) »  October 22. 2009 | Mike Micholas Welcome to Watkins Wire I’d like to welcome you to Watkins Wire, the newly launched, official blog of Watkins Meegan. For more than 30 years, the professionals at Watkins Meegan have provided our clients and the business community with insight, expertise and ideas about accounting, tax and business issues.
We’ve built upon our reputation by hiring and training talented people, assisting our clients in achieving their objectives, and educating the business community via our newsletters, white papers, seminars and webinars, among other outlets. As industry thought leaders, we see the Watkins Wire blog as an extension of our commitment to continue to educate and bring timely and valuable information to every interested party.
Whether you are interested in the International Financial Reporting Standards (IFRS), Federal Acquisition Regulations (FAR), new tax legislation or the Recovery Act, you’ll find the topic covered at Watkins Wire. Our team of CPAs, financial specialists, forensic accountants and risk management consultants will blog about these topics and their thoughts on the latest industry news.
I hope that you’ll come to find Watkins Wire as one of your go-to sites for industry commentary and news. While doing so, we will remain mindful that effective communication is a two-way street and we encourage you to send us your comments and suggestions.
Comments (2) » |
|
|
|
|