EXECUTIVE SUMMARY THE RISING COST OF EMPLOYEE BENEFITS HAS LED some small employers to find creative funding solutions benefits for themselves and their employees. Two popular alternatives are cafeteria plans under IRC section 125 and non-125 flexible benefit plans. IF AN EMPLOYER GIVES AN EMPLOYEE THE CHOICE between tax-free benefits
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TOPICS
Tax
Technology
UN-led international alliance releasing e-business version of XML ( www.oasis-open.org/news/oasis_news_12_12_00.shtml ). AICPA picks 2001’s top 10 technologies ( http://toptechs.aicpa.org ). For daily news from the AICPA and state societies, visit www.cpaweb.org , which also offers online CPE, AICPA professional literature, practice management aids and links to state society Web sites.
Fraud
Attempted check fraud soars, says American Bankers Association ( www.aba.com/Products/PS98_218950.htm ). SEC alerts auditors to fraudulent financial reporting techniques ( www.sec.gov/news/speeches/spch454.htm ).
Aggregate Approach to Partnership Causes S Corporation Taxation
One of the more confusing questions partnerships face is when to use the so-called aggregate or entity approaches. Most partnerships apply the entity approach in determining partnership income; they use the aggregate approach for other decisions. The Tax Court recently considered which approach entities outside the partnership arena—where there
Small Business
SEC creates Office of Small Business Policy ( www.sec.gov/news/digests/12-14.txt ).
Stealth Taxes
EXECUTIVE SUMMARY HIDDEN TAXES CAN MAKE IT DIFFICULT FOR CPAs to do accurate tax planning. Sometimes, a client’s marginal tax rate is not what it might appear to be because of the alternative minimum tax, tax credits and other provisions that come into play in determining the correct tax liability.
Professional Issues
NASBA’s CredentialNet facilitates equivalency verification for interstate practice ( www.nasba.org/nasbaweb.nsf/lp ).
Banking
New capital structure for federal home loan banks ( www.fhfb.gov/PressRoom/press/PR00-38capitalrule.htm ).
New Capital Gains Rules
or as long as the income tax has been around, capital gains and losses have been subject to special rules and taxed differently than other income from capital. But the rules governing the rate of taxation and the time the assets need to be held to qualify for long-term treatment
When a Service Is Not a Service
IRC section 448(d)(2) imposed a flat tax rate of 35% on the taxable income of qualified personal service corporations, prohibiting them from using the graduated tax rates of 15% to 35% available to most corporations. A qualified personal service corporation is defined as one where substantially all activities involve the
Financial Reporting
Levitt ends his tenure at SEC ( www.sec.gov/news/press/2000-192.txt ). FASB tentatively decides against write-downs of preexisting goodwill ( www.rutgers.edu/Accounting/raw/fasb/news/nr122000.html ). SEC, standard setters recommend reporting financial instruments at fair value ( www.sec.gov/news/speeches/spch436.htm ; www.rutgers.edu/Accounting/raw/fasb/news/nr010501.html ) FASB’s derivatives group adds to guidance on Statement no. 133 ( www.rutgers.edu/Accounting/raw/fasb/ ). FASAC survey
Auditing
Chief accountant says SEC will enforce new independence rules ( www.sec.gov/news/speeches/spch445.htm ). SEC answers frequently asked questions on auditor independence ( www.sec.gov/offices/account/audinfaq.htm ). GAO: Many federal agencies are mismanaged, unprepared for audits ( www.gao.gov/pas/2001/d01241.pdf ).
Optional Mileage Rate Increased for 2001
According to the IRS, if you own or lease an automobile used in your trade, business or profession, the new optional standard mileage rate is 34.5 cents per business mile, up from 32.5 cents in 2000. The mileage allowance is in lieu of a separate deduction for lease payments, depreciation,
Government Accounting And Auditing
GASB issues exposure draft to clarify Statement no. 34 ( www.rutgers.edu/Accounting/raw/gasb/news/nr010801.html ). Comments due by March 16. FASAB seeks comments on plan to omit stewardship category from federal reports ( www.financenet.gov/financenet/fed/fasab/dec_00_jan_01.html ). Comments due by March 15.
International
IASC releases study on accounting by mining, petroleum industries ( www.iasc.org.uk/docs/extr/ip/iss_sum.pdf ). Comments due by June 30. Outgoing IASC board recommends future rule-making priorities ( www.iasc.org.uk/docs/bd_stmt.pdf ).
Deposit Rules for Small Businesses Simplified
On January 1, the IRS ended its monthly employment tax deposit requirements for many small businesses, allowing them, instead, to make such payments quarterly. Businesses now can make employment tax payments every three months if the amount is under $2,500. Previously, the IRS permitted quarterly payments only for businesses whose
Getting Less for Your Money
Source: Social Security Administration, www.ssa.gov .
Taxes Take Biggest Bite Out of Family Budget
Source: Special Report no. 96, Tax Foundation, www.taxfoundation.org .
IRS Allows Advance Distribution of Transit Passes
Employers now can distribute tax-free mass-transit passes to their employees more than one month in advance. IRS Announcement 2000-78 changed the distribution requirement in proposed regulations that would have exempted transit passes from taxes only for the month in which they were actually distributed to employees. Employers now may distribute
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