Oscars Mistake Threatens Reputation of PricewaterhouseCoopers

If you saw the Oscars last night you know... and even if you didn't you have probably heard by now. For the first time in 83 years, the Oscars botched the Best Picture winner announcement.  What's interesting to me is that PricewaterhouseCoopers are the ones taking the blame.  Check out this article  from the New York Times that breaks down what happened and why.

What went wrong?

Hollywood and movie lovers were reeling on Monday, trying to understand how PricewaterhouseCoopers, the accounting firm that oversees the voting, mistakenly allowed the Academy Award for best picture to go to “La La Land” Sunday night when “Moonlight” was the real winner. Details were still coming together on Monday, but several factors may have contributed to the error.

There are two identical sets of envelopes, handed out from either side of the stage.

The envelopes’ design was changed this year, to red paper with gold lettering, which may have made them harder to read.

And then there is simple human error, in the crucible of one of the most highly anticipated television moments of the year — the announcement of the best picture Oscar at the end of the ceremony.

It all added up to a nightmarish several minutes for PricewaterhouseCoopers.

For 83 years, the company has performed this task without any major snafus. But in one of the most astonishing moments in Oscars history, chaos engulfed the stage of the Dolby Theater in Hollywood, after “La La Land” was named the top picture. As the film’s producers were making acceptances speeches, awards show staff rushed onstage and began searching for the envelopes.

PricewaterhouseCoopers had given the presenters, Faye Dunaway and Warren Beatty, the wrong envelope.

The stunning reversal instantly became the central theme of the Oscars, repeated endlessly on television and swamping social media. And just as quickly, PricewaterhouseCoopers, one of the so-called Big Four accounting firms, had a major brand crisis on its hands.

“Not since Janet Jackson and her wardrobe malfunction on the Super Bowl have we seen something quite as glaring as this snafu,” said Andrew D. Gilman, chief executive of the crisis communications firm CommCore Consulting Group. Although most of PricewaterhouseCoopers’s clients are aware that mistakes can happen, “the name of the firm has unfortunately been a little sullied,” he added.

The two identical sets of sealed envelopes are stationed on either side of the stage. The two PricewaterhouseCoopers partners who oversee the voting process, Martha L. Ruiz and Brian Cullinan, each have a briefcase with a complete set of the envelopes.

The envelope for best actress, the penultimate award of the night, came from one side of the stage.

After Emma Stone accepted that honor, Ms. Dunaway and Mr. Beatty came out to present best picture award. But they were handed an envelope from the other side of the stage, where the other best actress envelope was still unopened.

And Mr. Cullinan, who handed Mr. Beatty the envelope, clearly picked the wrong one.

After Mr. Cullinan and Ms. Ruiz realized that the wrong winner had been announced, they notified the stage manager, which set in motion a chaotic scene watched by the celebrity crowd in attendance and tens of millions of viewers on television.

Yet it still took more than two minutes between Ms. Dunaway announcing “La La Land” as best picture and an announcement from the “La La Land” producers that “Moonlight” was in fact the winner.

Why the wrong envelope was handed off is not yet clear. But it could have to do with the design. The envelopes containing the winner’s names were redesigned this year, and they featured red paper with gold lettering that specifies the award. Last year’s envelopes featured gold paper and red lettering, which may have been more legible. The Academy of Motion Picture Arts and Sciences, not PricewaterhouseCoopers, is responsible for the design and procurement of the envelopes.

Those details, provided by people familiar with the process who spoke on the condition of anonymity because the episode was still being investigated, helped clarify some of what happened onstage on Sunday night.

PricewaterhouseCoopers declined to comment beyond the statement it put out early Monday morning accepting responsibility for the mix-up and apologizing to those involved.

“The presenters had mistakenly been given the wrong category envelope and when discovered, was immediately corrected,” the firm said in its statement. “We are currently investigating how this could have happened, and deeply regret that this occurred.”

PricewaterhouseCoopers, a privately held company, reported sales of $36 billion during its last fiscal year, up seven percent from the previous year. Revenue from the entertainment and media sector account for just 4.2 percent of sales. Based in London, the firm employs more than 220,000 people and provides accounting, tax advisory and consulting services to most of the world’s largest corporations.

The company promotes the firm’s longstanding relationship with the Academy Awards on its website.

One video posted there, introducing the leaders who oversaw this year’s ballots, began with the line: “The reason we were even first asked to take on this role was because of the reputation PwC has in the marketplace for being a firm of integrity, of accuracy and confidentiality.” It went on to note that the relationship was “symbolic of how we’re thought of beyond this role and how our clients think of us.”

The two PwC partners who oversee the Oscars' voting process Video by PwC US
This is not the first time an incorrect winner has been announced at the Oscars. In 1964, Sammy Davis Jr. announced the wrong winner for the best music score. But he quickly realized his mistake, before an erroneous winner was giving an acceptance speech.

“They gave me the wrong envelope,” Mr. Davis said at the time. “Wait till the NAACP hears about this.”

He soon had the correct envelope in hand and announced the correct winner. “I ain’t gonna make no mistake this time, baby,” he said.

But never before has PricewaterhouseCoopers made such an enormous mistake at such a pivotal moment during the Oscars.

“I’m sure there will be a logical explanation for what happened, but they’re going to be the butt of jokes for late-night TV for at least a week, there will be memes written, and I think it’ll be interesting to see if they hold on to their contract,” Mr. Gilman said. “They have branded themselves around this event saying, ‘We’re trusted’ — that’s the implication. Now, I think that will take a hit.”

Original article by By David Gelles and Sapna Maheshwari of The New York Times


Correction: February 27, 2017
An earlier version of this article misidentified the location of the Dolby Theater. It is in Hollywood, not downtown Los Angeles.

Tips for Whittling Down Your Tax Bill

Photo By Tom Grillo

                                               
Regardless of what Congress ends up doing about the future of the tax system, you don’t need to pay more than you owe for the 2016 tax filing season. You can probably whittle your liability by going through last year’s records and checking to see if tips from tax professionals may apply to you.

Whether you use a professional tax preparer or software, or handle the return on your own, you will need to assemble information and gather receipts and tax documents.

Here are the basics: You need to track your income, but you are likely to get plenty of help on that. Be prepared for a blizzard of tax forms. Employers issue Forms W-2 to employees. Banks, brokerage houses and other payers, including businesses that use independent contractors, issue Forms 1099 and sometimes Schedules K-1 reporting the money they paid. They must report these payments to the I.R.S. as well, and discrepancies are likely to result in an I.R.S. notice.

But it is up to the taxpayer to claim itemized deductions and available tax credits. If you neglect to do so, you may end up overpaying.

Keep Track of Gifts to Charity

Taking deductions requires good record-keeping. Consider the rules for charitable deductions on donated money, household items or clothing, valuable art or properties. Sidney Kess, a New York accountant and lawyer, who is a senior consultant to the accounting firm Citrin Cooperman, said your own check is sufficient for gifts of less than $250, but for higher amounts a receipt from the charity is needed.

“To claim a deduction for items or property worth over $500 but less than $5,000, in addition to a written acknowledgment, records have to show when and how you got the property, the cost or other basis, and you must report this information on Form 8283,” Mr. Kess said. “For a deduction over $5,000, you need an appraisal from a qualified appraiser.”

Finding Family Opportunities

But record-keeping is only part of what confronts taxpayers trying to reduce liabilities. The tax code — four million words by some estimates — is chock-full of complexities, but therein lie opportunities.

Mr. Kess discussed one such opportunity: deciding how family members should file their returns. Like so much involving taxes, it’s complicated.

Say a couple has a daughter in college who earned money from a summer job. The couple provides more than half her support and could claim her as a dependent, but the I.R.S. imposes certain limits. Personal exemptions, which exclude $4,050 per person from income, begin to phase out for married couples filing jointly with adjusted gross income of $311,300 and are eliminated when income reaches $433,800.

If the parents had an income below those levels, they would probably have claimed their daughter as a dependent. Because their income is above the upper limit, they do not do so. Instead, she claims her own exemption on her return reporting her summer income, and she can take an education credit as well. Her parents could not get that credit because of their high income.

Protect Cash in an I.R.A.

Individual Retirement Accounts and Health Savings Accounts can be used to shelter tax refunds, noted Barbara Weltman, a lawyer in Vero Beach, Fla., and author of two J.K. Lasser books, “1001 Deductions & Tax Breaks 2017,” and “Small Business Taxes 2017,” both published by Wiley.

“You can use your tax refund to lower your 2016 tax,” Ms. Weltman said, “but you have to file as early as you can” because the deadline for depositing the money into an I.R.A. or H.S.A. is the same as the due date for filing tax returns, April 18 this year.

If you are eligible for an I.R.A. or H.S.A., claim deductions for them on the return, based on the amounts calculated by the accounts’ custodians, and include Form 8888, directing the I.R.S. to deposit those amounts directly into the accounts. Tell your account custodian (it may be a bank or a mutual fund company or a brokerage) that the deposit should be applied to 2016, she said. Any excess from the refund can go to your regular bank account.

Fat Refunds Can Be a Problem

Julian Block, a tax lawyer in Larchmont, N.Y., said that big refunds can sometimes cause problems. He cited the case of a new client who, he discovered, had been receiving a plump refund every year. Mr. Block advised him to file a revised Form W-4 with his employer, aimed at reducing the amount of money being held out of his regular paycheck and paring down his refund.

The reason, Mr. Block said, is that online identity thieves are increasingly active, and if they file a fraudulent return using your Social Security number and claiming a refund, your own refund will be delayed while the I.R.S. sorts it out. Of course, you won’t be held liable for the actions of a thief.

If, instead, you owe a small balance to the I.R.S., you won’t have that headache, though you will need to check whether your identity has been compromised in other areas of your financial life.

Mr. Block also noted that there is an alternative to an I.R.A. for some older self-employed people, including people who turn a hobby into a small business or do work like child care. If they are over age 70½, such people can no longer contribute to an I.R.A. but they can set up and contribute to a Simplified Employee Pension Plan. That enables them to deduct contributions now and withdraw money in later years. It will be taxable then, but their income may be lower, too.

For tax purposes, alimony counts as earned income, he added, so recipients who otherwise qualify for an I.R.A. may contribute the alimony to it and claim a deduction.

Scan the Deductions List

Many self-employed people do not realize that they are allowed to deduct the cost of health insurance, regardless of whether their unreimbursed medical expenses are high enough to take a deduction on Schedule A, Mr. Block said. They can deduct the health insurance cost on the front of the Form 1040, on Line 29.

That’s just one of several deductions on the front of the 1040 that are worth keeping in mind. Others include teachers’ out-of-pocket outlays of up to $250 for students or for their own professional development, the deductible part of self-employment tax, student loan interest, alimony paid and an H.S.A. deduction for those who are eligible. All are especially valuable because they reduce adjusted gross income on Line 37. That number ripples all through a tax return, often limiting other tax breaks.

File Quarterly? Watch Out

In addition to filing a 2016 return by April 18, many taxpayers must file Form 1040-ES to pay quarterly estimated taxes on income on which no taxes are withheld, like self-employment income; interest, dividends and capital gains on investments, or rental and royalty income.

Preparers often base the calculations on the previous year’s taxes, Mr. Kess said, but if tax cuts are indeed enacted by Congress, estimates based on 2016 taxes may turn out to be too high. If that happens, you will need to recalculate the estimate later — in June, September or even the end of the year, depending on when a law is enacted — and can reduce the payments accordingly.

Do-Overs Are Possible

For anyone thinking, “I wish I’d known that last year,” Greg Rosica, a tax partner with EY, formerly Ernst & Young, in Tampa, Fla., says it’s probably not too late.

Whatever the reason, you realize belatedly that you failed to take a deduction for which you were qualified. All is not lost.

“It’s fairly simple to amend returns,” Mr. Rosica said. Taxpayers may file a Form 1040X up to three years beyond its original due date. Say you filed a Form 1040 for 2013 income in March 2014. The due date was April 15, 2014, so you have until April 18 this year. But if you filed under an automatic six-month extension in 2014, you have until Oct. 16 of this year to file the amended return.

Mr. Rosica is a member of the editorial board for the “EY Tax Guide 2017,” which is published by Wiley, and includes this tip: Many taxpayers know they can deduct state income taxes on their federal return, but many do not realize they have the option of deducting sales taxes instead. That is advantageous if you live in a state like Texas, New Hampshire or South Dakota that has no state income tax. It may also be a boon to anyone who bought a big-ticket item like a car with a big sales tax, and is often the best choice for people over age 65 because many states — even high-tax New York — exempt Social Security income and some retirement-plan income from state income taxes.

Both Mr. Rosica and Mr. Kess advised taxpayers to check the tax consequences of any big life changes that may have taken place, like getting married or divorced or having a baby, all of which could affect filing status and the number of personal exemptions, as well as bring medical expenses that may have tax consequences. Changing jobs or moving may also mean income changes that would affect withholding.

Don’t Forget Money Overseas

If you have a financial account outside the United States, be careful to report it, Ms. Weltman said.

“Foreign financial accounts are high on the I.R.S. scrutiny list, and people who fail to disclose foreign accounts can be penalized severely,” she said, including people who inherited accounts overseas and those who worked abroad and still have ties where they once lived.

FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, is used for accounts of $10,000 or more and is filed electronically with the Treasury, while Form 8938, which is attached to Form 1040, is used in more complex situations, with the lowest threshold being for accounts of $50,000.

Original Article By The New York Times

2017 New Tax Laws for Small Business Owners

It's my job as an accountant to help small businesses thrive and plan for their financial future.  Taxes are a big part of the picture, especially if there's a big liability at the end of the year.   There are strategies that can be put into place to avoid this, deductions you may not know about and proactive steps you may take to decrease the impact of the annual tax bill on your small business finances.  Doing it online, especially if you have questions or are unsure of what liberties you can and cannot take when filing, may end up costing you more.  Call a professional to save you time, money and stress!

New Tax Laws That Impacts Small Business Owners in 2017

Published February 3, 2017 Entrepreneur.com

Since it’s always best to be well-prepared when it comes to taxes, here are some of the new changes that you should be aware-of. As with anything to do with the government or taxes -- if you really want to stay-top of this information, meet with your tax advisor and frequently check for updates on IRS.gov.

Keep in mind, this isn’t legal advice as I’m not in that space … but more a few new tax laws for 2017 that I’ve noticed that business owners should pay attention too.

Section 179 expensing/bonus depreciation
Under Section 179 of the tax code, explains Brian McCuller, JD, CPA, “the expensing provision allows capital investments of up to $500,000 for certain property to be taken as an expense deduction -- rather than being depreciated break -- which was made permanent under the PATH Act passed at the end of 2015 -- phases out for asset purchases above $2 million.”

Additionally, HVAC units are now eligible as an expense deduction instead of depreciation in tax years beginning after Dec. 31, 2015.

“The bonus depreciation provision allows businesses to claim additional depreciation for certain property in the first year of the recovery period if placed in service from 2015 to 2019 (with an additional year for certain property with a longer production period),” adds McCuller. “For property placed in service in 2015, 2016 and 2017, the bonus depreciation is 50 percent. For 2018, it drops to 40 percent; for 2019 it goes to 30 percent.”

In other words, if you purchased or leased new hardware or software for your business, for example, you can depreciate half the cost as part of “bonus depreciation.” For 2017, it may be in your best interest to invest in the most up-to-date equipment possible.

Tighter filing deadlines
Filing deadlines have been changed so that flow-through entity return deadlines are due prior investor return deadlines. This means that partnerships and S-corporations operating on a calendar year will have a new deadline of March 15. The deadline for calendar year based C-Corporations will be pushed from March 15 to April 15.

Below is a the complete list of changes to deadlines for each state.

Furthermore, if your business provides health benefits then please note that the deadline for Form 1095, which is the proof of insurance coverage, will be on January 31. Also take note that hard filing deadlines have been imposed for Forms 1094-B and 1095-A, B and C. These are due by February 28 by mail or by e-file on March 31.

New partnership audit rules
Effective in 2018, partnerships could be liable at the entity, as opposed to partner level for audit related tax collections. This change will have a significant impact on how partnership interests are valued and transferred. Because they’re also so complex, it’s best to speak to your tax advisor for additional information.

Expanded eligibility for R&D tax credit
Until the PATH Act, the development of internal use software was not eligible for the research and development tax credit.

Organizations, particularly in construction, software, manufacturing, wine, aerospace subcontracting, boat building and biotech, can qualify for this credit if they have engineers, scientists or product development personnel on staff.

Other qualifications include software that is innovative and can be commercially sold.

Tom Sanger, a partner with accounting and advisory firm Moss Adams, says that, “small businesses, now defined as having an average of less than $50 million in gross revenue over the prior three years, will be able to offset (the alternative minimum tax ) AMT with R&D credits generated after Jan. 1, 2016.”

“This provision opens up the credit to small corporations subject to the AMT, as well as pass-through entities (where the credits flow through to shareholders),” Sanger adds. “In the past, these credits were suspended and carried forward for up to 20 years until they were no longer subject to the AMT.”

Pending estate planning changes
“The IRS has proposed changes in the rules for how minority stakes in family-owned businesses are valued when owners transfer interests to the next generation during their lifetimes,” explains McCuller. “The changes have not been finalized, and business owners who have been considering passing along part of their ownership interests may want to consult with their tax advisors about accelerating those plans to take advantage of current rules.”

Possible tax laws under President Trump
In addition to the changes listed above, business owners should also pay attention to the tax laws that may take effect under President-elect Donald Trump.

For starters, “The Trump plan would reduce the corporate tax rate from a maximum rate of 35 percent to a rate of 15 percent (the GOP Blueprint calls for a U.S. corporate rate of 20 percent),” says accounting, tax and consulting firm Elliott Davis Decosimo. Also, “U.S. manufacturers would be able to fully expense new plant and equipment investments, though by doing so would forego any deduction for net interest expense.

“Most tax credits, other than the research credit would be eliminated. For U.S. taxpayers with foreign subsidiaries, there would be a one-time deemed repatriation tax of 10 percent on foreign earnings of those subsidiaries.”

This could have major tax consequences for small businesses. In fact, Trump’s tax reform will most likely benefit the wealthy and large corporations as opposed to SMBs.

(By John Rampton)

Tax Credits and Tax Deductions: What's the Difference?

As we move through the first quarter of 2017 tax season is already upon us.  If you are concerned with reducing your liability knowing the difference between tax credits and tax deductions can have an impact.  Both of these methods can save you big money but in very different ways.  Check out this article published by NerdWallet to learn how to maximize your savings.

Tax Credits vs. Tax Deductions
Published September 9, 2016

Tax credits and tax deductions may be the most satisfying part of preparing your tax return. Both reduce your tax bill, but in very different ways.

Tax credits directly reduce the amount of tax you owe, giving you a dollar-for-dollar reduction of your tax liability. A tax credit valued at $1,000, for instance, lowers your tax bill by the corresponding $1,000.

Tax deductions, on the other hand, reduce how much of your income is subject to taxes. Deductions lower your taxable income by the percentage of your highest federal income tax bracket. So if you fall into the 25% tax bracket, a $1,000 deduction saves you $250.

The catch to tax credits

Some tax credits are intended to help cover individual costs around adopting a child, child care expenses or caring for an elderly parent.

But these are nonrefundable tax credits.  If you don’t owe a lot in taxes to begin with, you don’t get the full value if the credits take your tax bill below zero.  In other words, a $600 tax bill combined with a $1,000 credit doesn’t get you a $400 tax refund check.

Other credits are refundable. If you qualify to take refundable tax credits — things like the Earned Income Tax Credit, the Premium Tax Credit, the Child Tax Credit and the Additional Child Tax Credit — the value of the credit goes beyond your tax liability and can result in a refund check.

The IRS lays out specific criteria you must meet to qualify for both nonrefundable and refundable credits.

As you run the tax credit calculations in your return, keep in mind that you must determine your tax liability before you apply any credits. The credits don’t reduce your taxable income.

But tax deductions do.

The catch to tax deductions

There are two types of tax deductions.

The standard deduction is a one-size-fits-all reduction in the amount of your income that’s subject to tax. You don’t have to do anything to qualify for the standard deduction or provide any documentation.

You can claim the standard deduction on whichever form you file: Form 1040, 1040A or 1040EZ. The amount varies depending on your filing status. The standard deduction in 2016 for single filers and married couples filing separately is $6,300; it’s $12,600 for married couples filing jointly. For those filing as heads of household, the standard deduction is $9,300. In 2017, the standard deduction for single filers and married couples filing separately is $6,350; it’s $12,700 for married couples filing jointly. For those filing as heads of household, the standard deduction in 2017 is $9,350.

But you may be better off opting to use the second type of deduction, the itemized deduction, instead.

Itemizing allows you to total the amount you spent on allowable deductions such as home mortgage interest, medical expenses or charitable donations. If together they exceed the value of the standard deduction, you’ll want to itemize.  You’ll need to use the regular 1040 filing form and Schedule A.

Taking the standard deduction or itemized deductions is an either/or situation.  You can claim one kind or the other, but not both.

And, just as with tax credits, taking certain deductions requires meeting certain qualifications based on your filing status, current life events and the amount of your income that’s taxable. Be sure you meet IRS criteria to qualify for both tax credits and deductions.


To read the original article, visit NerdWallet.com