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Reminder: Your Super Bowl Gambling Winnings Are Taxable

Caleb Newquist
February 8, 2010

So it’s the Monday after the Super Bowl and most of you are suffering from some kind of hangover. Whether it was caused by food, booze or you’re simply wallowing in a lack of a Peyton Manning comeback, this day should really be a national holiday (even non-football fans can agree on that notion).

Melancholy, indigestion and cocktail flues aside, the other certainty that comes with the SB is gambling. And we’re not talking friendly-poker-game gambling, we’re talking recklessly wagering on every single aspect of the biggest spectacle in sports gambling.

Two of the most creative wagers we’ve seen so far was the betting on rating for the Focus on the Family (featuring Tim Tebow and Mamma Tebow!) ad and the betting the spread between Kim Kardashian’s measurements and Reggie Bush’s rushing and receiving production. Both of which are completely ridiculous, yet sheer genius.

Regardless of where you put your money yesterday (we took the overs on Archie Manning appearances and lost), there are plenty of big winners from yesterday’s game. And now that we have a government who is feverishly trying to close a deficit gap, the question remains: will the IRS more aggressively pursue taxpayers for their unreported gambling winnings?

If you’re a degenerate loser than this obviously doesn’t apply to you but if you’re lucky enough to find some extra scratch in your pocket, you’re legally obligated to report that income next year.

Our government is looking for solutions anywhere possible, so it’s entirely possible that you could find yourself on the wrong end of an IRS-issued shotgun if you’re leaving your winnings off next year’s 1040. Look, it’s not that crazy and the pols need all the ideas they can get. You’ve been warned.

News

Is Tim Geithner a Closet IFRS Supporter?

Adrienne Gonzalez
February 8, 2010

Tim Geithner has inadvertently given his endorsement to standardized financial regulation around the globe, so is he also giving the adoption of IFRS in the US his approval?

Possibly, since he told ABC that “he wasn’t worried that tighter financial regulation would put U.S. banks at an international disadvantage. ‘I’m very confident we can make sure that we are working very closely to raise global standards around the world so we have a level playing field,’ Geithner said.” His motivations are only slightly suspect. Why?

Under IFRS, assets are overstated as derivatives are measured in gross exposure, as opposed to GAAP which concerns itself with net value. More magic financial reporting; of course Geithner would want to see banks magically healed by a change in accounting. If we’re going to do it, let’s also restate years 1999 – 2009 so we can compare at least.

Incredible what a slight adjustment can do (See also: page 19 of the Deutsche Bank report “Financial Transparency” – bwhahaha).

Speaking to the G7 finance ministers in Iqaluit, Canada this weekend, Geithner reiterated his commitment to globalization, accounting magic, and the heavy hand of regulation.

“We all share a deep commitment to try to move forward and reach agreement on a strong, comprehensive set of financial reforms on the timetable we all committed to last September,” he said at a closing press conference following a meeting of Group of Seven finance chiefs.

“That means agreement on … a new set of capital requirements for large global institutions by the end of this year,” he added, playing down the possibility that the Obama administration might be headed in a different direction from other governments.

TG is talking about pacts made with winners like Japan’s Shoichi Nakagawa, who blamed his “drunken behavior” on cold medicine. Sort of like Beavis blaming his tax problems on TurboTax.

Timmy is also somehow convinced that the United States will never lose its AAA rating but he forgets that the MBSs that the Fed is buying were also AAA once upon a time too. He also seems to have forgotten about our massive deficit.

At least he remembered to push the globalization agenda he’s been blabbering about all this time.

(UPDATE) RSM McGladrey, McGladrey & Pullen Officially Reconcile

Caleb Newquist
February 8, 2010

– Update includes response from RSM McGladrey spokesperson

Well, it’s official. RSM McGladrey and McGladrey & Pullen are back together, having signed a new definitive agreement and putting the brief fallout behind them.

In a statement released by RSM McGladrey on Friday, both firms made good on their promise to kiss and make up after announcing there intentions to do so in December.

Both RSM President C.E. Andrews and M&P Managing Partner Dave Scudder are putting this whole misunderstanding behind them.

“With the completion of these agreements, our focus is on moving forward and building the success of our respective firms by enhancing client service and accelerating growth,” said C.E. Andrews, president of RSM McGladrey, a wholly-owned subsidiary of H&R Block. “We have a clear opportunity to enhance our competitive position by taking the collaboration between our firms to a new level.”

“We now have the framework to build on our heritage of delivering the highest quality services to all our clients, while providing growth opportunities for our people and ensuring the independence of M&P,” said Dave Scudder, managing partner of McGladrey & Pullen. “We look forward to increased collaboration with RSM McGladrey and the renewed sense of enthusiasm and commitment that both firms have brought to this process.”

In spite of the boilerplate statements, it’s not entirely clear if the new agreement between the two firms puts each of them back in the same position prior to the breakup. An RSM spokesperson did not immediately return our email seeking comment on these details. A RSM spokesperson returned our email and informed us that the new agreement is the same as the old arrangement and it is effective for five years, at that time it will automatically renew for additional five years. H&R Block, RSM McGladrey’s parent company, will be filing an 8-K this week with the SEC that will include the signed agreement.

Additionally, some developments that we ponder for personal amusement: will the recombined forces of the two firms be enough to break the absence from the Fortune 100 List? Will M&P will reap any benefits from the Natalie Gulbis ad campaign bonanza? We’ll stay on these…

At the end of the day, we’re sure everyone at both firms is pleased that the issue is resolved for the rest of busy season. Who knows, maybe it was just a distraction for partners but at least you won’t be getting any more emails about it.

Accounting News Roundup: PCAOB Inspections Fall Behind in Europe, China; Schwarzenegger Cleared of Tax Lien; Private Equity Faces Tax on Carried Interest | 02.08.10

Caleb Newquist
February 8, 2010

• European Union, China Resist PCAOB Audit Inspections [Compliance Week]
PCAOB inspectors have had a helluva time getting access to the necessary information they need in Europe and China and it has caused the international inspections to fall way behind. Because they wanted to be upfront about it, the Board issued a list of the firms that should have had inspections performed in the past four years.

The majority of the firms on the list are international affiliates of the Big 4 and many of the remainder are affiliates of second-tier firms like Grant Thornton and BDO. The PCAOB didn’t give any particular reason that it was being stonewalled in its press release last week, just that “information necessary to conduct inspections was, and continues to be, denied”.

• IRS clears Schwarzenegger of $80,000 tax lien [AP via Mercury News]
As he promised, Arnie has been cleared of the $80k tax lien that was issued to him last November.

At the time, it was claimed that it was a “paperwork snafu” which looks to have been more or less correct as “[Scharzenegger] was not notified until late last year because the IRS had sent mail to his home instead of his office. Due to security precautions, the governor does not receive mail at his home.” For the trouble Ah-nuld has to pay $20.50 of administrative fees which might get the IRS an extra box of shotgun shells.

• Private equity firms brace for tax battle [Reuters]
Private equity firms have a tendency to be easy targets for a federal government that is looking to increase tax revenues. Following that idea, last week’s budget rollout proposes taxing carried interest at the ordinary rate of 35% that would raise $24 billion over the next ten years. As you might expect this is not a popular idea:

while high-profile buyout firms may seem an easy target, the question is a controversial one. Critics argue that raising the taxes paid by the private equity industry will also hit small partnerships and venture capital, and may not even raise as much revenue as governments hope.

$2.4 billion a year for 10 years doesn’t seem to be all that much in federal government dollars and we’re not sure the government will spend it better than the private equity but it serves is an easy target for politicians pandering during their election year “look how I’m taking on the greedy” speeches.

News

Five Questions with Joe Kristan

Caleb Newquist
February 7, 2010

Joe Kristan is the newest regular contributor to Going Concern but he’s been blogging on his own since 2001. For some of you, this predates your own lover affair with the American tax system.

Joe is a shareholder of Roth & Company, P.C. and also serves as the firm’s technical director. He works with a variety of clients on partnership issues, corporate restructurings, and acquisitions.

Between his professional responsibilities and discussing tax deductible sex change expenses and charities founded by pederasts, Joe also manages to find time to teach classes to other tax professionals and write articles for both professional and general publications.

Why do you blog?
Because I can’t golf or play an instrument.

If someone had to read just one post of yours which one would it be?
“Local CPA Firm vows to swallow pride, accept $28 million“

If you’re an accounting blogger you must…
…have understanding or clueless partners

Accountants are…
…people too.

Best Accounting firm we’ve never heard of
Roth Company, P.C. of course! It’s where I work, for starters. Also, we look a lot like a law firm, with 9 shareholders in a staff of about 35, with the non-shareholders weighted towards the highly-experienced. I think it’s a business model suited for an era of difficult tax and accounting rules and advancing technology.

News

Capitalizing on the Idea that “Accounting Is Boring”

Caleb Newquist
February 7, 2010

Mucho apologies for the downtime yesterday; seems that our servers also took a snow day. Accordingly, we’ll dispense a little bit of weekend wisdom (?) to make up for it.

We all know that 99.9% of the Internet is useful and informative. Dancing hamsters, celebrity gossip and an infinite amount of porn are all crucial to the infrastructure. So when we came across a website that’s sole purpose is to accumulate all the Tweets that state that accounting is boring, we thought, “this has got to be the most worthless and dishonest website that has ever been created.”

There are currently 85 pages of tweets that state this falsehood:

It’s shocking and disappointing that there is an army of people out there that think accounting is so dull. We that appreciate the beauty and importance of double-entry bookkeeping know that they are misguided. On the other hand, there is a saying about trends or something that basically solidifies it as truth but it escapes us at the moment.

Then we noticed the note at the top of the page that states that accounting doesn’t have to be boring. Having been duped into thinking that this was a joke at the expense of lover of accounting everywhere, we decided to investigate as to who was behind this little ploy. Turns out the creator of the site is ClearBooks, an “online accounting system for small businesses,” founded by a former KPMGer, Tim Fouracre and Fubra Limited.

As far as we can tell, ClearBooks is basically QuickBooks using cloud computing and this little tactic to introduce us to it is nothing short of genius. Exploiting the boring nature of accounting is exactly what everyone in the business should be doing whether it’s a firm or accounting software.

The serious approach has been tried and frankly it doesn’t float our boat. We realize are view is like asking a manager to downgrade their workspace or rocking flip-flops at the office but we are, nevertheless, encouraged by this development.

News

Quote of the Day: Ken Lewis Didn’t Like My Ideas, Okay? | 02.05.10

Caleb Newquist
February 6, 2010

“If former top executives at Bank of America committed the fraud outlined in Attorney General Cuomo’s suit, those executives must be held accountable not only to the people of New York, but also to the people of Florida.”

~ Alex Sink, CFO of Florida weighing in on the NYAG’s suit against her former boss, Ken Lewis.

News

Disappointing Accounting Firm Trend: Managers Sitting in Cubicles

Caleb Newquist
February 6, 2010

Sorry for the downtime today, we’ll make it up to you over the weekend. Promise.

It’s no secret that staff professionals working in public accounting are urged to “stay until manager” for all kinds of substantive reasons that we won’t get into here.

The attraction of being promoted to manager has many superficial benefits including being called a “manager”, having “manager” on your business cards, and getting an office rather than slumming in the cube farm.

With the reconfiguration of some offices however, your dream of getting an office with a door and possibly a window may be dashed as more and more managers, senior managers, and — GASP — even some directors are living life in the grey squares.

Now while this development is most certainly a direct slap in the face of everything public accounting represents, our understanding is that it is not spreading around like H1N1. It depends on the city you’re in, your practice, and possibly your coolness factor.

But if you are in one of the unlucky few in could be much, much worse if more firms follow the lead of E&Y Jericho and go the no-décor-will-be-allowed route (God help you if they lock the bathrooms too). How will these managers be able to appropriately express themselves? Oh! And how on Earth is a manager supposed to get some action during busy season? Cubicle sex is not happening. Christ, how will they live?

Career Center

Job of the Day: Help Jamie Dimon Celebrate His $16 Million Bonus

GoingConcern
February 5, 2010

Probably not but now that Jamie Dimon’s bonus is out, don’t you wish you could be him? Right. We all do. For starters, you could at least get a gig at the same company.

J.P. Morgan is looking to fill an AVP Senior Financial Associate role in their Worldwide Security Services group in the division of Treasury & Securities Services. Get the details after the jump.

Title: Senior Financial Associate – AVP

Location: New York, NY

Description: The Worldwide Securities Services Planning, Reporting and Analysis team is responsible for providing Business and Finance Executives standardized, meaningful and timely MIS to facilitate management decision making in support of performance analysis, forecasting and planning.

Responsibilities: Coordinate the weekly/monthly revenue and expense forecast process; deliver consolidated analysis, inclusive of the consolidated monthly and quarterly executive reviews; monitor the month-end close; support the annual planning processLiaise with product and function CFOs to understand the drivers of business variancePlay a proactive role in enhancing the current BAU processes.

See the entire description over at the GC Career Center and visit the main page for all your job search needs.

News

KPMG, Grant Thornton DC Offices Are Closing at Noon

Caleb Newquist
February 5, 2010

We heard that it was getting ugly in the Nation’s Capital so we called around to find out what’s what:

• KPMG – “Closing at noon both DC and Tyson’s”

• E&Y – “No word yet”

• Deloitte – “We’re hopeful”

• PwC – “We go by the Federal Government”

• Grant Thornton – Closing at noon.

Nothing like a snow day but a snow day during busy season is an especially welcome event. It’s supposed to get nasty in Philly too but it hasn’t started snowing there yet, so unfortch you’ll probably have a full day ahead of you (out at 3 pm if you’re lucky).

An added bonus is the possibility that the storm could keep you from working the weekend. Unless, of course, you plan on working from home. If this is the case, we advise you to get home safely, set everything down when you get there, take off your coat and slap yourself. Twice. Hard.

>75: What to Do Two Weeks Before Your Exam

Adrienne Gonzalez
February 5, 2010

Happy Friday CPA Exam munchkins! For the self-loathing types that are going through busy season and sitting for an exam, let’s discuss what you should be doing in the two weeks before your exam, not how to quit your job (not my line of expertise).

At this point, you should be through lecture videos and homework at least once. Really? You have two weeks left! If you’ve been disciplined up to this point, you’re feeling comfortable with most of the MCQ.

A final review at this point is essential. You have enough time to go back over weak areas and give everything a last look over. If you have software or your firm blew a bunch of money on overpriced programs to do this for you, use it. If you’re going with just a book, take a look at questions you’ve gotten wrong more than once and review those areas in the text.

Though we all know it’s illegal to discuss what’s actually on the exam, there are plenty of blogs and forums that share “commonly tested” items, many of which are updated often. The CPANet forums are a perfect example of candidates openly sharing their experiences and identifying common testing patterns. The AICPA Board of Examiners used to give paper and pencil candidates a COPY of their exam as they left so don’t let partners tell you it was way more rough back in their day. Still, there are channels available; it’s up to the candidate to use them.

The BoE has also committed to faster scoring and a continued evolution of exam content. They do not expressly state what that means for candidates, that’s why it’s important to ask questions and know about changes. The only real signals they’ve sent so far are that they are excited to start testing IFRS years before it is implemented in the US and the computerized exam is due for more changes in the years ahead. And? Get it over with now, whether or not BEC will be easier with communications but an extra half an hour.

Anyway, the last week. It’s your last chance to review weak spots and work through practice questions once more. I know you’re pissed at me for not writing “now you can screw off and play PS3 after 16 hours of work” but that’s not really how it works.

At this point, you shouldn’t expect to feel entirely confident and that’s okay; focus only on the last few, most heavily-tested areas. You should already know what these are, if they don’t, put off your exam and start asking questions or reading textbooks. Most CPA Review programs (even the cheap ones) give you some idea of what these areas are.

Hope that helps. On the next >75, we’ll talk about what “simulataneous IFRS implementation” really means for FAR unless you have a CPA exam question, in which case I’ll save my anti-IFRS rant for a different Friday.

Overstock.com to Restate Financial Statements; Reassures Profitability for 2009

Caleb Newquist
February 5, 2010

Well, then. This all very awkward for Pat Byrne and Co.

In an 8-K filed late yesterday Overstock.com announced that it would be restating the consolidated financial statements contained in its 2008 annual report, and the those contained in the Company’s last three 10-Q’s: period ended March 31, 2009; June 30, 2009; and September 30, 2009 (unreviewed!).

It goes without saying that those financial statements can no longer be relied upon.

The restatement is a result of errors that Overstock fired Grant Thornton for last year that led to a bit of a cat fight between the firm — who is not mentioned in the filing — and humble servant Patrick Byrne.

The Big O also admitted that it “incorrectly amortized the expense related to restricted stock units based on the actual three year vesting schedule rather than a three year straight line amortization and applied an outdated forfeiture rate in calculating its expense under the plans.” While they were at it, they threw a bunch of other corrections that were “[not] material either individually or in the aggregate,” as the saying goes.

The Company is still mulling over the numbers with both PwC and KPMG so there’s a chance that they could change but as of now, $1.9 million of income is going back to 2008 from 2009 and an increase in expense of $350k in 2008 and $900k in 2009.

But wait! The filing reminds us that “Patrick Byrne, the Company’s Chief Executive Officer, had stated to The New York Observer, ‘that the company is about to report its first annual profit.’ The Company continues to believe that it will report positive net income for fiscal 2009.” Whew! See shareholders? More commitment from your servant.

Sam Antar has been following this story from the very beginning and he is not shy about being vindicated:

Today’s news is a complete vindication of my analysis of Overstock.com’s financial reports and shows that the company willfully engaged in a financial reporting manipulation scheme. The company is restating its financial reports to correct GAAP violations, exactly as I have recommended in this blog. To date, every single initial financial report issued by Overstock.com throughout the company’s entire existence has violated GAAP or some other SEC disclosure rule. The company now has the dubious distinction of having to restate its financial reports three times in the last three years to fix GAAP violations.

We shot Sam an email last night and he simply told us, “I am going out for a glass of fine wine.”

So while this appears to wrap up the SEC’s Division of Corporation Finance investigation, one little problem that still remains is that the SEC’s Enforcement Division has not wrapped up its probe of the company. Yeah; so there’s that. Considering the the track record of the SEC, we’d typically give a company a 50/50 shot of coming out of a probe by the Enforcement Division unscathed but in the case of Overstock, we’ll be going with Schape’s crew.

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