Archive for Tax Accounting
November 19, 2008 at 7:17 am · Filed under Tax Accounting
The Treasury Department’s inspector general will review a quiet change in tax policy that stands to give banks a windfall of billions of dollars, a top official said on Tuesday.
The formal review is intended to address mounting concerns from Congressional leaders and independent tax lawyers about the process that led the department to announce the obscure tax break, which allows banks much greater leeway to use tax losses from banks they acquire. The initiation of the review was described by a spokesman for the Treasury’s inspector general.
On Sept. 30, a day before Congress passed the Treasury Department’s $700 billion bailout package to aid struggling financial firms, the department unexpectedly tweaked the rules and said that a bank was entitled to use all the losses related to troubled loans in a bank that it was purchasing, thus reducing its tax bill.
The break, which can be applied to deals made years ago, before the financial crisis began, will hand banks at least $110 billion, according to Robert Willens, an independent tax and accounting analyst.
For more than two decades, Congress has limited the amount of losses that a company can use from a company it acquires. The restriction was intended to prevent companies from buying and selling other companies solely to take advantage of their tax losses by applying them to their own income and thus reducing the federal taxes they owe.
Several prominent lawmakers have said that the Treasury Department’s action was improper, and a significant change in policy, because it circumvented the basic legislative process behind the nation’s tax laws and involved no discussion in Congress, which writes the Internal Revenue Code.
The code is administered by the Internal Revenue Service, which is overseen by the Treasury Department. The Treasury secretary, Henry M. Paulson Jr., has defended the tax break as proper and properly enacted.
But in recent days a firestorm of questions has emerged from Congressional leaders. Charles E. Grassley, a Republican from Iowa and the ranking member of the Senate Finance Committee, wrote to Eric Thorson, the Treasury Department’s inspector general, last Friday, asking that he review whether the department had the authority to enact the tax break without Congressional review.
Senator Grassley also asked Mr. Thorson to study whether the tax break was improperly devised to benefit certain banks.
The spokesman for the inspector general said Tuesday that the office was reviewing the questions raised in Senator Grassley’s letter and could not comment further on a current matter.
Other Congressional members, including Senator Charles E. Schumer, Democrat of New York, and Senator Max Baucus, Democrat of Montana and the Senate Finance Committee chairman, have also written to Mr. Paulson and others with questions about the change.
Senator Baucus has also asked that Neil M. Barofsky, the special inspector general who will oversee the $700 billion bailout, look into the tax break.
Several banks that have recently announced acquisitions will benefit from the tax break, which helps offset their own steep losses in ailing mortgages. Wells Fargo will be able to use $19.4 billion in losses at Wachovia, which it is buying for $15.1 billion.
And PNC, which will pay $5.6 billion for National City, will be able to use more than $5 billion in acquired losses to offset its own income.
http://www.nytimes.com/2008/11/19/business/economy/19tax.html
November 17, 2008 at 7:46 am · Filed under Tax Accounting
Federal prosecutors have indicted a lawyer trained in accounting, charging that he sold questionable tax shelters named for the lead character of the show “The Simpsons.”
The lawyer indicted in the case, John B. Ohle III, was an executive at Bank One before it was acquired by JPMorgan Chase in 2004. The case may put pressure on Deutsche Bank, which has been under criminal investigation over its tax shelter work from the late 1990s through 2001.
Deutsche Bank, identified in the indictment unsealed late Friday as “Bank B,” arranged the financial transactions that Mr. Ohle sold.
The shelter, known as Homer, allowed wealthy clients to falsely generate bogus tax losses of nearly $430 million, and to evade taxes of $103 million, according to the indictment from prosecutors for the Southern District of New York, who are also leading the inquiry of Deutsche Bank.
Mr. Ohle, who is also an accountant by training, is accused of selling 36 abusive shelters in 2001 to wealthy clients of Bank One and Jenkens & Gilchrist, a national law firm that went bankrupt in 2007 amid scrutiny of its tax shelter work.
Jenkens earned $12.1 million in fees, while Bank One earned $5.2 million from the Homer shelter, according to the indictment.
Mr. Ohle worked for a Bank One unit in Chicago that focused on selling aggressive tax shelters. In 2002, he left to form his own tax shelter boutique, the Dumaine Group, with former colleagues.
The indictment charges Mr. Ohle, a resident of Wilmette, Ill., and New Orleans, of multiple counts of tax evasion, conspiracy and obstruction of I.R.S. procedures. David Spears, a lawyer for Mr. Ohle, said on Sunday that his client “did not commit any crime, and we intend to defend the case vigorously at trial.”
Since at least 2004, prosecutors have been examining Deutsche Bank for its role in two related, abusive tax shelters that were sold to investors and involved collaboration between banks, law firms and accounting firms.
Homer and its cousin, Cobra, are both considered by the I.R.S. to be variations on one widely sold abusive tax shelter of the late 1990s, Son of Boss, itself related to Boss, or bond and options sales strategy.
Cobra, which stands for “currency options bring reward alternatives,” was sold to more than 1,100 wealthy investors, while Homer, which stands for “hedge option monetization of economic remainder,” was sold to dozens of investors.
The Homer and Cobra inquiries revolve around Deutsche Bank’s role in arranging what prosecutors contend are bogus trades and loans that were intended to lose money. Among the unnamed investors who bought Homers are a truck-stop owner from McComb, Miss., and the owner of an options-trading firm in Chicago, the indictment said.
http://www.nytimes.com/2008/11/17/business/17shelter.html
November 8, 2008 at 3:01 am · Filed under Tax Accounting
Following an emergency rule change in International Accounting Standards last month, banks have been allowed to adjust their assets from a fair value basis back to amortised cost. The effect on banks’ reported earnings is substantial, it has saved them more than €3 billion in losses in the last week alone.
The inflating effect on earnings may well have a correspondingly beneficial effect on otherwise blighted employee bonuses and share scheme performance. All additional positives for tax authorities such as our own. PAYE is the biggest earner for the UK government.
Not all banks have leaped forward to adopt the change in accounting policy: they are caught between “the devil and the deep sea”. To make the change might highlight the deficiencies in your assets, which is not good for attracting investor confidence, but to decline the opportunity to revalue your assets might make it look as if you have something to hide – this change of accounting policy also carries with it the pain of substantial additional accounting disclosures.
The International Accounting Standards Board (IASB) has been under heavy pressure since Easter to make a move on fair value accounting, but its head, Sir David Tweedie is unhappy with the evolving monster. According to a report in the Financial Times. he thinks that, “European bank’s accounting practices have worsened as a result of the easing of fair value accounting standards”.
“They bought these assets originally and thought they were going to be fine. Well, they weren’t. So how accurate is [their long-term assessment]?” he said. “I don’t see how disguising things is going to actually make confidence higher. That’s why fair value is so important: get it up front, show it as it really is, and that makes people more confident.”
The FT reports that Sir David also called for a loosening of the ties between accounting and banks’ regulatory capital requirements. Most regulators closely link their assessment of a bank’s reserves with its published accounts, meaning watchdogs can suddenly require a bank to hold more capital when markets are falling – just at the point it is hardest for it to do so.
Many banks have complained fair value accounting was pro-cyclical because it helped to exaggerate the impact of a downturn, but Sir David argued for regulators to change instead how they used accounts to calculate capital needs.
http://www.accountingweb.co.uk/cgi-bin/item.cgi?id=190919&d=1025&h=1019&f=1026
November 5, 2008 at 6:08 am · Filed under Tax Accounting
Is your accounting firm buried up to the ears with tax return preparation work? The peak taxing season normally sees a huge rush by customers to their CPAs office to get their tax returns prepared and prepared right in time. Accounting firms have to deal with this heavy influx to meet growing demands and meeting customer deadlines. Yes you do not want to spoil your firms impeccable image by not meeting your client demand and also by refusing to accept new clients. Just because you are overworked and overburdened does not mean that your firm will have to lose out on making profit during the tax season.
How about trying CPA tax outsourcing for your accounting firm and boosting your business prospects. No there is nothing to get worried about by just hearing the term CPA tax outsourcing. CPA tax outsourcing can only bring profit and benefits for your firm. By outsourcing you actually let a third party do the tiresome and time consuming work for your firm. The third party that will do the work for you is efficient in doing the job for you and also does the work at less than half the money that you will need for the same work if done by a CPA within your country.
Imagine the amount of money that you will be saving by using CPA Tax Outsourcing for your accounting firm. The money that you can save will spell profit for your business and imagine how high the margin of profit will be for your firm. Imagine the amount of workload you will be able to handle without hiring any new hands in your office. Everyone wants to have a prior knowledge about the amount they have to pay in taxes to the government and if you are able to deliver this to your clients on or before time then you are sure to attract more customers to your accounting firm.
Your accounting firm has to deal with many other things besides accounting bookkeeping and calculating tax return preparations and CPA tax outsourcing is the best way for you to do this work. Once the CPAs in your firm are freed up from doing the time consuming work they can concentrate on other aspects for the development of your firm. The CPAs in your firm can concentrate on advising clients and working on other aspects to generate new business leads for your accounting firm.
Outsourcing is a great way for your business to progress. However you must take note of the fact that the outsourcing company whose service you hire must have an impeccable reputation. The efficiency of the outsourcing company depends on the kind of work that the company has successfully handled before. The very stake of your accounting firm depends on the type of work that is done by the outsourcing company. Find out the security features given by the company to safeguard your clients financial and personal data.
CPA tax outsourcing has many benefits. One of the main benefits other than the fact that you can earn profit is that at anytime you feel that your work is not being done properly you can take it back the work from the company. There are plenty of opportunities available and you can choose many other companies to do the work for you. CPA tax outsourcing is beneficial for you in every aspect of your business.
http://accounting-outsourcing.blogspot.com/2008/10/cpa-tax-outsource-is-it-viable-for-your.html
