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Bramwell’s Lunch Beat: SEC Has a Home-Court Advantage in Enforcement Cases

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May 7th 2015
Staff Writer and Editor AccountingWEB
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IRS sets up cyber investigative team amid surge in tax fraud
The IRS is creating a criminal investigative team to focus on cyber crime as fraudsters used stolen data to collect tax refunds, wrote Elise Viebeck of The Hill. The IRS is creating the new unit following an unprecedented surge in tax scams this year. Experts believe that a spate of health insurance and banking data breaches have given cyber criminals enough personal information on individuals to file fraudulent state and federal tax returns in their names. The rise in cyber crime is a challenge for the IRS, which has faced budget cuts in the last five years. Reports detailing the creation of the cyber unit said that identity theft cases has jumped nearly fourfold since 2011.

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SEC wins with in-house judges
The US Securities and Exchange Commission (SEC) prevails against approximately 90 percent of defendants when it sends enforcement cases to its administrative law judges rather than to federal courts, wrote Jean Eaglesham of the Wall Street Journal. According to SEC data, that was markedly higher than the 69 percent success the agency obtained against defendants in federal court over the same period of October 2010 through March of this year. Going back to October 2004, the SEC has won against at least four of five defendants in front of its own judges every fiscal year. The SEC says its judges are impartial and the process is fair. It attributes the difference in outcomes partly to case mix. For instance, most of its complicated insider-trading cases have been heard in federal court, not by its in-house judges. The SEC also has a high success rate – 95 percent – in appeals of its administrative law judges’ rulings, which its own commissioners hear.

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Watchdog: Most tax violators at IRS weren’t fired
The IRS chose not to fire workers who violated tax laws in about 60 percent of cases over a 10-year period, according to a new report by the Treasury Inspector General for Tax Administration, wrote John D. McKinnon of the Wall Street Journal. IRS reform legislation adopted in 1998 said that the agency must fire any employee who violates tax laws, unless the agency decides to soften the punishment. The report found that over a 10-year period starting in 2003, 1,580 IRS employees were found to be willfully noncompliant with tax laws. Of that total, 620 (39 percent) were terminated, resigned, or retired. The remaining 61 percent got lesser penalties, such as suspensions, reprimands, or counseling. Specific violations included overstatement of expenses, claiming of a first-time homebuyer tax credit without buying a home, and failure to timely file tax returns. Some employees had “significant and sometimes repeated tax noncompliance issues, and a history of other conduct issues,” according to the report.

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Does your state have an estate or inheritance tax?
A new map released this week by the Tax Foundation shows the states that have an estate or inheritance tax. Currently, 15 states and the District of Columbia have an estate tax, and six states have an inheritance tax. Maryland and New Jersey have both. The state with the highest maximum estate tax rate is Washington (20 percent), followed by 11 states that have a maximum rate of 16 percent. Hawaii and Delaware have the highest exemption threshold at $5,430,000 (matching the federal exemption). New Jersey has the lowest, only exempting estates up to $675,000. Of the six states with inheritance taxes, Nebraska has the highest top rate at 18 percent. Kentucky and New Jersey are close behind with top rates of 16 percent.

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EU delays decisions on tax probes into Apple, Amazon
European Union (EU) regulators delayed decisions on whether four multinational companies, including Apple Inc. and Amazon.com Inc., may have benefited from illegal tax breaks, citing difficulty obtaining information to make their cases, wrote Tom Fairless of the Wall Street Journal. In a hearing at the European Parliament, EU antitrust chief Margrethe Vestager on Tuesday told lawmakers that her agency “won’t meet the deadline we set for ourselves [of] the end of the second quarter.” She declined to give a new deadline. The EU has opened a series of high-profile probes in recent months into tax deals struck by four multinationals – Apple in Ireland, Amazon and Fiat SpA in Luxembourg, and Starbucks Corp. in the Netherlands. Regulators had pledged to decide by the end of June whether the deals violated EU law – decisions that could be followed by demands for sizable back-tax payments. All the companies and governments involved have denied breaching EU rules.

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Regulators Ramp Up Scrutiny of Brokers in an Effort to Protect Senior Investors
Recent report highlights concerns about improper investment recommendations made by financial advisors to seniors.

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