October 4, 2022

Accounting News Roundup: Shifting Tax Deadlines and PwC’s Glitch | 04.27.16

Tax deadlines

As accountants, you're all accustomed deadlines. For the tax folks especially, a couple of dates get burned into your memory: March 15th and April 15th. March 15th marks the filing deadline for C and S corporations while April 15th is the deadline for partnerships and individuals. The obvious problem with this set-up being that many individual returns need K-1s from partnership to be completed. This arrangement caused many a CPA to suffer heartburn waiting for those partnership K-1s to come in. C corporations, on the other hand, don't have K-1s, so last year, Congress passed legislation that swapped the C corporation deadline with the partnership deadline. This move was backed by the AICPA as a solution to "correct the mismatch of information flow that exists in the system today." Everything's good, right?

Wrong. Our pal Tony Nitti explains:

If you are the average tax preparer, you have traded the pressure of preparing one C corporation return prior to March 15th for the pressure of filing two partnership returns, because each year, there are twice as many  partnership returns filed with the IRS than there are C corporation returns. Dig a little deeper, and you’ll find that the overwhelming percentage of C corporation returns are the domain of the Big Four, meaning regional and local firms are likely trading one early C corporation filing for five or six accelerated partnership returns. That’s a lot of extra work to get done by March 15th.

But that's not all! This screws with the September and October deadlines as well.

[T]he government’s fiscal year ends on September 30th. Prior to the law change, extended C corporations were due September 15th. With the move to an original due date of April 15th, had Congress allowed for a six-month extension, those returns would have been due with a drop dead date of October 15th, pushing them outside the fiscal year end. That means that somebody in Congress would have had to break out the abacus and recalculate the ten-year budget window to incorporate this change.

And since members of Congress are promised that their jobs will require no math, nobody wanted to do it. So instead, for the next ten years, calendar year C corporations are only going to be eligible for a five-month extension, bringing the due date to September 15th and keeping them within the government’s fiscal year.

This means that C-Corps, S-Corps and partnership returns will all have the same extended deadline for 10 years. That's ten glorious tax seasons with a new level of calendar-imposed urgency. Which actually is to your benefit, as Tony writes, "It’s how we’re able to so effectively convert procrastination into martyrdom." Enjoy the rest of your 2016.

LuxLeaks trial

When a document dump occurs, many people wonder how a whistleblower might obtain access to such a large amount of files. Does it require a combination of technical know-how, a cause for justice and a taste for DANGER?

Meh. Maybe. In the case of the LuxLeaks, it also sounds like there was quite a bit of luck involved:

A quirk in PricewaterhouseCoopers' IT settings made it a cinch for a whistle-blower to obtain thousands of documents cataloging secret tax deals between big clients and Luxembourg, an auditor at the firm said on the first day of a trial that may determine the role of informers in global tax scandals.

Former PwC staffer Antoine Deltour, 30, was able to access files containing some 45,000 pages about tax arrangements that were meant to be secret just by taking advantage of a quirk in the way files were stored on the firm's computers, according to Anita Bouvy, an internal auditor.

"There was a technical peculiarity by Microsoft that allowed access to such restricted files," Bouvy said, as if Bill Gates himself were responsible.

More and more I get the sense that whistleblowers aren't necessarily these crusaders for what's right as much as they are the right people in the right place at the right time. Sure, it takes fortitude once the information is discovered, but prior to that it's not like Deltour was spending his days combing through folder after folder, covering his tracks along the way, hoping that he'll stumble across the bombshell that will take down an international tax conspiracy. The whole hero status comes later when governments are after them for airing a bunch of dirty laundry and they face long prison sentences. In the case of Deltour and his alleged accomplice, Raphael Halet, they face five years in prison.

SEC enforcement

Cabela's agreed to pay $1 million to settle charges that it and its CFO Ralph Castner misled investors with a little accounting hocus-pocus:

The SEC alleged the company in 2012 failed to eliminate an intercompany promotions fee with Cabela’s wholly owned bank subsidiary. The error effectively increased the company’s gross margins.

Because Cabela’s didn’t eliminate the fees paid by its World’s Foremost Bank subsidiary, its margins for the first three quarters of 2012 and the full year were boosted by between 47% to 100%, the SEC charged.

I wonder if Cabela's had eliminated the fees in consolidation but then added them back as part of their non-GAAP reporting if they would've avoided the SEC charges. Like I said, just wondering.

Previously, on Going Concern…

Blake Oliver explained why there won't be an Uber for accounting.

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