IRS to rewrite nonprofit rules amid criticism
Rachael Bade of Politicoreported yesterday that the IRS will rewrite – without holding a public hearing – a proposed rule on the political activities on nonprofit groups, regulations that stemmed from the Tea Party controversy that rocked the agency last summer.
The IRS will start writing a revised regulation amid criticism from both the left and especially the right on the proposal to tighten rules governing the tax-exempt status of so-called social welfare organizations.
“Given the diversity of views expressed and the volume of substantive input, we have concluded that it would be more efficient and useful to hold a public hearing after we publish the revised proposed regulation,” the IRS said in a statement on Thursday, according to the article.
Bade noted that the revised IRS rule will keep many elements from the original proposal but will take the record number of comments into consideration for a new version. Some 150,000 written comments poured in, a record for the US Treasury Department.
Last year, the agency proposed the new regulation to limit the political activities of 501(c)(4)s, which operate under conflicting guidelines for the amount of political activity they can engage in and keep their tax perks, according to the article. The new rules try to clarify the policy by defining what constitutes political activity.
Federal employees owe $3.3B in back taxes
A total of $3.3 billion is how much federal employees owe in back taxes to the federal government, according to IRS data obtained by the USA Today under the Freedom of Information Act.
In all, 318,462 federal employees owed back taxes as of September 30, 2013 – an increase of 2.6 percent from the previous year. That puts the average tax bill at $10,391, Gregory Korte of the USA Todaywrote on Thursday.
Remember when the IRS was lambasted by lawmakers and criticized in the media last month after a Treasury Inspector General for Tax Administration (TIGTA) report found that the agency paid more than $1 million in bonuses to tax-delinquent employees over a two-year period? Well, according to Korte’s article, the Treasury Department has the best rate of tax compliance in the federal government, at just 1.2 percent delinquent.
However, the tax-delinquency rate for employees of the House of Representatives is 4.87 percent; 3.24 percent in the Senate. There are 714 tax delinquents on Capitol Hill owing a total of $8.6 million – more than one for each congressman or senator. Thirty-six employees in the Executive Office of the President are delinquent on their taxes, for a rate of 2.06 percent, Korte wrote.
IRS spent $14 million complying with congressional inquiry
According to a report issued on Thursday by the Joint Committee on Taxation, congressional committees received 10.6 billion disclosures of taxpayer information last year, up from 2.4 billion the year before, Richard Rubin of Bloombergreported yesterday.
The IRS has said it spent $14 million complying with congressional inquiries stemming from the agency’s disclosure that it gave extra scrutiny to Tea Party groups applying for tax-exempt status, Rubin wrote.
You can download the Joint Committee on Taxation report here.
Hedge fund auditor market share
As our BFFs at Going Concern have mentioned, there’s been some talk around the watercooler that Big Four firm KPMG may have an interest in buying Rothstein Kass. The driving force behind the acquisition may be the midtier firm’s extensive private fund practice, John Pakaluk of Audit Analytics noted in a recent blog.
Audit Analytics examined just how large Rothstein Kass’ hedge fund practice really is. And according to data of the 10 audit firms cited most frequently by hedge funds in their Form ADVs, it’s pretty large. Rothstein Kass ranked third with 2,063 hedge funds, behind EY (3,583) and PwC (3,483).
“Assuming KPMG were to retain all of Rothstein’s hedge fund clients, then KPMG would leapfrog both PwC and EY on its way to the total engagement leader in the hedge fund auditor market,” Pakaluk wrote.
Check out Audit Analytics’ blog for the full top 10 list.
Hong Kong court orders EY to hand over mainland China audit papers
Clare Baldwin and Nikki Sun of Reutersreported today that a Hong Kong court has ordered auditor EY to hand over documents related to a former Chinese client in a boost for international regulators seeking access to the books of mainland China companies listed outside their home territory.
In a case filed by Hong Kong's Securities and Futures Commission (SFC) in 2012, the court on Friday rejected EY's contention that Chinese law prohibits the mainland partner of the firm, previously known as Ernst & Young, from passing on documents, they wrote.
The Big Four firm must explain why it resigned as auditor of Standard Water in 2010 and provide a list of all staff involved in an application by the company to list in Hong Kong that was eventually scrapped, the court said in its ruling, the first of its kind in Hong Kong, according to the article. EY has 28 days to comply.
The ruling comes a week after China's Ministry of Finance reiterated the country's secrecy laws and said that accountants may not pass information to overseas regulators or exchanges.
EY loses in Hong Kong
Paul Gillis, who was quoted in the Reuters article above, wrote more about this issue today in his China Accounting Blog.
“I am surprised that SFC was not able to work out a compromise with Chinese regulators along the lines of the PCAOB agreement. The PCAOB deal, which allows for a rigorous redaction process, might have been unacceptable to the SFC. Chinese regulators might have been reluctant to give up any turf for fear that the precedent would work against them with the SEC,” he wrote.
“EY’s service as reporting accountant raises the question as to whether it should have been willing to sign the audit opinion in the first place. It is questionable whether EY could be the principal accountant if they outsourced the entire audit to their mainland affiliate. Instead, the mainland affiliate should have been the reporting accountant.”
IRS and Free File Alliance sign one-year renewal of partnership
The IRS and the Free File Alliance announced Wednesday they signed a one-year extension for their partnership that makes free tax software available to taxpayers.
Free File is the free federal tax-preparation and e-file service offered through brand-name software or online fillable forms. The software is available for taxpayers who earn $58,000 or less, which is 70 percent of all US taxpayers. Taxpayers who earn more than $58,000 and who are comfortable preparing their own federal return can use Free File Fillable Forms.
The extension agreement includes specific language that a full renegotiation of the five-year Agreement/Memorandum of Understanding will begin next month. The IRS and the Free File Alliance said they intend to enter into a multiyear agreement prior to the expiration of this extension.
The current five-year agreement expires in October, and the one-year extension provides each entity time to shape a longer-term agreement to include innovations to the 12-year-old Free File program in order to grow e-file, improve quality, and reduce taxpayer burden.
“Free File has helped millions of taxpayers prepare their taxes, and we look forward to continuing this important program,” IRS Commissioner John Koskinen said in a written statement. “The Free File program saw increased use this year, a reflection of the value of this innovative effort.”
According to the IRS, more than 3 million taxpayers have used Free File so far this year – up nearly 10 percent over last year; it’s also the first double-digit increase in program usage in several years. The IRS Free File website was recently redesigned, which the agency believes has made it easier for taxpayers to find the information they need and route to the software they want.
Nearly 43 million taxpayers have used Free File since it debuted in 2003. Using a conservative $30 tax-preparation fee, Free File has saved users an estimated $1.3 billion, according to the IRS.
Free File is still available through October 15 for extension filers.
- Recruiters left scratching their heads at the fact no one will take their calls (Going Concern)
- Actually, it is possible to start studying for the CPA Exam too early (Going Concern)
- Mikulski uses accounting tricks to close $4B gap (Bloomberg Businessweek)
- Madoff fraud victim’s estate can seek refund in Tax Court (Bloomberg)
- Intel files first audited conflict minerals report (CFO Journal)
- Genworth CFO: Managing costs and risks in a turnaround (CFO Journal)
- From Virginia, chasing down Credit Suisse (New York Times DealBook)
- Why not ditch the medical device excise tax and boost cigarette taxes? (TaxVox)
- Don’t turn over IRS debt collections to private contractors (TaxVox)
- The billionaire tax move that could be for you: Puerto Rico (Forbes)
- Can a financial assets tax be a pro-growth replacement for the capital gains tax? (Forbes)
- Revenge tax is a kind of wild justice (Forbes)
- Summer travel time is prime tax time (Don’t Mess With Taxes)
- Eide Bailly expands into Washington state (Eide Bailly)
- Transactional tax specialist David R. Gette joins Marks Paneth as partner (MarketWired)
- Sikich LLP hires Frank Jakosz as new partner of not-for-profit services (PRNewswire)