TAX CASE Food service employees generally rely on tips to earn a reasonable wage; they and their employers have special withholding and reporting requirements. IRC section 3121(q) requires that “tips received by an employee in the course of his employment shall be considered remuneration” and “deemed to have been paid
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Tax
FYI
The Senate brings the SEC to full strength by confirming the nominations of four commissioners: Paul S. Atkins and Cynthia A. Glassman of Virginia, Harvey Jerome Goldschmid of New York and Roel C. Campos of Texas ( www.senate.gov/legislative/legis_act_nominations_confirmed_civilian.html ). Atkins, Goldschmid and Campos will serve out the remainder of terms
International
The International Accounting Standards Board publishes an exposure draft of a group of proposals, First-time Application of International Financial Reporting Standards ( www.iasb.org.uk/docs/ed1/ed1.pdf ), intended to ensure that entities adopting these standards provide in their financial statements information comparable to that reported under previous standards. The board wants to make
Evaluating Tax Software
ax-preparation-software products generally received higher marks from practitioners this year than last year. That’s the conclusion of a survey conducted by the National Association of Tax Professionals (NATP) and shared with the JofA . A total of 977 NATP members responded to the survey, reporting their experience with the
Government
The Federal Accounting Standards Advisory Board issues Technical Bulletin 2002-1, Assigning to Component Entities Costs and Liabilities that Result From Legal Claims Against the Federal Government ( www.fasab.gov/pdf/presreltb.pdf ). According to the guidance, all such costs and liabilities must be attributed either to the component entities responsible for the programs
Line Items
Short Sales In revenue ruling 2002-44 the IRS has provided two “fact patterns” that help explain when a taxpayer realizes a gain or loss on a short sale of stock. Both examples involve a taxpayer who entered into a short sale and directed his or her broker to purchase the
We Work Hard for the Tax Man
October 2002 > We Work Hard for the Tax Man TAX MATTERS Source: Tax Foundation, www.taxfoundation.org .
Fraud
The Treasury Department issues the 2002 National Money Laundering Strategy ( www.treas.gov/offices/enforcement/ml.html ), a report that describes a governmentwide effort to fight financial crime and to shut down terrorist organizations’ funding sources.
Securities
Fannie Mae (formerly the Federal National Mortgage Association; www.fanniemae.com ) and Freddie Mac (formerly the Federal Home Loan Mortgage Corporation; www.freddiemac.com ) voluntarily consent to unprecedented SEC oversight of their financial disclosures. The accord’s immediate practical consequences—registration of the two government-sponsored enterprises’ (GSE) common stock with the SEC—are perhaps less
Kiddie Tax Grows Up
TAX MATTERS Source: TaxPlanet.com, www.taxplanet.com .
Contribution of Appreciated Stock
TAX CASE Owners of closely held corporations frequently contribute corporate stock to public charities or private foundations. The tax benefits from the contribution will vary greatly depending on whether the taxpayer can claim a deduction for the stock’s full value or whether the deduction is limited to the stock’s basis.
Liberty Comes a Little Sooner
TAX MATTERS Source: Tax Foundation, www.taxfoundation.org.
IRS TEAM Pilot Program
TAX BRIEF Good news for CPAs helping clients get guidance from the IRS. Revenue procedure 2002-30 explains a pilot program to test whether the IRS can streamline its process for issuing a technical advice memorandum (TAM). The new guidance will be known as a technical expedited advice memorandum (TEAM). During
S Corporation Conversion Doesn’t Trigger Lifo Recapture
TAX CASE IRC section 1363(d) generally requires a C corporation that elects to become an S corporation to include a “Lifo recapture amount” in its gross income. The amount is the difference between the inventory reported under the Lifo method and the inventory the company would report under the Fifo
Taxing Social Security Benefits
TAX CASE Under IRC section 86 a taxpayer must reach a certain income level before his or her Social Security benefits are taxable. For married taxpayers filing separately and living apart, that threshold is $25,000. But if the taxpayer files separately and lives with his or her spouse, the threshold
Government Auditing
The GAO issues a series of questions and answers ( www.gao.gov/govaud/d02870g.pdf ) to clarify the revised yellow-book auditor independence standard it released in January. Recognizing the amendment’s broad scope and the time necessary to implement it, the watchdog agency extends its effective date. The new standard applies to all audits
Tax Notes
The IRS issues proposed regulations that would require taxation of “split-dollar” life insurance policies ( www.treas.gov/press/releases/po3230.htm ). Many businesses use such products as a form of supplemental compensation for their employees. Under these regulations, a split-dollar policy bought for this purpose would be taxed one of two ways depending on
Financial Reporting
For news from the AICPA and state societies, visit www.cpa2biz.com , which also offers online CPE, AICPA professional literature, practice management aids and links to state society Web sites. Amid ongoing revelations of falsified corporate financial statements, the SEC moved to buttress investor confidence in companies’ reported results. In late
Smart Education Tax Moves
EXECUTIVE SUMMARY IN THE 2001 TAX ACT CONGRESS INCLUDED A NUMBER of expanded and improved education tax incentives. The differing limitations, definitions and interactions of these provisions with existing education benefits make it crucial for CPAs to plan carefully to ensure clients receive the maximum tax savings. CONGRESS EXPANDED
Sales and Use Tax Reverse Audits
n a sales and use tax audit, a state revenue auditor reviews a business to determine if state sales and/or use taxes were properly collected and paid. A sales and use tax “reverse audit,” which is conducted by tax practitioners, is similar in many ways to the state government’s review,
Features
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