Financial reporting

There are possible tax strategies that are particularly suited to the times that we are in. Here are two that I keep seeing, with the latest in a press release from a major tax publisher. According to analysts with the Tax & Accounting business of Thomson Reuters, C corporations may secure a refund of overpaid estimated taxes, or use projected current-year NOL to offset taxes owed for the previous year.

More than a third of CPA firms plan to supplement their workforce in the next 12 months, according to a newly released survey.

I’ve heard at least half a dozen people complain about their lack of a holiday party this year.

The optimism of chief financial officers across the U.S. has fallen steeply in the fourth quarter, according to a new survey.

The Financial Accounting Standards Board and the International Accounting Standards Board have published a discussion paper that takes a joint approach to solving some perplexing questions about the recognition of revenue.

There is no question that in today’s economic climate, lots of people have lots of different questions. In my own family and among my own friends, I hear the same recurring questions being asked. So, here with the help of my friends in the financial planning/services community, are some answers you might consider telling your clients. Naturally, there might be a difference of opinion but here goes: Are bank accounts, IRAs, and 401(k)s insured? The Federal Deposit Insurance Corporation (FDIC) has raised the limit for individual bank deposits from $100,000 to $250,000. Joint accounts held by a husband and wife would be covered up to $500,000. Unfortunately, defined contribution plans such as 401(k)s are not protected against market losses. But federal protections are present in the event the employer or the company managing the account goes under. In fact, under the Employee Retirement Income Security Act, the amount on the 401(k) account cannot be claimed by creditors of failed companies. How about money market funds? The government now temporarily insures money market funds against losses for the next year. A brokerage account, which may include mutual funds, stocks, or bonds, is not protected against market fluctuations. However, the account is protected against fraud and that’s where the Securities Insurance Protection Corporation (SIPC) comes into play. It insures the account up to $500,000. It’s important then to make sure that the brokerage is SIPC-insured. Don’t stay in the market? People talk about bailing out. Experts advise it is usually best to stay the course, because a highly diversified portfolio generally reflects the amount of risk that the individual has been comfortable with as well as goals. Many advisors are recommending that one just hangs in there and avoids panic selling. Of course, there are some who simply can’t ride out the storm, so where do they put their money? Experts claim that the safest investments are certificates of deposit and money market funds, particularly those that invest in Treasury bills. However consider the tradeoff. The safest investments generally produce the lowest returns. Buying annuities, or charitable gift annuities from a charity or university, which do come with tax breaks, may be an alternative for investors who are looking to reduce their stock exposure and who want an income stream for life. What about those annuities? Many leading experts in financial circles advise that because variable annuities fluctuate with the market, they do provide an opportunity to take advantage of a market boom. Conversely, they may not protect from a down market unless a guaranteed minimum withdrawal benefit had been purchased, which affords a guaranteed income stream regardless of the performance of the investment accounts. However, there is a downside here: it costs more and most insurers restrict the investment choices. Some experts suggest transferring a variable annuity to a fixed annuity where the principal is guaranteed and withdrawals of up to 10 percent of the account value are permitted each year without a penalty. But, keep in mind that this may incur heavy penalties for just switching from one to another. Is it better to use a credit card or a debit card for purchases? Much depends on the individual’s situation but it doesn’t take being a brain surgeon to realize that a credit card should only be used if the full balance can be paid off each month. That way, it’s really borrowing someone else’s money to finance a monthly purchase and at no interest. Of course, if there already exists a heavy balance, then obviously, that shouldn’t be added to; therefore, consider using the debit card to keep the debt load down. Finally, keep in mind that savings itself should be handled based on age and years until retirement. The most important factors are the post-retirement income and the value of the overall investments in determining how to allocate a portfolio. Diversified investments focusing more on capital preservation and income generation, and less on riskier growth stocks, are usually considered the best bets. Older investors may opt for the safety of money market funds.

The American Institute of CPAs has begun investigating the accounting firm listed as the auditor of Bernard Madoff's investment management business after the firm told the institute for 15 years that it did not perform any audit work.

Accounting firm BDO Seidman has been sued in connection with the $50 billion Ponzi scheme run by Bernard Madoff's investment securities business, even though it wasn't Madoff's auditor.

President-elect Barack Obama has named Mary Schapiro as the next chairman of the Securities and Exchange Commission, replacing Christopher Cox.

Marcum & Kliegman has created a task force to advise investors who may have been defrauded by Bernard Madoff and his investment management business.

The Internal Revenue Service plans to make it easier for financially troubled homeowners to avoid federal tax liens that block them from selling their homes or refinancing their mortgages.

The Financial Accounting Standards Board has issued a proposed standard to address the controversial issue of applying fair value accounting to assets and liabilities acquired from a business combination.

Given the economic implosion where trillions have been lost in personal investments and wire houses are boarding up like ice cream shops in January, high-net-worth clients are looking to their accountants and wealth management advisors to help preserve their investments amidst roller-coaster swings in the markets.Compounding their concern over the economic malaise, high-net-worth individuals now also have to worry about the potential affects of President-elect Barack Obama's tax and economic policies.

COHN CREATES RECOVERY TEAMRoseland, N.J. - Accounting firm J.H. Cohn has formed a Client Economic Recovery Team to advise financial institutions and public companies affected by the financial crisis.

It's hard to believe we can write another column about pensions and the bad GAAP applied to them, but here we are again, beating the same old drum. In addition, there is a new drum in the Pension Protection Act of 2006.While we're putting this column together, the market is continuing its sliding and bouncing, and the government is doling out money left and right (and in between) to bail out insurers, mega-banks, regional banks, investment banks, depositors, money funds, brokerage houses, and who knows what else.

Government officials now expect 401(k) plan sponsors to conduct periodic due diligence reviews. With respect to their 401(k) or other retirement plans, the problem is that most sponsors (owners) do not have the in-house resources to do so.This is not something that 401(k) plans historically did. On the heels of the recent mutual fund scandals, though, Labor Department officials indicated that sponsors had a duty to periodically investigate plans and benchmark funds and fees.

PLANNERS GET NEW CLIENTSTwo thirds of certified financial planners have seen an increase in potential clients as economic turbulence has increased in the past several weeks, according to a recent survey.

On Thursday, Congress passed a waiver of the minimum distribution rule for 2009, but not for 2008, for employer-provided qualified retirement plans and individual retirement accounts and annuities in H.R. 7327, the Worker, Retiree, and Employer Recovery Act of 2008. President Bush is expected to quickly sign it.The Treasury Department is studying whether to provide relief with regard to 2008 minimum distributions.

The European Union has formalized its waiver allowing companies to file financial statements in European markets using U.S. generally accepted accounting principles -- as well as the accounting standards of five other countries -- without reconciling them to International Financial Reporting Standards. The measures declare U.S. GAAP, as well as accounting standards from Canada, China, Japan, South Korea and India, to be "equivalent" to IFRS as adopted in the European Union. An earlier transitional waiver was due to expire at the end of this year. European Internal Market and Services Commissioner Charlie McCreevy welcomed the measures: "Today's adoption by the commission is a momentous step. It marks the culmination of important work spanning several years." Standard-setters in the U.S. and at the International Accounting Standards Board, which sets IFRS, have been working to converge the two sets of standards. Earlier this year, the U.S. announced that it would allow companies to file here in IFRS without reconciling their accounts to GAAP. The European Commission said that it would review the situation of standards in Canada, China, South Korea and India by 2011 at the latest.

A completely revised Form 990 will require an overhaul of internal policies and procedures for most tax-exempt organizations, according to Joyce Underwood, director of nonprofit taxation at BDO Seidman's Institute for Nonprofit Excellence.