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Anticipate, Prepare, Take Action: How To Protect Your Tax Career During This Time

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We are proactively coming up with solutions to help the global tax professional community during a time of great uncertainty. Over thirty years, experience has taught us there are unforeseen events that occur effecting the hiring of tax professionals. When it comes to working in the Big Four, you may find sites like www.goingconcern.com of interest as they are a good reminder of what happens. There are lessons to learn from previous disruptions in the tax profession. Once you learn them you will be able to anticipate what is ahead. However, you need to have insight about what to anticipate before a layoff affects you or anyone you know. Understand the value of staying ahead of the curve of any layoff and position yourself to land top the tax jobs available now.

There are numerous tax organizations searching right now for your tax expertise. However, there are also tax professionals who will be laid off during a time of uncertainty. For those of you considering a move after tax season, take my advice: The smartest tax professionals are interviewing “now via video” and not after tax season. Why? After busy season, you have a lot more people competing for the same pool of tax jobs available. Tax professionals who are tech savvy online will win the attention of future employers. Stay ahead of the market by interviewing now if possible and not after tax season. Anticipate layoffs after tax season and you will be ahead of competitors in being considered for choice tax roles. Remember this is the best way to stay ahead of the curve.

An interesting article in the Financial Times brings to our attention how the Big Four accounting firms handles economic disruption. KPMG came up with the codename “Project Zebra” which stands for “zero-based budgeting” which is a means of stripping as much cost as possible out of a business operation. In particular, KPMGs own website advertises zero-based budgeting requires “getting leadership to rethink their business through the eyes of an external investor and “remove emotion” from their decision-making on cost savings. Shockingly, they state “focus ruthlessly on value creation”. About 150 cost-cutting measures were (are) being considered including recalling hundreds of employees’ corporate mobile phones and making about a third of its personal assistants redundant. What will they do now in an uncertain market? They will likely focus their attention on driving long-term value.
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Two Updated IRA publications, Other Online Resources Can Help Anyone Planning For Retirement

IRS LOGO - BLOG

The Internal Revenue Service has updated two comprehensive publications designed to help anyone making IRA contributions or receiving IRA distributions for tax year 2019 or considering making retirement donations before April 15, 2020.

The 2019 editions of Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) and Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs), are both now available on IRS.gov. Both publications address the unique features of both Roth and traditional IRAs.

Most people who work can make contributions to a traditional or Roth IRA. Contributions to a traditional IRA are usually tax deductible and distributions are generally taxable. On the other hand, contributions to a Roth IRA are not tax deductible, but qualified distributions are tax-free. Taxpayers can make contributions until April 15, 2020, and count them on their 2019 tax returns.
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Business Valuation, Growing Value And Liquidity Realization (Part XII Of Book Series)

Business Valuation, Growing Value And Liquidity Realization (Part XII Of Book Series)

Section 2 – Financial Analysis Report

The second step is creating an understanding of the financial strengths and weaknesses, a section most valuable to a prudent business owner:

1. Financial analysis helps in assessing Your Company’s financial performance over time. Past sales and earnings, while not a guarantee of future performance, can provide an indication of
future growth potential and can put Your Company’s current performance into a historical context. For example, a company with steadily rising sales and earnings is worth more than one
with little or no growth.

2. Trends and key factors impact results, and comparing financial performance and financial statement ratios with available industry performance measures also provides an indication of the
attainability of future results.

3. Ratio analysis provides a relationship among financial statement accounts that indicates trends for Your Company. These indications of overall probability of future success or failure
often influence premiums and discounts while measuring and monitoring financial performance.

This section analyzes Your Company’s financial performance relative to itself and relative to the industry in which Your Company operates.
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Business Valuation, Growing Value And Liquidity Realization (Part XI Of Book Series)

Business Valuation, Growing Value And Liquidity Realization (Part XI Of Book Series)

► The Blueprint for Building Value™ will quantify the financial value of your business, analyze your business, interpret your vision, and effectively communicate this information to key stakeholders. This tool will improve business performance and heighten your degree of confidence to make the best capital markets decision.

The decision may be to sell the business, finance the business, raise capital, grow or cultivate the business, create an ESOP, insure the business or its Key People, or develop a comprehensive estate or gift tax plan, or a combination of strategies.

This insightful tool identifies and measures Your Company’s strengths and weaknesses − which if properly acted upon will increase the business’s value.

• The Blueprint for Building Value™ is a comprehensive report of a substantive analysis of your business including its financial valuation, operational and structural aspects, and
capital markets alternatives.

• The Blueprint for Building Value’s Questionnaire Workbook is designed to accumulate and put in one place the most critical business information, in a streamlined no-nonsense fashion.

• The benefits that the Blueprint for Building Value™ brings are many (including but not limited to the following):
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Retirement Savings Contributions Credit (Saver’s Credit)

IRS On Retirement Savings Allowances

You may be able to take a tax credit for making eligible contributions to your IRA or employer-sponsored retirement plan. And, beginning in 2018, if you’re the designated beneficiary you may be eligible for a credit for contributions to your Achieving a Better Life Experience (ABLE) account.

Who’s eligible for the credit?
You’re eligible for the credit if you’re:

Age 18 or older;
Not a full-time student; and
Not claimed as a dependent on another person’s return.
See the instructions for Form 8880, Credit for Qualified Retirement Savings Contributions (PDF), for the definition of a full-time student.

Amount of the credit
The amount of the credit is 50%, 20% or 10% of your retirement plan or IRA or ABLE account contributions depending on your adjusted gross income (reported on your Form 1040 series return). The maximum contribution amount that may qualify for the credit is $2,000 ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly). Use the chart below to calculate your credit.
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The High Value Of Tax Expertise: What Every CFO Needs To Know

Kat Jennings- High Value of Corporate Tax Expertise

Over the years, we have been retained by hundreds of CFOs to locate lead tax executives for their tax organizations. We have learned valuable lessons along the way we would like to share with you. As a CFO, you are an Officer of the company with primary responsibility for managing the company’s capital structure, finances, financial reporting and planning, record keeping and mitigating financial risks. The best CFOs in the world understand the importance of the tax organization in mitigating risks. We have observed that CFOs who work closely with their tax executives are working as a team to mitigate risk to the company; and CFOs who have their tax executive reporting to anyone other than a CFO is often missing opportunities to mitigate risk.

With the tax laws ever changing all over the world, it is imperative to have an in-house tax executive who partners with the CFO to mitigate risks. These integral relationships between a CFO and a lead tax executives increase opportunities for companies to outperform competitors. A close relationship between the CFO and in-house tax executives is an important driver for successful organizations all over the world.
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Tax Policies In The European Union: A Report On A Changing Tax System Every Tax Professional Should Read

European Union Union - Changing Tax System

The Publications Office of the European Commission has released the results of a survey on Tax Policies Of The European Union 2020. In the report the European Commission states that the next five years will be important for tax policy in Europe and especially so for corporations operating across international borders. The foreward states “Changes in climate, technology and demography are transforming our societies and way of life, leaving EU citizens anxious about their own and their children’s future.

In the face of these challenges, tax policy plays a vital role in supporting a just transition to a sustainable and digital economy compatible with the principles of our social market economy. This transition will not happen overnight. Now, therefore, is the moment to set a course for a tax system that can solve our contemporary and future challenges. This will require action at all levels: international, EU and national.

According to the report “It presents an indicator-based analysis of the design and performance of Member States’ tax systems. It has been prepared to provide policymakers across Europe with analyses and insights which can support the transition to a tax system that reflects the realities of the 21st century. By pursuing a new trajectory for tax policies, we can be confident that our social market economy will emerge from the challenges of today and tomorrow stronger, fairer, greener and more digital than ever before.”

Click Here To Download Report On Tax Policies In The European Union

Business Valuation, Growing Value And Liquidity Realization (Part VIII Of Book Series)

Michael Gilburd on Business Valuations

The Power of Customer Insight Research

For many decades, researchers have worked with companies and brands to assess their position in the marketplace. The same attitude and customer insight research employed by both B to C and B to B companies are powerful tools for generating data that can strongly affect a determination of value. Such research can take any number of forms and include:

• Market segmentation studies
• Awareness, attitude and image studies
• Psychographic and ethnographic studies
• Package and product testing studies
• Advertising and communication effectiveness studies

Whatever research approach is used, the goal is the same: to determine the strength of the company or brand as compared to competition.

Often, though, valuation experts ignore the importance of customer insight research. They fail to realize that by measuring the attitudes of customers and prospects, and producing hard data across a range of factors can greatly increase the value of a company.

Consider how you, and your competition, are perceived by your customers or prospects in regard such elements as:
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Potential Consequences And Penalties Failing To Maintain Adequate Business Records

Penalties From Failure To Maintain Adequate Business Records

A recent United States Tax Court decision, issued on December 12, 2019, demonstrates the potential consequences and penalties that can arise from failing to maintain adequate business records to substantiate claimed income and deductions.

The case of McRae v. Commissioner, T.C. Memo 2019-163, was decided against the taxpayers, Randy and Shelby McRae, leaving them with a tax bill of $84,544 for unreported income and additional accuracy-related penalties for the tax years of 2013–2015.

The McRaes’ tax returns for 2013–2015 were selected by the IRS for audit. Because of inadequate records for their Schedule C (sole proprietorship) business activities, the IRS performed a bank deposit analysis, and determined that income was substantially underreported.

The IRS issued a Notice of Deficiency to the taxpayers and disallowed various deductions claimed on the McRae’s Schedule C’s, as well as itemized deductions for mortgage interest expenses and all NOL deductions. Accuracy-related penalties were also proposed for the tax years of 2013–2015. The McRaes filed a Tax Court Petition against the IRS, challenging its decision.
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IRS Criminal Investigation Veteran Selected As New Fraud Enforcement Director

IRS Criminal Investigation

As part of a continuing focus on compliance issues, the Internal Revenue Service announced today that Damon Rowe will serve as the agency’s director of the newly created Fraud Enforcement Office beginning in mid-March.

Rowe and the new office will reside in the IRS Small Business/Self Employed Division and work on agency-wide compliance issues. He will serve as the principal advisor and consultant to IRS Division Commissioners and Deputy Commissioners on all issues involving Fraud Enforcement strategic plans, programs and policy.

A veteran of IRS Criminal Investigation, he will also provide agencywide executive leadership and direction in the design, development and delivery of major activities within the Fraud Enforcement office in support of IRS efforts to detect and deter fraud while strengthening the National Fraud Program.

In addition to leveraging existing law enforcement relationships, Rowe will have a continued focus on unscrupulous activities of taxpayers and professional enablers that undermine our Federal Tax Laws in a manner that is consistent and fair to the American public. With additional training, resources and applied analytics, SB/SE will thwart emerging threats as it relates to fraudulent filings and related activities.
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Tax Court Clarifies Burden Of Production In Section 6751(b) Cases

Burden of Production in Section 6751(b)

A. An Overview

On January 7, 2020, the United States Tax Court issued its division opinion in Frost v. Commissioner, 152 T.C. No. 2. For tax professionals who practice in the Tax Court, the decision in Frost is worth a quick read as it discusses the proper allocation (and shifting) of the burden of production in Section 6751(b) penalty cases, the latter of which is currently a hot issue.

B. Background

Mr. Frost was a former IRS collections officer. After his employment with the IRS, he set off on his own to become a self-employed salesman and consultant. He also prepared federal income tax returns. On his 2010 through 2012 returns, he reported his business income and expenses on Schedule C. He also reported a partnership loss on Schedule E of his 2011 return.

The IRS selected Mr. Frost’s returns for examination, resulting in the IRS Office of Appeals issuing a notice of deficiency (“NOD”) for the years at issue. The NOD disallowed many of Mr. Frost’s Schedule C deductions and his loss on Schedule E. In addition, the NOD determined that Mr. Frost was liable for accuracy-related penalties under Section 6662 for negligence and/or substantial understatements of income tax.

Mr. Frost timely filed a petition with the Tax Court. During those proceedings, the IRS produced a Civil Penalty Approval Form (“Approval Form”). The Approval Form was necessary to support the IRS’ burden of production on the penalties issue. See also Section 7491(c). However, the Approval Form indicated the accuracy-related penalty had been approved only for substantial understatement of income tax (and not negligence) for 2012. Thus, the Approval Form did not address the 2010 and 2011 penalties.

Because many of the deductions claimed by Mr. Frost required strict substantiation under Section 274(d), the Tax Court wasted little time in disallowing Mr. Frost’s Schedule C deductions. Moreover, because Mr. Frost was unable to substantiate his basis in the partnership, the Tax Court similarly disallowed his loss claimed on Schedule E.
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Treasury Exempts Applicable “Tax-Favored Foreign Trusts” From The Form 3520… And Therefore Form 3520A Requirement

Form 3520 And Form 3520A

Introduction – A small step for forms, one giant leap for “formkind”

It’s true. Many Americans abroad will no longer have to file Form 3520 and Form 3520A to report their lives abroad! Early indications appear that many Americans will (assume their retirement vehicle does qualify as a trust) be required to report on Form 3520. This new initiative from Treasury a positive step in the right direction.

I have long thought that Treasury could solve many of the problems experienced by Americans abroad. Here is a wonderful example of Treasury taking the initiative to clarify the obvious:

Americans abroad do NOT use non-U.S. pension plans and non-U.S. tax-advantaged investing accounts to evade U.S. taxes. Hence, there is NO reason for the Form 3520 reporting requirement. This is an example of the tax compliance industry sitting down with Treasury, explaining a problem and getting a resolution. I suggest (and hope) that the same can be done for PFIC (Form 8621), Small Business Corporations (Form 5471) and other penalty-laden forms.

Yes, this announcement from Treasury in the form of RP 20-17 is a great achievement. Although it certainly doesn’t solve all the problems, it’s:

A small step for forms, one giant leap for “formkind”

The background to this problem – It starts in 1996 (same year as the beginning of the Exit Tax)…

Since 1996 Internal Revenue Code 6048 has required extensive reporting of almost any interaction with a foreign trust. Treasury has required that the reporting take place on Forms 3520 and 3520A. The forms are complex and subject to the draconian penalty regime described in Internal Revenue Code Section 6677. In order for an entity to be a foreign trust, it must be a trust. A “trust” for IRS purposes is defined by the Treasury Regulations as:

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