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Get Ready for Here They Come

GEITHNER0031175.jpgTreasury Secretary Tim Geithner’s recent testimony on Capitol Hill is a clear warning to corporate America that the IRS is shifting gears.  While the Secretary stated the IRS requires a modest amount of money to reform the tax code and the complicated super system of laws; he also stated that he is seeking a larger allotment for enforcement purposes.  Clearly for the immediate future the focus of the agency will be to insure corporations are in full compliance of existing tax laws and statutes.

According to the article,  Geithner wants $332 million to go to new IRS enforcement efforts, including $128.1 million to improve international tax compliance. The balance of the funds would be used to support 755 employees to increase examinations of tax returns for businesses and high-income individuals; 300 employees to expand the IRS document-matching program, which compares tax returns to other forms such as W-2s and 1099s; and an additional 491 employees to improve collection operations and build two new IRS automated collection center sites.

Corporate tax professionals need to be vigilant and begin to design a strategy to mitigate rising tax risk.  Sum2’s Corporate Audit Risk Program (CARP) is a unique tool that helps corporate tax managers and professionals assess, manage and mitigate tax risk exposures.

Learn more about how CARP can help you manage this mounting risk factor here: manage tax risk.

You Tube Music Video: The Temptations, Get Ready

May 25, 2009 Posted by | CARP, IRS, regulatory, risk management, Tax, Treasury | , , , , , , , , | Leave a comment

A Taxing Situation

irs-and-capitol1President Obama announced his intention to curb the use of offshore tax havens for multinational corporations.  The Treasury Department is looking to raise tax revenues and believes that by closing the use of offshore tax shelters it will be able to raise over $200 bn over the next ten years.  According to the New York Times,  firms like Citibank, Morgan Stanley, GE and Proctor and Gamble utilize hundreds of these type structures to shelter revenue from being taxed by the IRS.  It has effectively driven down the tax rates these companies pay and has been a key driver in maintaining corporate profitability.

This move should come as a surprise to no one.  The Treasury Department needs to find sources of tax revenues to cover the massive spending programs necessitated by the credit crisis and the global economic meltdown.  The TARP program designed to revitalize banks has  expenditures that amounted to $700 bn.  Amounts pledged for economic recovery through EESA, PPIP and ARRA will push Treasury Department expenditures targeting economic stimulus projects and programs to approximately $2 tn.  These amounts are over and above routine federal budget expenditures that is running significant deficits as well.

The planned move by the Treasury Department to rewrite the tax code may be an intentional effort to close budget deficits but it also represents a significant rise in tax audit risk.   For the past two years the IRS has been developing a practice strategy and organizational assets to more effectively enforce existing tax laws.  Private sector expertise, practices and resource has significantly out gunned the IRS’s ability to detect and develop a regulatory comprehension of the tax implications of the sophisticated multidomiciled structured transactions flowing through highly stratified and dispersed corporate structures.  The IRS is looking to level the playing field by adding to its arsenal of resources required to engage the high powered legal and accounting expertise that corporate entities employ.

The IRS has hired hundreds of new agents  and has developed risk based audit assessment guidelines for field agents when examining corporations with sophisticated structures and business models.  As such investment partnerships, global multinational corporations and companies utilizing offshore structures can expect to receive more attention from IRS examiners.

The IRS had developed Industry Focus Issues (IFI) to be used as an examination framework to guide audit engagements for sophisticated investment partnerships and  Large and Mid-size Businesses (LSMB).  The IFI for LSMB has developed three tiers of examination risk.  Each tier has comprises about 12 examination issues that will help examiners focus attention of audit resource on areas the agency considers as high probability for non-compliance.  Clearly the audit risk factors risk

To respond to this challenge, Sum2 developed an audit risk assessment program to assist CFO’s, tax managers, accountants and attorneys conduct a through IFI risk assessment.  The IRS Audit Risk Program (IARP) is a mitigation and management tool designed to temper the threat of tax audit risk.   A recent survey commissioned by Sum2 to measure industry awareness of IFI risk awareness indicated extremely low awareness of tax audit risk factors.

Sum2’s IARP helps corporate management and tax planners score exposure to each IFI risk factor.  It allows risk managers to score the severity of each exposure, mitigation capabilities, mitigation initiatives required to address risk factor, responsible parties and mitigation expenses. The IARP allows corporate boards and company management to make informed decisions on tax exposure risk, audit remediation strategies, arbitration preparation and tax controversy defense preparation.

The IARP links to all pertinent IRS documentation and information on each tax statute and IFI audit tier.  The IARP links to pertinent forms and allows for easy information retrieval and search capabilities of the vast IRS document libraries.  The IARP also has links to FASB to have instant access to latest information on accounting and valuation treatments for structured instruments.

The IARP is the newest risk application in the Profit|Optimizer product series.  The Profit|Optimizer is a enterprise risk management tool used by SME’s and industry service providers.

The IARP is available in two versions.

The IRS Audit Risk Program for investment partnerships (IARP)

Buy it on Amazon here: IARP

The Corporate Audit Risk Program (CARP)

Buy it on Amazon here: CARP

Sum2’s Audit Risk Survey results are here: IFI Audit Risk Survey

You Tube Video: Chairman of the Board, Pay to the Piper

May 6, 2009 Posted by | business, CPA, EESA, FASB, hedge funds, IARP, IRS, NP, private equity, risk management, Sum2, Tax, Treasury | , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

How Many Zeros Are In $53 Trillion?

Paul O’Neill just finished jabbering away on Bloomberg TV.  Great stuff.

O’Neill declared the death of the private equity industry, opined on the evils of Sovereign Wealth Funds, stressed the need for banks to be better capitalized and raised a warning flag about the $53 trillion in unfunded liabilities lurking in the future federal government spending commitments.

I believe he also said “that government is broken.”

Was this guy actually the Treasury Secretary in W’s administration?

From his perspective it appears that Paulson is just rearranging the chairs on the deck of the Titanic.

Risk: Political, Banking, Deficit Spending

You Tube Video: Tennessee Earnie Ford, 16 Tonnes

April 16, 2008 Posted by | sovereign wealth funds, Treasury | , , | Leave a comment