2014 Regulatory Changes Impact SMEs

Accounting Today lists nine key regulatory changes identified by Paychex that could have a significant impact on Small Mid-Sized Enterprises (SME). 

 Many SME’s hope to fly under the radar when it comes to regulatory compliance issues. With the drive toward greater transparency and governance practices required by regulators and corporate stakeholders, SMEs must adopt better engagement strategies to incorporate regulatory mandates into the enterprise. 

Regulatory compliance initiatives need not be a check the box exercise. SME’s dedicated to a best practices regimen incorporate regulatory compliance initiatives as an opportunity to implement improvements in operational and governance practices. SME’s committed to a culture of continuous improvement use regulatory mandates to integrate requirements into sound practices as central pillars of effective governance, risk, compliance (GRC) program.

Sound practices are a set of standards and controls that mitigate numerous risk factors in the corporate enterprise. Sound practices address corporate governance, operational and market risk factors, regulatory compliance, corporate citizenship, and stakeholder communications within a set of defined expense ratios. Market leading SME’s effectively ascertain emerging regulatory initiatives to optimize operations to enhance competitive position. 

The Paychex list notes the Affordable Healthcare Act, Defence of Marriage Act, Minimum Wage legislation, Immigration and E-Verify, IRS focus on Revenue Recognition, Retirement Programs, Employment Regulations, Privacy Rights and Data Security, Mobile Technology and Bank regulations. These emerging regulatory concerns need to be thoroughly assessed to determine how they can be incorporated into the company’s business model to create a new and improved value proposition for clients, employees and stakeholders.

A STEEPLE analysis is a useful tool to determine how these emerging issues will impact the SME business model. STEEPLE is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Emerging Risk factors confronting the business. A STEEPLE analysis is fully incorporated into Sum2’s S3 app.

Sound practices require that regulatory compliance programs be embraced as a brand building exercise. Corporations that approach compliance by implementing best practice solutions will mitigate reputational and regulatory risk, attract high end clientele, and command premium product margins.

Sum2 believe this to be the case as well. Our clients engage risk as a daily cost of doing business. We design risk management products for small business managers that empower them to lower the odds and consequences of damaging risk events while positioning themselves to be the beneficiaries of opportunities changing market conditions produce. 

Get risk aware and protect your business with the S3 an SME Seismograph, a risk detector and an early warning and opportunity discovery app on Google Play. 

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Get Risk Aware

Risk: regulatory, tax, emerging risk, GRC, S3, STEEPLE, AHCA, Defence of Marriage Act, Card Check, Immigration and E-Verify, Minimum Wage, Accounting Today, IRS, Paychex, STEEPLE

A Taxing Problem: Digital Assets and Global E-Commerce

The Independent reports that Ireland's Chartered Accountants are warning that "new OECD proposals on taxing hi-tech multinational companies will fundamentally change business landscape." 

The OECD has published a draft discussion on companies operating in the digital economy.  The question of determining tax liability for companies with a business model spanning multiple countries is a growing concern for national tax agencies. Outsourcing, offshoring, the use of tax havens and global e-commerce are perplexing tax authorities seeking to enforce outdated national tax codes written before the explosion of the global digital economy. 

The report proposed redefining when and where a company is liable for tax; suggesting a company would have a tax liability in a country where it had a "significant digital presence".

Ireland is particularly sensitive to this issue in wake of it's recent tax dispute with Apple and other multinationals with operations in the tax friendly EU nation.

Revenue recognition in a rapidly changing global economy with a growing preponderance of digital assets, intellectual capital and digital specie like Bitcoin raise important questions for corporate managers, tax authorities and regulators. Defining revenue, asset types and national jurisdictions of taxing authorities pose great challenges for tax professionals, corporate management, legislators and revenue agencies. Leveraging global disparities in national tax laws to arbitrage local tax codes is the mark of shrewd treasury management. It can also raise questions with tax agencies.

SME's involved in global digital e-commerce must become aware how the evolving tax code opens the door to tax controversy that rises audit risk factors from national revenue agencies.

Sum2 developed the IRS Audit Risk Program (IARP) to provide SME’s an audit risk assessment tool to keep the taxman away from the door. IARP outlines tax code focus areas where caution should be exercised when filing tax returns. Business owners can rest a bit more easy that audit risk is being effectively managed. Get Tax Audit Aware with IARP.

Get Tax Aware

Risk Bitcoin, CPA, digital assets, e-commerce, EU, global economy, IARP, income repatriation, Irish Independent, IRS, multinational, OECD, off-shoring, outsourcing, revenue recognition, risk: tax, sme

File an FBAR or Find Yourself Behind Bars

A few years ago the IRS offered a tax amnesty program for US citizens who failed to declare assets held in foreign bank accounts. This came on the heels of a highly publicized legal action against UBS. The IRS forced the Swiss based bank to turn over the account information of US citizens. The IRS was clamping down on tax evaders, exploiting the protection of Switzerland's bank secrecy laws to hide income and assets. The IRS was looking to determine if FBARs had been filed by the banks US citizens.

Individuals and corporations with assets greater then $10,000 held in foreign bank accounts must file a Foreign Bank Account Report (FBAR) with the IRS or face potential legal action.

UBS counted 52,000 US citizens as private banking clients. It would be safe to assume that most of those accounts had balances greater then the $10,000 declaration threshold. 

Any US investor participating in a foreign based fund partnership or investment vehicle must also file an FBAR. High Net Worth (HNW) investors and their tax advisers should conduct due diligence on private bankers and asset managers to confirm that FBARs and appropriate declarations and forms have been filed by investment partnerships and their administrators. HNW tax advisers should contact the chief compliance officer at the fund to request an attestation letter stating that the fund is in full compliance with foreign bank reporting requirements.

Bernie Madoff and Sir Allen Stanford may look good in orange prison jumpsuits but that doesn't mean it will look good on you. Don't become a slave to fashion. Get compliant. Check with your tax adviser to make sure FBARs are filed.

Get compliant and file an FBAR with Sum2's AML SAR Filing BSA Reporting App. The app is used by financial institutions, compliance professionals and industry service providers to comply with Anti-Money Laundering (AML) best practice provisions and regulations. Protect your clients and your business from money laundering risk with this critical compliance application.

Since 2002,  Sum2's AML compliance products have helped investment managers, broker dealers, MSB's, banks and credit unions comply with the AML provisions of The Patriot Act, BSA Reporting and OECD best practices. 

Get AML aware. Download AML SAR Filing / BSA Reporting App on Google Play.

Get AML Aware

Risk: AML, FBAR, legal, compliance, tax, reputation, criminal prosecution, IRS, OECD, Patriot Act, MSB, private banking, hedge funds, CPA, UBS, Credit Unions, SAR filing, BSA Reporting

UBS to Clients, "You're on the List!"

UBS, announced that it will inform American clients whether information out their bank accounts will be turned over to the US Justice Department in a tax evasion investigation. UBS is required to disclose information on over 4,300 American citizens who are clients of the firms private banking division. The US Justice Department believes that wealthy Americans are using these accounts to conceal assets and are using the bank to hide money under the protection of Switzerland's storied bank secrecy laws.

UBS has so far refused to name the individuals in public. U.S. authorities, meanwhile, have hoped that the identities of the individuals on the list would be kept secret for longer so that more Americans with undeclared assets abroad might come forward under a recently extended tax amnesty program.

According to a bank spokesperson, "UBS is currently examining which client relationships fulfill the government's criteria of 'tax fraud." The review may take some months but UBS is committed to informing clients that they are affected by the tax evasion investigation. UBS has already informed 500 clients that they are the subject of an investigation by the US Justice Department.

The IRS on Monday said it would extend its deadline for an amnesty program that has been flooded with applications from people who hid assets overseas. The program promises no jail time and reduced penalties for tax dodgers who come forward.

The financial services industry can expect these types of investigations to become more commonplace. Institutions that offer hedge funds and investment products that cater to High Net Worth investors will increasingly become subject to greater scrutiny as the US Treasury Department and its enforcement arm the IRS moves to insure that compliance with tax laws and statutes are adhered too.

This resolution signifies that the IRS is serious about its intention to ramp up enforcement of the tax code. The IRS has enhanced its focus on US citizens and corporations utilizing foreign banks and offshore investment vehicles. The agency is concerned that investment products and financial services offered by foreign banks have enabled US citizens and corporations to avoid tax liabilities. Products such as credit cards, hedge funds and other investment partnerships are coming under the exacting microscope of the IRS.

The IRS is under pressure to enforce compliance with federal tax statutes. The US Treasury coffers are seriously depleted and the IRS is is looking to assure all taxable revenue streams are identified and taxpayers pay taxes on all capital gains and income. The IRS has developed an Industry Focus Issue, (IFI) audit strategy. IFI's provides IRS field auditors tax risk profiles of investment partnerships and other corporate entities that use offshore domiciles to harbor assets. IFI guides field audit personnel through a risk based assessment of investment partnerships. The IFI aggregates and ranks Three Tiers of high risk tax compliance issues. Examiners will conduct rigorous reviews of these issue sensitive factors. Many of the factors concern the recognition of income and assets in custody outside of the US and repatriation of revenue derived in foreign domiciles.

Sum2 has published a product, IRS Audit Risk Program (IARP) that guides corporate tax managers and tax professionals through a risk assessment of their exposure to IFI risk factors. The IARP is a strategic tool that corporate tax professionals utilize to score risk exposures, determine mitigation actions, estimate remediation expenses and manage tax controversy defense strategies. The IARP is available for purchase on Amazon.com.

Risk: tax evasion, compliance, reputation, prison

Get Ready for the IRS

Treasury Secretary Tim Geithner’s recent testimony on Capitol Hill is a clear warning to corporate America that the IRS is shifting gears. While the Secretary stated the IRS requires a modest amount of money to reform the tax code and the complicated super system of laws; he also stated that he is seeking a larger allotment for enforcement purposes. Clearly for the immediate future the focus of the agency will be to insure corporations are in full compliance of existing tax laws and statutes.

According to the article, Geithner wants $332 million to go to new IRS enforcement efforts, including $128.1 million to improve international tax compliance. The balance of the funds would be used to support 755 employees to increase examinations of tax returns for businesses and high-income individuals; 300 employees to expand the IRS document-matching program, which compares tax returns to other forms such as W-2s and 1099s; and an additional 491 employees to improve collection operations and build two new IRS automated collection center sites.

Corporate tax professionals need to be vigilant and begin to design a strategy to mitigate rising tax risk. Sum2’s Corporate Audit Risk Program (CARP) is a unique tool that helps corporate tax managers and professionals assess, manage and mitigate tax risk exposures.

You can manage this mounting risk factor with CARP here: manage tax risk.

You Tube Music Video: The Temptations, Get Ready

Risk: tax, audit, reputational

A Taxing Situation

President Obama announced his intention to curb the use of offshore tax havens for multinational corporations. The Treasury Department is looking to raise tax revenues and believes that by closing the use of offshore tax shelters it will be able to raise over $200 bn over the next ten years. According to the New York Times, firms like Citibank, Morgan Stanley, GE and Proctor and Gamble utilize hundreds of these type structures to shelter revenue from being taxed by the IRS. It has effectively driven down the tax rates these companies pay and has been a key driver in maintaining corporate profitability.

This move should come as a surprise to no one. The Treasury Department needs to find sources of tax revenues to cover the massive spending programs necessitated by the credit crisis and the global economic meltdown. The TARP program designed to revitalize banks has expenditures that amounted to $700 bn. Amounts pledged for economic recovery through EESA, PPIP and ARRA will push Treasury Department expenditures targeting economic stimulus projects and programs to approximately $2 tn. These amounts are over and above routine federal budget expenditures that is running significant deficits as well.

The planned move by the Treasury Department to rewrite the tax code may be an intentional effort to close budget deficits but it also represents a significant rise in tax audit risk. For the past two years the IRS has been developing a practice strategy and organizational assets to more effectively enforce existing tax laws. Private sector expertise, practices and resource has significantly out gunned the IRS’s ability to detect and develop a regulatory comprehension of the tax implications of the sophisticated multidomiciled structured transactions flowing through highly stratified and dispersed corporate structures. The IRS is looking to level the playing field by adding to its arsenal of resources required to engage the high powered legal and accounting expertise that corporate entities employ.

The IRS has hired hundreds of new agents and has developed risk based audit assessment guidelines for field agents when examining corporations with sophisticated structures and business models. As such investment partnerships, global multinational corporations and companies utilizing offshore structures can expect to receive more attention from IRS examiners.

The IRS had developed Industry Focus Issues (IFI) to be used as an examination framework to guide audit engagements for sophisticated investment partnerships and Large and Mid-size Businesses (LSMB). The IFI for LSMB has developed three tiers of examination risk. Each tier has comprises about 12 examination issues that will help examiners focus attention of audit resource on areas the agency considers as high probability for non-compliance. Clearly the audit risk factors risk

To respond to this challenge, Sum2 developed an audit risk assessment program to assist CFO’s, tax managers, accountants and attorneys conduct a through IFI risk assessment. The IRS Audit Risk Program (IARP) is a mitigation and management tool designed to temper the threat of tax audit risk. A recent survey commissioned by Sum2 to measure industry awareness of IFI risk awareness indicated extremely low awareness of tax audit risk factors.

Sum2’s IARP helps corporate management and tax planners score exposure to each IFI risk factor. It allows risk managers to score the severity of each exposure, mitigation capabilities, mitigation initiatives required to address risk factor, responsible parties and mitigation expenses. The IARP allows corporate boards and company management to make informed decisions on tax exposure risk, audit remediation strategies, arbitration preparation and tax controversy defense preparation.

The IARP links to all pertinent IRS documentation and information on each tax statute and IFI audit tier. The IARP links to pertinent forms and allows for easy information retrieval and search capabilities of the vast IRS document libraries. The IARP also has links to FASB to have instant access to latest information on accounting and valuation treatments for structured instruments.

The IARP is the newest risk application in the Profit|Optimizer product series. The Profit|Optimizer is a enterprise risk management tool used by SME’s and industry service providers.

The IARP is available in two versions.

The IRS Audit Risk Program for investment partnerships (IARP)

Buy it on Amazon here: IARP

The Corporate Audit Risk Program (CARP)

Buy it on Amazon here: CARP

Sum2’s Audit Risk Survey results are here: IFI Audit Risk Survey

You Tube Video: Chairman of the Board, Pay to the Piper

IRS Audit Risk Survey: Final Results

Sum2 is please to report the final results of the IRS Audit Risk Survey for Fund Managers. Sum2 has commissioned the survey to determine financial services industry awareness and readiness for IRS audit risk factors. The survey sought to determine industry awareness and readiness to address IRS Industry Focus Issue (IFI) risk exposures for hedge funds, private equity firms, RIAs, CTAs and corporations using offshore structures.

Survey Background

Due to the pressing revenue requirements of the United States Treasury and the need to raise funds by recognizing new sources of taxable revenue; hedge funds, private equity firms, CTA's and other corporations that utilize elaborate corporate structures, engage in sophisticated transactions and recognize uncommon forms of revenue, losses and tax credits will increasingly fall under the considered focus of the IRS.

Since 2007 the IRS began to transition its organizational posture from a benign customer service resource to a more activist posture that is intent on assuring compliance and enforcement of US tax laws. Specifically the IRS has invested in its Large and Mid-Size Business Division (LMSB) to enhance its expertise and resources to more effectively address the tax audit challenges that the complexity and sophistication of investment management complexes present. The IRS has developed its industry issue competencies within its LMSB Division. It has developed a focused organizational structure that assigns issue ownership to specific executives and issue management teams. This vertical expertise is further enhanced with issue specialists to deepen the agencies competency capital and industry issue coordinators that lends administrative and agency management efficiency by ranking and coordinating responses to specific industry issues. IRS is building up its portfolio of skills and industry expertise to address the sophisticated agility of hedge fund industry tax professionals.

To better focus the resources of the agency the IRS has developed a Three Tiered Industry Focus Issues (IFI). Tier I issues are deemed most worthy of indepth examinations and any fund management company with exposure in these areas need to exercise more diligence in its preparation and response. Tier I issues are ranked by the IRS as being of high strategic importance when opening an audit examination. This is followed by Tier II and Tier III focus issues that include examination issues ranked according to strategic tax compliance risk and significance to the market vertical. Clearly the IRS is investing significant organizational and human capital to address complex tax issues of the industry. The IRS is making a significant institutional investment to discover potentially lucrative tax revenue streams that will help to address the massive budget deficits of the federal government.

Survey Results

The survey was open to fund management executives, corporate treasury, tax managers and industry service providers. CPAs, tax attorneys, compliance professions, administrators, custodians and prime brokers were also invited to participate in the study. The survey was viewed by 478 people. The survey was completed by 43% of participants who began the survey.

Geographical breakdown of the survey participants were as follows:

• North America 73%
• Europe 21%
• Asia 6%

The survey asked nine questions. The questions asked participants about their awareness of IFI that pertain to their fund or fund management practice and potential mitigation actions that they are considering to address audit risk.

The survey posed the following questions:

• Are you aware of the Industry Focus Issues (IFI) the IRS has developed to determine a fund managers audit risk profile?
• Are you aware of the organizational changes the IRS has made and how it may effect your firms response during an audit?
• Are you aware of the Three IFI Tiers the IRS has developed to assess a funds audit risk profile?
• Are you aware of how the Three IFI Tiers may affect your audit risk exposures?
• Have you conducted any special planning sessions with internal staff to prepare for IFI audit risk exposures?
• Has your outside auditor or tax attorney notified you of the potential impact of IFI risk?
• Have you held any special planning meetings with your outside auditors or tax attorneys to mitigate IFI risk?
• Have you had meetings with your prime brokers, custodians and administrators to address the information requirements of IFI risk?
• Have you or do you plan to communicate the potential impact of IFI risk exposures to fund partners and investors?

Survey highlights included:

• 21% of survey participants were aware of IFI
• 7% of survey respondents planned to implement specific strategies to address IFI audit risk
• 6% of survey respondents have received action alerts from CPA's and tax attorney's concerning IFI audit risk
• 26% of survey respondents plan to alert fund investors to potential impact of IFI audit risk

Recommendations

Sum2 believes that survey results indicate extremely low awareness of IFI audit risk. Considering the recent trauma of the credit crisis, sensational fraud events and the devastating impact of last years adverse market conditions; fund managers and industry service providers must remain vigilant to mitigate this emerging risk factor.

These market developments and the prevailing political climate surrounding the financial services sector will bring the industry under heightened scrutiny by tax authorities and regulatory agencies. Unregulated hedge funds may be immune from some regulatory issues but added compliance and disclosure discipline may be imposed by significant counter-parties, such as prime brokers and custodians that are regulated institutions.

Market and regulatory developments has clearly raised the tax compliance and regulatory risk factors for hedge funds and other fund managers. Issues concerning FAS 157 security valuation, partnership domiciles and structure, fund liquidation and restructuring and complex transactions has increased the audit risk profile for the industry. Significant tax liabilities, penalties and expenses can be incurred if this risk factor is not met with well a well considered risk management program.

In response to this industry threat, Sum2 has developed an IRS Audit Risk Program (IARP) that prepares fund management CFO's and industry service tax professionals to ascertain, manage and mitigate its IRS risk exposures within the Three IFI Tiers. The IARP provides a threat scoring methodology to ascertain risk levels for each IFI risk factor and aggregates overall IFI Tier exposures. The IARP uses a scoring methodology to determine level of preparedness to meet each of the 36 audit risk factors.

The IARP helps managers to outline mitigation actions required to address audit risk factors and determine potential exposures of each risk. The IARP calculates expenses associated with mitigation initiatives and assigns mitigation responsibility to staff members or service providers. The IARP links users to issue specific IRS resources, forms and documentation that will help you determine an IFI risk relevancy and the resources you need to address it.

The IARP will prove a valuable resource to help you manage your response to a tax audit. It will also prove itself to be a critical tool to coordinate and align internal and external resources to expeditiously manage and close protracted audit engagements, arbitration or litigation events. The IARP product is a vertical application of Sum2's Profit|Optimizer product series.

The Profit|Optimizer is a C Level risk management tool that assists managers to uncover and mitigate business threats and spot opportunities to maintain profitability and sustainable growth.

The IARP product is available for down load on Amazon.com.

The product can also be purchased with a PayPal account: Sum2 e-commerce

Sum2 wishes to thank all who anonymously took part in the survey.

If you have any questions or would like to order an IARP please contact Sum2, LLC at 973.287.7535 or by email at customer.service@sum2.com.

About IRS Audit Risk Survey for Hedge Funds (Interim Update 2)

The IRS has developed a methodology to determine an audit risk profile for hedge funds, private equity firms, CTA’s RIAs and corporations using offshore structures. Sum2 has commissioned a survey to determine financial services industry awareness and readiness for IRS audit risk factors.

The survey seeks to determine industry awareness of IRS Industry Focus Issue (IFI) risk exposures for hedge funds, private equity firms, RIAs, CTAs and corporations using offshore structures. The survey is open to fund management executives, corporate treasury, tax managers and industry service providers.

CPAs, tax attorneys, compliance professions, administrators, custodians and prime brokers are also welcomed to participate in the study. The study’s purpose is to determine the level of industry preparedness and steps fund managers are taking to mitigate potential exposures to IFI audit risk.

Sum2 will share weekly interim results of the surveys findings. The survey will run for four weeks. This is the second weekly report.

Survey Highlights

• 65% of survey respondents are from North America
• 15% are from Great Brittan
• 12% are from other EU countries
• 3% are from Asia
• 78% of respondents indicate an unawareness of IFI
• 18% of respondents indicate they plan to alert investors to IFI impact
• 17% of respondents indicated that they initiated actions to address IFI
• 11% of respondents indicated that they have received action alerts from industry service providers

Take the Survey

We invite you to participate in a survey to determine industry awareness of IRS Industry Focus Issue risk for hedge funds, private equity firms, RIAs, CTAs and offshore corporate structures.

The survey can be accessed here: IRS Audit Risk Survey for Hedge Funds

The survey is open to fund management executives and industry service providers to the industry. CPAs, tax attorneys, compliance professions, administrators, custodians, consultants and prime brokers are welcome to take the study. The study’s purpose is to determine the level of industry preparedness and steps fund managers are taking to mitigate potential exposures to IRS Industry Focus Issue risk.

Sum2 is looking to use the survey to better respond to the critical needs of fund managers and the alternative investment management industry by improving our just released IRS Audit Risk Program (IARP).

This survey asks ten questions. The questions concern your awareness of IFI and how it pertains to your fund or fund management practice. The survey seeks to determine overall industry risk awareness, potential exposure to IFI risk factors and any mitigation initiatives you plan to address IFI risk factors.

It should take no more then 5 minutes to complete the questionnaire. Your participation in this study is completely voluntary. There are no foreseeable risks associated with this project. However, if you feel uncomfortable answering any questions, you can withdraw from the survey at any point. It is very important for us to learn your opinions. Your survey responses will be strictly confidential and data from this research will be reported only in the aggregate. Your information will be coded and will remain confidential.

If you have questions at any time about the survey or the procedures, you may contact Sum2 at 973.287.7535 or e-mail us at customer.service@sum2.com

Thank you for your participation.

Hedge Fund Audit Risk Survey: Interim Results

The IRS has developed a methodology to determine an audit risk profile for hedge funds, private equity firms, CTA’s RIAs and corporations using offshore structures.

Sum2 has commissioned a survey to determine financial services industry awareness and readiness for IRS audit risk factors. The survey seeks to determine industry awareness of IRS Industry Focus Issue (IFI) risk exposures for hedge funds, private equity firms, RIAs, CTAs and corporations using offshore structures.

The survey is open to fund management executives, corporate treasury, tax managers and industry service providers. CPAs, tax attorneys, compliance professions, administrators, custodians and prime brokers are also welcomed to participate in the study.

The study’s purpose is to determine the level of industry preparedness and steps fund managers are taking to mitigate potential exposures to IFI audit risk.

Sum2 will share weekly interim results of the surveys findings. The survey will run for four weeks. This is the first weekly report.

Survey Highlights

• 62% of survey respondents are from North America
• 18% are from Great Brittan
• 16% are from other EU countries
• 4% are from Asia
• 50% of respondents who viewed survey begin survey
• 20% of respondents indicate an awareness of IFI
• 9% of respondents indicated that they initiated actions to address IFI
• 7% of respondents indicated that they have received action alerts from industry service providers concerning IFI
• 2% of respondents indicated that they plan to communicate impact of IFI to fund investors

Take the Survey

We invite you to participate in a survey to determine industry awareness of IRS Industry Focus Issue risk for hedge funds, private equity firms, RIAs, CTAs and offshore corporate structures.

The survey can be accessed here: IRS Audit Risk Survey for Hedge Funds

The survey is open to fund management executives and industry service providers to the industry. CPAs, tax attorneys, compliance professions, administrators, custodians, consultants and prime brokers are welcome to take the study.

The study’s purpose is to determine the level of industry preparedness and steps fund managers are taking to mitigate potential exposures to IRS Industry Focus Issue risk. The goal of the survey is to help Sum2 better respond to the critical needs of fund managers and the alternative investment management industry by improving our just released IRS Audit Risk Program (IARP).

This survey asks ten questions. The questions concern your awareness of IFI and how it pertains to your fund or fund management practice. The survey seeks to determine overall industry risk awareness, potential exposure to IFI risk factors and any mitigation initiatives you plan to address IFI risk factors. It should take no more then 5 minutes to complete the questionnaire.

Your participation in this study is completely voluntary. There are no foreseeable risks associated with this project. However, if you feel uncomfortable answering any questions, you can withdraw from the survey at any point. It is very important for us to learn your opinions.

Your survey responses will be strictly confidential and data from this research will be reported only in the aggregate. Your information will be coded and will remain confidential.

If you have questions at any time about the survey or the procedures, you may contact Sum2 at 973.287.7535 or e-mail us at customer.service@sum2.com

Thank you for your participation.

Hedge Fund Audit Risk and Foreign Nationals

Sum2 is conducting a study to determine fund management industry awareness and preparedness to address recent IRS initiatives concerning the use of Industry Focus Issues (IFI) to guide agency field engagements.

The survey can be accessed here: IRS Audit Risk Survey for Hedge Funds

Sum2 asked industry participants to take part in the survey that were not domiciled in the US. Though the IRS is not the national tax authority for fund managers located outside of the US the audit guidelines that the agency is developing has a high focus on foreign nationals investing in funds with a US nexus. This has implications for any individuals, institutions and subscribers to fund of funds regardless of their nationality. The IRS has developed three tiers of IFI that relate to the investment management industry and four (4 ) of the fourteen (14) First Tier IFI concerns foreign nationals participation in US domiciled partnerships. The IFI risk profiling that will guide agency field agents examination of investment partnerships and other fund structures will impact all partners in a investment fund corporation.

The duration of the survey will be four weeks. Sum2 will be releasing interim weekly results of the survey. The first interim update will be released later today. So far respondents of the survey have indicated an extremely low level of awareness about the IFI and its potential impact on fund partnerships.

One of the goals of the survey was to create visibility for our new IRS Audit Risk Program (IARP) product. In future releases of the product, we plan to incorporate other tax domiciles.

We encourage all global participants to review the survey to determine how it may impact their fund management business.

We also welcome any comments or insights from industry participants about how IFI may impact their investment fund partnerships company's and how Sum2's IARP can be improved to help investment partnerships more effectively mitigate and manage audit tax risk.

In particular we welcome insights and intelligence on EU market application and best practices guidelines industry participants employ to monitor and manage tax audit threats. As with all risk management products, there is a lot of interest in the IARP product in the United States.

We are looking forward to the release of subsequent additions of the IARP that speak to managing audit tax risk in other domiciles and tax jurisdictions.

We welcome your insights into initiatives or trends that impact the global fund management industry.

Thank you for your response.

Sum2 Commissions IRS Audit Risk Study

Sum2 has commissioned a survey to determine financial services industry awareness and readiness for IRS audit risk factors. The survey seeks to determine industry awareness of IRS Industry Focus Issue risk exposures for hedge funds, private equity firms, RIAs, CTAs and corporations using offshore structures.

The survey is open to fund management executives, corporate treasury, tax managers and industry service providers. CPAs, tax attorneys, compliance professions, administrators, custodians and prime brokers are welcome to take the study.

The study's purpose is to determine the level of industry preparedness and steps fund managers are taking to mitigate potential exposures to IRS Industry Focus Issue risk.

The goal of the survey is to help Sum2 better respond to the critical needs of fund managers and the alternative investment management industry by improving our just released IRS Audit Risk Program (IARP) for fund managers.

To take the IRS Audit Risk Survey, click here.

IRS background information can be found here.

Sum2 alerts can be found here.

IARP product information is here.

This survey asks ten questions. The questions concern participants awareness about IFI that pertain to their fund or fund management practice. The survey seeks to determine overall industry risk awareness, awareness of potential risk exposure to IFI risk factors and any mitigation initiatives managers may plan to address IFI risk factors. It should take no more then 5 minutes to complete the questionnaire.

Participation in this study is completely voluntary. There are no foreseeable risks associated with this project. If participants feel uncomfortable answering any questions, they can withdraw from the survey at any point. It is very important for us to learn your opinions.

Survey responses will be strictly confidential and data from this research will be reported only in the aggregate. Respondent data will be coded and will remain confidential. If you have questions at any time about the survey or the procedures, you may contact Sum2, LLC at 973.287.7535 or by email at customer.service@sum2.com.

Thank you for your time and support.

Sum2 Product Announcement: IRS Audit Risk Tool for Hedge Funds

IRS Audit Risk Program (IARP) for Hedge Funds helps managers to determine IRS risk exposure to Tier I, II and III; IRS Industry Focus Issues (IFI).

The IARP is a threat management and scoring tool that helps managers ascertain level of audit risk for each IFI Tier risk factor. The IARP aggregates and groups overall IFI Tier risk exposures. Managers and fund advisers can then take considered action to mitigate tax exposure risk factors, prepare for tax audits and organize defensive responses for potential mediation, arbitration or litigation of tax audit disputes.

The IARP uses a scoring methodology to determine a funds exposure and level of preparedness to meet IFI audit risk factors. The IARP guides managers through a thorough IFI risk assessment. It helps managers formulate and initiate actions required to mitigate the threat of IFI risk exposures.

The IARP helps to identify and calculate expenses associated with mitigation initiatives. The IARP helps managers to assign mitigation responsibilities to staff members or service providers and tracks any open risk issues.

The IARP links to issue specific IRS resources and documentation that clearly outlines the risk factor, documentation and agency engagement guidance pertaining to the specific IFI risk factor. These critical tax compliance resources enable managers to determine the severity an IFI risk factor represents and helps to align corporate resources needed to address it.

The IARP is a necessity for hedge funds, private equity firms, CTAs, RIAs, global multinationals and corporations utilizing offshore structures. The IARP is a critical resource for CFOs, CCOs, CROs and internal corporate counsel. Corporate treasury executives that engage in innovative transactions, recognize unusual revenue sources and employ sophisticated tax strategies will benefit from the use of this product. CPA firms and corporate tax attorneys with a focus on financial services industry will find the IARP an indispensable risk discovery and client engagement tool.

The IARP is a vertical application of Sum2's Profit|Optimizer product series. The Profit|Optimizer is a C Level risk management tool that assists managers to uncover and mitigate business threats and discover opportunities to assure profitability and growth. The IARP product is available as an industry standard MS Excel© application and is delivered by digital download.

More information on our sound practice product suits can be found on our Sum2 website. Please visit our bog Credit Redi. We can always be reached by e-mail at customer.service@sum2.com or by phone 973.287.7535.

The IARP is available for purchase on Amazon.com.

A single user license can be purchased for $95.00.

The link can be found here: IARP for Hedge Funds.

IRS Audit Risk for Fund Managers

The earths axis seemed to have tilted way off course last year. The global capital and credit markets crashed. Venerated banking institutions moved dangerously close to insolvency forcing mergers with better capitalized banks. The bulge bracket investment banking institutions disappeared. Some were acquired by traditional banks, others converted to a bank holding company structure; while others declared bankruptcy. In response, the Federal Reserve, Treasury Department and SEC initiated unprecedented concerted interventionist actions. The passage of EESA legislation and the implementation of the $750bn TARP program are the first in many expected moves by the government to maintain the solvency of the banking system as a national economic security issue. In addition to these initiatives the government has also passed a massive $750bn economic stimulus bill to kick start the economy. All told over $1.5 trillion dollars has recently been appropriated by the federal government to address the economic crisis. This massive capital infusion has ratcheted up the federal budget deficit. It will be incumbent on the Treasury Department and the IRS to make a concerted effort to uncover new sources of revenue to finance these massive spending programs.

Hedge funds, private equity firms, CTA's and other corporations that utilize elaborate corporate structures, engage in sophisticated transactions and recognize uncommon forms of revenue, losses and tax credits will increasingly fall under the considered focus of the IRS. Times have changed and so has the posture and practice of the IRS. The agency is transitioning its organizational posture by moving away from a benign customer service resource and assuming the form of an activist body that is intent on assuring compliance and enforcement of US tax laws. In particular it is building up its expertise and resource to more effectively address the audit challenges the complexity and sophistication hedge funds present.

The IRS has developed its industry issue competencies. It is creating a focused organizational structure that assigns issue ownership to specific executives and issue management teams. This vertical expertise is further enhanced with issue specialists to deepen the agencies competency capital. Industry issue coordinators have also been appointed to lend administrative and agency management efficiency by ranking and coordinating responses to specific industry issues. Clearly the IRS is building up its portfolio of skills, industry expertise and organizational capacity to address the sophisticated agility of the alternative investment management industries tax professionals.

To better focus the resources of the agency the IRS has grouped Industry Focus Issues (IFI) within three tiers. IFI are industry issues the IRS considers to be of strategic interest to the agency and are worthy of considerable attention by field audit teams. Corporations with exposures in these focus areas need to exercise more diligence in its preparation and response to potential audit threats. Each IFI tier comprise risk factors ranked by its strategic interest to the IRS . This helps IRS auditors to understand a funds risk profile when opening an examination of an investment company and other sophisticated corporate structures. The IRS has created the three IFI tiers to rank significant examination issues according to the strategic agency interest within the investment management market vertical. In all the IRS has identified 36 risk factors across the three IFI tiers.

Clearly the IRS is investing significant organizational and human capital to address an industry that will no longer fly beneath the agencies radar. The IRS is making a significant investment in its industry response capability and will be called upon to generate a considerable return on the investment in the hopes that the discovery of lucrative tax revenue streams will help to pay down the massive spending deficits of the federal government.

This development has clearly raised the tax compliance and regulatory risk factors for the investment management industry. Significant tax liabilities, penalties and expenses can be incurred if this risk factor is not met with well a well considered risk management program.

In response to this industry threat, Sum2 developed the IRS Audit Risk Program (IARP) as a tool for investment and corporate treasury managers to determine exposures to each IFI risk factor. The IARP helps managers determine aggregate risk by scoring audit threats for each risk factor.

The IARP helps managers to prioritize the threat of each of the 36 risk factors. Tax managers can outline mitigation actions, assign mitigation tasks and monitor task completion. The IARP is a valuable tool to help managers frame strategies to respond to tax audits.

The IARP allows managers to determine the extent of potential resolution expense associated with each risk factor. The IARP calculates aggregated mitigation and resolution expenses for all tiers.

The IARP assists managers to more effectively communicate with outside tax attorneys, CPA's, custodians, administrators, prime brokers and fund investors.

Sum2 is conducting a survey on IFI awareness and its impact on audit risk for fund managers. To date the results have indicated that industry awareness of IFI and the audit risk factors associated with IFI is low.

The IARP is a necessity for hedge funds, private equity firms, CTAs, RIAs, global multinationals and corporations utilizing offshore structures. The IARP is a critical resource for CFOs, CCOs, CROs and internal corporate counsel. Corporate treasury executives that engage in innovative transactions, recognize unusual revenue sources and employ sophisticated tax strategies will benefit from the use of this product. CPA firms and corporate tax attorneys with a focus on financial services industry will find the IARP an indispensable risk discovery and client engagement tool.

The IARP is a vertical application of Sum2's Profit|Optimizer product series. The Profit|Optimizer is a C Level risk management tool that assists managers to uncover and mitigate business threats and discover opportunities to assure profitability and growth. The IARP product is available in an industry standard MS Excel© application and is digitally delivered.

The IARP is a vertical application of Sum2's Profit|Optimizer product series. The Profit|Optimizer is a C Level risk management tool that assists managers to uncover and mitigate business threats and spot opportunities to maintain profitability and sustainable growth.

A single seat license for the IARP is $95.00.

It can be purchase on Amazon by clicking the below icon.




NB: The IARP product does not offer advice nor does it recommend compliance guidelines. Its purpose is to help fund managers assess risk levels and provide a tool to align corporate resources to mitigate risk factors. It is highly recommend that you consult with tax, legal and compliance professionals to address the risk exposures that the IARP uncovers.