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Accounting News Roundup: IRS Taking Heat; Deckers Keeping KPMG as Auditor; Signs Your Firm’s Partners Don’t Trust Each Other | 05.13.13

IRS targeted groups critical of government, documents from agency probe show [WaPo]
At various points over the past two years, Internal Revenue Service officials singled out for scrutiny not only groups with “tea party” or “patriot” in their names but also nonprofit groups that criticized the government and sought to educate Americans about the U.S. Constitution, according to documents in an audit conducted by the agency’s inspector general. The documents, obtained by The Washington Post from a congressional aide with knowledge of the findings, show that the IRS field office in charge of evaluating applications for tax-exempt status decided to focus on groups making statements that “criticize how the country is being run” and those that were involved in educating Americans “on the Constitution and Bill of Rights.” The staffers in the Cincinnati field office were making high-level decisions on how to evaluate the groups because a decade ago the IRS assigned all applications to that unit. The IRS also eliminated an automatic after-the-fact review process Washington used to conduct such determinations. Marcus Owens, who oversaw tax-exempt groups at the IRS between 1990 and 1999, said that delegation “carries with it a risk” because the Cincinnati office “isn’t as plugged into what’s [politically] sensitive as Washington.”

‘I’m not good at math’: The IRS’s public relations disaster [WaPo]
About a half-hour into a conference call with reporters Friday afternoon, senior Internal Revenue Service official Lois Lerner said something she will regret. “I’m not good at math,” she confessed as she tried to summon a statistic. Lerner clarified that she is a lawyer and not an accountant (a fair defense) but the remark instantly blew up on Twitter — an IRS official being bad at math!? — and wound up punctuating what was a torturous response to the IRS’ admission that it inappropriately targeted tea party groups.
Deckers Keeps KPMG as Its Auditor [MB/WSJ, Proxy]
One of the small lingering questions from the insider-trading scandal involving a former KPMG LLP partner has finally been addressed: What would Deckers Outdoor Corp. do? […] The answer for Deckers, disclosed this week: Keep KPMG as its auditor, but cancel its vote for its shareholders to approve KPMG, apparently out of concern that the insider-trading affair complicated efforts to ensure that shareholders had enough information and notice about what had happened before they cast their votes.
Seven Signs You’re Working in a Firm Where the Partners Don’t Trust Each Other [CPAT]
#8 — They all work at Dewey, Cheatum & Howe.
Minnesota budget deal: Higher taxes on high earners, tobacco [MST]

DFL Gov. Mark Dayton and Democratic legislative leaders reached a budget agreement Sunday that calls for $2 billion in new taxes and boosts spending for schools and property tax relief. The Democrats are relying on a tobacco tax hike and the governor’s long-sought income tax increase on high earners to pay for the new spending. The budget outline scraps a proposed sales tax on clothing, but lawmakers continue to consider resurrecting at least part of a heavily criticized plan to tax businesses services. “It’s a budget that is going to work for Minnesota. It’s going to put Minnesota to work,” Dayton said Sunday afternoon. “It’s going to fulfill our promises to invest in education and infrastructure. We’re going to see a better Minnesota as a result of this budget.”
Treaty shopping and auditor independence [China Accounting Blog]
Maybe a little heavy for a Monday morning, but Paul Gillis has a nice payoff at the end: "
Auditors have a conflict of interest here. Setting up these treaty structures has been a profitable business for the firms. How can they now tell their clients that it is more likely than not that the structure does not actually work, and that they need to accrue withholding taxes at a higher rate? The audit partner may be concerned with this issue, but how can he demand the company accrue withholding taxes at the non-treaty rate when he has his tax partner who he uses as an expert to evaluate the issue advocating the client’s position? Audit committees should not permit audit firms to also provide tax services."
DPS rehires accountant accused of fraud, forgery [ADS]

The Arizona Department of Public Safety is rehiring an accountant who was fired for allegedly making false statements to the police agency about his qualifications. A state law-enforcement review board overturned the firing of Richard Echols, and DPS spokesman Bart Graves said the department is reinstating Echols because the board's decision is binding. "We will abide by the board's ruling," Graves said. […] He has pleaded not guilty to the criminal charges of fraud and forgery and awaits trial in Maricopa County Superior Court. The charges accusing him of lying about his qualifications by signing employment applications and through other actions. His attorney contends prosecutors have insufficient evidence and that Echols had no criminal intent. According to the Arizona State Board of Accountancy, Echols has not been a certified accountant in Arizona since 2000.

Instagram 'food porn' photo leads IRS to identity thieves [OSS]
IRS agents on the trail of a man who claimed he had 700,000 stolen identities to sell said they only had a few clues about who he was early in the investigation. A witness working undercover for the IRS told agents the man went by the name "Troy," he was dating [Tenise] Thomason and said he was from Harlem during a Jan. 5 meeting at YOLO restaurant on Las Olas Boulevard. The break came Jan. 7 after the three met up again – at the swanky Morton's steakhouse on the corner of Federal Highway and Broward Boulevard – so the couple could turn over a flash drive containing 50,000 identities they thought would be used to file fraudulent income tax returns. When IRS agents examined the drive – which contained only 50 identities – they found hidden data linking the drive to "Troy Maye." Louis Babino, a special agent with the IRS criminal investigation unit, searched online and found a profile for "TROYMAYE" on Instagram, a social media website for sharing photos. Babino wrote that he found "a photo of a steak and macaroni and cheese meal containing the caption "Morton's" that coincided with the Jan. 7 meeting between the witness and the couple.


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