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NEWS HIGHLIGHTS FOR THURSDAY - 2.25.16

By:
Maya Lindsay
Published Date:
Feb 25, 2016

Banks Brace for Potential Energy Losses

Wall Street Journal

Banks are admitting what investors have long suspected: The energy bust is likely to result in major losses. Wells Fargo & Co. set aside $1.2 billion in reserves for potential losses tied to oil and gas loans, according to a Wednesday securities filing. About 10% of Wells Fargo’s total loan-loss reserves are related to oil and gas, even though those loans account for about 2% of its overall loan portfolio, the filing said. The bank’s nonaccrual oil and gas loans—nonperforming loans on which the bank isn’t sure it will collect—totaled $844 million at the end of 2015, up more than 10-fold from $76 million at the end of 2014. The disclosure was the first time the San Francisco firm, one of the country’s largest bank energy lenders, released details about potential oil and gas credit losses.


Closing the Holes to Protect Senior Investors

ThinkAdvisor.com

The North American population is aging at an unprecedented rate, with wealth increasingly concentrated in the hands of seniors. This demographic and financial trend, combined with the prevalence of medical conditions affecting cognitive ability among seniors, has led to an unfortunate acceleration of senior financial fraud and abuse, in some cases by unscrupulous financial professionals and, in many instances, family members or caregivers. Faced with this serious and growing societal issue, the North American Securities Administrators Association (NASAA) and its members have responded aggressively with innovative regulatory solutions, targeted enforcement and investor education.


Bank-Stock Bloodbath: The Cycle Financials Can’t Escape

Wall Street Journal

Bank investors, there’s no escaping the doom loop. Shares of big U.S. banks were hit again Wednesday, making an already bad year even worse. The KBW Nasdaq Bank Index, for example, is now down nearly 20% since the start of the year. Bank of America and Citigroup, meanwhile, have fallen around 30%. What is making things so bad for banks? In many ways they are trapped in an adverse feedback cycle that has been made worse by a fall this week in a key proxy for bank profitability. The cycle seems to start with cratering oil prices. That has two negative impacts. First, and directly for banks, this has raised fears of widespread losses should energy-sector losses spiral as the year goes on. That was one reason bank stocks got walloped Tuesday; J.P. Morgan Chase at its annual investor day said it expected to take an additional $500 million in provisions in the first quarter for energy exposures.


IRS Audited One In Ten $1 Million-Plus Earners In 2015, Correspondence Audits Up By A Third

Forbes

Are you ready for an IRS correspondence audit? The Internal Revenue Service fiscal year 2015 audit data has good and bad news for high-income taxpayers. For $1 million-plus earners, field audits (in person) are down, but correspondence audits (by mail) are up dramatically. Overall, those earning $1 million-plus faced a 9.55% chance of an IRS audit compared to a 7.5% chance in 2014. Compare that to the less than 1% audit chance for those with incomes of under $200,000. It used to be, for the rich, that field audits were the norm and correspondence audits were less common, but now that’s reversed; the IRS is relying on correspondence audits to go after the wealthiest taxpayers. Out of a base of 416,178 $1 million-plus tax returns, there were 13,781 field audits (down 8% from 15,029 in 2014) and 25,972 correspondence audits (up 34% from 19,332).


States Take Different Approaches on Income Taxes

Accounting Web

The difference between a taxidermist and a tax collector? The taxidermist takes only your skin, Mark Twain said. But a new report by the Tax Foundation offers a look at how states tax individual income – and how much is left untaxed on taxpayers’ bones varies a lot more than the old sage might think. It’s certainly no secret that most states (43) levy income taxes. Of those, 41 tax wages and salaries, while New Hampshire and Tennessee only tax dividend and interest income. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming don’t impose any income tax. Of the states that tax wages, eight impose one tax rate for all taxable income. But most (33) levy graduated rates, and those tax brackets can vary widely. California and Missouri, for instance, have 10 tax brackets, while Kansas has a two-bracket system.


’Tis the Season for Data Breaches and Tax Scams

Accounting Web

Tax season is well underway, making it one of the most popular times for individuals to become victims of scamming efforts and companies and accounting firms to experience data breaches. According to the IRS, tax refund fraud is expected to soar this tax season, hitting $21 billion this year from just $6.5 billion two years ago. But what makes tax season so popular for people to become victims of scamming efforts? Hackers see it as a prime opportunity to socially engineer victims due to the nature of tax season itself – people are expecting money back on their returns. Additionally, people are filling out forms, either by paper or online, which contain sensitive information, such as Social Security numbers, bank numbers, and more. This gold mine of personally identifiable information (PII) to steal and sell in the black market yields a high return for hackers.