Tax Feed

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

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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Staying Ahead of the ATRA and NIIT Curve

Financial-planning-consultationDue to the American Taxpayer Relief Act of 2012 and the net investment income tax, many clients have no doubt experienced the impact of the new multi-layered tax environment. According to a panel of leading CPA financial planners, clients ranging from those with high net worth to those with middle income were shocked to be hit with the NIIT and higher tax rates this tax season, and have been receptive to proactive planning to mitigate in future years.

Consequently, 2014 is the year to sit down with your clients and provide proactive guidance, education, planning and expertise. Here are a few helpful tips from our panel of experts to help you do that.

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Time to Clean House with Asset Retirement

TimeRegardless of the size of your business, somebody should be responsible for maintaining your company's fixed asset or depreciation schedule. Since in most cases this is not a full-time job, it may be neglected. Updating accounting records is unavoidable for most of us. However, many of us are incredibly busy. Who has time to pull out a fixed asset list - just to make an addition? If your company is large enough to employ an asset manager, you may be up to speed with fixed assets. If not, who is responsible for managing this schedule and do they have the information they need? New tax regulations that went into effect Jan. 1 allow organizations to go back and write off those assets on the books that are long gone. The regulations even allow for partial dispositions of "units of property" that previously were not permitted.

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Time to Change the De Minimis Amount for Tangible Property?

FeedbackSince the release of the final tangible property regulations, practitioners and taxpayers have shared numerous concerns about their complexity and administrative burden.  One of the most common complaints is the de minimis safe harbor election. 

The de minimis safe harbor provision, if elected, allows a taxpayer to immediately deduct amounts paid to acquire, produce or improve tangible property and gives the taxpayer additional protection from future Internal Revenue Service examination adjustments.  The safe harbor provision has two separate thresholds ($500 for taxpayers without an applicable financial statement and $5,000 for taxpayers with an AFS).  A certified audited financial statement is considered an AFS but reviewed or compiled financial statements are not.    

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5 Things You May Have Missed During Tax Season

Missing-puzzle-pieceWhether you’re new to tax season or an experienced pro, there were probably times in the months leading up to April 15that brought new meaning to the term “multi-tasking.” Helping clients sift through back-up material, preparing and filing returns and keeping abreast of tax news, is an all-consuming process. Yet, tax season is also a time when you can easily overlook opportunities to improve your practice, strengthen client relationships and foster your professional development.

With April 15 comfortably behind you, now is the perfect time to look back and identify opportunities that can help grow your practice or help manage your staff. Here are five AICPA resources you might have kept on the back burner while you were in the throes of tax season.

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3 Tax Planning Tips for Parents-to-Be

BabyMy husband and I, both CPAs, are expecting a baby boy in August. Of course, being the fun-loving accountants that we are, as soon as we found out about the good news, we started thinking about tax planning for our new addition. Names, nursery theme, telling our family about the good news – those items could wait.  But, tax planning, that was a today item.

I’ve been fortunate to work with many clients with children in my public accounting days, so I knew the general tax items that we needed to think about, such as tax credits, flexible spending accounts, household employee/nanny rules, etc.  However, I wanted to refresh myself on these items and share some insights with anyone who has or will have a family. Here are some tips for you parents-to-be:

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Beyond the Tax Return: Transition to Trusted Adviser

Trusted-adviserIs this a scenario you could relate to during busy season? It’s one of those days. Your schedule is jam packed. You’re working in overdrive to get it all done. The next thing you know, the receptionist buzzes you with news that one of your clients is in the lobby to drop off some paperwork. They would like to see you if you have a few minutes.

“ARGGHHH…not today!” you’re thinking. “I just don’t have time.” As tempting as it would be to decline the last minute request, you’re mindful that a client is right there in your office. That means you have the opportunity to amp your trust factor while they’re visiting. Maintaining a hands-off approach can make client retention tough. In my practice, the biggest complaint we hear from prospective clients who are considering a new firm is that their current tax expert never talks to them.

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Understanding the ACA’s Mandates

I am at the AICPA Tax Strategies for the High Income Individual conference in Las Vegas. This popular conference features national experts who dig keep into new tax policies and offer strategies for navigating new laws so that CPAs can advise their high-income clients with confidence.  

Today I am live blogging the "Affordable Care Act: Understanding the Individual and Employer Mandates” session with speaker Eddie Adkins, a partner with Grant Thornton LLP. This session delves into challenges and responsibilities faced by employers and individuals to comply with the provisions of the complex health care reform law, and technical aspects of the responsibility provisions and traps for the unwary. 

Follow along with the live blog below (email subscribers can view the live blog on our website).

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IRS E-Services: Where are We Now? And Where are We Going?

QuestionsAs the staff liaison for the AICPA’s Internal Revenue Service Advocacy and Relations volunteer committee, I am in the unique position to listen to our members’ concerns and discuss those issues with the IRS.  When the online e-services of Power of Attorney and Electronic Account Resolution were terminated on Sept. 2, I heard concerns from numerous practitioners.  In fact, we received more calls regarding this issue than all other issues combined last year. 

The AICPA adamantly voiced members’ frustrations and concerns to the IRS.  The backlash the IRS felt from the AICPA and other members of the practitioner community was so severe that IRS officials made it clear they never wanted this situation to repeat itself.  This was a top priority to then-Acting Commissioner Danny Werfel.  The IRS also quietly looked into different possibilities to bring back these online e-services.

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3 Tips to Find Your Professional True North

CompassFinding your professional true north, a path you can be passionate about and one that will provide you with direction in the future, is attainable – when you have the right navigation. Whether it is honing your personal skill set, positioning your practice for growth or transforming your organization’s technology infrastructure, it is important that you be the navigator. There are endless possibilities to explore, pursue, master and achieve, and it is important you arrive exactly where you want to go.

Keep in mind that finding your way often means asking for directions and talking with others who have already arrived at your desired destination. They can tell you what is not on the map and the best roads to follow to enhance the quality of your journey. Here are three quick tips to find your professional true north:

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In the News: It’s Never too Early to Think About Taxes

ReceiptsThe deadline to file your 2013 taxes – or file for an extension – passed earlier this week. What’s the significance of that? It’s time to think about planning for the 2014 filing season.

As many CPAs will tell you – taxes are something to consider year round. And one of the best ways to ensure that you are best positioned to pay no more than you owe is by being meticulously organized throughout the year. Enterpreneur.com recently posted an article suggesting some technology tools that will keep you organized in advance of next tax season – and no, a shoebox to hold all your receipts is not one of them.

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Tax Planning is a Critical Factor in Financial Planning

Financial-planning-consultationCongratulations on making it through another tax season! From those long hours, including rigorous reviews and meetings with clients, you’ve gained unique insight into their lives—insight into their incomes, spending habits, investments and life events. Income tax planning and estate planning elements have become a more critical part of overall personal financial planning with the enactment of the American Taxpayer Relief Act of 2012 and the Net Investment Income Tax. While reviewing those 1040s, you are able to envision potential tax impacts of financial decisions and begin considering tax planning strategies for your clients, which broadens your relationship. This is a great first step in helping them meet their overall financial planning needs, including making estate, retirement, investment and risk management planning decisions to move them toward their long term goals.

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Confessions of a Tax Season Junkie

Dancing-womanAs I shot up in bed last night in a cold sweat, I realized that a nightmare must have interrupted my peaceful night’s sleep. Waking up during tax season in a panic was pretty common during my over 20 years in public accounting, but why now? As a recent convert from tax practice, this spring is the first one since the early ‘90s that I am not preparing tax returns.

After some reflection, I discovered my dream was, in fact, about tax returns: phones ringing, emails and all of the anxiety-causing triggers for CPAs during tax season. Having sold my practice after last tax season, the only tax return I have to worry about is my own, so what was my trigger? 

I realized that the source of my anxiety was a recent project where I had to draw on my prior tax season experiences. I was preparing for the AICPA’s Tax Power Hour webcast on managing tax season burnout. To truly empathize with the participants, I mentally placed myself back at my old office during the height of tax season. I could hear the phones ringing and the postage machine humming, I could smell the hot printers being overused, and I remembered the sight of peers walking into my office to ask a “quick question.”  The experience was so real for me that I actually felt the urge to pick up my computer and hurl it at the wall.

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Depletion Deductions for Landowners Receiving Gas Royalties

Natural-gasIt is filing season and landowners receiving natural gas royalty payments may be shocked by their tax liability if they have not been planning with their CPAs. Landowners who sign a lease with a gas company own a royalty interest. When royalty income is received, the landowner is entitled to depletion. Similar to depreciation, depletion is the cost recovery of a natural resource and, in the case of royalty owners, natural gas. It is provided for by IRC §611 and the rules governing it are IRC § 613 and 613A.

The Internal Revenue Service provides for two methods:

  1. Cost depletion - allows the taxpayer a deduction based on the ratio of units sold to the number of units available at the end of the year plus the units sold during the year. 
  2. Percentage depletion - allows the taxpayer a deduction based on the gross income of the gas producing property.

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Happy St. Patrick’s Day – The Luck of the Beer Tax Continues

LeprechaunIt should surprise no one that the amount of Guinness consumed worldwide on St. Patrick’s Day more than doubles, to approximately 13 million pints. Celebrations are held far and wide from Australia to Russia to the International Space Station, where astronauts like Catherine Coleman play Irish music in space.

As a Maloney and a Fitzpatrick, I love the idea of a global Irish celebration - makes the world feel a wee bit friendlier (even if the saint being honored is technically Scottish).

The U.S. accounts for much of the increase in St. Patrick’s Day Guinness consumption. But while the enthusiasm may be spread out across the  country, the excise tax on beer collected by each state varies considerably.

The map created by the Tax Foundation shows an interesting pattern - a low-tax band across the middle of the country, with a few Western states collecting the least, while southern states charge the most, with Tennessee coming in first at $1.17 per gallon. The Mid-Atlantic area defies categorization – my state of Virginia is in the middle but neighboring Maryland ranks much higher.

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Capturing Online Sales and Use Tax: The Battle Continues

EcommerceHave you purchased something online this past year, month or day?  You probably looked at the cost of the item purchased, but did you pay attention to whether you paid taxes on your purchases?  Sorry to tell you this, but just because a sales tax was not charged does not mean you don’t owe a tax on the transaction.

All states that impose sales taxes also require purchasers to remit use tax on any taxable purchases if sales tax is not paid. Many, if not most, consumers are unaware of the use tax and, therefore, do not comply.  It is almost impossible for state taxing authorities to enforce these laws with respect to individual consumers (but businesses often are audited for use tax). 

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Staying Mentally and Physically Motivated during Winter Tax Season

Businessman-yogaHow do we stay motivated to continue to get a full night’s sleep, hydrate and enforce good habits when the pressures of work and the reality of deadlines, client demands and day-to-day fire drills become overwhelming? Long hours of winter busy season don’t allow for extra time to take care of our physical well being. Our daily workouts are replaced with early morning or late night staff meetings. Saturday afternoon pickup basketball games at the YMCA are just a fond memory. The only thing worse than going to work in the dark and coming home in the dark is dealing with the bitter winter weather in between.

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Hidden Traps for Small Employer HRAs in 2014

Surprised-businessLike many small employers with under 50 full-time equivalent employees, I thought my company would be relatively unaffected by the Affordable Care Act. I was surprised to discover that my company Healthcare Reimbursement Arrangement is legal, but is now completely unworkable.

I have offered for several years to full-time employees a standalone HRA for which they get pre-tax reimbursements for out-of-pocket medical expenses and health insurance premiums, up to the annual predetermined dollar limit. HRAs generally fall under Code Section 105(b) and are considered employer self-insured accident or health plans. By design, HRA plans have dollar limits on annual and lifetime benefits provided to participants. However, to be a qualified group health plan in 2014, the plan must provide minimum essential health benefits without annual or lifetime dollar limits. My company’s HRA fails to meet this basic requirement. 

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How Would a U.S. Bitcoin Transaction be Taxed?

Accepting-bitcoinsOverstock.com, the Sacramento Kings and a few countries have all taken positions on what they will do with Bitcoins.  The two major Bitcoin positions are treatment of it as property, as Singapore has recently adopted, or as currency, as Germany has chosen.  

Much has been written on the creation of the Bitcoin, and its rise in popularity – and value – from 5 cents in 2010 to over $1,200 in 2013.  Bitcoins were born from combining electronic commerce and communications with mathematics, cryptography and privacy – as they only exist when your computer is functioning (or your iPad, smartphone, tablet, smart watch or Google glasses!), and they have no intrinsic value, save for what value people are willing to give.

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Relief for Missed Portability Elections

In this podcast, Bob Keebler covers Revenue Procedure 2014-18, which provides a simplified method for certain taxpayers to obtain an extension of time to make a portability election. Rev. Proc. 2014-18 provides an automatic extension for certain estates of decedents dying in 2011, 2012 and 2013 to elect portability. The extension applies to estates that would otherwise not have had a filing requirement, and allows the estates to file a return to elect portability until December 31. It includes the estates of same-sex decedents who were not eligible to elect portability until after the Windsor decision. Access more resources in the Planning After ATRA and NIIT Toolkit, including more podcasts, new charts by Bob Keebler as well as webcast recordings and Forefield Advisor alerts/videos, and the complete four-volume set of The CPA’s Guide to Financial & Estate Planning, recently updated for ATRA and NIIT, and much more.

Relief for Missed Portability Elections

 

 

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Downton Abbey’s Death Duty Explained

Highclere CastleHighclere Castle (Photo credit: Wikipedia)

Spoiler Alert: This blog post contains spoilers if you have not seen the first episode of season four of “Downton Abbey.”

“Downton Abbey,” the British period drama that takes place in the early 1900s, has made death taxes… fun. If you are not familiar with the show, I will set it up for you. The Crawleys are part of the British aristocracy as the Earl and Countess of Grantham. Robert Crawley is the fifth Earl of Grantham and has only one heir, Matthew Crawley. Matthew is Robert’s third cousin, once removed (at this time in history, women still could not inherit property or title). In season three, Matthew marries Mary, Robert’s daughter, to keep the estate, title and money in Robert’s direct line of descent. Almost immediately after the birth of Matthew and Mary’s son, Matthew dies in a car accident.

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Super Bowl’s Hidden Treasure… the Jock Tax

Super-bowl-hotelAs the focus here in New Jersey switches from “Bridgegate” to “tailgate,” we think about the things that we love best about the Super Bowl. A few of mine include eating wings, drinking beer and, of course, watching those witty commercials. However, as the players gear up to battle the elements this week, one other thing separates this Super Bowl from the others: the proverbial taxman. Many states impose an income tax on nonresidents’ earnings and New Jersey is one of them. To professional athletes, it is known as the “jock tax.” 

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Top 10 Tax Resources for the 2014 Tax Season

Top-tenCaffeine, check. Office supplies, check. Patience for lost or late documents, check. What else do you need for tax season besides, of course, sympathetic family and friends?  Knowledge and technical resources help, as does convenience in finding them – so keep these resources from the AICPA bookmarked to help you prepare returns, manage your office, advise and communicate with clients, and even keep a sense of humor.

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Interview with Team Who Wrote Net Investment Income Tax

Bob Keebler interviews David Kirk and Adrienne Mikolshek, part of the team who wrote the Net Investment Income Tax regulations, to help members understand the new IRS Form 8960, Net Investment Income Tax for Individuals, Estates and Trusts and the draft instructions. Access more resources in the Planning After ATRA and NIIT Toolkit, including more podcasts, a customizable letter to send to clients to illustrate why it is important that they meet with you and new charts by Bob Keebler as well as webcast recordings and Forefield Advisor alerts/videos and the complete four-volume set of The CPA’s Guide to Financial & Estate Planning, recently updated for ATRA and NIIT and much more.

Interview with David Kirk and Adrienne Mikolashek

 

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Explore the New IRS Form for Net Investment Income Tax

Bob Keebler goes line by line through Form 8960, Net Investment Income Tax for Individual, Estates and Trusts, to help members understand key elements they need to know for tax season. Access more resources in the Planning After ATRA and NIIT Toolkit, including more podcasts, a customizable letter to send to clients to illustrate why it is important that they meet with you and new charts by Bob Keebler as well as webcast recordings and Forefield Advisor alerts/videos and the complete four-volume set of The CPA’s Guide to Financial & Estate Planning, recently updated for ATRA and NIIT, and much more. (Email subscribers can listen to the podcast on our website.)

IRS Form 8960 Draft Instructions

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Understanding the 3.8% Net Investment Income Tax and Its Effects

In this podcast, Bob Keebler discusses the impact of the regulations on net investment income tax. Access more resources in the Planning After ATRA and NIIT Toolkit, including more podcasts, a customizable letter to send to clients to illustrate why it is important that they meet with you and new charts by Bob Keebler as well as webcast recordings and Forefield Advisor alerts/videos and the complete four-volume set of The CPA’s Guide to Financial & Estate Planning, recently updated for ATRA and NIIT and much more. (Email subscribers can listen to the podcast and see the slides on our website.)

Understanding the Net Investment Income Tax

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Tax Relief for Disaster Victims: We Can Do Better, Sooner

Hurricane-sandyIn 2005, when Hurricane Katrina hit landfall along the Gulf Coast, the Katrina Emergency Tax Relief Act of 2005 (H.R. 3768) was introduced and passed by Congress in less than two weeks.

Unfortunately, this prompt response is not the standard model each time a disaster occurs.    Relief offered through the tax system varies, and as explained in the AICPA’s comment letter submitted to Congress last November, “this process results in taxpayers receiving different treatment for similar losses and not knowing what tax treatment they will receive until Congress enacts some form of relief, which frequently occurs long after the disaster.”

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How CPAs Can Prepare Clients for Healthcare Reform

Health-care-fileCurrently, there is a massive amount of confusion in the business community and among consumers – the very same people that are CPAs in public accounting’s clients – with the implementation of the Affordable Care Act or Obamacare. Change, of course, creates opportunity, and knowledgeable CPAs can expand their role as trusted advisers by gaining an understanding of the implications of the ACA on businesses and individuals.

The changes in insurance primarily affect two client types: small business and individuals who do not get insurance from their employer. This latter group would include self-employed individuals and their families who do not qualify under the definition of “small business” for purposes of the ACA’s insurance market rules. There are provisions for large employers that go into effect in 2015.

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In the News: CPAs Providing Financial Guidance for 2014

New-year-resolution

In a recent post I detailed a number of articles highlighting tax tips provided by AICPA staff and members that individuals can use to save themselves money when they file their 2013 returns.

As the calendar flips to 2014 (the year of the polar vortex), AICPA members and staff have been providing guidance on how to ‘recover’ from holiday spending, save more in 2014, and outlining tax changes that may impact consumers.

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Trust But Verify – Another Perspective on Comfort Letters

Back in March, AICPA Senior Vice President Susan Coffey wrote about the dangers of providing client comfort letters. Since then, we’ve been hearing from more and more members that they are seeing a rise in requests from third parties for some sort of assurance on client accounting and tax information, or financial condition. I think Edward Karl said it best in CPAs and Comfort Letters: The New Chocolate (from the July edition/DC Currents column of The Tax Adviser) when he described them as requests for “verification, confirmation, certification, corroboration, authentication or substantiation of their clients’ financial information.” You name it, we’ve been asked to validate it. On the bright side, an increase in these requests confirms the faith, confidence and trust that business owners, decision makers and the public have in CPAs.

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Final Tangible Property Rules – A Win for Small Business?

Black-eyed-peaOne of the New Year’s superstitions says that you should eat black-eyed peas for good luck and financial prosperity. If you (or your client) are a business owner who hates black-eyed peas, don’t worry. You got a bit of luck already. In issuing the final tangible property (aka repair) regulations, I believe the IRS went above and beyond to make the final regulations more taxpayer friendly and tried to reduce the administrative burden from the draft regulations. 

When a business buys equipment for their business, it may qualify for an immediate tax savings by expensing the full purchase price instead of depreciating it over its useful lives (e.g., the section 179 deduction and 100% bonus depreciation). However, these options have restrictions. For example, the section 179 deduction requires taxable income and imposes an overall deduction ceiling and the bonus depreciation has a new property requirement (e.g., refurbished assets are not eligible). With well thought out planning, businesses can maximize the tax savings using both options.  

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