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The IRS announced on Friday that it will be rolling out the ability to electronically file the new Schedules K-2 and K-3 next year, but not at the beginning of the filing season. Schedules K-2 (Partners’ Distributive Share Items — International) and K-3 (Partner’s Share of Income, Deductions, Credits, etc. — International) are new for the 2021 tax year. If taxpayers have items of international tax that are relevant, they’re required to report the information on Schedules K-2 and K-3 if they file Form 1065 (U.S. Return of Partnership Income), Form 1120-S (U.S. Income Tax Return for an S Corporation) or Form 8865 (Return of U.S. Persons With Respect to Certain Foreign Partnerships). They are part of the IRS’s efforts to require better tax compliance, especially for large partnerships that do business internationally. The schedules are supposed to give partners and shareholders more clarity about how to figure their U.S. income tax liability when it comes to international tax items, including claiming deductions and credits. 

 

Accounting Today

The U.S. Trade Representative's office said on Friday it was committed to legislation strengthening the U.S. electric vehicle industry despite its inclusion of a tax credit that has drawn threats of retaliation from Mexico, which calls it "discriminatory". The proposed $12,500 electric vehicle tax credit would include $4,500 for EVs built in the United States by union workers, effective after 2027. Mexican Economy Minister Tatiana Clouthier said the tax credit was "discriminatory," and would violate the U.S.-Mexico-Canada Agreement on trade. She added that it was "totally contrary to free trade." U.S. Trade Representative Katherine Tai has said she is aware of trading partners' objections and was discussing the matter with them. Opposition to the credit comes from many international automakers, notably Toyota and Volkswagen. 

 

US News and World Report

The judge in a recent Tax Court case, Andrew McNulty et al. v. Commissioner, rule that owners of IRAs with assets invested in gold and silver coins can’t store them in a safe at their home. As a result, the judge imposed accuracy penalties of 20% of the McNultys’ tax understatement under Section 6662(a) of the tax code. Based on the facts in the decision, the penalty comes to about $54,000, on top of taxes of nearly $270,000 on about $730,000 of IRA assets. The ruling disallows a scheme that was heavily promoted several years ago, when radio and internet ads based pitches on a perceived ambiguity in the law, despite warnings from the IRS and legal specialists. The law gives retirement-plan owners broad latitude in how they invest funds, as long as it’s not in collectibles like artwork, jewelry, antique furniture, cars, wine and such. Savers investing in alternative assets must follow strict rules against self-dealing; an IRA owner can use account funds to invest in a rental property like a beach house. But if she uses it herself for a week of vacation, that’s a “prohibited transaction” that dissolves the IRA, triggering taxes and perhaps penalties.

 

Wall Street Journal

Bookkeepers Transform to Capture Growth and Expand Value
The bookkeeping industry is ready for a rebrand. Bill.com recently polled 600 accountants and bookkeepers for their third annual survey 2021 State of Bookkeeping Practices: Bookkeeping Rebooted. Findings indicate that clients' are relying on bookkeepers now more than ever, prompting a turning point for bookkeepers to rethink their current processes, accelerate their digital services, and expand offerings outside of traditionally closing the books.

 

EY has promoted Asia Pacific based partner Richard Watson to Global Leader of its Cybersecurity Consulting division. Mr. Watson, who is based in the firm’s Sydney office, has been with the Big Four firm for six years, joining in 2015 as Cybersecurity Consulting Leader for Australia and New Zealand. One year on, he was promoted to the division’s leader for Asia Pacific, steering the unit and its 20+ country teams through a period of rapid growth. In his new role, he will oversee a team of over 12,000 cybersecurity consultants working across sectors.

 

Consultancy.org

Four weeks ago, the Federal Reserve set in motion carefully telegraphed plans to gradually wind down a bond-buying stimulus program by June. However, the Wall Street Journal reports that officials are making plans to accelerate the process at their policy meeting next week, ending it by March instead. The abrupt shift opens the door to the Fed raising interest rates next spring rather than later in the year to curb inflation, marking a significant policy pivot by Chairman Jerome Powell shortly after President Biden offered him a second four-year term leading the central bank. With this move, Mr. Powell would be focusing the Fed’s efforts more on restraining inflation and less on encouraging employment to return to its pre-pandemic levels. Inflation has surged this year—to 5% in October from a year earlier, according to the Fed’s preferred gauge—amid strong demand for goods and services and supply chain bottlenecks associated with reopening the economy.

 

Wall Street Journal

German insurer Allianz SE said its U.S. life insurer had reached an agreement to reinsure liabilities of $35bn, in one of the largest transactions of its kind. U.S. subsidiary Allianz Life struck the deal with life insurance group Resolution Life and affiliates of investment firm Sixth Street, including Talcott Resolution Life Insurance Co., for a portfolio of fixed annuities. Resolution Life, which operates in Bermuda, the U.K. and elsewhere, acquires and manages portfolios of life insurance policies. San Francisco-based Sixth Street, the former credit arm of private equity firm TPG, manages more than $55bn in assets. Allianz is one of the top sellers of fixed annuities, a popular retirement product, to individuals in the U.S.

 

Reinsurance News

Wall Street Journal

Former Immunomedics CFO Usama Malik and his ex-girlfriend have been charged with using inside information he had obtained about one of the pharmaceutical firm’s drugs to trade in its shares. According to the SEC, Mr. Malik was living with Lauren Wood, Immunomedics’ former head of corporate communications, when he tipped her off in April 2020 that a clinical trial to evaluate the company’s Trodelvy breast cancer drug had been halted because existing data already showed it was effective. Within minutes of receiving the tip, Wood bought Immunomedics shares, eventually realizing profits of $213,618 when she sold the stock after the company announced the favorable news about Trodelvy, the SEC said in a civil complaint. Malik also allegedly tipped off three family members, who made a total of about $21,400 in illegal trading profits. He and Wood were arrested Wednesday on parallel criminal fraud charges.

 

CFO

The investment division of Goldman Sachs says it will vote against publicly-traded firms if they do not improve diversity at the senior level. Goldman Sachs Asset Management (GSAM) wants all companies on the FTSE 100 and S&P 500 to have at least one director from an ethnic minority background as of March 2022. It also expects global publicly-traded businesses with at least ten board members to have at least two women around the table. Failure to meet these targets will see GSAM vote against the nominating committee of the firm’s board. Heather Miner, the chief operating officer of GSAM, said: “These latest enhancements to our voting policy will keep Goldman Sachs Asset Management at the forefront of driving greater diversity and inclusion on boards around the world.”

 

Financial Times

Reuters

Daily Mail

The Hong Kong Secretary for Financial Services and the Treasury said they “regret to see” the SEC’s statement on December 2nd that “describes Hong Kong as a jurisdiction not having worked with the PCAOB, which is unfair and ungrounded.” Christopher Hui Ching-yu, the city’s Secretary for Financial Services and the Treasury, and the Financial Reporting Council, the regulator in Hong Kong, rejected the claim and said the city has always allowed the PCAOB access to Hong Kong auditors and their working papers. The response followed comments by SEC chairman Gary Gensler, who on Thursday said that Hong Kong and mainland China were the only two jurisdictions that had “historically” not worked with the PCAOB, while 50 others had done so. He highlighted Hong Kong and China’s non-cooperation in a statement announcing the final amendments to the Holding Foreign Companies Accountable Act of 2020, which became law at the end of last year. The law stipulates that any foreign company listed on US exchanges faces delisting if it fails to turn over audit results for three straight years. 

 

Bloomberg Tax

South China Morning Post

New Zealand’s Inland Revenue (IR) has switched off the computer that ran the country's tax system for about 20 years following a five-year transition to new technology. Business groups joined IR in labeling the public sector's biggest-ever computer project a success. Contractor Unisys unplugged the mainframe computers at data centers in Auckland and on the Kapiti Coast ahead of a phased transition to a new software system built by US company Fast Enterprises called Start. The move is accompanied by new rules that aim to ensure individuals  and businesses are taxed more accurately throughout the year. IR's workforce has fallen from 5,662 in June 2016 to fewer than 4,000 today. IR chief executive Naomi Ferguson said that the cost of the Business Transformation (BT) project was likely to be under $1.5bn, including staff and other internal and consulting costs. This figure is less than the $1.7bn capital and operational budget. IR data suggest that, according to some measures, the project could already be close to paying for itself.

 

Stuff NZ

Writing for Bloomberg, Matthew Boyle and Jeff Green say plans for new year office returns are colliding with rising virus cases and uncertainty about a new variant, and warn that how managers proceed may further erode already diminished levels of trust between workers and bosses. Nearly half of executives want to work from the office every day, but just 17% of employees do, according to an ongoing poll of more than 10,500 office workers in six countries by the Future Forum, a research consortium. Mark Royal, a senior director at consultancy Korn Ferry Advisory, observes: “The question...isn’t whether we should ever be back in the office—but should we be back now?”

 

Bloomberg