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15 posts from April 2016

Prince’s $250 Million Mistake

PrinceWith songs like “Purple Rain” and “Little Red Corvette,” Prince wrote the soundtrack of a generation.

However, his failure to write a will could spell trouble for his $250 million fortune. Last week, people around the world mourned the death of this gifted singer and songwriter, and many were shocked to hear that Prince didn’t have a will or an estate plan in place. Even though he was a notoriously hands-on negotiator who meticulously controlled the intellectual property rights of his song collection, this unfortunate lack of planning has left uncertainty for Prince’s heirs. The future inheritance process could cost tens of millions of dollars in legal fees, and state and federal estate taxes. Surprisingly, he’s not the first famous person who left this world without a plan.

Not yet famous with a quarter billion dollar estate to leave loved ones? It’s still important to draft a will and keep it up-to-date based on changing personal and financial situations. Here are a few tips to make sure you have an effective will:

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How to Clean Your Data and Make it Look Slick


HouseEvery day we are inundated with articles, infographics and news reports that quote statistics that we are just supposed to accept at face value. Consider online real estate prices. If you search in your local area, you will find varying figures for median price, price per square foot and return on investment. The volume and variance in data leads to many questions: Who is supplying this information? What types of property does it include? What period does it cover?

As accountants, this unsubstantiated reporting should make us uncomfortable. We are a profession that prides ourselves on transparency and disclosure. When that isn’t forthcoming, our red flags should go up. How can we trust what we are reading when we know nothing about the source and quality of the underlying data? With all the advances in technology, accountants are uniquely positioned to be the champions who set higher standards for reporting. By giving the audience access to the data, we achieve the ultimate transparency. It’s not as hard or expensive as you may think.

I recently challenged myself to create a case study that analyzed real estate sales in my community—Panama City, Fla. Like many other resort areas, our beachfront county experienced wild fluctuations in property prices over the past decade. I was curious about property values, whether they were selling at a gain or loss and if the values used for tax purposes were fair.

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Change: As Necessary as it’s Inevitable

Arleen Thomas Current Photo (2)At a state society member event in El Paso, Texas, an older gentleman told me about his daddy that had passed away 53 years ago, and if he were to come back today, he wouldn’t understand very much about the modern world. He wouldn’t understand the phone he had in his pocket, the computer he used every day, or the car he drove. But, he went on to explain, he would understand that times change and we have to let them.

The profound respect this gentleman had for his father continues to resonate with me as does the lesson his father imparted: Change can be scary and intimidating, but it is necessary — and it’s inevitable.

Consider for a moment what happens if we don’t embrace change. Consider Kodak. It didn’t fail because it did not create a product for the digital age. In fact, Kodak invented the first digital camera in 1975. It failed because it didn’t embrace new technology and adapt to a marketplace with new consumer attitudes.

There are many other examples, of course. The point is flexibility and adaptability are integral to remaining relevant. You need to focus on your market, your surroundings, and what your customers need in order to succeed.

That’s what the AICPA and The Chartered Institute of Management Accountants (CIMA) have done with a proposal to create a new accounting association to represent and advocate for the entire accounting profession, while preserving the member bodies of both organizations. The AICPA Board of Directors, governing Council, Business and Industry Executive Committee and Government Performance and Accountability Committee have all endorsed the proposal and 52 state societies have passed resolutions of support. It also has broad support from finance and firm leaders across the profession. Now they’re asking for you to vote ‘yes.’

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Say “Yes” to Advancing Our Profession


Barry and timFor nearly 129 years, the accounting profession has preserved an esteemed reputation through a commitment to protecting the public interest and upholding the profession’s core values of competence, integrity and objectivity. Each and every day, CPAs live those values through the work they do for their organizations, employers and clients. You now have a new opportunity to further strengthen our profession and play an integral part in its vitality for the future.  

On March 24, the AICPA governing Council voted to proceed with a member ballot on a proposal that would enhance our profession and position us for continued success far into the future. The proposal already has strong support: 52 state CPA societies; leaders from many CPA firms of all sizes; finance leaders from businesses and organizations worldwide; and the AICPA’s Business & Industry Executive Committee, Private Companies Practice Section Executive Committee, Government Performance and Accountability Committee, Women’s Initiatives Executive Committee, Pre-certification Education Executive Committee, and National Accreditation Commission. We urge you to vote “yes” as well.

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Tax Season Wrap Up

End of the roadCongratulations – you have made it through another tax season! 

Take the requisite time to mourn the loss of your time, sleep and missed social events.  Enjoy some much needed rest and relaxation with an activity of your choosing.  Then, if you have not already done so, take the advice of Kool & the Gang and celebrate!

No matter how many years pass, this song always manages to lift me up. So, whether this is your first or 50th tax season, it is an accomplishment and should be celebrated. Embrace the hard work that you have put in and give yourself a pat on the back.

Even as a perpetual optimist, I too fall victim to feeling down when I am exhausted, have hit a roadblock or have experienced a failure. In my many years in tax practice, I often came out of tax season telling myself this was my last. But guess what? By the beginning of the next tax season, I was hyped up and couldn’t wait for those first returns to come in the door.  

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Make Every Day Earth Day and Save Two Kinds of Green

Earth DayWhere I live in Queens, New York, recycling is mandatory. My husband and I keep a plastic sorting bin with two compartments—one for glass and plastic, the other for paper and cardboard—right next to our garbage can to make things easy…and messy, since our almost 20-month-old son thinks that the cardboard recycling is there for his entertainment. But a little mess in our living room is a small price to pay to help the planet. While recycling has become common practice in many parts of the United States, there are so many other things you can do that will help both the earth and your bottom line, and, in some cases, offer a tax break.

Water Conservation

  • Shut off the tap when brushing your teeth. Doing this twice a day saves up to 8 gallons of water.
  • Install low-flow shower heads in bathrooms.
  • If remodeling, consider low-flow toilets. These give the user the option of how much water will be used to flush based on the amount of waste.
  • Don’t buy disposable water bottles. Instead fill reusable water bottles.
  • Be sure sprinkler systems won’t go off when it has rained or during the sunniest times of the day and be mindful of drought conditions.
  • When running water to wash dishes, collect the initial cool water to water houseplants.

Potential cost savings: A family of four that upgrades and optimizes their water usage can save nearly $300 a year in utility bills and 32,000 gallons of water.  For more tips on water conservation and to calculate how much you might save, visit the Environmental Protection Agency website.

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The Growing Importance of Financial Literacy Month

Fin lit 2Every second, America’s trillion dollar student loan debt grows by nearly $3,000. This debt that people begin to carry at an early age often leads to more uninformed financial decisions, such as taking on credit card debt and other loans they can’t afford. Typically, this occurs because of limited access to financial education tools and resources. This alone points to the urgent need for financial literacy in this country.

The AICPA and state CPA societies across the country are leading the effort to address this growing problem through new programs and initiatives. April is Financial Literacy Month, and we continue to be diligent in spreading the important message of financial literacy to millions of Americans. Through the AICPA’s flagship 360 Degrees of Financial Literacy program, the national volunteer effort of CPAs to help all Americans understand their personal finances through every life stage, we have combined grassroots advocacy with free public resources and tools for CPAs to educate Americans of all ages. Additionally, Feed the Pig, the AICPA’s award-winning public service campaign with the Ad Council, has provided tools and resources aimed specifically at Americans aged 25-34, an age group that is making major life decisions, often with little financial experience or guidance.

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Elder Planning: Life’s Transitions After Retirement

Elder planningClients often fantasize about retirement; it becomes a sort of finish line for them. Get to retirement and you’ve made it. What they might not consider are the ways life may change once they’ve retired, and the financial, health care and other planning needs that go into preparing for the future.

Enter the knowledgeable CPA/PFS, who can go beyond retirement planning and assist with elder planning. There is a fine line between retirement planning and elder planning: While all financial planners help ensure their clients have enough savings to last until the end of their lives, elder planning also involves helping clients plan for life’s transitions after retirement.

You’re probably thinking, “Isn’t that the same as retirement planning?” Not really. Elder planning goes beyond financial independence and retirement to touch all areas of financial planning, including investment strategy, health care, estate planning, risk management (insurance) and end-of-life care.

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IRS Form 990 is an Opportunity for Not-for-Profits to Shine


Mission

IRS Form 990 is the information return that is filed annually by most tax-exempt organizations, including charities and fundraising organizations. Just like any other return, it is vitally important to comply with the IRS requirements. What makes Form 990 unique is that it reports extensive information on operations, programs and governance and contains not just financial data, but written narratives and opportunities to provide supplemental information as well. Because Form 990 is available to the public, fundraising organizations that view it as merely another compliance requirement are missing a golden opportunity to shine a light on their organization’s accomplishments and attract support for their causes.

Here are some tips to help you or your clients make the most of Form 990 as a promotional tool:

Be mindful of your audience. With few exceptions, organizations are required by law to make their Form 990 returns available to the public. There are several widely accessible online databases, the largest being GuideStar, from which the public can easily access that information at no cost. Also, many online fundraising platforms, such as CrowdRise, Network for Good and Kimbia to name a few, interface with GuideStar’s database to provide would-be donors access to Form 990 information. When preparing your Form 990, consider who is reading your return: your constituents, including clients, customers and citizens in the communities you serve, and others who put faith in your organization. Also, consider your current and prospective donors. These individuals have the expectation that their participation and contributions of time and money are put to good use. Other groups and individuals who may read your Form 990 include community leaders who influence local policy decisions, other not-for-profits and the media.  

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Jay-Z Learned the Value of a Good "Blueprint"

Jay zWhen New York-based rapper/producer/entrepreneur Jay-Z released his critically-acclaimed The Blueprint in 2001, he cemented his place at the top of the music industry with an album that serves as a model for his music genre and those who came after him.

Much has been written about The Blueprint and its impact on Jay-Z’s career, with critics noting that it was a defining moment. The album became the foundation of a young man’s rise from just another rapper to that of a world-renowned musician, entrepreneur and investor.

Now, I admit that pivoting from Jay-Z to the next version of the CPA Exam might seem like a stretch. But think about the figurative title of The Blueprint and what the album did for future rappers. Now compare that to what the new CPA Exam blueprints (unveiled on April 4) mean to a candidate in their quest to become a CPA. Both serve as a valuable guide and resource.

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Americans Need Financial Literacy More Than Ever

Financial literacy monthAmericans are delaying major life decisions, including buying a home, marriage or retirement in increasing numbers—for financial reasons. According to a recent survey, as many as 51 percent of college students say finances, such as the high cost of student loans, play a major role when making important life choices.

This staggering statistic points to the need to educate and help all Americans make smart financial decisions. As Chair of the AICPA’s National CPA Financial Literacy Commission, I help spread the message about the critical need for financial educational programs. The AICPA, state CPA societies and thousands of CPAs across the country share a common responsibility for leadership and promotion of financial education through the profession’s flagship 360 Degrees of Financial Literacy program and the public service announcement campaign Feed the Pig.

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Starting Here: On the Path to Assuring Sustainability Data


Esg2In terms of intangible accounting, there are no assets or liabilities more ethereal than those related to environmental, social and governance issues. Mother Nature does not send monthly balance sheets. An organization’s diversity and inclusion committee cannot easily sell its access to deeper talent pools on the open market. And yet, gaps in management structures can wreck value beyond any analysis.

As a result, an organization must account for these concepts with hard data to help manage and improve these often overlooked risks and assets. Furthermore, just as it can with an organization’s financial data, regular auditing (or “assurance” as it’s known by the CPA profession when covering subject matter other than financial statements) can strengthen environmental, social and governance data’s accuracy, collection process and reporting.

The environmental, social and governance assurance landscape

In 2014, more than 2,600 reports were produced applying the Global Reporting Initiative framework for sustainability reporting. And while the proportion of assured reports has been slowly growing, less than half of the reports published that year were assured.

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From the Frontlines: Kimberly Ellison-Taylor

Welcome to the AICPA’s series focused on bringing the perspectives of diverse CPAs to life.

Kimberly Ellison-TaylorAttitude. Aptitude. Appearance.

If I had to boil down the topics I focus on when I give advice to women in the workplace, the triple-A approach would be it.

Attitude, because people want to be around engaging, charismatic and nice people. Think about talent shows like “American Idol” or “The Voice.” Raw talent will get you far, but star power draws people in. The corporate world is the same. It is not enough to only be smart. Plenty of people who are smart have trouble growing their carreers and getting promoted. The difference maker? Confidence. Self-esteem. The ability to speak up and also work as part of a team.

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Benchmarking Helps Not-for-Profits Achieve Greater Impact


BenchmarkingWhen I was first introduced to the not-for-profit world, I knew there would be a steep learning curve. I read everything I could find on nonprofit finance, but it wasn’t until I got involved in a networking group of peer organizations that I felt totally at ease in my new role. When a peer recommended that I participate in a benchmarking study, I had no idea what to expect. It turned out that the experience was very valuable. The goal of the project was to explore ways to provide apples-to-apples comparisons and trending reports on key data. The overall lesson was that by comparing operating data and identifying areas where relative performance can be improved, we can make our organizations stronger.

Our group’s first attempt at providing data in a comparable measure was difficult. Fortunately, we had the advantage of meeting face-to-face to explain anomalies in the data and discuss the qualitative aspects behind it. A decade later, our results have been refined for the benefit of everyone in the group and our respective organizations. 

I frequently speak on the topic of benchmarking, and folks ask, “How do you get started?” Often, they do not realize that benchmarking is quite simple. It can typically be performed in six steps:

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In the News: CPAs Say Presidential Election Will Have an Impact on Business Planning

Shutterstock_304155794It’s election season in the U.S. – perhaps you’ve heard?

As we inch closer to the picking our next president, the AICPA recently conducted a survey of CPAs who serve as CEOs, CFOs, controllers and other leadership positions in companies to learn their thoughts on the potential impact of the election on their businesses.

According to the survey, nearly two in three (64 percent) of business leaders said that the election will impact business planning forecasting or budgeting for the next fiscal year. Survey respondents also said that the election ranked fourth in overall impact, behind changes in economic conditions, outlook for their specific industries, and interest rates and borrowing cost.

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