blockchain

WAKE UP WITH REM: Attack of the one-hit wonders

attack of the one-hit wonders.png

Today is National One-Hit Wonder Day, and we’re celebrating by kung fu fighting and doing the Safety Dance. But enough tubthumping—we’ve got plenty of tax news to share.

$77 million is missing. Kevin Garnett has filed a federal malpractice lawsuit against an accountant and his firm, alleging they helped a wealth manager steal $77 million from the retired Minnesota Timberwolves and Boston Celtics star. [NBC Sports]

Charitable giving: how to save tax deductions despite new law. A feasible workaround for the new SALT deduction limitation? [Forbes]

Think you know your one-hit wonders? Take the REM Cycle quiz challenge here.

 
 

Dubai Department of Finance launches blockchain-based payment system for UAE government. The new platform, called “Payment Reconciliation and Settlement,” was officially launched Sunday, September 23. It is reportedly geared towards government entities, such as the Dubai Police, Roads and Transport Authority (RTA), Dubai Health Authority (DHA), and others. [Cointelegraph]

 
 

The Wake-Up Call is The REM Cycle’s biweekly compilation of newsworthy articles pertaining to taxation, accounting, and life in general. Got a hot tip? Email us at REMCycle@rem-co.com.

WAKE UP WITH REM: Tesla, blockchain to control use of consumer data, and a wombat who just wants to play

 
 

Annnnnd we’re back, with tax withholding, pot-smoking CEOs, IBM Blockchain, and a fat little wombat who just wants to play.

Millions of taxpayers could wind up owing for 2018. Regular “Wake Up” readers may recall previous articles on this topic. The takeaway? Review your current withholding and make any necessary adjustments as soon as possible. [CBS News]

Tesla’s new Chief Accounting Officer David Morton resigns just weeks after joining the company. Things have been weird lately for the electric vehicle maker. Iconoclastic founder and CEO Elon Musk tweeted plans to take Tesla off the public stock market, only to reverse his plan days later. (The SEC is investigating both announcements.) Musk has a documented history of abusing the prescription drug Ambien and appeared on Joe Rogan’s webcast while smoking what appeared to be a joint. So we kind of get why Morton didn’t want to stick around. [New York Times]

“Should I pay my taxes with a credit card?” Depends on your situation and the type of card you use. [ThePointsGuy.com]

IBM to use blockchain to help consumers control the use of their personal data. In an attempt to help stem the current onslaught of data breaches and cyberattacks, the global technology firm has announced that it is providing the IBM Blockchain Platform to “enable consumers to exercise control over the use of their personal data.” IBM was an early adopter of blockchain as a means of creating an infrastructure for processing millions of transactions per second. [Venture Beat]

This week’s videos

Geni Whitehouse talks about "Leading from Within: The Basset Hound versus The Nun" as part of the TEDxNapaValley "Empowering Leadership at Every Level" event. Geni Whitehouse, CPA.CITP, CSPM is the is the author of "How to Make a Boring Subject Interesting : 52 ways even a nerd can be heard".

During a cool morning shower by a brave ranger, this chubby Wombat (26 kilos!!) is in for either an innocent play or a deadly attack! First time we've ever seen a jumping wombat, anyway!

The Wake-Up Call is The REM Cycle’s biweekly compilation of newsworthy articles pertaining to taxation, accounting, and life in general. Got a hot tip? Email us at REMCycle@rem-co.com.

WAKE UP WITH REM: First African-American female CPA, medical marijuana tax revenue, and budget surpluses

Mary T. Washington Wylie ( source )

Mary T. Washington Wylie (source)

We’re excited to share the news that Mary T. Washington Wylie, America’s first black female CPA, is being publicly honored by the City of Chicago. Also, a heads-up regarding state budget surpluses that don’t get shared with municipalities, tax revenue for medical marijuana, and “blockchain blockchain blockchain.”

Illinois CPA Society honors first African-American female CPA. The City of Chicago and the Illinois CPA Society are honoring Mary T. Washington Wylie (1906 – 2005), the first African-American woman in the U.S. to become a certified public accountant. [Accounting Today]

Cryptocurrency mining at college campuses results in huge electric bills for schools. Bitcoin hijinks are taking place on campus. [CNBC]

“Blockchain blockchain blockchain.” This short talk was given at Crypto 2018 in Santa Barbara, California, which is a conference for mathematicians and computer scientists to discuss new findings in the world of cryptography — the study of how to encrypt and decode data so unwanted parties can't access it. [Business Insider UK]

Show us the money! 39 out of 50 states currently have budget surpluses, often amounting to several billion dollars. All of which is great, but municipal governments aren’t receiving any of the wealth. Local governments are pressured to keep taxes low, but they also need to pay for infrastructure, purchase new police vehicles, and give municipal employees COLA raises. So where’s the funding from the states? [Forbes]

$1.8 million in medical marijuana tax revenue. Montana’s initial 4% tax on marijuana providers’ gross revenues resulted in nearly $2 million in just over a year. [San Francisco Chronicle]

This week's videos

This panel discussion explores the key skills and qualities that professional accountants need to succeed in their career, now and in the future - from first qualifying right through to the boardroom.

Out of coffee? Nooooo!!!

Wake up with REM: Blockchain, tax fraud, and... Cheech & Chong?

Richard "Cheech" Marin and Tommy Chong.  Source

Richard "Cheech" Marin and Tommy Chong. Source

Um, wow. The last few days have been pretty exciting: a new system promises to change the face of bookkeeping, Apple fails to avoid paying taxes in Ireland, and marijuana entrepreneurs find themselves holding the bag (literally). We’re always looking for ways to help our readers with their professional development, so we also have some conversational advice to bring your communication skills to the next level, as well as an emotional support velociraptor.

You’re welcome.

An Ohio tax preparer was acquitted on tax fraud charges after almost five years of investigation by the IRS, including a sting operation in which an undercover agent failed to get the defendant to include an erroneous Child Tax Credit claim. [Accounting Today]

10 ways to have a better conversation:
When your job hinges on how well you talk to people, you learn a lot about how to have conversations - and that most of us don't converse very well.

Artificial intelligence is coming to a ledger near you! PeaCounts, a blockchain-enabled bookkeeping system, is expected to launch this summer. “Business owners will no longer require a dual-entry system with manual reconciliations,” said PeaCounts co-founder Crystal Stranger, in a statement. “Combined with machine learning, PeaCounts has developed a system that makes manual entry a thing of the past.” [Accounting Today

Do you itemize your deductions? This might be a good time for a checkup on your taxes. [Forbes]

In our last Wake Up, we mentioned AllianceBernstein is moving to Nashville for local tax incentives. You’ll never guess who’s moving into their old building… [Globest.com]

Ireland takes a big bite out of Apple as the tech giant pays Ireland its first tranche of disputed taxes. [Reuters]

Cheech and Chong they’re not—marijuana entrepreneurs face unusual challenges in paying their taxes. Federal laws necessitate bags of cash and stealthy deliveries: this is how pot start-ups pay taxes. [New York Times]

 

My dinosaur is a service animal:
Just because it's a Velociraptor with knives for teeth doesn't mean it's not my best friend.

 

The Wake-Up Call is The REM Cycle’s biweekly compilation of newsworthy articles pertaining to taxation, accounting, and life in general. Got a hot tip? Email us at REMCycle@rem-co.com.

Blockchain: the future of accounting?

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Valuation of cryptocurrencies has fluctuated in recent months, drawing interest from every type of investor. While the markets remain volatile and uncertain, we here at REM believe that blockchain technology will play a significant role in the future of accounting. The concepts we first introduced in Blockchain 101 are here again in an infographic provided by the Bachelors of Science in Accounting Program at Maryville University Online, which demonstrates how blockchain can and will change some of the fundamentals of the accounting profession. We have taken part in many information sessions regarding the details of these key areas to blockchain technology and how it can impact our clients and the way we do business in the near future.

The key concepts we particularly focus on as auditors (and you should, too, with respect to blockchain) are security, trust, and verifiability. We ask:

  • How is the blockchain built?
  • How is the underlying data encrypted and how can we verify the integrity of the encryption?
  • Who are the users and who has the ability to post transactions to the blockchain network?
  • What is being transacted?
  • Who validates transactions and maintains records of the ledger?
  • What access points do we have to the ledger?
  • Do we have access to multiple points of verification?
  • Is a trusted third party involved in the validation of transactions and ledger maintenance, or is it a trustless application with distributed functionality?

In other words, a fundamental concern is whether the blockchain is centralized and vulnerable to record alteration, or whether the validation/maintenance functions are decentralized and distributed across a wide network of participants. This essentially provides an unalterable/immutable/censorship-resistant ledger with network consensus.

At REM, our Think Lab is working diligently to develop our knowledge base and identify best practices in embracing and utilizing this powerful tool. Feel free to contact us with your questions and your concerns about how blockchain might improve your business.


Click here for a quick primer on blockchain terminology.

Source (For enlarged version, click here.)

Wake-Up Call - Don't hit the snooze!

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Posted by REM Cycle Staff

Welcome back to another edition of The REM Cycle's Wake-Up Call, our biweekly feature where we bring you a variety current tax-related issues. Let's get it started, shall we?

As the Super Bowl approaches, it’s time to examine our priorities… Specifically, how will the new tax structure affect your ability to get reasonably-priced craft beer? How the Tax Cuts and Jobs Act could impact small and independent craft brewers [Brewers’ Association]

A young Swiss banker allegedly abetted dozens of Americans in hiding millions of dollars from the IRS between 2009 and 2013 (hey, take advantage of offshore voluntary disclosure programs, guys!). Here’s what happened when he was extradited and brought to trial [New York Times]

Why is tax day April 17 this year? Tax returns for 2017 are due a couple days later than usual this year. Here’s why. [MSN.com]

SALT news for New York taxpayers: Representatives Nita Lowey (D-NY) and Peter King (R-NY) introduced a bipartisan piece of legislation last week to “restore the full state and local tax (SALT) deduction, which is limited by the new tax law that President Trump signed last month.” NY lawmakers offer bill to restore state and local tax deduction [The Hill]

How does blockchain technology work? Political scientist and blockchain researcher Bettina Warburg was challenged to explain the central concepts of blockchain to five different people: a child, a teen, a college student, a grad student, and a blockchain expert. Blockchain expert explains one concept in 5 levels of difficulty [WIRED-YouTube]

Meet Angel, a kitten who does not like to file her tax returns. Can you blame her? [YouTube]

That’s all for this week. Got a hot tip? Email us at REMCycle@rem-co.com and tell us all about it.

Blockchain 101

Thousands of years ago, ancient Mesopotamians first developed accounting practices for the purpose of keeping a written record of money and barter transactions. In the intervening millennia, advances in technology and theory has allowed accounting to evolve into an art and a science. The most recent “upgrade” has enabled a revolutionary overhaul of accounting as we know it.

In 2008, an unknown person (or persons) using the pseudonym Satoshi Nakamoto created the first digital currency, Bitcoin. Nakamoto’s groundbreaking whitepaper Bitcoin: A Peer-to-Peer Electronic Cash System paved the way for the establishment of a multi-billion dollar[i] global industry via a distributed database known as a blockchain.

A blockchain is a decentralized public ledger system that stores digital information chronologically in the form of “blocks.” These blocks are inherently linked (“chained”) to one another, and each block plays a role in facilitating anonymous and secure transactions between users, while providing monetary rewards to those who help maintain the public ledger. This chain of blocks contains a record of every single transaction ever in the history of a given cryptocurrency (“coin”). Cryptocurrency coins are virtual assets created by the process of “mining,” which is essentially the process of a computer algorithm solving a complex mathematical equation to validate a single block of the blockchain (think of a batch of transactions), and subsequently broadcasting this record to all other computers connected to this global network (each computer being a “node”). This process creates a single distributed public ledger across thousands of nodes around the globe. If a computer is able to solve the complex equation (via “cryptography”) and prove to the network that its equation validates a block (“proof of work”), the computer’s operator is compensated with a combination of a per-block reward of newly minted coins--“block reward”--and a small percentage of the transactions contained within the block--the “mining fee.” The newly-minted miner rewards tend to decrease over time on a schedule as the monetary value of the coin tends to increase, giving cryptocurrencies an economically deflationary appeal. The monetary value of a coin stems from the active trading between users on public coin exchanges. Technically, cryptocurrency mining creates inflation; however, using Bitcoin as an example, the inflation is controlled. For example, the mining reward for successfully “solving” the first ever block started at 50 Bitcoins, and at every 210,000 blocks (approximately every four years) the mining reward is cut by 50%, up to a total maximum supply around 21,000,000 Bitcoin. As of July 31, 2017, we are currently in block #478446, and the mining reward today is 12.5 Bitcoin (equivalent to approximately $35,000).

The revolutionary aspect of blockchain technology rests in the triple entry accounting concept. Triple entry accounting tweaks the double entry by including a cryptographic seal by a third entry. Today, a seller and a buyer maintain two separate sets of accounting records. A seller books a debit to account for cash received, while a buyer books a credit for cash spent in the same transaction. This is where the blockchain comes in. Rather than these entries occurring separately in independent sets of books, they occur in the form of a transfer between “wallet” addresses within the same distributed public ledger. This process creates an interlocking system of enduring accounting records. Because the entries are distributed and cryptographically sealed, falsifying them in a credible way or destroying them to conceal activity is practically impossible. How it is impossible, well… keep reading!

 
 

Transactions (i.e., transfers of coins from one party to the next) are recorded in blocks on the blockchain. Depending on the coin in question, the size of a block is usually fixed to either the total number of kilobytes or megabytes of transaction data contained within (which is merely a bunch of alpha-numeric characters), or simply a predetermined length of time containing all transactions falling within that time span. Today, there are hundreds of cryptocurrency coins, each with their own unique blockchain and their own unique characteristics as defined within the open-sourced codes of their respective mutually agreed upon distributed algorithms. The total number of cryptocurrencies increases daily.

To visualize a blockchain, imagine a hierarchal grouping of folders on a hard drive. Each block, or sub-folder, within the root “Blockchain data” folder essentially contains a batch of time-stamped transactions representing every transaction of a given cryptocoin over a small span of time, from numerous anonymous parties to the next anonymous parties. All of this data is publicly available and searchable either by block number, transaction ID, or wallet address. Using the example above, the Block002 sub-folder contains a reference to Block001’s encrypted validation code. The encrypted code for Block001 must be incorporated into the encryption of the Block002 validation code by the miner validating the block, along with the encryption of every transaction within Block002, for the block to be considered validated (thus creating a running chain of encryption and validation). This chronological validation process computed by the miners proves not only the validity of the Block002 and all its contents, but also every single block preceding it. Throughout the validation process, miners stamp on their digital signatures documenting their witness and confirmation of the activity on Blockchain. It’s important to note that the miner validation for each block is competitive around the globe. This is due to the high monetary reward for successfully solving the equation. This intense competition renders it highly unlikely for the same individual to validate the two or more times in a row.

This is how the blocks become a chain. Because the system is managed by a peer-to-peer network collectively adhering to a validation protocol, the system is inherently resistant to modification of the data. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks and a collusion of the network majority. Blockchains can be used to facilitate any financial transaction between multiple parties—not just cryptocurrencies, but transactions in real estate, ordinary property, and financial securities.

What makes a blockchain truly valuable, especially from an accounting perspective, is that each block has a unique identifier. In any given transaction, the unique identification of each party involved is auditable. This unique identification system creates a transparent and verifiable path documenting the historical transfer of value from one individual wallet to the next. Similar to the process of an auditor confirming a cash balance with the bank directly, an accountant could verify a transaction or the balance of a wallet across hundreds of independent, yet identical ledgers.

 

Curious to know more? Click here for a quick primer on blockchain terminology.

 

Due to the blockchain concept’s relative novelty, authoritative regulatory bodies have yet to create blockchain policies specific to the industries they operate in. The IRS’s position on virtual currency (cryptocurrency) in their IRB 2014-16 in April 2014 maintains that for federal tax purposes, virtual currency is treated as property. In June 2017, the Chamber of Digital Commerce petitioned FASB to determine the appropriate recognition, measurement, presentation, and disclosure for digital currencies. This petition considered four different accounting topic methods under which digital currencies could fall (ASC section’s 305, 330, 350 and 825), but no guidance to define exactly what a digital currency is. In July of this year, Accounting Today discussed key foundations that need to be in place before fully adopting blockchain to meet business needs. Among them are standards to be set by the auditors who must rely on the system as audit evidence.

Ethereum is the second largest cryptocoin by market capitalization, but it’s much more than a digital currency. Ethereum helped organize the world’s largest open-source blockchain initiative, the Enterprise Ethereum Alliance. Its purpose is to build a clear roadmap for businesses to learn and leverage the technology and to provide governance for enterprise accountability, features, and licensing models. One of the systems they have helped implement is the smart contract.

A smart contract follows the same principles as a cryptocurrency transaction, but you can layer condition-based code to facilitate, verify, or enforce the negotiation or performance of a variety of financial and non-financial transactions. This effectively and efficiently eliminates a lot of the paperwork and middle-man responsibilities in the world today. Many Fortune 500 companies have already invested billions of dollars in this technology and are members of this organization (e.g., J.P. Morgan, Intel, UBS, Microsoft, ING) who recognize the impact this technology will have on their specific industries and the marketplace. Deloitte and PwC (and now Raich Ende Malter) have started ThinkLab groups in their practices and are working diligently in developing strategies to employ using blockchain.

What does all this mean for us as auditors and tax preparers? Stay tuned—we’ll explain in a future post.

Are you involved in cryptocurrencies? Thinking of getting involved? Contact your trusted advisor, or talk to us at REM.

Special thanks to The Geek Group of Grand Rapids, Michigan, for vetting.