Tax Break

Essential Reading: Ernst & Young’s fine, Swiss bank fallout and the Buffett rule

Welcome to the top tax and accounting headlines from Reuters and other sources.

* Watchdog fines Ernst & Young $2 million over audits. Dena Aubin – Reuters. The watchdog board for corporate auditors on Wednesday said it has imposed a $2 million penalty, its largest fine ever, on accounting and consulting firm Ernst & Young LLP in a settlement involving past audits of Medicis Pharmaceutical Corp. The Public Company Accounting Oversight Board said it also sanctioned four current and former Ernst & Young partners for violating PCAOB rules in the audits of Medicis, which sells prescription drugs for asthma and skin conditions. Ernst & Young settled without admitting or denying the PCAOB’s findings. The audits in question involved Medicis’ 2005, 2006 and 2007 financial statements, the PCAOB said. Link.

* Payroll-tax cut extension talks bog down as time runs short. Siobhan Hughes and Corey Boles – The Wall Street Journal. U.S. Senate Majority Leader Harry Reid said on Tuesday lawmakers working on an extension of a popular payroll-tax cut had only until early next week to reach a deal, as the two sides negotiating the package showed few signs of compromise and spent a morning meeting digging in to their positions. House Ways and Means Committee Chairman Dave Camp said that if negotiators can’t agree on current proposals to offset the cost of the package, they may have to “begin looking at scaling back some of these core policies” or else rely on deficit spending or simply kick the issue “outside the scope of the conference.” House Republicans started the latest round of talks with a proposal to cover the cost partly with a freeze to cost-of-living pay increases for federal workers. That outraged Maryland Democrats, whose constituents include many government workers. Democrats were no happier with a proposal to gradually force more senior citizens to pay higher premiums for Medicare. Link.

* Wegelin boss gives up NZZ role after US tax probe. Emma Thomasson – Reuters. The head of Wegelin – Switzerland’s oldest private bank and which the United States has indicted for helping clients dodge taxes – is standing back from his role as chairman of the country’s influential Neue Zuercher Zeitung daily. Konrad Hummler, one of Switzerland’s most high-profile bankers, said on Thursday he needed to focus on the U.S. case against Wegelin on charges it enabled Americans to evade taxes on at least $1.2 billion in offshore bank accounts. Hummler had come under pressure to step down as NZZ chairman for fear the Wegelin case could damage the reputation of Switzerland’s oldest newspaper – the voice of the country’s business establishment. Link.

* Buffett meets with Democrats on “tax fairness.” Thomas Ferraro – Reuters. Warren Buffett, the billionaire philanthropist who inspired President Barack Obama’s new crusade to make the rich pay more taxes, made his pitch for the proposal at a meeting on Wednesday with Senate Democrats, party aides said. Buffett was the dinner speaker at a closed-door meeting of the lawmakers and discussed their efforts for tax fairness, aides said. President Barack Obama has said he wants Congress to enact a “Buffett rule,” which would require anyone earning more than $1 million to pay an effective rate of at least 30 percent. Link.

Essential reading: Uneven IRS scrutiny, and more

Welcome to the top tax and accounting headlines:   

* Uneven IRS scrutiny seen in political spending by big tax-exempt groups. Nicholas Confessore – The New York Times. For the I.R.S.’s bipartisan legion of critics, the agency’s record has underscored its contradictory and seemingly confused response to the fastest-growing corner in the world of unlimited political spending. Link    

 * Q&A: Details of the IRS controversy. Laura Saunders – The Wall Street Journal. The Internal Revenue Service is embroiled in a controversy over its handling of applications by tea-party and other conservative groups seeking to set up as tax-exempt nonprofits known as 501(c)(4)s. Link 

* IRS officials in Washington were involved in targeting of conservative groups. Juliet Eilperin – The Washington Post. Internal Revenue Service officials in Washington and at least two other offices were involved with investigating conservative groups seeking tax-exempt status, making clear that the effort reached well beyond the branch in Cincinnati that was initially blamed. Link    

Calendar

Some important tax and accounting events in the week ahead:

Monday, July 23 – Wednesday, July 25  * American Institute of Certified Public Accountants conference on gift and estate taxation, the generation-skipping transfer tax, income tax considerations related to trusts, estates, and large IRAs, and more. Las Vegas.

Monday, July 23 – Tuesday, July 24  * Practicing Law Institute seminar on foreign tax credits, tax treaties, international tax reform, the Foreign Account Tax Compliance Act, and passive foreign investment companies. New York and webcast.

Tuesday, July 24  * U.S. House of Representatives Judiciary Committee hearing on the Marketplace Fairness Act, which would permit states to require online retailers to charge sales tax. 10:00 a.m. EDT, Rayburn House Office Building. Washington.

Essential Reading: Deductions Romney would target, Buffett Rule politics, more

Welcome to the top tax and accounting headlines from Reuters and other sources.

* Romney specifies deductions he would cut. Sara Murray – The Wall Street Journal. In order to offset the 20 percent income tax cut he has proposed for all taxpayers, Romney would eliminate or limit for high-earners the mortgage interest deduction for second homes, and likely would do the same for the state income tax deduction and state property tax deduction. He also said he would look to the Department of Education and the Department of Housing and Urban Development for budget cuts. Link

* Q+A: The ‘Buffett Rule,’ a minimum tax on the rich. Kim Dixon and Patrick Temple-West – Reuters. President Barack Obama and congressional Democrats are laying a political trap for Republicans to be sprung on Monday when the U. S. Senate is slated to vote on the proposed “Buffett Rule,” which would slap a minimum tax on the highest-income Americans. Link

* For Americans abroad, taxes just got more complicated. David Jolly – The New York Times. Americans overseas face a new form that will add to the hassle of tax time for many and, critics say, set up the unwary for penalties. The new requirement comes courtesy of the Foreign Account Tax Compliance Act, or FATCA, an effort to crack down on offshore tax evasion by U.S. citizens. Link

Essential Reading: Capitol Hill, Liechtenstein, Mark Zuckerberg and Mitt Romney

Welcome to the top tax and accounting headlines from Reuters and other sources.

* US payroll tax talk mired in election-year politics. Richard Cowan and Donna Smith – Reuters.

Republican and Democratic leaders accused each other of bad faith negotiations on Tuesday as both parties played hardball in talks to extend a tax cut for 160 million U.S. workers. Both sides agree the payroll tax cut should be renewed for a full year before it expires on Feb. 29, and its extension has been seen as a foregone conclusion. But the parties are far apart over how to pay for it and the rancor of election-year politics complicates lawmakers’ work. They argued over whether to continue a pay freeze on federal workers for another year, saving around $26 billion, and whether to squeeze $31 billion out of the Medicare healthcare program for the elderly. Link.

* Romney’s returns revive scrutiny of lawful offshore tax shelters. Jonathan Weisman – The New York Times.