Daniel Werfel leaves government after guiding IRS through troubles
Daniel Werfel, a longtime federal official who led the IRS after its targeting controversy and oversaw efforts to improve the government’s financial management, has quietly left public service, Josh Hicks of the Washington Post reported on January 27.
The White House Office of Management and Budget, where Werfel served as controller from 2009 until assuming the role of acting IRS administrator in May 2013, confirmed on Monday that Werfel’s last day with the government was December 31.
Werfel said yesterday he plans to spend time with his family and explore new opportunities for the next phase of his career.
[Daniel Werfel had a busy 2013 as the acting chief of the IRS. Click here for all AccountingWEB articles involving Werfel and the IRS.]
IRS budget cuts mean delays, less help from IRS
A lot has been made lately of the $11.3 billion the IRS will receive from the $1.1 trillion spending bill that Congress passed on January 15. The $11.3 billion is the lowest allocation the IRS has received since 2008, when it received $11.1 billion. Congress has also depleted the agency’s budget by almost $1 billion over the past four years.
The National Society of Accountants (NSA) is the latest organization to criticize lawmakers, in particular US Representative Ander Crenshaw (R-FL), for the lack of IRS funding.
Crenshaw, chairman of the House Financial Services and General Government Appropriations Subcommittee, recently took to the House floor and explained why the IRS funding was being cut. Crenshaw brought up the Tea Party targeting scandal and how the agency wasted money on lavish conferences and videos.
“Well, we said we’re going to reduce your funding, IRS, until you can demonstrate to us that you can spend money and a wise and efficient way,” Crenshaw said. “We say, ‘no more can you spend money to harass individuals or groups of individuals based on their political philosophy.’ But we do carve out money to provide taxpayer services to provide for monies to pursue people who cheat on their taxes.”
In a letter sent to Crenshaw on January 27, NSA Executive Vice President John Ams said the society’s members are gearing up for tax-filing season and “desperate for the kind of help and guidance that only the IRS can provide but for which the agency has little or no budgeted funds.”
“How is your budget helping taxpayers or tax professionals when individuals calling for help are more likely to receive incorrect information or no information because of the lack of funds for training?” he wrote. “How is your budget helping taxpayers if, because of the lack of funds, they face inappropriate adjustments and assessments, inappropriate levies, or inappropriate liens because IRS enforcement employees are not well trained?”
[Click here to read AccountingWEB’s article on the spending bill.]
SEC to drop suit against Deloitte over China documents
Michael Rapoport of the Wall Street Journal reported on January 27 that the US Securities and Exchange Commission (SEC) said it would drop a federal lawsuit in which the commission demanded documents from Deloitte Touche Tohmatsu's Chinese affiliate to help with its investigation of a US-traded Chinese company.
The SEC and the Big Four accounting firm on Monday jointly asked a federal judge in Washington to throw out a lawsuit that the SEC had filed against Deloitte China in 2011, seeking to enforce an SEC subpoena against Deloitte for documents about former Deloitte client Longtop Financial Technologies Ltd. The SEC indicated in its 2011 complaint that it is investigating Longtop for possible fraud, the article stated.
"Monday's move doesn't directly affect a broader SEC administrative case against the Chinese affiliates of Deloitte and the other Big Four accounting firms - PricewaterhouseCoopers, KPMG, and Ernst & Young - over similar document-handover issues," Rapoport wrote. "Last week, an SEC administrative law judge ruled in the broader case that the firms should be suspended from auditing US-traded companies for six months. The firms have said they will appeal."
Regarding the federal lawsuit, Deloitte said in a statement that it was "pleased" by the move and "looks forward to continuing to work with" the SEC and Chinese regulators.
Swiss banks seek tax amnesty as third accept US offer
David Voreacos of Bloomberg reported on January 26 that one-third of Swiss banks offered amnesty by the United States for helping Americans evade taxes have applied for the program.
“The US government gave more than 300 Swiss banks until Dec. 31 to seek non-prosecution agreements if they have ‘reason to believe’ they violated tax laws,” the article stated. “Some 106 sought to join the initiative, which requires participants to disclose how they helped Americans hide assets, hand over data on undeclared accounts, and pay penalties.”
According to Voreacos, to gain nonprosecution deals, banks must pay 20 percent of the value of accounts not disclosed to the IRS on Aug. 1, 2008, 30 percent for such accounts opened between then and February 2009, and 50 percent for accounts opened afterward.
Companies fleeing taxes pay CEOs extra as law backfires
Another Bloomberg article, this one written by Zachary R. Mider on January 27, focuses on how companies are fleeing the US tax system by reincorporating abroad.
In 2004, Congress passed a law intended to penalize CEOs whose companies shift their legal addresses to tax havens. But the law hasn’t worked out as planned.
“Companies have found ways around the law that create new rewards for executives. When Actavis Inc. changed its incorporation to Ireland in October, the New Jersey-based drugmaker helped CEO Paul Bisaro avoid the law’s bite by handing him more than $40 million of stock as much as three years ahead of its schedule, then promising him an additional $5 million to remain with the company,” Mider wrote.
“The payouts to executives highlight the ineffectiveness of the 2004 law, which contained a series of provisions aimed at reducing the tax benefits of reincorporating overseas. In the past two years, a fresh wave of companies has fled the US system to avoid hundreds of millions of dollars in taxes.”
Tax-free gifts quadrupled in US after IRS limit lifted
US taxpayers reported making $122 billion in nontaxable gifts on the returns they filed in 2012, more than four times the amount in each of the two previous years, according to IRS data released on January 27, Richard Rubin and Margaret Collins of Bloomberg reported.
“Most of the money – $84 billion – came in the form of gifts exceeding $1 million, and those were made by fewer than 30,000 people, according to the IRS,” the article stated. “The data cover tax returns filed in 2012. Typically, gift-tax returns are due on April 15 of the year after the gift is made.”
A law approved by Congress in December 2010 increased the lifetime gift-tax exclusion to $5 million from $1 million.
Deloitte may seek outsider to lead restructuring practice
In an e-mail sent to its restructuring professionals earlier this month, Deloitte asked for their “collective wisdom” to help decide the future of the business of advising companies on restructuring, Reuters reported on January 27.
“The time has come to identify someone to lead the practice for the next few years,” William Snyder, the joint head of the group, said in the e-mail that was obtained by Reuters.
The other joint head of the restructuring group, Sheila Smith, will retire in a year’s time.
In his e-mail, Snyder said candidates would be considered from other Deloitte practice areas, and external candidates would be considered in “a very targeted manner.”