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Form 1040 income tax return

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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).

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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.

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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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Top 10 Tax Resources for the 2016 Tax Season

Top 10 Tax Tips 2016Have you “lost” that shiny new FitBit, depleted the family inventory of holiday goodies and now scrambled through the house trying to dig out Aunt Lucy’s famous fruitcake? Rather than investing $2,500 in a standing desk with a treadmill, it may be time to consider a new resolution!

A more practical choice may be to make a commitment that will yield positive results for the next few months. Commit to your staff, your clients, your tax practice and your professional goals during the upcoming tax season.  The AICPA wants to help you jumpstart that success by pointing out useful tools to ensure you flex your tax season muscles.

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A Lesson from 2015: Help Clients Avoid Unpleasant ACA Surprises

ACA surprisesWe made it through last year’s tax season thinking Affordable Care Act (ACA) matters were over with until the 2016 filing season, but we were wrong. Individuals who did not indicate on their Form 1040s that they had received the Advanced Premium Tax Credit were surprised to get an IRS notice at the end of 2015 requiring repayment of the credit.

The IRS identified many cases where taxpayers took the credit, but then did not indicate that they did so on their Form 1040. Tax preparers, unaware of the advance credit, calculated it again on the 1040, so taxpayers were effectively paid twice. The IRS caught these double dips, assessed the difference, and included the 20% accuracy penalty (Section 6662) in addition to repayment of the advanced premium tax credit and interest.

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It’s Just Hitting and Catching (and 1040s and W2s and 1099s and 1095s)

BaseballBaseball offseason: the time roughly between Halloween and Valentine’s Day when Major League Baseball teams take a break from hitting, catching and fielding. While there may be not peanuts, hot dogs, cracker jacks, or $12 beers being peddled at baseball stadiums across North America, it does not mean the teams are idle. In fact, in the days lead up to February 18, 2016 (when pitchers and catchers report!), teams are busy preparing for the coming season, the same way tax professionals are gearing up for the impending busy season.

This work behind the scenes is what ultimately lays the groundwork for a successful tax (or baseball) season. Without adequate preparation, both baseball and accounting organizations would find themselves struggling mightily to keep up with the demands of their professions.

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Tangible Property Wins Demonstrate AICPA’s Advocacy for Taxpayers

AdvocacyThe AICPA continually advocates on tax matters to improve tax policy and administration for tax practitioners and taxpayers alike. Though the issues and challenges we grapple with could be difficult, our goals are simple:  transparency, simplicity and certainty.  Taxpayers and practitioners have scored a major victory for certainty and simplicity as AICPA-supported provisions in legislation will soon become law.  Taxpayers will have to deal with fewer late and amended Forms 1099 that have $100 of income or less impact, fewer identity theft situations due to Forms W-2 will soon have truncated Social Security numbers, and clients will be able to rely on several permanent rather than temporary tax credits.

We also achieved more simplicity when the small business tax community received two big wins to make the “repair regs” more taxpayer friendly.

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Taxes and Terrorism: Why Data Could Become Vulnerable

Data breachThe world watched and listened in horror recently as reports of terrorism in Paris and San Bernardino, Calif., dominated the airwaves. In what is becoming a regrettably familiar scene, countries around the world joined the victims in mourning. But as the days wore on, attention increasingly turned to the covert, encrypted digital communications of the perpetrators. The government has begun questioning the wisdom of unbreakable encryption as a result. It might all seem a million miles from the concerns of tax practitioners. But is it?

In the wake of potential terrorist attacks, government officials are again addressing the complexities of obtaining intelligence data in an encrypted world. John Brennan, Director of the CIA, recently outlined these complexities in a talk at the Center for Strategic and International Studies in Washington:

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BEPS: FATCA on Steroids or Much Ado About Nothing?

ArbitrationBy now, most CPAs have heard of FATCA (Foreign Account Tax Compliance Act), which requires foreign financial entities to report information on their U.S. account holders to the IRS.  In return, the U.S. (in some cases) is sharing information on accounts held in this country by foreign nationals with the individual’s home country. The goal of this information sharing is to ensure that individuals are reporting all their income properly and paying the appropriate amount of tax.

Now the focus is shifting to tax avoidance by multi-national businesses. In early October, the Organization for Economic Co-operation and Development (OECD) released the final reports from their two-year project targeting Base Erosion and Profit Shifting (BEPS) activities. BEPS occurs when businesses take advantage of differences in countries’ tax laws, tax treaty provisions and (occasionally) special arrangements with a local tax authority to minimize their total worldwide tax liability. Some of the ways businesses do this include:

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Tax Extenders: Been There, Done That

Hamster in a wheelWhat has been will be again . . . There is nothing new under the sun."

      - Ecclesiastes

It seems like writing about expiring provisions is a regular rite of passage and frankly, it doesn't feel like the religious experience alluded to in Ecclesiastes. The last time I spoke with you about tax extenders (Nov. 28, 2014), I asked: Whats the million dollar topic on membersminds these days? The choices were the following:

  1. The IRS
  2. The congressional lame duck session
  3. Extenders
  4. Starting busy season
  5. Government appropriations
  6. The Keystone Pipeline
  7. Immigration reform
  8. Bipartisan cooperation in Washington
  9. All of the above

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Need Help? 3 Simple Steps to Find CPA Talent

Hiring“I just cannot decide which one of these tax manager candidates to hire”…

Says the rare CPA firm these days.

It is no surprise to CPAs in tax practice that finding and keeping talented staff is no easy task. Gone are the days of a waiting area filled with navy suits, briefcases, and overly qualified CPAs, each praying he or she will be the one chosen for the position. I imagine, instead, a desperate employer fumbling through Internet job sites, which serve as a digital wall too tall and wide to see around, with talented people all over the world on the other side, yet often seemingly unreachable to the employer.

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Change is Scary, but Can Inspire Progress

ChangeEarlier this year, the AICPA decided to phase out the “free/no CPE” option for attending section-sponsored webcasts. This “mixed model” was creating CPE compliance concerns so it was replaced with a selection of free events with CPE while maintaining the event archives for viewing content without CPE.

When the Taxation Team learned that the change would also apply to the Tax Power Hour (TPH), a monthly practice management webcast series, we were concerned about the impact it might have on our members. However, the team quickly came to realize this change was a blessing in disguise.

We had become complacent and had not really followed our own advice: always spend time working on your business, not just working in your business. We had stopped working on our business and were completely consumed with working in our business of serving members with new fresh resources. I’m falling on my sword with a public ‘mea culpa’ in the hopes that our members can learn from our mistakes with this valuable resource. As writer Phyllis Theroux said, “Mistakes are the usual bridge between inexperience and wisdom.

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Deflategate, Binkygate & Disclosing Open Tax Years

DeflategateNot many things capture our collective attention like investigations into controversial cases. The NFL’s investigation into underinflated footballs, or the ongoing allegations of corruption in FIFA, to whether or not David Beckham is a shoddy parent for allowing his daughter to continue to use a pacifier at age 4 are just a few examples. The accounting profession has its investigations into controversies too. A recent example is the investigation the Center for Plain English Accounting (CPEA) conducted about the applicability of the disclosure requirement of open tax years associated with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The CPEA issued a report on this investigation in March.

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Due Date Changes– A Way Station on the Journey

Imagination is the only weapon in the war against reality.
― Lewis Carroll

JourneyIt started like most things we do: AICPA members needed it done. One after the other, after the other, and on and on, we heard from members who were tired of receiving complicated K-1s on October 13, 14 or even 15. “Please help us” they asked, so we turned to our Tax Executive Committee and said: “what makes sense?” And so, a multi-year, imaginative effort to craft a solution ended in a “way station” of success on July 31 when President Obama signed into law the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (H.R. 3236).

The law provides for a more logical flow of a broad array of returns. The main idea was to have flow-through returns completed before the returns in which the information is reported – Forms 1040 and 1120; give folks enough time to breathe and digest the flow-through information. And so calendar-year partnerships are due March 15 and calendar year C corporations are due April 15. Partnership returns are due a month earlier than they had been, but six-month extensions are now available. Other fixes were made, too, to Forms 990, 1041 and 5500. Also, the due date for FinCEN Form 114 (FBAR) moves from June 30 to April 15, but for the first time, taxpayers will be allowed a six-month extension.

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Making the Next Tax Season a Better One

Tax lessonsReflections on Tax Season

As we head into the second part of the 2015 filing season (with the 2016 season not far behind), some thoughts come to mind. Many practitioners felt as though recent tax law changes and related guidance was vague, late and not well supported. As a result, the 2015 filing season was more demanding than previous seasons, with uncertainty surrounding the final “repair regulations,” complex financial products and late receipt of client 1099s and brokerage statements.

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“Courteously” Connecting with IRS Service Needs

Phone cut offWords have no power to impress the mind without the exquisite horror of their reality.

                        —Edgar Allan Poe

Courtesy disconnect. You may have heard about it. The telephone hold times during this past filing season were so long that the IRS hung up on callers when the hold time reached two hours. Callers were warned they were about to be dropped — hence the courtesy disconnect. 

We heard from so many members about IRS service issues that we conducted a survey of all AICPA members to find out what exactly was going on  correctly — and to give everyone an opportunity to be heard. The survey, conducted right after busy season, included a question about courtesy disconnects. Ten percent of respondents were courteously disconnected once; 12 percent twice; and 17 percent disconnected three or more times. Give our members credit, though. Thirty-nine percent indicated they were too busy to hold on for two hours so they courteously disconnected themselves. 

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Baby on Board? 7 Tax Tips for Expectant (and Hoping to be Expectant) Clients

Connor 10 monthsIn simpler times, all you needed to welcome a new baby into your family was love and an empty drawer in which he or she could sleep. In 2015, babies are expensive and modern parents need a lot of gear: diapers, cribs, strollers and car seats—not to mention child care. The list can seem endless. And, it all adds up fast. When my husband and I were expecting our son Connor, now 10 months old, our first trip to Buy Buy Baby left us dazed and concerned about how we would afford all of it.

The good news is, there are more ways than ever to offset the considerable costs related to having a child. If your clients are expecting or planning to have a child, the seven tax tips below might help.

Infertility Treatments

For couples facing infertility (roughly 10 percent of the U.S. population), costs can start mounting long before the much-coveted positive pregnancy test. In fact, couples who require medical assistance to conceive often get hit with a one-two punch—the emotional pain of infertility and the fear of not being able to afford treatments.

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Wanted: Guidance for Bitcoin Tax Compliance

BitcoinOne of the most popular crypto-currencies available today is Bitcoin. Launched in 2009, this digital currency is similar to real currency in that it holds value which can be used to buy goods and services. More noticeable, however, are some of the key differences between Bitcoin and real currency:

Bitcoin operates independent of a central bank;

Bitcoin does not have legal tender status by any government; and

Bitcoins are treated as property by the IRS for tax purposes.

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A Key Step that ID Theft Victims May Overlook

Background checkThis year, taxpayer identity theft took a maliciously clever turn: phony tax returns were filed that looked very much like the taxpayers’ previous years’ returns. Standard pattern deviation software would not catch this type of filing. How could this happen?

It turns out that rather than just using stolen names, birthdates, street addresses and Social Security information to file tax returns with made-up numbers, criminals used the stolen information to access the taxpayers’ previous returns to make up believable numbers to file for tax refunds. The criminals were successful in about 100,000 out of approximately 200,000 attempts to acquire taxpayer information on the Get Transcript section of the IRS website, which requires other personal verification questions that only the taxpayer is supposed to know.

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Tax Reform Fatigue Got You Down?

Tax reform_stressed taxpayerFINALLY! This is the year that we get tax reform done. More than 26 years since the last tax reform, the stars are finally aligned: the Democrats and Republicans in Congress and the Administration all agree the tax code is too complex and needs to be fixed. Oh wait, that was 2012, and surprisingly (not) tax reform did not happen, but Washington will get it done in 2013. No, of course that did not happen either. Clearly tax reform would not happen in 2014 because it was a mid-term election year, but just wait until 2015, that will be the year for comprehensive tax reform, because after all, we now have one party leading both houses of Congress. OK, maybe not comprehensive reform in 2015, but you just wait until 2017…that will be the year!

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Nanny Tax 101: Managing Employer Obligations at Home

Nanny TaxesOne of the most important decisions working parents will make is deciding who will get the honor of taking care of their little one during the day. My husband and I decided to hire a nanny to watch our sweet little boy, Henry. We liked the idea of Henry getting excellent one-on-one care from an experienced caregiver, and daycare can present challenges for us in terms of picking up and dropping off our son each day – we may be parents, but our career demands still exist. Hiring a nanny worked well for our situation, but there are certainly administrative and tax responsibilities to consider when making this decision:

Nannies are household employees

Though most families want to consider their nanny an “independent contractor” to avoid costly payroll taxes and the associated administrative duties, nannies are household employees. The instructions for Form 1040, Schedule H are pretty clear on this matter.

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Who’s on Your (Fictional) Client Wish List?

Good WifeReady for some peace and sunshine in your life? In a recent blog, we speculated about TV characters who would make truly awful clients (Walter White, members of the Walking Dead, you get the picture). Now we are focusing on fictional clients who could really take the stress out of life. Which one of these would be your dream client? 

Here are our top picks:

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In the News: CPAs Provide Gift Tax Guidance and Cyber-Security Tips

Shutterstock_124401508CPAs serve as trusted advisers and provide their clients with expert guidance on a variety of topics. It’s no surprise that they are frequently cited by the media for their expertise in areas such as tax, financial planning and even cyber security best practices. I’ve summarized a few recent examples of CPAs helping people make informed decisions about their financial lives.

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Help Us Improve the “Service” in the Internal Revenue Service

Man on hold with IRSIt is no secret that IRS service during this past tax season plunged to a level that I can only describe as unacceptable.  The anecdotes from members keep coming in, and from what we hear, the predicted 53-minute average wait time to reach someone on the IRS Practitioner Priority Hotline is not so much an average as it is wishful thinking. That prediction came from IRS Commissioner John Koskinen, who said in November that the IRS will try “to do as well as we can. As well as we can is still going to be miserable.” 

Taxpayers trying to get through to a representative are not faring much better as discussed in recent news reports and shown in the chart below. In its annual report to Congress, the National Taxpayer Advocate deemed this to be the most serious problem facing taxpayers. 

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Potential State Tax Law Changes on the Horizon

In and out of focusAs we get ready to put away our snow shovels, gloves and winter coats, and take out the sandals and sunscreen (yes – we probably should be using it all year), Congress and many state legislatures are considering some important tax changes. The AICPA and state societies are closely monitoring these issues and ensuring that the profession’s voice is heard:

  • State Sales Tax on Professional (Accounting) Services

With states searching to either expand their revenue base or reduce reliance on income taxes, several states are considering proposals to expand their sales tax to cover professional services, such as those provided by CPA firms. So far this year, 11 states (California, Connecticut, Hawaii, Indiana, Maine, Maryland, Mississippi, Missouri, Ohio, South Carolina, and Virginia) are considering the issue. Recently, Pennsylvania Gov. Tom Wolf (D) proposed a sales tax expansion that would include accounting services, but professional services provided to a business would be exempt.  The AICPA continues to work with state CPA societies and our profession partners to try to stop these proposals from becoming law.

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Due Diligence Reminders for Tax Extensions

Tax formOur hours get longer as we approach the downhill stretch of filing season, and it gets more tempting (if not mandatory) to file an extension for many clients. The proper preparation of an extension involves more than the entering of numbers on the extension form. And, the demands of filing season sometimes take over and quality control procedures and professional standards are overlooked in an effort to get everything filed.

This year will be especially complicated with Affordable Care Act items, a late start with extenders, many late documents from third parties and a culture that expects convenience and increasingly instant results. But the AICPA Code of Conduct, Circular 230, AICPA Statements on Standards for Tax Services (SSTSs) and the Internal Revenue Code (IRC) all still need to be considered in the preparation and filing of extensions for clients. The applicable standards include:

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Snow White Meets the IRS and Other Fractured Fairy Tales

Fairy tale imageIf you have ever watched the television show Once Upon a Time (one of my favorites) you know that it offers some compelling twists on popular children’s stories. Peter Pan author J.M. Barrie was probably rolling in his grave when his main character, a lighthearted kid who just doesn’t want to grow up, emerged as an evil teenager, but at least a relatively happy ending followed. 

Watching the show and working for the world’s largest association of CPAs got me thinking:  what would our beloved fairy tales be like if a CPA were to write them and perhaps play a role?  Here is my best tongue-in-cheek guess. Let us know if you have others you’d like to share.

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What Employers Assume about the ACA Can Hurt Them (and Staff)

Healthcare WordleThe Affordable Care Act is here to stay and continues to challenge CPAs with many unanswered questions and some mind boggling confusion. Every time I think I understand the ACA, rules change and interpretations contradict themselves. Despite the high frustration level, our own firms, our companies and our clients depend on us to guide them.

As a CPE discussion leader for the AICPA and others, I am continuously challenged by participants who complain about leaving class with more questions than answers on ACA. This situation is not about to resolve itself.

When the law was passed in 2010, the knee jerk reaction for many employers was: “We'll just cancel our health insurance plan and pay the penalties.” This is not a good answer. Take my own CPA firm as an example. We employ about 35 people and do not have to offer affordable health insurance since we have fewer than 50 full-time equivalent employees. Although Full-Time Equivalent Employee is defined three different ways in the ACA, our firm is definitely exempt from penalties.

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Rules and Resources for ACA Due Diligence

Due diligenceThe filing season is upon us and the question practitioners are asking themselves is “What due diligence steps are necessary for getting Affordable Care Act information from clients?”

The ACA provides a new challenge to practitioners in preparing 2014 returns, which will require more due diligence and effort to comply with these new rules.

The IRS, the AICPA, and others have provided many resources to practitioners on understanding the filing requirements of the ACA. In addition to these resources, practitioners should note the due diligence requirements under Circular 230, the AICPA Code of Professional Conduct, and the AICPA Statements on Standards for Tax Services that provide enforceable standards for AICPA members:

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CPA Potential Nightmare Clients: Walking Dead or Game of Thrones?

Petyr BaelishCould you use a break these days? Many of us turn to the tube when we need a mental break, but eventually our minds drift back to the office. Perhaps you have considered what it would be like to have the characters from your favorite television shows as your clients. We put our heads together and came up with the following list of television characters whom we think would be challenging clients.

Walter White, Breaking Bad. Have you ever had a client who was, say, a mild-mannered high school chemistry teacher, but you still felt there was something just a little off about him? White has built a meth-dealing empire in order to provide for his family in light of his terminal cancer diagnosis. Has he filed taxes in recent years? Are his financial statements in order? Does he have an estate plan? You might well be nervous to ask these questions, given the guy’s fairly hostile intensity. “I am the danger,” White proclaims at one point, and it would seem smart to believe him. 

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Due Diligence and ACA: A CPA Raises Some Tough Questions

ACA blog 1Editor’s Note: Last January, Janet Hagy, CPA (and AICPA Tax Section volunteer) wrote a popular blog about her concerns regarding new rules for health reimbursement arrangements and their impact on her staff. We asked Ms. Hagy to give us an update and also discuss the Affordable Healthcare Act compliance concerns she has as a practitioner for the current tax season.

What I have learned in the last year about the ACA adds extra concerns to this already complicated tax season. We have two major compliance challenges right now – coverage documentation and standalone health reimbursement arrangements (HRAs). Otherwise, penalties, higher fees and more frustration could be waiting for many of us.

The first issue is that we as CPAs have sign-off on whether our individual clients had the required health insurance for each month in 2014 for all household members. We are probably not going to receive any 2014 forms 1095-B or 1095-C from employers or insurance companies substantiating what our clients tell us about their coverage, since these forms are voluntary for 2014 and do not become mandatory until 2015. 

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How the New Congress Might Affect the CPA Profession

Capitol2Meet the new Congress. Same as the old Congress? That remains to be seen. The 114th Congress opened on January 6 with 74 new members of the House and Senate, 104 women – more than ever before, and the largest House Republican majority since 1929. Those are the numbers, but let’s look at what they mean for the CPA profession.

Our profession’s core services are greatly impacted by the legislators and regulators who set policy and standards. The November election brought many changes and several new faces to Washington. One thing that did not change, however, was a strong CPA presence. I was very pleased that nine CPAs were reelected to the House. I know that these nine individuals, as well as other CPAs, whether as elected officials or active constituents, will continue to provide crucial experience and guidance. In light of the new representatives, staff members and committee chairs in the Congress, we have been reviewing our advocacy and education efforts on initiatives affecting the profession and the public.

We expect Congress to focus on certain issues in 2015. Here is a brief summary of the more significant ones.

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Top 10 Tax Resources for the 2015 Tax Season

10 tax tipsA mother tries to get her son out of bed in the morning to go to school, and says, "Come on, lazy head, get up. You're going to be late.” But he remained in bed, burrowing deeper under the covers. Finally, she pulled him out, and he said, "Mommy, I can't go to school. The kids throw sticks and stones at me, and they call me names." "But you have to go anyway," she said.  "Why?" he asked. "First of all," she said, "you're 50 years old. And, second, you're the principal."

Your clients hopefully don’t throw sticks at you, but you are the CPA and like the principal, you need to show up, right?  So fight the urge to burrow - listed below are some popular tools from the AICPA to help you.

(By the way, credit for that joke goes to former NBC president Michael Gartner, who included it in an excellent speech on the 10 Rules for Life at my college commencement. Good luck prying that date out of me.)

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4 Tips for Turning Tax Season Lemons into Lemonade

Tax- lemonsRaise your hand if every article on the upcoming tax season has left you reconsidering your choice of profession? The messages are everywhere and are not painting a rosy picture of what tax practitioners can expect. Well, I promise not to drudge up ACA, repair regulations, foreign accounts or countless other changes - enough has been said on those. Instead, I have a few ideas that you can try the next time you spot a tax season lemon.

Whether your firm is big or small, gone completely high-tech or still doing everything manually, there are always opportunities for improving efficiency, exploring new service lines, reinforcing your value to clients and raising your fees. This lemonade recipe has four ingredients, and simply requires a notebook, a plan and a commitment to try something new.

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AICPA President and CEO Looks Ahead to 2015

In an interview with CPA Letter Daily, AICPA President and CEO Barry Melancon, CPA, CGMA, reflects on the accounting profession’s successes in 2014 and discusses the opportunities and challenges of 2015. Below is an excerpt from the interview; for the full interview, watch the accompanying video.

 

 

 

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Going out on a Limb for Tax Extenders

Tax blogAre we there yet?  Are we there yet?  Are we there yet? Are we there yet?

~ One of my grandsons

What’s the million dollar topic on members’ minds these days? It’s always a multiple choice with me so here you go:

1. The IRS

2. The congressional lame duck session

3. Extenders

4. Starting busy season

5. Government appropriations

6. Affordable Care Act compliance

 7. The Keystone Pipeline

8. Immigration reform

9. Bipartisan cooperation in Washington

10. All of the above

(Ed, why is “starting busy season” on your list?  When you were in practice, did you look forward to starting busy season?  And isn’t bipartisan cooperation in Washington an oxymoron?  What were you thinking?)

OK, fair enough, maybe not starting busy season, but busy season is a key to a successful practice year, and getting through it with fewer gray hairs wouldn’t hurt. (By the way, take a peek at our recent Tax Power Hour (for Tax Section members) for some tips.) 

I wish it were bipartisan cooperation, but the obvious answer is “extenders.”  We’re hearing from lots of members and rightfully so. Over 50 provisions expired last December.  Our tax advocacy team has been talking about those provisions on Capitol Hill for over a year.  And we recently sent in a letter about them.  IRS Commissioner Koskinen even asked for a copy of the letter to tout with members of Congress because of the IRS’ interest in getting off to a smooth and early start to filing season. Truth is, energy and immigration policy aren’t my thing but they really are intersecting with tax policy on Capitol Hill this year.  So what's the scoop?

The talk about quick passage of extenders is being replaced by congressional interest in smoothing the way for the Keystone Pipeline; indeed, legislation has passed in the House and Senate that the President has indicated would be vetoed (and they do not have enough votes to override the veto). And the President has acted on immigration issues through executive order; the Republicans have said such unilateral action could result in legal action to stop it.  And if that weren’t enough, there’s other legislation, such as the Terrorism Risk Insurance Act, that requires congressional attention; and even talk about letting the continuing resolution, the temporary government funding mechanism, expire on Dec. 11. It may not be a likely result but even a remote possibility of a government shutdown leading up to tax busy season is not good!

There has also been quite a bit of talk on dealing with extenders, which is good news.  Piecemeal or blanket extension?  One year or two? The House has been interested in the permanent extension of some provisions and a temporary extension of the remaining provisions, and the Senate leans “blanket.”  And lots of groups are posturing for something to happen - one broad coalition of business groups has urged Congress to act right away lest uncertainty and instability be injected into the marketplace.  Even outgoing Ways and Means Chairman Dave Camp has said he thought the Democrats were acting in good faith.

But some would like to see provisions wither away on the vine, for example, retroactive extension of the decades old wind production tax credit has garnered a long and vocal list of opponents. And the President recently warned he would veto a congressional deal in the works, contending that it benefits corporations more than families.

However, there is still hope and I’m a glass-half-full type of guy so let me go out on a limb and give you my predictions (OK, maybe they’re wishes):

  • Congress will enact a two-year extension of the 2013 extenders - one year retroactively - during the lame duck session.
  • Congress will also pass another continuing resolution to fund government though busy season.
  • IRS will expeditiously finish the forms and complete programming and get things off to a smooth start.
  • The President and Congress will quietly work towards a bipartisan solution to immigration, energy issues and other items that need attention.

And a giant duck will land on the end of the limb I just went out on . . . is that a crack, I hear? (Ed, that wasn't just your grandson asking if “we're there yet;” it was all 400,000 of the AICPA’s members.)

Edward S. Karl, CPA, Vice President of Taxation, American Institute of CPAs

Going out on a limb image via Shutterstock

Employers’ Denial of ACA Impact Could Cost Them a Fortune

ACA-Image 600x600In all of my dealings with employers on Affordable Care Act (ACA) matters since 2010, I’ve reached a few reasonably sound conclusions.  Here’s one: employers are faking it!  They are doing so when it comes to how IRS controlled group rules influence the ACA’s “Applicable Large Employer” (ALE) determination.  It is this determination that serves as a foundational component of the ACA’s Employer Shared Responsibility (“pay or play”) mandate.  To recap, employers of 50 or more full-time equivalent employees (100 or more for 2015) are expected to offer ACA compliant coverage (play) or pay assessable payments.  The amounts of these payments are based on factors that include the number of full-time employees and how many of them qualify for Exchange-based premium subsidies.

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8 Tips to Becoming Your Clients’ “Advisor of Choice”

Over the past three decades, a growing number of CPAs expanded their service offerings beyond tax compliance to help individuals and families address and plan for all aspects of their financial lives. These aspects might include paying for children’s education, transferring wealth, protecting assets, funding retirement and more. Trusted-adviser_2

As CPA financial planners help their clients realize their long-term goals, this expansion of service offerings opens up new revenue streams and deepens client relationships.

Earlier this year, as part of the AICPA’s PFP Section’s CPA Financial Planning Thought Leadership series, I moderated the webcast, “Being an Advisor of Choice.” Panelists shared their perspectives on working with individual and closely held business clients, the benefits of this expanded business model to the practitioner and firm and the outlook for maintaining this model. (See the note at the end of this blog post about how to download a recording of the webcast.)

During the webcast, we discussed a great deal of information. Here is a quick rundown of eight ways you can become your clients’ “advisor of choice.” How many of these are you already doing and how many would you like to accomplish?

1. Add Financial Planning to Your Practice

Tax compliance is becoming a commodity. Integrating financial planning into your practice offers a chance to make a deeper connection with clients, requiring you to give objective advice and keep clients’ best interests at the forefront.

2. Determine Your Value Proposition

When you add financial planning to your practice, you also add value, but you figure out what kind of value you want to add in order to grow your bottom line. The last thing you want to do is become just another firm offering the same services as everyone else.

3. Avoid Becoming a One Trick Pony Advisor

Clients are outgrowing the services of mono-line advisors. If you were simply a specialist in tax or investments, your clients will grow beyond your services.

4. Know Your Strengths

Position yourself as the advisor of choice. You have an excellent professional reputation, offer high quality professional advice and possess transferable skills that are diverse and applicable to various client situations.

5. It’s all About the Relationship

Deepen and enhance the relationships you have with existing clients who already understand your role as their advisor of choice. You may even need to reposition yourself with existing clients, particularly CFOs or controllers who retain you just for audit work or corporate compliance.

6. Listen to Your Clients

Competent advisors do their best work when they sit down with their clients to let them voice their concerns about the current financial world they live in. Listen for issues you can help understand and solve.

7. Build on Your Three Distinguishing Qualities

As a financial professional, you are competent and objective and maintain the highest integrity. Remember these qualities and seize the best opportunities you can.

8. Break the Mold

Advisors who are willing to address the wide range of issues that come into play and work with their clients and other specialists to serve their needs will be in a great position to be a strong, key resource.

AICPA PFP Section’s Thought Leadership Series

Access the free webcast recordings and presentation materials from the AICPA PFP Section’s Thought Leadership series featuring forward thinking from CPA financial planners advising their clients in tax, estate, retirement, risk management and investments. Two panels will host free thought leadership webcasts on November 12th and 13th covering investments and the outlook for the CPA financial planning profession.

 

Lyle Benson, CPA/PFS, CFP®, President and Founder, L.K. Benson & Company. Based in Baltimore, Lyle’s firm specializes in personal financial planning, tax and investment advisory services for high income individuals and families, as well as corporate executives and entrepreneurial, closely held business owners across the country. Lyle is chair of the AICPA’s PFP Executive Committee.

 Financial planning image via Shutterstock

 

Getting to the Bottom Line about Contingent Fees

"Intaxication: Euphoria at getting a refund from the IRS, which lasts until you realize it was your money to start with." Unknown, from a Washington Post word contest

Court-judgementWhen is a CPA practice not "practice before the Internal Revenue Service?" And if it is not practice before the IRS,  does that mean it’s okay to use contingent fees in a client arrangement?

Why do I write about this topic now?  This past July, the U.S. District Court for the District of Columbia issued an opinion (Ridgely v. Lew) that takes a significant strike at IRS’s ability to regulate contingent fee arrangements. 

Gerald Ridgely is a CPA who practices with Ryan LLC, a global tax services company, but not a registered CPA firm. Ridgely sued the IRS, arguing that the Service exceeded its authority under Circular 230 in regulating the preparation and filing of ordinary refund claims, which practitioners file after a taxpayer has filed his original tax return but before the IRS has initiated an audit of the return.  Ridgely contended that the inability to charge a contingent fee for a refund claim cost him clients and significant revenue. Under a contingent fee arrangement, the client only pays the fee (or a percentage of the refund) if the claim is successful.

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Should You Sign a Business Associate Agreement Under HIPAA?

HIPAA-complianceDr. Smith left you a voicemail at 10 p.m. on a Sunday night. You couldn’t make out the entire message due to a weak cellphone signal and background noise, but you gathered he was talking about the Health Insurance Portability and Accountability Act and needing you to sign something called a Business Associate Agreement.

Dr. Smith is an excellent dermatologist, but you know from doing his taxes that regulatory compliance isn’t necessarily his forte.

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Value Pricing Tax Services: Don’t Leave Money Behind

Have you ever stopped and asked yourself why you would ever want to make a tax return engagement more efficient, if it really only means you will charge less over time? 

Stay with me here while I explain how value pricing and efficiency can go hand-in-hand.  Below is a hypothetical chart of fees incurred to prepare a 1040 return, as well as the amounts actually invoiced.  I am going to explain how you are leaving money on the table.

Year

Hours

Rate

Fees

Discount

Invoice

1

10

$150

$1,500

(400)

$1,100

2

8

150

1,200

(80)

1,120

3

6

150

900

 

900

Year one is largely spent reviewing the prior year returns to familiarize yourself with the client and to establish your internal workpapers. This will naturally take more time. So when you bill the client and see that you have incurred $1,500 in fees, your gut might tell you that the return is not worth that amount. So, you discount the fees to reflect the amount that you a) think the return was worth and b) think the client is willing to pay. 

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ACA: A Maze of Rules and Reporting Requirements

Corn-mazeMy daughter, her fiancé and I were recently looking for something fun to do in Washington, D.C.  As we were poking around, we found a special attraction at the National Building Museum – a maze. 

When we took our first steps into the maze, we felt excited but a little apprehensive. We knew there would be twists and turns to weave through. We wondered, would it be easy to navigate or would we get lost in a sea of offshoots and dead ends? But as we made our way through, apprehension gave way to pure fun!

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How the IRS Revamped Tax-Exempt Applications

One-way-new-wayWith a new leadership team in place, the Internal Revenue Service Exempt Organizations Division has swiftly come together to introduce a shorter and easier application form (Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code) for organizations seeking section 501(c)(3) tax-exempt status. The IRS estimates up to 70% of all applicants will qualify to use the new streamlined approach.

Prior to the form’s July release, Tamera Ripperda, IRS Exempt Organizations Division’s newly appointed director, shared insights with CPAs at the AICPA Not-For-Profit Industry Conference and explained the significant role the simplified form will play in the new IRS transition process her team has internally dubbed: “Moving Exempt Organizations Forward.” 

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