REPOST: Making It Safe for Banks to Take (Legal) Pot Money

Read about the banks effort to be able to safely process payments from people or companies involve in marijuana. Bloomberg.com

Image Source: Yahoo.News

Colorado’s pot sellers are open for businesses and enjoying brisk sales since recreational marijuana became legal under state law on New Year’s Day. What those stores do with the revenue they bring in, however, is a different question—one that’s gaining salience and attention as more and more legal pot businesses open up shop.

Anti-money laundering rules forbid banks from processing payments or holding accounts for businesses that deal in drugs that remain illegal under federal law. That has left pot businesses forced to operate largely in cash, hauling bags of bills in to pay state taxes and manage their books. As marijuana legalization spreads, with Washington State permitting recreational use and additional states embracing medical uses, more businesses will face this cash conundrum.

The governors of Colorado and Washington have pressed federal bank regulators to let financial institutions open accounts for businesses that follow the state’s pot regulations, and yesterday the Denver City Council passed a resolution (PDF) “urging swift federal action to provide guidance for banking and other financial institutions to serve legal marijuana businesses.”

They are seeking clarity in the banking world similar to what the U.S. Justice Department has already provided by saying it generally won’t pursue criminal drug cases against businesses or users following state laws. In August, the DOJ said that it could decide to bring cases if a situation violates any of eight conditions, such as failure to prevent sales to minors or to customers who illegally resell pot across state lines.

The Justice Department is already working on a memo to provide some guidance for banks, the Wall Street Journal reports. Whether one will provide enough clarity for banks to feel comfortable isn’t yet clear. Other agencies involved in the discussion include the Financial Crimes Enforcement Network, the Federal Deposit Insurance Corp., the Federal Reserve Board, the Office of the Comptroller of the Currency, and the National Credit Union Administration.

Meanwhile, Bob Hasewaga and three other Washington State senators have submitted a bill to create a state-run bank that would be the sole depository for Washington’s marijuana businesses. Hasegawa acknowledges that the bill is a long shot, but he argues that pot businesses need a solution. “They are hoping against hope that the Treasury Department and the financial regulators are going to come up a letter similar to what the U.S. attorney general produced,” he says. “The only alternative right now is cash-based, which is totally unacceptable and cannot adhere to the attorney general’s guidelines because it can’t track every last dollar.”

Isidor Hefter is a senior partner at Rosen Seymour Shapss Martin & Company LLPholds with over 20 years of experience. To know more about him, visit this Facebook page.

Avoiding big surprises on tax day

Image Source:money.msn.com

Thorough preparation is the way to avoid surprises and this applies to the approaching tax day, which is just a few months away. Those who haven’t started on tax planning need to work quickly and accomplish more in a shorter span of time in order to avoid any stressful situations on the 15th of April.

It is faulty oversight to assume that one’s current tax liabilities mirror the previous year’s if his/her financial situation has changed in the present year. There may also be some changes to tax laws that have been implemented, so scheduling an appointment with a tax expert should be at the top of every business owner and gainfully employed citizen’s priorities right now. In accomplishing this as soon as possible, an individual can buy time for measures to deal with the liability such as starting a savings program or adjusting payroll withholdings.

Image Source: usnews.com

As for the factors that could affect a person’s taxes, the common ones are a change in marital status, buying/selling a house, a job change, and retirement. Each of these situations present many details that a taxpayer needs to know in order to avoid being surprised by a change in their tax liability. For instance, newly married couples would need to analyze how their joint finances rearrange their fiscal obligations. In analyzing two sets of data, couples can find out if there are items from which they could derive rebates or if they’ll need to pay more during tax day.

Image Source: quizzle.com

Isidor Hefter is a certified public accountant and a senior partner at Rosen Seymour Shapss Martin & Company LLP who specializes in tax planning and research. Find more articles about year-tax planning through this Twitter page.

REPOST: IBM stands behind cloud-computing account amid SEC probe

Many companies believe that cloud-computing is the future, and IBM is no exception. This AccountingToday.com article reports that the company is standing behind its cloud-computing accounting methods despite the SEC probe.

*****

(Bloomberg) International Business Machines Corp., facing a Securities and Exchange Commission investigation into how it reports revenue from offsite cloud services, said it stands by its accounting methods.

IBM is cooperating with the SEC in the probe, which it learned about in May, it said today in a filing. The company books its revenue from cloud services, such as storing customers’ data and software applications remotely, under generally accepted accounting principles, said Ed Barbini, a spokesman for Armonk, New York-based IBM.

“IBM’s reporting of cloud revenue is the result of a rigorous and disciplined process, and we are confident that the information we have provided has been consistently accurate,” Barbini said.

Chief Executive Officer Ginni Rometty has identified cloud computing as one of IBM’s chief sources of growth amid a slowdown in demand for hardware and for consulting services. The investigation at the company, known for consistently meeting analysts’ earnings estimates, underscores confusion about how cloud revenue should be booked, said Michael Cusumano, a management professor at the Massachusetts Institute of Technology’s Sloan School of Management.

“This is a murky area where the rules aren’t really established,” Cusumano said. “Companies treat cloud-computing revenue in different ways.”

About half of publicly traded software companies since 1990 have had to restate revenue because of misclassification of sales and product returns, or because they categorized ongoing payments for tech-support services as a sale of a product license, Cusumano said.

‘Disciplined Process’
While IBM doesn’t disclose its revenue from cloud services, it said the sales rose 70 percent in the first half of 2013 from a year earlier. In its filing today, the company didn’t provide details on what information the SEC was seeking.

“IBM has robust systems and controls to identify and validate what products and services count as cloud revenue,” Barbini said. “IBM accounts for cloud transactions exactly the same way as it would account for those transactions if they were not cloud—in accordance with GAAP.”

Florence Harmon, an SEC spokeswoman, declined to comment.

IBM has beat analysts’ earnings expectations in 32 of the past 33 quarters, according to data compiled by Bloomberg. On the other hand, it has missed sales estimates in seven of the past eight quarters.

More Probes?
The investigation may be the first in a series of probes into companies in the same industry as the SEC tries to clear up confusion and differences in standards, said Jack Ciesielski, owner of investment firm R.G. Associates Inc. in Baltimore and the publisher of the Analyst’s Accounting Observer.

The company has a goal of reaching $7 billion in cloud revenue by 2015, with about $3 billion from new business and the rest from current contracts shifting over to the cloud category.

IBM’s 70 percent growth rate for cloud-computing services in the first six months of 2013 was a slowdown from 80 percent last year. IBM has also said cloud revenue, which is spread across several divisions, tripled in 2011 from 2010.

IBM shares fell 1 percent to $195.04 at the close in New York. The stock has gained 1.8 percent this year.

The disclosure of the probe comes days after IBM won court approval for a $10 million settlement with the SEC for accusations of bribery in China and South Korea. IBM said earlier this year it’s the subject of a U.S. Justice Department bribery investigation related to contracts in Poland, Argentina, Bangladesh and Ukraine.

Autonomy Writedown
Hewlett-Packard Co., IBM’s archrival in the computer-services business, took an $8.8 billion charge last year to write down the value of Autonomy, a software company it acquired, amid allegations of accounting improprieties within the unit. Autonomy, whose products organize corporate customers’ data, had used aggressive tactics to inflate its results, a former executive told Bloomberg News last year.

Earlier this month, IBM acquired SoftLayer Technologies Inc., a cloud-computing storage provider. IBM paid almost $2 billion for Dallas-based SoftLayer, according to a person familiar with the deal.

Market researcher IDC estimates the cloud-computing market may more than double to $105 billion by 2016 from last year. SoftLayer specializes in public clouds—data-center networks that manage computing and software for businesses remotely. IBM is pairing those capabilities with private-cloud operations, building dedicated systems for individual customers.


More news and tidbits about accounting and taxation can be found by following this Isidor Hefter Twitter page.

The social media leverage in the tax prep business

Image credit: https://www.facebook.com/FreedMaxickCPAs

Social media has revolutionized many facets of society, so much so that almost everything has come to be affected by this global phenomenon. But who would have thought that social media would also touch on the business of tax preparation?

Image credit: http://learnthat.com/

In fact, many tax prep firms have decided to use different social media platforms in marketing their services. Deciding that the best way to attract business is to go wherever the customers are, these firms have decided to jump in the bandwagon and went on to explore popular avenues, such as Facebook, Twitter, and LinkedIn.

And as more social media platforms arise, more tax preparers are taking advantage of every opportunity to make themselves positively known to the general public.

Image credit: http://phandroid.com/

A relatively new service which tax prep firms have been using lately is Yelp, a popular review site for consumers who want to learn more about local businesses. A recent Yelp search in Manhattan generated over 200 results of tax prep services reviewed by clients. For these services, their reputation lies on what their customers say—reviews which may range from acclaims to scathing denigrations.

 This is a clear breakaway from traditional marketing strategies. But because the population is slowly but surely migrating to cyberspace, all these efforts might all be worth it in the long run.  

To access more updates on tax preparation, log on to this Facebook page for Isidor Hefter.

Resolving differences: FASB and IASB should agree on credit loss standards

Image Source: soxfirst.com

Intending to encourage both the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) to settle their differences on the issue of credit loss standards for the purpose of converging financial instruments, 15 US banks have written a letter stating their wishes to the chairmen of the FASB and the IASB.

Last year, after initially agreeing on some proposed changes to the standards, the FASB and the IASB ended their meeting without coming to a compromise. Since then, both institutions have released divergent drafts regarding their proposed changes to the standards, especially to loan loss provisioning and expected credit losses for loan impairment.

Image Source: european-business-journal.com

Recognizing that all the players and movers in the financial marketplace are going global, the banks, which include Capital One, JP Morgan Chase, and Bank of America, realized that there is a need for a common set of high-quality credit-impairment standards. Although they realize that reconciling different points of view of the two institutions may be difficult, they believe that coming to an agreement on what those standards should be is more important, as loan impairment is a big part of credit risk management.

Image Source: aei.org

Isidor Hefter, CPA, specializes in tax planning and research for both corporations and individuals with high net worth. He is also adept at estate tax planning and providing representation for the Internal Revenue Service and other state and local government organizations. More information about his services can be found at this website.