ALABAMA CPA MAGAZINE OCTOBER 2015
ASCPA PARTNERS ISSUE
THE ALABAMA CPA MAGAZINE Alabama Society of Certified Public Accountants P.O. Box 242987 Montgomery, Alabama 36124-2987 1-800-227-1711 334-834-7650 www.ascpa.org OFFICERS Dr. Lowell S. Broom, Chair James R. L. Carroll, Chair-Elect Don McCleod, Past Chair BOARD OF DIRECTORS Lynne N. Bozeman Michael L. Brand Caitlin F. Glass Paul Marcus Hamilton M. Buddy Johnsey Lisa M. McKinney Gregory E. Sellers Dennis E. Sherrin Rachel M. Taylor Macaroy Underwood AICPA COUNCIL MEMBERS Dr. Lowell S. Broom E. Lamar Reeves John P. Shank
Message from the Chair... “No man is an island” How many times have we all heard that phase? If I had a penny for every time it’s been repeated since it was first penned in a Christian devotional poem by John Donne in 1624, I would be a rich man. But, alas, I don’t. I do, however, believe that Donne was very much on point with what he wrote. It’s true in football (how could you not mention that at this time of year?), I know it’s true in higher education, it’s true in life in general, and it’s certainly true in the profession of accountancy. I have said before that I am proud to be a part of an organization like the Alabama Society of CPAs. In almost all of the literature our Society produces and on the organization’s website you see the words “Protect, Educate, Connect” which expresses the mission of our organization. In the past few years I have been amazed at all of the positive things that the ASCPA does in each of those areas and I am absolutely sure that that good work is going to continue for a long time to come. However, to paraphrase Mr. Donne…No professional organization is an island! Sometimes I think we fail to properly recognize the help we receive from some of our sponsoring partners in what we have been able to accomplish. Organizations like Lyons, HR and PNC Bank, AON – AICPA Member Insurance Programs, Southeastern Financial, Cypress Resources, DavisDirect, Paychex, and Aldridge have been sponsors of annual meetings the past two years. Our Young CPA golf tournament has generated significate dollars for The Exceptional Foundation and for our own ASCPA Educational Foundation over the past few years. Certainly many of you out there deserve some pats on the back for that due to your participation in the golf tournament. But those events would not have been nearly as profitable without the organizational sponsorship of PangeaTwo, Advantage Payroll Services, Bradley, Arant, Boult &Cummings, Servis1st, ITAC, Nutech, Balch & Bingham, Wolter Kluwer, Jackson Thornton, Lloyd, Gray, Whitehead & Monroe, Warren Averett and Merrill Lynch. Many of our efforts have also been supported by organizations that have regularly chosen to advertise with us in our monthly newsletter or other types of formats. Alabama Opportunity Scholarship Fund and Accounting Practice Sales are two organizations that fit into that category. While it is true that all of these sponsors and advertisers have a vested interest in spending their money with the ASCPA, it is also true that, without their support, our ability to function as an organization as we currently do would be impossible. If you have an opportunity, let these organizations know how much you appreciate their working with us. Even better, give them an opportunity to work with you if they provide services that you or your client need. Just keep in mind, none of us is an island….individually or as an organization!
Lowell
Jimmy L. Williamson, Past Chair, AICPA The Alabama CPA Magazine is published by Alabama Society of Certified Public Accountants as a membership service to Society members. Views and opinions appearing in this publication are not necessarily endorsed by the ASCPA. The deadline for submitting materials for publication is the first of the month preceding issue date.
Jeannine P. Birmingham, CPA, CAE, CGMA President and CEO Diane L. Christy, Editor ON THE COVER Greg Haney, PNC Bank and Sam Aidee, Aon at the ASCPA Technology Conference
2
69th Annual Federal Tax Clinic
November 19 - 20, 2015 Bryant Conference Center, University of Alabama The Alabama Federal Tax Clinic Inc., the Alabama Society of Certified Public Accountants, the Alabama State Bar, and the University of Alabama invite you to the 69th Annual Federal Tax Clinic. Founded in 1947, The Alabama Federal Tax Clinic has provided quality educational service to certified public accountants and tax attorneys in the southeast. Each year the program is designed by the board of directors, comprised of members appointed by all three of the sponsoring organizations. Using their expertise and feedback from clinic participants, the board has developed and maintained a quality clinic for more than 60 years! This year the Clinic will be held on Thursday, November 19th and Friday, November 20th, at the Bryant Conference Center on the campus of The University of Alabama in Tuscaloosa.
Register at www.training.us.edu/fedtax. $350 THE ALABAMA CPA MAGAZINE
THE ALABAMA CPA MAGAZINE
3
MARKETING GUIDE
But wait, there’s more! I
n last month’s Alabama CPA magazine you read about changes to Annual Meeting and the magazine. Just like in those crazy infomercials, there’s even more news to share. This month the ASCPA will publish the 2016 Marketing Guide. It will be on the website as a downloadable pdf file. The Marketing Guide describes all the ways in which companies can connect with ASCPA members at conferences, through sponsorships and by advertising in the magazine. New this year will be the option for non-members to advertise in the digital newsletter, #ALcpasuccess, with members still receiving a preferred rate. Why is this information important? Because you, as a CPA and member of the Society, are a valuable audience for goods and services. Since the ASCPA is scrupulous about keeping your information private, vendors prize the events and channels where they can connect with you. The education department is also creating Premier Partnerships for those companies who work most consistently with the ASCPA in sponsoring major events. For a flat fee they will receive recognition throughout the year and preferred placement in advertising, trade shows and event promotion. This guarantees that the marketing staff can work far in advance in planning and generate a stable source of income for the ASCPA at the same time. The Marketing Guide will appear in the Tuesday digital newsletter so be on the lookout for it. Feel free to share with clients who can benefit from associating with the Society. But wait, there’s more! In late-breaking news, the digital marketing task force of the board of directors has been working hard to re-brand the ASCPA Annual Meeting. It’s especially important to take advantage of the shift to a multi-day event to make this conference appealing to contemporary audiences. ASCPA Accounting Connection was the winner by a wide margin, after whittling choices from more than a hundred to a dozen, to the final ones. Those comic book people shouldn’t have all the fun at Comic Con, now ASCPA members can revel in their own coolness with AccountingCon!
4
THE ALABAMA CPA MAGAZINE
ASCPA PARTNERS
Employer Affordable Care Act Compliance By Dennis L. Day, CPA.CITP, CGMA
Common Employer Scenario: This year our company has been working a lot with employers, insurance brokers, attorneys and employers’ outside CPA firms on setting up ACA Compliant software. Common scenario: We begin talking with the human resources director, payroll manager and sometimes the CFO of a company. We ask who is leading the ACA compliance effort for the company. There are stares around the room and usually everyone points to someone else. Unfortunately, we usually find that companies are not fully ACA compliant and we also find that someone is entering a lot of data in an Excel spreadsheet which nobody is reviewing on a monthly basis and does not understand what needs to be reviewed. Monthly Monitoring of ACA Compliance: Excel is a great tool but cannot by itself monitor ACA compliance on a monthly basis. A good ACA compliance software solution should include monthly dashboards and alerts including monitoring of employee eligibility for coverage, testing for the affordability of coverage, provide forecasting to view which variable employees are trending towards full-time status for ACA purposes and notify immediately via alerts of any possible employee scenario where the system believes the company may incur a penalty. Most companies we have worked with over the last several months believe they are in compliance and offer affordable health coverage to eligible employees. However, they usually do not realize monthly monitoring is needed and this is where the penalties add up fast! We advise the human resources department, payroll department along with the accounting department to work together and review monthly alerts which can save thousands of dollars in penalties. Common Myths: 1. Employers only need to worry about providing the new employee Form 1095-C: There is a penalty for not filing an accurate Form 1095-C. However, the large penalties which are incurred monthly require someone from an organization to review alerts along with dashboards produced from an ACA compliance software solution and act quickly to avoid future penalties. 2. If an employee transfers from full time status to part time status, the employer may automatically stop their health insurance coverage: If an employee was considered full time at the end of the last measurement period, the employer must continue to offer insurance to an employee until the end of the current measurement period. 3. An employer hires a part time employee believing the employee will probably work on average less than 30 hours a week and therefore does not offer health insurance coverage: An employer must review on the employee’s anniversary date, the average number of hours worked during the first year of employment and if it is determined that the employee is an eligible full time employee for ACA purposes, the employer must offer coverage within 30 days (all other employees usually are part of the standard measurement period). 4. Employers believe that they need to track dependent information: An employer only needs to track dependent information and fill out part 3 of Form 1095-C if the employer is self-insured. The health insurance company will provide dependent information to the employee on Form 1095-B if the employer is not self-insured. 5. Smaller companies believe that if they have less than 50 full time employees they are not considered an Applicable Large THE ALABAMA CPA MAGAZINE
Employer (ALE) for ACA purposes: A company must determine if they are an ALE by reviewing the number of full-time employees plus fulltime equivalents. Going through this calculation might surprise some companies. A good ACA compliant software solution should be able to calculate this for you (especially if you are very close to the 50 fulltime employees including full-time equivalent employees). Some Payroll Software Solutions are not ACA Compliant: Several payroll software companies (whether providing payroll software for in house or outsourced payroll) have not yet mastered the monthly monitoring and alerts needed to prevent penalties. More of the payroll software companies are gradually adding the capability to print the new employee Form 1095-C (which will have to be edited by the employer in some cases) but are still slow in adding the ability to electronically file Form 1094-C. In order to be ACA compliant, your company may determine that you need to implement a fully functional ACA compliance software solution which can work with multiple payroll systems (imports certain data either by pay period or by month) to provide the level of protection/assurance that an employer needs to avoid penalties, provide an accurate Form 1095-C and Form 1094-C. Questions Needed to Evaluate ACA Compliance Software: 1. Ask a lot of questions! 2. Go over specific scenarios (Examples: does your company have multiple legal entities, what type of employer (government, tribal, etc.) 3. Ask for references and call the references. Ask specifically how the software has helped their ACA compliance efforts. 4. Ask to speak to one of the experts on the team (not just the sales person). An ACA expert should be able to provide you at least one item of information that you did not know or were unsure of how to proceed. 5. What is the cost of the software? What variables determine the cost of the software? (Example: Possibly number of active employees and number of related legal entities) 6. What are the ongoing costs, including support? 7. Does the company offer free ongoing education webinars and year-end webinars? 8. What type of monthly alerts and dashboards are available and can these dashboards be downloaded to Excel? Summary: Some Applicable Large Employers are still not ACA compliant and have a few misperceptions of the Affordable Care Act. Companies must quickly assess their ACA compliance and determine if they need to invest in an ACA compliance software solution to assist in avoiding penalties and to accurately produce both the employee Form 1095-C and employer Form 1094-C. If you would like to take the ACA quiz to determine your general knowledge of ACA compliance, email info@dldbsi.com to request a copy of the ACA Compliance Questionnaire. ________ Dennis L. Day, CPA is the President of DLD Business Solutions, Inc. DLD implements and supports business, accounting, ERP and payroll software solutions to solve complex business issues. DLD is also a Microsoft Certified Partner specializing in Microsoft Dynamics GP and Microsoft Dynamics CRM. 5
ASCPA PARTNERS
Continuity planning has your back – and your future. Les Pasternack, Specialty Director of Sales, PNC Bank.
I
t’s a topic hardly anybody wants to talk about, yet it’s one of the most important discussions to have for the sake of your business: What if an accident, a sudden illness or death meant you were unable to work tomorrow? A continuity plan addresses these whatifs. Different from a succession plan — which is more long-term in nature and focused on a planned exit, such as retirement — a continuity plan covers the unexpected and helps ensure your clients will continue to be taken care of and your firm will retain its value. Without a continuity plan, your firm risks being liquidated or sold to outside parties for less than it’s worth. When drafting a continuity plan, one of the main points of focus should be naming a continuity partner who can keep your business moving forward without you. This person is someone who shares your business values, understands your clientele and is willing and able to step into your shoes at a moment’s notice to help your firm continue to serve your clients. Having a partner not only alleviates the worry of what will happen to clients if you’re not available, but also protects your business’s
value. If clients are suddenly without an accountant to handle their needs, they will likely leave your firm, lessening its value to a potential buyer. If your disability is temporary, your contingency partner can handle business matters until you return to work. If your disability is permanent or you die, you may want to allow the continuity partner to become a preferred buyer of the firm. You may already have someone in your firm who can serve as the continuity partner. Or, you may need to network with other accountants in your area to determine who would be a good fit. Put in writing how the arrangement will work, including how the contingency partner will be compensated. Be sure to have the partner sign nondisclosure and no-solicitation clauses. Share the details of the plan with family members as well as employees so everyone understands what will happen if you are incapacitated and how they and
your clients will be taken care of. It’s likely that some of your family’s wealth is directly tied to the value of the business. In the event of your death, your family may be forced to sell the firm or at least their stake in the firm, so communicate the potential impact on their future wealth. Update the plan at least annually, and consider seeking the guidance of a lawyer to make sure the terms of your agreement are in the best interests of your business and those you care about. _______ The article(s) you are reading were prepared for general information purposes by Manifest. These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions. These articles may provide reference to Internet sites as a convenience to our readers. While PNC endeavors to provide resources that are reputable and safe, we cannot be held responsible for the information, products, or services obtained on such sites and will not be liable for any damages arising from your access to such sites. The content, accuracy, opinions expressed, and links provided by these resources are not investigated, verified, monitored or endorsed by PNC.
2015 Banking Insights for CPAs, Accounting Professionals and Advisors Please join us for a free, informative webinar* Wednesday, October 28, 2015
12:00–1:00 p.m. (Americas) Eastern Time (U.S. & Canada)
To register for this free event, go to http://tinyurl.com/2015cpawebinar Who should attend: CPAs, accounting professionals, advisors
Deadline to register is October 27.
Join us as PNC Business Banking Portfolio and Credit Product Manager Gavin H. Geraci provides banking updates and insights relevant to CPAs and other trusted business advisors. This timely webinar will focus on common banking industry changes and the impact they can have on your commercial clients. Topics to be discussed:
· Key findings from the PNC fall survey of small and middle-market business owners · How has the banking industry adapted to the changing environment? How have regulations influenced this? influenced this? · Given the current business and economic environment, how can banks and CPAs best prepare a small business owner seeking credit?
*Internet access is required for webinar participation. By registering, attendees from the states of Pennsylvania and Alabama are consenting for PNC to share information with PSTAP and ASCPA to fulfill CPE credit processing. 6
THE ALABAMA CPA MAGAZINE
STUDENT SUCCESS
2015 ACCOUNTING INTERVIEW DAY
2015 Classroom Blitz Opens Doors Join the Young CPA Cabinet in the 8TH CLASSROOM BLITZ.
Teach high school students about borrowing and share your passion for the accounting profession!
November 16-20
ASCPA contact is Shirley Carroll, scarroll@ascpa.org, 334.834.7650 Sign-up information is available on the ASCPA website.
THE ALABAMA CPA MAGAZINE
7
Learn how to claim approximately $10.5 million in state tax credits for the 2014 tax year. Schedule your �irm’s Lunch & Learn
Two CPE Credit Hours Lunch is on us
Presented by the Alabama Opportunity Scholarship Fund (AOSF), the Alabama Accountability Act (AAA) Course “Tax credit donations focuses on the AAA legislation, give me an opportunity!” taxpayers’ bene�its, Scholarship Granting Organizations, and how to claim dollar-for-dollar tax credits. For more information or to schedule your �irm’s Lunch and Learn, contact Bri Jackson at 205-206-7803 or bjackson@alosf.org.
AOSF’s 2014-2015 School Year: 2,851 students were awarded. 12,000 students applied. $16,899,434 in scholarship funds were distributed. www.alabamascholarshipfund.org 8
P.O. Box 59188
Birmingham, Alabama 35259
205-206-7803
THE ALABAMA CPA MAGAZINE
MEMBERS IN MOTION PROMOTIONS AND NEW POSITIONS Culotta, Scroggins, Hendricks and Gillespie, P.C. (CSH&G) announced the promotion of Kyle Melvin to tax manager. Melvin has been with the firm for three years and previously served as a senior supervisor. He is a graduate of the University of Alabama at Birmingham and specializes in taxation issues for corporations, partnerships, individuals, non-profit entities, and trust. As manager of the firm, Kyle’s primary responsibility will be the management of staff in delivering high quality tax compliance services for existing businesses as well as new business opportunities and development.
third party hosted environment, evaluating major software applications for implementation, and updating hardware replacement programs. Godwin was noted as a leader who understands that change is constant and as an advocate for improvement, excellent internal service and outstanding client service. In addition to her internal leadership, she has honed an expertise in CFO services to local government organizations providing counties and cities comprehensive expertise they otherwise would not have.
Wealth Management Partners, LLC (WMP) is pleased to welcome Karli Holt as manager. Holt has over fifteen years’ experience in public accounting working with clients in the areas of taxation and auditing. She has extensive expertise in both the public and private sectors and will serve contractors, small businesses, municipalities, non-profits and employee benefit plans. Holt is a graduate of Troy University.
Jessica Thompson has been promoted to manager in the audit division of Warren Averett’s Montgomery office.
L. Scott Barringer recently joined Lovoy, Summerville & Shelton. The firm has offices in Birmingham and Auburn. Barringer is a 1993 graduate of Sewanee, the University of the South and completed his master’s degree at the University of South Carolina. Machen McChesney announced promotions of the following executives. Nick Wheeler is now senior tax manager. He’s been at the firm for 10 years, is an Auburn graduate and specializes in small business and individual tax compliance, business consulting and advisory services, tax planning, estates and trusts. Laura Taber is now a supervisor. She received her MAcc from Auburn and works in business taxes, accounting, auditing and consulting. Tyler Settles is now a senior accountant. He has a degree in accounting and aviation management from Auburn University.
Jessica Thompson
COMMUNITY NEWS For the second consecutive year Kassouf & Co. has been named one of the top accounting firms in the nation by Inside Public Accounting. They were listed in the annual Best of the Best Firms feature, which recognizes firms with overall
superior financial and operational performance. Only 50 made the cut, and Kassouf was the only Alabama-based firm to make the list. Hartmann, Blackmon & Kilgore, P.C. was named one of the Best Companies to Work For in Alabama for the third year in a row. The award is presented by Best Companies Group, an organization dedicated to distinguishing companies who are superior in workplace excellence, and Business Alabama, the state’s leading statewide business publication. The Best Companies rankings were revealed at a reception in Birmingham on Aug. 4, 2015. The list is made up of only 20 companies across the state. CDPA has opened a third office in Florence, expanding their reach from current locations in Athens and Huntsville. The city of Madison, Alabama has announced the formation of a 10 member City Administration Study Task Force. Among its members is Ray White, managing partner at Warren Averett Huntsville. He served on the Madison City School Board for ten years, 2005-15.
Nick Wheeler
Laura Taber
CHANGE IS INEVITABLE. DIRECTION IS INTENTIONAL. Tyler Settles
AWARDS AND NEW DESIGNATIONS Rachel Godwin, of Hartmann, Blackmon, & Kilgore, P.C. was presented with the 2015 “Bridging the Gap” Emerging Leader award on August 17 during the 2015 Boomer Technology Circles Summit in Kansas City. As chair of the firm’s technology committee, she led the group in initiatives to improve technology by migrating to a THE ALABAMA CPA MAGAZINE
PANGEATWO successfully matches clients with talented professionals. Our seasoned understanding of human potential, including individual strengths, lets us design far-reaching and personalized workforce solutions for employers. Our experience gives candidates an advantage and creates common ground between companies and professionals. PANGEATWO is a leader in recruitment and staffing solutions in accounting and financial services. Call today, and we’ll help you connect talent and potential.
Birmingham, AL 205.444.0080 | Mobile, AL 251.732.3000 www.pangeatwo.com
9
ASCPA PARTNERS
Why would a criminal want to steal a CPA’s client records?
T
By Kenneth J. Mackunis
he quick answer: they are worth large sums of money! A CPA’s confidential client data, such as names, addresses, dates of birth and social security numbers, provide a target-rich environment for thieves. Tax refund fraud is the #1 cyber crime facing CPAs today, according to the AICPA.1 Criminals use stolen records to file phony tax returns and receive refunds. The IRS issued 1.1 million refunds to people using stolen social security numbers in 2012, which resulted in fraudulent tax refunds of $3.6 billion.2
Professional Firms division. “It’s full of confidential information. It doesn’t have to be a breach of a network. We say cyber, but it’s a privacy data breach.” Regardless of the format of data, whether it’s stored on a desktop computer or in a paper file, a CPA has an obligation to protect it. With data being exchanged, collected and stored in a greater variety of methods, and what qualifies as protected data continually evolving, the risk of having a potential privacy breach grows exponentially.
“It becomes a race to get your tax form filed,” said Gretchen McCole, an assistant vice president at Aon Affinity‘s Professional Firms division “Tax thieves know that if they file first the IRS will assume they are the legitimate taxpayer. The actual taxpayer is stuck trying to sort out the mess.” The most sought-after records are those belonging to Americans who are not normally required to file a federal tax return – the deceased, elderly, students, children under age 14, and the low income population.2 In the case of the deceased, the crime may never be uncovered.
Potential litigation is not the only fallout from a breach The federal government has enacted laws such as the Health Insurance Portability and Accountability Act and Health Information Technology for Economic and Clinical Health Act to protect Americans’ privacy. In addition, 47 states and the District of Columbia have enacted legislation requiring business owners to notify individuals of a breach of personally identifiable information. “Breach notification is one of the most important responsibilities that come with having clients’ personally identifiable information in your care in the event of a breach,” said McCole. “It’s important to engage a data breach team with legal, forensic and public relations experts to help your firm navigate a breach.” What constitutes personally identifiable information, the time frame when notification must be given, the method of notification, whether or not an investigation is required, whether public notice must be made, and the penalties for noncompliance vary by state. “From a notification perspective,” said Alvin Fennell, vice president of underwriting at Aon Affinity’s Professional Firms Division, “it’s not where the accounting firm is based, it’s where an affected client is located. If your firm is located in New York and you have a breach involving clients in Pennsylvania and New Jersey, you are required to respond to the notification laws of each one of those states. It’s complex. CPA firms are rarely set up to handle this requirement.”
Not all tax frauds are the result of hacker infiltrations Fifty-two percent of privacy data breaches are due to criminal activity, 30% are due to employee error and 29% due to system errors.3 Criminal activity is not limited to cyber attacks. It can involve a lost or stolen laptop, tablet, smart phone or flash drive. Employees are increasingly taking work home. When they do, they’re transporting client files on their portable electronic devices. Criminals break into cars, homes and offices to get to those devices—and either use the records themselves or sell them on the black market. “While traveling to see a large client, a CPA loses their briefcase,” said Christopher Brammer, a vice president at Aon Affinity’s 10
What can a CPA firm do to help protect itself? With the threat of cyber crime in the world today, all firms, large and small, should have a plan in place to help protect themselves from a potential privacy data breach. “Firms should have an instant response
team ready if a breach occurs,” said Brammer. “Notification procedures vary widely by jurisdiction, so it’s critical that the firm’s response team is empowered to respond quickly.” The second thing a CPA firm can do is to purchase a network privacy risk insurance policy. Because privacy data breaches are relatively recent, the insurance industry has not created a standard contract. When shopping for coverage, make sure it includes: • protection for data breach litigation and regulatory fines/penalties, • remediation coverage to help pay for a breach response team, notification costs, credit monitoring, public relations and forensic services, and • risk management tools such as mobile security apps and computer vulnerability scans designed to help prevent claims. “Recent years have been an education to CPAs on the danger of privacy data breaches,” said Fennell. “Now we’re starting to see a lot more acceptance and proactive questioning.” ________ 1 Singleton, Tommie. “The Top 5 Cyber crimes.” AICPA. October 2013. 2 Robert Holtfreter PhD, Robert, “Identity Theft Tax Refund Fraud: A Growing Epidemic,” Fraud Magazine, April 2014. 3 “Cost of Data Breach Study: Global Analysis,” Ponemon Institute, May 2014. ________ Kenneth J. Mackunis (ken.mackunis@ aon.com) is an executive vice president at Affinity Insurance Services, Inc., the endorsed provider of the American Institute of Certified Public Accountants (AICPA) Professional Liability Insurance Program since 1967. Aon Affinity is a trade name for Affinity Insurance Services, Inc. For more information call 800-221-3023 or visit cpai.com. This article is provided for general informational purposes only and is not intended to provide individualized business, insurance or legal advice, You should discuss your individual circumstances thoroughly with your legal and other advisors before taking any action with regard to the subject matter of this article. Only the relevant insurance policy provides actual terms, coverages, amounts, conditions, and exclusions for an insured. THE ALABAMA CPA MAGAZINE
BABC SALT CORNER Beware Increased Worker Classification Audits
A
s many of you are aware, there has been a marked increase in the emphasis on worker misclassification, not only by the Internal Revenue Service and U.S. Department of Labor, but by the states. The IRS and the U.S. DOL have signed a memorandum of understanding (in essence, an exchange of information agreement), and the U.S. DOL signed a similar agreement with the Alabama DOL last fall. The latter agreement, and its March 2015 amendment, is referred to as a “Partnership Agreement.” This is not just an issue for Federal Express and Uber. Our law firm is handling or has recently settled several independent contractor classification audits, some of which involve labor law issues and some of which involve tax issues – or both. In a few cases, unfortunately, the client turned to (or on) their CPA and asked the CPA why he or she didn’t warn them about this issue years ago? Or, going further, why didn’t the CPA suggest that the client have outside counsel review its independent contractor relationships and, if needed, consider quietly converting certain workers to employee status? Here are some practical suggestions. First and foremost, if you’re preparing the client’s Forms 941 or 1099, it should be clear to the client that you are relying on them for the proper classification of their workers, either as employees or independent contractors. Yes, we know, we’re suggesting that you add yet another clause to your form engagement letter for those clients…. Secondly, think about suggesting to these clients, and perhaps all your clients, that someone in your firm be allowed to review their existing worker relationships, including their independent contractor agreements,
to apply the 20 “common law” factors and the Revenue Act of 1978’s Section 530 “safe Bruce Ely William Thistle harbor” to determine if the client has a defensible case if they are audited or investigated. Perhaps the independent contractor relationship should be strengthened, e.g., implementing a clear independent contractor agreement and work guidelines that comply with the 20-factor test. Perhaps the client should convert one or more of its workers to employee status under the IRS’ Voluntary Compliance Settlement Program. Our firm has recently used the VCSP to the advantage of multiple clients. Most of your clients have been reading the newspapers lately and are already aware of this issue. But even if not, you might remind them of the looming January 1, 2016 deadline for the minimum health insurance coverage requirements of the Affordable Care Act (Obama Care), which apply the 20-factor test in determining whether a worker is an employee or independent contractor, but disavow Section 530 protections. In other words, this issue will be gathering even more attention going forward. Addressing it now may spare you and your clients from headaches in the future. And, remember, and “an ounce of prevention is worth a pound of cure.” If we can be of assistance, please don’t hesitate to contact us at bely@babc.com or wthistle@babc.com. ––––––––– ©September 2015. Bruce P. Ely / William T. Thistle, II / Bradley Arant Boult Cummings LLP. All rights reserved.
Does your professional liability insurance include coverage for a
GET CPA NETPROTECT®
The AICPA Professional Liability Insurance Program includes cyber liability coverage for litigation resulting from damage to a third party’s network. Add the CPA NetProtect® endorsement to your policy and you also get first-party privacy event expense coverage for client notification costs, credit monitoring, and more.*
CYBER ATTACK?
To learn more about the AICPA Professional Liability Insurance Program or CPA NetProtect®, please contact Robert Albertini at Aon Insurance Services at 1-800-221-3023 or visit www.cpai.com/cyberad Endorsed by:
Underwritten by:
Administered by:
*CPA NetProtect® is offered for an additional fee as part of the AICPA Professional Liability Insurance Program. Aon Insurance Services is the brand name for the brokerage and program administration operations of Affinity Insurance Services, Inc. (TX 13695), (AR 100106022); in CA & MN, AIS Affinity Insurance Agency, Inc. (CA 0795465); in OK, AIS Affinity Insurance Services, Inc.; in CA, Aon Affinity Insurance Services, Inc. (CA 0G94493), Aon Direct Insurance Administrators and Berkely Insurance Agency; and in NY, AIS Affinity Insurance Agency. One or more of the CNA companies provide the products and/or services described. The information is intended to present a general overview for illustrative purposes only. It is not intended to constitute a binding contract. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice. The statements, analyses and opinions expressed in this publication are those of the respective authors and may not necessarily reflect those of any third parties including the CNA companies. CNA is a registered trademark of CNA Financial Corporation. Copyright © 2015 CNA. All rights reserved. E-11346-915 AL E-11346-915 AL.indd 1
THE ALABAMA CPA MAGAZINE
7/27/15 3:42 PM
11
12
THE ALABAMA CPA MAGAZINE
REMEMBERING Sara Sudduth Holton Dinius Auburn, Alabama / March 23, 1928 – August 11, 2015 / Certificate #1800R Dr. Sara Dinius (Sally) was born in Normal, Illinois, attended Illinois Wesleyan University where she met her husband of 62 years, Dr. Robert Dinius. She also attended the University of Illinois at Northwestern and Florida State University. Dinius became a faculty member at Auburn University in 1961, earning her PhD in psychology from Auburn in 1969. She served as the secretary of the University Senate Committee in 1989 and was named associate professor emeritae on her retirement in June 1993. She authored a number of article in professional journals and presented programs at national accounting meetings. After the couple retired, they traveled extensively in their RV throughout the US, Canada and Mexico. At their Lake Martin home they supported Auburn sports teams with their devoted dogs, Shamoo, Rhapsody, Susie I, II, and III. The family requested any memorials be made in her name to the Lee County Humane Society. Professor Dinius had been a member of the Alabama Society since 1958.
Charles Howard “Buddy” Moses, Jr. Birmingham, Alabama / October 11, 1917-July 17, 2015 / Certificate #355 Born in Bethlehem, Pennsylvania, Buddy Moses grew up in Birmingham. He served as a captain in the US Army, attached at the end of the war to Patton’s Third Army division. Although he was licensed as an attorney, he practiced as a CPA in the firm founded with his father, which continues as Moses, Phillips, Young, Brannon & Henninger. When he retired from the firm, he continued working in his law practice until he was 84. He was active in the community with Cerebral Palsy of Greater Birmingham, as a board member of SOS Foundation (formed to combat polio and distribute vaccine) and was a lifelong member of the Optimist Club of Birmingham. He was a member of First Presbyterian Church for 95 years, serving as elder, deacon and officer.
School’s out for one more year. Collect your transcript now. Log into My Education Account at
www.aspca.org
OR receive a copy via email by October 9.
THE ALABAMA CPA MAGAZINE
13
ASCPA PARTNERS
Why membership in the ASCPA is a good decision By Ed Rigsbee, CAE, CSP
I
f you are taking advantage of the “member-only” products, services and activities that the Alabama Society of CPAs provides— you realize that membership is a smart decision. You demand a reasonable return on your investment (ROI) in membership and you should get it. You have done more than the non-member outliers; you have invested in this organization. Simply put, you deserve more. You differ from other industry/profession stakeholders that simply take advantage of the ASCPA activities that serve the accounting profession. You have decided to actively participate with your time and resources. Let’s make sure you are getting all you can. SEVERAL YEARS OF RESEARCH Over the last several years, Rigsbee Research has been conducting qualitative research in the area of calculating the ROI of membership in actual dollar numbers. Society members like you have valued their memberships accordingly: in the category of professional development at an annual realdollar value of just under $4,000. The number for the business solutions category is just over $7,100, with knowledge management delivering a little over $2,400.
•B usiness development and peer referral opportunities •A ffinity or partner program discounts
knowledge sections on organization’s website
• I nnovative business/practice solutions
• Industry/profession standards, regulations and codes
•D iscounts on organization’s goods, services and events
• Printed and electronic magazines and newsletters
KNOWLEDGE MANAGEMENT In days of old, associations and societies were the hard-copy depository for industry or professional knowledge. Today, membership organizations compete against Google daily; however organizations that excel in knowledge management have found ways to make access by members to their vast resources quick and easy. Some of the member-only features measured included:
• Member directories through the website referral system
• Industry research, benchmarking and compensation studies
BUYING MOTIVES In the above listed examples of features of membership delivered by various membership organizations – your specific value might depend on your buying motive for joining and belonging. Of the six buying motives listed in The ROI of Membership, the three most frequent membership buying motives tend to be:
• Legislative updates
1. Profit and Gain
• Member-only password protected
2. Fear of Loss
LOOKING FOR A TEAM PLAYER ? Every position has its own set of expertise, challenges and goals. Whether it’s shortstop or baseman, you have to play to your strengths, but this isn’t a one-man sport and we understand the essence of teamwork. We believe that when you connect the right person to the right job and the right individual to the right company, it’s like a hand in glove. We’re here to help you find that ideal person to play on the team, and to make sure they can help the team PERFORM FOR SUCCESS.
PROFESSIONAL DEVELOPMENT Professional development and career growth are basically synonymous. Some of the member-only features are as follows: • Income differential through certifications • Gained knowledge and experience through volunteer leadership positions • Peer support and mentoring • Access to national, state-wide or local chapter resources • Special interest groups • Career development programs • Peer and industry prestige BUSINESS SOLUTIONS The business solutions category is a large one for many organizations. Some of the member-only features measured included: • Security programs, education and resources 14
www.itacsolutions.com TECHNOLOGY | CORPORATE PROFESSIONAL/CLERICAL GOVERNMENT/ENGINEERING | ACCOUNTING/FINANCE
Providing temporary/contract, contract-to-hire, and direct hire staffing solutions. SOLUTIONS
Birmingham | Mobile | Huntsville | Nashville THE ALABAMA CPA MAGAZINE
3. Avoidance of Pain With this in mind, consider the ASCPA to be your number one strategic alliance for success. Much of what you and your organization need to prosper is available to you as “member-only” features of membership. Just think how much more value the ASCPA could deliver to you in products, services and activities if there were more members. Help the ASCPA to help you by recruiting just one new member this year. Then, help that new member to assimilate into the organization by influencing them to attend the annual meeting— and when they do—introduce them to your network of friends and colleagues. This will better assure their long-term membership. Interestingly enough, we found that most membership organizations today are far better at delivering value to members than they are at calculating and communicating the ROI of membership. It has been quite common for various membership organizations to deliver, annually, in the range of $10 $50 in return for every dollar invested in membership. What does this mean to you? While the ASCPA may not have communicated all the value they deliver to you, you can be assured that if you access all that is available to you—you will enjoy an excellent return on your membership investment. Copyright © 2015 Ed Rigsbee ________ Ed Rigsbee, president at Rigsbee Research, is both a non-profit CEO and professional speaker, he has a firm grasp of all sides of the member ROI equation. He holds both the Certified Association Executive and Certified Speaking Professional credentials, something enjoyed globally by less than a hand-full of professionals. Rigsbee is the author of five books and over 2,500 published articles, has been an adjunct professor at two universities and is the founder of a non-profit public charity. Learn more at www.rigsbee.com
THE ALABAMA CPA MAGAZINE
AICPA APPOINTMENTS ANNOUNCED Chad Singletary has been appointed to the AICPA Auditing Standards Board. His term will begin in January for the 2015/16 volunteer service year. Singletary is a partner at Carr Riggs & Ingram (CRI) and works in their Montgomery office. He is a member and past chair of the Alabama State Board of Public Accountancy and is a member of its national counterpart, the National Association of State Boards of Public Accountancy (NASBA). Singletary currently serves as a member of CRI’s Accounting and Audit Quality Control and Continuing Education Committees. He regularly serves as a continuing education discussion leader for CRI, as well as outside organizations including the Alabama Society of CPAs. He is a 2005 inductee to the Troy University Accounting Hall of Honor and also serves on the Troy University Planned Giving Council. Don Murphy and John Shank, both of Barfield, Murphy, Shank & Smith, will serve on the AICPA Life Insurance/Disability and AICPA Benevolence Committees, respectively. Murphy and Shank are founders of the Birmingham firm, regularly listed as one of the Best Companies to Work For by the Birmingham Business Journal and Best Companies. Shank is a former chair of the ASCPA Board of Directors.
Reduce Income Taxes With Conservation Easements! Conservation Easement Advisors, LLC, Helps Clients: • Consult • Set-up • Structure • Assist • Source • Syndicate Conservation Easements For Our Clients Throughout the United States. Referral Fees Available To CPA Firms Upon Request and Disclosure.
To Learn More Call Or Visit Our Website: Jason B. Stinson, CCIM Conservation Easement Advisors, LLC
1-855-TAX-CUT-0 (1-855-829-2880) www.conservationeasementadvisors.com
15
Presorted Std US Postage PAID Permit No. 131 Montgomery, AL OCTOBER
2015
The Alabama Society of Certified Public Accountants 1041 Longfield Court P.O. Box 242987 Montgomery, AL 36124
CLASSIFIED CLASSIFIED CLASSIFIED CLASSIFIED
YOUR PRACTICE WANTED: We are North America’s leader in practice sales. Let us navigate the complexities, locate the best match from a deep pool of qualified and serious buyers, and optimize your return on the years invested in building your practice. If you are considering a change, contact Alabama broker Lori Newcomer, CPA, at (888) 277-6040 or LNewcomer@ apsleader.com for a confidential discussion. BARFIELD, MURPHY, SHANK & SMITH (BMSS), a Birmingham, Alabama based accounting firm, is looking for experienced accountants with 2-4 years of experience in public accounting. BMSS is one of the largest locally-owned firms in Alabama – ranking in the top 10 in size in Alabama and top 200 in the US. BMSS has a high level of employee satisfaction, low turnover and the ability to recruit topnotch professionals. The employee growth and low turnover has allowed BMSS to receive several recognitions including “Top Small Workplace” by The Wall Street Journal , “Best Accounting Firm to Work For” by Accounting Today , “Best Place to Work” by the Birmingham Business Journal and the Alfred P. Sloan Award for Business Excellence in Workplace Flexibility. We are proud to be named a “Southern Hero” by SouthernLINC Wireless and to have received the AICPA Public Service award for our commitment to our community as demonstrated through service projects and employee volunteer days. If you are interested in learning more about our firm, please submit your resume to edunlap@bmss.com.
SELLING IN 2015? READY TO BUY A FIRM? Considering selling your CPA firm this year? Knowing what your firm is worth is the first step. Contact us TODAY to receive a free no-obligation market analysis of your firm. Accounting Biz Brokers has been offering personalized business brokerage services to CPAs for over 10 years and we know your market. Our process is strictly confidential. Visit our website at www.AccountingBizBrokers. com to request additional information about the sales process. Current Listings: Montgomery Area Gross $40k, Virgin Islands Gross $480k. Kathy Brents, CPA, CBI, Cell 501.514.4928 Office 866.260.2793; Kathy@AccountingBizBrokers.com T. E. LOTT & COMPANY, CERTIFIED PUBLIC ACCOUNTANTS, is seeking a CPA with 2-5 years tax experience for its Tuscaloosa, AL office. The firm offers excellent salary, benefits and an opportunity to grow and advance. Qualified applicants can send resume to 6834 Hwy 69 South, Tuscaloosa, AL 35405 or hesler@telott.com. PRACTICES FOR SALE Gross revenue shown: Hoover CPA $55K, South of Knoxville CPA $330K, NE of Knoxville CPA $245K, Rutherford County TN $75K, Southern Middle TN CPA $320K, Oxford MS CPA $350K, Central MS CPA $380K, MS Gulf Coast near Biloxi $100K. For more info, please contact Lori Newcomer, CPA at 888-277-6040 or LNewcomer@APSLeader.com. Seller pays brokerage fee. TAX SUPERVISOR – Auburn firm is seeking a tax supervisor with 3 to 7 years’ experience in public accounting. Competitive salary and benefits within a flexible environment. Send your resume to dchastain@machenmcchesney.com. Visit the website, machenmcchesney.com, for further details.