Tuesday, July 31, 2007

Accounting Today Editor: Edwards Tax Proposal Not Ready for Prime Time

Bill Carleno, editor-in-chief of Accounting Today, criticized a John Edwards proposal to have the IRS automatically calculate taxes for 50 million Americans and send them either an invoice or refund for difference in tax owed and taxes paid (through withholdings or estimates). Apparently, Edwards is concerned about taxpayers having to "pay preparers to help with taxes."

Carleno has done a good job of finding flaws with the Edwards approach: the expectation that government employees would be more effective than licensed private preparers, the belief that the IRS somehow would become cutting edge in IT applications and that somehow this approach would reduce the "tax gap." Another prolem or two: for low-income taxpayers--the ones with the most to gain from a government-based tax preparation system--the IRS-run VITA system already provides FREE tax assistance; also, the plan does not in any way appear to address the complexity of the present IRC and associated regulation. Assuming that government-employed preparers would provide improvement over licensed private preparers in dealing with the present tax code is at best highly optimistic.

Monday, July 30, 2007

Stiff Working as New IRS Commissioner

The Internal Revenue Service appointed Linda Stiff as the acting Commissioner of the IRS; she replaces acting commissioner Kevin Brown who now is COO of the Red Cross alongside CEO and ex-IRS commissioner Mark Everson. Ms. Stiff is also moving from personnel services director to deputy commissioner of services and enforcement.

For all the grief that I sometimes give the IRS, I wish Ms. Stiff well in her duties; she has a thankless job.

Tuesday, July 17, 2007

Robert Half on What to Expect from New Hires

The Robert Half International Leadership Council released a report on what to expect from new graduates and how to attract the best graduates to a CPA firm. General recommendations include increased referral bonuses and finding ways to improve the stature of the accounting and auditing profession both in the media and on campus. Once hired, Robert Half recommends more career guidance and a balance between repetitive and challenging projects. For present professionals, Robert Half recommends efforts to improve cultural literacy and familiarity with new reporting models (presumably XBRL as an example).

Robert Half is a well-established recruiter of accounting professional; their thoughts are certainly worth considering.

Monday, July 16, 2007

Mid-July Update

I am planning to a few new blogs soon--thanks to Michelle Golden for her ongoing attempts to keep up with the latest status on the accounting blogosphere. Additionally, posting for the next 10-14 days will be below average; my in-laws are visiting this weekend and my wife and I effectively will have a "vacation at home" next week.

Federal Agency CFOs Say Present Reporting Requirements Too Cumbersome

Financial managers of Federal agencies and bureaus argue that CFO Act compliance is taking up too much of time and resources. Of the 132 respondents to the Grant Thornton/AGA survey, estimated time spent on financial compliance was 25% as compared to 19% on strategic planning/decision making. Survey respondents criticize the CFO Act as providing diminishing returns and keeping management from more desirable activities. Part of the complication includes "tag-ons" to the original legislation, including a OMB Circular (A-123) requiring internal control analysis.

Even assuming that the remaining 56% of management time is used productively on items such as training and supervising employees; I am not overly sympathetic--though to be fair, I have not "walked in the shoes" of these managers. Given the massive amounts of taxation and spending that American citizens support, it IS imperative that Federal accounting be as thorough and transparent as possible. Only in recent years have Federal accountants faced the level of government limitations and oversight which accountants for private enterprises have experienced for decades.

Thursday, July 12, 2007

Senate to USSC: Act or We Will on Physical Nexus for State Taxes

  • Senate Fights Back on Nexus--Accounting Web

  • Senators Mike Crapo (R-ID) and Charles Schumer (D-NY) have authored legislation which would clarify state taxation where a business has no physical presence. The U.S. Supreme Court recently refused to address two cases: Lanco, Inc. and FIA Card Services where states assessed taxes with no physical presence--claiming that the companies had "significant economic presence." Crapo and Schumer want to return to Quill vs. North Dakota, a case decided a decade ago which required physical presence for states to qualify to apply business taxes. Schumer referred to the present state as an administrative burden with the potential to be debilitating to commerce.

    It is a little hard to understand the Supreme Court's refusal to act unless they are considering a change in present law. Businesses selling on the Internet, perhaps even those in foreign countries, should take note--some states are more than eager to apply sales taxes to Internet sales.

    Wednesday, July 11, 2007

    NABA Awards

    The National Association of Black Accountants announced 60 scholarship winners with awards totalling slightly over $200,000; tripling the previous years scholarship awards. NABA also announced Ernst and Young funding of $200,000 in additional NABA scholarships over the next four years. Additional award winners included the Prudential Group, the chairman of Deloitte South Africa, the chief tax officer of Wal-Mart and the director of Spielman, Koeningsberg and Parker's entertainment division.

    Congratulations to all winners, particularly the student scholarship winners.

    Does WHERE a Student Get Their Bachelor's Matter in Hiring?

    An Accountemps survey of 1,400 chief financial officers looked at the importance or lack of importance that the prestige of a student's university makes in hiring decisions. One out of eight surveyed said that the school of graduation is very important, 38% said of some significance and virtually half said that the name of the university on the diploma made no difference.

    I am generally inclined to agree that the source of degree is not that important; I had some auditing students this past spring that could hold their own against almost any SEC or Big Ten accounting school's graduates. Three caveats, however: [1] if your university is not regionally-accredited (AACSB is nice but less critical) you could have problems, [2] if you are moving to a different part of the country, getting the degree from a "big-name" school probably makes more of a difference--Austin Peay students can probably compete effectively with UK (Kentucky) students for jobs in Hopkinsville, KY but would be at a disadvantage vs. UK (and even greater disadvantage vs. more local universities) in getting a job in Chicago, [3] good work experience, an enjoyable personality, a high GMAT or some combo of the three can level the playing field in a hurry for those from smaller, less well-known universities.

    Tuesday, July 10, 2007

    Revised Ethics Code for Financial Planners

  • Ethics Code for Financial Planners--Smartpros

  • The Certified Financial Planner Board of Standards (CFP Board) has updated its standards with the redone standards starting next July. Standards include key topics to discuss with potential clients, disclosures required in a financial planning engagement and a requirement to emphasize the client's best interests. Karen Schaeffer of the CFP Board says that the updated standards send a strong message of accountability and trustworthiness to potential clients.

    There are a number of organizations, including the AICPA, which provide professional designation for financial planners--probably all have some form of ethical code. The CFP Code asks the right questions--it is not clear whether it does a better job of policing ethical behavior than other designators of financial planners.

    Saturday, July 07, 2007

    Financial Peace--An Update on the Ramsey course

    My wife and I are about five weeks into Dave Ramsey's Financial Peace. Some initial thoughts:

    [1] Go in thinking "short-term pain for long-term gain". One of the things you have to do in the early weeks is converting from paying credit cards a month after you buy to generally paying at time of purchase. Effectively, you are paying three months of bills in two months (or, if REALLY disciplined, two months in the first month). We were not carrying a credit card balance and it has been hard; I can only imagine how hard it must be if you are paying off an old balance before converting to "pay-as-you-go."

    [2]We have no children, it must be REALLY hard to tell kids that they can't have some toy or fancy clothing item just because you are going off credit cards. To balance that, Dave has some interesting ideas about teaching money management--his requirement that his kids give to church a portion of their earnings from chores is a good way to prepare youth for the future shock of taxes.

    [3] My wife remarked that she finds it more painful to buy groceries with cash than with a credit card. This reminds me how shrewd/devious the federal government was to institute tax withholding during World War II--if workers had to save up each year to pay taxes my guess is that George W. Bush would be considered a "taxaholic" rather than a tax cutter.

    [4] For those unfamiliar with Dave, he is a quite devout Christian. Fine with me, but could be a hangup for some who could use his help.

    [5] Probably the most useful feature so far has been the "keys to negotiating." I have never considered myself a good negoiator; I hope to make his insights helpful on major future purchases such as autos and appliances.

    [6] We have a good many soldiers from Fort Campbell in the program. I am thrilled to see these fine men and women who have fought valiantly to give a chance for freedom to Iraqis and Afghans themselves get the option to be freed from the stranglehold of consumer debt.

    Wednesday, July 04, 2007

    BOOM!! (Happy Fourth of July)

    From the last stanza of the "Star Spangled Banner"--Francis Scott Key

    O, thus be it ever when freemen shall stand
    Between their lov'd homes and the war's desolation
    Blest with vict'ry and peace,may the heav'n-rescued land
    Praise the Pow'r that hath made us and preserv'd as a nation!
    Then conquer we must, when our cause. it is just,
    And this be our motto: "In God is Our Trust"
    And the star-spangled banner in trimuph shall wave
    O'er the land of the free and the home of the brave

    Frustrating Flaws in IRS Free File Software

    The Inspector General for Tax Administration criticized software for the Free Filing program for shortcomings in credits related to children. In addition, Senator Max Baucus (D-MT) and Charles Grassley (R-IA) were critical of the IRS's decision not to test the software before use. Particular problems existed in the determination of dependency exemption and the use of child and dependent care and earned income credits. At present, only about 3% of eligible filers use Free File and the number of taxpayers using Free File dropped for the 2005 year vs. the 2004 year (as pointed out in a previous post).

    Wow!! No wonder that taxpayers are staying away from Free File in droves! This program is an important supplement to VITA in reducing tax compliance costs for low-income taxpayers--but ONLY if it can be trusted.

    Monday, July 02, 2007

    Snippets of Possible Interest

    [1] This is the hump day of 2007; 182 days completed when today started; 182 to go when today concludes.

    [2] To Neil Mc Intyre and other Canadian readers, happy 140th yesterday. My wife and I have enjoyed a number of visits to your fine country--apparently, we have to get a passport before coming again. :(

    [3] I choked and did not participate, but the Carnival of Taxes was posted today at Don't Mess with Taxes. Other carnivals are also available, check Fraud Files for the Carnival of Fraud and links on the blogroll at right to such carnivals as the Carnival of the Capitalists and Carnival of Personal Finance.

    IRS Free e-File Use Drops: Are Taxpayers Looking a Gift Horse in the Mouth?

    The Taxpayer Inspector General announced that use of the free e-filing system made available by IRS dropped from over 5 million users for 2005 tax year to slightly under 4 million in the 2006 tax year. At part of the decrease can be explained by a tightening of an income limitation to $50,000 according to Inspector General J. Russell George. George also expressed concerns that the program needs to be marketed better and more reliably accurate. The drop in use of the program threatens a Congressional goal of 80% e-filed returns by the end of 2007.

    IG George probably is on target with his critique of e-filing marketing and concerns about limiting the free filing opportunity; in all likelihood, fear of technology is also limiting use of e-filing. I believe that some people believe that use of e-filing increases their risk of audit; that perception alone, even if incorrect, would put a damper on e-filing.

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