As we enter into another audit busy season, I have started my standard exercise of compiling a list of frequently encountered audit and accounting issues that require research, additional analysis and often times detailed disclosures and even material adjustments to my client’s financials. An oft-recurring theme is the existence of related party transactions and how such transactions are recorded and disclosed.
Below are a few frequently asked questions on this subject that merit our attention: (more…)
We all have heard and know of people becoming millionaires overnight with “stock option” money, especially in Silicon Valley. Stock options are an important part of the compensation package for many employees in the technology sector. For companies, it is a tool to retain employees and motivate them to perform better as the company’s growth and success translates to their success.
The most common types of stock options are Incentive Stock Options (ISO’s) and Non-Qualified Stock Options (NQSO’s). The tax consequences to employees are as follows:
Incentive Stock Options (ISO) (more…)
In November 2016 the Governor’s Office of Economic Development announced that it had awarded $61 million of California Competes tax credits to 74 taxpayers.
These business entities promised to add over 6,500 jobs and invest $670 million in the California economy.
The credits granted ranged from $8 million to businesses receiving the minimum credit of $20,000. The program is required to grant 25% of the credits to small businesses. It is interesting to note that credits were granted to many taxpayers not operating in manufacturing. Taxpayers receiving credits included entities performing: engineering consulting (Roseville), software development (Folsom); dentist (Fresno), day care services (Oakland); financial planning (Irvine), data analysis (Los Angeles) and architecture (Anaheim). (more…)
Diversity in practice led the FASB to revisit the GAAP guidance for the Statement of Cash Flows that has been around since 1987 with the issuance FASB No. 95. Many people thought aspects of these rules were confusing (and contradictory, at times), or even missing entirely. In fact, restatements of public company financial statements often relate to issues with the Statement of Cash Flows (as noted in an earlier post).
Originally planned as a comprehensive project, the FASB altered course to focus efforts on just the most confusing areas, resulting in new guidance covering nine specific issues. The good news is that most of these issues rarely apply to nonpublic tech companies in the Silicon Valley. Eight issues are covered in ASU No. 2016-15 “Classification of Certain Cash Receipts and Cash Payments” issued in August 2016. Several of the issues that might be encountered include handling proceeds from insurance claims, distributions from equity method investees, and contingent consideration payments made after a business combination. Mid-sized companies outside of specific industries would rarely run into the remaining issues. (more…)
By Sheba Dalaney, Principal
Recent legislation has made changes to due dates for some tax and information returns that will be filed for the 2016 and following tax years. These changes will require modifying the timing of the preparation work in many cases.
Payroll and information reporting returns (Forms W-2 and 1099)
These forms historically were sent to the recipients by January 31st of each year, and government reporting copies of these forms were transmitted by either February 28th or March 31st , depending on whether they were mailed or electronically filed. For 2016 returns filed in 2017, all copies of the forms must be sent to recipients and filed by January 31st. This change was made to combat identity theft by allowing the IRS to match withholding information when tax returns are filed and reject fraudulent refund claims. The due dates for filing all other information reporting returns remain unchanged. See the table below for specific details: (more…)
Beginning next year several tax filing due dates will be changing. The existing filing schedule has been in place since I manually prepared tax returns with pencil and paper before the computer age began so these changes are significant. The new filing dates were established under the Protecting Americans from Tax Hikes (PATH) Act of 2015 without much publicity outside of the tax practitioner community. The new filing dates are effective for tax years beginning January 1, 2016, so taxpayers unaware of the new dates may have an unexpected surprise next year.
Fortunately, the traditional April 15th due date for individual tax returns has not changed but the due dates of business returns have been modified. The changes were implemented to help smooth the tax filing process for taxpayers owning interests in pass-through entities such as partnerships and S-Corporations. (more…)
My first post about the FASB GAAP Simplification Initiative was in April 2015, and I have posted since then about specific GAAP changes under this umbrella that seemed to bestow the most widespread consequences for companies in Silicon Valley. Now seems like a good time to look back over the past year and a half for other GAAP simplification subjects you might not know about, but are not exactly esoteric topics. (more…)
Business entities use insurance to provide protection against various risks ranging from natural disasters to cyber threats. As our economy has evolved the risks that can be insured against have grown more complex. An introduction to business insurance was the topic of our August, 2015 Emerging Business Group seminar. One traditional use of insurance is to provide funds to compensate a business in the event of the death of a founder or other key employee. For founders and other stockholders, the life insurance proceeds received by the entity can be used to fund the purchase of the founder’s ownership interest in that entity. In the case of key employees, life insurance proceeds can help to offset potential revenue losses or increased costs incurred while the entity determines how to deal with the knowledge and resources lost due to their employee’s death. (more…)
June 30th deadline for filing the Form 114 – Individuals Filing the Report of Foreign Bank and Financial Accounts has passed, but the IRS continues its fight to secure US tax revenue from foreign financial accounts. (more…)