Archives for May 2016

Removing Sec. 199 Benefits and Burdens Test

In an effort to create and preserve US manufacturing jobs, Congress created a section in the American Jobs Creation Act of 2004, P.L. 108-357, enacted Sec. 199. Sec. 199 allows domestic manufactures to take deductions on production activities, which improves cash flow and makes investments in manufacturing facilities more attractive.

The original version of Sec. 199 was enacted in 2009 and accounts for 9% of the taxpayer’s qualified production activities income (QPAI) or the taxpayer’s taxable income. The deduction cannot exceed 50% of the Form W-2 wages for the tax year. Often the taxpayers enter into contractual agreements having other parties perform most or all the activities required to produce the qualifying production property (QPP) According to Sec. 199(d)(10), only one taxpayer can qualify for the deduction. The taxpayer that qualifies has to prove they have the burdens and benefits of the ownership of the QPP. This analysis is referred to benefits-and-burdens test.

Several times over the last few years, Congress has enacted a process to help determine the benefits and burdens, but the factors still only relied on the benefits-and-burden test. So in August, 2015, the Treasury proposed new regulations (REG-136459-09) addressing the issues of Sec. 199, including the benefits-and-burdens test. The new regulations would remove the benefits-and-burden test altogether. In its place, the Treasury would provide clearer guidelines on where the benefit and burden lies. The Treasury decided that in a contractual relationship, the party performing the Sec. 199 activity is eligible for the deduction. By doing this, the Treasury creates administrable consistent rules with a statue, they reduce the burden on the IRS and taxpayers who have to evaluate the benefits-and-burdens-of-ownership factors, and it prevents more than one taxpayer from taking the deduction.

By changing the way the law reads, it takes away the incentives to outsource to third parties because the taxpayer who is doing the work is the only one eligible for the deduction, instead of the property owner. This creates two problems. The first is without incentives, manufacturers will move production abroad where it cost significantly less money. The second is, if the manufacturer is unable to meet the requirements, then neither parties are eligible for the Sec. 199 deduction. Both of these problems defeat the purpose of what Congress was trying to do.

Share

Protecting Yourself from Identity Theft

In a recent survey conducted by the AICPA, they found that half of the 1,005 US adults surveyed reported that it was somewhat likely they would be a victim of identity theft in the next year. One in five (21%) say they have already been a victim or attempted victim of identity theft. Once those people became victims, 93% of them took steps to minimize the impact of the crimes on their finances or protect their identity afterward.

So how can people protect themselves before identity theft happens? Nothing is fool proof, but there are steps that can be taken to minimize your chances of having your identity stolen.

  1. Review and read statements carefully and note anything suspicious.
  2. Know payment dates.
  3. Read health insurance plan statements, and make sure the care received matches what is on the statement.
  4. Shred personal documents.
  5. Review your credit report once a year.
  6. Monitor tax account transcripts on a regular basis and review before filing the tax return.
  7. Watch out for tax scams or any money making offer that seems too real to be true; it probably is.
  8. Sign up for free identity theft protection if offered by your credit or debit card providers.
  9. Check account balances frequently.
  10. Use strong passwords and change them frequently.
  11. Immediately report and suspicious activity to the local police, credit reporting agencies, etc.

If you experience identity theft or are a victim of fraud, it is important to report the incident. Many people feel stupid that they fell for the investment or scam, so 59% of the victims do not even report the crime to authorities. There are many reasons for this, 41% blame themselves for it even happening, 27% knew the fraudster, and 18% were embarrassed. This is not a crime that can be ignored because if you are a victim then there are others. One quarter of the victims (25%) stated the reason they did not report the crime was because they did not know who to contact. Literature published by the AICPA’s National CPA Financial Literacy Commission recommends reporting fraud cases to the SEC and the Financial Industry Regulatory Authority, but contacting the police is just as effective. This is a crime and by turning in the thief, they are more likely to be brought to justice. Don’t stay silent. Remember if something sounds too good to be true, it probably is.

Share

Eliminating Violations through Automation

The pressure on financial leaders to ensure integrity in auditing and controls is greater than ever. There is more scrutiny on Boards to ensure that their financial statements is error free and every piece of data is doubled-checked and tripled checked. In business, there is no tolerance for errors. The public expects perfection and do not tolerate any messing with the numbers.

The digital age make calculating number for reports easier than ever before. Companies have millions of transactions to audit yearly and through technology, this process is easier. Technology allows companies to process through and catch errors before they are made public. This can keep the reputations clean and investors happy.

The questions is how do companies keep their violations down. When the APQC looked at 70 different companies, they found that the companies that were top performers had less than four violations. The companies labeled poor performers had up to 34.2 violations. The difference between the top and the bottom quartiles is the top performers have automated at least half of their primary controls, while the bottom performers have only automated around 12% of their primary controls.

When more of the primary controls are automated, there is less chance of errors made. Automated transactions are a direct link between systems. This cuts down on how many people have access to the information. When a company start seeing changes or adjustments, then the companies controls are not a secure as they presumed.

Even the companies that perform the audits have invested millions of dollars to automate their system. With the advanced algorithms, a computer can detect tends in data that comes into the system. This allows auditors to have ways of flagging information that is off better than when conduction a traditional audit.

Share

How to Talk in Meetings When You Don’t Want To

The room is filled with people and you are preparing for the worst part of your day. It is time for a meeting, and even though you know most of the people in the room, it is still something you don’t want to do. You have to speak in front of this group. For people that are introverts, this is scary. The ideas of coming out of their quiet place to insert themselves into the world of others is a difficult task, but here are some tips on making the transition easier.

Introverts Tend to Listen and Think

Many introverts do background and prep work before the meetings so they know the information ahead of time. This can help them know what they want to say when the chance comes for them to speak up. It is best to speak your ideas early. This give you the feeling of being part of the meeting. People respond to what was said and then direct comments to you once they know what you are thinking.

Inserting Yourself in a Fast-Paced Meeting

This is a thinking on your feet. Something some introverts are not comfortable doing. This is why prep work is so important. It is hard to articulate your thought when there are new ideas being thrown out every few minutes. Some people speak out with well formulated ideas while other are just part of ideas. Each has value and this gives everyone a chance to speak up, the trick is speaking loud enough to signal you want to say something. This is an art form and needs to be done carefully, while maintaining respect for those around you.

Not Having Snappy Come Back

It is hard to think on your feet sometimes, but there are ways to give yourself time. By replying, “I need to think this through” or “Why don’t you come back to me.” This buys time for you to process what was said and how you want to respond. This also give others in the room extra time to process the information.

I Hate Presenting!

This is the worst part of meeting. You get to give a presentation. For many people it is hard to overcome the fear of speaking in front of a large group or any group. By exposing yourself in small doses, you can overcome this fear. Start small, but keep building until eventually you become more comfortable in front of other people. It is still scary, but it becomes manageable.

Being in introvert in the work place can cause some uncomfortable situations. Preparing yourself and knowing what people expect can help, but it really comes down to practice and patience.

Share