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Week of October 31, 2008 • Issue No. 022
This Week in the iNews:
▲ LUNCH & LEARN SERIES PROGRAM #4 – PART 1 - YEAR END TAX PLANNING
▲ MCCAIN VS. OBAMA ON PROPOSED TAX PLATFORMS
▲ FOCUS ON FRAUD: AN EMBEZZLEMENT FRAUD CASE AND THE FINDINGS OF A RECENT AUTHORITATIVE STUDY
▲ Lunch & Learn Series Program # 4 – Part 1 - Year End Tax Planning
Please join us for the fourth program of our Lunch & Learn Series at noon on Tuesday, November 18, 2008 in the Prangley Marks, LLP lunch/conference room. It is the first in a two-part series on year end tax planning for individuals, corporations and for the new Michigan Business Tax.
Please contact mripley@pmcpa.com or call (616) 774-9004 to reserve your spot.
Complimentary lunch, program and parking provided.
Seating is limited.
▲McCain vs. Obama on Proposed Tax Platforms
Earlier this month, just prior to their third and final debate, Senators McCain and Obama released details of the updated versions of their proposed tax platforms. Summarized below are the main points of each candidate’s latest proposals.
Obama
Corporate Changes
Retain corporate tax rate of 35% and broaden the tax base
Make the R&D tax credit permanent
Tax publicly-traded partnerships as corporations
Impose a windfall profits tax on oil & gas companies
Eliminate oil and gas loopholes and limit CEO pay and other perceived loopholes
Create an international “watch list” to require additional disclosure and scrutiny for possible tax shelter transactions/ operations
Healthcare Tax Credits for small businesses. Plans to expand pooling options and easing enrollment for health insurance; paid for via increased Social Security tax of 2% to 4% percent (split between employers and employees)
Provide a refundable $3,000 per employee credit for firms that increase hiring
McCain
Corporate Changes
Gradually cut the corporate tax rate from 35% to 25%
Convert R&D credit to 10% of wages incurred for research and development, make R & D credit permanent
Eliminate the IRC Section 199 Domestic Production Activities Deduction.
Eliminate oil and gas loopholes
First-year deduction of the full cost of three- and five-year business equipment purchased and placed in service between 2009 and 2013. Eliminate the interest deduction for expensed equipment
Ban Internet taxes, any permanent ban on taxes that threaten the Internet’s economic growth and prosperity
Employee income inclusion for company-paid medical insurance (see “Personal Changes” for more details.)
Ban new cell phone taxes
Obama
Personal Changes
The top two individual income tax brackets return to 36% and 39.6% (from current 35%), and restore 1990’s levels for personal exemption and itemized deduction phase-outs
Increase maximum capital gains rate to 20% for those earning more than $200,000 ($250,000 for married couples)
Eliminate capital gains taxes for entrepreneurs and investors in small business
Re-characterize current capital income associated with “carried interests” as ordinary income
Top dividends rate of 20% when income is over $250,000.
Eliminate income taxes for seniors making less than $50,000.
Allow penalty-free (but still taxable) withdrawals from retirement plans.
Extend the current AMT patch and index exemption amounts for inflation and Expand the Earned Income Tax Credit, increase eligibility and benefits, reduce the marriage penalty
Suspend tax on unemployment benefits
Make child/dependent care credit refundable, increase amount to up to 50% of qualifying expenses
Expand tax credits for clean vehicles up to a $7,000 tax credit for the purchase of advanced technology vehicles
Refundable $4,000 American Opportunity tax credit for qualified tuition expenses (to replace Hope credit)
Refundable “Making Work Pay Credit” of 6.2% of earnings up to a maximum earnings of $8,100 per worker
Existing refundable Savers Credit expanded to match 50% of the first $1,000 of savings for families that earn under $75,000
10% mortgage interest tax credit for non-itemizers capped at $800.
Mandate 401(k) and IRA plan participation
McCain
Personal Changes
Keep the top individual tax rate at 35%; make permanent the phase-out of the limitation on itemized deductions
Retain the current 0% (for low-income taxpayers) and 15% long-term capital gain rates
Maximum long-term capital gain rate would decrease to 7.5% for 2008 and 2009 then remain at 15% thereafter
Increase the amount of capital loss deduction from $3,000 to $15,000.
Reduce tax rate to 10% on the first $50K seniors withdraw from retirement plans in 2009 and 2010
Increase AMT exemptions and allow non-refundable personal credits to offset AMT
Increase dependent exemption by $500 beginning in 2010 until it reaches $7,000 in 2016
Exempt the unemployment insurance benefits from tax in 2008 and 2009 for taxpayers making less than $100,000
Refundable tax credit towards health insurance of $2,500 ($5,000 for couples); treat employer provided health care benefits as taxable
Obama
Estate Tax Changes
Estate tax rate of 45%, estate tax exemption of $3.5 million per individual
McCain
Estate Tax Changes
Reduce estate tax to 15% with $10 million exemption
▲ FOCUS ON FRAUD: AN EMBEZZLEMENT FRAUD CASE AND THE FINDINGS OF A RECENT AUTHORITATIVE STUDY
West Michigan news media recently reported on an embezzlement fraud case filed as a civil lawsuit in Kent County Circuit Court alleging the former employee of a Zeeland-area company with stealing “$350,000 of the company’s cash.” Upon review of the news and the reported information, it is interesting to note how the facts and allegations align with many of the findings reported in the 2008 Report to the Nation on Occupational Fraud and Abuse (2008 RttN) published by the Association of Certified Fraud Examiners.
A small sampling of quotes taken from an internet article:
“ ….. attempted to conceal her scheme to defraud by removing or destroying evidence of her acts from (the company’s) accounts payable vendor files or ,,, computer system, ….. ”
“The company said its checks, with an unauthorized signature, ….. “
“The company said in its suit that (the defendant) used false information, including incorrect Social Security and driver’s license numbers, to conceal her prior criminal convictions of ….. and embezzlement to get the job as a bookkeeper.”
The 2008 RttN was based on data compiled from 959 cases of occupational fraud that were investigated between January 2006 and February 2008 as reported by Certified Fraud Examiners (CFEs). Major findings of the 2008 RttN were:
“Occupational fraud schemes tend to be extremely costly; the median loss in the study was $175,000.”
“Occupational frauds were most often committed by the accounting department.”
“Of the 959 total cases studied, 231 involved an employee in the accounting department and more than one-third of these cases involved check tampering, a much higher rate than in any other department.”
“The most commonly cited behavioral red flags were perpetrators living beyond their apparent means or experiencing financial difficulties at the time of the fraud.”
One more quote from the internet article, “West Michigan is a place where people trust people. I think that makes it even worse.”
Prangley Marks, LLP has implemented an anti-fraud procedure that has helped companies avoid this circumstance.
If you have suspicions, concerns in your business, or would like to have more information about the 2008 RttN, or how we can help companies avoid fraud, please contact Marty Grausam, CPA, CFE, CISA for further discussion.