Foreign Bank Accounts and Other Foreign Financial Assets

Jul 23, 2014

You must report worldwide income on your US income tax return. If you have an “interest in” a foreign bank or financial account you must check “yes” on Schedule B of your tax return. You may also have to file Form 8938 with your return to report foreign accounts and assets. Additionally, you may have to file an FBAR (114) report separate from your income tax return each year.

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UPDATE: Worker’s Compensation Refunds Still Available!!

Jul 17, 2014

We’ve had some confusion lately on the workers compensation refunds and we’d like you to know that refunds are still available! Since we posted a similar headline last year, the Ohio BWC has refunded numerous employers varying amounts of money. Well I’m here to tell you that may not be all that you are due! The Ohio BWC just lost the appeal on a class action lawsuit that would result in just under a billion dollars being refunded to Ohio employers. This is the second time they have been on the losing end of a judgment in this case. They are now looking to appeal for a second time to the Ohio Supreme Court. Whether or not they prevail in this matter will remain to be seen but right now Ohio employers need to position themselves to collect on the money that is due to them when it is available.

What does this mean for you? If you already received a refund, can you get another one? YES!! The refund last year was a rebate of 56% of the premium paid for policy year June 30, 2012. This refund will be for the 8 year period beginning in 2001 and ending in 2008. These refunds are completely separate and are not mutually exclusive. You do not have to currently be in business to receive this refund; however, it is not available to employers covered by group plans (this is because the groups already received hugely discounted rates) just individual policy holders.

What to do now? William Vaughan Company expects that several of our clients will be impacted by this ruling. The refunds are expected to range from as little as a $5 to as much as $1 million with several thousand businesses expected to receive over $12,000.

If you feel like you are entitled to a refund, are unsure as to your status, or would just like more information please contact us as soon as possible.

We will need your: • Name • Company Name • Address • E-mail Address • Phone Number • BWC Policy Number

Please Note These refunds will not be immediately available. The outcome for Ohio employers appears to be favorable as we have now won this case twice in court; however, everything could change with the ruling of the Supreme Court. As you know court cases take time and we have been watching this case for over a year now. Our goal is to get a running list of all of our clients that are due refunds so that we can act on their behalf the moment that the refunds are released. If you gave us your information last year and we told you that you were due a refund, we still have your information.

By: Courtney Elgin, CPA

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Mothers, Daughters, Money Managers

Jul 15, 2014

Whether it’s for a parent, child or other family member, the job of caregiver often falls on women. As a caregiver, you might have a variety of responsibilities — nurse, cook, housekeeper and errand runner. But you also could be responsible for managing the finances of the person in your care.

A power of attorney is a legal document giving you the authority to make financial decisions for someone else. It typically goes into effect when physical or mental disability prevents the person you’re caring for from handling his or her own finances. As the agent, you’re required to act in the person’s best interest, manage money and property carefully and maintain accurate records.

The nitty gritty

An agent performs many different tasks. You might pay bills, oversee bank accounts, review financial statements and pay for items the person you’re caring for needs. If the person owns property, it will be your job to maintain it and make sure it’s insured. Paying bills and taxes on time and collecting debts, such as rents, are also the agent’s responsibility.

You may also have to make investment decisions. Your financial and tax professionals can help you make choices based on the goals and needs of the person in your care.

Assets and debts

In order to make sound decisions, you’ll need a complete picture of the individual’s finances. Compile a list of all assets and debts, including bank and retirement accounts, investments, real estate, vehicles, insurance policies, valuable personal property and unpaid bills and outstanding loans.

Let the records speak for you

It’s important to have detailed and accurate records of the person’s money and property and the amounts you’ve spent or received for the person’s care. Include the amounts of checks written or deposited, dates, reasons and the names of the individuals or companies involved in the transactions. Retain all receipts, even for small expenses, with notes describing the purchases, and avoid paying with cash.

Keep your own money separate, even when the person you’re caring for is a close relative, to avoid any confusion over who owns what.

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E-Commerce & Income Taxes

Jul 10, 2014

While we have not yet evolved into a completely cashless society that some  foresaw, more and more commerce (and leisure activity) is taking place using digital currency, credits, or simple direct swaps. How does the IRS view this alternative economy and how might it impact you?

Bartering has been around forever but times have changed the way in which we negotiate. The use of digital payment services such as PayPal make e-commerce almost effortless. Online gaming often permits players to accumulate points or tokens which they can sometimes exchange for tangible goods.  “Virtual currency” such as bit coins permit instant transactions around the globe  with relative anonymity and without foreign exchange rate risk.

Bartering The act of bartering is simply trading one product or service for another. Generally cash is not involved in this type of transaction. Bartering can range from a simple “I’ll do this for you, you do that for me, and we’re even” to a more sophisticated barter with credits on an organized barter exchange with parties you have never met.

The tax code treats the fair market value of any goods or services received in a bartering transaction as income, the same as if you had received cash instead. Exchange of services results in income to both parties. Of course, the IRS is interested in capturing the income from these transactions. Barter clubs or exchanges are required to issue a Form 1099 for each member who earns credits or units during the year. While informal transactions are not normally required to be reported separately, questions regarding engaging in bartering activity are routinely asked during all IRS examinations.

Virtual Currency Virtual currency is a digital medium of exchange that replaces local coin or currency but is not backed by any country’s sovereignty nor has legal tender status in any jurisdiction. They are essentially an unregulated and untraceable currency. The most publicized is perhaps Bitcoin, a convertible virtual currency that can be digitally traded between users and purchased for, or exchanged into U.S. dollars, Euros, and other currencies.

In March 2014, the IRS issued guidance on the tax treatment of virtual currency. The Service made clear that virtual currency is treated as property for U.S federal tax purposes, and the general tax principles that apply to property transactions apply to transactions using virtual currency. Compensation paid with virtual currency must be reported, either on a W-2 or 1099. Gain or loss from the sale or exchange of virtual currency depends on whether the currency is a capital asset in the hands of the taxpayer. Payments for goods using virtual currency are subject to information reporting the same as any other payment made in property. Note however, that virtual currency is not treated as currency that could generate foreign currency gain or loss for tax purposes.

Foreign Account Reporting U.S. citizens who have an interest in or signature authority over a foreign account are required to separately file an annual report (FBAR) with the U.S. government if the account is worth $ 10,000 or more at any time during the year. How are virtual accounts treated?

In June, a district court ruled that online poker accounts were in fact controlled by overseas entities and were required to be reported on a FBAR report. The taxpayer had accounts with PokerStars and PartyPoker and used FirePay to remit and receive cash. Penalties for not reporting the accounts on a FBAR were assessed because the court stated the entities were organized outside the U.S. and in fact met the definition of “financial institution”, requiring reporting.

Although not authoritative, during a recent IRS webinar an IRS representative stated that for 2013 reports, taxpayers are not required to report virtual currencies on a FBAR report. He also indicated that the issue is up for review and could change. There is considerable discussion and debate regarding bitcoins—is there a “financial account” with a “financial institution” as outlined in the regulations? Stay tuned for updates in this area!

With the explosion of online transactions, it is difficult, if not impossible to quantify the extent of virtual economy and currency markets. Obviously, governments have a vested interest in potential revenue loss for unreported transactions. This will certainly be an area which will receive a lot of interest and activity in the coming years.

By: George Monger, CPA

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Employee Vacations

Jul 09, 2014

When it comes to employee benefits, paid vacation time is a favorite. Although not legally required in the U.S. (as it is in most other economically advanced countries), most employers — about 77% of businesses in the private sector — provide their employees with paid vacation time.*

What’s in it for you?

But what is the business impact of letting your employees go on vacation? Isn’t it bad, especially for small businesses, when key employees are gone for a week or longer? Actually, it isn’t. While it may be disruptive in the short term, providing paid vacation time can benefit employers. In a recent survey of human resources professionals, a large majority ranked taking vacation as very or extremely important for employee performance (94%), morale (92%), wellness (92%), productivity (90%), a positive culture (90%) and employee retention (88%).**

Survival strategies

Vacations may be a win-win, but you still need to minimize disruption and maintain productivity when employees are away. Here are a few tips:

• If you don’t already have one, formalize a vacation policy that spells out how to request vacation time, how many employees may be gone at the same time, how disputes will be handled, etc.

• Create a master calendar and record all approved time off.

• Cross-train employees; try to have at least two people trained to cover each job.

• Have employees update their job descriptions and provide access to any passwords or other information that may be needed during their absence.

• Prior to leaving, make sure employees compose “away” messages for voicemail and e-mail and let key customers and contacts know how long they will be gone.

Benefits are the bottom line

A comprehensive, competitive benefits package is the best way to attract and retain employees. Top prospects want health insurance, voluntary benefits and a retirement plan in addition to vacation time. How do your benefits stack up? Your financial professional knows the marketplace and can provide guidance to help you make your benefits package more competitive.

* No-Vacation Nation Revisited, Center for Economic and Policy Research, May 2013

** Vacation’s Impact on the Workplace, SHRM/U.S. Travel Association, November 12, 2013

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