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Form 1040 income tax return

The AICPA provides tax practice tools to help members elevate their practices and maintain the highest ethical standards. The AICPA also advocates sound tax policy and effective tax administration.

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Switching to a C corp? Think twice about it.

C corpMost people probably don't even know what toothpaste they buy; they just recognize the box on the shelf.

--Charles Duhigg

The recently enacted P.L. 115-97, known as the Tax Cuts and Jobs Act, will have a significant effect on tax planning for clients, but many CPAs are also investigating what it will mean to their own firms. Best to listen to the advice of American Pulitzer prize-winning reporter and best-selling author Charles Duhigg on the process; make sure you know what’s in the tax planning “box.”

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Engagement letter stories — when they hurt and when they worked

Engagement letterAs a risk management professional at CNA, professional liability insurance carrier for nearly 25,000 CPA firms, I am often asked if engagement letters are worth all the effort. The answer, based on my personal and CNA’s claim experience, is a resounding YES!

I’ve experienced firsthand the value these letters bring to the table. When an engagement letter is used, and a claim arises related to that engagement, the losses are typically less severe (meaning less expensive) than if an engagement letter had not been used. But what means more (especially to a CPA) than more money in your pocket? Many professional liability insurance carriers provide premium credits or other benefits for firms that use engagement letters.

If it’s not enough to just trust the numbers, consider the following experiences of CPA firms that have or have not used engagement letters.

One that hurt — no engagement letter meant higher risk

A CPA was engaged to prepare income tax returns for a small business and its owner for many years. The owner regularly spoke with the CPA about his plans to sell the business and ultimately retire. One day, the client did just that and moved away.

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Busy season cheat sheet: 8 considerations to make it easier

Busy season finish lineTime is always a precious commodity during tax season, but especially so this year. On top of starting to prepare 2017 tax year returns, CPAs are working to figure out exactly how the tax reform law affects clients.

Before you start pulling your hair out, take a deep breath and remember the wise words of Eleanor Roosevelt: “This too shall pass.” Then, check out the AICPA resources that not only make preparation a bit more convenient, but will also help you impress your clients by answering their questions before they even ask them.

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Government shutdown: What you really don't want to see during busy season

Government shutdown

The primary function of the government is - and here I am quoting directly from the U.S. Constitution - 'to spew out paper.'

-Dave Barry

Humorist Dave Barry can be quite silly, but it’s not so funny when faced with a government shutdown like the one that took place October 1-17, 2013. That was the last one before the shutdown that took place Friday at midnight. In 2013, government operations resumed after a continuing resolution, or CR, was signed into law.  And sometimes, well, we just “need that paper.”

Since accountants like to talk numbers, the 2013 16-day shutdown was the third-longest government shutdown in U.S. history. It trails behind an 18-day shutdown in 1978 and a 21-day shutdown 1995-96.

Monday, Congress voted to approve a temporary funding bill – the fourth since September – effectively reopening the government. But it’s a stopgap measure. And it’s possible we’ll see another shutdown on February 8. This is a critical time for CPAs who’ll be in the midst of filing season.

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Next step for tax reform: Busy season

Tax reformTax reform is now law.

A few weeks ago, Congress passed H.R.1, a tax reform bill known as the Tax Cuts and Jobs Act. Its full title is “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.” On Dec. 22, President Trump signed the bill into law.

As busy season approaches, it’s important that CPAs are aware of how this bill affects their clients. Some provisions apply retroactively, including reducing the threshold for deduction of medical expenses from 10% to 7.5% of adjusted gross income (AGI) for a two-year period beginning in 2017. This means some clients may be able to deduct more from their 2017 taxes or qualify for the deduction for the first time.

Individual tax rates changed, effective 2018-2025 tax years. These are now set at 10%, 12%, 22%, 24%, 32%, 35% and 37%. The IRS will issue guidance soon, meaning we could see changes to paychecks as early as next month. Business clients could also see their tax rate lower with the new flat 21% corporate tax rate. Previously the corporate rates ranged from 15% to 38% and were graduated based on taxable income.

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Tax reform: Steps to implementation

Tax reform 2“Lobbyists are in many cases expert technicians and capable of explaining complex and difficult subjects in a clear, understandable fashion.”  – John F. Kennedy

I once told a new acquaintance that I was a lobbyist, and he looked at me like I was the devil. Really. So, I greatly appreciate President Kennedy’s complement as generic as it might be. And in the case of tax reform, I wish it might be true. Frankly, finding anyone who knows the answers would make me happy. What am I talking about?

As you might have followed in the news, a comprehensive tax reform bill has moved a few steps closer to the president’s desk. It’s possible the bill will be signed before Christmas.

But the president’s signature is not the end of the story.

As we saw in 1986, the signing of the tax reform bill will set off a regulatory and legislative chain of events that will take years to complete.

After signing, the Joint Committee on Taxation will likely issue a “committee report,” or general explanations of the final bill. This will offer insight into how the new bill will affect revenue.

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Preparing for busy season after natural disasters

WildfiresYour clients are counting on you to be up-to-date on the latest in tax. This means keeping them informed on how major storms, floods, and wildfires could affect their returns.

We saw the hurricane headlines, and they were shocking. Three major storms stood out for their ferocity and damage. Hurricanes Harvey and Irma killed more than 100 in the United States and caused more than $150 billion in property damage. Puerto Rico was hit hard by Hurricane Maria. The island lost all power and nearly all cell service. In some places, these services have yet to be restored.

And it wasn’t just hurricane season that was unusually active. Wildfire season has been one of the worst on record. Almost 9 million acres have burned in wildfires across the western states.

And the year isn’t over just yet.

In November, TEC Chair Annette Nellen, CPA, CGMA, spoke on this topic and offered advice at the National Tax Conference in Washington, D.C. Here are some of the key considerations she shared to get you and your clients ready for busy season.

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The Gramm-Leach-Bliley Act still applies to CPAs

ID theftThe information encoded in your DNA determines your unique biological characteristics, such as sex, eye color, age and Social Security number. -  Dave Barry

The fight against identity (ID) theft is starting to bear fruit: The number of taxpayers who reported that they were victims of identity theft to the IRS dropped in 2016. This means 376,000 fewer taxpayers reported ID theft, a drop of 46%. Also, the IRS stopped 883,000 tax returns with confirmed identity theft links from getting through the system in 2016. That helped lead to a 37% drop in stolen returns that year.

Dave Barry is a funny guy, but ID theft is no laughing matter. Fraud detection is still one of National Taxpayer Advocate Nina Olson’s “most serious problems” as indicated in her 2016 Annual Report to Congress.

Olson sites a 2015 Treasury Inspector General for Tax Administration (TIGTA) report that said although the IRS’s fraud detection efforts were able to stop between $22 billion and $24 billion of false refunds from being issued, identity thieves were still able to steal approximately $5.75 billion in the 2013 filing season.

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Beyond tax: Extending your success

Financial planningAs we near the end of October, tax practitioners across the profession collectively breathe a sigh of relief. Another tax season is in the books, and CPAs find themselves ready for a vacation or a change to their tax-centric practices.

We’ve been there, craving balance as another tax deadline passes. In our search for an alternative, we discovered a complement to our tax skills that has reenergized our careers and opened new opportunities for our clients and practice.

If you find yourself in need of more than just a vacation after October 15, here are a few things we’ve learned as we’ve recently transitioned our careers from tax compliance to advising clients on all aspects of their financial lives, including estate planning, retirement planning and beyond.

The benefits to your practice and clients are vast.

If you’ve been in practice for a while, you probably have a roster that includes many long-time clients. Over the years, clients may have approached you for your thoughts on their plans for retirement or the best way to plan their child’s education. If you’ve had these kinds of conversations, you’ve been doing personal financial planning (PFP) without even realizing it. By formalizing your PFP services, clients will benefit from your holistic understanding of their full financial picture, and you’ll improve both your practice and lifestyle by:

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How to Fail in Your Tax Practice

FailMany people are intimidated when meeting with professionals such as doctors, lawyers and CPAs. While CPAs don’t see them undress, their detailed financial situation is laid out and for some can be even more uncomfortable.

So a professional with a good bedside manner (or deskside in this case) has an advantage. The ability to listen, understand, and empathize puts people at ease and forges a bond early in the relationship. The professional may also be inspired to work harder to find the best result. This bond may lead to friendship or at least the feeling of friendship, and who doesn’t need more friends?

 

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Fighting His Way Out of IRS Penalties. Literally.

BoxingIRS penalties and fees have caused a fair amount of consternation among taxpayers in the past, but in what might be a bout for the record books, we could witness the first time a taxpayer literally fights to pay what they owe and reduce penalties.

Floyd Mayweather, widely regarded as one of boxing’s greatest, apparently owes the IRS unpaid 2015 taxes. The boxer’s recent tax court petition seeking an installment agreement with the IRS might represent his first foray into the super heavyweight category.

Mayweather’s 2015 fight against Manny Pacquiao reportedly earned him as much as $220 million, and likely represents a significant portion of his income to which the taxes are due. The $22 million Mayweather reportedly owes is tiny relative to his estimated net worth, but net worth doesn’t need to be liquid. And as penalties and interest accrue over time, it’s a safe wager the bill could amount to a knock-out blow.

The boxer has requested in his petition that the IRS await payment until his August 26 fight with Conor McGregor, which he claims will provide the liquidity he needs to meet his tax obligation: the fighter’s guaranteed purse from the 2015 Pacquiao fight was $100 million, and his upcoming fight with McGregor is expected to earn him a similar amount. Again, keep in mind, that’s the guaranteed purse—win or lose. The final amount to the winner is a composite of various factors that could boost Mayweather’s take as high as $400 million.

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Discounting Tax Services: Good or Very, Very Bad?

DiscountPeople love discounts, coupons and the perception of saving money, even when they actually aren’t. But there is another side to the discount, and that’s the product or service provider’s. When they discount their offering, they are losing money, right? Not always.

The Good

The discount is a common and time-honored marketing tactic. It can be a powerful tool. There are a few ways discounts are used to the benefit of the provider. A few of these include: loss leader, introduction/new business and reconciliation.

The loss leader is a simple concept: by heavily discounting an offering (sometimes to cost), you get clients in the door where they will hopefully purchase additional, non-discounted offerings or upgrade from the discounted offering to a superior one that is full price.

In product or service introductions, either the product or service is new, or the client is. The idea is that the discount is used to lure the client in, give them a taste of how good the offering is, and hopefully turn them into a regular customer who pays full price.

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Scenarios in Quarterly Estimated Tax Payments

Estimated tax paymentsWhen people learn you’re a CPA, one of the first things they assume is that you “do taxes.” Often, they have a “quick tax question.” If you are a tax practitioner, you know a quick tax question is an oxymoron. It’s nice, however, to be able to translate some of our CPA lingo into easily understood information, both for clients and friends. One issue that stands out to me is: when and why does it makes sense to consider making quarterly estimated tax payments? 

Individual estimated tax payments – a primer

The government likes to get their money on a regular schedule. For most people, that means withholding from a paycheck. But if that’s not your situation, the IRS has estimated tax penalties in place that preclude you from waiting until April 15 every year to pay the balance due. In order not to be subject to those penalties, during the year you must pay at least 100 percent (or 110 percent depending on your level of income) of your previous year’s tax liability OR at least 90 percent of your current year’s tax liability. And unless there is a special circumstance where your income fluctuates during the year, those payments are expected to be paid in quarterly installments. 

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Reconciling Tax Reform and Reconciliation

Congress is not an ATM

-Robert Byrd, Former US Senator

Tax reformThe year is halfway through, but it doesn’t feel like we’re halfway to tax reform. Don’t get me wrong – tax reform might still happen. But as one Hill staffer said to me, “Health care is sucking the oxygen out of Washington.”

I’ve talked about the connections between ACA repeal-and-replace and tax reform several times on the video updates found on the Tax Reform Resource Center. In a nutshell, repeal of the ACA-related taxes, such as the Net Investment Income Tax (NIIT), before tax reform is undertaken, would make the tax reform baseline score less expensive.

The work on tax reform continues nonetheless, and the AICPA has testified at both a House Small Business Committee hearing and a Senate Small Business and Entrepreneurship Committee hearing. We’ve also supported the INVEST Act of 2017 (S. 1144). This tax reform legislation, introduced by Senator John Thune (R-SD), would simplify certain tax rules for small- and medium-sized businesses and their owners.

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Qualified Charitable Distributions Reduce Tax Bills

RMDCPAs are the frontline in mitigating the impacts of Required Minimum Distributions (RMDs)

CPAs have the opportunity to be proactive in helping their clients take advantage of the tax break for charitable IRA rollovers, technically known as QCDs (qualified charitable distributions). After my IRA update session at the AICPA ENGAGE conference, this topic generated the most questions of everything I discussed. It’s an easy provision to follow, and it’s even easier to know exactly which clients qualify.

The topic of QCDs is an important one for CPAs, because it’s an opportunity to provide real value to clients who are unaware of the provision. One of the most heavily emphasized messages from the ENGAGE conference was how to offer competitive services in the future. The answer always came down to relationships based on knowledge resulting in higher value services. QCDs fit perfectly into this.

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3 Tax Technologies You Shouldn’t Ignore

Cloud technologyOMG CLOUD. Cloud, cloud, cloud. You’ve heard it. Repeatedly. By now you probably even know what it means. But running a successful tax practice is about more than acknowledging the technology du jour. It’s about knowing which technologies make the most sense for you, and using them to their fullest potential. But no matter your firm’s size, market or specialty, here are three tax technologies you shouldn’t ignore.

Cloud-Based Servers/Software as a Service

An IT department is a luxury many small- and medium-sized firms can’t afford. Even in larger firms, the demands of day-to-day management of client systems can overtax an IT department to the point where managing servers is a time-draining hassle, not to mention expense.

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Tax Refunds and Financial Responsibility

Tax refundThe very same week our accountant (my father) informed us we would be getting a $1,550 tax refund (thank you, 2016, for the purchase of our first home and birth of our second child), my husband and I discovered a sizeable leak in our garage roof. So now, instead of using that money for a home repair we actually wanted to make, or to boost our savings account, or add to college savings plans, or more likely, to help pay for two kids in diapers and daycare, we’re buying a new flat roof. Lucky us. But this episode got me thinking—what do most people do with tax refunds? And what do CPAs advise they do? Is there a happy medium between fiscal responsibility and fun?

Aim for No Refund at All

First and foremost, the goal, according to most CPAs, is to not get a refund. While many people love getting a large chunk of change every spring, it indicates you’re overpaying and essentially giving the government an interest-free loan. Getting no refund at all means you’re paying the IRS exactly the right amount. Of course situations change from year to year (see my home purchase and birth of kid references above) so you might not always get it right.

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21 Songs to Motivate You for the Busy Season Homestretch

Shutterstock_233268223The end of March is here, which means that the end of busy season is just a few weeks away. Congratulations! You have accomplished a great deal so far.  I know it is easy to get discouraged at this point. You are likely feeling sleep-deprived and stressed about your looming deadlines. How will you ensure that you will finish this season strong? Maybe you stay motivated by thinking about the time you will have to catch up on your favorite shows, work out at the gym, or relax with family and friends once April 18 rolls around. Or maybe you push through to the end by turning up the music.

Whether you look for tunes with inspirational lyrics and catchy beats or songs that promote focus, there are numerous options out there, so why not create a motivational playlist?

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Why the ACA Executive Order Doesn’t Void the Rules for CPAs

Be sure you put your feet in the right place, then stand firm.

--Abraham Lincoln

ACAOn Inauguration Day, President Trump followed through on his campaign position regarding the Affordable Care Act (“ACA”) and issued an Executive Order (“EO”) with the stated intent of minimizing the economic burden of the Patient Protection and Affordable Care Act (ACA) pending repeal. Sec. 2 of the EO Addresses removing certain burdens from both the government and taxpayers surrounding compliance with the ACA. 

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Here’s the Skinny on Driver’s License Information for State Tax Returns

LicenseAs you have probably heard, several states have added a request or a requirement for a driver license number (or other state identification number) to be entered into the tax software system for the return to be electronically filed. As practitioners, you likely understand the reasoning for the request – this information helps states confirm the identity of taxpayers, which aids in reducing identity theft. However, the logistics of obtaining the information and explaining this requirement to your clients may prove to be difficult.

Here are some frequently asked questions (and answers) to help you with this issue.

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The Pieces to Make Tax Reform Happen are Lining Up: Knight to H3?

Shutterstock_534418180

"Today only happens once in a lifetime. Make the most of it."

-Michael Ray, Country Music Singer

It’s hard to believe that it’s been seven months since I blogged about tax reform; I guess I was distracted by IRS service issues. But here we are again and it looks like the stars are aligning for a once-in-a-lifetime opportunity for tax reform. Or in my case, a twice-in-a-lifetime opportunity.  I was around in 1986 for that monumental tax act and 15,000 changes later, here we are again.  Our legislative process is part of the price we pay for democracy and that isn’t all bad.

(Chess and the legislative process have a lot in common, hence the reference to Knight to H3, the dangerous but noble move Ron Weasley makes to achieve checkmate in the movie, Harry Potter and the Sorcerer’s Stone.)

Magic, however, is not one of the optional responses to the test I’ve given in my tax reform blogs:  “What will be the greatest driver of tax reform?”

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Top 10 Resources for the 2017 Tax Season

FootballAs 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.

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ID Theft: Two Prevention “Hassles” Worth Your Time

ID theftEven 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.

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Tax Reform in the 115th Congress?

Shutterstock_184356782 (1)Tax reform has been actively studied and discussed for the past six years by the 112th, 113th and 114th Congresses. At the start of the 112th 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.

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Earlier Date for Information Returns Brings Penalty Risk

Time for ActionWe 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.

 

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Unclaimed Property: When Does the Auditing Go Too Far?

Money and lockYou 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.

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Text Me Not: Hidden Perils of Modern Communication for CPAs

Woman on iPhoneTweets. 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.

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5 Scary Tax Characters to Watch Out For

ZombieHalloween 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.

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Tax Due-Diligence Checklist for Sharing-Economy Clients

UberPeople 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.

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7 Key Communication Points for Your Clients with Extended Returns

SevenAs the final extension deadline of October 15 (for individual clients) approaches, it is hard to believe it is almost time to flip the calendar to another year. Although finalizing your client’s 2015 Form 1040 is the most pressing item on the agenda, it’s important to focus on year-end planning. The good news is that with the tax legislation signed last December, tax planning should be easier since many provisions were extended through 2016 (or longer) or made permanent.  However, this is a presidential election year, and there is uncertainty about how a political change might impact tax reform and/or legislation.

Let’s focus on the good news (and what we can do for our clients). Here are seven topics to discuss with your clients as you wrap up their 2015 returns that will provide them the extra client service that they expect and deserve.

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Partnership Audits –Be Careful what You Wish For?

CrossroadsFor years, everyone involved with audits of partnership tax returns (tax professionals, the IRS and the taxpayers themselves) have complained about the often complicated and unclear Tax Equity and Fiscal Responsibility Act (TEFRA) rules. Disputes between the IRS and partnerships, as well as between the various partners, often dragged on for years. 

That is  if the IRS even bothered to start an audit – audit rates for partnerships were historically low compared to similar size corporate entities. Once an audit finally was completed, the IRS would face the onerous task of tracking down and collecting the assessments from each partner, often having to dive through dozens of tiers to find these ultimate taxpayers. Naturally, this resulted in difficulty collecting the additional tax, making the whole exercise seem futile to some. A better way was needed. TEFRA had to die.

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Gwen Jorgensen: From Tax Accountant to Olympic Gold Medalist

Gwen jorgensenIt’s not every day a tax accountant from Wisconsin wins a gold medal at the Olympics. But on Saturday, Aug. 20, Gwen Jorgensen, formerly of the EY corporate tax group in Milwaukee, became the first U.S. woman to do just that. Crossing the finish line with a time of 1:56:16, Jorgensen won gold in the triathlon.

Jorgensen, who earned a master’s degree in accounting at the University of Wisconsin-Madison and passed the CPA exam, didn’t even take up triathlon until after college. Jorgensen was a runner and swimmer in college, and was approached by USA Triathlon looking for college athletes they thought would be successful in the sport. At the time they contacted Jorgensen, she was still in school and had an offer from EY. She turned USA Triathlon down, but they convinced her to at least try triathlon as a hobby while she worked for EY. And, thus, a grueling schedule began: waking at 4 a.m. to ride her bike to the pool, swimming, and getting to the office at 8 a.m. After work, Jorgensen trained some more. And found that she loved triathlon.

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Taxing Emotions: Death, Section 754 Elections and Serving the Client

Estate Planning 2Confronting the cold monetary and business realities of an estate is extraordinarily difficult in the midst of mourning. Even a well-planned estate’s complexity could mean the process drags on for months or even years, drawing out not only raw emotion but also tax exposure. Careful planning and a detailed explanation of your clients’ wishes are a must if you want to save their loved ones additional suffering.

My mother’s estate was moderate in terms of her personal holdings, but she also participated in substantial limited partnerships that passed to my brothers and me upon her death. While her home and personal effects were relatively simple to liquidate, the partnerships were a different matter.

There was no provision for a buyout of my mother’s interest upon her death. We found ourselves in business with people who didn’t know us, and had conflicting ideas about the future of the entity itself. Like so many partnerships, ours rarely had K-1s prepared in time to allow us to file our individual returns in advance of April 15th. We faced an indeterminate future of filing expensive extensions, estimating our individual tax liabilities and possibly increasing our exposure to an audit.

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5 Tips to Maximize Productivity - Both at Home and at Work

Shutterstock_438684127“Amateurs sit and wait for inspiration, the rest of us just get up and go to work.” ― Stephen King 

Whether it be racing to the office to conquer the business world, or managing all of our other daily commitments, we work hard every single day. And it’s not easy to stay productive with conflicting priorities. 

To keep you on track (and your sanity intact), below are five tips to inspire productivity at home and at work. 

(1) Don’t Be Afraid to Say “No.” 

Apple co-founder Steve Jobs put it the best. ”Focusing is about saying no.” From a professional standpoint, in order to truly do your job and meet your objectives, every time someone asks you to do something, you need to evaluate whether you are the best person to be doing that job, or even whether it should be done at all. Many of us are people pleasers and want to help, but saying “yes” is not necessarily the best thing for you or the organization. 

Continue reading "5 Tips to Maximize Productivity - Both at Home and at Work" »

Modernizing Fax Filings with the IRS


Shutterstock_156974060Federal and state agencies, including the court systems, are modernizing by allowing the electronic filing of petitions and other court documents. For example, Alabama, Texas, Illinois and Missouri have e-filing systems for court petitions. In 2014, two federal courts (2nd and 9th Circuit Courts of Appeals) piloted an e-filing program for all courts in which the user is authorized to file electronically. The program is expected to become national in the next few years.

The IRS is also modernizing, although not as fast as many practitioners (or the AICPA) would like. Calls to the IRS and cases can be routed to any IRS employee or office all over the country. We are seeing more appeals conferences conducted by telephone with the various service centers instead of in person and expect Skype-type conferences to become more common. For many years, the IRS has electronically processed bank account and wage levies on delinquent accounts. Now, the IRS is also able to issue electronic summonses to eBay and PayPal.

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Keeping the Cash Method Promotes Simplicity and Economic Growth

We know what we are, but know not what we may be.

   -William Shakespeare

Followers of my blogs know that I periodically write about tax reform, but it’s been a while. So, I’ve decided to dust off this quiz – here we go:

What will be the greatest driver of tax reform?

  • Bipartisan compromise?
  • Congressional leadership changes?
  • Current events?
  • Revenues?
  • Good tax policy?

CompassI know you’re thinking: “Ed, are you forgetting that it’s a presidential election year and you recently predicted that tax reform won’t happen before 2018? Does it really matter?”

Well, it does. (And there may be more than one correct answer to my quiz.) Our profession must remain vigilant on what is being discussed now to safeguard businesses (including our own) and taxpayers later on down the line.

In its current iteration, tax reform has been top of mind on Capitol Hill for about five years. Hearings, task forces, discussion drafts and bills. Lots of conversations. It’s part of the normal vetting process and quite important. It’s how we separate the wheat from the chaff and arrive at much better legislative solutions; a process that continues today even if we “know not” the result.

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The Powerful Impact of Women in Accounting and Tax

Superwoman CPAJane Doe, CPA, also known as Super Woman, woke up this morning at 5 a.m., jumped on her computer to address some urgent work emails, proceeded to pack her children’s lunch, get them out of bed (easier said than done), dressed, and off to school – and then worked all day, leading her team and conquering the business world. She runs from one business meeting to the next, finally stopping only to make dinner for her family, help her oldest child with his homework, bathe her two-year-old, and put both kids to bed. Oh, and she also helped her husband with his PowerPoint presentation, fed the pets and paid the household bills. It’s now 9 p.m., time to jump back on the computer and wrap up more business.

Does this sound familiar? We all know women like this in our accounting profession – and these women should be celebrated.

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States Moving to Conform Tax Due Dates with Federal Law

ConformityAs you recover from yet another grueling tax season, the optimist (and realist sometimes) in me says next year will be better with fewer practitioner frustrations. After many years of AICPA tax policy and advocacy efforts, Congress enacted several AICPA-supported federal due date changes and a de minimis safe harbor of $100 of income/$25 of withholdings for corrected Form 1099s that take effect for 2016 tax returns (2017 filing season).

New Federal Due Dates

As described in detail in the AICPA summary chart, these federal due date changes should provide a more logical workflow next year. Starting with 2016 returns, business entity investors’ Schedules K-1 are due before the investors’ returns are due, and foreign account information (FBAR) is due (and can be extended) when the individual returns are due. Here’s a brief recap of the new federal tax return deadlines: 

  • Partnership and S corporation information returns are due March 15, providing investor Schedule K-1 information to their partners and shareholders (including corporations) before the investors’ returns are due.
  • Tax returns for calendar-year corporations, individuals, trusts and estates, and FBAR are due on April 15.
  • The extended due date for partnerships continues to be September 15, along with corporations (until 2026). The extended due date for trusts and estates is September 30.
  • The extended due date for individuals and FBARs (and starting 2026, for extended corporations) is October 15.

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Hitting it Out of the Ballpark with the IRS’s Future State

Baseball IRSBaseball is ninety percent mental and the other half is physical.

-Yogi Berra

Spring time.  The first busy season is done – that’s when CPAs can catch their breath, relax a little, maybe even catch a baseball game. Speaking of baseball, CPAs are in a league of their own, no question about it, and our Tax Section helps get you there. Baseball also brings me back to my childhood when I was a huge Washington Senators baseball fan. But the future for the Senators was never bright; thoughts of the playoffs, let alone the World Series, were out of the question. But now with the Nationals in town, the future is much brighter.

I’m hoping that’s the case with the IRS as well.  Unlike Yogi Berra’s concept of accounting, the numbers have just got to add up for the IRS and, well, the IRS has dropped the ball in service.  We all know that, including the IRS. With two strikes against them in the realm of public opinion, the IRS has unveiled its Future State Initiative. You may know from reading my recent blog on IRS service levels that I thought the signs were starting to look good in terms of possibly starting to move the IRS service needle back in the right direction. 

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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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7 Ways to Make Busy Season More Fun


MassageAlthough it can be a daunting and stressful time, busy season is also an extremely lucrative and productive one for tax practices, one that can be just as rewarding for them as the holidays are for retailers. What may be overlooked, however, is that it can also be a great time to build a sense of camaraderie and team spirit because a shared challenge can bring people together. That’s especially true if you add in some enjoyable activities that help maintain your team’s positive outlook and demonstrate your concern for their well-being.

To find out how CPAs are keeping the season upbeat—and even adding some fun to it—the AICPA recently engaged our social media audience and asked two questions: "How does your firm show appreciation for staff during busy season?” and “You get three wishes: What are the best ways to show staff appreciation during busy season?” We then put together the tips below based on their responses and what we’ve heard from other practitioners.

Be nice. This is the easiest and least expensive stress reliever available, so be sure to make the most of it by expressing appreciation for hard work and complimenting or publicly acknowledging outstanding efforts.

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Why “Extension” is not a Four-Letter Word for Tax Season

Tax extensionsUp until January, I worked in public accounting and remember all too well the feeling when the calendar flipped to March; it seemed like all I was hearing from my individual clients was that they still had not received their 1099s from their brokerage accounts. It seems every year the compression of when these 1099s are received and the deadline to file gets closer and closer. Not to mention the frustration of getting those amended 1099s right after the client’s tax return has been assembled. Talk about adding fuel to the fire!

There are strategies and processes you can implement to encourage your clients to bring in all of their tax return data (with the exception of the late 1099s) so that you will have everything ready to go and can quickly finish the return once the 1099 arrives. However, despite these well intended strategies, the reality is that it feels nearly impossible to move all the returns that have complicated, late arriving 1099s through the entire process before April 18th (or April 19th in the case of residents of Maine or Massachusetts).

Continue reading "Why “Extension” is not a Four-Letter Word for Tax Season" »

ACA: Step Away from that Form 1095 ‘Til You Read This

“Never do today what you can as well do tomorrow” – Aaron Burr

Proceed with cautionThis statement, sometimes written in the context of postponing an unpleasant task, was originally expressed by our country’s third vice-president to acknowledge that in certain circumstances, a premature action may be regrettable. Alexander Hamilton would agree.

The same can be said for reporting on the Affordable Care Act: CPAs may regret completing any related forms without first taking some precautions. We are in the business of helping our clients with a full range of accounting and tax needs, so offering services in this space seems to fall neatly into the area of tax compliance. This is a compliance matter, but the nature of the material required to prepare these information returns adds an additional level of complexity. CPAs who aid clients with the completion of these forms need to consider the applicability of privacy rules under the Health Insurance Portability and Accountability Act (HIPAA).

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Advice from a CPA Client - How to Break the News That They Owe

Tax billLet’s just get this out of the way up front: I’m not a CPA. I’m a pictures-and-words kind of guy. Numbers never loved me. They were my bully in school. To this day, the sight of long columns of numbers causes me all manner of gastric discomfort. So when I started my own business and realized there would be bookkeeping involved, naturally I addressed the challenge by running to my CPA.

Now, I have to pause here a moment to say my CPA is the most patient guy in the world. A sample of things he said to me over the years:

“No, Adam, you can’t deduct Warcraft.”

“What do you mean you LOST the checkbook? Don’t you use Quicken? Wait—you DON’T TRACK EXPENSES???”

“No, a 1099. Not a W2. No, that’s a K1—no, not a K9, a K1. Look, just hand me the box of papers and I’ll figure it out. Go home.”

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Update on Taxes and Terrorism: Why Clients’ Data Could Become Vulnerable

Data breachSince this article was initially published in December 2015, the FBI has attempted to compel Apple, Inc. to defeat its own encryption for the purposes of accessing the information on the iPhone of Syed Rizwan Farook, perpetrator of the mass shootings in San Bernardino in December of last year. Apple has thus far refused to obey a federal court order to provide access to the phone, based in part on a first-amendment argument that code-writing constitutes free speech. A federal court in California will hear arguments on March 22, but promises from both the Justice Department and Apple, Inc. to appeal any decision against their respective cases mean the dispute is unlikely to conclude at that time. The case is certain to have far-reaching implications for the nature of digital security both here in the United States and abroad.

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What’s a Hooraycation, and How Can I Go on One?

GalapagosGetting Away from it All After Busy Season: Trips for Any Budget

As busy season finally draws to a close, your senses dulled by long nights staring at a monitor and routing through piles of disorganized receipts, you might understandably be thinking about taking a well-earned break. Recharging your batteries, getting acquainted once again with those people who share your house and enjoying a few days of relaxation mean different things to different people, but in the end it always comes down to budget. Here are three family-friendly vacation types you can plan today, designed for modest, moderate and extreme budgets.

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Writing Off Expenses on a Martian Farm: The Trouble with Oscar-Nominated Clients


LeoIt’s Oscar season, and this year’s list of nominated films includes many characters you definitely wouldn’t want to meet in your reception area on a frantic Saturday morning. As busy season gets into full swing, here are some potential nightmare clients from current and past Oscar-nominated movies that you’ll be happy you don’t have to face in person.

Hugh Glass, “The Revenant.” The bearskin coat kind of says it all, doesn’t it? It’s certainly going to set this man apart from most of the usual clients. Glass is a fur trapper who’s left for dead and faces extraordinary hardships during a long, harrowing journey through the wilderness. At some point he wins a tough fight with a grizzly and uses its skin as a coat. Understandably, he’s not a big talker, so it will be hard to determine his long- and short-term financial goals. You also have to expect that much of his documentation for income and expenses is hard to locate.  

Mark Watney, “The Martian.” Talking about working with a client remotely! This takes virtual services to a new level. And while you may have wrestled with the complications of filing for U.S. expatriate or foreign clients before, when you deal with interplanetary tax situations you’re really breaking new ground. Another wrinkle: Where and how are you supposed to report information on income and expenses from Watney’s Martian farm?

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As Estate Basis Deadline Looms, Executors’ To-Do List Spirals

To do listUpdate: Since this blog post was published, the IRS extended the due date for Form 8971 basis reporting from Feb. 29 to March 31. For more informaiton, see Notice 2016-19.

Who thinks being an executor (or trustee) of an estate is a glorified and envied position? Have you always dreamed of being an executor and having that wonderful title – and I guess a few fees?  Have you ever served as an executor or trustee and wished to never be in that role again? 

In case you didn’t know it already, executors have many duties and responsibilities, including:

  • Setting up a bank account for incoming funds and paying any ongoing bills;
  • Maintaining property until it can be distributed or sold, and then distributing assets and disposing of other property;
  • Dealing with the probate court – filing the will and an inventory of the estate’s assets with the probate court, and representing the estate in court; and
  • Dealing with liabilities and taxes – providing notice to creditors, paying the estate’s debts and taxes, and, starting at the end of February, preparing and filing estate basis statements with the IRS and beneficiaries.

Continue reading "As Estate Basis Deadline Looms, Executors’ To-Do List Spirals" »

Absurd Tax Break Requests: Darth Vader and Other "Clients" Weigh In

Darth Vader‘Tis the season that tax practitioners must break it to clients that no, you can't write off that trip to the Bahamas as a medical expense (yes, we understand it reduced your stress), claim the Golden Retriever as a dependent or tell the IRS that Botox use is a legitimate business expense because it helps you sell more homes. To put this annual ritual of wishful thinking in perspective, perhaps it would help to consider what types of tax breaks some of our most famous characters in film, TV and literature would try to claim.

Below are excerpts from focus group interviews with these characters talking about the tax breaks to which they feel that they are entitled. It seems as if they didn't all get along, and maybe it had something to do with that good versus evil thing. Or maybe it was the "but my tax break makes more sense" philosophy that can infect anyone, even the good guys.

Focus Group 1

Facilitator: Thank you all for coming here today to share insights on how the tax code could be improved and made fairer for you. Our group includes Frank Underwood, from “House of Cards,” Sheldon Cooper, star of “Big Bang Theory”, Superman, and Cruella de Vil, of “101 Dalmatians” fame. President Underwood, we'll start with you:

Frank Underwood: Thank you, it's a pleasure to be here. I think with so many people needing help, let's eliminate any provisions that benefit people like Jackie Sharp. She's the Assistant House Minority Whip and married to a surgeon – now why would they need a tax break? You really need to take a look at what she's doing. And, I think, perhaps, I should get a deduction just for being me. Maybe even named after me.

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IRS Service Levels: Don’t Give Me Excuses!

CartoonHonest disagreement is often a good sign of progress.

-Mahatma Gandhi

Abysmal service levels; I hear you, I really do. It’s been a long time since I’ve been in practice but those busy season scars are still with me. I half joke but the memories don’t go away completely.

So, another busy season and the prospects for easily – wait, reasonably – representing your clients with the IRS appear to be no better than they were last year, when I blogged several times about service issues. In May, for example, you may have read about the AICPA governing Council resolution directing the Institute to intercede on a long-term solution to the service crisis. We started those conversations but, frankly, the environment in Washington got worse. Hard to believe, but it did. In October, House Oversight and Government Reform Committee Chair Jason Chaffetz (R-UT) joined 18 members of the committee in introducing an impeachment resolution against IRS Commissioner John Koskinen. The resolution is pending before the House Judiciary Committee.

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