Obama budget would expand low-income tax break
President Obama will release his annual budget today, and among his proposals is expanding a longstanding tax break to better benefit workers who are childless, Jackie Calmes of the New York Times wrote yesterday.
The White House estimates the Earned Income Tax Credit will help 13.5 million additional Americans who hold jobs yet remain poor. The current tax break favors low-wage workers with children, the article stated.
“Mr. Obama would offset the costs, $60 billion over 10 years, by ending two tax breaks for some wealthy taxpayers, as a Republican House leader also recently proposed as part of a broader plan to overhaul the tax code,” Calmes wrote. “The changes would close loopholes that lower taxes for some self-employed professionals and investment-fund managers.
“Advisers say Mr. Obama will propose to double a childless worker’s maximum tax credit to about $1,000 a year and increase the annual income level for qualifying for some benefit to about $18,000 annually, roughly 50 percent over the federal poverty line for a single adult,” the article continued. “The credit would also be available to workers at age 21 instead of 24, as long as they are living on their own, and remain available longer, until the age of 67 rather than 65.”
[There are plenty of other articles about the president’s proposed budget, including here (Wall Street Journal), here (Washington Post), here (USA Today), here (The Hill), here (Fox News), and here (CNNMoney).]
Auditors draw some clients closer
Regulators on both sides of the Atlantic have been cautious about auditors receiving large fees for consulting and other services that could potentially cloud their judgment when reviewing a company's books. Now, the US government’s audit watchdog has started quizzing accounting firms on whether their fast-growing consulting practices could hurt the quality of their audits, Emily Chasan, senior editor of the Wall Street Journal’s CFO Journal wrote yesterday.
At least 300 companies in the United States and Europe paid their auditors as much for add-on services as they did for audit work, according to public filings from the past two years reviewed separately by data provider Audit Analytics and stock-research firm Exane BNP Paribas SA, Chasan reported.
The main concerns for regulators are “scope creep” and conflicts of interest that could distract auditors from their core responsibilities, said US Securities and Exchange Commission (SEC) Chief Accountant Paul Beswick.
“There are permissible services that are allowed, but over time if the nature of those services change, they can actually evolve into independence violation,” he said, according to the article.
Camp’s plan shows a shift for Republicans
The release of the tax reform plan last week by House Ways and Means Committee Chairman Dave Camp (R-MI) has highlighted a dramatic shift among Republicans on taxes, Bernie Becker and Peter Schroeder of The Hill reported today.
“Camp went out of his way to avoid giving the highest earners a tax cut in the comprehensive draft he released last week, a goal Republicans likely would have scoffed at a decade ago, after two rounds of tax cuts under President George W. Bush,” the article stated.
Republicans on the Ways and Means Committee, including Representative Charles Boustany Jr. (R-LA), acknowledged that Camp weighed political considerations while crafting his proposal.
“The last thing we wanted to do is raise taxes on the middle class and raise taxes on those on the lower end of the spectrum,” Boustany said, according to the article. “We have to recognize the environment we’re in today and the fiscal circumstances we’re facing.”
25 interesting features in Camp’s new tax reform plan
AccountingWEB Editor-in-Chief Caleb Newquist included this article in his news roundup on our sister site, Going Concern, this morning, so I thought I would share it here, as well.
On Tax Analysis, Martin A. Sullivan takes a deep dive into Camp’s tax reform plan and provides a list of the 25 more intriguing aspects of the proposal.
Here is Sullivan’s one-paragraph summary of Camp’s plan: “The Camp draft is a revenue-neutral, distributionally neutral, Reagan-style reform that sets individual tax rates at 10, 25, and 35 percent. The corporate rate declines from 35 percent to 25 percent over five years. The universally despised alternative minimum tax is finally put to rest. In a landmark change, foreign profits are generally exempt from US tax, but significant anti-base-erosion rules are included, such as a minimum tax on foreign profits. To pay for rate cuts, hundreds of tax breaks are trimmed or outright repealed. On the individual side, the largest of those are cuts to deductions for mortgage interest (no borrowing over $500,000), for charitable contributions (must exceed 2 percent of income), and for state and local taxes (repealed entirely). On the corporate side, depreciation is slowed down (this is huge), and the last-in, first-out method of accounting and special deduction for manufacturing are repealed. The big, bold new revenue raisers are an excise tax on the largest banks and slowed cost recovery for research and development and for advertising. A bill like this has little chance of becoming law before 2017.”
SolarCity’s accounting delay continues: What you need to know
Travis Hoium of the Motley Fool wrote yesterday: “Once again, SolarCity is delaying reporting full fourth-quarter results, a week after an initial delay. Last week, management said accounting related to acquisitions and overhead allocation would delay complete GAAP financial results until today, but today only brought an explanation of the accounting challenges SolarCity faces, not the actual numbers.
“Thus far, the market has given SolarCity a pass and the stock is only down slightly today but continuing accounting problems are never good for a company.”
In the article, Hoium explains what SolarCity's problems are and why they might be understandable – but still concerning – for a company with its growth rate.
The importance of good, and separate, business records
Last weekend in her blog, Don’t Mess With Taxes, Kay Bell wrote about some business recordkeeping highlights included in IRS Publication 583, Starting a Business and Keeping Records.
For example, Bell wrote about recordkeeping systems: “Generally, you can choose the recordkeeping system that best fits your business. Just make sure that it clearly shows your income and expenses.
“Your recordkeeping system should include a summary of your business transactions. This generally includes your books, such as accounting journals and ledgers. These records must show your gross income, as well as your deductions and credits.
“For most small businesses, the business checkbook is the main source for entries in the business books.”