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Bramwell’s Lunch Beat: Up to 6 Million People Could Owe Obamacare Tax Penalty

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Jan 29th 2015
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There’s no stopping the growth of master’s degree programs
Obtaining a master’s degree hasn’t always been a key consideration for anyone pursuing a career as a CPA, but over the last 10 years, the numbers have increased significantly, according to a new report from our colleagues at Going Concern. Based on data from the American Institute of CPAs, enrollment in MA programs has increased 136 percent in 10 years. But why? The article examines some factors that are driving that growth.

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Obamacare fine to be owed by as many as 6 million taxpayers
As many as 6 million US taxpayers will have to pay a penalty of as much as 1 percent of income because they went without health insurance in part or all of 2014, the US Treasury Department said, wrote Alexander Wayne of Bloomberg. The penalty, part of the Affordable Care Act, is designed to encourage people to sign up for health insurance using the expanded options and financial assistance available under the law, known as Obamacare. The penalty would apply to about 2 percent to 4 percent of all taxpayers for 2014. People who owe a penalty “will pay a fee because they made a choice not to obtain health insurance that they could have afforded, and they’re not eligible for one of the exemptions,” said Mark Mazur, the department’s assistant secretary for tax policy. Form 1040 includes a new Line 61 asking if the taxpayer has health insurance. Three-quarters of taxpayers won’t have to do anything more than check that box, Mazur said. The remainder will have to take additional steps, though most won’t pay a penalty.

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GOP plans bill to halt proposed IRS rules on tax-exempt groups
Republicans will seek to block the Obama administration from issuing new rules curbing use of tax-exempt organizations for political purposes, wrote John D. McKinnon of the Wall Street Journal. House Ways and Means Committee Chairman Paul Ryan (R-WI) and several GOP colleagues plan to introduce legislation in the House and Senate that would prohibit the Obama administration from issuing the new regulations in the wake of alleged targeting of grassroots conservative groups by the IRS. The new rules, first proposed by the IRS and the Treasury Department in November 2013, would have laid out specific new guidelines to more clearly limit campaign activity by nonprofits. The rules drew more than 150,000 comments – many of them negative – from the public, the most ever for the IRS, and the agency said it would revise the rules.

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Medical device groups blame Obamacare tax for job losses
Opponents of Obamacare’s medical device tax released a pair of reports on Wednesday that portray a dim future for the industry unless the controversial policy is repealed, wrote Sarah Ferris of The Hill. A survey of 100 executives by the Medical Device Manufacturers Association found that three-quarters of companies slowed or halted hiring to pay the new tax. Another industry group, the Advanced Medical Technology Association (AdvaMed), warned that the tax will cost the country as many as 39,000 jobs, a finding that it described as a “call to action” for Congress. That group’s survey also found that 46 percent of its member companies are considering future decreases in hiring if the tax is not repealed. A recent Congressional Research Service report found that between 47 and 1,200 workers could lose their jobs due to the tax, a figure that was disputed by AdvaMed executives.

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Republican targets NFL tax exemption
Rep. Jason Chaffetz (R-UT) is taking another shot at ending the tax exemption for professional sports leagues, wrote Bernie Becker of The Hill. Just days ahead of the Super Bowl, Chaffetz introduced legislation on Tuesday that would strip both the National Football League (NFL) and the National Hockey League (NHL) of their tax-exempt status. Under the current set-up, the NFL and the NHL are organized as trade associations – akin to the US Chamber of Commerce – in the tax code. Major League Baseball and the National Basketball Association don't have tax exemptions. For the NFL and the NHL, that means the league offices are tax-exempt, but not the teams themselves and ticket and jersey sales – a point that league officials defending the exemption have been quick to make. The Joint Committee on Taxation said last year that repealing the exemption would raise about $109 million in revenue over a decade.

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Bush tax cuts persist 14 years later, bedeviling Obama’s plans
Richard Rubin of Bloomberg wrote that even though he’s been out of office for six years, George W. Bush’s tax cuts still constrain President Obama’s agenda. The president tried to get rid of Bush’s 529 tax break for college savings accounts loved by many middle-class families. He found out how hard it is to remove taxpayer benefits bestowed by Bush, even if the middle class as a whole would benefit. The White House gave up on its plan to end the 529 tax break on Tuesday, six days before it was to be included in the president’s Feb. 2 budget proposal. The Obama administration’s proposal would have ended the tax-free status of money withdrawn from 529 college accounts. It unsuccessfully tried to sell the idea as a way to redirect aid from upper-middle-class families toward people with less income who otherwise couldn’t afford college.

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How Obama’s tax plan will distribute income from the very rich to the poor
President Obama’s latest tax package, which he’ll unveil in detail next week along with his new budget, would lower taxes for low-income households and significantly raise taxes for the highest-income 1 percent – those making $663,000 or more, according to new Tax Policy Center estimates. But middle-income households would see relatively modest changes in their tax bills, wrote Howard Gleckman in a blog for TaxVox. Under the plan, after-tax income would increase by 1.2 percent, or about $175, in 2016 for households making $25,000 or less in expanded cash income. Those in the top 1 percent would see their after-tax income fall by an average of 2 percent, or about $29,000. Those in the top 0.1 percent – who make at least $3.4 million – would see their after-tax income cut by about 2.6 percent, or about $168,000 on average. Those making between $49,000 and $84,000 (the middle 20 percent of households) would see their after-tax incomes fall by an average of $7. Those making between $84,000 and $142,000 would take home 0.1 percent more, or about $50.

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Study: US multinationals bring home $12 billion in profits annually, tax-free
US-based multinational corporations move an average of $12 billion in taxable income back into the country each year, tax-free, through complex mergers and acquisitions, according to new research by Emanuel Zur, an assistant professor of business at the University of Maryland’s Robert H. Smith School of Business, and two co-authors. In the study, Zur and his co-authors looked at the behavior of 625 companies from 1990 to 2004, and 2,795 foreign or domestic acquisitions. Over the course of the study, some $184 billion returned to the United States without being taxed. Studies on this topic often stop at 2004 because that year saw a one-time tax holiday on repatriated income, changing corporate incentives. If anything, tax-free repatriation has increased since then, Zur believes.

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Deloitte retains top spot among “Big Four” accountants – survey
Deloitte has retained the top spot among the world's “Big Four” accountants, a survey showed on Wednesday, noting those leading firms had so far retained their grip on the audit market in the face of regulatory changes designed to boost competition, wrote Huw Jones of Reuters. Deloitte, whose audit clients range from carmaker General Motors Co. to investment bank Morgan Stanley, achieved total fees including consultancy work of $34.2 billion last year, giving it a $248 million lead over second place PwC, the annual International Accounting Bulletin World Survey said. The top four, which also includes EY and KPMG, have a combined share of 66 percent of the global accounting market.

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New standards for auditors of brokers and dealers are focus of PCAOB reminder
The Public Company Accounting Oversight Board (PCAOB) issued a reminder to auditors of brokers and dealers on Wednesday that the board’s new audit standards differ in certain respects from previous generally accepted auditing standards that applied to these audits, wrote Ken Tysiac of the Journal of Accountancy. PCAOB standards took effect for audits of broker-dealer annual reports for fiscal years ended on or after June 1, 2014. The PCAOB said the first five inspections of broker-dealer audits conducted under the new standards showed deficiencies in the auditors’ application of the standards. The PCAOB’s inspections were focused on areas relevant to amended US Securities and Exchange Commission rules and aspects of the auditor’s work that are unique to engagements subject to PCAOB standards. This included the examination of compliance statements and review of exemption statements.

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FASB proposes simplifications to income tax accounting
The Financial Accounting Standards Board (FASB) has issued two proposed accounting standards updates meant to simplify the accounting for income taxes, wrote Tammy Whitehouse of Compliance Week. One would simplify accounting for the tax effects of intra-entity asset transfers, while the other focuses on the classification of deferred tax assets and liabilities that are carried on the balance sheet. With respect to intra-entity asset transfers, the FASB proposes to eliminate the exception in US GAAP that prohibits a company from recognizing current and deferred income tax consequences of an intra-entity asset transfer until the asset is sold to an outside party. With respect to balance sheet classification, the FASB proposes to require that all deferred tax assets and liabilities would be classified as noncurrent on corporate balance sheets.

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