We applaud any and all efforts to assist the recovery in Haiti, and the IRS is also doing its part to ease the burden on taxpayers and organizations that want to help.

In fact, the IRS recently announced that the Haiti earthquake is designated for “Qualified Disaster Relief,” and is making exceptions in several areas:

1. Recipients of qualified funds can exclude those payments from income on their tax returns.

2. The guidance also allows “employer-sponsored private foundations to assist victims in areas affected by the January 2010 earthquake in Haiti without affecting their tax-exempt status. These payments generally include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance.”  For more, please read the official IRS announcement.

3. The IRS is also highlighting tax tips related to Haiti donations.  They point to this as a special case that allows individuals to make cash donations to qualified charities helping in Haiti and deduct them on their 2009 tax returns, as long as the donations are made by February 28.  The below video walks through a complete picture of the opportunity and the stipulations:

Here we are in late January, and we find ourselves between year-end tax planning and the actual filing period for most individuals. CPAs and wealth planners are working together to design an ideal strategy for their clients, and there is a crucial change in 2010 that will have a significant impact on the year: the temporary repeal of the federal estate tax.

Yes, the one-year disappearing act of the federal estate tax has come to pass. Some believe that quick action will be taken to reinstate the taxes at 2009 levels (see below bullets for details). Others believe Congress will proceed cautiously in an attempt to enact more sweeping reforms. In either case, any reinstated tax may or may not be made retroactive to January 1, 2010.

Needless to say, planning under these circumstances is challenging. Indeed, the failure of Congress to either extend the 2009 estate tax rules into 2010 or enact a permanent estate tax law has created a slew of unfortunate consequences. Some important pieces of the puzzle are:

- Both the federal estate tax and the federal generation-skipping transfer tax (a separate tax on property given to grandchildren, great-grandchildren, etc.) are repealed for 2010 unless Congress enacts legislation to reinstate them, retroactive to January 1, 2010 or otherwise.

- Both taxes are scheduled to return in 2011 at levels that applied prior to 2001. That means a $1 million exemption and a top tax rate of 55% (in 2009, the exemption was $3.5 million and the top rate was 45%).

- The federal gift tax remains in effect with a $1 million lifetime exemption, and the top tax rate has dropped to 35% in 2010 (versus 45% in 2009).  However, at this point in time the maximum gift tax rate is scheduled to jump to 55% in 2011.

Along with the repeal of the federal estate tax come new rules for determining the federal income tax basis of inherited assets which, if not changed, could mean heirs will pay more capital gains tax.  Read the rest of this entry »

A recent fraud case caught my attention as it brought to life the concern I expressed in a November post (Small companies may get SOX audit relief). I wrote that “internal controls will always be a crucial piece of the business that streamlines financials and paves the way for airtight fraud prevention, regardless of audit requirements.”

Here we are less than two months later, and CFO Magazine is reporting on the fallout from a fraud case that could have been avoided with a better check on internal controls. The article cites the case of Koss Corporation, a small public company that was not subject to an internal controls audit and  which appears on the surface to have lacked sufficient segregation of duties — they paid dearly for it. A company Vice President is accused of skimming more than $4.5 million for personal expenditures over a two year period — a loss that a thorough audit of internal controls may well have uncovered or prevented.  As James D. Ratley, President of the Association of Certified Fraud Examiners indicated in the article, the fraud may have been prevented with the knowledge that auditors would be coming in to specifically audit internal controls.

This example will weigh heavily for those arguing against the permanent elimination of the audit requirement for non-accelerated public companies.