Weinberg & Company

                 Certified Public Accountants

SIMPLY STATED

JULY  2014

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.

FASB’S QUEST FOR SIMPLIFICATION

As part of its ongoing initiative to simplify U.S. Generally Accepted Accounting Principles (GAAP), the Financial Accounting Standards Board (FASB) has added two short-term projects to its docket.

The first will consider eliminating the Extraordinary Items concept from GAAP. Currently, companies must consider whether an event or transaction is classified as an “extraordinary item,” and disclose it separately in the income statement.The other project will attempt to streamline the measurement of inventory. Currently, companies must compute inventory value based on net realizable value, replacement cost, and net realizable value less normal profit margin. The aim of this project is to recast the calculation: having inventory measured at the lower of cost and net realizable value (the net selling price less costs of disposal).Both short-term projects were identified by stakeholders as opportunities to simplify GAAP, with the ultimate aim of improving the decision-usefulness of financial information.”Under current GAAP, extraordinary items are material events that are considered to be both unusual and infrequent to a business’ operations,” commented Weinberg Managing Partner Corey Fischer.  “Eliminating them would further align GAAP with International Financial Reporting Standards (IFRS), which has disallowed the reporting of extraordinary items since 2002.”

IRS GETS CHARITABLE WITH CHARITIES

In a bid to streamline the tax exemption application process for 501(c)(3) entities, the IRS has published Form 1023-EZ. The form, currently available on the IRS website, significantly reduces the paperwork required for organizations to apply for tax-exempt status. Prior to release of the 1023-EZ, all applicants were required to fill out the 26-page Form 1023.According to the IRS, an estimated 70 percent of all applicants already qualify to use the new streamlined form. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible.”This is a common-sense approach that will help reduce lengthy processing delays for small tax-exempt groups and ultimately larger organizations as well,” said IRS Commissioner John Koskinen in a statement. “The change cuts paperwork for these charitable groups and speeds application processing so they can focus on their important work. Previously, all of these groups went through the same lengthy application process-regardless of size. It didn’t matter if you were a small soccer or gardening club or a major research organization. This process created needlessly long delays for groups, which didn’t help the groups, the taxpaying public or the IRS.”Currently, the IRS is attempting to manage a backlog of some 60,000 tax exempt applications, with an average nine-month wait.

RELIEF FOR SMALL RETIREMENT PLANS
The IRS is currently in the midst of a one-year pilot program designed to help small businesses that offer retirement plans.During the pilot, which began in June 2014, small businesses may avoid failure-to-file penalties by now filing current and prior-year forms. Multiple late retirement plan returns may be included in a single submission. If a retirement plan has delinquent returns for more than one plan year, penalty relief may be available for all of these returns. Similarly, delinquent returns for more than one plan may be included in a single penalty relief request. No filing fee will be charged during the pilot program.Plan administrators who fail to file Form 5500 may suffer penalties of up to $15,000 per return.  Per the IRS, the program is open only to retirement plans generally maintained by certain small businesses, such as those in an owner-spouse arrangement or eligible partnership. Those who have already been assessed a penalty for late filings are not eligible for the program.More information on how to participate in the program can be found in Revenue Procedure 2014-32, or by calling our office.

FATCA GOES LIVE 
Over the last several months, Simply Stated has reported on developments related to the Foreign Account Tax Compliance Act (FATCA), the new legislation designed to catch foreign tax evaders. On July 1st, a key provision of the act went into effect.As of July 1st, U.S. companies are now required to withhold a 30% tax on cross-border payments (such as interest and dividends) to foreign financial institutions, if those institutions do not share information about U.S. account-holders with the IRS.Compliance with FATCA has been an unwelcome burden, both for foreign financial institutions and U.S. citizens living abroad. Some major foreign banks have refused to provide services to U.S. account-holders in order to avoid the increased reporting requirements; for some banks, compliance with FATCA could put them in violation of their local bank privacy laws.U.S. expats are faced with significant reporting requirements and accounting costs to document their overseas activity and holdings, even when no tax is owed. There are reports of increasing numbers of U.S. expats that are relinquishing their citizenship to avoid the cost and burden of compliance.The pursuit of overseas tax evaders has been a top priority for the IRS, with several high-profile wins over the last several years. Major foreign banks have succumbed, surrendering details of thousands of U.S. taxpayer accounts and hundreds of millions of dollars in penalties and settlements.The U.S. government is actively engaged in building the legal framework for better cross-border sharing. Ongoing negotiations with foreign governments have yielded over eighty final or provisional agreements with foreign jurisdictions – from tax havens like the Cayman Islands, to major economies like Germany, the U.K., and Japan.The latest such agreement became effective just last month between the U.S. and The Peoples’ Republic of China. The agreement calls for the U.S. Treasury and the Chinese Ministry of Finance to collect and exchange financial information from each other’s foreign residents.

SO, YOU WANT TO BE AN ACCOUNTANT 
The American Institute of CPAs (AICPA) has proposed adding Accounting to the line-up of Advanced Placement (AP) courses available to high-school students.The courses, administered and sanctioned by the College Board, offer college-level instruction in disciplines ranging from Calculus to World History. At the end of the term, students who pass course-specific AP exams are considered to have demonstrated a college-level understanding of the subject and earn college credits that may be counted towards a bachelor’s degree.Recognizing the need to attract “the best and brightest” to the field at a younger age, the AICPA says it has already developed a course and is in the process of securing approval from the College Board, which administers the AP tests.The AICPA says it has already recruited over 100 colleges and universities that say they would recognize credit for an AP Accounting course and some 450 high schools that have agreed to offer the course to students.
WEINBERG & COMPANY

Simply the right choice

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

1925 Century Park East, Suite 1120  

Los Angeles, CA 90067

(310) 601-2200

6100 Glades Road, Suite 205

Boca Raton, FL 33434

(561) 487-5765  

Room 2109, 21/F, Shui On Centre

6-8 Harbour Road, Wanchai, Hong Kong P.R.C.

DISCLAIMER:
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.
Quick Links

Corey Fischer
Firm Managing Partner

310-601-2200

CoreyF@weinbergla.com

Bruce Weinberg
Florida Managing Partner

561-487-5765
BruceW@cpaweinberg.com

Jeffrey B. Engler

Director of Tax,

Los Angeles 

310-601-2200
JeffreyE@weinbergla.com

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