I am an analytical person; it’s in my nature, maybe in my DNA. As an analytical person, I gather and evaluate information, put it into some type of order and come to a conclusion. Also, as an analytical person, my original conclusion is never set in stone; it can and will be amended based on new information that becomes available. With the IRS issue being discussed in Washington DC, at this time I’m leaning towards a conclusion that the issue can very possibly have political underpinnings. My prliminary leanings are based on:
1. The 2010 mid-term elections brought about a shift in the DC power structure, shifting the House of Representatives from Democratic to Republican control, a shift which many, including me, felt was helped by the “tea party” movement, a movement opposed to bigger government, which the current administration appears to be in favor of;
2. The former director of the IRS, David Schulman’s arrogant response “going to the Easter Egg Hunt with my kids” to a congressional inquiry concerning what he was doing in his 118 visits to the White House, which later became 157, between 2010 and 2011; and
3. Preliminary information coming out of congressional interviews with staff members in Cincinnati, the location which is blamed for the scrutinizing of conservative leaning groups, indicating that they were being directed by an attorney in DC.
With this preliminary data, I’m lead to a conclusion that there possibly were some political efforts taking place to slow down the “smaller government” movement. However, as I hope I’ve made very clear, this is the way I am “leaning”. Frankly, at this point, there just isn’t enough known, “enough layers of the onion haven’t been peeled back”, to make any type of substantive, no less final conclusion. In this regard, I find it ABSURD for Representatives Jim McDermott (D-WA) and Elijah Cummings (D-MD) to state “…the circus happening at the Oversight and Government Reform Committee is political theatre” and “Based on everything I’ve seen, the case is solved. If it were me, I would wrap this case up and move on”, respectively. It appears to me there is a lot more to be found out here and maybe Mr.’s McDermott and Cummings are afraid of what might come out of further inquiry. As I would dig deeper for more data when I have a case that I just don’t feel I have enough information to come to a conclusion, I hope the “powers-that-be” in Washington keep digging and get down to something that can be seen as a bonafide, fact based conclusion.
Now for some other IRS matters of interest, the IRS Interest Rate for the 2nd Quarter of 2013 has remained at 3.0%, where it has been since the 4th Quarter of 2011. This interest rate is the rate the IRS adds to the Federal Short-Term Rate, which was 0.18% for 06/13, to apply against late payments to or from the IRS (yes, the IRS has been known to be late on some payments owed to taxpayers, and yes, it does pay interest on those late payments). Now you might be saying 3.18% doesn’t sound too bad; however, keep in mind, the IRS compounds interest DAILY, and it has penalties due along with interest on late payments, so it pays to send funds to the IRS in a timely manner.
If anyone is interested, back in 2006, when the economy was going full steam ahead, these rates were 7.0% and 4.99%, the IRS Interest Rate and the Federal Short-Term Rate, respectively. YIKES; that’s 11.99%, compounded DAILY, plus PENALTIES! That is one heck of a penalty for being late in getting funds to the IRS.
Finally for this post, on Monday, 06/10/2013, the American Institute of Certified Public Accountants (AICPA) launched the Financial Reporting Framework for Small and Meadium Sized Entities (FRF for SME’s), an accounting option intended for businesses that do not need to prepare GAAP-compliant financial statements, GAAP being Generally Accepted Accounting Principles. The framework was built to help owner-managed businesses provide relevant, streamlined reporting for users of their financial statements, giving business owners, CPAs and community bankers a viable and reliable alternative to the options already available.
I haven’t reviewed the framework, which is about 200 pages long; however, one point of interest is the fact that it uses historical cost as a primary measurement basis, steering away from potentially expensive fair value measurements. Frankly, most financial statements, GAAP or non-GAAP-compliant, are built around historical cost. If anyone wants or needs a “fair-value” statement, they can request and then pay for that statement.
Keep in mind, this new “framework” has been issued by the AICPA, not the Financial Accounting Standards Board (FASB) which, under the Securities and Exchange Commission (SEC), is responsible for issuing accounting standards that all organizations should try and abide by to keep from being questioned. In my opinion, financial statements can always be tailored, GAAP-compliant, to stand up to the scrutiny they should be put to by owners, lenders, etc., but still be economically palatable to the party’s needing to issue the statements. Just ask to have a statement prepared appropriately but priced where both you and the accountant can feel well served.