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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

IRS E-Services: Can They Come Back Better Than Before?

GoalThe online world operates 24 hours a day, seven days a week.  It never closes.  Our society has become accustomed, even dependent, on this real-time environment at its fingertips.  We read the news online, buy everything from clothes to home goods to work-out DVDs online, pay our bills online, even look for a potential mate online.  And we do all of these things whenever we want, and anywhere we want - as long as there is Wi-Fi!

But, soon, there will be something that you as a tax practitioner will no longer be able to do online: communicate with the IRS in certain circumstances.  The IRS announced on its website that as of August 11, it would no longer offer the Disclosure Authorization and Electronic Account Resolution products online due to low usage. This news caused an outcry from the tax practitioner community; many signed petitions to keep them up and running.  We received a flood of emails and phone calls from our members, rightfully concerned about the negative impact that losing these two products will have on their practice.

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Tax Planning Complexity Can Provide Growth for Your Firm

The increased complexity of individual taxation and the overall personal finance environment is leading many CPA firms to explore ways to address areas where tax planning overlaps with retirement planning, estate planning and other personal finance areas.  This approach delivers great value, creates new firm revenues and increases competitiveness.

As Barry Melancon, AICPA president and CEO recently noted in a video to AICPA members, the need for tax planning that integrates personal finance concerns is critical. Clients have many questions about how the American Taxpayer Relief Act of 2012 and the new Medicare surtax affect them, in particular. The retirement savings crisis is getting national media attention and threatens the financial security of Americans.  Post-ATRA, the estate tax may affect only a small number of clients, lessening the focus on planning to reduce taxes and refocusing estate planning on its primary purpose, which is protecting  loved ones through asset protection, asset titling, beneficiary designations and more.

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Tax Reform: How Do We Catch Up with the Maldivians?

Time-for-changeGet ready for a test. What will be the biggest driver of fundamental tax reform?

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


In my last blog, I predicted that fundamental tax reform would not come before 2014 so we have some time before the test answer arrives. But I do want to talk about good tax policy in this blog.

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Another Lesson on Unreasonably Low Compensation

Payroll-taxPayroll tax collection continues to vex the Internal Revenue Service despite several court cases that have resulted in rulings favorable for the IRS regarding unreasonably low compensation. A recent high profile case was David E. Watson, P.C. v. United States on which the Eighth Circuit ruled in 2012. Watson was an indirect partner in a CPA firm, practicing through an S corporation that paid him $24,000 of salary per year and between $175,000 and $203,000 in profit distributions. The court adjusted his compensation to $93,000.

It isn’t hard to see why shareholders of S corporations attempt to justify wage levels below what the IRS considers “reasonable compensation” (assuming the understated compensation is below the FICA wage base). Both the S corporation and employee save the 7.65% FICA and Medicare taxes on the wages not reported.

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Will The Research Tax Credit Be Extended Permanently?

Stop-go-switchThe research tax credit has been around since 1981.  The credit is generally available if you incur research and development expenditures for qualified research that are technology based and intended for the development of new or improved processes, products, techniques, or formulas (among other requirements).

Do you know how many times the credit has expired and been extended since it was enacted back in 1981? The answer is at least eight expirations and 15 extensions.  The credit expired as recently as the end of 2012 but was extended through 2013 with the American Taxpayer Relief Act of 2012.  If you answered that question correctly, I applaud you for keeping up with the changes.  I don’t know about you, but I am getting tired of looking up to see when the credit will be expired.

If you are tired of never-ending expirations and extensions, I have some good news to report. 

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In the News: Tax Breaks on Home Sales

Home-saleJust yesterday, The National Association of Realtors announced that its Pending Home Sales Index, based on contracts signed last month, increased 6.7 percent to 112.3, the highest level since December 2006.

With many people considering placing their home on the market, a timely Wall Street Journal article examined the taxes and tax breaks available when selling a home. According to Melissa Labant, director of taxation at the AICPA, these rules can be complicated and people often misunderstand or don’t take full advantage of the benefits available.

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Global Governments Waging War on Corporate Tax Avoidance

Tim-cook-apple-testifyingWhile reading through the Sunday New York Times, I stumbled across an opinion piece on corporate tax avoidance that I think is particularly relevant for business and industry CPAs. In today’s struggling economy, the corporate tax system is a hot button issue both in Washington and around the world. As companies become more global, we as CPAs in industry can continue to add value in this area.

The article, “Who Will Crack the Code?” by David Leonhardt, starts out by talking about the shift in the soda industry from domestic to foreign concentrate production—just one example of a thread that runs through many different industries. Leonhardt notes, “as a result [of moving manufacturing operations overseas], the industry paid a combined corporate income tax rate of only 19.2 percent over the past six years…the average rate for companies in the S&P 500 was 29.1 percent.”

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Time is Running Out: Verify Your Clients’ FBAR Obligations Now

HourglassJune 30 will be here very soon – making sure your clients are compliant with the requirement to file a Report of Foreign Bank and Financial Accounts by that date is critical as civil penalties for failure to file are huge – they range from $10,000 up to $100,000 or 50% of the total foreign account balance. Criminal penalties include $250,000 or five years of imprisonment or both.   

If your client is a U.S. resident and has a total of $10,000 or more in all foreign bank accounts combined or has signature authority over a foreign account, he or she must file FBAR Form TD F 90-22.1 annually.  The FBAR is a report and is not to be filed with the income tax return.  What makes the FBAR different from many other forms is that it must be received, not postmarked, by June 30 and it is filed with the U.S. Department of Treasury, not the IRS.  Also, there are no extensions. 

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New Taxes and the Cost of Healthcare and Insurance

The 2013 Practitioners Symposium and Tech+ Conference in Partnership with the Association for Accounting Marketing Summit takes place June 10 to 12 in Las Vegas. I am live blogging from select sessions throughout the three days. The first session is "The Impact of Healthcare Reform on Small Business: New Taxes and the Cost of Healthcare and Insurance" with Mark Dietrich, CPA/ABV, of Framingham, Mass. Mark wrote a prelude on AICPA Insights which generated a lot of interest and conversation.

This session covers the Accountable Care Act, which is the most significant and costly social spending legislation since the Great Society programs of the 1960s. Its impact extends beyond health insurance, and envisions a system of regulation and taxation that aims to restrict the impact that income has on access to healthcare, except the wealthiest top .1% (one-tenth of 1%) of taxpayers. (Email subscribers: See the live blog coverage on AICPA Insights).

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Tax Reform is Centerpiece of CPAs’ Advocacy on Capitol Hill

Capitol HillWhen more than 400 leaders of the CPA profession journeyed to Washington, D.C., to attend last month’s AICPA Spring Meeting of Council, visits to Capitol Hill to engage in advocacy of the profession’s legislative goals were a highlight of the agenda. To no one’s surprise, tax reform – which sits atop the list of the Institute’s legislative priorities – was a focal point of the visits.

The AICPA has a longstanding tradition of advocating for sound tax policy and assisting lawmakers on tax policy matters. The proliferation of new income tax provisions since the 1986 tax reform effort has led to complex compliance hurdles for taxpayers, administrative complexity and enforcement challenges for the Internal Revenue Service. The Institute has testified on tax reform before the House Ways & Means Committee and the Senate Finance Committee and submitted technical recommendations to five study groups whose findings will shape legislation expected later this year.

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In the News: 4 Helpful Quotes from CPAs

Cpa-quote (3)I read so many great quotes from CPAs every day and have such a limited space to summarize them on the blog– it can get to be a bit frustrating.  As I began drafting my bi-weekly ‘In the News’ post, I decided to switch things up this week.

I present to you four helpful quotes from CPAs. Hey – everyone can use a little help now and then.

As Kelli Grant reports in MarketWatch, going to summer camp may be a rite of passage for children, but for parents, it seems more like an initiation into the woes of tuition payments.

What parents might not know is that camp expenses can translate into a tax break.

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Tax Reform: The Crystal Ball Never Lies

Crystal-ballPeople often ask me, “Ed, when do you think we’ll finally see tax reform?”

“Not before 2014,” I respond with assurance.
“How can you be so sure, Ed?” they say.
“My crystal ball never lies!

But I started getting a bit nervous about sounding so confident.  After a little digging, I found out my crystal ball had once predicted that the Titanic was unsinkable, yet it went down on April 15, 1912. How’s that for foreshadowing?! That forced me to do some soul searching and thinking.

Flash back to November 2011. I was sitting next to Pat Thompson, who chaired the AICPA Tax Executive Committee.  We were listening to Don Longano, former House Ways and Means Committee Chief Counsel and Washington tax insider, share his views on the prospects for tax legislation at the National Tax Conference.

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While You Were Coping With a Filing Season out of...

Sleeping-CPAIt’s hard to believe that I’m coming up on my 30-year anniversary at the AICPA.  Before that, I spent eight years in public practice – six with a local firm and two with an international one. Truth is those 30 years have not dimmed the memories of the challenge of filing season.  I joke about those memories but I also admit about how important it is for me to “feel the pain.” 

So many of our members are in public practice and have to “live the pain.”  That is one of the reasons why I am glad that my two directors have experienced many, many filing seasons - one of them ran her own practice for 17 years – as it motivates the Tax Team even more to lessen our members’ pain.

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In the News: You Missed the Deadline to File Taxes, Now What?

Blackboard-deadlineAs I’ve mentioned previously on this very blog, I am a procrastinator by nature. My ‘to do’ list from January of this year is littered with winter-related items (two prime examples are ‘purchase warmer jacket’ and ‘book ski trip for President’s Day weekend’) that I simply didn’t get around to. In those instances, I can shake my head, let out a self-pitying sigh and put it off until next year… But if you missed the April 15 deadline to file either your federal income tax return or an extension, you don’t have the luxury of simply waiting until next year – the time to act is now.

Melissa Labant, AICPA director of tax advocacy, speaking to the New York Times Bucks Blog, advised taxpayers to file as soon as possible and to avoid falling into the trap of thinking ‘oh, the deadline passed so there’s no rush now.’

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In the News: Using Tax Refunds Wisely

Mailbox-tax-returnDo you see your neighbor waiting by the mailbox for their tax refund? Chances are it’s not so they can use it on a fancy vacation or a new spring wardrobe.

This year, workers are most likely to save their refund or use the money for day-to-day expenses, according to a recent survey conducted for the AICPA by Harris Interactive for National Financial Capability Month. And that refund money is substantial. An AccountingWEB article on the survey results states that through March 22, the average refund this tax season is $2,827. That’s trending slightly lower than this time last year, when the average individual refund was $2,860.

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8 Tax Reform Questions Congress Needs to Raise (and Answer)

Number-8It looks like comprehensive tax reform is gaining some sense of realism. Consider these important actions so far this year:

  • President Obama mentioned it in his January 2013 State of the Union address: "Now is our best chance for bipartisan, comprehensive tax reform that encourages job creation and helps bring down the deficit.  We can get this done."
  • The House Ways and Means Committee formed 11 working groups to address specific areas for reform.
  • On March 21, the Senate Finance Committee began issuing Tax Reform Option Papers -the first one covers simplification for families and businesses.
  • Tax reform is mentioned in both the House and Senate FY2014 Budget Resolutions produced by the budget committees.

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In the News: You Got Tax Questions? We Got Answers!

Tax-questionIt’s been more than a month since my (legendary?) first post of this tax season and there has been a ton of recent media coverage. In my second tax season post, I’ll share a few articles for those of you who haven’t filed yet. In addition, I promise to throw in some good information for people who have their refunds already and are just rubbernecking.

Once again this year, members of the AICPA are using their expertise to answer one daily tax question from USA TODAY readers and help the public understand how to approach some common filing issues.

Thus far, readers have asked questions regarding the requirements for claiming adult children as dependents and how to handle the tax implications of rolling over an IRA.

Readers can submit their questions to taxadvice@usatoday.com through April 15.

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9 Tips for Invigorating Weary Brains, Bodies and Balance Sheets

BreakfastWhew! After months of long hours, you and your colleagues are likely finishing up the first filing deadlines of the year. Nice going!

Even with April 15 clearly in sight, there’s still work to be done by many practitioners. Clients are counting on your smarts like never before to help them make sense of their financial situation in this new environment and find ways to improve it. Let’s face it, you are running on fumes, yet you are far from the finish line and a well-earned break.

The big question you may be asking now is, “How can I get an energy boost so I’ll have the stamina to deliver on the promises I have made to my clients?”   

It’s no secret that when human engines are operating at full throttle they need more than adrenaline to perform their best. Sure, we know that we should eat right, exercise and be good to our bodies and minds if we want to sustain our ability to work at a record pace. The trick is finding the proper balance to yield the needed strength when our days are jam packed with meetings and client commitments.

Here are nine best practices to reinvigorate you so you can be your best. Even better, they are not complicated, expensive or unfamiliar. 

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Is Hiring a CPA Worth it? 5 Tips for Getting Your Money’s Worth

Tax-accountantOften when people find out I’m a tax accountant, I get asked, “How much does a CPA cost?”  It’s like me asking “How much does a home cost?” We all understand that a 1,000 square-foot home in Kansas has a different cost than a 1,000 square-foot penthouse condo in New York City.  The same concept applies to CPAs.  

The answer to both questions is the same:  it depends.  For example, my uncle has a simple tax return and pays $250 in preparation fees.  On the other hand, I had a client whose return took over a week to prepare when I worked in a large firm, which cost the client around $100,000. 

A good CPA may cost you more upfront but will pay off in the long run because he or she is thorough.  Anyone can drop numbers in software.  However, a CPA will analyze the situation to look for tax savings opportunities and help you plan for next year – in short, they become your trusted advisor.  I once had a client whose former preparer had cost her an additional $4 million in taxes because he didn’t consider accelerating her fourth quarter estimated tax payment to December from January.  

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The Dangers of Providing Client Comfort Letters

Signing

Every few years, the issue of providing clients with comfort letters – or verification documents – rears its head among our members. Regulators or banks often look for verification that certain items within a financial statement (e.g., revenue) or a tax return (e.g., income) is "right" and they want a CPA to verify it. AICPA members have even received requests for comfort letters from adoption agencies, health insurance providers and state taxing authorities.

According to the AICPA’s Professional Liability Insurance Program, examples of third party verification information requested by lenders and loan brokers include:

  • Confirmation of a client’s self-employment status;
  • Verification of income from self-employment;
  • Verification of a self-employed borrower’s business ownership percentage;
  • Profitability or sustainability of a self-employed client’s business; and
  • The impact on a self-employed client’s business if money is withdrawn to fund the down payment on a real estate purchase.

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Top 12 Tax Resources (for the 2013 Tax Season)

Finding time to do anything during tax season is tough. This year, with a delayed tax season, it will be an even bigger challenge. So save a little time this year by using the resources developed by the AICPA and its volunteer committees to help members successfully navigate the tax season. If you like free, you’ll love this list of resources as most of them cost nothing. 

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In the News: For the Love of Money

Money talkThose wilted flowers and almost empty boxes of chocolates can only mean one thing: Valentine’s Day was last week. According to some estimates, as many as 200,000 couples across the United States choose this date to become engaged. Congrats to all the lovebirds out there!

But before these happy couples tie the knot, they’ll need to make sure they’re on the same page when it comes to their finances – otherwise, problems will likely arise. 

A timely Chicago Tribune article on this topic cited an AICPA survey showing that 27 percent of couples married or living together said money issues were likely to lead to an argument. In fact, money issues are more likely to cause an argument than topics on children, chores or work.

Tracy Stewart of the AICPA’s National Financial Literacy Commission stresses that a primary reason behind these types of arguments is a lack of communication.

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Windows on Washington

Distorted-politicsA few weeks ago I talked about the jitters many business owners and families are feeling in regards to the current U.S. economic situation. Now, more than ever, businesses are looking to their CPAs to help them make sense of this increasingly complex world. At the AICPA, we want to do everything we can to help you succeed in this environment.

We asked you to describe the angst you are observing in your practice. We received dozens of comments via the blog post and social media channels. Overwhelmingly, members said that Congressional action—or in many cases, inaction—is the primary source of uncertainty and anxiety for clients and in their companies.

Right or wrong, it is clear that we live in a time when the Federal government is quite active. Think about it: TARP, the auto-industry bailout, Dodd-Frank, healthcare reform, American Tax Reform Act—and the list continues to grow. There will assuredly be more “cliffs” to come this year: surpassing the debt ceiling, a possible downgrade in US credit ratings, sequestration, and another continuing resolution(s) to fund the Federal government.

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In the News: After the Super Bowl, Tax Season Kicks Off

KickoffThe IRS has been accepting tax returns electronically and by mail since Jan. 30, but this Monday marked the official start of tax season, which is defined, for my purposes, as the day after the Super Bowl.

That means that for the next few months, as CPAs around the country are working with their clients to ensure that their returns are submitted correctly and on time, reporters and bloggers will be looking to provide their audiences with articles about all things tax. Therefore, I will be highlighting some more tax content of interest in my bi-weekly ‘in the news’ post. The circle of life, if you will.

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Tentacles of State Tax on Professional Services May Reach CPAs

TentacleCould your clients be required to pay a sales tax on your CPA tax and accounting professional services? Could states really “tax a tax service” that CPAs provide to taxpayers who need these services to comply with the increasingly complex tax law and accounting rules?

Well, three states already tax professional services and do not exempt accounting services, so CPAs in those states can speak to its impact. The states are Hawaii - 4%, New Mexico - 5% and South Dakota - 4%. Some states also have taxes that affect (but do not specifically target) the accounting profession. For example, Delaware imposes a gross receipts tax of .004% on monthly receipts over $100,000, and the state of Washington has a 1.8% business and occupation tax on service providers.

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Host a “Welcome to Tax Season” Celebration

"The Bruce Dickinson" (Christopher W..."The Bruce Dickinson" (Christopher Walken) delivering the iconic phrase "...more cowbell!" (Photo credit: Wikipedia)

As we enter one of the most anticipated times of the year, why not host a celebration to mark its arrival? You know, show the business community that you are excited about this special season.

“Are you C-R-A-Z-Y?” you might be asking. It’s tax time. Parties are just not what we do right now.

This year, maybe it’s time for a change. Do something different. Welcome the arrival of tax season with clients and friends of the firm. After all, it’s your time to shine. Embrace your place in the spotlight.  

Take a tip from movie producers and best-selling authors who hold premiere parties when they release new films and books. Believe it or not, there are a number of strategies that you can adapt from their attention grabbing events. Even though your firm isn’t likely to have such an extravagant budget, you can achieve the same results with a simple gathering. It’s all about getting your audience excited! Not to mention spreading the word about your firm with viral conversation starters such as “Guess where I’m going tonight?” or “You will never believe who threw such a great party last evening.”

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Name that Angst

Fiscal cliff name badgeAfter a nice holiday break relaxing with friends and family, it’s now time to get back to the real world. Re-entry is always a drag, but coming back this year to the crescendo of anxiety surrounding the fiscal cliff made it that much more difficult.

I’ve spent the last two days meeting some of our AICPA course instructors and asking them about their practices and their clients, and one message came through loud and clear. Clients are concerned. And they’re turning to their CPAs for guidance.

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Tax Season: Our Time to Shine

Tax-seasonIt’s almost tax season once again. Can you think of a better way to kick off 2013 than adopting a fresh approach to this ever important time of year?

Here’s a thought: What if we all agree to tell a new story this tax season? Instead of framing it as a time to work your fingers to the bone, embrace the notion that tax season is your time to shine. Don’t you owe it to yourself, your colleagues and your clients to let the world know that you love tax time? After all, it’s what you have studied for and worked toward throughout your career. Even better, it’s the time when the world looks to the CPA profession for its tax smarts and number savvy, problem solving know-how.

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CPAs to Federal Government: Reduce the Debt

Money-on-fireMost Americans greeted the news that the “fiscal cliff” had been averted with a mix of relief that a worst case scenario had been averted and frustration with the seemingly endless process. What has been lost on some casual observers is that, as a result of the deal, the U.S. deficit will actually increase an additional $4 trillion dollars in the next decade, according to the Centralized Budget Office.

Earlier this week, the AICPA released the results of a survey* asking members questions regarding the economic sustainability of the United States. The survey found that the vast majority are calling on the federal government to demonstrate more fiscal responsibility. In fact, seven in ten U.S. CPAs are concerned that both individuals and families will be severely affected if policy makers are unable to reduce the federal debt.

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Crossing the Finish Line with Circular 230

Tax Ethics and Horses

OK, raise your hand if you have that Circular 230 legend at the bottom of all your emails.  Great – now keep your hand up if you know why.  Not to worry – most of us are in the same boat.  So why the question now?  Here’s the story . . .

If you do any kind of tax work, I hope you're familiar with the AICPA’s Statements on Standards for Tax Services.  And if that work involves any kind of federal filing or representation, you'll also need to be familiar with Treasury Department Circular No. 230

Horse-raceCircular 230 isn’t new - its roots go back to the Civil War. The post-Civil War Congress enacted legislation that gave citizens the authority to make claims with the Treasury Department for the value of horses and other property lost during the war.  It soon became evident that more claims had been submitted than horses lost.  On July 7, 1884, President Chester Arthur signed what became known as the Horse Act, giving Treasury the authority to regulate the admission of representatives of claimants before them and to take related disciplinary action.  Eventually, the Horse Act led to the system we have today in which licensed CPAs are automatically admitted to represent taxpayers to the IRS with full practice rights.

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Immediate 2012 Tax Planning Opportunities for Individuals

Bob Keebler discusses three opportunities individuals can take advantage of while we wait for final resolution on the "fiscal cliff." Bob discusses gain harvesting to avoid the increase in the capital gains, Roth conversions to avoid the increase in income tax rate and the potential to take advantage of the loss of state income tax deductions in the future, and finally funding dynasty trusts before a new federal law could come into effect. Visit aicpa.org/PFP/YearEnd for free resources to help you get financial plans in place for your clients now.

3 Immediate 2012 Tax Planning Opportunities for Individuals

Robert S. Keebler, CPA, MST, DEP, Partner, Keebler & Associates, LLP. Bob is a 2007 recipient of the prestigious Distinguished Estate Planners award from the National Association of Estate Planning counsels. From 2003 to 2006, Bob was named by CPA Magazine as one of the top 100 most influential practitioners in the United States. He is the past Editor-in-Chief of CCH's magazine, Journal of Retirement Planning and a member of CCH's Financial and Estate Planning Advisory Board. His practice includes family wealth transfer and preservation planning, charitable giving, retirement distribution planning, and estate administration.  

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Charitable Remainder Trust and the 3.8% Medicare Surtax

The 3.8% Medicare surtax on net investment income is set to take effect on Jan. 1, 2013. How this surtax will affect those who are current beneficiaries of charitable remainder trusts is a hot financial planning topic. Robert Keebler explores planning for this new surtax and the Treasury Department's recently issued regulations addressing section 1411 of the Internal Revenue Code, the 3.8% Medicare surtax in his latest podcast. Download a free Medicare surtax chart and visit aicpa.org/PFP/YearEnd for free resources to help you get financial plans in place for your clients now.  

Charitable Remainder Trust and the 3.8% Medicare Surtax

Robert S. Keebler, CPA, MST, DEP, Partner, Keebler & Associates, LLP. Bob is a 2007 recipient of the prestigious Distinguished Estate Planners award from the National Association of Estate Planning counsels. From 2003 to 2006, Bob was named by CPA Magazine as one of the top 100 most influential practitioners in the United States. He is the past Editor-in-Chief of CCH's magazine, Journal of Retirement Planning and a member of CCH's Financial and Estate Planning Advisory Board. His practice includes family wealth transfer and preservation planning, charitable giving, retirement distribution planning, and estate administration.

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AICPA Advocates for CPAs with Mobile Workforce Legislation

Tax formsDo you or your employees travel around the country, working in different states and jurisdictions? As I travel around the United States, I hear more and more management accountants lamenting the difficulties associated with interstate operations and the significant regulatory burden with regard to compliance with non-resident state income tax withholding laws.

Currently, there are 41 states that impose a personal income tax on wages and there are many different tax requirements regarding the withholding of income tax of non-residents among those 41 states. While some states offer de minimis thresholds or exemptions before taxes must be withheld and paid, others require only a work appearance in the state before imposing personal income taxes on the employee and withholding requirements on the employer—even for just one day.

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Merchant Card Reporting Compliance Raises Its Head Again

Credit card terminalCPAs are well aware of how Form 1099 reporting improves tax return compliance. CPAs are also aware of how the 1099 rules can lead to considerable taxpayer frustration or opposition. For example, during the 2012 filing season, we heard a lot about the difficulties taxpayers had trying to comply with the new cost basis information reporting rules for brokers reporting stock sales; and this particular issue remains a concern of ours. Another major initiative, which until recently seemed like a sleeper issue, is now ripe for taxpayer focus. Merchant card companies are required to report (on Form 1099-K) the gross receipts that a business receives from customers paying with merchant cards during the year. Merchant cards typically include both credit cards and debit cards.

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In the News: AICPA Advocates for Fiscal Responsibility

National debtAs many of you may recall, in an effort to bring attention to how and why the financial sustainability of our nation is at risk, earlier this year the AICPA developed What's at Stake? A CPA’s Insights into the Federal Government’s Finances, which explicitly spells out the issues for policy makers and the public.

Following up on those calls for solutions to our nation’s financial problems, Accounting Today reported that the AICPA’s board of directors recently voted toadopt a resolution calling on lawmakers to do more to ensure the long-term fiscal health of the United States by better controlling the growing national debt. One aspect of this resolution involves the AICPA supporting two non-partisan efforts, the Campaign to Fix the Debt and the Comeback America Initiative, both of which align with the AICPA’s goals of putting America on a better path toward fiscal responsibility.

As AccountingWEB notes, the resolution will also be shared with state CPA societies as the AICPA continues to seek ways to advocate for reduced complexity for American businesses and individuals. Stay tuned.

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What Happens When a Lame Duck Meets a Fiscal Cliff?

10 (Tongue in Cheek) Predictions

Fiscal-cliff-questionsLast year, I wrote a blog about the congressional “super committee” created by the Budget Control Act of 2011 to deal with government’s immense debt and the deep deficit hole in which we find ourselves. The super committee of 12 members of Congress was unable to reach consensus on specific ways to wrestle with our unruly fiscal problems. That means, come this January, Washington will face $1.2 trillion in automatic spending cuts (known as sequestration).

What else is staring at us as we head towards the winter solstice? Not too much - there's the 2011 extenders including the AMT patch, 2012 extenders, the 2% payroll tax cut, the debt ceiling limit, expiration of the Bush tax cuts, and oh, the grim reaper is chasing the estate tax yet again. Did I also mention that we have a very contentious presidential election leading up to a lame duck session of Congress? Federal Reserve Chairman Ben Bernanke calls it a “fiscal cliff.” I'm exhausted just thinking about it!

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2012 Presidential Election and the CPA Profession

Election 2012The 2012 presidential election is just around the corner. While it’s not clear who will win the White House, there are many reasons you should be paying close attention. And we’re seeing indications that you’re doing just that. In a CPA Letter Daily poll on Oct. 16, 65% of more than 3,200 respondents said they would be watching that night’s presidential debate.

There is no shortage of issues affecting CPAs and our clients or employers. Highlighted below are some of the important financial issues facing our country:

  • “Fiscal cliff.” The uncertainty surrounding potential tax increases and spending cuts, as well as related issues, has brought Washington to a stand-still. Uncertainties include extension of the Bush-era tax cuts, a fix for the Alternative Minimum Tax, tax increases attached to the Patient Protection and Affordable Care Act, and a package of mandatory federal spending cuts totaling $1.2 trillion over 10 years.

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In the News: Now is the Time to Lower your 2012 Tax Bill

Tax planningFall, or autumn if you’re a season snob, is a busy time of year at the AICPA. Earlier this week, we held our Fall 2012 Governing Council Meeting – but you know that already because we’ve covered all the news earlier in the week. In addition to The World Series and beautiful foliage, fall is also the time to get proactive and take steps to lower your 2012 tax rate if you haven’t already done so.

This year, it is particularly important for taxpayers to pay close attention to the planning process with the uncertainty surrounding the potential expiration of the Bush tax cuts and many widely-used tax cuts which have not yet been renewed for the 2012 tax year . Susan B. Garland spoke to Melissa Labant,director of taxation at the AICPAabout this issue for a recent article in Kiplinger's Retirement Report focused on this issue.

The article calls attention to the fact that one of the biggest changes on the books for 2013 is a 3.8% surtax on investment income for singles with a modified Adjusted Gross Income of more than $200,000 ($250,000 for married couples). The tax applies to the smaller of net investment income or the amount by which taxable income exceeds the thresholds.

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Day 2 of AICPA Governing Council Fall Meeting 2012

The second day of the fall meeting of the AICPA governing Council happened yesterday and featured a professional issues update from AICPA President and CEO Barry Melancon, CPA, CGMA. Follow the "read more" link for a look at the day through the eyes of social media. (If you're viewing this post through our email subscription, please click through to read the entire story.)

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Selling a Business or Advising a Seller? Tips to Navigate the Fiscal Cliff

Fiscal cliffWith about 10 weeks left in the calendar year, it would be difficult for even the most motivated business owners to complete their company’s sale by Dec. 31, unless they’re already in process.

Some owners are hustling to get that process done to avoid falling over the tax cliff set to take effect Jan. 1. But the principles of selling a business apply no matter what the calendar says, according to Scott Miller, CPA/ABV, an expert presenter for the Oct. 30 Journal of Accountancy webcast, Inside Buyout Basics and the Tax Cliff: A Timely Combination.

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FATCA: Move Over FFIs, Here Come the NFFEs

Stage-curtainsMost people would agree that the Foreign Account Tax Compliance Act and foreign financial institutions are like peanut butter and jelly.  Whether or not you like the combination, they simply go together. 

Their pairing has been reinforced by the frequent publicity garnered by FFIs and the expanded withholding obligations FATCA has imposed on them.  But CPAs beware!  Lurking backstage is another set of entities affected by the rules of FATCA that you need to keep in mind.

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What Can CPAs do about Tax Identity Theft?

identity theftI am constantly getting emails and calls from members who have stories about how one of their clients has become a victim of tax identity theft and the person’s refund has been put “on hold” until the government can sort things out. Some of these stories can be heart wrenching. 

It’s no surprise that these stories are on the rise. Tax identity theft has mushroomed – the IRS identified 1.2 million incidents in 2011, over double the amount from 2010 (440,581) and the numbers may actually be much higher according to a Treasury Inspector General analysis. So, unfortunately, the odds that your clients may be affected have gone up considerably.

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How Do You Tackle Health Care Reform?

One provision at a time, of course!

Everyone is talking about the new Affordable Care Act.  Everyone is reading about it. Everyone is writing about it. Everyone is learning about it. But what is anyone doing about it?   

Red-appleNot enough is what I am hearing from my fellow CPAs. And that is quite understandable when simply thinking about the magnitude of health care reform can leave you scratching your head. But there is a way to devour the totality of the legislation without feeling completely overwhelmed:  tweak your approach.  Just as the saying goes, “How do you eat an elephant? One bite at a time, of course!” The same holds true for tackling health care reform, you tackle it “one provision at a time.”

Prior to the Supreme Court’s decision on June 28 to uphold the mandate requiring  most U.S. citizens and legal residents to maintain minimum health coverage, many individuals and businesses put off action in case the law was overturned. Now that the results are in, many people are taken aback wondering how to go about implementing the vast array of elements that make up health care reform.

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Interview: Tax Aspects of Donating a Car to Charity

Donate vehicle to charityWhile donating a car to a charity can get you a nice deduction, it can be complicated and confusing. Kars4Kids, a national car donation charity, interviewed Jerry Love, CPA, who has extensive experience consulting clients on donating cars to charities. This is a summary of the interview; the full interview can be found on AICPA.org.

Kars4Kids: How important is it for a donor to document the donation?

JL: The Internal Revenue Service has gotten very strict recently and will disallow deductions or impose fines if a vehicle donation is not documented properly.

Kars4Kids: What is the proper documentation that donors should get from the charity?

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Estates and Trusts with 3.8% Medicare Surtax

The Supreme Court’s decision upholding the Affordable Care Act confirmed that trusts and estates will be subject to a new 3.8% Medicare surtax when net investment income exceeds a threshold amount. This year presents an unprecedented opportunity for you to differentiate your firm and services and show that you provide significant value to your clients by having all of their financial planning needs in mind, including retirement, estate, tax, investment and insurance planning. With so many unknowns in 2013 compounded by an election year, your clients need to take advantage of many financial planning avenues now to avoid missing crucial opportunities to protect their nest egg and increase their net worth. Listen to a recent podcast below from Bob Keebler, CPA, in which he points out issues surrounding this new surtax and how to plan for trusts and estates. Access other resources to help you educate your clients and proactively plan now in preparation for 2013.

Estates and Trusts with the 3.8% Medicare Surtax

Robert S. Keebler, CPA, MST, DEP, Partner, Keebler & Associates, LLP. Bob is a 2007 recipient of the prestigious Distinguished Estate Planners award from the National Association of Estate Planning counsels. From 2003 to 2006, Bob was named by CPA Magazine as one of the top 100 most influential practitioners in the United States. He is the past Editor-in-Chief of CCH's magazine, Journal of Retirement Planning and a member of CCH's Financial and Estate Planning Advisory Board. His practice includes family wealth transfer and preservation planning, charitable giving, retirement distribution planning, and estate administration.  

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343,020 Reasons CPAs Should Talk Up Their Tax Expertise Now

Competition aheadNearly three years ago, the IRS launched the tax return preparer oversight program and seeds were planted in the landscape of tax return preparation services.  Today, those seeds are starting to sprout. 

In June, the IRS estimated there are 717,161 PTIN holders, many of which (212,975, or 29.7%) are CPAs, outnumbering Enrolled Agents (42,895) and attorneys (31,189) combined.  While CPAs have dominated the regulated tax preparation arena, that landscape is about to change. More and more people are completing the final step to becoming a Registered Tax Return Preparer, or RTRP (they have until 12/31/13 to pass the competency exam).  Currently, there are 4,893 RTRPs.  That leaves an estimated 338,127 “provisional preparers” who may join the RTRP ranks. 

That means more competition is coming and it will influence the public perception of tax return preparers.  Unfortunately, the public doesn’t really understand the difference between a CPA and other tax return preparers.  We have all seen the advertisements by the big box tax preparation and software chains that inflate the qualifications of their employees.  They often compare them to CPAs or perhaps they feature a CPA in the ad, implying that every customer representative will have similar qualifications.

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Planning Strategies in Wake of the New 3.8% Medicare Surtax

The Supreme Court’s decision upholding the Affordable Care Act confirmed that taxpayers whose income exceeds a threshold amount will be subject to a 3.8% Medicare surtax on net investment income, effectively raising their marginal income tax rate. However, whether the Bush era tax cuts will be extended and, if so, for whom, remains an open question. In light of this uncertainty, CPAs may want to start planning for possible 2013 tax increases now, particularly for clients who will benefit from transferring assets to family members, decisions that can take time to make. Download a free Medicare surtax chart from Robert Keebler, CPA, and listen to his recent podcast on how to plan for the Medicare surtax below.

Understanding the 3.8% Medicare surtax under the healthcare law

Robert S. Keebler, CPA, MST, DEP, Partner, Keebler & Associates, LLP. Bob is a 2007 recipient of the prestigious Distinguished Estate Planners award from the National Association of Estate Planning counsels. From 2003 to 2006, Bob was named by CPA Magazine as one of the top 100 most influential practitioners in the United States. He is the past Editor-in-Chief of CCH's magazine, Journal of Retirement Planning and a member of CCH's Financial and Estate Planning Advisory Board. His practice includes family wealth transfer and preservation planning, charitable giving, retirement distribution planning, and estate administration.  

 

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Some Garlic Sauce for Your LinkedIn

Vegetarian personLima beans, broccoli, and mushrooms are among Americans’ most hated foods according to a recent survey.  I’m right there with them.  But I have found that mushrooms and broccoli are not so bad when smothered in garlic sauce or maybe topped with crabmeat. 

What does any of this have to do with social media? Many people think of social media as something they know they should do, like eating broccoli or Brussels sprouts, but it’s still difficult to swallow.  Perhaps you started a profile and joined a couple of groups at some point but you haven’t been active in months. Or years.  

Just like eating vegetables is a must to stay healthy, an online presence is a must for a healthy career, especially if you are considering changing jobs or want to expand your professional or client base.  “If you’re not on it [LinkedIn], you’re not in the game,” says Mark Lee, a tax director and author of blogs and professional journal articles about social media.

So here is my version of garlic sauce to tempt those of you who are leery of getting involved or have dropped out. 

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Key Income Tax Planning Ideas for 2012

This year presents an unprecedented opportunity for CPAs to differentiate their firm and services and show that they provide significant value to their clients by having all of their clients' financial planning needs in mind, including retirement, estate, tax, investment and insurance planning. With so many unknowns in 2013 compounded by an election year, clients need to take advantage of many financial planning avenues now to avoid missing crucial opportunities to protect their nest egg and increase their net worth. Listen to Bob Keebler as he discusses how CPAs can use this uncertain time to help their clients plan for the future.

Key Income Tax Planning Ideas for 2012

Robert S. Keebler, CPA, MST, DEP, Partner, Keebler & Associates, LLP. Bob is a 2007 recipient of the prestigious Distinguished Estate Planners award from the National Association of Estate Planning counsels. From 2003 to 2006, Bob was named by CPA Magazine as one of the top 100 most influential practitioners in the United States. He is the past Editor-in-Chief of CCH's magazine, Journal of Retirement Planning and a member of CCH's Financial and Estate Planning Advisory Board. His practice includes family wealth transfer and preservation planning, charitable giving, retirement distribution planning, and estate administration.  

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Whatever November Brings, Start Preparing Clients Now

2013 tax uncertaintyThere will be some significant potential consequences on the horizon if Congress allows certain existing tax laws to expire on January 1, 2013. With only a few months left to plan, it’s time for CPAs to be aggressive in educating clients about the decisions they may face.

Several tax changes are now set to occur at the beginning of 2013 if Congress does not act. Among them:

  • Individual income tax rates will go up.
  • Long-term capital gains rates will rise.
  • The gift and estate tax exemption will drop from $5.12 million to $1 million. Estate assets more than the $1 million exemption will be taxed at a maximum 55% rate.
  • Taxpayers whose income exceeds a set “threshold amount” will be subject to a 3.8% Medicare surtax on net investment income, effectively raising their marginal income tax rate. An affected taxpayer in the 39.6% bracket—the highest bracket in 2013—will have a 43.4% marginal rate. This will apply to individuals and trusts and estates.

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