Category: Tax

WFT’s Material Weaknesses Led to Giant Tax WTF

It’s bad enough that 3% of Weatherford International’s revenues come from Libya, Egypt, Tunisia, Yemen and Bahrain but the company also revealed in a their NT 10-K filed yesterday that they aren’t so good at staying top of their taxes:

The Company’s Annual Report on Form 10-K (the “Form 10-K”) for the year ended December 31, 2010 cannot be filed within the prescribed time period because the Company has identified a material weakness in internal controls over financial reporting for income taxes and requires additional time to perform additional testing on, and reconciliation, of the tax accounts to be included in the annual financial statements to be presented in the Form 10-K. The Company expects to file the Form 10-K on or before the 15th calendar day following the prescribed due date.


FuelFix has the gory details:

Oil field services firm Weatherford International goes by the stock ticker is WFT, but analyst reaction to the company reporting more than $500 million in tax errors is more likely drawing the reaction of “WTF?” from investors.

The company said it will have to restate its earnings going back to 2007 due to “material weaknesses” in its internal controls, namely:

1. inadequate staffing and technical expertise within the company related to taxes,
2. ineffective review and approval practices relating to taxes,
3. inadequate processes to effectively reconcile income tax accounts and
4. inadequate controls over the preparation of quarterly tax provisions.

So in other words, Weatherford has no tax experts in their accounting department, no one to supervise or review the work of those experts and no checks or balances over the tax provision process as a whole. Was the Ernst & Young audit team aware of this? Last year’s 10-K had a clean opinion, in case you were wondering. Oh, and Weatherford moved its HQ to Switzerland back in ’08. So there’s that.

Oops: Weatherford reports $500M tax error [FuelFix]

BREAKING: Tax Reform Will Be a Long Process

Yesterday in a Senate Finance Committee hearing, Senator Max Baucus (D-MT) said that he would like a “weekly set of get-togethers” to address reforming our tax code. You see, Baucus was having similar weekly hearings for two years leading up to the healthcare reform bill that was passed last year. And since those were such a hoot, he figures attacking a equally polarizing issue like tax reform will demand a similar strategy. However, witnesses before the committee – all former assistant Treasury secretaries for tax policy – warned that this debate will likely haunt our dreams and news cycles for a long time:

Fred Goldberg, Jonathan Talisman, Mark Weinberger, Pamela Olson and Eric Solomon discussed, among other issues, the difficulties in crafting a revenue-neutral tax reform plan; problems with the alternative minimum tax and the tax exclusion for employer-provided healthcare; and issues with double taxation in the corporate code.

The former Treasury officials also declared that any successful overhaul of the tax code could take several years and would require leadership from the Oval Office.

Now for the older crowd, the long arduous process of tax reform harkens you back to days of when Charlie Sheen was winning by dodging…er, Charlie in Platoon. For many of the Millennials, well, you were all a lot cuter back then.

“We saw that in 1986,” Weinberger said. “President Reagan at the time made it his No. 1 domestic policy initiative and it still took over two years and failed three times before it was ultimately enacted into law.”

Baucus wants weekly tax reform hearings [On the Money/The Hill]

That Duke Snider Autograph May Have a Tax Story Behind It

Snider returned to Brooklyn on a sad note on July 20, 1995, when he appeared in federal court, a couple of miles from where Ebbets Field once stood, as a criminal defendant. Snider and another Hall of Famer, the former Giants first baseman Willie McCovey, pleaded guilty to tax fraud for failing to report thousands of dollars earned by signing autographs and participating in sports memorabilia shows. “We have choices to make in our lives,” Snider said. “I made the wrong choice.” [NYT]

Tim Geithner Wants to ‘Revisit’ This Pass-Through Entity Idea

U.S. Treasury Secretary Timothy Geithner told the Senate Finance Committee Feb. 15 that Congress should “revisit” long-standing rules that give businesses a choice of paying taxes as a corporation or through a structure such as a partnership through which they can report business income on individual tax returns. The recommendation, which Geithner repeated in a meeting with reporters this week at Bloomberg News in Washington, would affect income earned by the nation’s largest law firms, investment partnerships and so-called S corporations. It would more than double, to about $3 trillion, the amount of business income potentially affected by tax-law changes. [Bloomberg]

Bill That Would Fire Federal Employees for Unpaid Taxes Wouldn’t Apply to Lots of Federal Employees That Have Unpaid Taxes

Senators Tom Coburn (R-OK) and Claire McCaskill (D-MO) have introduced a bill that would take care of all the federal employees who have ‘seriously delinquent tax debts.’ Quite simply, they would be fired:

In 2009, the IRS found that nearly 100,000 civilian federal employees were delinquent on their federal income taxes, owing over $1 billion in unpaid taxes. When retirees and military are included in the total, more than 282,000 federal employees owed $3.3 billion in taxes.

The Senate bill would require all federal employees to be current on their federal income taxes or be fired from their jobs. According to Coburn’s office, “this is a commonsense bill that most Americans would believe is reasonable, necessary, and likely surprised that it is not already the standard throughout the federal government.”

So if the 182,000 people that owe approximately $2.3 billion aren’t eligible to be fired, how exactly is this bill ‘commonsense’? Oh, right! By threatening the 100,000 people who owe $1 billion with the loss of their jobs. Got it!

Senate Bill Would Fire Federal Employees with Unpaid Taxes [AT]

IRS Eases Up on the Tax Liens for the Little People; Celebrities Not So Lucky

Commissioner Doug Shulman said in a statement today that the agency would make it easier for taxpayers to seek withdrawal of liens when they pay a tax debt or make arrangements to pay in installments for debts of less than $25,000. The agency also raised the dollar thresholds before liens are typically filed. “We are making fundamental changes to our lien system and other collection tools that will help taxpayers and give them a fresh start,” Shulman said in the statement. “These steps are good for people facing tough times, and they reflect a responsible approach for the tax system.” [Bloomberg]

Questionable Tax Deduction of the Day: Engagement Cruise and Wedding Expenses

Every tax professional has run across questionable expenses provided by their clients. Maybe you’ve got a used car-lot proprietor who insists that his hairpiece is crucial to his business appearance and, thus, his ability to put people behind the wheel of their dream ride. Perhaps you’ve got a sociologist that is conducting weekly research in the champagne room of a local gentleman’s club. Or maybe you’ve recently concluded that the process of, and expenses related to, tying the knot have been such a burden that it is completely acceptable to ram it onto your 1040:

Dear Caleb,

I have now figured out why the divorce rate is so high in America. Apparently, according to one of my taxpayers, wedding expenses and cruises for celebrating your engagement are now considered “write-offs.” Unfortunately, I cannot find this particular subject in THE CODE – but I think I’ll take my taxpayer’s word for it.

Maybe you should pass on this tidbit – I sure wish I had known about this obscure write off before I got married, but obviously, it’s time for me to start planning my next one. It’s going to be HUGE!!

– One of the many tax preparers currently wishing they remembered what their home looks like.

Our tipster insists that her client provided the receipts but didn’t want to forward them (something about client confidentiality). Of course, if you’ve got something that tops this, you’re invited to share it with us. In the meantime, any tax sages out there that wish to advise/debate the credibility of including the cost of sheet cakes from Costco, amateur photographers and invitations that may or may not kill you on a Schedule A (or wherever) are free to do so.

Congressman Todd Akin Doesn’t Want ‘A goon squad of 5,000 IRS agents tromping around the country’

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AS PREDICTED! Republican Congressman Todd Akin of Missouri could barely wait 48 hours before falsely asserting that the new 5,000 employees at the IRS will all be agents that will be breaking down the doors of every freedom loving American to fleece them for every last dime.

“Don’t call me Clay” Akin was giving Treasury Secretary Geithner a hard time about President Obama’s budget yesterday when he thought it necessary to start calling people – Americans that pay taxes, no less – names:

The back-and-forth began after Akin questioned Geithner about President Obama’s fiscal 2012 budget, which includes spending increases for the IRS that could reportedly lead to thousands of more staffers at the agency. The Missouri congressman said he thought energy might be better spent simplifying the tax code. “Not to mention the fact that it’d make us all look better if we don’t have a goon squad of 5,000 IRS agents tromping around the country with the economy the way it is,” Akin said.

Right. Because you looking good is what’s most important, right Congressman? Geithner, not really impressed with a two-bit fly-over representative giving people in his house shit, tried explaining to him that most of the new employees would work in “customer service or information technology [rather] than enforcement” but this fell on deaf ears:

[T]hat argument did not assuage Akin very much. “’I’m from the IRS. I’m here to help you,’” the congressman said. “That’s hard to sell in the state of Missouri.”

Akin probably didn’t think to ask the employees of the nine IRS locations in Missouri about this. Maybe some of them would be able to explain how, you know, working for the IRS is how they put food on the table, put clothes on their kids, etc. etc. etc. You know, the rhetoric you like to use, Congressman.

Republican calls IRS agents a ‘goon squad’ [The Hill]

(UPDATE) Brilliant Business Idea of the Day: Delaware Liquor Store Offers Tax Prep Services

Taxes are a touchy subject with Americans. This is known. On the one hand, a Tennessee CPA combined his love for 1040s and firearms, issues coupons to clients who, in their jubilation, can spend their refunds at his gun shop. Even if someone were not due a refund, it wouldn’t be tough to convince someone in small-town Tennessee that purchasing a gun is bound to make you feel better about the IRS impending on your freedom. For others, finding out that their sophisticated tax planning didn’t go as intended, may just cause them to grab the nearest bottle of hooch and try to forget their troubles for awhile.

Thanks to Kay Bell, we have learned that one liquor store in Delaware has made this latter scenario more convenient for its customers:


Because we were curious to know more, we called up Steve’s to find out the situation. We spoke to someone who said that returns start at $65 but the lady in charge was out and could call us back with the details. We’ll have the lowdown for you when we hear back from her.

UPDATE: We just got off the phone with Yvette Nidwik, who does the tax prep over at Steve’s and she shared with us a few more details. Unfortunately, the answer to the question on everyone’s mind, “Do we get a discount on booze?” is a flat “No.” Apparently it’s illegal in Delaware law to give discounts on liquor associated with another service (or something). Be that as it may, we were surprised when Yvette told us that she has a lot of “church people” as clients despite the proximity to the Devil’s brew. Yvette has been preparing tax returns for eleven years, five of those at Steve’s. She is not a CPA but plans on becoming an Enrolled Agent soon. She also doesn’t have a problem with the IRS’s forthcoming preparer regulations, saying, “it’s a good thing,” and that she’s “a fixer” meaning she has lots of clients who come in with prior year returns and she find lots of mistakes (especially from discount preparers that will remain nameless).

So if you’re in the area and don’t have the time or willingness to do your own, look Yvette up at Steve’s but she’s a busy lady, so no messin’ about and she’d probably prefer if you stopped in the liquor store after speaking with her.

Tax service in liquor store sure makes toasting the end of tax season easy [DMWT]