Is Your Firm Seaworthy?

The parallels between sailing and audit quality came to mind recently when I was speaking with a practitioner who is passionate about sailing. His comments about his enthusiasm for sailing reminded me of the profession’s passion and ongoing commitment to quality.

When sailors go to sea, they depend on their ships to get them to their destinations quickly and safely, conquering instability, uncertain weather conditions and unexpected obstacles along the way. In many ways, they place the same faith in their vessels as CPAs place in their firms. CPAs rely on the firms they’ve built to achieve their goals – to help them serve their clients and business communities, uphold the public interest and create thriving workplaces – as they navigate the many challenges of a fast-changing and increasingly complex environment. In both cases, a strong discipline and commitment to quality is critical to success.

International Perspectives: Chinese New Year

On January 28, nearly one-fifth of the world’s population will begin the 15-day celebration of Chinese New Year. The holiday, also known as the Spring Festival, sets the tone for the year ahead and is a time for family members to reunite and share joy in successes, prosperity and good health. As the world’s borders become increasingly blurred, you may find that you have friends, colleagues or clients who observe the holiday.

Show your appreciation for their culture by familiarizing yourself with the meaning and traditions of Chinese New Year. In this video, Irene Teng, Managing Director of Europe, Africa and Asia - Management Accounting, with the Association of International Certified Professional Accountants, highlights some of the customs and shares quick tips on how to greet clients and colleagues during the holiday. You can also learn more here.

For all who celebrate, we wish you a very Happy Chinese New Year!

 

Top 10 Resources for the 2017 Tax Season

As we prepare this list for all of our current members, we cannot help but feel like a pair of college football coaches rallying the team before the big game. So to everyone out there looking at their screen, we ask you to take a knee (figuratively) and lean in for a huddle.

We are on the eve of the big game. People are watching and will be expecting your all. The competition will be fierce, the plays will change frequently and you can expect someone or something will be coming at you from all directions. But fear not! You’ve got this. (Fist pump).

All your years of training have led to this very moment. Now is the time to stretch your muscles, gather your equipment and focus on the game plan. We want to help by putting some tools at your fingertips to get you warmed up, refreshed and staying sharp.

Get Ready to Face a Trifecta of Accounting Standards

The Big 3 Accounting Standards Updates (ASUs) ─ ASU 2014-09, Revenue from Contracts with Customers, ASU 2016-02, Leases, and ASU 2016-13, Financial Instruments – Credit Losses ─  from the Financial Accounting Standards Board pose significant challenges for CPAs. And, as their effective dates loom near, more and more practitioners are coming to realize the substantial level of work involved in applying these standards.

The Center for Plain English Accounting, the AICPA’s national A&A resource center, is receiving and answering quite a few inquiries about how to apply these standards. We recently celebrated our third anniversary of providing our members with valuable guidance on a wide array of accounting, financial reporting, auditing, compilation, review and preparation topics. Recently, we have been especially focused on providing our members with in-depth and practical implementation guidance on the new revenue recognition, leases, and credit loss standards. Below are three implementation questions and answers that we’ve selected to share with you.

ID Theft: Two Prevention “Hassles” Worth Your Time

Even if you aren’t personally a victim of identity theft, as a CPA you still bear the burden of combating it on behalf of your clients. More often than not, for tax practitioners, the big cost is your time.

Recently, to help combat thieves, the IRS implemented various authentication measures, which emerged from the Security Summit. While many of these measures may not be noticed, some are quite visible. One measure, two-factor authentication for e-Services, has already prompted comments and complaints and another, the optional W-2 pilot program, is not being used much by practitioners and I suspect time has a lot to do with that too.

Elder Financial Abuse: How CPAs Can Help – Part 1

Scenario 1: Your usually chatty elderly client Nancy has become quiet and refuses to speak with you without her son Chris present. When they come in together, she is timid and acts nervous, while he is combative and secretive about sharing bank statements and other financial information. When you insist, you see discrepancies and unusual cash withdrawals, or other activity that he claims are for “household expenses, which are none of your business”.  

 

Tax Reform in the 115th Congress?

Tax reform has been actively studied and discussed for the past six years by the 112^th, 113^th and 114^th Congresses. At the start of the 112^th Congress in 2011, Congressman Dave Camp (R-MI), then chair of the House Ways and Means Committee, announced the first in a series of hearings on fundamental tax reform to simplify the Internal Revenue Code and improve economic growth and job creation. Since then, Congress has held over 80 hearings on tax reform. In addition, several congressional study groups were formed and various proposals introduced. Yet, despite President Obama and congressional leaders supporting a lower corporate tax rate for international competitiveness purposes, tax reform did not occur in that six-year span.

What’s in a Name?

I recently had the privilege of speaking on financial planning to 150 CPAs at a Washington Society of CPAs conference. I began my remarks by asking how many in the audience considered themselves financial planners. Only two raised their hands.

That surprised me. I know that many CPAs help clients with some aspect of financial planning, from tax, retirement and estate planning to succession planning and wealth management. And, frankly, who better to help clients negotiate their financial futures than CPAs? Clients already rely on us to provide trusted advice on other financial matters.

The sparse response got me thinking back about my own experience coming to terms with the term “CPA financial planner.”

5 Ways to Drive Small Firm Growth

CPA firms across the country are thriving, according to the 2016 PCPS/CPA.com National Management of an Accounting Practice (MAP) Survey. This unique study is the largest and most comprehensive examination of firms’ financial health and practice management approaches and solutions. To enhance the survey’s usefulness, the results are broken down into seven defined CPA firm segments, from small practices with less than $200,000 in annual revenue to large firms with $10 million or more. The latest survey found that firms are indeed doing well, with many practices making the strategic decision to reinvest profits back into the firm to build an even stronger foundation for the future.

Small firms appeared to have a particularly bright future. Firms with less than $200,000 in revenues who completed the survey reported growth of almost 11%—up from 8% in 2014. What trends or decisions are powering small firm growth? Here are some key insights based on the survey findings:

Earlier Date for Information Returns Brings Penalty Risk

We are all now facing a new Jan. 31 deadline for filing Forms W-2 with the Social Security Administration and 1099-MISC (when reporting nonemployee compensation payments in box 7) with the IRS. The earlier deadline will allow faster matching of W-2 and 1099 information with tax returns, which helps combat identity and refund theft. Unfortunately, when something is done to combat identity theft, it sometimes means extra work for practitioners, and with this new rule comes increased risk of penalties for not timely filing so we urge you to act quickly.

 

Reflections on 2016: Diversity, Inclusion, Our Nation and Our Profession

As December draws to a close, I’ve been reflecting on the many ways difference and respect have been brought to the forefront in our communities and on the political stage this year. I’ve witnessed tragedies and heard disturbing rhetoric that have left many in our nation feeling unsettled, and even fearful. We cannot ignore these realities because they help shape our strategies for the future.  And while it may be difficult for some, we all must do our best to continue to move forward and lead with clear vision. It’s important to recognize that respect, inclusion and difference made real advancements in 2016, and will continue to do so in years to come.

With this in mind, I’d like to take a moment to highlight several accomplishments in the accounting profession that I am particularly proud of, as well as accomplishments within AICPA’s diversity and inclusion (D&I) initiatives.

 

5 to Watch: Trends and Predictions Shaping 2017

Our profession took shape more than a century ago, about the time a Scottish-born scientist named Bell was inventing the telephone, two brothers from Ohio were figuring out how to take flight and Henry Ford was creating his horseless carriage.

To say that things have changed a bit since then would be a comedic understatement. We’ve transformed the phone into an omnipresent digital assistant, soared far beyond the boundaries of this planet and figured out how to make cars drive themselves.

As the world has changed, so has our profession. We are strong and relevant today, because we anticipate and adapt to the changing needs of the clients and businesses we serve. As chairman of the AICPA, it’s so important to me that we maintain a laser focus on what’s next – because it is coming at us faster than ever.

From my conversations with CPAs and CGMAs across the country and around the world I’d like to share five disruptors that I see shaping the business environment in 2017. I would love to hear from you, too. Let me know in the comments what you are seeing and anticipating in the New Year.

CPA Exam Q1/Q2 2017 Score Release Timetables

The Q1/Q2 2017 score release timetable is now available. Score release timelines are updated biannually on AICPA Insights and on the CPA Exam website. For more information about score release and the scoring process, please visit the Psychometrics and Scoring page.

The National Association of State Boards of Accountancy releases the scores to candidates and state boards of accountancy based upon the target score release dates listed in the tables below.

Keeping it in Perspective: A Woman’s Take on the Profession

It’s amazing how much things have changed. Back in 2004, I was recruited by my adviser and changed my career from forensic accounting to financial planning. I can clearly remember my first day in the firm’s Monday morning training; I was the only woman in the group and the firm owner addressed us as, “Guys… and gal.” I imagine his limited experience with women in this role (the firm had only employed a few other women advisers) caused him to want to tread lightly. His effort to include me was sincere, but in the process he made me feel different. It may not be surprising to hear that many financial planning firms simply do not have a large number of female advisers on staff in 2016, but they were even more scarce in 2004.

Three Tips for Effectively Managing Remote Teams

With business continuing to expand globally, leaders need to exercise new management skills in order to effectively engage an increasingly remote and diverse workforce. <click to tweet> In an article for CGMA Magazine, Dan Griffiths, CPA, CGMA, director of strategy and leadership at Tanner LLC, says, “One challenge of managing decentralized workers is giving them a sense of inclusion. Their in-person interaction is limited, but there are ways to make them feel like part of the team.” Read on for three tips from profession leaders on effectively managing remote workers:

7 Book Recommendations for Not-for-Profit Leaders

Curling up in a blanket by the fireplace with some hot cocoa and a great book is one of the most relaxing ways to spend a winter afternoon. To help prepare for potential downtime over the holidays, the AICPA Not-for-Profit Section polled staff and volunteers to pull together a list of recommended page turners that will help invigorate you for the year ahead. Here are our top picks: 

Jennifer Brenner, Controller, World Vision recommends

• Primal Leadership: Realizing the Power of Emotional Intelligence by Daniel Goleman (2013)

This is a must-read for financial professionals to better understand different leadership styles and become an effective leader. The leadership teams at most not-for-profits are comprised of individuals from diverse backgrounds. For example, board chairs and executive teams may come from academia, scientific research, public policy or the medical field, and may not necessarily have a corporate or business background. This book affirms the importance of emotionally intelligent leadership and illustrates leadership that is self-aware, motivating and collaborative. 

 

Forging Ahead in Complex Times

In the following interview, AICPA President and CEO Barry Melancon, CPA, CGMA, reflects on the profession’s achievements in 2016, and looks forward to the opportunities 2017 will bring.

1) What do you see as the profession’s most significant accomplishments in 2016?

One of the things that has made our profession so strong and vibrant is our willingness to embrace change and adapt to meet evolving needs of the clients and businesses we serve. Today, change is happening at unprecedented speed and fundamentally reshaping the environment where we operate. That means we have to move faster, look farther down the road and over new horizons to anticipate and get ahead of what’s coming next.

We have met that challenge head on, and I would say that is our most important achievement this year. There are numerous examples – the effort to seize new technologies to evolve audit for the future. The work in cybersecurity to create a consistent approach to examination and report on an organization’s safeguards. The new version of the Uniform CPA Exam, which goes live in April 2017 and tests higher order cognitive skills. The launch of RIVIO clearinghouse, which transforms how private company information is exchanged. Our thought leadership and work with employers through the CGMA program to elevate quality in management accounting. And the new international association that members of the AICPA and The Chartered Institute of Management Accountants approved last spring will provide a broader and more powerful platform to advance public and management accounting around the world.

All of this work is critical to our ongoing relevance and our strong reputation as a beacon of insight and trust in a volatile, complex world. It keeps us moving along a path of progress.

Unclaimed Property: When Does the Auditing Go Too Far?

You know those gift cards you never got around to using? It’s possible they are now being counted as revenue by the state. Same goes for uncashed payroll checks and other financial instruments that were never claimed or used. States’ interest in unclaimed property as a source of revenue continues to grow. CPAs need to be extremely alert to state abandoned and unclaimed property (AUP) laws (which continue to evolve) and AUP reporting requirements to limit surprises related to an audit.

Find the Answers to Your Practice Management Questions

Do you have questions about the best practice management direction for your firm? Should your firm consider value billing? Is your firm’s revenue comparable to other similar-sized firms in your area? How much are other firms investing in technology? The 2016 AICPA PCPS/CPA.com National Management of an Accounting Practice (MAP) Survey has the answers. The profession’s largest benchmarking poll on practice management topics, which is conducted every two years, offers unique perspectives on the latest trends within seven defined CPA firm segments, from small practices with less than $200,000 in annual revenue to large firms with $10 million or more. The comprehensive data spotlights best practices for firms, identifies challenges and highlights how firms are tackling them. Practitioners can use the survey data to compare their own approaches with those of firms in the same region along with those with similar revenues. They also can compare their firms to others across the profession. Let’s look at some of the insights the latest survey has to offer. 

Professional New Year’s Resolutions

“A goal without a plan is just a wish.” — Antoine de Saint-Exupéry

As a CPA, commitment to lifelong learning is a key to your continued success. To ensure you are meeting both your goals and CPE requirements, it is crucial to spend time planning how you will build not only your technical competence, but also your networking and people skills.

What works for me is setting New Year’s resolutions for my career every year. I start by assessing my development needs and setting my goals.

Try these questions to get started:

• Are there skills I need to strengthen?
• Are there gaps in my knowledge?
• Do I want to provide new services to my clients?
• Is there a certificate or a credential I want to add to my professional profile?
• What do I want to achieve in 2017?

Leave Yourself Behind When Working With Clients

I once attended a workshop in which an established adviser shared a story from a conversation he’d had with one of his clients. The client was a young, affluent widow who decided she wanted to fulfill a lifelong dream to buy a condominium in her favorite city in Europe. While she could well afford the $2 million price tag, something was keeping her from pulling the trigger.

The adviser asked, "What is it that is really bothering you about this purchase?" After some deeper probing, she finally shared her issue: "It's just that I keep hearing my mother's voice in my head." (Her mother had died many years ago).

"And what is your mother saying?" he asked.

"She is saying that I am being frivolous with my money."

Make a List, Check it Twice: Sensible Holiday Shopping

Walk into any drug store, and you’ll be bombarded with holiday music insisting “‘Tis the season to be jolly…” and other calls for assorted cheer. And while the holidays offer plenty of opportunities for moments of merriment, fun and being jolly, they can also be a source of anxiety and financial stress for many Americans.

Consider me among those many Americans this year. I have eight nieces and nephews, a few young cousins, grandparents, godchildren, and my husband and two-year-old son on my list. Oh, and I’m having kid number two on December 27. Where to begin? I find it helpful to follow these 10 steps to stay on track while doing your holiday shopping.

1. Make a list, check it twice. A big, scary don’t-leave-anyone-or-anything-out list. This includes the office Secret Santa gift, a few bottles of wine for the neighbors, gifts you donate to places of worship or charitable organizations, stocking stuffers, and the various friends and family members you’ll be sending gifts to. Then, take a deep breath.

Five Experts Advisers Should Follow

When I think about why I love being a financial planner, the first thing that comes to mind is the relationships I have with my clients. A close second is the community of other planners around the country who are some of the brightest and most engaging people I know. I consider myself extremely lucky to have been able to meet and learn from so many of these people. I could write an entire book about everyone who has impacted my career, but here are five who I think you should know:

• Lyle Benson (@LyleKBenson) - Anyone who has been lucky enough to work alongside one of their parents will understand why I have my dad at the top of this list. I've been learning from him my whole life, but I'm certainly not the only person in our industry who has felt his impact. For years, he has been actively involved in the AICPA PFP Section and has put forth tremendous amounts of time and energy promoting CPAs who do financial planning. He is a driving force in our profession.
• Bob Veres (@BobVeres) - Bob is a true visionary in the financial planning world, and he has an uncanny ability to see the future. He's a passionate advocate for financial planners and isn't afraid to ruffle feathers to make sure the general public knows who we are and what we stand for. He hosts the Insider's Forum each year, and his monthly newsletters are available to all AICPA PFP section members.

5 Things You May Not Know About IRS Form 990

With over 300 pages of instructions and 300 possible questions to answer, the IRS Form 990, Return of Organization Exempt From Income Tax is a complex and extensive form. It is filed annually by most exempt organizations, including charities. Here are five things you may not know or may have forgotten about Form 990:   

1. It is a misnomer to call Form 990 an “income tax return.” There is no income tax calculation in the core Form 990 or within any of the accompanying schedules. The fact that it is not an income tax return becomes very important when attempting to apply the Internal Revenue Code to the filing of Form 990. Generally, where the Internal Revenue Code and the related regulations only reference an “income tax return,” the code or regulation in question will not normally apply to Form 990. It is very important, however, to remember that organizations subject to unrelated business income taxes (UBIT) file a separate Form 990-T, Exempt Organization Business Income Tax Return, which can be subject to the Internal Revenue Code and the regulations related to the filing of an income tax return.

8 Ways to Save Money at Lunchtime

Lunch prices are getting out of control. For instance, working in midtown Manhattan, it is a challenge to find lunch for $10 or less. That amounts to spending approximately $50 a week or $2,600 a year. Consider how these funds could instead be used to help you reach your intermediate or long-term goals— such as buying a home or saving for retirement.

According to a recent study by research firm NDP Group, the average lunch costs $8.36 nationwide. Because of this, Americans are starting to change their lunchtime habits. In fact, the same study reported that traffic at eateries during lunchtime is down 7% since last year. Below are some tips to help you stick to a lunchtime budget regardless of whether you choose to make lunch, buy it already prepared or join the (shorter) line at the sandwich, salad, and soup place near your office.

Blast from the Past: Lessons Learned from #AdviceAt25

Look back at your 25-year-old self — what would you tell her or him? Would you share career wisdom? Life advice? What’s the one thing you’d share that could impact a young person? 

Earlier last week, we asked our social media audience what advice they would share with their younger self using the hashtag #AdviceAt25. Here’s what they said:

Naveed Hussain

“Pave your own way, don’t lose yourself trying to be and look like others.”

Lisa Hastings

“Be brave! Hurdle yourself forward and ask for help along the way. Make the ask specific – an introduction, critical feedback – and cast a wide net of people in your circle.”

Dan Griffiths

“Invest even more energy into building a network. It's much like saving for retirement. Small investments made early on can pay huge dividends down the road and it requires huge investments later in your career to make up for a failure to make the small investments when you're just getting started.”

Text Me Not: Hidden Perils of Modern Communication for CPAs

Tweets. Likes. Posts. Not so long ago, those three words were not only unrelated, they had nothing at all to do with communication. But as communication methods and strategies have advanced, the speed of information has approached infinity. As a result, expectations have grown that responses will be similarly fast and, in many cases, extremely concise. There’s an old saying about the kind of person who is incapable of a simple answer: ask them what time it is, and they’ll tell you how the watch works. Today, tolerance for that trait is at an all-time low.

But while pithy responses can be good for personal communication, they might not always be suitable for business. For CPAs in particular, there can be consequences for choosing an inappropriate means of communication with clients on certain matters. Text messaging in particular is fraught with perils. I recently spoke with Gerard Schreiber Jr., CPA, principal at Schreiber & Schreiber in Metairie, LA, to discuss how communicating with clients has changed over the years, especially with regard to texting.

Six Tips for Valuation Experts in High Stakes Divorces

The headlines announcing Brad Pitt and Angelina Jolie’s divorce were just the latest in a slew of stories about celebrity splits. In fact, there are more than 800,000 divorces and annulments in the United States each year, according to government statistics. Based on my experience performing valuations in many high-profile divorces, much of the advice I’d offer to my fellow practitioners applies whether you’re working with Brad and Angelina or the divorcing, high-powered owner of a local business. Below are my top tips:

1. Determine what’s at stake and how location matters. The assets in a divorce will typically include cash, retirement funds or a home. Often, the largest asset at stake is a closely held business. That can be a professional practice – if one or both partners are, say, a lawyer, physician or accountant – or an operating entity, such as a retailer, wholesaler, manufacturing business or a farm. The complexity of the engagement can be affected by the jurisdiction in which the case is being heard and can depend on state law. Be prepared, as the legal environment may produce unexpected complexities.

Recipe for a Delicious Holiday, AICPA Style

Thanksgiving, Christmas, Hanukkah, Kwanzaa, New Years. Late fall and early winter are choc-a-bloc with holidays and, thus, opportunities to entertain and cook for friends and family. Some people like to stick with their tried and true holiday recipes year after year. Others are always looking for something new to serve. And if you've been invited somewhere as a guest, you might be looking for just the right thing to bring to a party or holiday gathering.

AICPA staff and affiliates gathered some favorite recipes from aunts, uncles, or in my case, my second grade class in elementary school. We hope this collection of old favorites is helpful—and tasty. And as one colleague suggested, if toiling in the kitchen isn't your thing, you can always make reservations!

Happy Holidays!

4 Critical Reasons Startups and Smaller Organizations Need Internal Control

I often hear from practitioners that many of their small business and startup clients lack an adequate and effective system of internal control. In fact, the Association of Certified Fraud Examiners’ recent Report of the Nations on Occupational Fraud and Abuse found that small organizations implemented anti-fraud controls much more sparingly than larger organizations. Additionally, the report found that the median loss incurred by small and large organizations due to fraud was the same, but that the impact on smaller organizations was much greater due to their smaller size. Since small companies such as startups are often hit hardest by fraud, it is critical that they develop adequate anti-fraud controls at their organizations. Outlined below are a few of the many significant benefits of a strong internal control system.

6 Ways to Ease Audit Workload Compression during Busy Season

With the start of busy season just around the corner, planning is on most practitioners’ minds. I have recently spoken with many professionals about ways they jumpstart their upcoming audits. Outlined below are some activities to begin now that will make your busy season a little less hectic.  

Ask your clients to fill out background information forms. If there have been changes to their management, ownership structure or board of directors, ask clients to document them before busy season begins. Also, if your client has entered a new market, they should note these changes as well. You can provide your clients with the prior year documentation and transfer information to the new form as soon as it is available.

Thank a Veteran Today, Help Veterans Year Round

It is relatively easy to take time out of your day to acknowledge our veterans—in person or on social media—and say thanks to those who bravely and proudly served our nation. There are some CPAs who have found ways to give even more to our veterans. AICPA Insights recently spoke with former AICPA Chairman Ernie Almonte, CPA, CGMA, who has volunteered extensively with Operation Stand Down Rhode Island, a veteran’s organization in his home state of Rhode Island, about his experiences.

AICPA Insights: Why did you get involved in working with veterans?

Ernie Almonte: I have always been interested in history.  The more I learned about history the more I realized the important role veterans play in our freedom. As a participant of the Marine Corps ROTC program in high school, as a son of a U.S. Marine veteran from the Korean War and a member of a family that has lost relatives and friends in various wars fighting for our freedom, I felt an overwhelming need to give back.

Top 3 Takeaways on FASB’s New Not-for-Profit Standard

Are you nervous about implementing the Financial Accounting Standards Board’s new not-for-profit standard? At 270 pages in length, it is understandable that one would find it daunting and would be unsure of where to begin. Even though the standard does not go into effect until 2018 for most not-for-profits, you and your clients need to be thinking about the standard and your implementation plan now.

To start my education, I reviewed this AICPA Insights blog post from FASB member Larry Smith that provides an overview of the new standard. I also recently attended the webcast, “Applying FASB’s New Not-for-Profit Financial Statement Standard,” which was hosted by the AICPA’s Not-for-Profit Section team. I learned some practical tips and received information I can share with my clients.

Here were my top three takeaways from an implementation perspective:

An Election Like No Other

“What do you make of the presidential campaign, Barry?” That’s the question I'm often asked by fellow CPAs and CGMA designation holders.

I have a simple refrain: It is an election like no other. And it may well matter more than any U.S. election before it for one reason. It comes at a time when the country is the most polarized it’s been in modern political history. People on both sides of the ideological spectrum feel distrust and anger at large institutions and government officials. So it’s fair to wonder if the new President and new Congress will choose to build bridges—or burn them. 

Regardless of your own political preferences, the outcome is likely to have a significant bearing on the accounting profession in the U.S. and beyond, our advocacy agenda, and our ability to shape legislation and regulation for at least the next four years.

5 Essential Controls for Charities during the Holiday Giving Season

For not-for-profit leaders, strong controls for fraud are especially important during this time of year. The unofficial kickoff of the charitable giving season occurs on Giving Tuesday, which takes place the Tuesday following Thanksgiving, Black Friday and Cyber Monday here in the United States. In my state, Minnesota, we have a “Give to the Max Day” to encourage giving to nonprofits and schools before Thanksgiving.  A 2015 Charitable Giving Report produced by Blackbaud noted that of the not-for-profits surveyed, 17% of their contributions were received in December.  

Here are five things small organizations can do to protect themselves and ensure that the influx of contributions received this holiday season support programs, not fraudsters:

5 Scary Tax Characters to Watch Out For

Halloween is my favorite holiday, bar none. Once a year, we all have license to use our imagination and be someone or something else. And beyond the goblins, pumpkins, ghosts and black cats, there is the absurd amount of candy floating around the stores and office. 

The late Vincent Price, an actor who unquestionably had the best horror movie voice in the world, said, “It’s as much fun to scare as to be scared.” Vincent, wherever he is, may be pleased to know something can spook the unwary taxpayer in the same way his voice could invoke fear and trembling: tax creatures like the ones listed below. The good news is that you can avoid or at least minimize these horrors if you start thinking about these things now.

• Count AMT (aka Line 45 on Form 1040) – Dracula could not have devised a better way to suck the money or refund out of your life than the alternative minimum tax. If your income reaches a certain amount, you must recalculate the tax you owe based on a higher income, one that does not have some of the deductions that helped to lower it. Devised as a tool to ensure that wealthy taxpayers could not use loopholes to avoid paying taxes entirely, the AMT now preys on taxpayers who are not so wealthy. The current AMT exemption is $59,900 for single taxpayers and $83,800 for joint filers. Talk to your CPA about ways to soften the impact and be aware that certain deductions act as triggers for the AMT.

CPAs with Clients in the Marijuana Industry Need to Consider Risks

On Nov. 8, voters in nine states will consider ballot initiatives to legalize marijuana – a move that could create new businesses that will need CPA services. However, conflicting federal and state laws mean that CPAs have to carefully consider the risks of providing services to these businesses. The AICPA spoke with Stan Sterna, vice president for Aon Insurance Services, the national administrator of the AICPA Professional Liability Insurance Program, and Mike Komoll, assistant vice president of professional service claims for CNA, the underwriter of the AICPA Program, to discuss key considerations for CPAs providing services to the expanding marijuana industry.

Which states are considering legalizing marijuana in November, and why might CPAs be interested?

Sterna: Five states – Arizona, California, Maine, Massachusetts and Nevada – will vote whether or not to legalize recreational marijuana, while four states – Arkansas, Florida, Montana and North Dakota – will consider legalizing medicinal marijuana. In the 26 states and jurisdictions where marijuana is already sold legally, businesses in this industry have increasingly sought out accounting and tax services. CPAs in any states that pass marijuana initiatives next week will likely start seeing similar requests, which makes sense when you consider the size of the industry.

3 Potential Financial Reporting Errors Found at Not-for-Profit Organizations

As a CPA who has been in public practice for many years, I know the challenges that not-for-profit organizations face in financial reporting, and, more specifically, in applying generally accepted accounting principles.

Financial statements provide a compelling picture of the not-for-profit entity’s activities. However, in my experience, there are potential financial reporting concerns not-for-profit organizations need to be aware of to make sure that picture is conveyed properly. Here are three errors that come to mind.

Tax Due-Diligence Checklist for Sharing-Economy Clients

People have been sharing services and property, and generating money from it, for years. For example, someone with a spare bedroom might have posted a note on a bulletin board at the local grocery store or advertised in the local paper to find a tenant. But do we understand the tax implications of the shared economy? That’s where CPAs come in.

Today’s technology allows for easier publishing and access to a wider pool of people for matching offers and acceptances. Using Airbnb or similar sharing websites, the owner with a spare bedroom will find that short-term rentals are relatively simple to arrange. Yet that same owner is unlikely to know the full tax consequences of this convenient rental, so it will be up to the tax preparer to ask the right questions.

Why CPAs Should Learn about Integrated Reporting

Integrated reporting <IR> is receiving a growing amount of coverage worldwide lately, from both academics and from the accounting profession, and this trend shows no sign of slowing down. Books, research articles, presentations and other publications that highlight the potential opportunities of integrated reporting are becoming commonplace. The International Integrated Reporting Council has developed a plethora of resources including case studies and reports that provide a solid introduction to this topic. But a fundamental question remains unanswered. In terms of day-to-day implementation and data that can be acted upon, what exactly is an integrated report, and what does it mean for the CPA profession?

What is it?

Four Steps to a Happier, Successful “Business” Retirement

As CPA financial planners and advisers, we spend a considerable amount of time addressing the technical aspects of IRAs, 401ks and defined benefit plans. We work to convert enterprise value into retirement assets. We consider diversification, funding strategies and tax implications.

Those issues are important, but it can be the personal and emotional aspects of helping your clients retire from their businesses that set you apart from other planners. Here are four critical steps to help you be a better partner to your clients who own a business.

Step One: Adjust the Conversation

The first step, and for many retirees the hardest one, is the mental adjustment of retiring after decades building a business and creating value. Then, one day, they sign a contract and turn those work responsibilities over to others.

3 Steps to Mitigate and Respond to a Security Breach in the Cloud

The AICPA is participating in National Cybersecurity Awareness Month with a series of blog posts to help CPAs understand the role they can play in addressing cybersecurity issues. This is our second post in this series. Our first post discussed low- and no-cost ways to protect data.

Much like their counterparts who run growing companies in virtually every industry, many accounting firm executives have their heads in the cloud. They have implemented, or are considering, cloud computing options for everything from data storage and networking to task automation and product delivery. Some firm executives see an additional opportunity: offering consulting services to help clients understand and use the cloud.

It’s clear that cloud computing provides proven advantages over on-premises options, such as savings, convenience and flexibility. However, the cloud also presents some unique challenges, including often complex deployment options, operational issues and substantial security concerns. Below you’ll find three steps to take to address cloud computing security.

Step One: Know the Risks

The first way to mitigate a security breach is to understand and prioritize the risks related to using cloud services. For accounting firms and their clients that use a cloud service provider (CSP), cloud-based solutions present the same risks as traditional information security, plus the risks associated with managing and governing a third-party service provider.

5 Tips for Becoming a Firm of the Future

Here’s a familiar scenario: A firm has been in business for decades, achieving success using a tried-and-true formula of providing high-quality work and great client service. As a new generation takes over and market demands change, however, the firm’s partners begin to wonder how they can grow the practice while maintaining the winning attributes that have made the firm what it is. They worry a major change will distract their team from the important business of serving clients—and eat up too much time and money.

That’s the situation my firm faced about five years ago. As the recession was coming to an end, the firm, which has been in business roughly 70 years, had about 25 people and around $3.5 million in revenues. Our culture had long been to work hard and play hard. We’ve held on to the spirit of camaraderie and the family environment our founders built, but as we moved forward into the millennium we hadn’t developed the internal structures we would need to manage growth. However, by making some strategic decisions, over the course of five years we have grown to a firm of 35 people and $5 million in revenues.

It’s a Great Day to Be a CPA!

As someone who grew up in the small farming town of Belmont, Wisconsin, the past year has been remarkable for me. I’ve visited more than half the states and met thousands of CPAs working in every professional accounting role you can imagine. And I’ve learned something from every one of them.

There’s nothing like talking with CPAs working with or in real businesses facing complex accounting and tax issues to understand what is important to the future of our profession. They understand we need to evolve to maintain our relevance. The confluence of complexity and rapidly evolving technology has accentuated the imperative for change.

We often discuss the four areas I spoke about at my inaugural address last October. CPAs want to modernize their services, which means adopting new technologies and being a step ahead of what the marketplace demands. They’re asking about everything from how auditors can leverage data analytics, to the latest standards from the Financial Accounting Standards Board and the impact Brexit will have on the work they do.

Something else they want to talk about, and the second area where we can shape our own future and ensure relevance, involves the speed in which we are developing new fields of expertise. These efforts are in response to the changing needs and requirements of our clients and employers. Today the world moves too fast to wait.

5 Low- or No-Cost Ways for CPAs to Help Slam the Door on Cybercriminals

The AICPA is participating in National Cybersecurity Awareness Month with a series of blog posts to help CPAs understand the role they can play in addressing cybersecurity issues. This is our first post in this series.

October is National Cybersecurity Awareness Month, but fighting cybercrime is a year-round battle. As experienced keepers of confidential information, CPAs are uniquely positioned to support cybersecurity initiatives for their firms, clients, or employers. But cybersecurity is costly, and budgets are always limited, especially in the public and not-for-profit sectors. Consider these five simple steps CPAs can take to help protect data without breaking the bank.

1. Know email scams and warn others. People are increasingly the weak link in organizations’ cyber armor. You know not to give your checking account info to an unknown foreign government dignitary. But what if you get an email from your CEO instructing you to wire funds for a deal that you know is about to close? This scenario was all too real last year for a finance employee who was tricked into wiring $730,000 to a bank in China, according to an FBI report. Since the FBI started tracking business e-mail scams in late 2013, it has compiled statistics on more than 7,000 U.S. companies that were targeted. Total losses exceeded $740 million.

3 Steps to a Secure Financial Future for Your Divorcing Clients

Anyone who has ever been through, or witnessed, a divorce knows that the pain of separating isn’t just emotional—it’s also financial. CPA financial planners may often feel at a loss as to what advice or guidance to offer distraught clients.

Let’s say your client Kate, age 50, calls in tears to tell you that her husband of 25 years, a high-level executive, wants a divorce.

“He wants to avoid using attorneys,” she says. “He made me an offer yesterday: He keeps all his retirement savings and I keep mine. I get the ski lodge; he gets the apartment in the city. We split cash and investments. I really don’t want to make him angry, but my own retirement will be so small. Is his offer enough?”

We all want what’s best for our clients and answering this complicated question will take some research. However, the most important factor is to avoid any conflict of interest. If you were advising the couple before the split, you may need a disclosure, a waiver or even a new engagement letter.

How Not-for-Profits Can Share Risks and Reap Benefits through Collaboration

“We are all here on earth to help others; what on earth the others are here for I don't know.” - W. H. Auden

I’ve spent most of my career in business development and have worked with organizations of all shapes and sizes, both for-profit and not-for-profit. From this vantage point, I’ve observed that leaders of social- impact organizations tend to be risk averse. This is because they feel pressure to maximize their time and resources on achieving the immediate needs of program service delivery. Often this pressure is increased when funders restrict resources to specific short-term projects.

In business, as in philanthropy, it takes long-term planning, time and resources to identify prospective partners and find mutual goals. There is an element of risk involved in sharing information and undertaking new business strategies together. One way that I like to describe strategic partnerships is by comparing them to a seesaw.  Participating organizations strive to balance the four R’s: Reach, Resources, Revenue and Risk.

5 Ways to Make the Most of Mentoring

A successful mentoring relationship, like all relationships in life, is about give and take. But in order to be successful, both mentor and mentee need to give genuine input. It isn’t as simple as the mentor giving and the mentee taking. Considering the value of mentoring, what can mentees do to guarantee they’re getting the greatest advantage from the relationship?

Be sure to opt in. Everyone’s schedule is busy, and mentoring may seem like something that’s easy to delete from a crowded calendar. It’s a mistake to underestimate the importance of support, however. Among other things, a mentor can help you assess your priorities, which can ensure your time is spent wisely and more productively.

Introducing a New Framework for Reporting on Cybersecurity Risk Management

The list of companies is growing. Businesses, organizations and governmental entities have suffered damaging publicity—and faced lawsuits—due to data breaches, forcing them to make cybersecurity a priority. It’s not surprising to hear, then, that 95% of CGMA designation holders said their companies were concerned about cyberattacks, according to an AICPA survey. Organizations and their stakeholders are not only seeking ways to address current and potential threats but also to gain assurance and communicate about the efficacy of their own efforts to identify and manage the potential effects of cybersecurity risks.

Stepping up to help our fellow CPAs meet businesses’ and clients’ needs, the AICPA is proposing a way for businesses to demonstrate due care and build stakeholder confidence in their cybersecurity risk management efforts. The Cybersecurity Working Group of the AICPA’s Assurance Services Executive Committee (ASEC), in collaboration with the AICPA’s Auditing Standards Board, is developing criteria and guidance that companies can use to communicate, and we can use to report on entity cybersecurity risk management efforts.

3 Steps to Maintain Independence When Preparing Financial Statements

Consider this scenario: A longtime tax client of yours approaches you. They are interested in starting an online gaming platform with a colleague and have already landed a significant contract. The future of this business appears bright. A local bank has agreed to extend them a $75,000 line of credit, contingent on certain ratios and providing monthly financial statements and copies of all tax filings. You client asks you if you would be interested in performing nonattest services on their behalf. They are looking for a CPA to prepare the new venture’s monthly financial statements for the bank so the bank can monitor compliance with its ratio requirements, while the client maintains the books.

The current loan covenant only calls for a complete set of financial statements, classifying the engagement as a nonattest service. You do not need to be independent to prepare your client’s financial statements, however, based on the new venture’s growth trajectory, you believe that at some point in the future, attest services will likely be needed. Because of this, you decide to take certain steps to maintain your independence in case your client’s needs change, and you are asked to provide a service that requires independence down the road. Below are three steps you take to maintain independence.