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23rd September 2022
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Improperly-forgiven PPP loans are taxable, says IRS
The IRS said Wednesday that improperly-forgiven Paycheck Protection Program loans are taxable, as federal investigators uncover billions of dollars in fraud tied to pandemic relief programs like the PPP. The agency cited a memorandum released last week by its Office of Chief Counsel saying that when a taxpayer's loan is forgiven based upon misrepresentations or omissions, the taxpayer isn't eligible to exclude the forgiveness from income and needs to include in income the portion of the loan proceeds that were forgiven based upon misrepresentations or omissions. Taxpayers who inappropriately received forgiveness of their PPP loans should take steps to come into compliance, for example, by filing amended returns that include the amount of the forgiven loan proceeds within their stated income.
Tax collections up 23% this year
U.S. tax collections this year are up 23% on an annual basis, according to a new study by the Tax Foundation. Citing Congressional Budget Office data, the Foundation found that individual income tax collections have surged the most, up 32% from $1.8tn last year to $2.4tn this year. Payroll taxes are up 14% from $1.2tn last year to $1.4tn this year, while corporate taxes are up 12% from $285bn to $319bn. Forbes' Robert W. Wood notes that federal tax collections are approaching the all-time high of 20.5% of GDP set in 1943 during World War II. Compared to average federal tax collections in the post-war era of 17.2% of GDP, this year’s collections are set to exceed that level by 3 percentage points.
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FASB adjusts new rule on insurance contracts
The FASB is allowing insurers that recently sold their long-term insurance business to exclude those from their balance sheets when they comply with a new accounting rule on valuing certain contracts. Wednesday’s move is aimed at helping insurance companies meet new requirements, which are set to go into effect for large publicly traded businesses in early 2023. The FASB in 2019 and 2020 delayed implementing the rule by a year to give companies more time to prepare. Under the rule, companies must review the assumptions they use to measure the value of their long-term obligations related to policies such as annuities and life insurances and revise them if needed. Long-term contracts include agreements on annuities, endowments and title insurance, whereas short-duration contracts usually cover property and liability protection. Originally, insurers that sold or disposed of their long-term policies would have needed to apply the new accounting rule on valuing certain contracts when they presented prior periods. That would have posed a challenge for some insurers, as they would have had to value contracts they no longer possessed.
IRS advisory committee for electronic tax adds eight new members
The IRS has chosen eight new members to serve on the Electronic Tax Administration Advisory Committee, which makes recommendations to inform IRS decision makers on issues like identify theft and refund fraud. The main goal of the committee is to promote paperless filing of tax and information returns, the IRS said. New members include Keith Richardson, deputy chief financial officer tax commissioner for the District of Columbia, and Hallie Parchman, a product manager at Amazon working on tax reporting and withholding.
Jobless claims rise to 213,000
U.S. applications for unemployment benefits rose slightly after five consecutive weeks of decline as many employers continue to hold on to workers despite a slowing economy. The Labor Department said that initial jobless claims increased to a seasonally-adjusted 213,000 last week, from a revised 208,000 the previous week, and slightly lower than the prepandemic average of 218,000 in 2019, when the labor market was also tight. Economists polled by the Wall Street Journal had forecast new claims to total 214,000. The four-week moving average, which smooths out weekly volatility, fell by 6,000 to 216,750. Continuing claims, a proxy for the number of people who have been unemployed and have received benefits for more than one week, decreased slightly to 1.38m in the week ended September 10th from the previous week. Of the 53 states and U.S. territories that report jobless claims, 37 showed an increase and 16 reported a decline. “With monetary policy aimed at softening labor market conditions, demand for workers is set to moderate and layoffs are likely to pick up over time,” said Rubeela Farooqi, chief U.S. economist for High Frequency Economics.
U.S. current account deficit shrank in Q2
The U.S. current account deficit narrowed sharply in the second quarter amid a surge in goods exports, contracting 11.1% to $251.1bn. The current account gap represented 4.0% of gross domestic product, down from 4.6% in the January-March quarter. The deficit peaked at 6.3% of GDP in the fourth quarter of 2005. Exports of goods jumped $52.0bn to $539.9bn. They were boosted by shipments of industrial supplies and materials, mostly petroleum and products. Imports of goods increased $20.8bn to $850.4bn, reflecting petroleum products. Import growth has slowed as businesses assess their inventory needs amid cooling domestic demand against the backdrop of aggressive interest rate increases from the Federal Reserve. Primary income receipts rose $21.1bn to $299.1bn, while payments of primary income increased $16.2bn to $255.5bn. The rise in receipts was led by direct investment income. The increase in payments was led by other investment income, mostly interest. Secondary income receipts advanced by $1.4bn to $43.6bn, reflecting a rise in general government transfers, largely fines and penalties.
Justice Department encourages corporate self-disclosure on misconduct
The Justice Department is encouraging companies to swiftly and voluntarily self-disclose malfeasance as it increases efforts to combat corporate misconduct.  Deputy Attorney General Lisa Monaco has expanded on policies introduced by the department last October and said it is "committed to providing incentives to companies that voluntarily self-disclose misconduct to the government." Those policies require companies to name all people involved in misconduct in order to receive credit for cooperation and required prosecutors to consider a company's full record when deciding how to resolve an investigation. “In many cases, voluntary self-disclosure is a sign that the company has developed a compliance program and has fostered a culture to detect misconduct and bring it forward,” Monaco said. “We also want to clarify the benefits of promptly coming forward to self-report, so that chief compliance officers, general counsels, and others can make the case in the boardroom that voluntary self-disclosure is a good business decision,” she said. But Reuters notes the agency is also wielding a stick, in the form of enhanced penalties on corporate repeat offenders. Monaco said that between 10% and 20% of large corporate criminal resolutions have involved repeat offenders.
Colorado now accepts crypto for taxes
Colorado has become the first state in the U.S. to accept cryptocurrency for tax payments. This includes individual income tax, business income tax, sales and use tax, withholding tax, severance tax and excise fuel tax. “The state will operate our own ledgers in dollars. Taxpayers who pay with crypto will see their transactions converted to dollars,” Gov. Jared Polis said. The Colorado Department of Revenue website has been modified to add cryptocurrency as a payment option when paying taxes online. People will be directed to PayPal, where they can select which cryptocurrency they want to use. The service fee is $1 plus 1.83% of the payment amount. Tax refunds won’t be issued in cryptocurrency.
China sends regulators to Hong Kong to assist U.S. audit inspection
Beijing has sent a team of regulatory officials to Hong Kong to assist the PCAOB with onsite audit inspections involving Chinese companies, as part of a landmark deal between the two countries. A China-U.S. agreement last month allows U.S. regulators, for the first time, to inspect China-based accounting firms that audit New York-listed companies.
Shakira vows to fight 'false' Spanish tax accusations
Superstar musician Shakira has promised to battle what she calls "false" accusations by Spanish authorities that she evaded €14.5m ($14.31m) in taxes. The Colombian is facing trial in Spain accused of failing to pay taxes between 2012 and 2014, a period in which she said she was leading a "nomadic life" because of her work. "I have to fight for what I believe because these are false accusations," the 'Hips don't lie' singer told Elle magazine in an interview published online in the United States and due to run in its October print edition. "I owe zero to them." The prosecutor's document, seen by Reuters, asserts that Shakira spent more than half of each year in Spain between 2012 and 2014, and in May 2012 bought a family home in Barcelona. In July last year, a Spanish judge said he had seen "sufficient evidence" for Shakira to face trial. A second judge rejected her appeal against the decision in May.

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