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BRIEFLY:
IRS 2007 compliance and enforcement report for business
In the business arena, the IRS (Internal Revenue Service) continued efforts to review more returns of flow-through entities — partnerships and S Corporations. The IRS business numbers reflect more emphasis in the growing area of these flow-through returns. While large corporate audits are down slightly, IRS has increased their focus on mid-market corporations — those with assets between $10 million and $50 million dollars. The IRS enforcement budget in 2007 was similar to the budget in 2006, and in times of flat budgets, the agency cannot increase activity across the board but must address the areas where there is growth and potential risk. Findings include:
- Audits of S Corporations increased to 17,681 during 2007, up 26 percent from the prior year's total of 13,984.
- Audits of partnerships increased to 12,195 during 2007, up almost 25 percent from the prior year's total of 9,777.
- Audits of mid-market corporations increased to 4,473, up 6 percent from last year's total of 4,218.
- Audits of businesses in general rose to 59,516, an increase of almost 14 percent from the prior year's total of 52,223.
- Although the audits of large corporations dipped slightly in 2007 to 9,644 audits, the number of audits is up 14 percent from the fiscal year 2002 level.
IMA BUSINESS DAY 2008
Where Illinois government meets Illinois business - face to face
Wednesday, May 7, 2008 * Springfield
Sign up today at http://www.ima-net.org/bizday08.cfm
Business Day offers the opportunity for you to meet with your elected officials to help drive home our message of job growth and prosperity. With your participation, legislators can more completely understand the impact of their actions on the employers of Illinois.
Luncheon: 12:00 noon - 2:00 pm
Abraham Lincoln Hotel & Conference Center
701 East Adams, Springfield
Lobby Your Legislators 2:30 - 5:00 pm
Legislative Reception: 5:30-8:30 pm
Under the tent at IMA Headquarters
220 East Adams, Springfield
An invitation to participate in RSM McGladrey's 2008 Industry Survey . . .
The Illinois Manufacturers' Association has arranged with RSM McGladrey an exciting program to provide you with industry comparisons by participating in their third annual 2008 Manufacturing and Wholesale Distribution National Survey.
By completing the survey, you will receive from McGladrey a customized report detailing your responses versus the national averages, a national survey report and an invitation to a June results webinar. The association will receive an aggregation of all member responses versus the national averages and a results presentation by McGladrey at one of our upcoming meetings. This is a significant value the association has arranged for you at no charge.
Add your voice and make a difference
There is a lot more to this survey than interesting statistics — by adding your voice, you're helping your government and your association to help you. This is a survey with an impact.
U.S. policymakers and industry trade associations have come to rely on the RSM McGladrey survey to benchmark and ascertain the current health and competitive well-being of U.S. industry. Findings from last year's survey were presented to the White House Council of Economic Advisors, key congressional leaders, the National Governors Association, the U.S. Departments of Commerce and Labor and others.
Besides the IMA, several other trade associations are actively encouraging members to participate in the 2008 survey in order to benchmark trends they can report back to members.
Help your company, help your industry and help a child
One final — and very worthwhile — reason to participate: For every completed survey, RSM McGladrey will donate $5 to Alex's Lemonade Stand Foundation. ALSF is an organization dedicated to pediatric cancer research. You can learn more at www.alexslemonade.org.
To go to the survey click the following link:
http://guest.cvent.com/SURVEYS/Welcome.aspx?s=72d37d6b-eabe-4126-8717-158bf59368aa
On the very last question of the survey, make sure to
check the box for Illinois Manufacturers' Association.
The survey takes approximately 20 minutes to complete. Responses are due by April 18, 2008. Executives who respond by April 18th will receive a copy of Forging New Partnerships: How to Thrive in Today's Global Value Chain, a report developed jointly by RSM McGladrey, The Manufacturing Institute and the National Association of Manufacturers. Forging New Partnerships outlines strategies manufacturers are exploiting to succeed in an intensely global market.
On the very last question of the survey, make sure to check the box for Illinois Manufacturers' Association.
RSM McGladrey is a leading professional services firm providing accounting, tax and business consulting to midsized companies.
Tax Freedom Day® to arrive April 23 in 2008
America will work three days less to pay taxes in 2008 than in 2007
Tax Freedom Day® will fall on April 23 in 2008, according to the Tax Foundation's annual calculation using the latest government data on income and taxes.
That's three days earlier than in 2007. Stimulus rebates and a projection of slow growth in 2008 are the principal reasons for the earlier celebration.
The study is Tax Foundation Special Report No. 160, "America Celebrates Tax Freedom Day®," by Tax Foundation senior economist Gerald Prante and Tax Foundation president Scott Hodge.
In addition to announcing the nation's Tax Freedom Day®, the new study compares tax payments to other major consumer expenditures, traces the course of America's tax burden since 1900, examines the composition of today's tax burden by type of tax, and calculates a Tax Freedom Day® for each state. Illinois ranks 16th out of the 50 states in number of days worked to pay taxes, and coincides with the national tax freedom date of April 23.
"Government continues to dominate the American taxpayer's budget," said Tax Foundation president Scott Hodge. "Americans will still spend more on taxes in 2008 than they will spend on food, clothing and housing combined."
In 2008, Americans will work 74 days to afford their federal taxes and 39 more days to pay state and local taxes. Meanwhile, buying food requires 35 days of work, clothing 13 days, and housing 60 days. Other major categories are health and medical care (50 days), transportation (29 days), and recreation (21 days).
"Tax freedom has been a see-saw affair in recent years," said Tax Foundation senior economist Gerald Prante. "In 2000, Tax Freedom Day® was celebrated May 3, the latest date ever. Then a string of tax cuts between 2001 and 2003 pushed Tax Freedom Day® up by more than two weeks, so that it fell on April 16 in 2003 and April 17 in 2004. For the next three years, incomes and tax collections soared, pushing Tax Freedom Day® back to April 26 in 2007. Now the stimulus rebates and a projected slowing of income growth have made Tax Freedom Day® come three days earlier, on April 23."
Five major categories of tax dominate the tax burden. Individual income taxes, both federal and state, require 42 days' work. Payroll taxes take another 28 days' work. Sales and excise taxes, mostly state and local, take 16 days to pay off. Corporate income taxes take 13 days, and property taxes take 12.
Benefits of dollar's rebalancing begin to emerge
Between 1995 and 2002, the U.S. dollar seemed to be riding a permanent updraft, as its value against other currencies soared. While U.S. consumers enjoyed the lower-priced imports that were one side effect of the superheated dollar, U.S. workers and businesses paid full price as the higher cost of U.S. goods made them harder to sell — here and abroad — and more jobs were threatened or lost. Meanwhile, the nation's trade deficit exploded, reaching levels that most economists agreed were unsustainable, raising fears of a sudden and catastrophic dollar free-fall.
Now that the dollar's value has started down the path to more sustainable levels, beginning with the euro and the Canadian dollar, there are some early signs that the trade deficit, too, may be starting to come back to earth. Last week the Bureau of Economic Analysis reported that the nation's current account deficit, the broadest measure of foreign trade, fell nine percent last year, from $811.5 billion in 2006 to $738.6 billion in 2007. This good news is reflected in a steady rise in U.S. exports, which offset the effects of higher fuel prices on U.S. imports.
In two new analyses published on March 26, the Economic Policy Institute's senior international economist, Robert Scott, parses the latest data and explains why, for further progress on taming our trade debt, all eyes are now turning to Asia. The Economic Policy Institute's International Picture shows that the combination of progress on revaluing the dollar and growth abroad has begun to level international playing fields. The Economic Snapshot, which compares the dollar's value against the currencies of its trading partners, shows that further gains on the trade deficit will depend on convincing Asian nations, especially China, to end policies that are continuing to keep the dollar artificially high against their currencies.
Source: The Economic Policy Institute, an independent, non-profit, non-partisan research institute — or "think tank" — based in Washington, D.C. EPI researches the impact of economic trends and policies on working people in the United States and around the world. For more information visit EPI online at
http://www.epi.org.
Very small manufacturers more affected by global conditions
Currency exchange rate pressures lead to an increase in the exit rates very small manufacturers (fewer than 20 employees), finds a report released March 27 by the Office of Advocacy of the U.S. Small Business Administration.
"Interestingly, small manufacturers in high-tech industries are more insulated from international competitive pressures than those in other sectors," said Robert Feinberg, professor at American University and author of the paper.
The study, The Impact of International Competition on Small-Firm Exit in U.S. Manufacturing, focused on 1990 to 2004. The author noted little variation in the overall exit rate of small manufacturers over time, but a reasonable amount of variation across firm size and industry. Factors affecting exit across firm sizes included overall economic activity, labor costs, and whether the firm's industry sector produced consumer goods. Changes in an industry's import share produced mixed results across time periods and firm sizes.
For more information, visit the Office of Advocacy website at http://www.sba.gov/advo. Download the report at
http://www.sba.gov/advo/research/rs320tot.pdf.
The Office of Advocacy, the "small business watchdog" of the federal government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President.
Illinois' High Impact Business (HIB) program
The Illinois Department of Revenue's HIB program is designed to encourage large-scale economic development activities by providing tax incentives (similar to those offered within an enterprise zone) to companies that propose to make a substantial capital investment in operations and will create or retain an above average number of jobs. Businesses may qualify for: investment tax credits, a state sales tax exemption on building materials, an exemption from state sales tax on utilities, a state sales tax exemption on purchases of personal property used or consumed in the manufacturing process or in the operation of a pollution control facility. The project must involve a minimum of $12 million investment causing the creation of 500 full-time jobs or an investment of $30 million causing the retention of 1500 full-time jobs. The investment must take place at a designated location in Illinois outside of an Enterprise Zone. The program has been expanded to include qualified new electric generating facilities, production operations at a new coal mine or, a new or upgraded transmission facility that supports the creation of 150 Illinois coal-mining jobs, or a newly constructed gasification facility as a "Coal/Energy High Impact Businesses."
A qualifying High Impact Business may be eligible to receive the following: sales tax exemption on building materials, an investment tax credit, an exemption from state gas and electric tax, and a state sales tax exemption on personal property used or consumed in the manufacturing process or in the operation of a pollution control facility.
The Coal/Energy High Impact Business may qualify for sales tax exemption on building materials, an investment tax credit, an exemption from state gas tax on utilities and excise tax on electricity.
A designated High Impact Business located in a foreign trade zone or sub-zone is eligible for additional incentives including an income tax credit for a minimum of five new eligible hires, an exemption from municipal tax on utilities, an exemption from the telecommunications excise tax, and an income tax deduction for financial institutions receiving interest from loans secured by property eligible for the High Impact Business Investment Tax Credit.
For further information visit the Illinois Department of Commerce & Economic Opportunity, Bureau of Business Development online at
http://www.commerce.state.il.us/dceo.
RSM McGladrey, Axiom Solutions sign agreement to offer companies enhanced R&D Tax Credit services
Alliance helps middle market companies boost after-tax returns on R&D investments
In a joint effort to help more companies increase their after-tax return on their R&D investment and to provide enhanced R&D tax services to companies, RSM McGladrey, Inc., and Axiom Solutions, LLP, have announced an agreement to work together to provide Research & Development Tax Credit services to companies in the upper end of the middle market.
The R&D Tax Credit program, an economic investment incentive, has been in place since 1981 and recognizes investment that leads to the development of new, more efficient products and technological services. The R&D credit has become increasingly attractive to a broad range of businesses, primarily in the manufacturing, technology and engineering industries. The credit applies not only to product development efforts, but also to manufacturing process improvements and certain types of software development.
In 2007, in an effort to close the tax gap, the IRS increased the scrutiny of Large and Medium Sized Businesses (LMSB) R&D Tax claims, declaring the claims as a Tier 1 Issue. As a result, RSM McGladrey and Axiom Solutions have each strengthened their offerings to an even higher level of precision and focus in documenting and substantiating the IRS areas of interest.
"This is a very attractive strategic alliance for RSM McGladrey." said Tom Windram, national R&D tax practice leader for RSM McGladrey. "We are proud to work with Axiom, which has developed an excellent R&D Tax Credit practice very similar in philosophy to our own."
The RSM McGladrey R&D team is composed of more than 60 R&D professional specialists, including accountants, tax attorneys, consultants and former IRS specialists with significant experience preparing R&D claims and supporting documentation. Axiom's R&D business is comprised of more than 45 accountants, engineers and tax attorneys from a variety of industries.
RSM McGladrey is a leading professional services firm providing accounting, tax and business consulting.
Axiom Solutions is one of the nation's leading professional services firms specializing in R&D Tax Credits for medium-sized companies.
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