Don’t overlook this crucial part of estate planning

We live in a time when numbers are getting so large that they begin to lose meaning. Understanding just how large one million is, is hard enough; when it’s a billion? A trillion? How about 30 trillion?

We’re seeing the largest transfer of wealth in history, as $30 trillion passes to the next generations from the baby boomers over the next two decades. Those estates come in sizes big and small, but they all have one thing in common: taxes. 

In the Tax Cuts and Jobs Act (TCJA) that took effect last year, the individual exclusion from gift/estate and generation-skipping tax was temporarily doubled, and in 2019 now stands at $11.4 million. That means a married couple has an exclusion of $22.8 million to use during their lifetime or at death. Before you go thinking that means estate taxes won’t affect the vast majority of clients, think again: the state your clients live in might not conform to the federal exclusion. It’s important to understand the major tax considerations in estate planning.

Tax technology: Outpacing the pace of change

The world is changing, but you already know that. As CPAs, we understand the quickening pace of technological, legislative and demographic changes because we see them influencing each step of our professional lives.

To be our best, we must out-maneuver and outsmart the changes that lie ahead before they ever happen. That means finding new ways to use technology to enhance what we do and how we do it.

The AICPA Tax Section recently released a Tax Technology Resource Center to help you do just that. Here are some of the highlights of how you can embrace technology trends and make the most of the exciting progression of our tax profession.

The government has shut down, but tax season doesn’t stop

On January, 15, the IRS released an updated Contingency Plan recalling 57.4% of its employees to work during the filing season shutdown. Per the new plan, excepted employees now include those whose activities are necessary for the payment of tax refunds. These activities include:

• Processing electronic returns through issuance of refunds
• Processing Paper Refund Tax Returns through issuance of refunds
• Processing 1040X Amended Refund Returns Adjustments including Carrybacks, Amended Returns, Duplicate Filed Returns (DUPF), Correspondence, Injured Spouse Claims, Disaster Claims, F843 Claim for Refund and Request for Abatement in support of issuing refunds
• Processing Department of Defense Claims for refunds
• Manual Refund Support - Clerical
• Document preparation, screening and control of work in Image Control Team

5 retirement planning tips for tax clients

Successful retirement planning is all about strategy. Analyzing sources of income, estimating expenses, choosing investments and managing assets are vital to safeguarding long-term financial comfort later in life. However, one aspect of retirement planning is sometimes overlooked — tax planning.

As a CPA, you’re already helping your tax clients with their retirement planning needs, but are you doing enough? Take a moment to review these tax considerations to make sure you’re exploring all the options with your retiring clients. Then listen to this AICPA podcast for a deeper dive into the topic.

Looking at tax as part of retirement planning

How some taxpayers are getting grounded

Jane has a problem. She has tickets to fly to Europe next week, but her back taxes may be standing in her way.

Jane owes more than $75,000 in taxes, fees and interest to the IRS. She was aware of this substantial debt but had no idea that she could lose her passport because of it. She doesn’t understand what’s going on or what she can do.

Jane isn’t alone. The number of people receiving a Notice CP508C is growing, and more than 362,000 Americans are facing passport revocation due to significant tax debt.

One of your tax clients could be next.

‘Twas the night before tax season

'Twas the night before tax season, when all through the states,

The nighttime felt heavy, and folks were up late.

The children were nestled all snug in their beds,

While Dad stared at forms with immeasurable dread.

And Mom in her PJs, the cat in her lap,

Had just settled in for the tiniest of naps.

4 things your clients don’t know affect their taxes

This year is coming to an end, and there’s one thing we can all agree on: 2018 was a doozy for tax practitioners. Between tackling a challenging busy season, reading up on the Wayfair ruling and navigating the constant stream of tax reform guidance, there’s been a lot to keep up with. But while you were making heads or tails of the changes to tax, your clients had their own list of challenges keeping them up at night.

Whether they got married or divorced, retired or sent a child off to college, their financial realities shifted and not just because of tax reform.

It’s beginning to look a lot like tax busy season

Washington, D.C., got its first taste of winter just two days after the AICPA National Tax Conference this year. In some parts of the capital, it was just a dusting of snow. For those just north of the city, it was a blanket. While CPAs bundled up, drank hot cocoa and anticipated the wonder the season always seems to bring, they were reminded of the cold months ahead where the days are shorter, but the workdays are much, much longer.

The first sign of winter is also the first sign of busy season. It’ll be here before you know it, and with tax reform implementation in full swing, you’re going to need more than a wool coat and an ice scraper to get you warmed up and out on the road in the morning.

A recipe for success: Experiences to keep your clients coming back

You’re staying at a hotel in a city you’ve never visited before. After you check in and unpack your bags, you realize you’ve forgotten your pajamas and it’s too late to shop. You walk down to the lobby and mention your predicament to the front desk clerk. Sympathetically, she offers a solution. She tells you to have a seat and serves you a cup of hot tea and a perfectly warm and melty chocolate chip cookie. After just a few minutes, another staff member approaches you with a package of blue cotton pajamas. She explains they’re offered to you complementary for your stay.

Increasingly, consumers are valuing their overall customer experience much more than any tangible product or service they may receive. It’s what keeps them satisfied and coming back for more. You, too, have an opportunity to create exceptional and memorable experiences for your clients. What are you doing to keep them coming back for more? Here are three things to consider as you strive to go above and beyond for your clients:

Tax identity theft: A horror story

Halloween used to scare me. I was sure that monsters — specifically zombies — were out to get me. But I’m not afraid anymore because I faced down a nameless ghoul who did more actual harm to me than any imaginary monster could ever do.

It all started one fateful day when an identity thief used my name, Social Security number and birth date to file a fraudulent tax return, netting the fraudster a $4,000 refund. While it was an excellent payday for the thief, it was the start of some major headaches for me.

By the time I found out what happened, I was on the hook for more than $14,900 (including supposed unpaid taxes, penalties and interest). Fresh out of grad school with high student loan debt, rent and health insurance payments, I was completely unprepared to weather this storm.

Life lessons learned while training for the IRONMAN® triathlon

On August 19, 2018, I checked something off my bucket list: I completed the IRONMAN® Mont-Tremblant triathlon – a 2.4 mile swim, a 112 mile bike ride and a 26.2 mile run. I wasn’t particularly fast — it took 15 hours and 40 minutes to finish — but it was an amazing day in beautiful Quebec, Canada, that I will never forget.

As an adult, I developed a love of running to help stay active and reduce stress. When I turned 40, I got into triathlons to mix it up a bit. For many years, I wasn’t very athletic. So it was pretty shocking to many that I had undertaken such an intense activity.

Now, having run countless miles, I’d like to share some of the lessons I learned while training and running. I find they cross over into my everyday business life.

Cybersecurity facts tax practitioners need to get right

How many emails does your firm receive in one day?

Whatever the number, there’s a good chance a chunk of it is malware. According to a 2018 report compiled by Symantec, Corporation, one in 412 emails contained malware in 2017. For businesses with less than 250 employees, this rate jumped to one in 376 emails. When you consider just how many emails the average office worker receives in a week, things can look a little scary.

Cyberattackers represent a growing and evolving threat to CPA firms. Perpetrators are seeking sensitive client information, financial records and firm data like PTINs using any method available to infiltrate your defenses. And a lot of times, it works.

Understanding how to ward off these attacks is half the battle. Learn how to dispel common misconceptions about cybersecurity so you can be better prepared to face down any threat to your data.

5 tips for nudging procrastinators on extension

Your clients may feel like October 15 is still far away, but you know better. Completing a return that is on extension takes time, and you’re getting worried because you don’t have all the information you need. Calls and emails to the clients aren’t producing results. 

You may feel like you’ve seen this movie before, and perhaps it’s time to write a new script. Here are a few actions you can take to address the issue.

1. Issue an alert

Ideally, you sent clients an engagement letter at the beginning of the year that spelled out deadlines and responsibilities of both parties, as well as the consequences if the client does not produce information required to complete a timely return. These letters are important, as they protect the practitioner and make the client aware of the consequences of procrastinating. If your engagement letter didn’t include a deadline, set this now and notify your client by certified mail. 

So, your tax clients say their daughter got into Harvard...

Your clients are ecstatic. Their daughter just got accepted to an Ivy League college. But they’re also worried because that top tier school is expensive. Concern doubles when they think about their 15-year-old son who just started at a private high school. He’ll be looking at colleges soon, too.

Many parents feel financial pressure when it comes to their children’s education. That’s not surprising considering that in 2016, the yearly estimated average cost of undergraduate tuition, fees, room and board was $16,757 at public institutions, $43,065 at private nonprofit institutions and $23,776 at private, for-profit institutions. 

What can you as a tax practitioner do to prepare your clients for this financial milestone? Below, you’ll find four suggested talking points to put your clients’ minds at ease.

Do you know these three tax client types?

Your tax practice sees a lot of traffic, no doubt. Clients of every stripe pass through your doors seeking your guidance on all kinds of things. While every CPA tax practitioner is at the ready with good advice and service on all things tax, many go above and beyond with additional planning services. There’s even the occasional left-field question about the best restaurant in town or which university seems best suited to their kids. Over time, you’ve come to identify the personalities of your clients, and you might have noticed that many fit into some broad client types. Do you recognize any of these?

Get your groove back: 4 tips to ramp up for fall busy season

Is there any season more relaxing than summer? The weather is warm. The days are long. Perhaps best of all, busy season is still a ways off. There’s no cause to worry about extensions or business returns or even tax reform, right?

Nope. Believe it or not, summer is winding down and the fall busy season is ramping up. Now is the time to shake off that beach brain and prepare for what’s ahead. You’ll thank yourself in October, not to mention in February and March. 

Confessions of a young tax practitioner

Olena Romanchuk, CPA, knows what it’s like to fall in love with tax at an early age. She was only fifteen the first time she pored over a stack of ledgers. After studying accounting in her home country of Ukraine, Olena came to the United States as an exchange student. She later attended Western Carolina University and fell for the tax profession all over again.

While Olena was developing her tax skills, Glenda Bowman was trying to figure out exactly what she wanted to do in college. As the first person to pursue a bachelor’s degree in her immediate family, just getting to college was a significant accomplishment. She said she was a typical college student who went straight into general business before she felt something click in her first accounting class that led her to embrace the profession and become a CPA.

Calling all tax CPAs: help quality reviews take center stage

Data breaches happen daily. We see it in the news, and we hear it from our clients. Clients trust us with their private information including Social Security numbers, paystubs, birthdays and other data valuable to identity thieves.

We need to maintain security and provide the best service for our clients. To do this, we must observe two things: integrity and adherence to the quality of services we deliver. And both require obedience to specific standards of behavior.

In the case of quality, there are many ways to prove we’re adhering to standards. Reviews of our work are one. But doing so can raise significant concerns for practitioners, particularly when it comes to logistics.

Could IRS reform mean smoother waters for tax practitioners?

“. . . once again there is an historic opportunity to overhaul the IRS and transform it into an efficient, modern, and responsive agency.” - Report of the National Commission on Restructuring the IRS, 1997

Last year, I wrote a blog about tax reform and quoted country singer Michael Ray that “[t]oday only happens once in a lifetime.” I talked about how I was around for the 1986 tax reform process and passage of the legislation, so happening once in a lifetime might be twice for me, as tax reform was then developing. I’m also hoping that twice in a lifetime refers to IRS reform.

Is hiring a CPA worth it in 2018?

When people hear I’m a CPA who specializes in tax, the question invariably comes up — what do I think about the new Tax Cuts and Jobs Act (also known as “tax reform”)? I’m not one to talk about politics, so to be neutral, I say “it’s certainly an exciting time to be a CPA in tax.” No question, many of the provisions of tax reform bring added complexity to areas of the law that were not simple to begin with. 

Some individuals will continue to feel comfortable using tax preparation software, but there are circumstances where “you don’t know what you don’t know,” requiring you to call in the help of a CPA. A great CPA can provide much more value than just the peace of mind that comes from knowing that your forms are correct. They can provide planning and tax advisory services, consultation, business and international accounting, forensic accounting, business valuation and more. 

Read on to learn four reasons why it’s worth hiring a CPA.  

An insider's look at avoiding ethical violations

Ethical dilemmas can occur at any time during the career of a tax practitioner. Sometimes, the practitioner doesn’t even know they did anything wrong. As a former IRS Office of Professional Responsibility attorney, cases just like that would come across my desk.

A vast majority of these cases came from simple misunderstandings of ethical responsibilities — practitioners were not aware they were violating Circular 230 or the practitioner just had a bad day and made a one-time mistake. Review these stories and learn a little more about how easy ethical violations can happen if you aren’t paying close attention. (Note: details have been changed to protect the privacy of those involved).

Practitioners division can help IRS put taxpayers first

“Wouldn’t you know IRS extended filing season an extra day the year I retire.”

- Nameless but real CPA

On April 17, what was supposed to be the final day for Americans to file 2017 tax returns, Internal Revenue Service (IRS) hardware issues resulted in the outage of several key online systems. The timing couldn’t have been worse. The website crash forced the IRS to delay the tax deadline by one day. It also served as a warning sign for those of us advocating for the agency’s modernization. And don’t tell that CPA that he actually got an extra three in his last busy season. Gravy, as it were.

The day after the technology collapse, the Taxpayer First Act — described as the most transformative revisions to the IRS in 20 years — won unanimous passage in the U.S. House of Representatives. The package of nine bills is intended to redesign the IRS to emphasize customer service, new taxpayer appeal rights, improved responsiveness to victims of identity theft and modernization of technology.

5 tax tips for the newly engaged couple and their CPA

I’m getting married in June, and for me, wedding planning has been relatively simple and drama-free. I’ve buttoned up the budget, signed every contract, booked travel and have a final headcount for the caterer. There’s just one thing that’s still unsettling my mind.

What’s going to happen to my taxes?

It seems like such a straightforward question, but newlyweds often find themselves on the wrong side of a tax bill. Couples may think it’s silly — or even awkward — to think about taxes just after getting engaged, but a financial head start could do wonders for a marriage (money issues are often cited as a cause of divorce). 

As a tax practitioner, you are in the unique position to help guide clients like me through this financial milestone. Knowing what to look for and how to spot potential red flags can be key to keeping them on track. For a little insight, I reached out to Tax Practice & Ethics team members Susan Allen, CPA, CGMA, CITP, and Henry Grzes, CPA.

Introducing our newest heroes: “The (CP)A-Team”

Pop culture seems to be obsessed with the 1980s.

Remakes of popular blockbuster hits are now the norm for movie-goers. From “RoboCop” to “21 Jump Street” to “Footloose,” today’s entertainment is all about nostalgia.

So, it’s no surprise that television’s favorite action drama, the “A-Team,” would make a comeback. Updated for 2018, the reboot is coming to prime time. And this time, the fearsome foursome is taking on the single greatest threat to our security: cybercriminals.

Airing at 8 p.m. Wednesdays on your television or tablet is America’s newest special task force: “The (CP)A-Team.” Each half-hour episode features the all-CPA unit as they travel the world detecting and responding to cyberattacks and data breaches.

Cyberattacks are on the rise. Personal information is swapped for pennies on the dark web. Ransomware is lurking in the shadows of your desktop. And one team perseveres against it all to expose cyberthieves and other scoundrels.

In 2002, this crack team of auditors met on the job. Fresh out of college and stepping into the vast world of accounting, they found in each other a bond that nothing could shake. Once they graced the cubicles of Metro Zero, New York City’s finest financial institution. Today, they survive as practitioners with a purpose: protecting millions from the loss of sensitive personal and corporate information.

Jane “Caesar” Jones is a master of disguise. She is most commonly seen portraying beauty school dropout “Mrs. Bentley,” a salon owner who uses weak passwords and unsecured wifi devices as part of a ploy to entice small-time hackers. As the leader of the group, it was Caesar’s idea to go rogue after discovering Metro Zero shared client data. Now on the run, she and her team aim to level the playing field and repair the damage done.

Nick “N.N.” (Negative Nelly) Nichols is the muscle for the (CP)A-Team. N.N. is always in a bad mood but is the first on the scene when things get hairy. Armed with only a laptop and personal hot-spot, N.N. attacks hackers before they can reach your server. A reformed hacker, his secret past is known to only Caesar.

Finding your second wind during busy season

The last stretch of busy season can be tough.

So how do you get that mojo back? Just like your car, your body and brain perform better under certain conditions. Use that analytical brain that makes you a great CPA and run through some key sources of energy to see where you can replenish.

Time to do a quick 6-point check:

1. Air – When was the last time you exercised? How often are you moving around during the day? A runner’s ability to get a second wind in a marathon depends on how well they restore oxygen to their muscles. Your brain needs a little more oxygen to function best in the tax season marathon. Exercise stimulates blood flow to your brain, which leads to more oxygen and more energy. If taking a brisk walk or hitting the gym is not feasible, here are some exercises you can do at your desk.

2. Light – Winter is a tough time to be working a lot, especially if it’s dark when you go to the office and it’s dark when you leave. Just as oxygen has been proven to stimulate brain activity, light can affect your mood, which influences your energy level. Take a moment to go outside and soak up the sun.
   
3. Fuel – I can’t say “lay off the caffeine” without being a total hypocrite. Instead, I will suggest keeping an eye on how often you’re filling up that coffee mug, especially since it may mess with your sleep. Stay hydrated by drinking two glasses of water after each cup.

3 myths about tax extensions

Sometimes filing a tax extension can be a benefit to your clients, but only if they are clear on what an extension means —and what it doesn’t mean.

If you’re a tax CPA, you’ve probably come across a client who chose not to file an extension because they misunderstood how it would affect them. On the other hand, maybe a client was happy to go on extension but for the wrong reasons.  

Below are three myths that your clients may have about extensions that you can proactively dispel.

Tax pros: How are you protecting your clients’ data?

“I don’t need to worry about identity theft because no one wants to be me.”

-Jay London

American comedian Jay London is funny, but identity theft isn’t. Unfortunately, cybercriminals know that targeting tax professionals is more effective than going after individual taxpayers; after all, tax professionals keep records on hundreds, if not thousands of individuals. This means any firm could be a target this tax season.

The IRS receives three to five data theft reports a week from tax practitioners. And, as IRS Commissioner John Koskinen said last year, “These (cybercriminals) are well-funded, knowledgeable and creative. It’s going to take all of us working together to combat these identity thieves. But doing nothing or making a minimal effort is no longer an option. Anyone who handles taxpayer information has a legal responsibility to protect it.”

While this may not be the time of year to do a full assessment of data security and technology integrity, there are steps CPA firms should take now to keep their clients’ data safe:

Now accepting applications: 5 tips for mid-season hiring

It’s the middle of busy season, and you’ve just realized you could use a little more help. Maybe you underestimated your firm’s capacity, or a staff member unexpectedly needed to leave. When it’s all hands on deck to manage client needs, mid-season hiring is a curveball no firm wants to face. Here are a few ways to prevent such departures and prepare for the unexpected.

An ounce of prevention

Of course, one of the best ways to handle mid-season hiring is to prevent departures. 

While people will leave, and not always at the best time, a firm should try to create a fun office culture so employees won’t want to go anywhere else. This means creating a family-like atmosphere in hopes that staff members are less likely to leave “family” in the middle of a busy time. To make the firm more inviting, consider:

Switching to a C corp? Think twice about it.

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

--Charles Duhigg

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

Engagement letter stories — when they hurt and when they worked

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

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

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

One that hurt — no engagement letter meant higher risk

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

Busy season cheat sheet: 8 considerations to make it easier

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

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

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

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

-Dave Barry

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

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

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

Next step for tax reform: Busy season

Tax reform is now law.

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

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

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

Tax reform: Steps to implementation

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

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

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

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

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

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

Preparing for busy season after natural disasters

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

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

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

And the year isn’t over just yet.

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

The Gramm-Leach-Bliley Act still applies to CPAs

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

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

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

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

Beyond tax: Extending your success

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

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

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

The benefits to your practice and clients are vast.

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

How to Fail in Your Tax Practice

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

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

 

Fighting His Way Out of IRS Penalties. Literally.

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

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

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

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

Discounting Tax Services: Good or Very, Very Bad?

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

The Good

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

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

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

Scenarios in Quarterly Estimated Tax Payments

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

Individual estimated tax payments – a primer

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

Reconciling Tax Reform and Reconciliation

Congress is not an ATM

-Robert Byrd, Former US Senator

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

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

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

Qualified Charitable Distributions Reduce Tax Bills

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

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

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

3 Tax Technologies You Shouldn’t Ignore

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

Cloud-Based Servers/Software as a Service

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

Tax Refunds and Financial Responsibility

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

Aim for No Refund at All

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

21 Songs to Motivate You for the Busy Season Homestretch

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

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

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

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

--Abraham Lincoln

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

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

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

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

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

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

-Michael Ray, Country Music Singer

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

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

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

Top 10 Resources for the 2017 Tax Season

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

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

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