Following are a few important issues our accounting professionals wanted to briefly share with you. As always, should you desire more in-depth information please feel free to contact us.
U.S. AND CHINESE REGULATORS FORGE ENFORCEMENT COOPERATION AGREEMENT
An agreement announced in late May between the U.S. Public Company Accounting Oversight Board (PCAOB) and the China Securities Regulatory Commission (CSRC) and the Ministry of Finance appears to be a good first step towards solving the regulatory dispute between the United States and China involving the audits of U.S.-listed Chinese companies.
A memorandum of understanding (MOU) on enforcement cooperation was entered into which establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations in both countries’ respective jurisdictions. While a positive step, some issues still remain, including:
* Under the MOU, some documents can still be withheld if China declares them state secrets.
* No agreement was reached that would allow regulatory inspections, which are the most important function of the PCAOB, to verify the performance and compliance with accounting rules.
* The agreement does not fully involve the U.S. Securities and Exchange Commission (SEC)
The SEC filed lawsuits against several U.S. traded Chinese companies for fraud and late last year filed legal action against the Chinese affiliates of five major accounting firms demanding they follow U.S. law. Those accounting firms have refused to provide documents to the SEC citing Chinese law that threatens their employees with jail for releasing documents without permission from Beijing. An SEC Administrative Judge will rule on that matter later this year and could strip those audit firms of their ability to audit U.S. traded companies.
Although this U.S./China agreement falls short, it is a positive signal of cooperation. As such it might eliminate the possibility that China-based companies will be delisted by the SEC as previously threatened.
The U.S.-China relationship is complex but financial interests have a habit of trumping ideological differences. If so, both sides will continue to move toward greater cooperation and that would be a positive development toward restoring investor confidence in China-based companies.
To read the PCAOB news release:
Tax Deadline Approaching…REPORT OF FOREIGN BANK AND FINANCIAL ACCOUNTS (FBAR):
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.
United States persons* are required to file an FBAR if:
1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
* United States person is defined as a U.S. citizen, a U.S. resident, an entity created in the United States and trusts or estates formed under the laws of the United States.
You may not request an extension for filing the FBAR. The FBAR is not filed with the federal income tax return and the granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR.
The FBAR is an annual report and it must be received (not just postmarked) by the Department of the Treasury in Detroit, MI, on or before June 30th of the year following the calendar year being reported. Electronic filing for FBAR forms becomes mandatory on and after July 1, 2013.
Penalties for failing to comply can be up to $10,000 for non-willful violators. For willful violations it is the greater of $100,000 or 50% of the account’s balance.
Often overlooked foreign interests include:
* A corporate officer with signature authority over a foreign business account.
* Inherited foreign accounts, even if transferred to the U.S.
* Recent U.S. immigrants whose name is included on family accounts in their native country.
Weinberg & Company’s Private Client Services represents high net worth individuals, entrepreneurs and family office clients. In addition to FBAR filings, our tax accounting professionals can assist in preparation of individual, trust, estate, gift, tax-exempt and private foundation tax returns.
FIGHTING CALIFORNIA’S RETROACTIVE TAX ON ENTREPRENEURS AND SMALL BUSINESS :
As reported in the May issue of Simply Stated, the state of California, since 1993, has offered a tax deduction for those who start, invest in, and eventually sell California small businesses. This deduction allowed entrepreneurs and angels to exclude 50% of the gain on the sale of qualified small business stock.
Late in 2012, based on their interpretation of a state Appeals Court decision (Cutler v. Franchise Tax Board –  208 Cal. App 4th 1247) the California Franchise Tax Board issued FTB notice 2012-03 canceling this program and began to retroactively tax those Californians who had supported those small businesses since 2008.
This 5-year retroactive tax serves as a punitive disincentive for California’s small business entrepreneurs and investors.
This story has gathered significant state-wide traction as well as national attention. Affected small business owners bandied together to fight this unfair, retroactive tax which undermines the spirit of entrepreneurship that has long defined California and were able to produce the following action:
* February 11– Legislative bill SB209 introduced in the California Senate to overturn the retroactive tax.
* February 28-The FTB announced delaying the mailing of tax bills (Notice of Proposed Assessments- NPA) for 2008 tax year until April and will delay mailing the NPAs entirely if taxpayers sign a waiver of the statute of limitations.
* May 1, 2013– The California Senate’s Finance and Governance Committee approved SB 209 in a 6-1 vote and passed the bill onto the Appropriations Committee.
* May 23, 2013– The California Senate Appropriations Committee voted 5-0 to pass SB 209 onto the full Senate floor for a vote. As a condition for that approval, the committee insisted on a number of amendments to the bill:
1) The exemption level for the 2008-2012 period would be reduced from 50% to 38%.
2) The QSBS exclusion program would terminate on 1/1/13 and not exist going forward.
3) That all penalties and interest would be waived on the amounts remaining due in retroactive taxes as a result of the amendments.
4) Taxpayers would be allowed 5-year installment plans to make the payments on the retroactive taxes remaining due as a result of the amendments.
* May 30, 2013– The California Senate voted 34-3 to approve the amended SB209 and sent it to the State Assembly.
WEINBERG & COMPANY NEWS:
Accounting Today recently named Weinberg & Company as one of the fastest growing CPA firms in the nation. New engagements, coupled with our commitment to client service, require that we seek additional accounting professionals to join our firm.
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Weinberg & Company is a leading, international, full service, multi-office CPA firm serving clients throughout the United States and the Pacific Rim. Founded over two decades ago, the practice groups include: Assurance and Audit, Tax and Accounting, and Advisory Services. Weinberg has a depth of knowledge and experience to meet the needs of both public and privately held companies, high net worth individuals, entrepreneurs, family offices, and can provide customized business management services. www.weinbergla.com
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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