CPA Journal, The

The trend of outsourcing preparation of income tax returns overseas began about five years ago and shows no signs of abating. Its popularity has grown as tax practitioners have come to appreciate its advantages. The reason for this growing trend is threefold. First, there is an economic basis. Outsourced tax returns can be prepared in an cost-efficient manner by a highly skilled workforce. The second reason is the practical efficiency associated with using an overseas workforce coupled with t...

Sarbanes-Oxley and Social Clubs and Other Tax-Exempt Organizations

How the Sarbanes-Oxley Act (SOA) does or might affect tax-exempt organizations has been much discussed. Officers and directors of tax-exempt social clubs, who typically serve in a voluntary capacity, are often officers, directors, or professional advisors to publicly traded companies, where SOA compliance is essential. Because SOA is central to the management of publicly traded companies, it is reasonable for such officers and directors to consider its application to social clubs. Second, cer...

Publisher's Column

'Encouragement of a Great Example': Cpas On Boards

According to the National Center for Charitable Statistics, there were more than 1.3 million nonprofrts nationwide as of 2003, with almost 91,000 in New York State, representing more than $231 billion in gross receipts and $254 billion in total assets. About half of all nonprofits are devoted to "charitable and educational" purposes, and an unknown number of small community groups and other organizations operate outside the center's scope. Because all nonprofits deserve strong governance and ...

Accounting & Auditing: Accounting

Company-Owned Life Insurance in Business Combinations and Goodwill Testing

According to a 2002 series of Wall Street Journal articles, an important source of income for hundreds of public companies is death benefits from company-owned life insurance (COLI) on company employees. The articles noted that companies buy life insurance on thousands of present employees, former employees, and retirees. The anticipated increase in business combinations, especially by banks, increases the need for guidance. FASB is currently developing an exposure draft on purchase accountin...

Taxation: Federal Taxation

Are Business Trips Deductible Expenses or Taxable Employee Fringe Benefits?

On September 15, 2003, the Eighth Circuit Court of Appeals reversed the Southern District Court of Iowa and allowed Townsend Industries, Inc, to exclude from taxable wages the amounts it paid on behalf of employees for its annual company business fishing trip to Canada for 1996 and 1997 because the trip was a working condition fringe benefit under IRC Section 132. In accordance with its interpretation of tax law, Townsend treated the fishing trip as a business trip and excluded the trip costs...

Technology: What To Bookmark

Website of the Month: Gpo Access

The US Government and Printing Office's GPO Access website (www.gpoaccess.gov) provides free access to official versions of a variety of federal government publications, an easy online ordering process, and links to other federal sites. The website is designed to be used by the general public, but several resources will interest professional accountants and tax practitioners. Most materials and links can be reached by several routes. The homepage is organized into four major sections to help ...

Editorial: A Message From The Editor-In-Chief

The Rhetoric of Belief

One of several fundamental changes that FASB will work on during the coming year will be the movement of the GAAP hierarchy and of the authority for GAAP to FASB's own standards. The board will likely specify two levels of GAAP and make it clear that following GAAP is the responsibility of the preparer. The other fundamental change will be a reconsideration of the FASB conceptual framework, which would become part of authoritative GAAP. One of the author's deepest concerns about these two pro...

Book Review

Tax Planning and Compliance for Tax-Exempt Organizations: Rules, Checklists and Procedures, 4th Edition

Taxation: State & Local Taxation

American Jobs Creation Act of 2004 and State Income Taxes

A provision in the American Jobs Creation Act of 2004 could create an opportunity for taxpayers to reduce their state income tax bill. Section 501 of the act adds IRC Section 164(b)(5), which provides that taxpayers who itemize their deductions can elect to deduct state and local general sales taxes instead of state and local income taxes paid for 2004 and 2005. The provisions of IRC section 164(b)(5) resemble the sales tax deduction that was in effect before 1987 and was repealed by the Tax ...

Accounting & Auditing: Auditing

Auditor Changes and Restatements

In October 2002, the General Accounting Office (GAO) released a report on its analysis of 919 restatements from 1997 to June 2002. Several aspects of the relationship between the auditors these companies selected and how those choices compare to the broader market are investigated in this article: whether such companies changed auditors before, during, or following the year of restatement; whether these changes are comparable to other companies' auditor changes; and whether the audit opinions...

Finance: Personal Financial Planning

Medicaid Planning with Life Estates

A common technique in planning for Medicaid eligibility is the transfer of an individual's home to family members while retaining a life estate. In New York State, this technique has the potential to provide Medicaid planning benefits without the loss of tax benefits. The transfer subject to a retained life estate provides a reduced transfer penalty for Medicaid institutional benefits and avoidance of a Medicaid lien at death, without the loss of various tax benefits, including senior citizen...

Taxes and Bond Returns

The tax laws governing the returns from holding bonds are complex and change frequently. The law distinguishes between the two components of return: interest income and capital gain or loss. Capital gains or losses are further classified as short term (bonds owned for one year or less) or long term. Short-term gain is taxed at the marginal tax rate on ordinary income, currently as high as 35%. For investors in the 25% bracket or higher, the current long-term capital gains tax rate is 15% (5% ...

Finance: Employee Benefit Plans

Advantages of 401(K)-Profit-Sharing Plans

Many sole proprietors and sole practitioners can now take advantage of the salary savings feature of 401(k) retirement plans as a result of the 2001 Economic Growth and Tax Relief Reconciliation Act. The owner-employee of a single-employee corporation or limited liability company can likewise benefit by adding a 401(k) feature to her retirement program. The new design for a single-person 401(k) has three advantages over its two principal rivals, the Simplified Employee Pension Plan (SEP) and ...

Management: The Cpa In Industry

Internal Controls and the Isa Program

Strong internal controls can limit a company's risk exposure and provide many competitive benefits. The need for strong internal controls is not limited to financial areas. Significant benefits are available to US importers that implement compliance controls in the customs area. The primary mission of the US Bureau of Customs and Border Protection (Customs) has significantly shifted over the past three years to security, and away from commercial import processing. Customs is trying to focus i...

Management: Management Tools

Are Technical Skills Still Important?

For decades, various groups and institutions within the accounting profession have been advocating a change in accounting education to address the skills necessary for success in the workplace. The 1989 Big Eight white paper "Perspectives on Education: Capabilities for Success in the Accounting Profession" first emphasized the need for general skills, including communication, intellectual, and interpersonal skills. Since then, many have suggested incorporating into accounting curricula classr...

Personal Financial Planning

Current Trends in Hedge Funds

A new category of hedge fund investments, often referred to as "absolute return" investments, attempts to achieve traditional equity-market returns with the volatility associated with the bond market. These funds are sometimes registered with the SEC, allowing more investors to participate (sometimes with as little as $25,000). In addition, registered vehicles that are also regulated avoid unrelated-business income tax for any tax-exempt entities, such as private foundations, that invest in t...

Accounting & Auditing: Governtment Accounting

Gasb Statements 34 and 41

Budgetary comparison statements have always been an important part of external government financial reporting in the United States. With the issuance of GASB Statement 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, GASB reaffirmed the importance of presenting budgetary information. Statement 34 continues to require budgetary comparisons for certain funds, but has been amended by Statement 41, Budgetary Comparison Schedules - Perspe...

Responsibililties & Leadership: Corporate Governance

Corporate Governance and the Forensic Accountant

Recent corporate accounting scandals and the resultant outcry for transparency and honesty in reporting have given rise to two disparate yet logical outcomes. First, forensic accounting skills have become crucial in untangling the complicated accounting maneuvers that have obfuscated financial statements. Second, public demand for change and subsequent regulatory action has transformed corporate governance. Increasingly, company officers and directors are under ethical and legal scrutiny. Bot...

Perspective: Personal Viewpoint

Don't Shrink From the Challenge; Stand Up and Do What's Right

The accounting profession is facing great challenges. Federal and state regulatory bodies, investors, public interest groups, and the public at large are demanding professional independence and accountability. Many view the accounting profession as the culprit in precipitating the recent bull market. Sadly, the actions of a relatively small number of accountants have cast a shadow over the entire profession. Government intervention has been swift and decisive. Meanwhile, skeptics gloomily que...

Finance: Estate Planning

Limited Liability Companies and Estate Planning

With the widespread adoption of limited liability company acts by state legislatures, limited liability companies (LLC) have become the business organization of choice for small closely held businesses. An LLC also provides tax advantages to transfer wealth from one generation to another while allowing the donor to maintain control over over the assets until death. LLCs can be structured to allow flexibility to accommodate income distribution issues and restrictions on transfers of interests....

Responsibililties & Leadership: Education

The Importance of Educators and Coursework in Choosing an Accounting Career

A survey was conducted to explore job satisfaction in public accounting as perceived by partners and principals in accounting firms, a group that has enjoyed success in accountancy. The goal was to gain insights from these individuals that could be shared in an open discussion with accounting students and faculty about how experienced and successful CPAs rose to partner level, how they initially decided to enter the profession, why they have chosen to remain in it, and whether or not they wou...