“ Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund. ”
—F.J. Raymond, humorist

Feeling the Tax Sting
M utual fund investors were hit hard in 2006, paying the IRS more than $23.8 billion on their reinvested distributions. Equity fund shareholders paid more than 60% ($14.4 billion) of the total tax burden on their capital gains.

Investment companies distributed $418.5 billion last year, surpassing the previous record high of $376.6 billion set in 2000. Short- and long-term distributions from equity funds increased 79% and 86%, respectively, from 2005 levels. Over the last 10 years, investors paid on average 17% to 44% of their load-adjusted returns in taxes.

Source: Lipper’s Taxes in the Mutual Fund Industry—2007, www.lipperweb.com .

Tip Your Hat to Tipsters
The Association of Certified Fraud Examiners found occupational frauds are more likely to be detected by tips (34% of cases) than by internal audits (20%), external audits (12%), internal controls (19%) or police alerts (4%); accidental detection uncovered fraud 25% of the time. In some of the 1,134 cases studied, companies reported more than one initial detection method.

Nearly two out of three tips came from employees, with the remaining third supplied by outside (customers and vendors) or anonymous sources.

Source: 2006 ACFE Report to the Nation on Occupational Fraud & Abuse, The Association of Certified Fraud Examiners, www.acfe.com/fraud/report.asp .

Gender Gap in Financial
T he latest Retirement Fitness Survey reported about six out of 10 women felt worried (58%) and uncertain (61%) about planning financially for retirement. Married women appeared less prepared than their unmarried counterparts, with 39% vs. 27% not knowing how much they had saved for retirement (20% of married men and 28% of unmarried men reported not knowing their total savings). Only one in eight respondents had a detailed plan of how much they needed to save and how to reach that goal.

Women cited coaching and education about investing, in addition to a better evaluation of their expenses and where they can cut back, as resources that would improve their preparedness.

Source: Wachovia’s Retirement Fitness Survey, www.wachovia.com .

Filings Tumble Following Bankruptcy Reform
I n the first full year the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was in effect, bankruptcy filings fell 70% to 617,660, the lowest number since 1988.

Filings involving business debts totaled 19,695, down 50% from almost 40,000 in 2005, while non-business filings dropped 71%, from more than 2 million in 2005 to 597,965.

BAPCPA established a needs-based formula that determines whether debtors are eligible to file under Chapter 7 (where all unsecured debts are generally discharged) or should be converted to Chapter 13 (where at least a portion of debts are paid). The test resulted in a 78% decline in Chapter 7 filings.

Other consumer and commercial bankruptcy provisions of the act are available at the AICPA’s Personal Financial Planning Center at http://pfp.aicpa.org .

Source: www.uscourts.gov .

A Humbling Appointment
“I’ve told most of my family and friends that if and when I became chairman of the awesome and powerful Ways and Means Committee, I didn’t want to be treated any differently from any other world leader.”

—House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., to the National Press Club, April 17.

10 Minutes to Impress
According to a survey of hiring managers, it takes just minutes to form a positive or negative opinion during the initial interview, despite spending on average 55 minutes and 86 minutes meeting with staff and management-level applicants, respectively.

“The opening minutes of the conversation often set the tone for the rest of the discussion, making it wise to prepare especially well for the first few interview questions,” says Max Messmer, chairman and CEO of Robert Half International.

Here are five questions frequently asked at the start of an interview and tips for responding:

Can you tell me a little about yourself? Summarize your professional interests and goals in a manner that explains why you are the right fit for the specific position and company.

Why do you want to work here? Respond in a way that shows your research and understanding of the firm’s business objectives and priorities.

W hat do you know about our firm? Describe how your skills and experience will contribute to the firm’s success.

Why are you looking to leave your current position? Avoid criticizing other employers and keep your answer focused on the opportunity at hand.

What is your most significant professional accomplishment? Cite a specific achievement that demonstrates your abilities and shows tangible results.

Source: Robert Half Finance & Accounting, www.roberthalffinance.com .

Weaving the Web of Information
C ompanies are getting the message that their employees want benefits information online—62% reported they prefer this delivery method. But there’s a right and wrong way to educate and encourage responsible behavior among employees via the Internet, according to Michael Rudnick, national eCommunications and portal leader at Watson Wyatt.

Rudnick offers the following dos and don’ts for providing online benefits resources:

DO send personalized, relevant and meaningful information.

DON’T send employees links to several vendor Web sites and expect them to plot a course of action on their own.

DO improve employee experience by using a single sign-on portal that combines information, applications and vendor sites.

DON’T forget to establish specific criteria to guide changes to information delivery systems based on employee feedback.

DO use simplified terminology, navigation and multimedia.

Source: Watson Wyatt Worldwide, www.watsonwyatt.com .

An Antidote to Excess?
A recent study by Institutional Shareholder Services found CEO succession planning, which many public company boards have adopted over the past three years, to be a key practice in reducing excessive executive and golden parachute payments. The study suggests that without a succession plan in place, a board can become desperate to hire an outsider and is then more willing to offer a “candy store of incentives.”

Index Group

Percentage of companies with a board-approved CEO succession plan, Jan. 2004 Percentage of companies with a board-approved CEO succession plan, Jan. 2007 Percentage- point change
CGQ Universe 1 2% 28% +26
Russell 3000 12% 64% +52
S&P 400 38% 90% +52
S&P 500 65% 96%
S&P 600 20% 82%
Grand Total
14% 54% +39

1. 5,000 public companies tracked by ISS’ Corporate Governance Quotient

Source: Exit Pay: Best Practices in Practice, The ISS Center for Corporate Governance, 2007, www.issproxy.com/pdf/ExitPay2007.pdf .


$48.7 billion
Tax receipts from individuals on April 24, 2007,
a one-day IRS record.

Source: Reuters.

Turn the Spotlight on Tax-Friendly Benefit Options
Y oung employees are in the dark when it comes to retirement planning, and as a result, potential tax savings are slipping through their fingers, according to a taxpayer survey by CCH and Harris Interactive.

Employees ages 18 to 24 were least likely to use company-sponsored
401(k) plans—participation rates sit at 28%, with just 4% reaching maximum levels and 16% putting away the amount needed for the greatest employer contribution allowed under the plan, according to the survey. Participation in tax-advantaged IRAs and medical flexible spending accounts was 19% and 10%, respectively, and a lack of education may be to blame—57% said they didn’t know if they qualified for a traditional or Roth IRA and 11% were uncertain if their employer offered a medical FSA.

Nearly one in five rated their employer as horrible in delivering tax-advantaged benefit information. Tax analyst David Bergstein, CPA, suggests that firms consider if they’re using the communication avenues that young employees are most receptive to. “If young workers are not hearing the message, no matter how good it is, they don’t have the information they need to make informed choices,” he said.

To avoid using catch-up contributions later in life, Bergstein suggests employees of all ages consider these tax-saving, retirement-friendly habits:

Add up how much you paid in income taxes for 2006 and research what tax-saving benefit programs and tax-advantaged accounts you qualify for.

Participate in a medical FSA.

Contribute to a 401(k), at least up to the amount needed for the maximum employer contribution.

Take a portion of your 2006 tax refund and put it toward retirement.

Source: CCH and Harris Interactive taxpayer survey, http://hr.cch.com/news .

Where Taxpayers Are Most Likely to Pay the AMT in 2007


State Percentage of all filers
Maryland 25%
New Jersey 25%
Massachusetts 24%
California 20%
Minnesota 19%
New York 19%
Virginia 19%
Wisconsin 19%
District of Columbia 18%
Michigan 18%
Pennsylvania 18%


Source: Institute on Taxation and Economic Policy, www.ctj.org/itep .

Always Something New to Learn?
T he answer would be “yes” for the majority of adult consumers who complete financial education programs.

Gallup polled consumers six to 12 months after finishing the Federal Deposit Insurance Corp.’s Money Smart course, which focuses on money management, banking skills and basic financial services education. A majority of participants reported increasing savings and falling debt and were more likely to comparison shop for financial service providers.

Other lasting behavioral changes included:

61% not using a spending plan at the end of the course had used one when polled.
95% using a spending plan at the end of the course continued to do so.
37% without a savings account had opened one.
12% increase in those who always paid bills on time.

The complimentary program—offered online or on CD-ROM in six languages—has had 864,000 users and prompted more than 120,000 consumers to establish new financial relationships.

Source: www.fdic.gov/consumers/consumer/moneysmart/index.html .


Year-end tax planning and what’s new for 2016

Practitioners need to consider several tax planning opportunities to review with their clients before the end of the year. This report offers strategies for individuals and businesses, as well as recent federal tax law changes affecting this year’s tax returns.


News quiz: Retirement planning, tax practice, and fraud risk

Recent reports focused on a survey that gauges the worries about retirement among CPA financial planners’ clients, a suit that affects tax practitioners, and a guide that offers advice on fraud risk. See how much you know with this short quiz.


Bolster your data defenses

As you weather the dog days of summer, it’s a good time to make sure your cybersecurity structure can stand up to the heat of external and internal threats. Here are six steps to help shore up your systems.