How Kindness & Compassion Can Reduce Company Turnover

(Forbes Magazine – December 9, 2019)

Rob Dube – (He  writes about leadership, business, and meditation.

Employee retention and happiness is often a top priority for many organizations. In today’s job market, a low turnover rate has become more critical—and more difficult—than ever. 

To keep their teams intact, employers increasingly rely on professional growth, salary, benefits, and even foosball tables to earn long-lasting loyalty. However, as great as these perks are, these days, they are simply a ticket to the game. The modern workplace must-haves. 

Ok. Maybe not the foosball table. But, if the other essentials aren’t enough, how can a company succeed at holding onto their best people? According to Leah Weiss, Ph.D., retention really starts with a company that prioritizes kindness, compassion, and empathy—most notably from those on top. As a Stanford Graduate School of Business lecturer, researcher, and author of How We Work: Live Your Purpose, Reclaim Your Sanity, and Embrace the Daily Grind, Leah has focused her studies on compassionate leadership, and the positive effect it has on organizations. She also helped to develop Stanford’s Compassion Cultivation Training, which was initially conceived by the Dalai Lama.

Through Leah’s discoveries and research, find out why simple acts of kindness within the workplace decrease turnover, increase loyalty, and can even boost your bottom line.

A More Compassionate Company Culture

“The costs of an organization where people are not deeply committed [to compassion] far outweigh what the investment would have been to help.” — Leah Weiss, PhD

Most organizations do strive to show their team appreciation. Maybe it’s shown in the form of holiday parties, happy hours, or bonus programs. These symbols of gratitude are wonderful, but is it truly showing compassion? Or, are these perks merely fill-ins for more authentic human connections?

Too often, leaders are so busy that they fail to genuinely acknowledge their employees’ real emotions. “It’s a common mistake,” says Leah. “It’s a very human mistake, but it is not a smart mistake to make as a leader.”

By failing to recognize those emotions, it won’t be long until team members flee to a company that treats them like people. “They’re going to rethink all the times they stayed late, put in time on the weekend, and gave it their all,” Leah says. “But at the moment they need you, you’re not there.” 

They gave you loyalty. Where’s yours? 

It’s pivotal for leaders to show authenticity, empathy, and compassion towards every person that they lead. Engage in honest conversations. Support your employees during difficult times. Show some flexibility. These small gestures on your part can mean everything. 

“If you don’t extend resources to them to support them,” says Leah, “They’re going to have an experience of you as a leader—and of your organization—that’s negative.”

Especially in today’s connected world, we all know how easy it is for criticism to spread fast. Once word gets around that your company doesn’t reciprocate loyalty, expect for engagement, retention, and your overall reputation to sink. 

“You can skip over ‘compassion’ and say, ‘I don’t have time to worry about all this,'” Leah says. “But it’s going to come back and bite you.” 

Start Integrating Empathy into the Workplace

Be kind to your employees. Easy enough, right?

Not necessarily—especially if your goal is to incorporate these practices throughout your company and make it last. This will take intention, thought, and time.

First off, clarify your intentions. Why do you want to create a more compassionate work culture? Just like every leader, team, and business differs, so too will this answer. “It’s easy to say I’m too busy to touch base with intention,” says Leah, “but cut that corner at your own peril. If you don’t have clarity about your plans, how can you know where you’re going?”

Leah suggests checking in with your values surrounding compassion and empathy. “How have they played out in your history and narrative,” she says? “What do we feel like when we’re out of alignment with our values physically, mentally, and emotionally?” 

Use these observations as fuel when making decisions regarding compassion. By looking back and within, you can tap into your own emotions. How did you feel when faced with a similar obstacle? What did your superiors do? Should you handle it differently?  

Next, take a step back and focus on your company’s true purpose. “We need a purpose to be healthy and happy,” says Leah. “It’s not a nice-to-have. It’s a must-have.”

She uses the healthcare industry as an example. There, the purpose isn’t about prescribing medications, taking measurements, or booking appointments. It’s about helping patients live happier and healthier lives. 

Once again, it goes back to finding compassion for other people.   

This takes reminding your team, and yourself, about your company’s purpose. Typically, this involves bringing empathy into the bigger picture. What does your business do to make your customers’ lives even just a little bit better? How does each individual contribute to making this a reality? 

With a reinvigorated sense of purpose, expect you and your team will feel more engaged than ever.

Spend More Time With Yourself

Compassionate leadership isn’t always easy. Life gets stressful. Sometimes, extending compassion does feel like too much to handle.

That being said, as leaders, our actions matter. We must mentally and physically show up for our team as often as possible. And by caring for ourselves, we can be at our best in caring for others. 

Leah says silence, space, and introspection are her three favorite ways to periodically unplug from her daily rigors and gift valuable time to herself.

“I think silence is the most under-appreciated resource, especially in a time when we’re so busy,” she says. “There’s constant pressure to consume and stay on top of information. We need to be aware of the power of attending to our inner experience with greater intimacy and precision.”

But if you’re not used to regularly checking in with yourself, where do you begin?

Leah suggests finding a few minutes during the day—perhaps first thing in the morning, while exercising, or on the commute home—to power every device off and reflect inwards without distraction.  

If you prefer something more structured, meditation is also an incredible practice that more high-level leaders like Bill Gates, Jack Dorsey, and Marc Benioff have embraced. Thanks to apps like Headspace, Calm, and Insight Timer, it’s easier than ever to start a meditation practice of your own.

Leah also suggests trying a mindful meditation retreat. Unlike a daily meditation practice, retreats allow for participants to fully escape from the world’s distractions and immerse themselves in mindfulness. It’s the best way to give your mind the uninterrupted space to think, reflect, and grow.

“Instead of filling up space with noise and input,” Leah says, “you can start to see what’s happening. You’re more aware of your own physical, emotional, and cognitive patterns.” Then, you can take everything you’ve discovered, bring it home, and use it when it matters most.

She recognizes that retreats, meditation practices, and self-care can require personal and financial investments—something that already causes many leaders anxiety. “But,” she says, “part of us knows we need them, and they might benefit us massively.”

Even if you’re still on the fence, why not take a chance and give it a try?

“Take it as an experiment,” Leah says. “Do the thing and thoughtfully put everything you can into it. Then, reflect on whether it was worth it. Maybe it will be a one-time experiment.

“Or maybe it’ll unlock a whole set of life experiences that you would’ve otherwise denied yourself.”

Listen to Rob’s entire conversation with Dr. Leah Weiss on the do nothing podcast

You’ll learn more about how she started studying kindness and compassion, what other leadership strategies she loves, why compassion can make you physically healthier and so much more.

Will You Be Prepared for the Next Recession?

What to Expect and How to Prepare for a Recession 

Economists generally determine that our country has fallen into a recession after two consecutive quarters of negative gross domestic product (GDP) growth. Since 1967, the United States has experienced seven recessions.

The thing is, predicting a recession is a little like predicting a tornado. Experts are never exactly sure if or when one will occur, but they can cite when conditions a ripe for one based past experience. The good news for predictors is that the economy follows a similar pattern of indicators in the months leading up to a recession.

The bad news is that many of those indicators have recently emerged. For example:

  • Inverted Yield Curve – This is when the yield on longer-term Treasury bonds is lower than the yield on shorter-term Treasury bonds, which happened recently for the first time since 2007. On average, an inverted yield curve has occurred 14 months in advance of every recession in the past 50 years.
  • Corporate Profits – Estimates for corporate earnings growth have dropped substantially since last year, from 7.6 percent to 2.3 percent.
  • Global Trade – The ongoing U.S. trade war with China has resulted in weakness in the manufacturing and farming industries. Moreover, global trade volume is also down, which further reduces the market for U.S.-manufactured goods.

What to Expect in a Recession

The worst recession in U.S. history was the most recent one, between 2007 and 2009. Dubbed the Great Recession, it was short (compared to the Great Depression of 1929-1939) but it took a powerful toll on a large chunk of the population. For example, close to half of U.S. households lost at least 25 percent of their net worth; one out of every four households lost at least 75 percent of their net worth.

About one-third of households experienced one or more of the following:

  • Fell more than two months behind on their mortgage
  • Had their home foreclosed
  • Had their home equity drop into negative territory
  • Lost a job

That was a bad recession. Fortunately, while economists are seeing signs of another one on the horizon, as of now (absent any significant shocks) they do not expect it to be as severe.

Tips to Prepare for a Recession

With multiple warning signs evident, it appears we do have some time before a recession potentially hits. It’s a good idea to use this time to protect your financial situation to help minimize any impact that a recession can have on you personally. The following are some tips to consider.

Shore Up Your FinancesStart by reducing your debt as much as possible, particularly any accounts exposed to a variable interest rate. The interest on credit cards and home equity lines of credit have a habit of increasing when you can least afford it. If you have a variable rate mortgage you might want to refinance at today’s low fixed mortgage rates so your monthly payments do not increase. One way to generate a robust savings fund is to temporarily suspend contributions to a retirement plan and save that money in a readily available account.

Minimize Household ExpensesMost people have to cut back on household expenses during a recession, so you might as well start now to help you prepare. For example, consider trading in a gas-guzzling car for one with better gas mileage and lower monthly payments, or pull the plug on cable TV and switch to a streaming service. Deploying these cost-reduction strategies now not only reduces your expenses during a recession but will also help contribute to your savings fund.

In many areas of the country, real estate prices are at the top of the market. It might be worth considering selling your house now while you can get a good price. This will give you a pot of cash to sit on during the recession, which is especially helpful if you lose your job. In fact, after the sale you may consider renting until real estate prices drop and you can purchase another home at a good price – and maintain a healthy cache of savings. This strategy could also save you from raiding your investment portfolio for money – helping protect your future financial security.

Protect Your Investment PortfolioTake a good look at your portfolio and give it a recession stress test. Consider reallocating some funds to options that tend to perform reliably during an economic decline, such as:

  • Government bonds
  • Treasury Inflation-Protected Securities (TIPS)
  • Corporate Inflation-Protected Securities (CIPS)
  • Consumer staples stocks
  • Well-established dividend stocks
  • Fixed Income Annuity (FIA)

Recognize that it is generally not a good idea to completely cash out of the market. The best way to accumulate wealth over time is to stay invested regardless of temporary economic declines. In fact, investors who maintained their market positions between 2007 and 2017 experienced an average 240 percent growth rate.

Once the recession has ended, think about rebalancing your portfolio to realign its strategic asset allocation with your investment objectives and timeline. This allows you to cash in on outperforming assets and buy into depressed securities that could be poised for post-recession growth.

专业的会计师、税务顾问不会让国税局IRS找你的麻烦

 

与新客户初次会面时,经常会被问及我所是一间有多“进取”的会计师事务所。在这情况下,我们一定会做出这样的回应:“在法律允许的范围内,我们会采取一切的方法,确保客户向国税局支付最低的税额。”同时,我们也会明确表示 :当我们有理由怀疑客户所提供的报税资料没有确实凭证时,我们就会拒绝为他们服务。为什么?因为专业会计师的职责是确保客户不会在税务上招麻烦。

要精确的报税需要准备很多的数据材料及凭证。商业报税需要准备的数据信息更为繁复,所以偶尔难免会有遗漏,这种情况是可以理解接受的。但那些故意将个人开支作为业务支出,且没有按实际收支记录入账的刻意隐瞒虚报行为就是违法的。我们也有遇到客户在申报年度税时,所提供的年度财务数据是随意编造的。当他们知道用这些虚假数据计算出来的应付税款高于预期时,就会说还有其他商业支出没有记录入账。如果违规报税被国税局审计,那么省下的税钱瞬间变成一场噩梦。因为他们不仅要缴纳应付政府的税款,还要支付相应的罚款和利息,并可能会面临以欺诈而产生的刑事指控!

以下是一个真实案例:

在康涅狄格州,有一个拥有三家餐馆的32岁老板承认在2013至2015纳税年度期间隐瞒欺骗应付税款达$122,000美元。该商人被控协助和提交虚假税务申报表,认罪后最高可判处三年有期徒刑,最高罚款$250,000美元,并需将所欠税款完全归还国税局。

以下是这位商人的瞒税手法:

  • 把营业现金收入从收银柜台取走,并没有存入餐馆的银行账户。
  • 所聘记账员和会计师只能通过银行记录来计算业务总收入,被拿走而未存入银行账户的现金并没有申报给国税局。
  • 以现金方式支付员工部分或全部工资,并没有把这些现金支付的工资税如实申报缴纳。
  • 用收取的现金支付各项开支并且从不将这些收支入账,这样就减少向国税局申报的收入,从而减少需缴纳税款。

这位商人自以为避税的好方法,在被查到后,除了需要缴纳所欠税款外,还要额外支付罚款和超过$50,000美元的利息。

收取现金及用现金支付商业开支是合法的,但是必需要如实记录入账。如果您的朋友,甚至是专业的税务顾问告诉您只要是现金收支是可以不入账的,这样就可以减少应付税款。请您不要相信这是一个省税的好方法。每位专业的税务从业者都必须遵守财务部发表的第230公告(Treasury Department Circular),其中 10.21指出:“税务从业者是有责任告知客户,若在税表中提供不合规、错误或遗漏准确真实的数据,所带来严重的后果。”税务顾问有责任向客户解释税法法规并协助他们遵守法律条例。

所以您如果需要寻找专业的会计师、税务顾问来协助您处理有关税务问题,必须选择一位能以诚信为基础的税务从业者来帮助您避免招惹税务上的麻烦。其实最佳的节税方法就是按税法规定和标准来做税务规划,这样您就能“岁税不忧”。

潘汉高会计师事务所

若有任何意见和查询,欢迎致电801-559-7730.  邮件地址:lchan@phgcpas.com

Quick Action May Save You Hundreds of Dollars in Tax Savings

Prepaying Qualified Deductions in 2017 May Save You Hundreds of Dollars in Taxes!!

Now that the tax bill has passed both the house and the senate, it will soon be signed by the president and become the law of the land.  Now that we have information regarding the final version there are some things even middle-income taxpayers who itemize may consider doing before year end. 

The standard deductions have increased from $6,350 to $12,000 and $12,700 to $24,000 for single and joint filers, respectively.  By moving payments for medical bills, state and local income taxes, property taxes, and/or charitable contributions to 2017, you could save taxes.

For example, let’s assume you file jointly and currently have itemized deductions of $14,000 for 2017.  Because the standard deduction for 2017 is $12,700, you can use IRS Form Schedule A to increase your deductions by $1,300 ($14,000 – $12,700).  If you are in the 15% tax bracket, your federal tax savings is $195 ($1,300 x 15%).  Remember that in 2018 you will have a standard deduction of $24,000.  If your itemized deductions are under $24,000, it gives you no benefit to use Form Schedule A because it is to your advantage to take the standard deduction.  Let’s assume you had the ability to pay for charitable contributions and/or property taxes you would normally pay in 2018 in 2017.  In this example we will assume you prepaid $2,000 in charitable contributions and $1,500 in property taxes that you would have normally paid in 2018 by December 31, 2017.  By doing so, you would be able to save an additional $525 in federal income taxes in 2017.  Those same deductions would give you no benefit in 2018 because the standard deduction is being increased by $11,300.  Paying those amounts in 2018 would do nothing to decrease your tax liability.  By prepaying those charitable contributions and property taxes in 2017, you get a 15% return on your money (tax savings of $525).

So, if your itemized deductions for 2017 exceed the standard deduction but will not likely exceed the standard deduction of $24,000 in 2018, it could be to your advantage to prepay medical expenses, income and property taxes, and charitable contributions to enjoy a one-time tax savings that could mean hundreds of dollars of tax savings.

Five Things to Know about Estimated Taxes and Withholding

Five Things to Know about

Estimated Taxes and Withholding

(IRS Tax Tip 2017-70)

With 10 million taxpayers a year facing estimated tax penalties, the IRS offers some simple tips to help prevent a surprise at tax time.

People pay taxes on income through withholding on their paycheck or through estimated tax payments. Taxpayers who pay enough tax throughout the year can avoid a large tax bill and penalties when they file their return.

Taxpayers should make estimated tax payments if:

  • The tax withheld from their income does not cover their tax for the year.
  • They have income without withholdings. Some examples are interest, dividends, alimony, self-employment income, capital gains, prizes or awards.

Here are five actions taxpayers can take to avoid a large bill and estimated tax penalties when they file their return. They can:

  • Use Form 1040-ES. Individuals, sole proprietors, partners and S corporation shareholders can use  this form to figure estimated tax. This form helps someone calculate their expected income, taxes, deductions and credits for the year. They can then figure their estimated tax payments.  
  • Use the Withholding Calculator on IRS.gov. This tool helps users figure how much money their employer should withhold from their pay so they don’t have too much or too little tax withheld. The results from the calculator can also help them fill out their Form W-4. Taxpayers whose income isn’t paid evenly throughout the year, can check Publication 505 instead of the calculator.  
  • Have more tax withheld. Taxpayers with a regular paycheck can have more tax withheld from it. To do this, they must fill out a new Form W-4 and give it to their employer. This is a good option for taxpayers who participate in a sharing economy activity as a side job or part-time business.  
  • Use estimated payments to pay other taxes. Self-employed individuals can make estimated tax payments to pay both income tax and self-employment tax. Self-employment tax includes Social Security and Medicare.  
  • Use Form W-4P. Generally, pension and annuity plans withhold tax from retirees’ payments. Recipients of these payments can adjust their withholding using Form W-4P and give it to their payer.

Taxpayers Should Be Wary of Unsolicited Calls from the IRS

Taxpayers Should Be Wary of

Unsolicited Calls from the IRS

(IRS Tax Tip 2017-53)

Unsolicited Calls from the IRS

Taxpayers who get an unexpected or unsolicited phone call from the IRS should be wary – it’s probably a scam. Phone calls continue to be one of the most common ways that thieves try to get taxpayers to provide personal information. These scammers then use that information to gain access to the victim’s bank or other account. 

When a taxpayer answers the phone, it might be a recording or an actual person claiming to be from the IRS. Sometimes the scammer tells the taxpayer they owe money and must pay right away. They might also say the person has a refund waiting, and then they ask for bank account information over the phone.

Taxpayers should not take the bait and fall for this trick. Here are several tips that will help taxpayers avoid becoming a scam victim.

The real IRS will not:

  • Call to demand immediate payment
  • Call someone if they owe taxes without first sending a bill in the mail
  • Demand tax payment and not allow the taxpayer to question or appeal the amount owed
  • Require that someone pay their taxes a certain way, such as with a prepaid debit card
  • Ask for credit or debit card numbers over the phone
  • Threaten to bring in local police or other agencies to arrest a taxpayer who doesn’t pay
  • Threaten a lawsuit

Taxpayers who don’t owe taxes or who have no reason to think they do should follow these steps:

  • Use the Treasury Inspector General for Tax Administration’s IRS Impersonation Scam Reporting web page to report the incident.
  • Report it to the Federal Trade Commission with the FTC Complaint Assistant on FTC.gov. 
  • Taxpayers who think they might actually owe taxes should follow these steps:
  • Ask for a call back number and an employee badge number.
  • Call the IRS at 1-800-829-1040.

Every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are the Taxpayer Bill of Rights.

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How to Protect Yourself from the Equifax Data Breach

How to Protect Yourself from the Equifax Data Breach

The massive Equifax breach means consumers need to be on guard against data thieves. The credit-rating company hack earlier this year left approximately 143 million people’s personal information exposed and vulnerable. Here are the steps you take to help protect yourself in the wake of this event.

1)      Determine the exposure of your information: Go to Equifax”s website here and follow the instructions provided. You’ll need your Social Security number handy to complete the check and to tell if you”ve been impacted by the breach.

2)      Enroll for free credit monitoring: Regardless of exposure, consumers who have information under Equifax are entitled to free credit monitoring for one year, along with other monitoring and protective services. You can learn more about what is available here.

3)      Monitor your credit reports and accounts for unusual activity: Equifax, Experian and TransUnion, the three major credit reporting companies, are required to supply you with a credit report free of charge once every 12 months. Go to AnnualCreditReport.com and request them. Once you have the reports, monitor them to ensure there are no unauthorized accounts, incorrect personal information or credit inquiries you didn’t initiate. These are signs of fraud and you should follow up on them to ensure you weren’t the victim of identity theft.

4)      Consider implementing a credit freeze: If you see suspicious activity or are highly concerned, you can place a credit freeze to help deter an identity thief from opening new accounts in your name. Visit the consumer information section of the Federal Trade Commission website to learn more about credit freezes and how to activate one.

5)      Set up fraud alerts: Fraud alerts require potential creditors to verify your identity before they can open an account, issue a new card or increase a credit limit. Remember that fraud alerts won’t necessarily prevent identity theft, but they will make it much harder for someone with your personal information to use it.

 

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Healthcare Reform Update

Healthcare Reform Update

The Affordable Care Act (ACA) – also known as Obamacare – was not the perfect solution to the nation’s need for affordable healthcare, but it did increase the availability of quality, affordable healthcare for small businesses. Companies that had struggled for years – not only to find affordable health insurance for their workers but also to negotiate double-digit premium increases every year – were relieved to have choices and manageable premium rate increases.  Following Trump’s inauguration, Republican attempts to repeal the ACA without providing an alternative solution recreated the nightmare for many small firms. The administration’s ultimate failure to kill Obamacare ended up being a relief for many entrepreneurs and small business owners, but many issues remain unresolved. Healthcare Reform.

Business owners see the need for a bipartisan effort to develop realistic and affordable solutions, which would enable the small business sector to thrive and continue to fuel our nation’s economic growth. Here are some of the concerns that leaders have identified:

  • A recent report from the Congressional Budget Office on the fiscal impact of the Federal government yanking the cost-sharing subsidies that support the ACA marketplaces (a revision that would most likely occur if Republicans continue to gut the ACA) suggests that insurance premiums for small businesses would increase an average of 20 percent next year growing to a 25 percent increase by 2020. Although the Federal government is required by current laws to pay these subsidies, President Trump has indicated he wants to stop these subsidies by any means possible as part of his mission to dismantle the ACA. The CBO has calculated that the potential economic impact on the federal deficit could be as much as $194 billion, because a move like this would require consumers to obtain additional tax credits to offset their premium payments.
  • The elimination of cost-sharing subsidies would likely lead many insurance companies to exit the individual insurance market, and could disrupt the health insurance marketplace and leave small business owners with limited access to affordable health insurance options.
  • Small business advocates oppose the introduction of any measures that would result in separate risk pools for the healthy and the sick, and want to see measures to encourage businesses to establish association health plans.
  • Sector leaders want to see steps taken to expand Medicaid. ACA already had provided coverage to an additional 14 million previously uninsured Americans – a total that includes an estimated 2 million small business employees.
  • Entrepreneurs want to see healthcare tax equity measures in place for the self-employed to allow them to deduct healthcare expenses from FICA tax obligations.

The small business segment is hailed as the champion of job-creation in the United States. If it is to continue in this vital role, lawmakers must expand efforts to do more to reform healthcare insurance.

Reimagining Entire Industries with Artificial Intelligence

Artificial Intelligence

About a year ago, at an Artificial Intelligence (AI) Conference in Cambridge in the U.K., Dr. Stephen Hawking noted that, “Success in creating AI could be the biggest event in the history of our civilization … either the best or the worst thing, ever to happen to humanity. We do not yet know which.”

The question remains unanswered, even as the AI sector continues to boom. Most of the major advances in AI that we are experiencing originated from research centers and startups – many based in the U.K. It is interesting to note that major U.S. technology leaders like Microsoft, Google and Twitter have entered this arena by acquiring some of the U.K.’s brightest AI stars.

Simply stated, AI is changing many of the ways businesses engage with their customers – whether with “chatbots” providing customer service, or by automated virtual assistants, or using technology to power self-driving automobiles. The advances in this sector are transforming operations at businesses of all sizes. This burgeoning industry has made major strides in helping businesses – especially small businesses – operate more effectively with social media. It used to be that analyzing social dialogue to identify and prioritize consumer targets was a tedious and lengthy process. With an AI software interface, the job takes minutes rather than days.

The blossoming of the AI sector has produced tools that are both super-efficient and inexpensive, offering major benefits to many small businesses. Now, routine customer service, sales and human resource tasks can be automated. As AI takes off, we can expect to see it making major inroads into areas of specific expertise, such as law and medical diagnostics. Expect to see virtual lawyers offer cheaper solutions to traditional legal practitioners. These bots can search law files and resolve complex immigration or employment law questions in minutes – research tasks that would have taken a paralegal many billable hours. Likewise, medical diagnostic AI tools can make assessments faster and often with a greater degree of accuracy than medical professionals.

Cybersecurity is another area where expectations run high for AI applications. In the never-ending battle to counter and defeat complex computer hacking schemes, machine learning is expected to continue to play an important role in combating increasingly sophisticated plots and uncovering potential vulnerabilities before cybercrooks strike.

Ethical Concerns

There are many issues – both ethical and legislative – that will need to be resolved as AI continues to grow and expand throughout the global business world. Some industry observers worry that AI will make many occupations in IT obsolete; others believe that AI will create new jobs by freeing human beings from routine tasks to allow them to focus on the “higher value” cognitive skills that currently elude chatbots and virtual assistants. Some find the proliferation of profiling AI tools – programs that are used to prioritize sales prospects or job candidates based on their LinkedIn profiles – unsettling. Champions of such assessment tools believe they merely speed up the interactions that take place between people, and do so with much less error and bias.

Whether we like it or not, AI is here to stay and is likely to be a game-changer in the way we do business in the near future.

Avoid IRS Trouble by Reporting Bitcoin Cash

Avoid IRS Trouble by Reporting Bitcoin Cash

IRS guidance on the tax treatment of cryptocurrencies already exists. Right now, the IRS considers cryptocurrencies to be “intangible assets.” As a result, they are subject to capital asset treatment. However, recent developments complicate matters.

On Aug. 1, Bitcoin split into two separate cryptocurrencies – Bitcoin and Bitcoin Cash. The currently issued guidance does not address cryptocurrency splits, also known as fork transactions.

How to Report Your Bitcoin Cash

At the split, Bitcoin Cash’s initial price was set at 9.5 percent of Bitcoin’s unit price of $2,801 – or $266. Holders of Bitcoin received one Bitcoin Cash unit for every Bitcoin they held at the time of the split, making Bitcoin Cash a separate financial instrument. As a result, this makes it taxable – so recipients of Bitcoin Cash should include the transaction on their 2017 income tax returns.

Since a cryptocurrency is not technically a security or a debt-like interest, the transaction is considered neither a dividend nor interest income. So how should you report the transaction? While there is no clear-cut guidance as of yet, the best place to report the transaction is as “Other Income” on Form 1040, since this is where you can report transactions that do not neatly fit anywhere else.

Another reporting alternative is to use Form 8949, where you report the sale of capital assets. If you use this form you would report $266 per unit and offset it with a corresponding 9.5 percent of your Bitcoin cost basis. By transferring a proportional amount of your basis from the original investment you will reduce your taxable income. This reporting method also has the advantage of allowing you to offset the capital gains with capital losses and carryovers. Beware however, that this method is less likely to be accepted by the IRS.

What to Do if You Sold Your Bitcoin Cash

Selling some or all of your Bitcoin Cash means you’ll need to treat it as a capital gain and report it via Form 8949. If you sell any Bitcoin Cash, make sure you report your receipt as “Other Income” per above, since this will then serve as your basis for offsetting your sale. Your selling price would be whatever value you sold it for, less any commissions or fees on the sale. Also, remember that for your 2017 tax return filing, your holding period would start from the split date of Aug. 1, and therefore be short-term.

Why Cryptocurrency Splits Are Not Tax-Free Exchanges

Some will argue that cryptocurrency splits such as Bitcoin Cash qualify as tax-free exchanges; however, this view is unlikely to hold up to IRS scrutiny since none of the corporate reorganization non-recognition events under Section 368 apply. Bitcoin Cash is economically different from Bitcoin, and therefore should be viewed as a new category of financial instrument.

Beware the IRS

Over the past several years, many investors sold cryptocurrencies, including Bitcoin, but did not report any taxable income from the transactions, while others used Section 1031 like-kind exchange laws to postpone taxation. The IRS is none too pleased by all of this and is taking action.

The IRS estimates that hundreds of thousands of U.S. taxpayers failed to report cryptocurrency income sales over the past few years. Combined with the recent meteoric rise in prices, the IRS is hungry for the potential to collect billions in interest, penalties and back taxes.

Recently for example, the IRS summoned a large cryptocurrency exchange (Coinbase) to hand over its customer lists. Subsequently, they reached an agreement to disclose only transactions in excess of $20,000; however, it is clear from this case that the IRS is going to get aggressive on the matter.

Cryptocurrency investors need to be aware of the evolving nature of taxation in this space in order to avoid IRS problems. This is an emerging issue and one on which you can bet the IRS is not going to stand down. As always, consult a tax professional for details about your particular situation.