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29th July 2021
More refunds heading to those who overpaid on unemployment benefits
The IRS is sending another 1.5m refunds to people who were taxed on unemployment income last year before a portion of the benefits were made tax-free, the agency said in a statement. Refunds being sent by direct deposit are already being distributed, while paper checks will be sent from Friday. The average refund is $1,686.
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Interest in opportunity zones peaks as higher rates loom
The real possibility of higher capital gains rates has fueled interest by investors in opportunity zone funds. “There have been several rounds of proposed regulations, final regulations and changes from COVID,” noted Paul Gevertzman, partner and leader of Anchin’s economic opportunity zones group. The initial incentive was the deferral of capital gains placed into an opportunity zone fund, with 15% forgiveness if the investment was held for seven years, until 2026. “That’s no longer possible, but an investor can still get a 10% ‘haircut’ on the taxable amount of their investment if they hold it for at least five years by the end of 2026,” he said. “That’s a secondary benefit that goes away after 2021.” The real benefit is the 100% exclusion of tax on the appreciation of assets placed into the fund, Mr. Gevertzman said, noting that the 10% forgiveness after five years applies to the gain on the sale of assets put into the fund
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Global regulators come together to intensify SPAC scrutiny
The International Organization of Securities Commissions (IOSCO), made up of regulators in 130 jurisdictions worldwide, says its members have begun trading information and jointly monitoring deals involving special purpose acquisition companies (SPACs). Global SPAC IPOs boomed during the first half of 2021 - exceeding the record level set for all of last year - with 634 transactions completed, EY said in a report. Among those, 182 SPACs announced acquisitions by the end of June valued at a total of $470bn and 452 SPACs with about $136.5 billion in funds were looking for investment targets. “While SPACs have long existed, transactions have surged recently, drawing regulatory attention to the issues SPACs raise,” IOSCO said in a statement after the first meeting of its SPAC Network. “While SPACs may offer alternative sources of funding and provide opportunities for investors, they may also raise regulatory concerns.” The SEC, an IOSCO member, issued guidance in April cautioning companies about the accounting treatment of SPAC warrants and the liability risk of forward-looking disclosures.
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Fed keeps rates unchanged, but heralds 'progress' toward goals
The Federal Reserve inched toward scaling back the easy-money policies adopted at the start of the pandemic by signaling that the process could start later this year. The Fed cut its benchmark interest rate to near zero in March 2020 and has been purchasing at least $120bn a month in Treasurys and mortgage bonds to provide extra stimulus to the economy. At the conclusion of their two-day meeting yesterday, Fed officials said the economy has made progress towards their goals of low unemployment and stable inflation - an indication that they could start reducing, or tapering, the purchases, later this year. The Fed’s statement modestly upgraded its assessment of the economy. “With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen,” it said. Fed Chairman Jerome Powell played down concerns about economic fallout from the spread of COVID-19’s Delta variant, which has led to increasing cases among unvaccinated populations; while it could lead to significant public health problems, he acknowledged, higher rates of vaccination and greater improvisation by consumers and businesses suggest “we’ve kind of learned to live with” the virus.
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SBA streamlines forgiveness process for most PPP loans
The U.S. Small Business Administration (SBA) published new guidance yesterday  designed to simplify and speed up the forgiveness process for businesses and not-for-profits with Paycheck Protection Program (PPP) loans of $150,000 or less. The new COVID Revenue Reduction Score can be used at the time of forgiveness to document the required revenue reduction for second-draw PPP loans. The new IFR also establishes a direct borrower forgiveness process for lenders that choose to opt in as an alternative method of processing loan forgiveness applications. In addition, the IFR extends the loan deferment period for PPP loans in cases when the borrower files a timely appeal of a final SBA loan review decision. The SBA also announced that it will launch a new application portal August 4th, allowing borrowers to apply for forgiveness directly with the agency instead of having to go through their lender. More than 600 banks have agreed to allow access to the portal for more than 2.17m borrowers.
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Small firms struggle to secure overdue invoices during pandemic
Small business owners have been coping with unpaid invoices and inadequate accounting during the pandemic and needed to cover expenses by selling family heirlooms and other valuables. A survey released by Wave, an H&R Block company, found that 17% of the 1,008 microbusiness owners with nine employees or less it polled said there are invoices they’ve sent out that have never been paid. Nearly one out of 10 (8%) said they have waited more than a year for invoices to be paid, while 70% have waited between one to six months. Nearly one in 10 (8%) of the small business owners polled said they have sold off a family heirloom to cover expenses due to late customer payments, while 11% have need to take another job. “Cash flow emerged as a really key pain point for small business owners, particularly as a result of late customer payments,” said David Axler, vice president of books, banking and tax at Wave. "The majority of the small business owners we heard from are waiting one to six months to get paid. It results in challenges for that business, and 25% said that they've waited over a year or have yet to be paid for services rendered.”
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CPAs warn clients about ransomware attacks
Accountancy firms are becoming increasingly concerned about clients who have lax cybersecurity in place, making them vulnerable to ransomware attacks like the ones that have been in the news lately. Most recently, between 800 and 1,500 businesses around the world were reportedly affected by a ransomware attack centered on Kaseya, a provider of widely used technology management software. Ransomware attackers in some cases are using the financial and insurance information they find on their victims’ computer systems to find out how much the victim can pay for the ransom. “They’re understanding what their assets and annual revenue are, and based upon those numbers, they’re able to estimate fairly well what they think they should be able to charge and be able to get back,” said Mark Spaak, director of security and support services at Top 100 firm Rehmann. “They’re understanding what their assets and annual revenue are, and based upon those numbers, they’re able to estimate fairly well what they think they should be able to charge and be able to get back."
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Germany's top court rejects appeal in cum-ex tax evasion case
The German Federal Court of Justice, the country’s top court, has confirmed an earlier regional court ruling in a trial over so-called cum-ex tax fraud and upheld fines amounting to millions of euros against a bank and two London share traders. The court classified all such trades as illegal tax fraud. Cum-ex fraud sees traders use a legal loophole to trick governments and receive millions in tax repayments for taxes they had never paid. The Bonn district court had earlier issued a fine of around €14m ($16.5m) for one of the traders held responsible for cum-ex trades and ordered the private German bank MM Warburg to pay back around €176m. The sentence also included suspended jail time. The Federal Court confirmed that "there could be no doubt" regarding the intentions of the accused.
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Crown Resorts pays A$61m to Australian regulator in tax underpayment case
Australian casino giant Crown Resorts has paid a fine totalling A$61m ($44.86m) for underpayment of taxes at its Melbourne operations since 2012. Crown said it would continue to assess the value that has been underpaid, noting that the Victorian Commission for Gambling and Liquor Regulation (VCGLR) would also provide a final amount owed to the state after its review is completed by October 15th. This broader inquiry could see the casino operator lose its licence. The amount declared by Crown includes a penalty interest of about A$24m, the company said.
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Over 40 IRS employees died of COVID
More than 40 IRS employees had died due to COVID-19 as of June, despite the agency stockpiling face masks, hand sanitizer and other protections, according to a new TIGTA report on the agency's response to the pandemic. In March, TIGTA did unannounced health and safety inspections of nine of the IRS facilities and found the service generally implemented health and safety measures to help protect individuals at the nine facilities. The inspectors reported the IRS had an adequate supply of face masks, hand sanitizer, disinfecting wipes, or other cleaning supplies on-site, and the items were generally available in common areas or near shared equipment for employees to use. “The pandemic also threatens the lives of IRS employees; as of June 2021, the IRS reported that over 40 employees have passed away from the virus,” said the report. “As such, the IRS has had to balance the completion of its mission and the health and safety of its employees and contractors and others who visit IRS facilities.”
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