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Week of Oct. 22, 2019


G-7 says Facebook’s Libra threatens global financial system, IMF warns trade war could take global growth to decade-low, and more accounting news

Italy plans to impose web tax on tech firms in 2020

As part of its budget draft for 2020, Italy has approved a 3% web tax on digital companies such as Facebook, Google, and Netflix for internet transactions made within the country. Italy and other European Union members have complained that big tech companies generate huge profits in their countries but pay little in taxes. The move, however, could prompt retaliation from the United States, which has previously mentioned that such taxes unfairly target U.S. firms. [Read more]

Fed to buy Treasury bills through Q2 2020

The central bank stated on Oct. 11 that it will continue its overnight repurchase operations until January 2020 and that it will buy Treasury bills through the second quarter of 2020. The purchase of Treasury bills is meant to grow the central bank’s balance sheet and bank reserve levels and to keep the benchmark funds rate within the target range. Fed Chairman Jerome Powell stated that this operation is not the same as the “quantitative easing” carried out during the financial crisis. [Read more]

IMF warns U.S.-China trade war could reduce global growth to decade low

The International Monetary Fund (IMF) warned on Oct. 15 that the U.S.-China trade war could bring global growth to its lowest point since the 2008-09 financial crisis. The IMF’s World Economic Outlook report suggests that the trade war has led to market turmoil, supply chain disruption, lower productivity, and reduced investments. The report mentions that the latest 2019 GDP growth was down to 3% from 3.2% in July and will continue to fall if trade tensions persist. [Read more]

G-7 say Facebook’s Libra threatens global financial system

A report by the G-7 says that Facebook’s Libra and other cryptocurrencies like it threaten the global financial system and shouldn’t be allowed until it is proven they are legally sound and don’t support money laundering and terrorism and until consumer protections are implemented. The report says cryptocurrency projects that can scale rapidly should not be initiated until “legal, regulatory, and oversight challenges and risks” are addressed. [Read more]

Week of Oct. 9, 2019


U.S. to tax $7.5 billion of European goods, Wall Street indexes fall sharply, and more accounting news

U.S. federal judge dismisses lawsuit against IRS’s SALT cap

On Sept. 30, U.S. District Judge J. Paul Oetken dismissed a 2018 lawsuit challenging the $10,000 cap on state and local taxes (SALT). The lawsuit was filed by New York, New Jersey, Connecticut, and Maryland against the IRS, the Treasury Department, and others, stating that the SALT cap is unconstitutional, politically motivated, and that it encroaches on sovereign state rights. According to the dismissal, the lawsuit failed to establish any of this. [Read more]

Chicago Fed President says Fed can hold rates, raise them later

On Oct. 1, Chicago Federal Reserve President Charles Evans said rate cuts delivered earlier this year because of global economic and political uncertainties were nudging inflation toward reaching 2.2% by 2021, slightly below the 2.5% rate considered “neutral” in a healthy economy. Evans endorsed Fed Chairman Jerome Powell’s position that rate cuts are part of a “mid-cycle adjustment.” [Read more]

U.S. gets permission to tax $7.5 billion of European goods

On Oct. 2, the World Trade Organization permitted the United States to impose tariffs on $7.5 billion of European goods annually, starting Oct. 18. Some of these goods include Spanish olive oil, French wine and cheese, and European aircraft. The tariffs arise from complaints about subsidies provided to Airbus, a European plane maker, and they aim to regain losses incurred by American plane maker Boeing because of European trade practices. [Read more]

Wall Street indexes’ falls are sharpest in six weeks

Major Wall Street indexes fell sharply on Oct. 2, after reports of small enterprises becoming “especially hesitant” to hire new workers along with factory activity reaching a decade low amid fears of a U.S.-China trade war. The U.S. winning the approval to levy tariffs on $7.5 billion of European goods on Oct. 2 also led to concerns about possible retaliation. These factors caused the S&P 500 and the Dow to fall below their 100-day moving averages for the first time in a month, with the Dow falling 800 points in two days. [Read more]

Week of Sept. 24, 2019


Record high oil prices after Saudi oil plant attack, Google to pay $1.1 billion in fraud probe, and more accounting news

France and Germany block Facebook’s cryptocurrency

The French finance ministry said on September 13 that France and Germany had decided to block Facebook’s cryptocurrency, Libra. French and German governments said in a joint statement that a private entity could not claim monetary power. Commenting on the issue, Bruno Le Maire, French Finance Minister, said that Libra should not be allowed to operate within Europe due to financial risk and sovereignty concerns. [Read More]

Record high oil prices after drone attack on Saudi plant

Crude oil prices jumped 20%—a 28-year-high—following drone attacks on a processing plant in Saudi Arabia on September 14. According to Bloomberg, the attack is the biggest ever sudden disruption to the oil supply. Based on the possible scenarios presented by Goldman Sachs commodity strategist Damien Courvalin, the outage could last at best a week or at worst for more than three months. [Read More]

Smaller inflation adjustments and no personal exemptions on income taxes in 2020

Annabelle Gibson, practice lead for U.S. income tax and IRS procedure at Bloomberg Tax & Accounting says that according to the firm’s 2020 tax rate projections, it expects smaller increases in inflation-adjusted amounts due to a slower rise in inflation and the use of chained consumer price index (CPI) to calculate the cost of living. With the passing of the Tax Cuts and Jobs Act (TCJA), taxpayers in 2020 will have no personal exemptions while federal estate tax exclusion will increase. [Read More]

Google to pay $1.1 billion to France in fraud probe

Google agreed to pay $1.1 billion to French authorities to settle a 4-year-old fiscal fraud probe. At a hearing in Paris, one of Google’s lawyers Antonin Levy, said that the agreement settles for all past disputes. French Budget Minister Gerald Darmanin said that the settlement would create a legal precedent and talks were underway with large and small companies. [Read More]

Week of Sept. 17, 2019


AB Bernstein pegs U.S. debt at 2,000% of GDP, shell companies sheild $15 trillion from taxation, and more accounting news

Ally Financial and American Express cut rates on deposit accounts

Credit Suisse Group AG analysts, led by Moshe Orenbuch, said last week that Ally Financial Inc. and American Express Co. lead when it comes to lowering rates for deposit accounts. The two institutions cut their rates by 0.3 and 0.2 percentage points respectively following the Fed’s July rate cuts. Analysts said this move will likely lead to a drop in the costs of deposits by more than 10 basis points in the next quarter. [Read more]

AB Bernstein pins total U.S. debt at 2,000% of GDP

AB Bernstein, global asset management and research firm, pegged the total U.S. debt (social, financial, federal, state, and local) at approx. 2,000% of GDP, with social entitlements contributing the most at 633%. With the total federal debt reaching $22.5 trillion (105% of GDP), Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said that the debt will likely have an adverse economic impact in the coming decades. [Read more]

J.P. Morgan Chase creates ‘Volfefe Index’ to study market impact of Trump’s tweets

Analysts at J.P. Morgan Chase & Co. created the “Volfefe Index” (named after President Trump’s covfefe tweet) to quantify the impact of the president’s tweets on Treasury yields. Analysts found that words such as “billion,” “products,” “China,” “Democrats,” and “great” were most likely to influence prices. Citigroup Inc.’s foreign exchange team reported that the president’s posts were becoming increasingly relevant to foreign exchange movement, whereas Bank of America Merrill Lynch analysts linked higher frequency of presidential tweets to negative stock returns and vice versa. [Read more]

Shell companies keep $15 trillion from taxation: IMF study

A new study by the International Monetary Fund (IMF) shows that shell companies hold $15 trillion—40% of global foreign direct investment (FDI)—meaning local economies don’t gain tax revenue from that money. As a type of financial engineering to avoid tax payment, shell companies with no actual business activity receive “phantom capital” as FDI. This makes it difficult for financial institutions and world leaders to ascertain the impact of FDI on the economy. [Read more]

U.S. futures trade higher on probable interest cuts

U.S. futures traded higher after People’s Bank of China (PBOC) announced on Sept. 6 that it will cut the requisite cash reserves for banks. On the same day, Federal Reserve Chairman Jerome Powell also mentioned the high probability of another rate cut, which increased optimism among investors causing the S&P 500, Dow, and Nasdaq to move above their 50-day Simple Moving Average. [Read more]

Week of Sept. 10, 2019


IRS to save 18,000 work hours through automation, July consumer spending rises more than expected, and more accounting news

IRS issues reminder for taxpayers ahead of hurricane Dorian

Ahead of Hurricane Dorian, the IRS has issued a reminder to taxpayers to secure their key documents and equipment, as well as resources for reconstructing records after the hurricane. The agency also instructed employers to check that their payroll providers have fiduciary bonds in place. Taxpayers who aren’t present in the disaster-hit area but who might have documents necessary for filing or payment in the disaster area must self-identify to receive relief. [Read more]

U.S. stocks rise with renewed hope for U.S.-China trade talks

After the Hong Kong government withdrew the widely protested extradition bill, the Dow increased 0.9%, the S&P 500 rose 1.1%, and the Nasdaq Composite closed on a 1.3% gain Sept. 4. Investors considered the withdrawal a positive outcome, as they feared rising tensions between Hong Kong and China might hinder U.S.-China trade talks. [Read more]

IRS retains Q3 interest rates for Q4

The IRS has announced that interest rates will remain the same next quarter, which begins Oct. 1. A 5% interest rate will apply to underpayments and overpayments (4% for corporations), 2.5% will apply to corporate overpayments exceeding $10,000, and 7% will apply to large corporate underpayments. [Read more]

July consumer spending rises higher than expected

On Aug. 30, the U.S. Commerce Department declared that consumer spending (two-thirds of total economic activity) rose by 0.6% in July, higher than the 0.5% economists had predicted in a Reuters poll. The rise in spending was supported by personal savings with a 0.1% increase in personal income, the smallest rise since September 2018. [Read more]

IRS expects to save 18,000 work hours with robotic process automation (RPA)

On Sept. 3, the government-wide RPA Community of Practice gathered feedback from government partners and vendors on its first industry day. Some agencies, such as the IRS, are already launching pilots with RPA tools. Harrison Smith, the IRS’s deputy chief procurement officer, said that over the last five years, the office has completed 10% more work per year in Q4 of the fiscal year, while procurement has steadily decreased. Smith expects the agency to save over 18,000 work hours through RPA pilots. [Read more]

Week of Sept. 3, 2019


France and U.S. reach an agreement over French tax, yield curve hits lowest point since 2007, and more accounting news

TIGTA report highlights delays in IRS Data Loss Prevention effort

A report by the Treasury for Inspector General for Tax Administration (TIGTA)—an agency that provides independent oversight for the IRS—is urging the IRS to speed up deployment of its Data Loss Prevention solution. Although the first phase of implementation (the Data-in-Motion component) is functioning as intended, delays in implementation of the remaining components have hindered its effectiveness. [Read More]

10-year yield curve drops to its lowest point since 2007

On Aug. 27, the 10-year yield plunged to its lowest point against the 2-year yield since 2007. Meanwhile, the 2-year Treasury note, the benchmark, fell to five basis points above the 10-year Treasury note at 1.526%. Further, the spread between the 10-year Treasury note and the 3-month yield fell to -52 basis points, the lowest since 2007. [Read More]

IRS plans countrywide payroll tax compliance sweeps by end of year

On Aug. 27, the IRS said it is on track to hire 600 revenue officers by September to aid in potential fraud detection. It plans countrywide payroll tax compliance sweeps by the year’s end. Payroll taxes withheld by employers are a major source (72%) of revenue collected by the agency, which makes noncompliance a major issue for the tax system. [Read More]

France and U.S. reach agreement over French tax

The U.S. and French officials have reached an agreement on the French digital tax. As per the agreement, France will repay companies the difference between its digital tax and the tax plan being drafted by the Organization for Economic Cooperation and Development (OECD). The OECD’s tax plan aims to ensure a minimum tax limit for multinational companies to prevent them from shifting profits to countries with lower limits. [Read More]

U.S. to impose 15% tariffs on Chinese imports

The U.S. has officially announced 15% tariffs, a 5% increase from last week’s 10%, on $300 billion of Chinese imports. The U.S. Trade Representative’s office said that collections would start on over $125 billion Chinese imports beginning Sept. 1, and U.S. Customs and Border Protection will begin collection on the remainder on Dec. 15. [Read More]

Week of Aug. 26, 2019


Yield curves flash warning signs of recession, the IRS loses $34.3 billion in tax revenue, and more accounting news

Google, Facebook, and Amazon protest France’s digital tax

On Aug. 19, Amazon.com Inc., Facebook Inc., and Google testified in Washington in favor of the Trump administration’s punitive efforts against France’s newly enacted digital tax. France has imposed a 3% tax on tech companies with digital sales of $25 million in France and global revenue of $832 million. [Read More]

Budget cuts cost IRS $34.3 billion in lost tax revenue

Research from the Indiana University Kelley School of Business has quantified the amount the IRS is losing in tax revenue because of budget cuts at approximately $34.3 billion. The research uses tax data from large, publicly traded organizations from the years 2000 to 2010. [Read More]

Financial Accounting Standards Board (FASB) proposes delay to accounting standards

The FASB issued a proposal Aug. 15 to delay the implementation of new current expected credit losses (CECL), leases, and hedging standards. The deferral will allow nonprofits, private companies, and certain small public businesses more time to implement the new standards. [Read More]

Yield curves invert, flashing warning signs of recession

The yield on the 10-year Treasury note fell below 2-year yields Aug. 13, causing a yield curve inversion, which is widely seen as a recession indicator. The Dow Jones Industrial Average also plunged by 800 points. Bond prices soared as traders started accepting lower interest rates on longer-dated bonds. [Read More]

American Institute of Certified Public Accountants (AICPA) issues working drafts for implementing CECL

The Financial Reporting Executive Committee (FinREC) of AICPA has issued working drafts for the new CECL guidelines. The drafts include considerations for insurance companies and depository and lending institutions and aim to simplify implementation for auditors. [Read More]

Week of Aug. 19, 2019


U.S. budget deficit rises by 27%, the W-4 gets a facelift, and more accounting news

Dow plunges nearly 400 points amid U.S.-China trade war

Stocks took a nosedive on Monday, Aug. 12, with the Dow Jones Industrial Average dropping 400 points and the S&P 500 falling 4.7% below its all-time high, set just last month. Banks and technology companies held the biggest share in the sell-off. The fluctuation stemmed from President Donald Trump’s plans to impose 10% tariffs on $300 billion of Chinese imports, which fall outside the already imposed 25% tariffs. [Read more]

Goldman Sachs lowers U.S. GDP forecast for Q4 by 20 basis points

Goldman Sachs lowered its fourth-quarter U.S. growth forecast by 20 basis points, saying that the U.S.-China trade war is having a bigger impact on the country’s economy than expected. On Aug. 11, the bank’s chief economist, Jan Hatzius, said in a note to clients that the company does not expect a U.S.-China trade deal before the 2020 presidential election. Hatzius also mentioned that fears of a recession are on the rise. [Read more]

IRS and Treasury Department release redesigned W-4 forms for 2020

The IRS and Treasury Department released a redesigned W-4 form Aug. 9 after complaints from tax professionals about the previous version. The IRS said that the new version is more accurate and transparent and that it doesn’t expect further changes to the form barring inflation adjustments. Employees who’ve submitted a W-4 before 2020 do not need to submit a new form, and employers will continue to calculate withholding based on the most recent W-4 submitted. [Read more]

U.S. budget deficit rises by 27% through July

The Treasury Department reported on Monday, Aug. 12, that the U.S. budget deficit has reached $866.8 billion, a 27% hike since July 2018. Outlays increased by 22.8% compared to last July, while receipts increased by 11.6%. For the fiscal year so far, tax revenue has increased by 3% and federal spending by 8%. The deficit is being attributed to a rise in healthcare and military spending. [Read more]

City of Austin raises hotel occupancy tax to the maximum limit

On Friday, Aug. 9, the Austin City Council in Austin, Texas, unanimously voted in favor of raising the city’s hotel occupancy tax rate from 7% to 9%, the maximum limit allowed by the state. The tax rate hike aims to pay for the council’s proposed $1.2 billion-project of expanding the Austin Convention Center, which will be up for a vote in November. [Read more]

Week of Aug. 12, 2019


U.S. stocks post biggest percentage drop of 2019 and more accounting news.

Crypto tax bill referred to House Committee of Ways and Means

The Virtual Value Tax Fix Act of 2019, initially introduced July 25, was referred to the U.S. House of Representatives Ways and Means Committee on Aug. 7, 2019. The bill proposes to amend the Internal Revenue Code of 1986 to end double taxation on cryptocurrency by excluding gains and losses on “like-kind” cryptocurrency, i.e., considered to be the same type making the exchange tax deferrable. If the bill passes, the exchange of like-kind cryptocurrency would be treated similar to the exchange of real like-kind property. [Read More]

Kansas makes it mandatory for small businesses to pay remote sales tax

On Aug. 1, 2019, Kansas’ Department of Revenue issued Notice 19-04, which requires small online businesses from outside the state to register with the department and collect and remit sales tax on in-state sales starting Oct. 1, 2019. The policy makes Kansas the only state to collect remote sales tax from small businesses. With this measure, the department expects an additional annual tax revenue collection between $20 million and $40 million. [Read More]

U.S. stocks post biggest percentage drop of 2019

U.S. stocks registered the biggest plunge of 2019 after China allowed its currency to fall below 7 yuan to the dollar. The S&P 500, Dow, and Nasdaq indexes registered their worst August starts since 2011, which accelerated equity sell-off. The decline further accelerated mid-day Aug. 4, 2019, after Chinese companies suspended agricultural product purchases and amid the possibility of further tariffs. [Read More]

Property company fined $7 million over accounting fraud

The SEC has charged publicly traded real-estate investment trust Brixmor Property Group and four of its senior executives with fraud for manipulating key non-GAAP measures. The charges include lowering the previous year’s same-property net operating income (SP NOI) to mislead investors by projecting stronger growth. The SEC has sought a penalty of $7 million, permanent injunctions, and disgorgement plus interest. [Read More]

Orders in the U.S. services sector hit a 3-year low

The services sector, which accounts for two-thirds of U.S. economic activities, slowed further as orders dropped to a three-year low in July. A report by the Institute of Supply Management (ISM) showed a 1.4% point drop in the manufacturing activity index, making it a consecutive two-month decline. Factory activity also hit a three-year-low in July, while new orders for the services sector fell to the lowest since August 2016. [Read More]

Week of Aug. 5, 2019


Federal Reserve cuts interest rates, the IRS sends a letter to cryptocurrency owners, and more accounting news

IRS allows partnership firms to file superseding tax returns for 2018

The IRS has allowed certain partnerships to file superseding 2018 tax returns to correct any errors in the original returns. The concession is available to partnerships that filed Form 1065 and Schedules K-1 (partner’s share of income, deductions, credits, etc.) on time. The concession does not apply to firms that previously opted out of the revised centralized partnership audit regime. The deadline to file is Sept. 15, 2019. [Read more]

IRS mails Letter 6174-A to tax payers for accurate crypto income disclosure

Thousands of U.S. taxpayers have recently received IRS Letter 6174-A. The letter instructs taxpayers to amend their tax returns by disclosing cryptocurrency-related income and states that inaccurate disclosure will result in civil and criminal enforcement action. [Read more]

Synchrony Financial and American Express expect to increase loan loss reserves under new CECL standards

Synchrony Financial reported that it may boost loan loss reserves by 50 to 65% under the new current and expected credit losses (CECL) accounting standards expected to go live in December 2019. American Express Co. expects a 25 to 40% increase in its reserves. American Express describes the change as “manageable” based on the strong credit records of its customers. [Read more]

Federal Reserve cuts interest rates by 25 basis points; blames low inflation, global economic slowdown, and trade wars

The Federal Reserve has cut interest rates by 25 basis points—the first cut since the 2008 financial crisis. It aims to sustain the long-running economic expansion and is a precaution against low inflation, risks from global growth slowdown, and the impact of trade wars. [Read more]

AICPA’s personal financial satisfaction index (PFSi) remains high in Q2

The American Institute of Certified Professional Accountants’ PFSi remained at 37.8 points in Q2 2019 owing to rising home equity, a high number of job openings, and a high performing stock market. However, the index fell 2% from the previous quarter due to a slight increase in inflation and taxes. [Read more]

Week of June 10th, 2019


Higher ed dips its toes into crypto, a $4 million lunch, and more accounting news

According to EY, adoption of fintech is increasing

With consumers becoming more interested in using tech to manage online finances, the crossover between the finance and technology sectors (known as “fintech”) has firms opening up.

The latest report on the topic was published last week. Among the interesting stats are the fact that cost remains the most important consideration (27% see cost as the differential advantage) and that there is a high level of awareness (96% of consumers had at least heard of fintech). [Read more]

Chinese crypto entrepreneur bids $4.6 million for lunch with Warren Buffet

The owner and founder of the cryptocurrency platform Tronix, more commonly called TRON, has won a bidding war with other crypto enthusiasts. The prize? Lunch with billionaire investor Warren Buffet. Justin Sun set the record with his $4.57 million bid on eBay. He shared the news with his Twitter followers later that day. [Read more]

How much is the CPA exam worth in 2019?

What’s the future going to be like for the CPA exam? In a word: unsure. The National Association of State Boards of Accountancy has taken note of this trend and has recently released a survey on the CPA’s relevance this year. Candidates who sat for the exam in 2017 and 2019 were asked “Is the CPA exam outdated?” See the results of the honest comparison. [Read more]

Wharton just released an online fintech course

Wharton has released a new learning course that teaches fintech basics to students. This move shows that, true to its name, fintech isn’t only for big or established players; the movement that began with startups is not shying away from its roots. Wharton’s “new virtual fintech specialization program” can be accessed through the online learning platform Coursera. The course lasts several months and students who pass receive a certificate of completion. [Read more]

Apple adds the Bitcoin logo to its keyboard

With interest in cryptocurrency growing steadily, Apple added the Bitcoin logo to its icon set. The icon was cleared to be used as part of Unicode in 2015. [Read more]

Week of May 13, 2019


Xero’s brewtiful partnership, a post-Wayfair world, and more accounting news

Data breach within a European accounting firm

Cloud-based software from Wolters Kluwer, an accounting and financial process improvement firm, was taken offline May 9, after a supposed malware attacks breached its system. With the company’s $4.8 billion brand at stake, the market still lacks clarity on the attack’s long-term impact. [Read more]

Market sizing estimates for cloud-based accounting

It’s a time of rapid expansion for the cloud-based accounting market. According to MarketWatch, a compound annual growth rate of more than 7.2% will lead to a $4 billion pie by 2024. Currently, the market’s valuation is $2.6 billion. [Read more]

Xero to enable integration with Ekos

Community-focused tech company Ekos announced that it will integrate directly with Xero. If you’re one of the 1,500 craft beverage producers that partners with Ekos, check out this read from Brewbound. [Read more]

2 trends to watch this year, in the aftermath of Wayfair

eCommerce continues to be a burden for tax professionals. Coupled with constant updates, missing sales tax estimates, and new avenues for globalization, accountants across different industries should be ready. [Read more]

The rise of multidealer platforms

Checking in on the fintech space, it’s clear that multidealer platforms are getting more popular, within both traditional asset management firms (e.g., Fidelity) and startup firms. Difficulties still exist with over-the-counter trading. [Read more]

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