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Category: Tax Law Offices

Many attorneys have their practices in a home office, although it can be argued that a majority of “high powered” lawyers run their business predominantly from multi-floored office buildings found in our nation’s towns and cities. Some tax accountants and prepares work from a home office and others from commercial spaces like storefronts and office buildings.

  • Enron – A Classic Example of Why Greed is Not Good

    Everyone knows at least a little about the Enron story and the devastation it created in the lives of is employees. It’s a story that belongs in any discussion of ethical accounting processes and what happens when accounting standards and ethics are discarded in lieu of personal greed, which in almost every case of this sort turns out to be illegal.

    Enron began in 1985 selling natural gas to gas companies and businesses. In 1996, energy markets were changed so that the price of energy could now be decided by competition among energy companies instead of being fixed by government regulations. With this change, Enron began to function more as a middleman than a traditional energy supplier, trading in energy contracts instead of buying and selling natural gas.

    Enron’s rapid growth created excitement among investors and drove the stock price up. As Enron grew, it expanded into other industries such as Internet services, and its financial contracts became more complicated. In order to keep growing at this rate, Enron began to borrow money to invest in new projects. However, because this debt would make their earnings look less impressive, Enron began to create partnerships that would allow it to keep debt off of its books.

    One partnership created by Enron, Chewco Investments (named after the Star Wars character Chewbacca) allowed Enron to keep $600 million in debt off of the books it showed to the government and to people who own Enron stock. When this debt did not show up in Enron’s reports, it made Enron seem much more successful than it actually was. In December 2000, Enron claimed to have tripled its profits in two years.

    In August 2001, Enron vice president Sherron Watkins sent an anonymous letter to the CEO of Enron, Kenneth Lay, describing accounting methods that she felt could lead Enron to “implode in a wave of accounting scandals.” Also in August, CEO Kenneth Lay sent e-mails to his employees saying that he expected Enron stock prices to go up. Meanwhile, he sold off his own stock in Enron.

    On October 22nd, the Securities and Exchange Commission (SEC) announced that Enron was under investigation. On November 8th, Enron said that it has overstated earnings for the past four years by $586 million and that it owed over $6 billion in debt by next year. With these announcements, Enron’s stock price took a dive. This drop triggered certain agreements with investors that made it necessary for Enron to repay their money immediately.

    When Enron could not come up with the cash to repay its creditors, it declared for Chapter 11 bankruptcy. And thus went the story of greed and avarice that drove a once-successful company to ruin and in the process destroyed the lives of so many of its employees who had depended on the honest and forthright operation of the company which many of them spent a lifetime working for and now had absolutely nothing to look forward to in their retirement years.




     

  • A Law Enacted to Restore Order: The Sarbanes-Oxley Act




    Addressing scandal

    The Sarbanes-Oxley Act of 2002 is a United States federal law passed in response to major corporate and accounting scandals including those at Enron, Tyco International, and WorldCom (now MCI). These scandals resulted in a decline of public trust in accounting and reporting practices. Named after its sponsors, Senator Paul Sarbanes (D-Md.) and Representative Michael G. Oxley (R-Oh.), the Act was approved by the House by a vote of 423-3 and by the Senate 99-0.

    The legislation also set a number of deadlines for compliance. The Sarbanes-Oxley Act is arranged into eleven titles. As far as compliance is concerned, the most important sections within these are often considered to be 302, 401, 404, 409, 802 and 906. An over-arching public company accounting board was also established by the act, which was introduced amidst a host of publicity.

    provisions of the law

    The legislation is wide-ranging and establishes new or enhanced standards for all U.S. public company Boards, Management, and public accounting firms. The first and most important part of the Act establishes the new quasi-public agency mentioned above, the Public Company Accounting Oversight Board, which is charged with overseeing and disciplining accounting firms in their roles as auditors of public companies. Some of the major provisions of the Sarbanes-Oxley Act’s include:

    • Certification of financial reports by chief executive officers and chief financial officers
    • Auditor independence, including outright bans on certain types of work for audit clients and pre-certification by the company’s Audit Committee of all other non-audit work
    • A requirement that companies listed on stock exchanges have fully independent audit committees that oversee the relationship between the company and its auditor
    • Significantly longer maximum jail sentences and larger fines for corporate executives who knowingly and willfully misstate financial statements, although maximum sentences are largely irrelevant because judges generally follow the Federal Sentencing Guidelines in setting actual sentences
    • Employee protections allowing those corporate fraud whistleblowers who file complaints with OSHA within 90 days, to win reinstatement, back pay and benefits, compensatory damages, abatement orders, and reasonable attorney fees and costs.

    ‘Sarbanes-Oxley Act Section 302

    This section is of course listed under Title III of the act, and pertains to ‘Corporate Responsibility for Financial Reports. Here’s a summary of Section 302. Periodic statutory financial reports are to include certifications that:

    • The signing officers have reviewed the report
    • The report does not contain any material untrue statements or material omission or be considered misleading
    • The financial statements and related information fairly present the financial condition and the results in all material respects
    • The signing officers are responsible for internal controls and have evaluated these internal controls within the previous ninety days and have reported on their findings
    • A list of all deficiencies in the internal controls and information on any fraud that involves employees who are involved with internal activities
    • Any significant changes in internal controls or related factors that could have a negative impact on the internal controls
    Closed loopholes

    Organizations may not attempt to avoid these requirements by reincorporating their activities or transferring their activities outside of the United States.’ For more about the Act, please visit www.soxlaw.com/

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  • You’ve Heard the Term Auditor-What Does it Mean?


    Accountants and auditors help to ensure that the Nation’s firms are run efficiently, its public records kept accurately, and its taxes paid properly and on time. They perform these vital functions by offering an increasingly wide array of business and accounting services, including public, management, and government accounting, as well as internal auditing, to their clients.

    Beyond carrying out the fundamental tasks of the occupation – preparing, analyzing, and verifying financial documents in order to provide information to clients-many accountants now are required to possess a wide range of knowledge and skills. Accountants and auditors are broadening the services they offer to include budget analysis, financial and investment planning, information technology consulting, and limited legal services.

    Specific job duties vary widely among the four major fields of accounting: public, management, government accounting and internal auditing. Internal auditors verify the accuracy of their organization’s internal records and check for mismanagement, waste, or fraud. Internal auditing is an increasingly important area of accounting and auditing.

    Internal auditors examine and evaluate their firms’ financial and information systems, management procedures and internal controls to ensure that records are accurate and controls are adequate to protect against fraud and waste. They also review company operations, evaluating their efficiency, effectiveness, and compliance with corporate policies and procedures, laws, and government regulations.

    There are many types of highly specialized auditors, such as electronic data-processing, environmental, engineering, legal, insurance premium, bank, and health care auditors. As computer systems make information timelier, internal auditors help managers to base their decisions on actual data, rather than personal observation.

    Internal auditors also may recommend controls for their organization’s computer system, to ensure the reliability of the system and the integrity of the data. Government accountants and auditors work in the public sector, maintaining and examining the records of government agencies and auditing private businesses and individuals whose activities are subject to government regulations or taxation.

    Accountants employed by Federal, State, and local governments guarantee that revenues are received and expenditures are made in accordance with laws and regulations. Those employed by the Federal Government may work as Internal Revenue Service agents or in financial management, financial institution examination, or budget analysis and administration.

  • Depreciation Accounting and Reporting Methods


    In an accountant’s reporting systems, depreciation of a business’ fixed assets such as its buildings, equipment, computers, etc. is not recorded as a cash outlay. When an accountant measures profit on the accrual basis of accounting, s/he counts depreciation as an expense. Buildings, machinery, tools, vehicles and furniture all have a limited useful life.

    All fixed assets, except for actual land, have a limited lifetime of usefulness to a business. Depreciation is the method of accounting that allocates the total cost of fixed assets to each year of their use in helping the business generate revenue. Part of the total sales revenue of a business includes recovering of cost invested in its fixed assets.

    In a real sense a business sells some of its fixed assets in the sales prices that it charges it customers. For example, when you go to a grocery store, a small portion of the price you pay for eggs…

    …or bread goes toward the cost of the buildings, the machinery, bread ovens, etc. Each reporting period, a business recoups part of the cost invested in its fixed assets.

    It’s not enough for the accountant to add back depreciation for the year to bottom-line profit. The changes in other assets, as well as the changes in liabilities, also affect cash flow from profit. The competent accountant will factor in all the changes that determine cash flow from profit. Depreciation is only one of many adjustments to the net income of a business to determine cash flow from operating activities.

    Amortization of intangible assets is another expense that is recorded against a business’ assets for the fiscal year of that business. This is different in that it does not require a cash outlay in the year being charged with the expense. That occurred when the business invested in those tangible assets in prior years. Depreciation is not necessarily limited to a business, but can be used on personally owned investment real estate.

  • Depreciation as an Expense


    Depreciation is a term we hear about frequently, but don’t really understand. It’s an essential component of accounting however. Depreciation is an expense that is recorded at the same time and in the same period as other accounts. Long-term operating assets that are not held for sale in the course of business are called fixed assets.

    Fixed assets include buildings, machinery, office equipment, vehicles, computers and other equipment. They can also include items such as shelves and cabinets. Depreciation refers to spreading out the cost of a fixed asset over the years of its useful life to a business, instead of charging the entire cost to expense in the year the asset was purchased.

    According to this method of dealing with Depreciation, each year that the equipment or asset is used bears a share of the total cost. As an example, cars and trucks are typically depreciated over five years. The idea is to charge a fraction of the total cost to depreciation expense during each of the five years, rather than just the first year.

    Depreciation applies only to fixed assets that you actually buy, not those you rent or lease. Depreciation is a real expense, but not necessarily a cash outlay expense in the year it’s recorded. The cash outlay does actually occur when the fixed asset is acquired, but is recorded over a period of time.

    Depreciation is different from other expenses. It is deducted from sales revenue to determine profit, but the depreciation expense recorded in a reporting period doesn’t require any true cash outlay during that period. Depreciation expense is that portion of the total cost of a business’s fixed assets that is allocated to the period to record the cost of using the assets during period. The higher the total cost of a business’s fixed assets, then the higher its depreciation expense.

  • What Is Accounting Anyway?


    Anyone who’s worked in an office at some point or another has had to go to accounting. They’re the people who pay and send out the bills that keep the business running. They do a lot more than that, though. Sometimes referred to as “bean counters” they also keep their eye on profits, costs and losses.

    Unless you’re running your own business and acting as your own accountant, you’d have no way of knowing just how profitable – or not – your business is without some form of accounting. No matter what business you’re in, even if all you do is balance a checkbook, that’s still accounting. It’s part of even a kid’s life. Savings an allowance, spending it all at once – these are accounting principles.

    What are some other businesses where accounting is critical? Well, farmers need to follow careful accounting procedures. Many of them run their farms year to year by taking loans to plant the crops. If it’s a good year, a profitable one, then they can pay off their loan; if not, they might have to carry the loan over, and accrue more interest charges.

    Every business and every individual needs to have some kind of accounting system in their lives. Otherwise, the finances can get away from them, they don’t know what they’ve spent, or whether they can expect a profit or a loss from their business. Staying on top of accounting, whether it’s for a multi-billion dollar business or for a personal checking account is a necessary activity on a daily basis if you’re smart.

    Not doing so can mean anything from a bounced check or posting a loss to a company’s shareholders. Both scenarios can be equally devastating. Accounting is basically information, and this information is published periodically in business as a profit and loss statement, or an income statement.




  • Reasons to Hire a Tax Law Attorney


    The IRS is probably the most feared arm of the United States government. There are people who fear the IRS more than they do the FBI or the CIA. In facing this branch of the government, you will need a lot of help. While some people may advice you to get a Certified Public Accountant, there are lots of reasons not to do so. In fact, what you should do is get a tax law attorney.

    Why should you hire a tax law attorney? First of all, facing the IRS means that you either haven’t hired an accountant, or your current accountant has done a pretty bad job of managing your finances. This means that it is already too late to hire another CPA to fix your problem.

    The IRS has already done the math, so you will be wasting resources if you hire another person to do it all over again. You need to focus on areas that you still need to prepare for. What you need is a competent tax law attorney to help you with the legalities that you will be facing.

    There is also the issue of client-attorney confidentiality. While a CPA can be forced to divulge any information concerning your accounts to a court, a tax law attorney is legally exempted from doing so. Remember that this confidentiality can be extremely important during trials.

    Another advantage tax attorneys have over CPAs is a deep understanding of the ambiguity of tax law. CPAs are trained to recognize something as either black or white. They are trained to categorize things very specifically and may not recognize the various gray areas of tax law. A good tax law attorney knows that the law can have a thousand different interpretations and uses this fact to your advantage.

    A tax law attorney can also help you by giving you truly complete advice. This is because of the fact that they are experienced in matters involving tax laws. A tax law attorney will be able to give you advice on different legal measures that you can take to solve your Tax problems. A CPA can only help you in terms of fixing your budget or computing your taxes, but can offer very little help regarding how to fix your tax problems.

    A tax law attorney, on the other hand, can show you a lot of things you can do to legally get the IRS off your back. A good tax law attorney can help you by giving you various tips on how to compromise with the IRS and end up paying much less than what you might think is your due.

    The IRS can use different techniques to intimidate you into paying the amount that they will insist you owe. People who are unfamiliar with the methods of the IRS often pay this amount without taking the time to question why. A good tax law attorney can help you get over your fear of the IRS and meet them on the legal battleground.

    A good tax attorney will have the resources necessary to help you overcome any intimidation tactics that the IRS may use to force you to pay. The best reason that you can have to hire a tax law attorney is the fact that taxes are based on laws. This means that taxes are the natural stomping grounds of tax attorneys. They know their ways around it and they know how to survive it.