Black Tie Not An Option: Appeals Are Informal The 1998 IRS Restructuring and Reform Act contained a taxpayers bill of rights. one provision expanded taxpayers’ due-process protections when dealing with collection matters: IRC section 6330 gives taxpayers the right to a “collection due-process” hearing in the IRS appeals office before
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Forensic services
Tip Compliance Programs Widened
TAX NEWS The IRS expanded its voluntary tip compliance programs from the food and beverage, gaming and hairstyling industries to all those in which tipping is customary (announcements 2000-19 and 2000-23; notice 2000-21). In exchange for an employer’s or employee’s participation, the IRS agrees to refrain from tip examination. Employers
Expensing Corporate Activities
TAX CASE One of the most difficult questions a company faces is whether it must capitalize an expenditure or whether it can deduct it. Minor variations in the facts can greatly affect the answer to the question. American Stores Co., a corporation that filed consolidated tax returns, owned and operated
The Downside of Good Times
EXECUTIVE SUMMARY A PRACTITIONER FOUND ONE RISK OF A STRONG economy is that small business clients may loosen their internal controls, discovering fraud or theft only long after it has happened. THE MOST VULNERABLE ARE PRIVATE COMPANIES in the $10 million to $30 million range because they are large
Last Known Address Program Delayed
TAX NEWS Last year the IRS announced that, effective May 1, 2000, a new program would allow it to update taxpayers’ addresses using the U.S. Postal Service’s national change of address (NCOA) database. Previously a taxpayer’s “last known address,” although not defined by statute or regulation, had been determined by
Donating Excess Inventory to Charity
TAX NEWS CPAs may want to remind clients with excess inventory that they can earn a federal tax deduction when the product is donated to charity. Corporations with a fiscal year ending December 31 should be urged to check their inventory levels now. Clients that have difficulty finding an organization
So That’s Why It’s Called a Pyramid Scheme.
EXECUTIVE SUMMARY CPAs ARE UNDER ATTACK for not doing enough in the war against fraud, and they are, at the same time, being asked to play an increasingly important role in the detection of fraud. Because CPAs are becoming more educated about the subject, success stories about their helping
Taking Account: Key Dates for the Profession
he accounting profession has made remarkable progress since its early days, when practitioners struggled to establish credibility. An examination of some of the most important events during the first nine decades of the 20th century offers a glimpse into what has made the profession what it is today. Although
Earnings Management and the Abuse of Materiality
EXECUTIVE SUMMARY EARNINGS MANAGEMENT HAS RECEIVED wide publicity by the press and scrutiny from the SEC. It is one type of fraudulent financial reporting scheme where management’s desire to meet Wall Street’s earning projections can become a substitute for accurate disclosure. MATERIALITY PLAYS A VITAL ROLE in the financial reporting
Line Items
Too Late to Transfer A married couple owned assets in excess of twice the unified credit “exemption equivalent.” The husband had a terminal illness. Through his will he wanted to establish a unified credit shelter trust, but he owned insufficient assets to fund the trust. However, he jointly owned with
IRS States Position on Hybrid Plan Arrangement
The IRS released a coordinated issue paper for all industries on the use of pension plan distributions to pay for certain benefits. The paper says the portion of pension plan distributions former employees use to purchase benefits in their employer’s cafeteria plan under a tax-free salary reduction does not reduce
Self-Rental Income Considered Active
IRC section 469 states that a taxpayer can use losses from a passive activity only to offset passive activity income. In other words, passive losses cannot shelter active income such as salaries, commissions, wages or portfolio income such as interest, dividend or annuity income. Under IRC sections 469(c)(2) and (c)(4),
Determination of a Profit Motive
Tax Matters TAX NEWS IRS States Position on Hybrid Plan Arrangements T he IRS released a coordinated issue paper for all industries on the use of pension plan distributions to pay for certain benefits. The paper says the portion of pension plan distributions former employees use to
Mortgage Interest and Bankruptcy
Individual taxpayers often engage in more than one business venture. However, when a business also involves personal pleasure or recreation, the IRS may take notice. If the operation generates large losses that offset income from other sources, a taxpayer should consider all facts and circumstances before deciding to deduct the
Automatic Consent to Change Accounting Method Available
Under IRC section 446, taxpayers generally can choose any method of accounting to compute taxable income as long as that method clearly reflects income. However, many small business taxpayers who wish to use the cash method are prevented from doing so because of Treasury regulations section 1.446-1(c)(2)(i), which states a
The SEC’s Proposed Auditor Rule Threatens Our Profession and the Public.
SEPTEMBER 2000 VOLUME 190, NUMBER 3 Editorial Staff Publisher/Editor-in-Chief Colleen Katz Executive Editor Barbara J. Shildneck Managing Editor Elizabeth Uva Senior Editors Katharine W. Coveleski Peter D. Fleming Michael Hayes Raj Rangarajan Robert Tie Cynthia Waller Vallario Stanley Zarowin Assistant Editors Sarah Cobb Vincent Nolan Contributing Editors Maria
More Thoughts About Indexing
While the article, “The Quest to Outperform” ( JofA, Jan.99, page 32) made some valid points about indexing, the author puts the cart before the horse. The investment process does not begin by deciding what funds to invest in or whether or not to index. The process begins by identifying
For Tax-Qualified Long-Term-Care Insurance
I read with interest “Buyer Beware” ( JofA, Aug.99, page 27), but I believe the author’s arguments against tax-qualified long-term-care insurance plans are outdated. Based on my experience in the long-term-care industry, I present the following arguments for tax-qualified plans, which were not mentioned in the article: The IRS considers
Analyzing the Difference
When I read “Hiring Generation X” ( JofA, Feb.00, page 55), I wondered whether Gen-X expectations are really that different. Gen-Xers do want more and will apply the leverage afforded them by a very strong economy and favorable demand vs. supply. So do I—just as I did when I got
An Employee’s Viewpoint.
“Staying Off the Cover of Time” ( JofA, Feb.00, page 31) discussed the recent turmoil surrounding pension plan conversions, with particular emphasis on IBM’s recent difficulties. As a multi-degreed IBMer for more than eighteen years, I’d like to offer an employee’s perspective on what happened and what enraged employees to
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How to find the right CAS clients
The key to success with CAS is selecting the best clients. Tools like ideal client profiles (ICPs), buyer personas, and even artificial intelligence can help identify the businesses that best fit each CAS practice.
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