Legal Entity Identifier (LEI)

WASHINGTON – This Month, the U.S. Department of Treasury’s Office of Financial Research (OFR) issued the following statement on the progress made to date and next steps forward in the global initiative to establish a Legal Entity Identifier (LEI).

The plan is to issue a notice of proposed rulemaking that would require the LEI to be used for data reported to the OFR. 

“The OFR will continue to work with policymakers, regulators, and the private sector to achieve a mutually agreeable, effective, and timely global LEI solution,” said Richard Berner, Counselor to the Secretary of the Treasury. “An LEI would serve as a cornerstone in fulfilling the G-20 mandate to improve market integrity and regulators’ ability to mitigate risks posed to the financial system.”

The Financial Stability Board (FSB) is hosting a workshop on September 28 and 29 to discuss how to coordinate work on LEI and move the initiative forward. Additionally, because of the work that has been done to date, the OFR believes that sufficient progress can be made to allow for an initial phase of implementation in 2012, consistent with the needs of regulatory authorities in a variety of jurisdictions. The OFR intends to issue a notice of proposed rulemaking consistent with that timeline. In the United States, the OFR’s objective remains to coordinate with the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC), which are issuing rules for reporting swap transactions to trade repositories, and for all three agencies to require the same system for identifying parties in reporting.

An LEI is a unique number that would identify a legally distinct entity that engages in financial market activities. Currently, there are many ways to identify entities, but there is no universal identification scheme for legal entities across markets and jurisdictions.

During the recent crisis, the lack of a universal entity identifier made it difficult for firms and regulators to assess market exposures to risky or failing institutions. An LEI would promote financial stability by illuminating those exposures. It would also contribute to market efficiency by enhancing transparency for investors, reducing reporting burdens and other operational costs for financial firms, and improving customer service. Indeed, the Dodd-Frank Wall Street Reform and Consumer Protection Act created a critical sponsor in the LEI’s development: the OFR.

The OFR has conducted extensive outreach to solicit participation and input from a broad group of policymakers and regulators, and to facilitate global coordination on important issues, such as scope, governance, and implementation. A task force of the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO) has been evaluating the potential use of an LEI for over-the-counter (OTC) derivative reporting worldwide. In the United States, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) proposed rules for swap reporting and expressed a preference for using an LEI for that reporting, if it can be established through international consensus and is available in a timely manner. The Canadian Securities Administrators published a consultation paper calling for each participant conducting a derivative transaction in Canada to be assigned an LEI based on universal internationally accepted standards. And recently the Hong Kong Monetary Authority (HKMA) published a consultation paper on reporting to the Hong Kong Trade Repository (HKTR), which states that the HKTR will work with the HKMA to consider how to incorporate a global LEI into that reporting.

The OFR is working with the FSB Secretariat and other authorities to organize the September LEI workshop, which will include stakeholders and experts in finance, data, and technology from the public and private sectors. One objective for the workshop is for public sector participants to develop a roadmap for their next steps in the development and implementation of an LEI.

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Have an unreported Offshore Bank account?

The IRS 2011 Offshore Voluntary Disclosure Initiative (OVDI) will expire on Aug. 31, 2011. So, taxpayers who come forward voluntarily get a better deal than those who wait for the IRS to find their undisclosed accounts and income. New foreign account reporting requirements are being phased in over the next few years, making it ever tougher to hide income offshore. The IRS continues its focus on banksbanks and bankers worldwide that assist U.S. taxpayers with hiding assets overseas.

Source: IRS

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State of the U.S. Economy

The bad news:

Economic growth moderated in the first half of 2011. The advance estimate by the Bureau of Economic Analysis (BEA) is that real GDP rose by 1.3 percent at an annual rate in the second quarter of 2011, following a 0.4 percent increase in the first quarter. This is slower than growth in the second half of 2010, when the economy expanded by 2.4 percent at an annual rate.

The BEA show that the recent recession was even more severe than previously estimated. From late 2007 through mid 2009, real GDP fell by a cumulative 5.1 percent (revised from 4.1 percent) – the deepest recession in postwar U.S. history. The decline in real GDP growth in the fourth quarter of 2008 was revised sharply lower to an annual rate of -8.9 percent from -6.9 percent, making it the largest one-quarter decrease since early 1958. The revised data show that since the economy began to recover in mid 2009, real GDP has risen by 5.0 percent, recouping nearly all of the output lost during the recession.

The recent deceleration is partly due to transitory factors, so these factors have either reversed or are receding, and their absence is expected to provide a boost to growth in the coming months. Consumption growth has been held down by slow income growth, which in part reflects a recent soft patch in the labor market recovery, and by ongoing household balance sheet restructuring. The consequent low demand for credit, combined with tight lending conditions, has resulted in anemic credit creation. The underlying weakness in demand poses a downside risk to the economy going forward.

The GOOD news:

Private forecasters currently anticipate that the economy will grow by more than 3 percent at an annual rate in the second half of 2011.  The economy has made significant progress since the recovery began, especially given the historic proportions of the financial crisis and recession.

The unemployment rate, which is currently at 9.2 percent, has fallen about one percentage point since its peak in the fall of 2009. While this progress is encouraging, there are still far too many Americans looking for work. Moreover, unless more is done to generate jobs, the high level of unemployment will continue to weigh on the recovery. That is why the Administration has called on Congress to enact measures – including extending the payroll tax cut, passing the pending free trade agreements and creating an infrastructure bank – that will help put Americans back to work.

Source: Acting Assistant Secretary for Economic Policy- US govt.

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Do you need to keep track of your tax witholdings?

Why is better to have a mid-year tax withholding check-up?
To little in federal tax withheld from your pay, means you need to fiind a lot of money when you file your taxes. If you withhold too much, you will get a large refund, but that means you gave up the use of your money interest free for several months. 

What can you do?

Depending on your situation, and your choices. You may want to adjust your federal tax withholding with your employer.

What about if you married/divorced during the tax year?

Your calculations will change accordingly, can go either way.  The same applies if added a dependent, purchased a home, changed jobs or retired.

How do you know? Obviously, you must do the numbers to find out by mid year, or when circumstances changes.  You may want to do the calculations yourself or have a professional do it for you.  Fill in all information that applies to your situation. Estimate when necessary. But remember, the results are only as accurate as the information you provide.

What happens then?

You must do nothing or adjust your federal withholding on Form W-4, Employee’s Withholding Allowance Certificate. 

Documentation to keep.

Keep all calculations, asumptions, and documents in a secure place for when the time comes to do your taxes.

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Independent Contrator!....Anyone?

People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether these people are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.

Generally, you are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.

If an employer-employee relationship exists (regardless of what the relationship is called), you are not an independent contractor and your earnings are generally not subject to Medicare and Social Security Taxes for Self-Employed.  YOU are then an Employee.

There is a fine line where you do not want to be walking under, 'cause you may end up paying the employee share of the payroll taxes too. 

Source IRS

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Tax Savings

To encourage investments by small businesses, legislation was passed that will increases the ability of small businesses to immediately deduct the cost of machinery, equipment, and other qualifying property. For 2009, the American Recovery and Reinvestment Act (Recovery Act) increased the amount that a small business could expense from $133,000 to $250,000. The Small Business Jobs Act (Jobs Act) further increased this amount to $500,000 for 2010 and 2011. Although this amount would have fallen to $25,000 in 2012, last December’s Tax Relief Act increased the 2012 amount to $125,000.

Source: US Treasury Secretary minutes.

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Do you need to pay FICA taxes on tips?

Yes, you do and the IRS is enforcing compliance. The IRS is sending letters to employers for their share on unreported tips.  So, do not be surprise if you get an IRS notice, and penalties and interest may be assessed on underreported amounts.

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IRS Audits and you.

IRS audits are more common these days.

According to the IRS, audits of individual income tax returns rose 1% in 2010 and the trend may continue in the foreseable future.

Taxpayers (TP) whose income are over $200,000 have more probability to be audited than (TP) under that income level, and that makes sense since they probably they have many sources of income and many deductions.  However, other factors should be taken into consideration like: type and levels of deductions, earned income credit claims, errors and misinterpretations in the application of the IRS code, and other multiple other reasons.  Small business (i.e., Schedule C) filers are prone to audits for the same reason(s) given above.

So, what can you do if you get audited?

You must hire a CPA or a Tax Lawyer.  Get your paperwork ready and all IRS notices and call your accountant at once.

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TAX Situation Analysis- part 1

This is the best time to check your tax situation for 2011 and get some help before we approach the end of the year, December 31, 2011. Once we get close to the end of the year, there is little you can do to adjust your tax liability.

Among the things you may consider are:

1- Do you pay in to much or too little during the year?

2- If you file yourself your tax return, do you doubt that you took all available deductions you qualify for?

3- What cash outflows you need to maintain your life style?

4- Can you get a tax rate reduction on your tax return by doing some investment allocation-from one asset class to another?

5- What role play my earned Income have on my social security benefits collected?

6- How much money you need to take as a distribution from your IRA and how much tax would I pay as a result of that?

7- How much benefit I will get by purchasing an energy efficient appliance or making a home improvement?

8- Do you have the too much before tax investment vehicles than after tax or tax free investment vehicles?

9- Do I be better off taken the standard deduction or itemizing?

10- Can I time my itemized deductions to get more deductions in one year and reduce my tax liability?

11- Should I need to update my beneficiary names on my retirement plans, insurance policies, etc., due to the changes in the family relationships and other situations?

12- Should I be better of renting/leasing a car or a house?

The possibilities are endless as well as the factors to consider. But, you can lessen the impact by acting early in the year. Additional comments will follow.

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One way to use your federal tax refund for...

Have you consider buying US Savings Bonds with your tax refund?

Some of the things the IRS wants you to know about using your federal refund to purchase savings bonds.

1- You may use a portion of your refund to purchase up to $5,000 in U.S. Series I Savings Bonds for yourself or anyone.

2- The total amount of saving bonds purchased must be in multiples of $50. Any portion of your refund not used to buy savings bonds will be deposited into another financial account – such as a checking or savings account or can be mailed to you as a paper check.

3- Paper bonds will be issued in your name or the name you designate as primary owner, co-owner or beneficiary. If you are married and filed a joint return, the bonds will be issued in yours and your spouse’s name. You can also designate a beneficiary or co-owner under this name registration option.

4- You will receive the U.S. savings bonds in the mail.

However, there are other alternatives investment options available to you when you get your tax refund.

Source: IRS






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