The US government has become increasingly concerned about, and focused on, offshore tax evasion. One tool the government has to combat such tax evasion is the Report of Foreign Bank Accounts (TDF 90-22.1) or FBAR.
The due date for the 2011 FBAR is June 29, 2012.
The FBAR is required to be filed by two categories of US filers:
- Owners of foreign accounts
- Those with signature of authority over foreign accounts, but no financial interest in the accounts.
Unfortunately, the threshold for filing an FBAR is only $10,000 in aggregate for all foreign accounts. The amount per account is measured at the highest point during the year. The $10,000 threshold has not been indexed for inflation by Treasury since the early 1970s.
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For many companies, the most dreaded part of the year-end audit is the preparation of the income tax provision. Building a better process for the year-end tax provision will go a long way and make things easier. Here are some tips:
- Planning and communications are important. Schedule a tax planning meeting with the parties involved including the external auditors, company’s management and key accounting personnel and the outsourced tax service provider.
- The tax planning meeting should be scheduled prior to the start date of the audit and the parties involved should bring issues/logistics to the table early in the process.
- Make sure everyone has an update on new issues due to changes in business or tax law.
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The MNW Informed Team recently sat down with Keith Byars, an Audit Partner at Mohler, Nixon & Williams.
Keith, you are an audit partner working in Silicon Valley. What areas do you specialize in?
The primary areas that I specialize in include audits of employee benefit plans, professional service companies and other closely held businesses, and not-for-profit organizations, including private foundations.
In your work with not-for-profit organizations and foundations, is there a difference between how for profit entities and private foundations or not-for-profits are audited?
There are of course some differences in accounting and reporting rules between the for profit entities and not-for-profit organizations, but regardless of which type of client you are working with there is an equal need for accountability and transparency. The shareholders and officers of a company want accurate and reliable financial information to make the best decisions just as the officers and board members require for a not-for-profit organization. You might argue that the not-for-profit has an even greater need for transparency and accountability as the not-for-profit is also accountable to donors and other members of the community as stakeholders in the organization. Also, the state of California has passed legislation that requires audits to be made of certain not-for-profit organizations and private foundations. We have found that this comes up as a particular surprise to some private foundations we encounter for the first time.
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Mohler, Nixon & Williams (MNW) today announced that senior manager Trevor Gillespie has been promoted to audit partner, and senior manager Toby Johnston has been promoted to tax partner.
“Trevor and Toby have already made a positive impact on our firm and our client base in the Silicon Valley and Bay Area,” says Steve Vidlock, managing partner. “During their MNW careers they have demonstrated leadership in their respective areas. I’m especially pleased that we are adding to our partner ranks through internal promotions, as MNW is committed to providing professionals a long-term career path within the firm.”
Trevor Gillespie focuses on financial statement audits and reviews of software and software-as-a-service venture-backed technology startups, as well as distributors and manufacturers. He also concentrates on the audits of defined contribution employee benefit plans. Trevor also serves as the accounting and audit quality control partner for MNW’s audit and accounting practice, driving the firm’s compliance with professional standards. He graduated from the University of Utah with a Bachelors of Science in Accounting, and started his career at PricewaterhouseCoopers before joining MNW in 2004. He is a Certified Public Accountant, and is a member of the American Institute of Certified Public Accountants (AICPA), and the California Society of Certified Public Accountants (CalCPA).
Toby Johnston specializes in the tax issues of closely-held businesses and families, and advises clients in the areas of real estate ownership, stock option planning, and investment partnerships. His practice also focuses on the tax aspects of estate planning, including gift and generation skipping taxes, children’s’ trusts, life insurance trusts and charitable giving. In addition to being a Certified Public Accountant, Toby is also a Certified Financial Planner, adding further insight and value to his tax advice. Toby earned both Master’s and Bachelor’s degrees in Accounting from Brigham Young University, and worked at KPMG before joining MNW in 2005. He is a member of the AICPA, CalCPA, Santa Clara County Estate Planning Council and Silicon Valley Planned Giving Council.
As detailed in CFO.com’s recent article, a company (and 401(k) Plan Sponsor) is facing a staggering $35 million fine due to problems with the Plan’s investment line-up. This is one of the first class action suits related to Plan fees.
In this case, the Plan Sponsor did not meet its fiduciary responsibilities by:
- Not monitoring the Plan’s recordkeeping fees and revenue sharing payments
- Failing to negotiate rebates that could be used to offset plan administrative costs
- Improperly changing an investment option to a fund that provided more revenue sharing
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The MNW Informed Team recently sat down with Dave Anderson, an Audit Partner at Mohler, Nixon & Williams.
Dave, you are an audit partner working in Silicon Valley. What kind of clients are you working with?
Mohler Nixon & Williams is a full service CPA firm in the Silicon Valley. My area of focus is venture-backed technology companies, which is actually pretty broad. My clients range from traditional software, software as-a-service (SaaS), networking equipment, internet, social networking, mobile gaming, and life science companies.
In your work with software and internet clients, are you seeing any trends regarding revenue recognition?
Definitely. The biggest trend right now has been the result of the adoption of ASU 2009-14, which changes the accounting for certain revenue transactions that contain both software and tangible products. Before this pronouncement became effective, many of these transactions were required to recognize revenue under the software revenue recognition rules, which were quite restrictive as it related to recording certain elements of the transaction up front upon delivery. ASU 2009-14 scopes many of these transactions out of the software revenue rules, and is generally allowing for more revenue to be taken up front.
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For years the state of California has had in place the New Employee Registry Program which requires California employers to report new hires to the Employment Development Department (EDD) within 20 days of starting work. The purpose of the registry was to identify when child support debtors were working so that wage withholding orders could be enforced. For most companies who use an outside payroll provider, the notification process is likely happening through your provider.
What you might not be aware of is employers are also required to report independent contractors to the registry within 20 days of either making payments to a service provider totaling $600 or more OR entering into a contract for $600 or more during a calendar year, whichever is earlier. The reporting is required if the services performed are required to be reported on a 1099-MISC and the contractor is an individual or sole proprietorship. And the reporting doesn’t just apply to California residents. If an out-of-state resident contracts with your California office and/or provides service in California for your company headquartered out-of-state to derive income in California, the reporting requirement still exists.
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Business tax incentives offered by Congress and the State, such as the research, energy and new hire credits, receive all of the press. Often overlooked are other incentives that are not as highly publicized that could contribute to reducing your overall tax liability so we’ve highlighted a few of these below. The landscape for offering various tax incentives changes frequently as different jurisdictions attempt to entice new business investments so continued diligence is important.
California Enterprise Zone Deduction and Credits (State Wide)
California established Enterprise Zones (EZ) to provide tax incentives to business to allow private sector market forces to revive the local economy. This incentive provides businesses with different deduction and credit options for taxpayers operating or investing in designated EZs. The credits are sales and use tax credits for purchasing certain qualified property and hiring credits for wages paid to new employees. There are also accelerated business expense deductions for the purchase certain tangible property, net interest deductions for lenders and use of net operating loss deductions generated in a zone. The EZ credits and deductions are available to individuals, sole proprietors, corporations, estates, trusts and partnerships operating within a designated EZ.
San Jose, San Francisco and a few other nearby locations are designated as EZ’s. To check if your company is located in one of these zones, contact the California Department of Housing and Community Development at hcd.ca.gov and search for directory of zone contacts to find the Directory of Economic Development Areas.
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The Northern California Human Resources Association (NCHRA) is offering “A Working ACO Model: Integrate Health Care Purchasers and Providers to Lower Costs” webinar on Thursday, April 5, 2012 (10:00am – 11:30am). The presentation will describe how companies/organizations and health care providers can align goals and objectives through the deployment of population health management processes resulting in lower health care costs per covered individual. These apply for both PPO and HMO models. This webinar qualifies for 1.5 General Recertification Credits.
The ACO concept of health care purchasers and providers working together is not new. The presentation will describe an integrated health model for population health management that has been in place for over 9 years with proven results for over 2.5 million members nationwide. The system relies on the use of sophisticated data analytics, identification of the chronically ill and those most likely to incur large claims, establishment of a regimen of care with follow up, Nurse Navigator oversight of care for the chronically ill, active management of large episodic claimants, triage to the most cost effective and quality medical providers, and active and effective wellness and biometric screening tools.
Registration: General $49 / NCHRA Members $0
To learn more and register, please visit https://m360.nchra.org/event.aspx?eventID=43410&instance=0.
The Department of Labor (DOL) extended the timeframe to comply with the fiduciary level fee disclosure requirements of 408(b)(2) from the original effective date of April 1, 2012 to July 1, 2012. This regulation requires the fiduciary, usually the Plan Sponsor of a covered plan, to obtain certain disclosures from covered service providers so that the arrangement or contract can satisfy the statutory exemption from the prohibited transaction rules defining a “reasonable” service arrangement.
Here are the general provisions of 408(b)(2):
Any ERISA governed retirement plan (i.e. 401(k), ESOPs, 403(b), Profit Sharing and Money Purchase) is defined as being a covered plan.
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Business Taxation, Personal Taxation | Andy Mattson | 
May 21, 2012 8:48 am | 
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