Tuesday, January 30, 2007

IIA Cites Linkage between Internal Auditing and Social Responsibility

As a comprehensive approach to integrity and trustworthiness of the financial area of businesses, the Institute of Internal Auditors (IIA) are looking at corporate social responsibility (CSR). Also known as sustainable development, welfare capitalism and corporate good works, an increasing number of businesses are coordinating CSR with operational and financial goals. Internal Auditor Jim Key mentions that internal auditors are not limited to financial issues and their emphases on effectiveness and compliance fit well with the CSR concept. To support Key's point, a survey of internal auditors indicated that over 90% believed that internal auditors could add value to CSR reporting. Key also indicated that Europe is ahead of many American corporations in CSR reporting (one example: the ISO 14000 series on environmental reporting).
A new IIA seminar on CSR will be available this summer and IIA Vice President of Educational Programs Stacy Manzaris indicates that the seminar will enable businesses to apply CSR principles to help with risk management and improve their competitive position.

Although the late formidable Milton Friedman was no fan of social responsibility, a large body of academics, consultants and business executives have concluded that benevolent behavior by large and middle-sized corporations is good for society and that CSR is best developed by business managers rather than government fiat. Given the emphasis on effectiveness and compliance, it is legitimate for internal auditors to seek to participate in the growth of CSR; by no means are internal auditors the only accountants which should be involved in finding ways to bring high levels of ethical behavior, community-mindedness, respect for employees and customers and careful use of natural resources into American businesses.

Monday, January 29, 2007

Robert Half Selects Five Hottest Job Fields

Robert Half, a dominant placement firm for accounting and finance professionals, listed the five lines which they felt were best positioned for growth in 2007. The fields included internal auditing, compliance executives, financial analysts, staff accountants and external auditors. Estimated salaries for experienced personnel ranged from slightly over $50,000 for staff accountants to about $180,000 for compliance executives.

One of the great signs of the health of the accounting profession is that no specifically tax-oriented jobs made the growth list in spite of three significant pieces of tax-oriented legislation passed in 2006. For new college graduates, this hiring season will be one of the most promising in recent memory.

Friday, January 26, 2007

10 Key Issues in Dealing with IRS in 2007

George Jones and Mark Luscombe of Accounting Today point out ten issues that CPA tax preparers must strategically consider during the upcoming tax season. These include: [1] the impact and yet-expanding scope of the economic substance doctrine, [2] IRS efforts to close the "tax gap" (the authors hope that technology will be helpful here), [3] the impact of 2006 tax law changes--with three significant bills, there is lots of new material to consider, [4] the interaction of Schedule M-3 and FIN 48 on creating a climate conducive to conservative tax accounting for corporations, [5] opportunities created by the domestic production activities deduction, [6] new proposed Circular 230 regs and their potential for chilling aggressive tax positions, [7] the impact of new deferred compensation rules, [8] after many calm years, inflation may be making a comeback, [9] retirement savings issues, such as increased IRA contribution limits and new 401k rules, [10] issues yet to be decided, such as tax reform, long-term AMT improvement and the 2010 sunset question. Jones and Luscombe also mention as "runner-up" issues abuses by some charitable organizations, limitations on energy credits and the increase in "e-filing."

An excellent summary of the 2006 tax year and look ahead to 2007. Good luck to the tax preparation community; Jones and Luscombe have spelled out a potentially-daunting year ahead.

Tuesday, January 23, 2007

IRS Data Missing. In Other News, Sun Rises in the East

For something like the fourth time in the last eight months, important confidential US Government data has come up missing. In this latest case, the IRS was sharing information with Kansas City for a city earnings tax when the city failed to return the data to the US Treasury on a timely basis. KC Assistant City Manager Rich Noll stated that he became aware that the tapes were missing around Christmas. At this point, there is no indication that the confidential information has been misused.

Ignore the Mexican border brouhaha. If the US Government cannot protect its own data, one wonders to what extent it can protect us. Moreover, why is the American citizenry so confident that that politicans and governments can solve their problems when it can't even figure out how to maintain confidential information.

Monday, January 22, 2007

Try that Funky Tax Deduction, White Boy (on second thought, don't)

Jay McDonald of Bankrate has come up with nine doggone wacky attempts at tax deductions (and doggone IS appropriate; three of the "deductions" involved canines). His list: [1] mortgage interest for a condo used by a mistress, [2] doggy day care, [3] a landlord claiming wedding expenses as improvements for invited renters, [4] a $300 breast pump for a nursing mother, [5] a dog pulling construction supplies as an independent contractor, [6] claiming personal meals and entertainment as business expenses (but note the comic book deduction that worked), [7] donating a breeding-age dog to the Humane Society (however, costs of breeding show dogs may be deductible if fees earned from breeding are sufficient to escape hobby status), [8] claiming business attire as work-related clothing (work-related clothing deductions only apply if the item generally could not be worn except as part of a job), [9] a "tricked-out" Amish buggy.

Hopefully, none of my readers with tax clients will have any who try deductions which are this outlandish. Although I can sympathize with the desire to reduce taxes, the means here are generally not appropriate.

Thursday, January 18, 2007

FASB: Thou Shalt Document Tax Uncertainties

By an unanimous vote, the Financial Accounting Standards Board agreed to implement Interpretation 48 (aka FIN 48) which requires that companies must at least document a range of possible results when taking tax positions with uncertain results (presumably, aggressive tax positions). The FASB, while having some sympathy for businesses and trade organizations opposing the requirements, pointed out that the requirement had been deferred twice and accepted the SEC position that greater uniformity in reporting was needed to improve comparability for investors.

One quick question that comes to mind with this requirement: with IRS personnel theoretically able to look up these disclosures, will companies be less willing to take aggressive positions?

Wednesday, January 17, 2007

Save Cash Fast

"Automatic Millionaire" David Bach provides five ways to save up to $2,500 in 20 minutes. Two recommendations before the five steps: don't fret about the past and find ways to reduce fixed expenses. His specific recommendations: [1] cut back on premium TV (satellite or dish), [2] reduce your cell phone package to reflect actual call time needed, [3] use wireless instead of modem-based internet connections, [4] find less expensive exercise club memberships (or just walk or jog at home and avoid the gym charge), [5] shop car insurance; your first quote may not be your best.

Not all recommendations will work for all readers, but Mr. Bach does have some ideas worth considering.

Tuesday, January 16, 2007

Big Four plus Michigan CPA Firm Make Fortune Workplace-Friendly 100

All four of the dominant international accounting firms (E&Y, Deloitte and Touche, PWC and KPMG) along with Plante and Moran, a Detroit-area (Southfield) regional firm were named to Fortune's "100 Best Companies to Work for" by the Great Places to Work Institute of San Francisco. Of the five, Ernst and Young's 25th place rating was tops among accounting firms. The Institute used employee opinions combined with an evaluation of the business's culture and policies. Flexible work hours and upward mobility for women were two of the criteria specifically mentioned in the article.

Congratulations to each of the firms mentioned. If you are job-hunting; keep in mind that your expectations for an employer may or may not coincide with the criteria used by the Great Places to Work Institute.

Wednesday, January 10, 2007

Uncollectible Taxes and AMT Lead Nina Olson's Annual Report

IRS Taxpayer Advocate Nina Olson has released an 80 page annual report with considerable criticism and some praise of IRS performance. Drawing special scorn is the IRS collection efforts--Ms. Olson favors earlier intervention, greater use of offers in compromise and ending of use of private collection agencies. Other recommendations include repeal of the alternative income tax, simplification or elimination of phase-outs (such as itemized deductions), raising the filing floor for nonprofit organizations from $25,000 to $50,000 in gross revenues and clarification of the definition of a qualifying child. Ms. Olson did praise the IRS for improvements on the Questionable Refund Program and its efforts toward a five-year strategic plan for taxpayer service.

Once again, Ms. Olson comes across as a fair-minded advocate for the taxpayer. I do not necessarily oppose private collection, but all other items mentioned seem reasonable.

Tuesday, January 09, 2007

Top Ten Tech Issues for 2007: PLUS One by Strategic Finance

William Baker, writing in a Strategic Finance article reprinted at Smartpros, reviewed an AICPA survey. The subset of AICPA members chosen, primarily those who are Certified Information Technology Professionals, listed their top ten as follows:
1. Information security (again)
2. Assurance and compliance (primarily SOX)
3. Disaster and business continuity planning
4. Information technology (IT) governance and valuation
5. Privacy management
6. Digital identification and authentication
7. Wireless technology (such as Wi-Fi)
8. Application and data integration, including system intercommunication
9. Paperless digital technologies, such as XBRL
10. Spyware detection and removal

Baker emphasizes at the end that goal alignment between IT and management, similar to but not the same as IT governance, SHOULD be the top item--alignment will assure that IT and top management continue to seek the same goals and remain so as both IT and management adjust to future requirements.

Baker offers a compelling point of view-- at the same time, the listed top ten is also worthy of attention.

Saturday, January 06, 2007

New Blog Links for a New Year

Just added about half a dozen new links in the blogroll at the right. Two personal finance links, My Money Blog and My Money Forest, should have been added earlier. I decided to substitute one left-leaning law professor tax blog for another by replacing Start Making Sense with A Taxing Matter. I decided to add Taxalicious because many tax bloggers which I respect have joined the Tax Blogger community founded by Taxalicious. Finally, Tax Playa and Wandering Tax Pro are on trial--let me know what you think of these blogs.

Update: I just updated my Carnival links (except for fraud and taxes--continue to go through Fraud Files and Don't Mess with Taxes respectively for those carnivals). The Carnival of Enterpeneurship was reluctantly dropped--it does not appear to have published since June 2006.

Friday, January 05, 2007

Senate Leaders Vow Attack on AMT

Key Senate Finance Committee members Max Baucus (D-MT) and Charles Grassley (R-IA) have introduced legislation to repeal the alternative minimum tax. Similar legislation was unsuccessfully attempted last year, but both believe that the elimination of the AMT is an important step in middle-income tax relief. At the moment, only annual adjustments of AMT exemptions keep the AMT from affecting large numbers of American taxpayers.

Good luck to the Senators in their efforts; at the VERY least, a large enough patch to last several years is needed to avoid last-minute legislation and the associated stress for tax preparers.

Wednesday, January 03, 2007

IRS Gets Off to Bizarre Start to 2007

In two head-scratching rulings to start the New Year, the Internal Revenue Service allowed an unmarried cohabitating couple the principal residence gain exclusion under the premise that pregnancy was an "unforeseen circumstance" and refused to extend the tax deposit due date from January 2 to January 3 despite the federal mail holiday for Gerald Ford's death. In the first case, the couple had owned the house for seven months, the woman was about one month pregnant and they were living separately. The house was believed to be too small for two adults and a child but neither could pay for the rent. In the second case, there will be LIMITED opportunities under three conditions for late penalties to be waived.

I am completely perplexed by these decisions and hope that sense and reason will prevail as the year continues.

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