Monday, April 16, 2012

Survive and Advance (to Getting a Life Back)

Congratulations and job well done to the interpid men and women who finish another grueling tax season in less than 24 hours. Some kept blogging (like Russ Fox and Joe Kristan); others (like Robert Flach and Monica Lawver) took a hiatus--regardless, enjoy your extra time with family, at the country club, etc. in the weeks and months ahead. Also, keep posting those blog entries!

Tuesday, April 10, 2012

Tax Preparer Regulation: Will It Work? Will It Survive the Courts?

IRS Commissioner Douglas Shulman has recently cast tax preparer regulation in the role of police monitor to ferret out fraudulent tax preparer behavior. Shulman stated at the National Press Club that he believed that such fraudulent behavior was uncommon, but needed to be attacked to make sure that taxpayers get value for their money. Shulman also argued that such regulation would pass Constitutional muster in its recent challenge by the Institute for Justice. Patricia Thompson of the AICPA was generally positive on tax preparer regulation, arguing that such regulation would promote better compliance with Treasury Circular 230, insuring that tax preparers prove their understanding of Form 1040 before being able to charge for tax returns and upgrading continuing education for all tax preparers.

I tend to agree with Shulman that the IRS will survive its recent legal challenge. I am considerably less certain that tax preparer regulation, in and of itself, will effectively deter tax fraud.

Sunday, April 08, 2012

Truth IS Stranger than Fiction

"Who has believed what we have heard, and to whom has the arm of the Lord been revealed" Isaiah 53:1

As a sports fan, I have seen numerous "I won't have believed it if I hadn't seen it" moments over my life, ranging from the U.S.A. hockey "Miracle on Ice" in 1980 to the Villanova upset of Georgetown in the NCAA finals to Larry Mize's miracle chip to beat Greg Norman at the Master's to today second shot on the second playoff hole by Bubba Watson. Sometimes, such events occur outside the field of sports as well, such as the overthrow of Gaddafi in Libya last summer or the raizing of the Berlin Wall in the late 1980s.

All of the above pale in comparison to the story celebrated today. An itinerant preacher, abandoned to execution two days earlier, mysteriously left his grave as an angel guarded his forsworn linens and greeted first two astonished women, then two disciples. Over the next five weeks, he would appear to numerous people--and the impact of his appearance was unmistakable. Men who cowered in fear just days earlier boldly preached a message beyond comprehension and at no small risk to their freedom or even life. Massive crowds gathered in Jerusalem where he hung on a cross only days earlier without thought of time or personal wealth to hear the spectacular story.

I understand that many have heard this story beyond the point of boredom and am all too aware that Christians, myself definitely included, often fail to live up to teachings and life of Jesus. Our failings, however, do not change the truth beyond fiction of Easter and refusing to believe simply because his followers frequently can't get their act together goes beyond "cutting off your nose to spite your face."

Wednesday, April 04, 2012

Ernst and Young Predicts FASBs New Leasing Standards

  • E&Y on Leasing Changes

  • The U.S. Financial Accounting Standards Board and the International Accounting Standards Board are fairly close to convergence on leasing standards (the sticking point appears to be income statement-related) and expect to have an exposure draft on leases by the end of June with the goal of publishing joint standards sometime during the middle of next year. To help clients prepare, Ernst and Young discussed the impact of the new standards on businesses. Among the key points: be aware that almost all businesses have at least some leases; be extra aware of the changes if your business functions as both leasee and leasor, be alert for debt/equity ratio changes and do not treat these changes as only affecting accounting and finance.

    Having taught Intermediate Financial Accounting on a number of occasions, I can safely say that lease accounting is one of the most complex topics in accounting. Hopefully (I know, don't hold my breath), the final standards will bring clarity and consistency between leasor treatment and leasee treatment as well as capital vs. operating lease.

    "Free Money?" Not From Taxes!

  • Terrible Tax Surprises

  • Kay Bell (yes, the coordinator of Carnival of Taxes and operator of Don't Mess with Taxes) reminds Yahoo! Finance and Bankrate readers that five sources of income which some might consider tax-exempt are at least in part gross income and subject to taxation. Included in Kay's list are unemployment insurance (which has been subject to tax since the late 1970s), alimony received (but NOT child support received), most forgiven debt (some exceptions including a mortgage debt deduction), prize winnings (pay particular care if you receive noncash prizes like a vacation or living room furniture; often these items are promotional items from advertisers and the full retail value of the item will be listed, even if you live in a low-cost area where you could buy the item for significantly less) and Social Security winnings (if you have significant income other than social security (and in this case, $50,000 of other income is significant) up to 85% of social security received is subject to tax).

    Kay's article is a good reminder that what may popularly seem true and what actually IS true sometimes varies in tax law. Soapbox time: I have big problems with the 85% layer on Social Security taxation for two reasons: [1] it increases tax complexity, [2] since the recipient paid in at least 50% of his or her contribution to Social Security, it seems unfair to make receipts 85% taxable, ESPECIALLY at the relatively low level of modified AGI where the 85% provision kicks in ($44,000 MFJ, $34,000 other).

    Limited Accounting/Tax Blogging This Month

    I have a particularly busy month at school including a half-term (double speed) graduate course, three paper presentations at a conference mid-month and preregistration advising. Therefore, after today, accounting and tax blogging will be hit and miss (mostly miss) until early May.

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