Tax Complexity Working Out Alright for CPAs
The IRS estimates that in 2016 American taxpayers will spend 8.9 billion hours preparing and filing taxes. To put that in perspective, 8.9 billion hours is 1,015,286 years or the amount of time it takes to play about three games of Monopoly. The report goes on to estimate the cost of compliance at $409 billion. […]
Utah Man Discovers Liberty Tax Not as Effective as Maury Povich in Determining Paternity
Do you remember how Greg went to Liberty Tax to get his taxes done? No? Fine, read this. Surely you remember this at least: You didn't think Greg just put on the outfit for absolutely no reason, did you? He actually had them do his taxes. Poorly, at that. Well, let's say Greg wasn't totally […]
Accounting News Roundup: Liberty Tax CEO Hints at Combination with H&R Block; Former NABA President Killed in Skydiving Accident; Sam Antar Has a Question | 07.20.10
Liberty Tax CEO Floats Combining With H&R Block [AP]
John Hewitt, CEO of Liberty Tax, is hinting that maybe he’d like to merge with H&RB, “John Hewitt, founder and CEO of Liberty Tax Service, said Monday he is trying to contact departing board member Thomas Bloch to discuss the potential for combining his privately held company with Kansas City, Mo.-based H&R Block.
‘With my leadership and the name and backing of the Bloch family, we could put a great company going back in the right direction,’ said Hewitt.”
We didn’t say it was a subtle hint.
SEC May Add 800 New Positions as Part Of Reform [Reuters]
At least try to keep the porn enthusiasts out, “The top U.S. securities regulator will need to add about 800 new positions to carry out its part of the massive financial reform legislation, the head of the agency said in testimony to be delivered on Tuesday.
Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, said the agency is still crunching the numbers on costs and hiring, and expects the upcoming rulewriting task to be ‘logistically challenging and extremely labor intensive.'”
Two 70-somethings, Theodore Wilson and George Flynn, killed after mid-air skydiving collision [NYDN]
Messrs Wilson and Mr Flynn were both experienced jumpers and were having textbook jumps until something went wrong with approximately 100 feet to go. Mr Wilson was born and raised in the Bronx and he was a former president of the National Association of Black Accountants.
Job Hunting Is Often One Step Forward, Two Steps Back [FINS]
A recent study from the University of Minnesota suggests that people on the hunt for a new job are their own worst enemies, “The results won’t be news to anyone who has ever returned from a jog and mauled a chocolate cake or followed up a productive hour of work with some heavy Facebooking.”
In other words, if someone has a good interview, they’re likely to return home and vedge for the rest of the day, feeling good about their prospects, when the best thing would do is to land the next interview with another prospect.
BP Weighs New Way to Kill Gulf Well [WSJ]
“Oil giant BP PLC was Monday considering yet another method to kill its ruptured Gulf of Mexico oil well amid concerns that the cap it installed last week could be allowing oil and gas to seep out the sides.
Meanwhile, a federal panel investigating the disaster heard that the Deepwater Horizon drilling rig suffered a series of power outages and seized-up computers in the months before it exploded.
BP’s new containment cap has stopped the flow of oil since Thursday, but with the well now sealed at the top, government officials are worried that oil and gas could now be escaping elsewhere.”
Facebook Claimant Must Answer `Where Have You Been?’ to Succeed [Bloomberg]
“Paul Ceglia, the western New York man who says a 2003 contract with Facebook Inc. founder Mark Zuckerberg entitles him to 84 percent of the company, will have to answer a critical question to pursue his claim, lawyers said.
‘The first thing that comes to mind is, where have you been all this time?’ asked Los Angeles litigator Bryan Freedman, who isn’t involved in the case.”
Answer: Been busy on Facebook.
Nokia Conducting Search for New CEO [WSJ]
Get your résumé in now.
I Have A Question [White Collar Fraud]
If Sam Antar is asking a question, something usually stinks. This time he’s wondering if someone had the NBTY Directors jumped the gun on some stock purchases prior the company’s purchase by the Carlyle Group, “If [CNBC’s David] Faber’s reporting is correct, does ‘early May’ mean before or after Michael Ashner and Peter White bought their NBTY shares?”
Accounting News Roundup: Would IFRS Prevented Repo 105?; The Crazy Eddie Movie Hits a Snag; JP Morgan May Bolt Tax-Refund Loan Business | 04.29.10
Lehman case “backs” accounting convergence [Reuters]
Philippe Danjou, a board member at the IASB has been quoted as saying that Repo 105 would not have been allowed under IFRS, “From an IFRS perspective I would suspect that most transactions would have stayed on the balance sheet. It makes a case for convergence, it makes a case that we should not have different outcomes under different accounting standards when you have such big amounts.”
The G-20 asked the sages at both the FASB and the IASB to converge their rules by June-ish 2011 but some people don’t se c, as there are too many disparities on treatment of key issues between the two boards.
The Real Reason Behind Danny DeVito’s Crazy Eddie Movie Project Meltdown [White Collar Fraud]
Danny DeVito wants to make a movie based on the Crazy Eddie Fraud, which was perpetrated by, among others, Eddie and Sam Antar. The project has run aground primarily because of Eddie Antar’s life rights and the potential profit he would reap from the making of the movie. Danny D is disappointed by the developments and has sympathy for Eddie, discussing it in s recent Deadline New York article:
“He’s gone through tough times, and he’s not the aggressive tough guy they paint him to be,” De Vito said. “He’s in his 70s and the past has come back to bite us all in the ass. Peter [Steinfeld] and I told him we think there is a terrific story there, but we can’t do it with you involved, in any way. We’ve taken a breather, but we’re figuring out how to jump back in.
Sam Antar is not amused by this and chimed in with his side of the story:
Eddie Antar is plainly still in denial about his cowardice towards his own family and investors. There actually is a “family dynamic” that “explains Antar’s fall” as DeVito claims. However, Eddie Antar and other members of his immediate family are simply unwilling to give a truthful account of what really happened at Crazy Eddie, while Danny Devito is willing to accept Eddie Antar’s bullshit excuses for his vile behavior.
As Chipotle Sizzles, CFO Sells Stock [Barron’s]
Ten thousand shares at $144 and change will buy a bunch of burritos.
Medifast Lawsuit: Anti-SLAPP motions filed [Fraud Files Blog]
Back when we discussed forensic accounting, the aforementioned Sam Antar said that forensic accountants can look forward to “making many enemies in the course of their work and must be unhinged by the retaliation that normally follows uncovering fraud and other misconduct.”
Tracy Coenen, no stranger to this retaliation, is now fighting back against Medifast who has sued her and others for saying not so flattering things about the company:
Anti-SLAPP motions have been filed in the Medifast lawsuit by me and by my co-defendant, Robert FitzPatrick. My motion can be read in its entirety here, and Fitzpatrick’s can be read here.
SLAPP stands for Strategic Lawsuit Against Public Participation. It’s basically when a big company tries to shut up a little guy with expensive litigation. In my opinion, Medifast sued me and others in an attempt to get us to stop publicly analyzing or criticizing the company and it’s multi-level marketing business model.
In filing an anti-SLAPP motion, we are essentially asking the court to rule in our favor and in favor of free speech. Consumers should have the right to discuss, analyze, and criticize companies without the fear of expensive lawsuits.
JPMorgan May Quit Tax-Refund Loans, Helping H&R Block [Bloomberg BusinessWeek]
Bloomberg reports that JP Morgan may discontinue its financing of 13,000 independent tax preparers, a move that will benefit H&R Block, according to a competitor:
“Block is the biggest winner in this,” said John Hewitt, chief executive officer of Liberty Tax Service, a privately held company in Virginia Beach, Virginia, that also may benefit…
The reason HSBC is exiting this industry, even though they’re making $100 million a year in profit from it, is because of reputation risk,” Hewitt said in an interview. “Bankers don’t like the consumer advocacy groups picketing outside their offices.”
Refund anticipation loans (RALs) are attractive to clients that need cash immediately, based on their anticipated refund. The business is controversial because the high interest rates can drive people further into debt and consumer groups oppose them vehemently.
Funding for smaller shops that offer these loans will likely lose the business altogether as large banks like JP Morgan discontinue the financing, thus driving the business to franchise tax prep shops like H&R Block, Jackson Hewitt, and Liberty.
The Winners and Losers in the New Tax Preparer Requirements
Having mastered all of its other responsibilities, the IRS was getting restless. Seeking a new challenge, they are now going to run a testing and continuing education bureaucracy for unenrolled preparers.
When a bureaucracy takes on a new role, the smart question to ask is: who wins?
The big franchised tax preparers are the biggest winners &R Block, Jackson Hewitt and Liberty Tax will now get to put little neon signs saying “IRS Licensed” in their windows. Yes, they will have to take on some responsibility in administering continuing education and employee testing, but they will be able to spread that cost across a nationwide business. They will find ways to streamline things so their employees will miraculously achieve government-approved competence with amazingly little effort. And they will be able to afford fixers and lobbyists to unravel any glitches that happen in the IRS preparer bureau.
This process isn’t just hypothetical. It is just another variation of what happened in the accounting industry after Sarbanes-Oxley and PCAOB. Smaller firms who would take on small public companies before PCAOB could no longer justify the regulatory costs, and the public companies are now captive clients of the big firms.
Over time, the IRS regulatory function will undergo the inevitable process of regulatory capture by the big players. The result – regulations that don’t much bother them but which make life difficult or impossible for their little competitors.
Fixers and lobbyists – See above.
Congresscritters and their staffs – Especially those on tax writing committees. Their new friends Henry, Robert, Jackson and Hewitt will enrich their PACs and make sure that the needs of their new overlords are attended to.
IRS staffers – Once public service palls, the bureaucrats who oversee the programs will have cushy new homes awaiting them at the franchised tax shops.
When there are winners, there are losers. These include:
Small tax prep shops – A solo practitioner will have to manage the new bureaucracy alone, while his giant competitors will have full-time fixers. When a little guy’s competency exam gets lost by the IRS bureaucracy, he might lose a season’s worth of business; fixers and lobbyists will make sure nothing like that happens to the big boys. And of course the inevitable capture of the IRS bureaucracy by the big players will continue to squeeze the little guys.
Enrolled Agents – Now that the IRS will be creating a new lesser level of licensing, these professionals will have a harder time distinguishing their much higher standards to a confused public.
Consumers – The most obvious result will be an increase in prices, both to pay for the new compliance costs and because the rules will run smaller preparers out of the market. Supporters of the regulations will say that it will be worth it because the new standards will improve quality. That’s a pipe dream. A bozo test and a few hours of CPE won’t turn a quack into a brain surgeon.
Low income consumers will, of course, not have to pay for the fancy “licensed” preparers. There will still be plenty of folks with pirated copies of Turbotax preparing unsigned returns in their cars and apartments, and the higher prices of the licensed competitors will send them more business. Other consumers will either struggle through their own returns without benefit of CPE or drop out of the tax system entirely.
So what would be a better approach? – The real problem is Congress. A simple tax law without fraud-inviting refundable credits wouldn’t have preparer problems. At the very least, we should require Congresscritters to face the consequences of their own work. Every one of them should be required to prepare their returns themselves in a live (and archived) webcast. If they use software, their screens should be visible on the webcast. What about their privacy? They make us give them all of our personal information, so fair is fair.
Editor’s note: Joe Kristan is a tax shareholder for Roth & Company, a Des Moines, Iowa CPA firm, where he works with closely-held businesses and their owners. Prior to helping start Roth & Company, he worked for two of what are now the Final Four CPA firms. He writes the Tax Update Blog and is available for seminars, first communions, Bar Mitzvahs, etc. You can see his debut post for GC here.