ASSURANCE & ADVISORY____________________________________________________________

Red or Blue: What’s Your Favorite Color?

TAX____________________________________________________________

California November Ballot Measure Results

ENTERPRISE RISK

MANAGEMENT SERVICES____________________________________________________________

Spotlight on Your Bank Account... Yes, Your Bank Account

November 2012

From the Managing Partner

ARTICLES FROM THE TAX ADVISOR’S TAX CLINIC

Contents

______________________________________________________________________________________________________________________________________________________

FROM THE MANAGING PARTNER2 ART ICLES FROM THE TA X ADV ISOR’S TA X CL INIC

At SingerLewak, our Tax Practice group offers a wide array of tax services and expertise relating to tax laws and subject matters. Over the past several years, members of the Tax Practice group have often contributed articles to the Tax Advisor publication.

______________________________________________________________________________________________________________________________________________________

ASSURANCE & ADVISORY4 RED OR BLUE: WHAT ’S YOUR FAVORITE COLOR?

Everywhere we turned these last few weeks, we were bombarded with political ads, news stories and of course, spin! How would the next man to occupy 1600 Pennsylvania Avenue make an impact on how you run your business? After each of us cast our one vote, there wasn’t anything more we could do to influence the results. So, with Obama back in the game, what next? Let’s explore what you can control in order to thrive over the next four years.

______________________________________________________________________________________________________________________________________________________

TAX6 CALIFORNIA NOVEMBER BALLOT ME ASURE RESULTS

On November 6th, California voters went to the polls to decide the fate of the state’s economy. Various measures on the ballot contained tax-related bills that have had taxpayers on edge during the course of the year. However, of the several propositions affecting taxpayers, only two were passed by a majority – Proposition 30, the Temporary Taxes to Fund Education and Proposition 39 Business Tax for Energy Funding.”

______________________________________________________________________________________________________________________________________________________

ENTERPRISE RISK MANAGEMENT SERVICES7 SPOTLIGHT ON YOUR BANK ACCOUNT. . .

YES, YOUR BANK ACCOUNTThere’s a race occurring daily and it’s as competitive as any competition imaginable. What’s at stake you ask? Your bank account. Cybercriminals are hard at work, chipping away at any form of protection you or your bank can throw at them.

November 2012

1 | SingerLewak November 2012

F R O M T H E M A N A G I N G PA R T N E R

Dear Clients and Friends of SingerLewak:

At SingerLewak, our Tax Practice group offers a wide array of tax services and expertise relating to tax laws and subject matters. Over the past several years, mem-bers of the Tax Practice group have often contributed articles to the Tax Advisor publication.

In the November 2012 edition, ten articles - demonstrating our range of technical knowledge at

SingerLewak - were published in the Tax Adviser’s Tax Clinic sec-tion edited by our Tax partner, Mark Cook. Ranging from topics

such as Tax Deductions, R & E Credit Opportunities, Gift & Estate Tax Planning, the articles are great resources for businesses, individuals and estates.

November 2012 SingerLewak | 2

ARTICLES FROM THE TAX ADVISER’S TAX CLINICBY JIM PITRAT | MANAGING PARTNERjpitrat@singerlewak.com | 310.477.3924

JIM PITRAT CAN BE REACHED AT JPITRAT@SINGERLEWAK.COM

OR 310.477.3924

TO VIEW THE ARTICLES, PLEASE GO TO:

SINGERLEWAK.COM/SL/TAX/TAXCLINIC2012

3 | SingerLewak November 2012

Everywhere we turned these last few weeks, we were bombarded with political ads, news stories and of course, spin! How would the next man to occupy 1600 Pennsylvania Avenue make an impact on how you run your business? After each of us cast our one vote, there wasn’t any-thing more we could do to influence the results. So, with Obama back in the game, what next? Let’s explore what you can control in order to thrive over the next four years.

REVISIT YOUR MARKETING AND GROWTH PLANS

In elections as in life, there are always winners and losers. How-ever, the true winners are those that adjust and adapt to current circumstances. Now, as the dust settles post-election, it would be a good time to revisit your market-ing strategies and adjust growth plans. Where are the opportuni-ties that election results have left in their wake? What segments of business have been hurt by elec-tion results? Now is not the time to whine about how this candi-

date has destroyed your business or that Proposition’s passing means doom and gloom to your planned expansion. Hit the delete key on your current plan and start over! Hold strategy meetings with your management team and key professional advisors. Survey your customers to see what their collective thinking is. You need to think about how you can ful-fill a newly formed need or solve a brand new problem for a client or customer, rather than sit back and do nothing differently.

INVEST, INVEST, INVEST

I don’t know a single entrepre-neur or patriarch/matriarch of a family owned business enterprise who doesn’t think that invest-ing in their own enterprise isn’t a good idea. Why let an election

change that philosophy? There have been many election cycles that you and your business has survived and rest assured, you will survive this one too. The key to successful investments (adding equipment, personnel or locations) in businesses is to plan for contingencies. Invest-ment is nothing like Jack and the Beanstalk’s Magic Beans! Make sure you have thoroughly

A S S U R A N C E & A DV I S O RY

RED OR BLUE: WHAT’S YOUR FAVORITE COLOR?BY ROB SCHLENER | PARTNERrchlener@singerlewak.com | 949.261.8600

Hold strategy meetings with your management

team and key professional advisors. Survey your

customers to see what their collective thinking is. You need to think about how you can fulfill a newly formed need or solve a

brand new problem for a client or customer, rather

than sit back and do nothing differently.

November 2012 SingerLewak | 4

vetted all aspects of the invest-ment: What are my expected gains? How long will it take before the investment is return-ing profitable business? What do I do if I am unable to achieve my original goals? What is my Plan B? Remember, the definition of insanity is doing the same thing over and over, yet expecting a different result. In order to grow, you must constantly reinvest in your business... just be sure that you have planned for all possible contingencies, good and bad.

REVISIT YOUR RETIREMENT STRATEGY

Though it is prudent to always be evaluating your future, it makes even more sense to do so during uncertain times. There are many

ways to skin the proverbial retire-ment cat, but which one(s) make the most sense for you and the current times? The virtually end-less number of retirement strate-gies is left for another article, but

suffice it to say that if you haven’t revisited your own plan in the last 2-3 years, you’re way overdue! Whatever plan you decide to implement, should be both fluid

and achievable. Even cornerstone decisions such as family succes-sion planning vs. outright sales, should be challenged every so often, to ensure that the current strategy remains the right one. You’ve worked too hard and too much is at stake to take shortcuts here.

If you would like to discuss your specific situation, feel free to contact me.

In order to grow, you must constantly reinvest in your business... just be sure that you have planned for all possible contingencies,

good and bad.ROB SCHLENER CAN BE

REACHED AT RSCHLENER@SINGERLEWAK.COM

OR 949.261.8600

5 | SingerLewak November 2012

CALIFORNIA NOVEMBER BALLOT MEASURE RESULTSTA X

On November 6th, California voters went to the polls to decide the fate of the state’s economy. Various measures on the bal-lot contained tax-related bills that have had taxpayers on edge during the course of the year. However, of the several proposi-tions affecting taxpayers, only two were passed by a majority – Proposition 30, the Temporary Taxes to Fund Education and Proposition 39 Business Tax for Energy Funding.

PROPOSITION 30 - TEMPORARY TAXES TO FUND EDUCATION

Originally introduced in January, Governor Brown’s proposed bud-

get introduced legislation that aimed to shift the ever expanding costs of the state’s public educa-tion system and other public safety services, to high-income taxpayers through temporary increases in the personal income tax rates, as well as, a marginal

increase in the state’s sales tax rate.

With 53.9% of the voters approv-ing, Proposition 30 increases the state’s revenues by approximately $6.9 billion, which will be spe-cially allocated to funds intended strictly for spending on schools and public safety. The special funds will be subject to annual independent auditor reviews to ensure that monies are not misappropriated, and evidence of misuse by elected officials may result in criminal prosecution.

Under the Proposition, personal income tax rates would be tem-porarily increased as follows:

The personal income tax rates, specified above, would become retroactively effective for the tax year starting January 1, 2012, and would remain in effect through December 31, 2018.

In addition, Proposition 30 increases the state-level sales and use tax rate by a quarter-percent from 7.25% to 7.50% on the sale, use or consumption of tangible personal property within the

state. The increased sales and use tax rate would be effective for tax periods beginning on and after January 1, 2013, and remain in effect through December 31, 2016.

SINGLE FILER’S TAXABLE INCOME

JOINT FILER’S TAXABLE INCOME

HOH TAXABLE INCOME

CURRENT TAX RATE

ADDITIONAL TAX RATE

TOTAL TAX RATE

250,000 - 300,000

500,000 - 600,000

340,000 - 408,000

9.3% 1.0% 10.3%

300,000 - 500,000

600,000 - 1,000,000

408,000 - 680,000

9.3% 2.0% 11.3%

Over 500,000 Over 1,000,000 Over 680,000 9.3% 3.0% 12.3%

November 2012 SingerLewak | 6

JAVIER RAMIREZ JRAMIREZ@SINGERLEWAK.COM

949.261.8600 x2124

PROPOSITION 39 - BUSINESS TAXES FOR ENERGY FUNDING

For tax years beginning on or after January 1, 2013, most mul-tistate taxpayers will be required to use a Single Sales Factor (“SSF”) apportionment formula, with market-based sales for sales of other than tangible personal property. Proposition 39 elimi-nates a taxpayer’s option to use the standard three-factor appor-tionment formula.

The new law seeks to even the playing field between California-based and out-of-state corpora-tions doing business in the state. The use of a mandatory SSF removes the tax costs associated with investing in PPE, as well as, employees in the state, by removing them from the appor-tionment equation as material income-producing factors. Busi-nesses likely to see an increase in overall California apportionment include predominantly out-of-state corporations with only sales activity in the state. Such busi-nesses may no longer opt to use the three-factor, double-weighted sales formula, which may have diluted their California appor-tionment percentage in instances where a majority of investments in property and personnel were located in states other than Cali-fornia.

Moreover, companies engaged in service-oriented business activi-ties, or the use or sale of intan-

gible assets, must now account for their California sales activities under market based sourcing rules. Prior to Proposition 39, California sales were assigned based on where the majority of the costs of performing the ser-vice were borne. Under the new legislation, the focus has shifted to the location of the consumer or purchaser. Notwithstand-ing, the changes in the method of apportioning income to the state, whether a corporation or other enterprise is deemed to be engaged in business in the state, will still be considered under existing constitutional principles and jurisprudence.

Other provisions within the measure would also allow cer-tain corporations to include only 50-percent of sales from network services in the sales factor. It is expected that the FTB will issue Regulations defining the corporations eligible to receive this exemption, as well as, what network services actually apply.

Based on a study by the Cali-fornia Legislative Analyst Office (“LAO”), the new law is expected to create a “Clean Energy Job Creation Fund” in the State Treasury whereby $550 million would be transferred annually from the General Fund, unless the Department of Finance and the LAO determine the estimat-ed annual increase in revenues is less than $1.1 billion. Otherwise, only one-half of the “estimated annual increase in revenues,” for certain described educational and other programs would be con-tributed to the fund. In addition, a “Citizens Oversight Board,” consisting of a nine-member panel would be created to oversee and review the programs.

If you have questions with respect to the upcoming law changes, and how they may impact your personal or business finances, please do not hesitate to contact your lead tax Partner.

Under the new legislation, the focus has shifted to the location of the

consumer or purchaser. Notwithstanding, the changes in the method of apportioning income

to the state, whether a corporation or other enterprise is deemed to be engaged in business in the state, will still be

considered under existing constitutional principles

and jurisprudence.

E N T E R P R I S E R I S K M A N AG E M E N T S E R V I C E S

There’s a race occurring daily and it’s as competitive as any compe-tition imaginable. What’s at stake you ask? Your bank account. Cybercriminals are hard at work, chipping away at any form of protection you or your bank can throw at them.

It’s all in the numbers...the bad guys get as many attempts as they want and the bank only has to fail once before millions can be lost and just as many accounts are compromised. The attack-ers have the advantage, and they know it.

Think you’re too small of a fish to be a target? New data suggests that cyber attacks aimed at small

businesses have doubled over the past six months. According to Symantec, 36% of all targeted attacks during the last six months were directed at businesses with 250 or fewer employees.

How are they doing it? With your help! Whether it’s a website you visit or an email attachment you’ve opened, the Internet is littered with botnet-creating, information-stealing Trojans. A Trojan is a small program that first infects your computer and then sends information from infected computers to remote servers.

When thousands of copies of a

Trojan have been installed on computers all over the Internet, you get a network of machines under the remote control of a cybercriminal — known as a botnet. The reason this method has proven to be so successful for the bad guys is that the owners of the infected machines usually aren’t even aware that anything wrong is happening.

One recent story on how quickly things can go awry occurred on July 10th when crooks who’d broken into the computers of a fuel supplier in southern Geor-gia attempted to transfer $1.67

According to Symantec, 36% of all targeted

attacks during the last six months were directed at businesses with 250 or

fewer employees.

SPOTLIGHT ON YOUR BANK ACCOUNT... YES, YOUR BANK ACCOUNTBY RICK MARK | SERVICE AREA MANAGERrmark@singerlewak.com

7 | SingerLewak November 2012

How are they doing it? With your help! Whether

it’s a website you visit or an email attachment

you’ve opened, the Internet is littered with botnet-creating, information-

stealing Trojans.

million out of the company’s accounts. When that failed, they put through a fraudulent payroll batch totaling $317,000, which the victim’s bank allowed. Shortly after the dust settled, the victimized company hired an outside forensics firm to investi-gate, and found that the trouble started on July 9, when the firm’s controller clicked a link embed-ded in an image in an email designed to look as though it was sent by the U.S. Postal Service.

Criminals are using these botnets to perform a whole slew of mali-cious internet activities. Whether it’s mounting distributed denial-of-service (DDoS) attacks or sending out spam emails, like anyone else, they’re after the money. Banking Trojan botnets

are used specifically to snag login credentials to online bank ac-counts and payment processors such as PayPal.

While banks are constantly refin-ing online account security by coming up with new methods for authenticating users, there are still steps you can take as well. Getting to know what’s coming into your network is one thing, but what’s being sent out of it is another. Many of these botnets report from very specific and known areas of the world and internet addresses. Having a fire-wall block incoming traffic can’t help when a Trojan is injected into a system. Most networks do not filter proactively or on a regu-lar basis, for outgoing traffic and connections to the botnet servers.

In business, it’s often about the bottom line. There are criminals out there trying to attack yours...what are you doing to protect it? If you have concerns about secu-rity threats in general, and want more information about how to check your network for these threats, and then how to effec-tively ‘curb the trojan appetite’, email us at ITConsulting@SingerLewak.com and we’ll be happy to help.

November 2012 SingerLewak | 8

RICK MARK CAN BE REACHED AT RMARK@SINGERLEWAK.COM

OR 818.251.1323

GAAP REPORT

ING • T

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TERN

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NAL T

AX • BUSINESS MANAGEMENT • BACK-OFFICE ACCOUNTING • DEAL STRUCTURING • PARTICIPATIO

N/ROYALTY AUDITS • SALT • IPO AND VC

SINGERLEWAK

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LOS ANGELES • ORANGE COUNTY • WOODLAND HILLS • MONTEREY PARK • SILICON VALLEY • SAN FRANCISCO

SINCE 1959

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Expertise: Media, entertainment, high-net-worth individuals and private businesses.

Clients: Actors, producers, writers, agents, managers and directors. Also produc-tion studios and companies, high-net-worth individuals, entrepreneurs and family-owned businesses. Names include Roberto Orci of K/O Paper Products, the production company he co-founded with writing partner Alex Kurtzman; and “Hawaii 5-0” showrunner Peter Lenkov.

Client stories: A client once called Davis as a fire was racing toward the client’s home in the hills. “She wanted to know if she was adequately insured, and I told her she was insured to the nines and that she needed to evacuate her home immediately,” says Davis. “I told her to get her animals and essential things and leave. It didn’t matter where to; she could come to my house, or I could refer her to a hotel, but she needed to leave immediately.”

BRANDY DAVIS Business Management Practice Leader (Partner), SingerLewak

SingerLewak is a leading regional accounting services firm in California with offices in Los Angeles, Orange County, Wood-land Hills, Monterey Park, San Diego, Silicon Valley and San Francisco. Serving California since 1959, SingerLewak has established a reputation for excellence as professionals with expertise in the Accounting and Management Consulting industry. Providing the services of a large firm with a blended environment of practices, industry specializations and partic-ular attention to hands-on service, SingerLewak continues to demonstrate leadership and industry growth year-over-year.

We are nationally recognized as active community and profes-sional services partners, working among many sectors of the business world. Our core services deliver results whether it’s auditing, accounting, entrepreneurial business services, tax preparation, business management, SEC filings, transactions, enterprise risk management, forensic accounting, business valuation, litigation support, or consulting.

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