Werfel recalls IRS challenges, says agency is well-placed for Obamacare success
In an interview with Politico Morning Tax, Daniel Werfel, who served as interim IRS commissioner for seven months following the agency’s targeting scandal, believes the nation’s tax-collection agency has begun to land on solid footing and credits the dramatic turnover within its top ranks as one of the key reasons the IRS was able to quickly respond to the furor.
He noted there was also a concern that the agency would get lost in the IRS uproar and misstep on taxpayer service and collection.
“Obviously ensuring cooperation with all the ongoing investigations was a very high priority [but] while all of this was going on … we were also looking at the rest of the mission: delivering an effective tax system,” said Werfel, who on March 24 joined the Boston Consulting Group as a director in the public service division, according to the article.
Werfel said one area for which the IRS deserves praise is Obamacare, and added that IT is a significant strength for the agency.
“The chief technology officer over there [has] a shop that is top-notch. I was extremely impressed with what the technology folks over at the IRS are able to accomplish. The launch of the IT solutions went very smoothly, it was not without hard work. The final months leading up to October … what I saw was a very effective technology team,” he said, according to the article.
Bitcoin currency use impeded by IRS property treatment
The IRS's decision on Tuesday to treat Bitcoin as property will make tax consequences part of every transaction involving the virtual currency, so much so that Bitcoin users and analysts say the IRS guidance complicates people's ability to use it as a currency, Richard Rubin and Carter Dougherty of Bloomberg reported today.
"This greater clarity creates greater wrinkles," said Mark Williams, who teaches finance at Boston University, according to the article. "This reinforces that strategy of holding it as a commodity, which then undermines its value as a transactional currency."
Faced with a choice of treating Bitcoins like currency or property, the IRS chose property. For example, under the ruling, purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of gross income for the coffee shop, the article stated.
The IRS ruling means Bitcoin investors will be treated like stock investors, Rubin and Dougherty wrote. They must determine their basis, or cost paid, for the Bitcoins, so they can tell whether a particular transaction results in a gain or a loss. Someone who bought a Bitcoin for $400 and sold it for $500 would have $100 in capital gains.
Bitcoins held for more than a year and then sold would face the lower tax rates applicable to long-term capital gains – a maximum of 23.8 percent, according to the article. That compares with a 43.4 percent top rate on property sold within a year of purchase and the 39.6 percent top rate that applies to other types of income.
Biofuel groups push for renewal of tax credits
Timothy Cama of The Hill reported yesterday that a coalition of biofuel advocacy organizations sent a letter to the top tax lawmakers in the Senate on March 24 urging them to renew expired tax credits that helped their industry.
The credits, which incentivized advanced biofuel production and infrastructure, expired December 31, 2013, along with a slew of popular tax breaks. The letter – signed by representatives of the Advanced Ethanol Council, Advanced Biofuels Association, Algae Biomass Organization, Biotechnology Industry Organization, Growth Energy, National Biodiesel Board, and the Renewable Fuels Association – was sent to Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Orrin Hatch (R-UT).
“Advanced biofuel tax credits have allowed the biofuels industry to make great strides in reducing the cost of production and developing first-of-kind technologies to deploy the most innovative fuel in the world,” the groups said in their letter. “If Congress wants American companies to continue developing these homegrown technologies in the United States, it must extend these credits.”
Both Wyden and House Ways and Means Committee Chairman Dave Camp (R-MI) plan to bring up proposals next month to ex=tend the expired tax breaks.
IRS budget crunch limiting use of foreign government data
Richard Rubin of Bloomberg reported on Monday that according to IRS Commissioner John Koskinen, the agency initially will make limited use of information supplied by other governments about US citizens’ offshore holdings because of budget constraints.
On July 1, major pieces of the Foreign Account Tax Compliance Act (FATCA) take effect as the US seeks to clamp down on tax evasion by its citizens with money outside the country. The law has led to agreements with governments around the world to exchange information, Rubin wrote.
Speaking at the Tax Executives Institute conference in Washington on March 24, Koskinen said, “One of our biggest challenges lies in having the resources to build and maintain systems that can effectively use all of the incoming data,” according to the article. “As with any major new initiative, we expect a learning curve – for the IRS as well as for everyone affected.”
IASB proposal designed to improve disclosures
The International Accounting Standards Board (IASB) yesterday proposed amendments that are designed to play a role in the board’s efforts to reduce disclosure overload, wrote Ken Tysiac, senior editor of the Journal of Accountancy.
Proposed amendments to IAS 1, Presentation of Financial Statements, are the result of one of several short-term projects under the IASB’s broader Disclosure Initiative, the article stated. The initiative’s purpose is to ensure that financial reports are instruments of communication and not simply compliance documents, according to IASB Chairman Hans Hoogervorst.
The narrowly focused amendments proposed to IAS 1 are designed to address concerns about existing presentation and disclosure requirements and give preparers the ability to use judgment when they prepare financial statements.
Comments are sought by July 23 and can be made at the IFRS website.
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