Tuesday, May 29, 2012

Am"Bushed" by Taxes? Keep or Let Die the Decade-Old Tax Cuts?

  • Continuing the "Bush" Tax Cuts

  • House Republicans have announced legislative plans to extend the so-called Bush tax cuts beyond the end of 2011 during the summer. Eric Cantor (R-VA) argues that the largest tax increase in recent history would ensue if the cuts are allowed to wither away. Correspondingly, Minority Leader Nancy Pelosi (D-CA) proposes limiting the extension to only taxpayers with incomes over $1 million and using extra tax revenues to reduce the annual deficit. She argues that ending decade-old tax breaks for wealthy Americans would lead to the wealthy paying "their fair share." The Obama administration has proposed only extending the tax breaks for those earning over $250,000 and a number of influential leaders, including IRS Commissioner Doug Shulman, have encouraged Congress to address the tax issue before November elections to give taxpayers a chance to plan for any changes.

    I actually considered agreeing with Ms. Pelosi (and immediately worried about my sanity) under the premise of making sure that the issue was addressed before December 31 (or even the second half of December). Guess here is that while spending cuts (or freezes) are essential to getting the U.S. Government's fiscal house in order and that such adjustments clearly need to be the primary focus of fiscal correction; nevertheless, limited tax hikes or AT LEAST ending of some tax incentives may be required to totally get the budget completely under control.

    WebCPA: Best Starting Jobs for Graduates in Accounting or Finance

  • Where to Start Your Career

  • With many people just getting their Bachelors in Accounting and Finance--and with more than a few of them still job-hunting--Michael Cohn of Accounting Today chooses his six best options for jobs in the accounting and finance area. Michael likes financial analysts (big need at financial institutions), accountant (private or CPA), auditor, payables clerk (a somewhat surprising choice--perhaps made to emphasize that not all accounting positions require a bachelor's degree), credit analysts (similar to financial analysts in many ways but with primary focus of minimizing uncollectible risk) and mortgage underwriter (claim that bachelor's in finance is enough makes me skeptical unless the student has two of the following three: very good grades, extensive internship/past business background, degree from university with excellent academic reputation).

    I would have liked Mr. Cohn to have delineated the "accountant" category more clearly--there is a significant difference between working in a large CPA firm versus a small private business. Additionally, in the accounting realm, I would have included IRS Revenue Agent and Internal Auditor as worthwhile entry-level opportunities.

    Tuesday, May 22, 2012

    GASB's Efforts to Educate Parents about the Finances of their Child's Schools

  • GASB School District Guide

  • The Governmental Accounting Standards Board has published a second guide to understanding finances of public (K-12) schools (my guess is that the guide would be of some value; though less authoritative, for private K-12 schools and colleges and universities). Among the features of the guide are over 50 examples of financial statements, notes and schedules with accompanying commentary to help make these items easier to understand; examples of ratios which can be used to evaluate performance, an overview of financial reporting requirements for school districts and an extensive glossary of terms. The guide sells for $15 (probably about $20 including shipping).

    This guide should be required reading for school board members; teachers (or at least their unions) and principals; schools of education at universities and journalists covering K-12 schools as part of their reporting responsibilities. I also recommend this for public administration and governmental accounting classes; community advocates; local TEA parties; churches and parents of K-12 students.

    Taxes are Taxing to the Brain--Any Ideas?

  • Reform, Education or Maybe Both

  • A number of years ago, feminists were appalled by a version of Barbie which declared "Math is so hard!" Turn ahead to the early 21th century and a finding by Thomas De Lorenzo of Ernst and Young that taxes were hard--even for users of Turbo Tax. Almost a third of users surveyed were unable to distinguish between a tax deduction and a tax credit--considered a fairly simple concept in the field of tax. De Lorenzo believes that many taxpayers treat tax preparation as a gamble and miss tax planning opportunities which could decrease their tax liability or defer the time of payment. Author Roger Russell's conclusion: do a better job of educating future taxpayers at the K-12 level.

    Two thoughts: [1] Mr. Russell's call for education, though appearing to be obvious, still has validity. Two possible sources: Junior Achievement where available and a campaign by the AICPA simlar to their "Feed the Pig" program on personal finance. [2] while De Lorenzo and Russell correctly point out that tax simplification is unlikely to completely solve the education gap on taxes; a streamlined tax system could hardly hurt--and might even help with the "tax gap" which Democrats frequently bring forward. The FAIR tax advocated by Neal Boortz and Mike Huckabee has gained little traction in primaries and the "9-9-9" plan of Herman Cain is now almost forgotten--but tax simplication and streamlining is still a worthy goal.

    Friday, May 18, 2012

    A Descending Debt Debacle?

  • Walker Expresses Debt Concern

  • Former U.S. Comptroller General David Walker told an AICPA council that debt is out of control and that CPAs need to communicate the seriousness of this debt to their representatives and senators. Walker says that Congress probably is more aware of debt problems than a few years ago, but that such knowledge will not necessarily translate into action. He suggested that rates for very high earners probably were too low but at the same time said that a larger proportion of Americans should pay at least some taxes. Two other specific concerns: the quantity of tax exclusions in the IRC and the fiscal integrity of the Social Security system.

    I heard Mr. Walker at a national IMA convention about three years ago and he is a very credible and persuasive speaker. Certainly a nearly $15 trillion debt is intimidating--but can Congress find political will to act in an election year?

    Monday, May 07, 2012

    Malpractice Suits: Handling Your Worst Nightmare

  • Handling Client Lawsuits

  • Roger Russell of Accounting Today develops a game plan for the CPA firm who is sued by a client (while academic lawsuits are not unheard of, the presence of alternate venues such as grade appeals boards makes them less common) for negligence or other reasons. To minimize the likelihood of the suit coming in the first place: make sure to always use engagement letters, document any controversial position and maintain a relationship with a compentent attorney. In the first phase, the keys are objectively assessing the situation or problem at the heart of the action and keeping your "cool" under pressure from the client. Next priorities: comply with terms of malpractice insurance, never directly admit fault (focus on the descriptive, not the normative and try if possible to get to an alternative dispute resolution (ADR: mediation, arbritration, etc.) approach. Finally, understand the legal process (my wife is the legal expert in our family so I won't go into details) which can be long and take key people away from work with other clients. Finally, if ADR is not an option, determine early in the process whether an out-of-court settlement is palatable, and if so, under what circumstances.

    While I hope that you (and I) never have to use the author's advice, he does make good points--particularly in regard to keeping your cool (easier for some than for others) and attempting to keep the focus on facts. Additionally, try to let your lawyers handle the situation to the maximum possible, especially regarding contact with the plantiff--there are lots of things which a plantiff's attorney can legally do in a courtroom that can drive all but the most stoic amongst us to an emotional gaffe if not meltdown.

    10 States Which Let You Keep More of Your Money

  • Low-Tax States

  • CNBC rates the states with the lowest net taxes (for example: a state with no income tax but a very high sales tax would not necessarily beat out a state with low income taxes and sales taxes). The list of ten lowest is dominated by Southern (three of top five) and Western states (includes #1 Wyoming) states with South Dakota coming the closest to being a Midwestern state and only Delaware (Delaware?--guess DuPont pays taxes for everyone else in the state) in the East. Author Daniel Butszpan cautions readers to make sure that they like the state on the overall before setting down roots; however, each of the top states has corresponding issues.

    I guess for me that taxes are one of numerous considerations (job availability, proximity to family, climate, etc.) and by no means the most important that impacts where I live. Even though Tennessee is rated here as fifth, I think that I am more motivated to avoid a tax "hell" (such as New Jersey or Illinois) than seek a tax haven.

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