Tuesday, September 25, 2012

"Going Concern" Explanatory Does Not Always Mean that the Sky is Falling

50 years ago or so, one of the books my parents would read to me at night was "Chicken Little."  The story, as best as I remember it, involved a juvenile chicken who announced after a drop of rain fell on his head that the sky was falling--and convinced many of his young friends to join in the panic.  Periodically, one sees similar behavior in the business world; one present example being the widespread belief that a going concern explanatory paragraph inherently will lead to a (most likely Chapter 11) bankruptcy filing.  Peter Bible of EisnerAmper CPA firm points out that bankruptcy is NOT inevitable from a going concern expression and that converting financials to a liquidation basis is not necessary needed or even appropriate.

I have to acknowledge that Mr. Bible's advice is probably the reason that going concern opinions are uncommon, particularly among publicly-traded businesses.  In theory, it seems that going concern issues should be a significant red flag and I have even considered calling for a qualified opinion in the case of significant going concern anxieties.  Maybe I have done a small-scale Chicken Little here--guess there is a reason that I am in academia and not in practice.

IRS Showers Farmers with Tax Relief from the Drought

  • IRS and Drought Relief after a Fashion

  • Farmers in at least parts of 43 of the 50 states are eligible for a one-year extension of the time to replace stock from forced cattle sales if the forced sales occurred between September 2011 and August 2012.  The stock must have been intended for draft, dairy or breeding purposes.  Additional extensions may become available in areas where the drought continues.

    I cannot complain about this decision since the farmers effectively are "selling their seed corn" and this has little discretion involved.  I remember the dry days of June and July in northern middle Tennessee and nearby Kentucky and wish farmers well throughout the country; especially now with many gearing up to harvest.

    Wandering Over to a Tax Pro

    Robert Flach, host of the Wandering Tax Pro (seek link at right), was kind enough to interview me for his blog.  The results of the interview will be posted Friday.

    Thursday, September 20, 2012

    Could Your Tax Preparer Put Your Identity at Risk?

  • Tax Problems from Power of Attorney

  • In a time-saving manuever, some CPA firms are using electronic powers of attorney to obtain tax transcripts.  The Treasury Inspector General of Tax Administration (TIGTA) points out that this approach may increase the risk of inappropriate disclosure of tax information.  Online Form 2848 allows the CPA to get tax transcripts; TIGTA points out that nearly 900,000 Form 2848s and close to 17 million transcripts have been asked for since 2004.   TIGTA's recommendations to improve internal control included a review of 2848 filings for appropriateness; especially from law/CPA firms which file large numbers of Form 2848;  assuring that tax attorneys filing returns have a signed power of attorney (POA) before appealing for internet-based POAs and that unauthorized IRS employee would not "snoop." e-transactions.

    There is such a thing as being too hasty and clearly some tax law professionals are stretching the intent of Form 2848 for their own convenience.  Safest strategy to follow here: get a signed POA before trying for an electronic POA; also, talk with the client about advantages and possible disadvantages to using electronic POAs.

    California Dreaming No Longer: Governor Signs CPA Mobility Law

  • Jerry Brown Assures CPA Mobility in Golden State

  • [Post #1200]  California Governor Jerry Brown today signed into law a provision allowing CPA mobility making the Golden State the penultimate state (and last on the North American mainland; only Hawaii remains as a holdout) to provide this flexibility to accountants.  As is true with the mobility laws in other states, CPAs from other states remain subject to the California Board of Accountancy while practicing in California.  Johanna Salt, chair of the California Society of CPAs, praised the legislation as protecting California CPAs from retribution by other states.

    I guess better late than never is the operative phrase here; though California CPAs may look enviously at outside CPAs who do not have to pay some California fees.  There are enough large CPA firms in California to keep this new from seriously damaging California CPAs.

    Wednesday, September 05, 2012

    NAEA: Bring AMT and Taxes on Social Security Received into the 21st Century

  • Enrolled Agents Seek Update on Two Tax Law Provisions

  • Kay Bell's Tax Carnival 106: Labor Day

  • NOTE: Though I did not have any posts in this month's Carnival of Taxes; I still thought that many readers would like to see the fine posts referenced in the Carnival.

    The National Association of Enrolled Agents announced that their present focus in advocacy was the updating of tax code provisions.  Two particular provisions which got their attention.  One was the Alternative Minimum Tax, which they asserted would be devastating to the middle class save only for annual tax patch legislation--thus NAEA would want either elimination of the AMT or a major rewrite.  Second for now is taxation of social security benefits--the lack of indexing of income levels for the 50% and 85% provisions means now that even LOWER middle class retirees have half or more of their Social Security benefits subject to tax.

    Obviously, given the horrendous level of debt and deficit acquired over the last four years--and make no mistake, these last four years should unquestionably prove that heavy levels of government spending no longer can buy lower rates of unemployment or poverty--ANY adjustment reducing tax revenues has to be looked at with some skepticism.  That said, the NAEA has found two excellent provisions to reconsider.  The annual tax extender "dance" has become somewhat of a joke among tax types and, if anything, I would go farther than the NAEA on social security benefits--not only increasing the 50% taxable income levels to $45,000 single; $65,000 MFJ and $30,000 MFS AND indexing these levels, but also eliminating the 85% taxability layer--which adds complexity on top of being overly punitive to social security recipients of middle income levels.

    Meet an Olympian; Meet a CPA Firm

  • Deloitte Uses Olympics and Paralympics to Recruit

  • Big Four CPA firm Deloitte and Touche is bringing nine Olympic and Paralympic athletes to college campuses in a month-long recruiting blitz.  Soccer star Abby Wambach, two-time gymnast Jonathan Horton and others will recount their experiences while soon-to-be graduates discuss opportunities with the CPA firm.  Lisa Baird of the US Olympic commitee praised D&T for highlighting the dedication and character of the athletes.

    An excellent act by Deloitte: it provides a effective gimmick to get student attention; illustrates the potential and accomplishments of handicapped Americans and allows the Olympians to avoid being forgotten for the next 3+ years.  Doubt that they will be at Austin Peay, but hope many readers have a visit nearby.

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