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This Week in the iNews:

▲ PRESIDENTIAL CANDIDATE’S TAX POLICIES IN A NUTSHELL

▲ FOCUS ON FRAUD: 2008 REPORT TO THE NATION ON OCCUPATIONAL FRAUD AND ABUSE © ACFE – Part 8

▲ LUNCH & LEARN SERIES PROGRAM #3 – ESTATE TAX PLANNING: WHAT TO EXPECT AFTER THE ELECTION

▲ Presidential Candidates' Tax Policies in a Nutshell

Whichever candidate is elected in November, there are likely to be big changes proposed to the tax code. The presidential candidates' proposed tax policies include changes to individual and business income taxes, the estate tax and Social Security. For individuals, Sen. Obama would provide expanded credits for families, savers, homebuyers and clean vehicles; Sen. McCain would double the personal exemption to $7,000 and extend and index the increased alternative minimum tax (AMT) exemption amounts.

On the business side, both Obama and McCain seem to support reducing the corporate tax rate; McCain proposes a corporate tax rate of 25 percent. However, the candidates differ on the estate tax with Obama favoring the status quo, a top rate of 45 percent and a $3.5 million exemption, while McCain proposes a top rate of 15 percent with a $5 million exemption. The candidates also differ greatly on the issue of Social Security: Obama favors the current structure, with an increase in the payroll tax to pay for it, and McCain favors personal accounts for younger workers.

Individual Income Taxes
Obama proposes a $1,000 tax credit for families with incomes between $8,000 and $75,000 ($500 for individuals). He would extend the current marginal rates for the lower tax brackets and proposes to eliminate the federal income tax on seniors with incomes below $50,000. He suggests a universal mortgage credit of 10 percent, up to $800, a $4,000 refundable education credit, and expanding the existing Savers Credit to more taxpayers and making it refundable. He also proposes an expanded earned income tax credit (EITC), an expanded Child and Dependent Care Credit by making it refundable, and an expanded tax credit for clean vehicles. To pay for these tax breaks, he proposes restoring the 36- and 39.6-percent tax brackets, raising the capital gains and dividend tax rate to 20 percent for families with incomes over $250,000 ($200,000 for individuals) and restoring the phase-out for itemized deductions and exemptions. He also supports simplified tax returns for many filers and would also extend and index the increase in AMT exemption amounts.

McCain wants to make the Bush tax cuts permanent, including the lower marginal rates and capital gains and dividend rates. He also proposes gradually doubling the personal exemption amount to $7,000. He would pay for these proposals by eliminating congressional earmarks and with unidentified cuts in government spending. He has proposed simplified tax returns for many filers. He would also extend and index the increased AMT exemption amounts and has proposed an election for a separate and simplified alternative tax system.

Business Income Taxes
Obama generally supports corporate tax reform and hints of corporate tax rate reductions for domestic business activity tied to repealing other business tax breaks and closing loopholes to pay for the rate reductions. He also proposes to eliminate capital gains taxes on small businesses. Loopholes Obama has identified include clarifying the economic substance doctrine, increasing capital gains reporting, eliminating special tax breaks for oil and gas companies while expanding the renewable production tax credit, taxing carried interests as ordinary income, and what is described as the CEO pay loophole. He would also reform international tax loopholes and crack down on international tax havens. Further, he proposes making the research and development credit permanent.

McCain has proposed reducing the corporate tax rate from 35 percent to 25 percent, banning taxes on internet sales and cell phones, and permitting full first-year expensing for capital acquisitions. These tax breaks would be paid for with spending cuts or corporate loophole closers, identifying some of the tax breaks for oil and gas companies and repealing the domestic production activities deduction. McCain has also proposed expanding the research and development credit and making it permanent.

Estate Tax
Obama would preserve the estate tax as in effect in 2009: a 45-percent top tax rate and a $3.5 million exemption.
McCain wants to preserve the estate tax with a 15-percent top tax rate and a $5 million exemption.

Social Security
Obama would preserve the existing Social Security structure but help cover the growing deficit by imposing a payroll tax of four percent (two percent each from employer and employee) on incomes over $250,000.
McCain has proposed adopting personal accounts for younger employees, similar to proposals by the Bush administration.

Health Care
Obama proposes targeted health care tax credits including a health care credit for small business. He proposes a new health insurance exchange to provide health insurance, paid for by employers who do not provide employee health insurance. McCain wants a refundable tax credit of up to $5,000 for families to be paid for by treating employer-provided health benefits as taxable compensation to the employee.

▲FOCUS ON FRAUD: 2008 REPORT TO THE NATION ON OCCUPATIONAL FRAUD AND ABUSE © ACFE – Part 8

This study is based on data compiled from 959 cases of occupational fraud that were investigated between January 2006 and February 2008 and published by the Association of Certified Fraud Examiners. All information was provided by the Certified Fraud Examiners (CFEs) who investigated those cases.

Executive Summary – Part 8, Detection of Fraud Schemes

Respondents to the survey were asked to identify how the frauds were first discovered. Nearly half of the cases were reported as being uncovered by a tip or complaint from an employee, customer, vendor, or other source.

While tips have historically been the most common means of detection in prior years’ Reports to the Nation, the percentage of fraud discoveries attributed to tips in 2008 is quite a bit greater than in 2006. It is encouraging to note that the percentage of cases discovered by accident was five percent lower than in 2006, while internal controls were credited with catching a slightly larger number of frauds.

Initial Detecting of Fraud …

In All Reported Cases - by tips in the 2008 Report at 46.2% of the cases, in 2006 Report at 34.2%; by accident in 2008 at 20.0% vs. 25.4% in 2006; by internal controls in 2008 at 23.3% vs. 19.2% in 2006.

Committed by Owners and Executives – by tips in the 2008 Report at 51.7% of the cases; by accident in 2008 at 17.4%; by internal controls in 2008 at 15.2%.

In the Largest Frauds (i.e. Million Dollar Schemes) – by tips in the 2008 Report at 42.3% of the cases; by accident in 2008 at 22.8%; by internal controls in 2008 at 16.7%.

In Small Businesses (less than 100 employees) – by tips in the 2008 Report at 41.7% of the cases; by accident in 2008 at 29.6%; by internal controls in 2008 at 17.3%.

By Organization Type – in the 2008 Report all four organization types by tips were the runaway leader at 54.1% of the cases for public company; at 50.3% for government; at 48.8% for not-for-profit; at 38.5% for private company.

In the 2008 Report overall by far the greatest percentage of tips came from employees of the victim organization, which is consistent with the 2006 Report. Of the cases in the 2008 Report in which a tip or complaint was instrumental in the detection of the fraud, nearly one-third of them were received via a hotline or other formal reporting mechanism.

Next time: Executive Summary – Part 9 – Victim Organizations

▲ Lunch & Learn Series Program #3 -

Estate Tax Planning: What to Expect After the Election

Please mark your calendar for Thursday, October 16, 2008 to attend the third installment of our Lunch & Learn Series.

Complimentary Program, Lunch & Parking provided.

Make your reservations by email at mripley@pmcpa.com or calling (616)774-9004.

Seating is limited.