CONNECTIONS N O V E M B E R
P R A CT I C E M A N A G E M E N T I S S U E
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D E C E M B E R
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PRACTICE MANAGEMENT 6 | Put Social Media to Work for You 12 | Six Steps for Staring an Advisory Practice 22 | Top Accounting Issues for Practitioners
DEPARTMENTS
INSIDE THE ASCPA
4 | Message from the Chair
14 | Zoebelein on Tax
8 | Member Profile – Hal “Buzz” Coons, III
24 | Murphy Reed – Student Profile
11 | ASCPA 2016 16 | Member News 32 | Remembering 34 | Classifieds
FRONT COVER
Charles Leesburg, Wray Pearce and Steve Moore
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26 | Leadership Academy Class VII registration is open
MESSAGE FROM THE
CHAIRMAN
I
don’t know about you, but I can’t believe that 2016 already has 10 months in the books. It’s November; as in the month that has Thanksgiving and precedes the month that has Christmas. Football season is already half over and the October 15th deadline has come and gone. If all that doesn’t send shock waves through you, then you might want to check your pulse.
show. I felt almost like I had sat down at my grandmother’s house on a Sunday afternoon. These are just a few of the events that our ASCPA has hosted recently to benefit our members and our pipeline. The chapters have also been very active hosting their own local events and education seminars. There have been tailgate parties, charity events, student events and business networking opportunities. The chapters continue to be our best outreach to our members, our communities and the public across the state. I would encourage you to get involved with your local chapter. The chapters are continuing to evolve and better understand their purpose; new blood and new ideas are always welcome.
In the past two months I’ve had many exciting opportunities to see our members and our ASCPA at work. On September 2 I was privileged to attend the ASPCA’s Diversity in Accounting Student and Faculty Symposium in Birmingham. Students and faculty from all across the state came together for a day of education and networking. These students were introduced to career opportunities in the accounting profession and, thanks to volunteer members like you, they were able to have real interactions with CPAs and learn about their day-to-day life inside the profession.
Thank you for allowing me to be your chair, and if there is anything the ASCPA or I can do to help you please let me know. This is your ASCPA and we want to help you. As strange as it feels to be saying this….I hope you all have a wonderful holiday season. Happy Thanksgiving, Happy Iron Bowl, Merry Christmas and Happy New Year!
On September 23 the Society hosted the 24th Financial Accounting and Auditing Conference at Auburn Montgomery. This was a first class event with exceptional speakers (you know when you see other CPE leaders attending the class it must be good) but the lunch stole the
Jamey
Pearce, Bevill, Leesburg, Moore celebrates 35 Years of Service Originally named Pearce & Company, the firm was founded by J. Wray Pearce on September 1, 1981 with a total of 15 employees. Harold Bevill joined soon afterward and current named partners Charles Leesburg and Steve Moore were original employees who later became partners. The firm had offices in downtown Birmingham for the first 25 years and are now at 110 Office Park Drive, in Mountain Brook. Since its inception, the firm has grown to approximately 100 employees, including 17 partners and 45 certified public accountants. Made up of a diverse group of dedicated accounting professionals, PBLM has been providing assurance, consulting and tax services to the Birmingham community for 35 years. It developed strong roots within Birmingham and is very passionate about giving back to the community it serves. Experience, integrity and personal service are at the firm's core.
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IS IT A CHALLENGE TO PROVIDE TRAINING FOR YOUR FIRST THROUGH THIRD YEAR STAFF? If so, the ASCPA would like to provide your firm with the opportunity to send your associates to our staff training workshops. Each training level will include lectures and interactive group case studies to prepare your associates for their work in the field. Get your new staff started off on the right foot with our audit and tax training courses.
TAX SKILLS TRAINING PELHAM CIVIC COMPLEX
Tax Level 2 – November 15 & 16 Tax Level 3 – December 5 & 6
Each class qualifies for 16 hours of CPE credit. For more information contact Jessica Roberts at (334) 386-5766 or jroberts@ascpa.org.
Put Social Media to Work for You By Amy Massaro
“Like it” or not, social media has become an accepted channel of communication that accounting firms can use strategically to develop business. Firms that don’t add social media to their firm’s culture may miss opportunities as clients and potential clients attitudes towards it change. This article discusses how both firm managers and professional staff can take advantage of social media to deepen relationships with clients, develop themselves professionally and enhance the firm’s brand. If your firm has not already established a social media policy, it needs to create one before developing its marketing strategy. Your firm’s social media policy should address various legal terms and what they mean in your business environment, such as defamation, endorsements,
intellectual property, and forms of wrongful disclosure. Your marketing strategy builds from the established policy. “Social media is a great tool to build relationships and foster loyalty with your clients,” said Robert Albertini, professional liability specialist for Aon, the national administrator of the AICPA Professional Liability Insurance Program. “If used effectively, it can create buzz about your services and build brand recognition for your business. Through networking and sharing your story with the right audience, you’re offering added value, for which companies are searching.”
Do your research
Firms that want to develop a social media marketing strategy must first understand how the firm and its members are currently using social media and if it’s current online imagery is consistent with its brand. They also need to review how their competitors are using social media.
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Begin by asking: • What type of online presence does the firm currently have? How does that presence compare to the presence of its competitors? • On which sites are the firm and its professionals active? • Are employees using LinkedIn to connect with clients and potential clients? • Do staff members publish professional articles or make comments on social media sites? Do they comment on articles or comments posted by individuals and companies they follow? • Does your firm have a Twitter account? How many of your staff members have individual Twitter accounts? How many followers do they have? And are these followers clients or potential clients? • Which members of your firm are the most adept users of social media? • The last question is particularly important because those who frequently use social media may have experience and ideas from
which the entire firm can benefit. Managers should seek out these individuals and get their advice.
Develop a Plan
Once your research is complete, you can develop your marketing strategy. First, identify the various media outlets where you want to be present and then create a plan to contribute to those sites. Be sure to provide guidance to staff members regarding the frequency and content of their posts. Model how to engage on social media by posting frequently yourself. Invest some time in your social media strategy by discussing it with employees regularly. Consider including social media activity in your employees’ goals. Set expectations, drawing the line between personal and business use of social media in a positive way. Encourage staff to post online regularly about their volunteer work because these postings can create an unexpected connection with a client who may share an interest in that organization and it also demonstrates the firm’s support for community involvement. Ask employees how they are using social media to advance business development. Social media savvy employees may give you ideas for additional ways these channels can be used. Contact the AICPA for ideas or recommendations about how to use social media. Also be sure to follow AICPA on social media as well as the Alabama state CPA society. If you serve on any of the Alabama state CPA society or AICPA professional committees be sure to include your involvement in your online communications.
Remember, social media continues to evolve. Your firm’s social media policy and its marketing strategy should be reviewed regularly, and new outlets for your marketing should be considered.
Tips for professional staff
Individual members of the firm are more likely participate in social media for business purposes when the firm has a marketing strategy in place. If you are not already an active user, it’s a good idea to ask other professionals in your firm about how to develop an effective online presence. If you are already an active user, consider asking a mentor to review your social media activity and tell you if any of your activity raises a red flag. Ask also what you should add. Have conversations about your social media efforts regularly. Here are a few tips on how to develop business on social media: • Position yourself as a skilled professional by sharing information with people you follow. • Take full advantage of the networks available to you from your college affiliations. • Consider using all the avenues that a site offers, including sharing someone else’s post or liking it and offering positive comments or congratulations. • Translate personal relationships into business referrals. After you attend a business conference, consider following a speaker you liked on social media. It could be good for your personal development and
also provide a value-added asset for the firm. • Plan a specific time when you will use social media so that it becomes part of your work routine. • Report your social media successes to your manager so that the manager and the firm develop best practices. • Keep your comments positive. You should not criticize competitors or make controversial comments that could have a negative impact on your business development efforts. • Consider the appropriate outlet to discuss religion or politics. Are you expressing a personal position or a firm position? • Draw lines between your personal and professional online activity. Always be cognizant of the virtual image of the firm as well as the image you are creating of yourself— your personal brand. If you think social media is your strength, think about how you can use it to foster relationships with client companies and further develop business for your firm. Your efforts need to evolve along with emerging technologies. About the Authors
Amy Massaro is Vice President, Accountants Professional Liability, Aon Insurance Services, the national Administrator of the AICPA Professional Liability Insurance Program since 1974 and has more than 20 years’ experience with the program. Robert Albertini is a professional liability specialist with more than a decade of experience serving CPAs on the AICPA Professional Liability Insurance Program. For more information, please contact Robert at 267.282.6284 or at Robert.albertini@aon.com.
Plan a specific time when you will use social media so that it becomes part of your work routine. 7
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.
meet Buzz Hal “Buzz” Coons, III of Pearce, Bevill, Leesburg, Moore
a great opportunity because the firm was growing significantly in tax and audit. I was assigned to very large manufacturing and distributing clients, allowing me to develop my skills quickly. I felt that I worked with some of their very best clients.
Where did you grow up? I am from Jasper in Walker County. I attended Walker High, which is about to be renamed Jasper High School. My dad had an auto parts store and I worked there off and on while in high school and college. When did you decide on accounting as a career? I went to the University of Alabama determined to become a professional golfer. My (a distant) second choice was dentistry. The day we went to sign up for classes I followed some very wise sophomores (all of 19 years old) who led me to Bidgood Hall - the business school. I told my counselor that I thought I was probably too bright to take business classes, but she suggested that I try accounting, since those would be somewhat challenging. Obviously, I was more than challenged. Did you have a mentor in high school or college? I would say my mentor was always my Dad. I was born when my parents were older, but I was very close to them. He was a fighter pilot in WWII and I always looked to him for guidance. Tell us about your undergraduate experience. At the University of Alabama I pledged Phi Gamma Delta (FIJI). My brother was a Phi Gam at Auburn and my dad was at Georgia Tech. So what choice did my son have? He was naturally a Phi Gam at UA. During summers, in addition to working for my dad, I worked at First National Bank in Jasper. That experience was what developed my interest in business.
How has your career path developed? After three years with Wilson Price I moved to Pearce, Bevill Leesburg Moore in Birmingham. Birmingham was more appealing than Montgomery because I was from Jasper, most of my fraternity brothers were in the city and the golfing was great. I was single and golf consumed a lot of my away-from-the-office hours, so Birmingham became my new home. I chose Pearce Bevill based on research that my brother had done. Wray Pearce was the original founder of Warren Averett but had split off in 1981. I joined the firm in 1983, recruited by Harold Bevill. He made me an offer in early May and I turned in two weeks’ notice at Wilson Price. However, they had several new large clients coming on board and asked me to help keep those Hal “Buzz” Coons, III jobs moving, so I stayed for two months. I almost lost my Pearce Bevill slot, but after Wray and Harold conferred they decided it would be worth the wait. At that time they had about twenty employees. I could see that there were significant opportunities for rapid growth. Now we have over one hundred employees and are now celebrating our 35th anniversary. It’s been such a great ride. Probably the best part for me has been helping develop the healthcare niche at Pearce Bevill. What have been the biggest changes in the profession during your career? To me, without a doubt, it has been technology. Things that would take us two or three days to do when I first started, we can now do in a day or less. Plus, our profession has grown from providing a needed service to being a business partner with our clients. We’re not only helping them with basic tax and auditing, but also putting a heavy emphasis on business planning, enhancing profitability and making their business and financial lives better.
What did you do following graduation? My first job was with Wilson Price Barranco Blankenship & Billingsley in Montgomery. I worked closely with both Carl Barranco and Robert Gould. Gould always pushed me to be better than average. I owe a lot to him and have stayed in touch. That was
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MEMBER PROFILE
What has surprised you the most as your career has evolved? I am probably the luckiest CPA in America. I received wonderful mentorship at our firm and have focused on business and tax planning, but my true love is healthcare. Healthcare is where I spend 90% of my time. I got involved with healthcare through a hospital client. They were acquiring medical practices and I was able to learn a lot from that experience. Of course healthcare has been a volatile industry over the last 20 years, requiring me to stay on top of changing regulations and declining reimbursement rates. I provide not only financial and tax advice but also do a lot of consulting work on revenue cycle management, strategic planning and operational assessments. I work both with physician practices and other related business. I am currently the president of the CPA Healthcare Advisors Association. It is a group of 60 of the top healthcare CPA firms in the country, representing 10,000 medical practices.
my immediate group have over 150 years of experience working together in this firm. I am truly blessed. What are the biggest challenges facing the profession right now? The challenge of bringing in young, talented people who are willing to stay with public accounting firms and to become partners is at the top of my list right now. I see so many moving into industry, which is great, but we need more of that talent to stay inside public accounting. The top issue for young CPAs is establishing work life balance and finding a firm culture that fits. We all need to focus on this. I view our profession purely from a local firm perspective, but I do realize that tax and auditing services could become a commodity. What will differentiate accounting firms from each other is being willing to roll up our sleeves to make sure clients get more than they expect. I always think that I don’t want to just make my client’s lives better. They expect that. I want to make their lives easier. Most times they do not think about the distinction, but they always appreciate it when it happens.
An added element to my career has been my passion for marketing. I read a lot about it and every time I meet someone who is a potential client, or referral source, I make notes and follow up. I keep a marketing folder right by my desk and go through it regularly. Many accountants shy away from doing the work required to build their client list, but I counsel our folks on the importance of making a good first impression, following up with those who can help and demonstrating their professional skills. I track my business development time every day and expect it to be 60% of my non-chargeable time. That recipe has worked for me and I recommend it to younger CPAs. I also take the time to work with clients face to face. You simply cannot build the same degree of trust and professional bond through the phone and email.
What do you do to relax away from the office? Hobbies? Travel? I am still an avid golfer and still enjoy golf competition. It is truly the one way that I can get away from the office and forget about everything in the world for four hours. I plan on starting to travel more now that my youngest child has finished college. Currently we have a place in Destin, Florida where we enjoy going, especially in the spring and fall. Also, you can always play golf at the beach! I like to read books on history and marketing. It is always interesting to me to see how businesses work and how they make money. I like the challenge of finding ways to use marketing for financial success.
What prompted you to become a member of the ASCPA? I wanted to be a member from the very beginning. I admired those certificates on the walls of those that I worked with and, of course, I quickly found out that it is a lot more than just a certificate. The education resources and the contacts you make are vital to personal growth in our profession. It is from interacting with successful CPAs and learning from those that have been down the road before that you grow. You can’t put a price on that type of learning experience. I think it’s incumbent on seasoned CPAs to encourage our young CPAs to grow. Not just those that work with us, but also those that we come across in our daily lives.
What keeps you up at night? If I have a client that leaves our firm, that definitely keeps me staring up at the ceiling. I do have trouble sleeping when clients are facing business issues or obstacles, because I want to help them discover a great solution. Their obstacles are just as important to me as my own personal ones. Tell us about your family. I have the best family ever. My wife Carrie went to Auburn, but I am teaching her to become an Alabama fan. My daughter Camille graduated from Samford, is married to a lawyer and has a two-year-old. My son William is a recent graduate from the University of Alabama in finance and has begun pursuing several opportunities.
What keeps you inspired and motivated each day? Without a doubt, it is my clients. I feel like they need me to be ready to assist them 365 days a year, if necessary. I am also proud of the team members that I am privileged to work with each day. I could not have a better staff and support staff. They are all smarter than I! The people I interact with daily in
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LEGISLATIVE UPDATE
U.S. HOUSE PASSES MOBILE WORKFORCE BILL ESTABLISHES NATIONAL STANDARD FOR STATE INCOME TAXES ON NONRESIDENT EMPLOYEES The U.S. House of Representatives passed the Mobile Workforce State Income Tax Simplification Act of 2015, H.R. 2315, by voice vote on September 21. The bill would establish a uniform national standard governing the withholding of state income taxes for nonresident employees. Many state CPA societies sent letters to their representatives in the House urging them to vote for H.R. 2315. “This bipartisan legislation enhances compliance with state personal income tax laws and greatly simplifies the onerous burdens placed on employees who travel outside of their resident states for temporary periods and on employers who have corresponding withholding and reporting requirements,” said Jeannine Birmingham, ASCPA CEO. The bill would establish a uniform requirement that nonresidents would have to work in a state for more than thirty days before becoming subject to out-of-state income taxes. The change would make state income tax withholding easier to administer and would help ensure that states and local jurisdictions get the taxes they are owed. U.S. Representatives Mike Bishop (R-MI) and Hank Johnson (D-GA) sponsored the bill and spearheaded the measure’s passage. Cosponsors from Alabama include Representative Mo Brooks (R – 5th Congressional District) and Representative Terri Sewell (D – 7th Congressional District). H.R. 2315 includes several key components designed to alleviate the burden the current state income tax withholding system places on traveling employees and their employers. For the vast majority of states, the legislation contains minimal or no revenue impact.
H.R. 2315 WOULD:
n Provide for a uniform and easily administered law for traveling employees and their employers, establishing a national threshold of thirty days. n Ensure the correct amount of tax is withheld and paid to the states without the undue burden the current system places on employees and employers. n Simplify the patchwork of existing inconsistent and confusing state rules as well as reduce administrative costs to states and lessen compliance burdens on consumers. n Establish provisions for the use of time and attendance systems that would provide protection for honest mistakes by the employer and a reduction in audit risk. n Align the many different tax requirements of forty-one states regarding the withholding for income tax of nonresidents by setting a national threshold of thirty days or more before liability to withhold and pay taxes. n Provide an opportunity for greater compliance because of the certainty and consistency of minimum withholding rules across all states, thus encouraging the free movement of personnel within the marketplace.
The bill now moves to the Senate, where its companion bill—sponsored by Senators John Thune (R-SD) and Sherrod Brown (D-OH)—has 46 cosponsors.
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ASCPA 2016 Premier Partner Program Finding support for conferences and other programs through ASCPA’s Premier Partners gave the education department a strong base for organizing these larger events. Aon, Paychex, PNC Bank and others stepped up to meet you and discuss how they can assist with your business or that of your clients. Building those beneficial relationships is what your Society does best, working only with high quality, credible and trusted vendors to add value to you and your organization.
Here we are, almost at the end of another year. It’s been one of change for your Alabama Society, and you have demonstrated not only flexibility in adapting to those changes, but also enthusiasm in your reception of them. Connections magazine You’re seeing one of the most visible changes of 2016 right now, the new look of our member magazine. The ASCPA Board of Directors supported the change to a bimonthly publication schedule, to the fresh design and expanded advertising opportunities. Many of you have taken advantage of having classified ads in the magazine. It’s a member benefit and available at a reasonable cost. Your response to the magazine’s content, whether it’s contributions by members, stories about members, or news items of member accomplishments, has been overwhelmingly positive. Do you have an idea for an article or know of a member we should profile? Please get in touch with me or Connections editor Diane Christy.
Chapter Management During October we conducted conference calls with each chapter’s Advisory Council members to gain feedback on 2016 events and to learn how the Society could help plan for 2017. Many chapters held education events during the summer and fall as well as purely social events and student programs. Our hope is that having ASCPA staff assist with the organizational details of chapter meetings will free members to think creatively. Contact the Advisory Council members of your local chapter with recommendations and concerns (a full list is on page 32). Share your talents and commitment to the profession by volunteering for leadership roles in your chapter.
Accounting Connections Conference The name was changed from Annual Meeting to Accounting Connections Conference; we changed the venue from the Cahaba Grand Conference Center to the Sheraton in downtown Birmingham. We added a second day to include four more hours of CPE, a Young CPA session and a student event. The awards and recognition program, formerly held during the noon business luncheon, was moved to the end of day one. Each addition was well-attended and added so much enjoyment to the overall event. Thank you.
What’s going on out there? One of the most popular features of the magazine is Member News (page 16). Keep your fellow ASCPA members informed as changes take place at your firm or organization by passing that information along to us. Did you get a promotion, change companies, earn a new designation? We want to know about it.
CPE Catalog You’ve been asking for this and we heard you! Jessica Roberts and her CPE team did a great job in getting a complete schedule published in very early 2016. The catalog gave you the chance to plan CPE for the entire year, allowing you to check continuing professional education off your list! We added more webcasts and even had the option of live streaming at the Accounting Connections Conference and the Financial Accounting and Auditing Conference (FAAC). The CPE department is working on the 2017 schedule, so look for it at end of the calendar year.
Friday, November 11 is the next meeting of the ASCPA’s Board of Directors. Contact any member of the board, or local Advisory Council members, with concerns, comments, suggestions and ideas. We exist to serve you and depend on your frank feedback to direct our efforts.
Jeannine 11
Six Tips for Starting an Advisory Practice
strengthening and deepening your relationships with existing clients. Such is often the case when engaging in personal financial planning services.
In order to stand out in a crowded profession, many financial professionals are leveraging the escalating trend toward advisory services. The ability to offer specialized knowledge allows you to differentiate yourself from competitors and position yourself more favorably within the marketplace.
3. Reassess your fee structure. With the addition of an advisory service comes the responsibility to your firm for knowing how and what to charge clients for your new offering. You want to remain both competitive and profitable. If you don’t adequately understand all the costs associated with the new service and factor them into every proposal, you may lose money.
One of the best ways for you to demonstrate your knowledge and expertise in particular areas is through the addition of credentials. The AICPA offers the only credentials built on the foundation of competency, objectivity and integrity. They are: Certified in Financial Forensics (CFF®), Personal Financial Specialist (PFS™), Accredited in Business Valuation (ABV®) and Certified Information Technology Professional (CITP®).
4. Consider the technological investment that advisory services require. Research and talking with practitioners will help you assess what you’ll need in your new practice area. The upfront costs of purchasing software or systems and ongoing expenses, such as training and updates, should be factored into your business plan. This investment will more than pay for itself as your practice grows.
According to Jeannine Birmingham, “Advisory services are one of the biggest growth areas in our profession, and any licensed CPA who wants to take advantage of this opportunity should seriously consider pursuing a credential.”
5. Follow any applicable standards and regulatory and compliance requirements of your advisory service area. In addition to issuing standards for the audit and attest functions, the AICPA issues standards for business valuation, personal financial planning and consulting services to provide consistency in these areas of practice and to protect the public and the reputation of CPAs. Information technology advisers need to understand the requirements associated with the software products they implement or assess.
AICPA Credentials
Think Through Your Game Plan Let’s face it. Many qualified financial professionals are entrepreneurs at heart, so branching out into an advisory service often feels like the natural evolution of their business. Of course, adding an advisory service to an established practice takes dedication and diligence. But it can be an immensely rewarding pursuit, both professionally and financially. Before deciding to offer an advisory service, you must be willing to: 1. Commit to spending the time it takes to develop an advisory service practice. As Susan Pierce, CPA/CITP, CGMA, and senior technical manager of the Information Management and Technology Assurance Division at the AICPA said, “You can’t just hang a sign up and be successful; you need to have a plan.” For many established firms, that means writing an entirely new business plan. Consider such things as the market for the services you are considering providing and what competition you might face. 2. Identify your target audience. Adding an advisory service offers the potential to tap into a new client base, which requires careful thought and planning. In some instances, the end-user may not be the person who makes the hiring decision. A lawyer or other accounting firm may be the one to select the valuation, forensics or technology specialists. Keep this in mind when marketing your advisory service. Sometimes, however, adding an advisory service does not necessarily mean speaking to a new audience. Instead, you could focus on
And most importantly … 6. Obtain a credential in your advisory area. Here are two ways to look at it: First, you can use an AICPA credential as the pathway to gaining indepth knowledge as you move toward offering new services. Or, if you already have in-depth knowledge, experience and education in an advisory area, you can use a credential to help market your services and differentiate yourself, your firm or your role within an organization. It’s worth noting that, even if you have the financial and personnel resources to start an advisory practice, the AICPA Code of Professional Conduct states that you cannot take on a professional engagement without the requisite set of knowledge, skills and competencies. A credential is an official way of demonstrating that you have met these requirements. What Can Each Credential Do for You? Most financial professionals are drawn to the credential that naturally complements their professional interests, knowledge and skills. Here is how each credential serves its holder: The CFF credential encompasses fundamental and specialized forensic accounting skills that you can apply in a variety of service areas, including bankruptcy and insolvency; computer forensic 12
analysis; family law; valuations; economic damages calculations; and fraud prevention, detection and response. This credential also sets you apart as an expert witness in the courtroom. The PFS credential showcases expertise in personal financial planning. Many financial professionals use this credential to expand or diversify a tax-focused practice by demonstrating a comprehensive knowledge in financial planning and tax, thereby offering a holistic approach to their clients’ financial needs across retirement, estate, tax, risk management and investment planning. The ABV credential is ideal for financial professionals who want to enter an in-demand area by positioning themselves as an expert business valuation service provider who not only reaches a conclusion of value but also creates value for clients through the strategic application of their analysis. The CITP credential recognizes financial professionals who have the unique ability to provide technology-related assurance and business insight by demonstrating their knowledge of information, data relationships and supporting technologies. Focus areas include IT risk and IT assurance, security and privacy, business solutions, data analytics and emerging IT trends. CITP credential holders are helping their clients or organization improve operations, ensure financial data integrity, determine risks associated with financial reporting and prevent and detect fraud. Remember, these credentials are available only to qualified financial professionals who meet the criteria for professional experience and minimum education requirements as outlined by the AICPA, and who pass the required exam. Additional Resources for Advisory Services Before obtaining a credential, consider joining an AICPA section. Section membership provides you with access to technical content, advisory practice resources and discounts on credential education materials and exams. Once you hold a credential, the credential fee includes all of the section benefits, including webcasts, practice guides, guidance on hot topics, tools to practice competently and profitably, discounts on conferences and more, plus additional resources developed for you as a credential holder. And you’ll connect with other financial professionals who can offer advice, which can kick-start your advisory practice. If you decide to pursue a credential as one the first steps to starting an advisory practice, the AICPA will support you every step of the way by providing the resources and tools you need to maintain the highest level of competency in your specialty. When you’re ready to set yourself apart with an AICPA credential and explore starting an advisory service practice, visit aicpa.org/aicpacredentials.
Demand for Accounting Advisory Services Is on the Rise. Are You Ready? It may not be surprising that the accounting services industry is projected to grow at 1.8% overall between 2012 and 2017. But it may come as a surprise that specialized advisory services are projected to grow the most aggressively — at a 5.7% clip during that same time period There also is an increasing international demand for expertise in emerging A&A areas. Accounting organizations around the globe are addressing this with specialized resources and advisory service credentials. Here are a few highlights for specific advisory service areas: Forensic & Valuation Service Professionals — Trusted Experts Around The Globe In response to increased market demand for specialized services and a recognition of the rapidly growing forensic accounting and business valuation disciplines, the Accredited in Business Valuation (ABV®) credential was created in 1997, and the Certified in Financial Forensics (CFF®) credential in 2008. The global demand for qualified forensic and valuation specialists continues to grow as courts and other triers of facts not only seek out, but recognize CFF and ABV credential holders as
experts in their respective fields. In the 2013 “Top 100 Firms” issue of Accounting Today magazine, it was noted that more than 77% of firms offering business valuation services reported significant growth. In addition, 74% reported growth in litigation support (fifth-largest population), and 65% reported growth in forensic accounting (seventh-largest population). Information Management and Technology Assurance in an Increasingly Complex World Today, many corporate executives and operational managers expect immediate, on-demand financial information, advice and services. As a result, accounting operations and information management systems are becoming increasingly interdependent. As technology evolves and advances, ensuring the integrity and transparency of financial data and business reporting information becomes a more complex process. And more critical than ever. Qualified financial professionals who hold the Certified Information Technology Professional (CITP®) credential are equipped to provide assurance for, or business insight into, financialrelated data, processing or reporting in an everchanging business environment
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The Aging Population & Personal Financial Planning As baby boomers age and retire in record numbers, they are increasingly looking for objective financial guidance and advice to help prepare them for the next stage of their lives. This is triggering a great demand for personal financial planning services and resources. Other factors driving this growth are tax law complexities and an uncertain regulatory, political and economic environment. The Personal Financial Specialist (PFS™) credential was created in response to the increased market demand from this growing population segment and rapid growth in the number of financial professionals providing personal financial planning. Building on your expertise with an AICPA advisory service credential makes a strong statement. It sets you apart and gets you noticed. Credentials boost your career potential and credibility. Most of all, an AICPA credential establishes you as an expert. And that can be an invaluable addition to your résumé and practice. Learn more at aicpa.org/aicpacredentials.
ZOEBELEIN ON TAX Tom Zoebelein, CPA
Director of Tax Research Pearce, Bevill, Leesburg, Moore
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ll of your clients’ tax returns are filed, and the 2016 filing season has come to a close. I realize this time of year is your time to relax and catch your breath before the start of clients’ yearend meetings. Looming over the horizon is the beginning of the holiday season that will require much of your time. My goal for this article is to provide a few items to consider as you prepare for your clients’ year-end planning meetings plus a few important items for 2017.
2016 Year-End Thoughts
December 18, 2015, President Obama signed the tax extender bill titled “Protecting Americans from Tax Hikes (PATH) Act of 2015.” The timing of the enactment of PATH left little time for year-end planning in 2015, but dust off your copy of PATH because it is relevant for your 2016 client year-end planning.
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Dust off PATH for 2016 client year-end planning.
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PATH’s Impact on Depreciation
§179D PATH extended the §179D through 2016 which allows a tax deduction for energy improvements in lighting, HVAC, and building envelope to commercial buildings. If all three systems meet the qualification under §179D, the taxpayer will get a current deduction of $1.80 per square foot of interior space. It is not all or nothing, as each of the three building systems receives a $.60 square foot deduction. Each of the three systems must produce at least 50% efficiency over the Standard 90.1-2001 of the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America, as in effect on April 2, 2003. Most local building codes of today have standards in excess of 90.1-2001. The deduction is available for new construction, remodels, required upgrades and building additions, but each system must have certification that it has met the energy efficiency requirement. The contractor(s) should be able to provide the certification, but do it now while you have time. Note: the §179D deduction is considered additional depreciation, as such it will reduced the depreciable base of the building and is subject to §1250 recapture. 14
§179D Deduction for Government Owned Buildings Can Be Passed to the Contractor Do you have clients involved in the construction of government owned buildings in 2016 (or earlier)? Construction under §179D includes construction, designing, and engineering work on these three energy efficient systems for government owned buildings. The §179D deduction is of no benefit to government owning the commercial building; as such, the §179D deduction can be passed through to the civilian contractor. This means your contractor, architect, or engineer clients that designed the three energy efficient systems are eligible to receive an allocation of the Government’s unusable §179D deduction. The §179D allocations are not automatic, as your client must request an allocation of the §179D deduction. The allocation is on a first-come, first- served basis, but it is my understanding, not all available §179D deductions were allocated by the government building owners. The mechanics of the §179D allocation is the contractor is deemed to be the building owner for purposes of the §179D deduction. As you advise your clients, encourage those with qualifying projects to seek their portion of the 2016 §179D allocation for not only 2016 but also to review prior governmental projects for their work in HVAC, lighting, and building envelope. The allocated §179D deduction can be taken on amended open
tax returns. Advise your client to contact the governmental agency to see if there is any §179D deduction still available for allocation on those projects that qualify (even if only a subcontractor on the project).
Bonus Depreciation Here Today, Gone by 2020 Prior to your year-end meetings, request your clients’ future plans to acquire additional fixed assets. Make your clients aware that bonus depreciation is scheduled to be phased out. Assure your clients that they need not panic to get purchases in by this year-end as 50% bonus is extended through the end of next year (2017). Make sure planning for purchases in 2018 recognizes assets will be subject to 40% bonus depreciation, and 2019 asset purchases will be subject to only a 30% bonus deduction. Unless changed by new legislation, your clients’ purchases after 2019 will not qualify for bonus depreciation. Real Property Qualifying for Bonus Depreciation PATH made permanent the 15 year life for qualified real property that includes leasehold improvements, restaurant property and retail property, and it extends qualification for bonus depreciation as well. Starting this year, there is a new category of property that will also qualify for bonus depreciation referred to as qualified improvement property. This property category is similar to qualified leasehold improvements but fails the qualification to be 15 year property. Despite its 39 year life, this property will qualify for bonus depreciation. The good news is improvements to your clients’ existing commercial real property can now qualify. The only catch is they must be made after the building was placed in service. There is no specific length of time the owner must wait after placing the original building in service before he can make qualified improvements. I believe it can be the same tax year. It may be as simple as securing the certificate of occupancy and placing the building on the books for new construction prior to making the qualified improvements. I would make the QI a separate item in the GL and depreciation software. PATH -§179 First Year Depreciation Deduction The 2015 $500,000 cap and $2 million purchase limit were made permanent by PATH. PATH removed the $250,000 yearly limitation for real property qualifying for §179 deduction effective for 2016 and beyond. PATH Makes Research and Development Tax Credit Permanent. PATH not only made the credit permanent, but it made it more available to small businesses. Beginning in 2016, small businesses (less than $50 million in average gross receipts for the prior three years) • Can now use the research credit to offset AMT. • That are start-ups (less than $5 million in sales in the current year and less than five years of
gross receipts) can use the R&D credit to offset up to $250,000 in federal payroll taxes. The Alternative Simplified Credit makes it easier to compute and use. Final Regulations issued last year made significant improvements. Qualifications for the R&D credit is beyond the scope of this article, so I recommend you look at the requirements and/or seek the help of a firm specializing in R&D credits and let them help you with documentation for obtaining the credit. If your business client is not currently taking a research tax credit, 2016 may be the time to rethink that position. Qualifying for the credit may not be as elusive as you think for your business clients; it can be as simple as improving a current process. Don’t think when the IRC §174 states that research must be in a laboratory sense, it is restricted to laboratory work that many associate with doing research. Qualifying research activity has a four part test; all four parts must be met to be eligible for the R&D tax credit. The research activity, “RA,” will qualify if: • The RA seeks to eliminate uncertainty development or improvement of a product or process. • The RA is useful in development of a new or improved business component. • The RA discovers information that is technological in nature. • The RA is experimental in nature and conducted for a permitted purpose. Any of your clients engaged in software development could be a good candidate for the research credit. Now that it is permanent, if you don’t approach your clients to see if they can qualify for the R&D credit, be assured that others will.
2017 Issues of Interest
Federal Filing Date Changes Due dates for filing partnerships and C corporation tax returns have switched due dates beginning in 2017. Corporations, excluding S corporations, will now be due on the 15th day of the fourth month, while partnerships (including LLCs treated as partnerships) will be due on the 15th day of the third month. S corporations will not move but share the stage with partnerships. Extension of time to file will not change in 2017. Alabama passed legislation to conform to the new federal due dates, so for Alabama income tax reporting purposes, the due dates mirror the federal due dates for 2017 and beyond. At this writing, the bill to conform the income tax filing dates did not impact the AL privilege taxes BPT & PPT. That means, absent a Department of Revenue Rule change, LLCs & SMLLCs will keep their 2016 due dates. It is my understanding, the Department is working to correct this glitch. DOL’s New Rules Effecting Employee Retirement Plans Effective 4/10/17-This is Scary 15
Under the guise of protecting the plan participant, the Department of Labor, “DOL,” issued new fiduciary rules that will impact all of your clients that have employee retirement plans. DOL claims the changes were necessary to stop the $17 billion a year investors’ waste in exorbitant fees. The idea is to stop investment advisors from putting their own interests over that of the employee plans in the $25 trillion retirement services market.
That would be fine if it stopped there, but three new rules set traps for small business with employer sponsored plans. Simple advice to their employees, however innocent, can cause the employer to take on deeper fiduciary responsibilities for the plan’s performance. I am posting on the ASCPA website an article by Robin Solomon of the Washington DC law firm, Ivans Phiips & Barker, that explains in more detail what the employer plan sponsor needs to know about the new DOL Rules. Robin’s advice to our small businesses is as follows: The key issues for a small business owner would include: • Understanding that they shouldn’t give investment advice to employees • Understanding the role that the 401(k) plan service provider plays, especially with respect to rollovers, and whether it is a fiduciary • Understanding the fees paid by the plan, and disclosing this information to employees The new rules do not impact IRAs but do cover the following employer plans: • cash balance plans, • §401(k) plans, and • profit sharing plans for their employees. Your clients will need to carefully review their plan documents to make sure they have been compliant with the plan requirements. During 2014, 65% of the DOL plan audits resulted in plan sponsor fines. The DOL plans to hire 1,000 new examiners for 2017, so the audit risk will be much higher. The following are some examples of violations: • Late contributions • Mishandled eligibility • Not following loan provisions • Prohibited transactions • Failure to periodically monitor their plans investment success & switching out of low producing fund investments • Advise your clients to be aware of investment advisors’ attempts to push back on them more of the fiduciary risk and/or hide some fees. Tell your clients to contact you before signing agreements to exclude the advisor from the new rules by signing a best interest contact, “BIC.” Please refer to Robin’s article and the DOL “Fact Sheet” that I have posted to the ASCPA website.
CONTINUED ON PAGE 31
MEMBER NEWS MOVING UP & ON
KIM STALLINGS is now with Bain & Company in Pell City. She attended Jacksonville State University and worked at Warren Averett in Anniston after graduation, while studying for the CPA exam. In 2010, Stallings moved to industry as the comptroller of Anniston Medical Clinic and received her CPA license in 2011. South Central Alabama Mental Health (SCAMH) Board executive director DIANE BAUGHER has been named associate commissioner of the Alabama State Department of Mental Health. She joined the SCAMH in 2009 after serving as the CFO of the Mental Health Center of North Central Alabama in Decatur. Baugher is a graduate of Athens University and received her MBA from Liberty University.
Banks Finley White & Co. announced that JAMES C. WHITE, JR. has been elected managing partner of the firm. He is a graduate of the University of Maryland with more than 18
years of accounting experience. Much of that time was spent with an international firm, including three years in Berlin, Germany. He takes on the responsibility for overall operations of the firm from his father, James C. White, Sr., who served as managing partner from the firm’s inception 43 years ago. The elder White will remain a partner with the firm and assume the position of chairman emeritus. Banks, Finley White & Co. was founded in 1973 and is one of the oldest and largest blackowned CPA firms in the country with offices in Birmingham, Atlanta, Jackson and Memphis. Machen McChesney has promoted BRAD MARTIN to supervisor. Martin is a graduate of Troy University and has also been with the firm since 2013. He works primarily in construction tax and financial reporting, business and individual tax.
clients in construction, banking, not-for-profit and associations and the retail and wholesale distribution industries.
Aldridge Borden announced that BONNEE BAILEY, SCOTT GRIER and JASON WESTBROOK have all been admitted as partners in the firm. MELISSA HILL and KACIE MCCLOUD have been promoted to senior accountant. Bailey joined Aldridge Borden in 1997 and practices in the taxation department where she serves clients in individual, partnership and corporate taxation, traditional accounting/ attestation services and business valuation, primarily for the estate and gift transactions areas. Grier practices in the assurance services group. A member of the firm since 1998, he provides assurance, tax and consulting services to highway and bridge contractors, general and electrical contractors, and homebuilders. He also assists contractors with licensing and prequalification in multiple southeast states. Westbrook has a presence in both the firm’s consulting and assurance areas. He provides a diverse ranges of consulting services not limited to business valuation, economic damage analysis, financial record analysis, etc. Westbrook works with 16
TRACY GODWIN and CASEY RODDEN have been promoted to senior accountant and SHELBY JOHNSON has been promoted to supervisor at Russell Thompson Butler & Houston (RTBH) in Mobile. Godwin has degrees in French and English from the University of the South in Sewanee, Tennessee and chemical engineering and accounting degrees from the University of South Alabama. Her practice areas include corporate, partnership and individual taxation, as well as audits of 401(k) plans, casualty insurance companies and not-forprofit entities. Rodden is a 2010 graduate of the University of Memphis. Johnson is an accounting graduate of the University of South Alabama. Her practice areas primarily include audit and tax services for a variety of construction and not-forprofit industries.
CONGRATULATIONS Huntingdon College inducted six new members into its Athletic Hall of Fame on Saturday, October 8. Among them was Jackson Thornton partner SHAW PRITCHETT, class of 1992. He played on the Huntingdon College golf team from 1988 through 1992, when he was recognized as an NAIA All-American and was a member of the 1992 NAIA national champion golf team. During Shaw’s junior and senior seasons, when he won four tournaments (including wins in three consecutive tournaments as a senior) and finished in the top ten in 75 percent of the tournaments he played, he was named captain of the golf team, was on the All-District team, and had the team’s lowest stroke average. Following his senior year, he was invited to be a member of the United States Golf Team for the World University Games in Mallorca, Spain, where he helped lead the team to a second-place finish. Shaw had a brief career playing on the professional golf tours and continues to compete in local and statewide amateur events today.
Russell Thompson Butler & Houston, LLP, is proud to announce that KATHERINE H. MCKENZIE has completed the certification process with the National Association of Certified Valuators and Analysts™ (NACVA®) to earn the Certified Valuation Analyst® (CVA®)
credential. The CVA credential is granted only to qualified individuals with considerable professional training and experience in the field of business valuation.
WHAT’S GOING ON OUT THERE?
CEO MATT SNOW DIXON HUGHES GOODMAN is expanding to California by merging in Parke, Guptill & Company, a
firm based in Ontario, Calif., effective November 1. Parke Guptill specializes in providing assurance, tax and advisory services to clients in Southern California, particularly automobile dealers. The firm, led by Jonathan Forgy and Dan Duir, will be joining Dixon Hughes Goodman’s DHG Dealerships practice. DHG, based in Charlotte, N.C., ranked 17th on Accounting Today’s 2016 list of the Top 100 Firms, with $371 million in annual revenue. In June, the firm expanded to Maryland by merging in Stegman & Company in Baltimore. Their Birmingham office has 26 CPAs, 6 partners.
WARREN AVERETT will enlarge its Huntsville footprint with the merger of BEASON & NALLEY. Warren Averett is ranked 27th on Accounting Today’s 2016 list of top 100 firms with $123.3 million in revenue. Beason & Nalley is a full-service accounting firm with many government contractors as clients. Four people from Beason & Nalley will join Warren Averett as members: Cecelia C. Hill in Warren Averett’s tax division, Jeremy H. Jefferys in the corporate audit division, J. Brett Holt in the corporate advisory division and S. Hobie Frady in the corporate advisory division. Auburn/Opelika firm
BRANTLEY BOUCHER & FARR joined JACKSON THORNTON on September 2. This addition brings JT to a total of 200 employees, serving clients from six offices in Alabama and Tennessee. BB&F has clients in west Georgia and east Alabama who will benefit from JT’s depth and width of resources services.
of a new coffee shop in downtown Montgomery. Prevail Union is a craft coffee roaster and micro importer currently housed in space at One Court Square. They plan to move into permanent quarters in the historic Kress building on Dexter Avenue once renovations are completed in 2017. Johns has experience in public accounting and is a graduate of the University of Alabama. He completed ASCPA Leadership Academy Class V.
PHILLIP JOHNS, accounting manager with the Alabama Farmer’s Federation, is owner
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Goodbye A-133, Hello Uniform Guidance: What You Need to Know The investment of time and resources necessary to perform high-quality single audits of federal funds can be substantial and daunting for many CPA firms. Add the implementation of new single audit rules to the mix, and the challenges increase exponentially. The good news is that through the Enhancing Audit Quality initiative, the profession provides education, tools and resources that continue to support firms in driving improved single audit quality.
cies administering federal programs, recipients of federal funds and auditors. Among the changes for auditors are revisions to the major program determination process, threshold changes and modifications to the compliance requirements subject to audit. To achieve high-quality engagements, auditors should carefully review the new requirements to make sure they clearly understand how to implement the guidance. Changes to client requirements under the new regulations may also present an audit quality challenge. Clients may make changes to their internal control in response to the Uniform Guidance that auditors need to understand and test. Further, the criteria that auditors test compliance against may have changed.
Audit quality is always important, and data gathered through Peer Review and ethics investigations indicate that firms performing single audits should pay particular attention to these specialized engagements. Additionally, the AICPA Peer Review Program recently engaged experts in public practice to review a statistical sample of “must-select” engagements, including single audits. These reviews revealed that 44% of the engagements reviewed did not conform to applicable professional standards in all material respects. Issues identified in the reviews included missed major programs and failure to test internal controls over compliance. Maintaining and driving high audit quality for these engagements is a key focus for the profession.
Now Is a Great Time to Revisit Your Processes
Effective for fiscal years beginning on or after December 26, 2014 (generally December 31, 2015, calendar year ends and beyond), single audits that were formerly performed under U.S. Office of Management and Budget (OMB) Circular A-133 must now be performed under the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The Uniform Guidance presents both opportunities and challenges for CPA firms practicing in this area. In brief, the Uniform Guidance consolidates federal grants administration requirements into one regulatory location and makes significant revisions to the requirements that had been previously contained in numerous OMB circulars. The new regulation addresses grant management policy for federal agen-
titioners. Here are some steps you can take now to be successful in your single audit engagements: • Partners and firm managers should emphasize the importance of single audit quality to their professional staff. A recently issued Uniform Guidance flyer containing tips for auditors implementing the Uniform Guidance may help firm leaders with this effort. • Consult with members of the ASCPA Peer Review Committee for, single audit case guidance. • The AICPA’s Governmental Audit Quality Center (GAQC) provides up-to-date information, resources, tools and events to support governmental engagements and single audits. If your firm is not already a member, consider joining. • Listen to a free, archived GAQC web event, Avoiding Common Deficiencies in Yellow Book and Single Audits, to learn more about common pitfalls and tips to prevent them in your single audit practice. • Check out a new free practice aid, Establishing and Maintaining a System of Quality Control for a CPA Firm’s Accounting and Auditing Practice, which contains customizable illustrative policies and procedures and includes tips, warnings and reminders to help practitioners better implement the quality control policies and procedures.
Finally, the Uniform Guidance emphasizes the importance of audit quality by requiring a government-wide audit quality study once every six years. The first study will likely occur in 2019 or 2020 as determined by OMB, and will include single audits submitted to the Federal Audit Clearinghouse as early as 2018 (meaning certain 2017 year-end single audits could be included in the scope of the study). Given the need for firms to retool their single audit procedures to implement the Uniform Guidance, there is a unique opportunity to reexamine existing processes and tap into best practices.
Steps to Success for Firms
Since the release of the Uniform Guidance, the AICPA and Alabama Society of CPAs has been working to help firms prepare for implementing the Uniform Guidance. Now that the implementation is underway, we will continue to collaborate to provide educational resources and tools to assist prac19
• Review the AICPA’s free AICPA Competency Framework: Governmental Auditing, which includes single audit competencies to gauge your knowledge, and learn more about the AICPA’s exam-based single audit certificate program as a way to demonstrate your competencies. • Direct your clients to the free tools and resources available through the GAQC Auditee Resource Center to help them understand their role under the Uniform Guidance.
A Commitment to Excellence
The CPA profession has a long history of transforming challenges into opportunities. “We have a long-standing commitment to quality and must always look for ways to improve. CPAs must preserve the reputation we have worked very hard to earn; that reputation is what enables the public to rely on our services”, stated Jeannine Birmingham. Successful adoption of the Uniform Guidance is yet another opportunity to show an unrelenting dedication to audit quality.
can focus on strategy. We can imagine CPA security risk as a pyramid, with the bottom being the most likely to occur and the top being the least likely. Currently, we can construct the risk pyramid like this: Seeing the risk laid out like this helps to identify what defenses can overlap to give the biggest return on our security investment. For example, it would make little sense to spend 75% of our time and money on firewalls and adaptive security appliances when all of the firm’s laptops are still unencrypted. The likelihood of an attacker directly breaking into your network over the wire is much less than just a common laptop theft or loss.
PRACTICAL APPROACH TO CPA FIRM CYBER SECURITY The cyber-threat landscape has evolved considerably over the last 5 years into something that most small CPA firms find overwhelming. And, if they don’t find it overwhelming they aren’t paying attention. Attacks are no longer just email viruses that can cause down time. The focus of modern attacks are on financial fraud and ransom. Attacks take many forms such as fraudulent emails and phone calls, malicious web advertising, viral email attachments, fake links and network penetration. Firms are now truly getting attacked on all fronts. So, how can we simplify the flood of security threats into a manageable, actionable plan that will allow us to
sleep at night? To do that, you must first assess your firm’s cyber-security knowledge position. It’s true that cyber security is not just an IT responsibility. But, the reality is that this stuff is complicated. You really need someone watching the gate who understands how security works.
Instead of going through these risk levels and talking about mitigations to each threat, we can solve it with a layered approach, where each layer covers a large area of the risk pyramid and overlaps with the others so that there is no single point of failure.
Whether you have in-house IT staff or use an outside provider you need to assess their security knowledge. Do they understand the current threat landscape? Do they keep up with security news from inside and outside of the CPA industry? Do they take responsibility for security training within the firm? These are critical questions. You must have a frank discussion with your IT manager or provider to discuss their security understanding. If it is lacking, you must consider supplementing with an outside security consultant.
1. Antivirus/encryption – What used to be called “antivirus” has now evolved into a suite of products called “endpoint protection” that can protect your workstations from many types of threats. Every workstation should also employee full disk encryption.
Once a security knowledge worker is in place on behalf of the firm, you 20
The layers:
2. Application whitelisting – This is a tool that blocks anything other than known, approved executables from running on a workstation. 3. Email virus/spam filtering – Blocking viruses and spam messages before they ever get to your
network is best, using an external provider like AppRiver in addition to your normal email provider’s filtering.
“recently registered domains” should be blocked.
6. Firewall content filtering – Even small firewalls now offer filtering of different categories of content. At minimum, “advertising” and
The last thing you need to do is come to terms with this: Nothing can stop a sufficiently motivated, highly skilled attacker with enough time from
4. User training – This is perhaps the most critical piece of all. The first three layers mostly exist as safety nets in case this layer fails. There are many good sources of online security awareness training now.
Dave Jones is the IT Manager for Pearce, Bevill, Leesburg, Moore in Birmingham. He has been a network and system administrator for 19 years and in the CPA technology field for 17 years. His article was first published in the September 26 issue of CPA Practice Advisor.
Tax Hotlines Make a Comeback!
5. Strong password policies – Enforce strong, unique passwords and make it a firm policy that this password is not to be used for anything other than computer login. Other network-level access passwords such as VPN’s should be different.
These six layers apply to all of the highest risk cyber threats a firm will face, and they are all critical parts of the puzzle. No single layer can stand on its own, and none can be left out. Of course, there are many other layers you can implement to enhance your security beyond these. But, these six should be considered a baseline implementation for every sized firm. If you don’t know for sure that your firm has these in place, I suggest you print this out and give it to your IT Manager, or schedule a meeting with your IT provider and tell them you want these layers in place.
breaking into your system. Cyber-security is not about absolute protection because that’s impossible. It’s about layering your defenses so that your firm is no longer “low hanging fruit”. Most hackers are not “highly skilled”. Those are rare. So, getting yourself out of that bottom rung of exposure should be the goal.
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Chapters who have held tax hotlines in the past will offer them again in 2017. Birmingham, Huntsville, Montgomery and Mobile chapters will enlist the aid of their members in manning the phone lines. Each event is generally 4:30 - 6:30, depending on the TV station. A light supper is offered and volunteers are encouraged to bring laptops or tax guides to aid them in fielding calls. More than 300 members of the public are assisted at each hotline, providing an invaluable service to Alabama citizens. Sign up when your chapter sends out the invitation for volunteers!
Top Accounting Issues for Practitioners Charles E. Frasier, CPA, Ernest F. Baugh Jr., CPA and Jan R. Williams, Ph.D., CPA
We would like to offer this summary of some of the top financial reporting and auditing issues now impacting, or soon to impact, the accounting profession. This article briefly examines certain recent major accounting pronouncements, accounting for private companies, different accounting frameworks, regulation of the PCAOB and the CPA Exam.
Leases while allowing the income statement effect to remain unchanged. Accounting treatment for Capital Leases (to be known as Type A leases), is remaining basically the same as current treatment, with a “front-end” recording of expenses, including both Interest Expense and Depreciation (Amortization) of the Right of Use (capitalized) asset.
Accounting for Leases
Generally, former Operating Leases (other than short term, one-year or less) will be capitalized as Right of Use assets, with the corresponding present value liability also booked at the beginning of the lease. These leases will become known as Type B leases, with the asset and liability being amortized on a straight-line basis. For example, if annual lease payments total $100,000, Lease Expense will be reflected at $100,000. Using an effective interest amortization table, the principal portion reduces the Lease Liability and the Right of Use asset by the same amount.
Accounting for leasing changes are generally effective for public business entities for fiscal years beginning after Dec. 15, 2018, and for all other entities beginning after Dec. 15, 2019. The underlying principle for lease accounting should provide additional transparency and comparability, reducing opportunities for nonrecognition of “off-balance-sheet” financing. The primary emphasis is on the lessee and recognition of obligations (and related assets), with a secondary emphasis on expense recognition. This is consistent with the “balance sheet approach” when evaluating financial reporting issues. When compared to current Operating Leases (to be known as Type B leases) accounting rules, this change may result in additional assets and liabilities, but will have no effect on the income statement because the annual lease payment will continue to be recorded as Lease Expense. This meets the intended conceptual reason for the new leasing standard: to capitalize Operating
Criteria for distinguishing between Type B Leases (formerly Operating Leases) and Type A Leases (formerly Capital Leases) will be similar to current rules, except that a more “principles-based” approach is to be used, in evaluating “transfer of risk” rather than the four traditional “bright-line” rules used in current GAAP. The new standard also will require additional qualitative and quantitative disclosures to help access the amount, timing and uncertainty of cash flows. 22
Lessor accounting will follow rules similar to existing GAAP for lessors, reporting Lease Revenue on a straight-line basis for Operating Leases. Lessors will continue to amortize (depreciate) the asset under lease. Non-operating leases, for lessors, will continue to follow similar rules now being applied for Direct Financing and Sales-Type Leases. If the lease is a Sales-Type lease, the full profit of the “sale” will continue to be recorded. Rules for guaranteed and unguaranteed residual values will continue as under current GAAP. Organizations will need to determine how increased assets and liabilities will affect contractual arrangements, including loan covenants. Treasury departments and legal advisors will probably need to renegotiate these arrangements.
Revenue Recognition
The change in existing revenue recognition standards, as with most significant changes in current standards, reflects a move to more principle-based accounting models. The transition requires a move from an industry-specific model to a single comprehensive model based on core concepts and clear principles, while providing more consistency with international accounting standards. The new revenue recognition standard, which was delayed by one year, now has an effective date
(for public entities) of fiscal years beginning after Dec. 15, 2017, with earlier adoption available for fiscal years beginning after Dec. 15, 2016. All other entities have an effective date beginning after Dec. 15, 2018, with earlier adoption available for fiscal years beginning after Dec. 15, 2016.
delay revenue recognition. • Sale of multiple element software arrangement currently encourages delay of revenue recognition, but the new guidance will require that each element be separated, reasonably measured and recognized in a manner that reflects transfer of control to the customer. • Rather than delaying revenue recognition relating to variable consideration, more judgment will be required to estimate the effect of such items as discounts, rebates, incentives, penalties, performance bonuses and other variable payments in customer contracts.
SEC Deputy Chief Accountant Wesley Bricker stated that revenue recognition judgments should be well reasoned and practical, grounded in the standard’s underlying principle, while considering the usefulness to investors. Such considerations should include: • A thorough look at the definition of a “contract,” and should not include consideration of a future contract, even if likely to arise. • A continued application of existing practice regarding the timing of loss recognition for contracts. • A move away from delayed recognition of revenue in such areas as real estate sales and software licenses, which are rules-based and were originally designed to avoid premature recognition of revenue. Examples include: • A sale of a multi-tenant property contingent on future cash flow from existing tenants will now allow revenue recognition based on transfer of control to buyer, as compared to existing guidance to (205) 807-4466
FASB continues to issue clarifications to the standard, having recently (May 18, 2016) completed its third round of clarifications.
FASB Simplification Initiative
FASB has issued nine standards under its simplification initiative, designed as “tightly focused” standards to improve or maintain usefulness of information. Reduced complexity is expected to reduce costs for entities and auditors. Below are titles of the nine standards, with a brief description if considered widely applicable. 1. Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. 2. Employee Share-Based Payment Accounting.
steve@cpapartnerships.com
FASB has issued, outside the simplification initiative, additional standards to simplify certain elements of GAAP. These additional standards are not listed in this article.
Big GAAP/Little GAAP and the Private Company Council (PCC) - Accounting for Private Companies Several accounting frameworks are available for private companies, which can create confusion among investors and other users of financial statements. These frameworks include:
Steve Steve Emerson Emerson
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Comprehensive Cost Segregation final reports that are easy for Accountants to read New Income stream for Accounting Firms Affiliate or Partner fees No Affilia
3. Equity Method of Accounting. Eliminates the need to retroactively adopt the equity method when ownership interest increases to require the equity method. 4. Extraordinary Items. Simplifies income statement presentation by removing the concept of extraordinary items. 5. Measurement Date of Defined Benefit Plan Assets. 6. Presentation of Debt Issuance Costs. Requires debt issuance costs be deducted from the carrying amount of the debt liability, rather than being shown as a deferred charge. 7. Simplifying Measurement of Inventory. Requires “market” in the lower of cost or market principle to be defined as net realizable value. 8. Simplifying Accounting for Measurement Period Adjustments. 9. Accounting for Income Taxes, Balance Sheet Classification of Deferred Taxes. Requires disclosure of deferred tax assets and liabilities as noncurrent rather than netting in the current or noncurrent categories.
cpapartnerships.com/steve costsegregationhelp.com/steve
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• U.S. GAAP • Income tax basis financial statements • FASB’s Private Company Council (PCC) • AICPA’s Financial Reporting Framework for Small to Medium-Sized Entities (FRF for SMEs) • IASB’s IFRS for SMEs Private companies will generally use the framework recommended or required by their major lender or as preferred by company owners or major investors. Because private company stock is not traded publicly, accounting standards may not require similar companies to apply the same framework, but will require consistency of application among accounting periods of the same company. The “income tax basis” and FRF for SMEs frameworks do not meet GAAP standards but may likely meet the needs of small business. Financial statement users should keep in mind that the use of these different frameworks within similar business environments can dilute comparability and financial analysis when attempting to use standard ratios and other analytical tools. continued on page 25
EDUCATIONAL FOUNDATION DOLLARS AT WORK My name is Murphy Reed and I’m an accounting student at the University of Montevallo. I’m also a Campus Ambassador for the Alabama Society since I was awarded an Educational Foundation scholarship this year. It took me a little longer than most to choose accounting as the career I wanted to pursue. After working in the restaurant industry for five years right out of high school, I made the decision to go back to school. I moved to Birmingham and, shortly afterwards, chose to major in accounting. After working three jobs for six months I was able to save enough to enroll at Jefferson State Community College. By continuing to work, I was able to pay my tuition myself and graduated with my associate’s degree in 2015. I transferred to the University of Montevallo in pursuit of my bachelor’s in accounting.
experience through the internship I have just accepted and (hopefully) through a full-time position after I finish my bachelor’s degree. Next will be studying and sitting for the CPA exam, all while earning my masters and working. Though this seems overwhelming to me now, I am determined and will persevere.
Murphy Reed
I went to Northwest High School, in Clarksville, Tennessee, my hometown. I was a great high school student and received a full scholarship to Austin Peay State University. Unfortunately, I did not know what I wanted to do with my life at that point. My high school did not offer any business or accounting classes, but I was so indecisive about my future back then I don’t think I would have been influenced anyway. Looking back, I wasn’t quite ready for college. Going to work after high school wasn’t a perfect choice, but it did allow me to grow up.
I have loved my experience at UM. I love the small class sizes and our beautiful campus. I commute from Hoover every day, and enjoy my daily drive through the countryside. I feel I have gained valuable connections here, with fellow students and professors, that I might have missed if I had chosen a larger school. Up until I got to UM I did not personally know any CPAs! However my uncle was a successful top manager for an automobile manufacturer and his input helped sway my decision to choose business when I first went to Jeff State.
My favorite accounting class so far has been cost accounting. I enjoy the process of analyzing and allocating data and evaluating alternative courses of action to control costs. Finding the most effective and efficient solution gives me an internal sense of satisfaction. This semester I am taking tax and audit and am enjoying those as well. I like the idea of helping individuals and businesses succeed by reducing their tax liability, while still adhering to all applicable tax laws. I also feel my objective and skeptical mindset can serve me well in the examination and evaluation of financial statements. I have worked an average of 25 hours a week my entire college career. I’ve had to learn how to manage my time and truly appreciate work-life balance. After I complete my undergraduate degree, I’ll stay at UM for an MBA and the additional 30 credit hours needed for CPA licensure. I’ll gain
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I wanted to study accounting for many reasons, but the top ones include the wide array of career and advancement opportunities, my interest in the business world and the satisfaction I find in analyzing numbers to find the best solution. I have a strong work ethic and a detail-oriented personality. I am accountable, organized and adaptable. I consider my organizational skills to be a top strength of mine. I am proactive and always plan ahead. I am great at creating and completing to do lists and firmly believe in eating the biggest frog first, as Mark Twain would say. I’m an avid user of my calendar, day planner and phone to assure I stay on top of and accomplish tasks before the deadline. After I have earned an MBA and my CPA license, I expect to have an even better understanding of the accounting industry. As much as I enjoy solving problems, I also love working with people. Ultimately, I’d like to be in a managerial role, preferably where I can use my people skills and industry knowledge to benefit my company’s clients and entire organization. It’s been great participating in ASCPA programs as a student member and scholarship recipient. I was able to attend the Accounting Connections Conference last June, including the awards program and student session. I learned so much and met a lot of professionals. The Accounting Interview Day in August was tremendous in my gaining exposure to potential employers. I can’t wait until the next step of my journey and appreciate the help I’ve received along the way.
continued from page 23
Regulation and the Public Company Accounting Oversight Board (PCAOB) Since 2002, the accounting profession has experienced increased regulation, primarily from the PCAOB. Generally, the PCAOB was established to monitor and regulate the audits of public entities by independent auditing firms. This regulation includes examination of company internal control systems, issuance of audit pronouncements and the monitoring of auditor independence. On May 11, 2016, the PCAOB revamped its 2013 proposal to change the auditor’s report to include, among other items, the following: • Retain the “pass/fail” model under current practice. • Add auditor communication of critical audit matters (CAM). • Add a materiality component to the definition of a CAM. • Revise the related documentation requirement. • Describe the considerations that led to determination of the CAM, describe how addressed in the audit and refer to relevant financial statement disclosures. • Add language to the auditor’s report concerning auditor independence and audit tenure. • Revise standard audit report to place the opinion paragraph in the first section. Auditing standards for private companies are issued and monitored by the AICPA’s Auditing Standards Board (ASB). While the ASB is independent of the PCAOB’s regulatory authority, it is influenced by actions of the PCAOB.
Revised CPA Exam
On April 1, 2017, the AICPA will launch a revised, higher-order CPA Exam for each of the four parts: FAR, BEC, REG and AUD (Financial, Business Environment, Regulation and Auditing). The exam will add 2 hours to the existing 14 hours, and will provide for a higher degree of cognitive skills, requiring more critical thinking and analytical ability. A major objective of the revision is to test candidates on the knowledge and skills generally required for newly licensed CPAs in today’s business environment. The business community must continue to challenge colleges and universities to evaluate educational delivery systems that meet global demands for new professionals.
About the Authors Charles E. Frasier, CPA, is a professor in the accounting department at Lipscomb University in Nashville. He can be reached at frasierce@lipscomb.edu. Ernest F. Baugh Jr., CPA, is a professional standards consultant for Mayer Hoffman McCann, PC, in Chattanooga. He can be reached at ebaugh@mhm-pc.com. Jan R. Williams, Ph.D., CPA, is dean and professor emeritus of the Haslam College of Business at the University of Tennessee, Knoxville. He can be reached at jwilli13@utk.edu. This article is reprinted by permission of the Tennessee Society of CPAs and originally appeared in the July/August issue of the TSCPA Journal.
FRANCHISE LAW
APPLICATION DEADLINE December 15
Stay in the Know with the Accountant Knowledge Center The Paychex Accountant Knowledge Center (AKC) helps accounting professionals access industry news and resources to answer key business questions, enhance client relationships, and better manage your practice — with no cost to you or your firm!
• Daily Payroll, HR, and Tax News • CCH Tax Briefings and State Tax Review Newsletter • HR Compliance Library • More than 150 Interactive Financial Calculators • U.S. Master Tax Guide • Online CPE Courses • Client Letter Toolkit
To learn more, contact your Paychex Birmingham representative at 205-991-3990.
Paychex is proud to be the preferred provider of payroll services for the ASCPA.
End-of-Year Payroll, Benefits, and HR Checklist As year-end approaches, it’s important to make sure that your clients’ payroll information is up to date. From endof-year reporting and taxation to preparing for 2017, there are numerous steps that can help keep client information organized and accurate. Here’s a high-level checklist that accounting professionals can use in their practice: • Ensure contact information for all client employees is up to
date, including phone numbers and mailing addresses. Check for missing or invalid social security numbers. There can be penalties associated with incorrect information. Having the wrong address on file can also create difficulties in mailing out Forms W-2, Forms 1099, and other forms. • Determine when client employees should have the “retirement
plan” indicator for box 13 of Form W-2. • Verify that your clients have up-to-date and accurate taxation
documentation on file for all employees for the previous year. • Ensure that all information that needs to be filed in compliance
with the Affordable Care Act is completed. • Have any of your clients’ employees died in the last year? If so,
deceased employees need to be coded correctly in the payroll system. • Review the employee data for individuals who have left your
clients’ businesses during the past year. Determine whether those employees have zero balances for categories such as vacation time, sick time, and loans. Correct any issues in the final payroll of the year. • Update records for any client employees who have left their
employer. Advise clients to remove them from the system as the 2017 payroll framework is created. • Review wage, tax, and withholding information for categories
such as bonuses, other compensation, group life insurance, business expense reimbursements, taxable fringe benefits, tips, and any other benefits/compensation categories relevant to your clients’ businesses. If appropriate withholding has not been made, ensure this is corrected by the final payroll of the year.
• Schedule special payrolls needed, such as for seasonal
bonuses or annual bonuses. • Create a list of year-end reporting needs; if required,
communicate those requests to your payroll provider along with deadlines (i.e., taxable cash and non-cash fringe benefits, thirdparty sick pay, personal use of a company car [PUCC], etc.). • Ask your clients to audit payroll supplies, such as blank
checks provided they handle these issues in-house. • Ask clients who have current employees who will remain with
the company in 2017 to update their Form W-4 if required. • Balance your clients’ books to ensure that any manual or voided
checks are properly reflected in the accounting statements. • Verify Earned Income Credit (EIC) reporting, if applicable. • Review state regulations related to unemployment insurance
and disability insurance taxation rates. • Complete reasonableness of withholding for categories such
as: social security, Medicare, state unemployment, and other categories. Make adjustments as necessary. • Verify compliance for contributions to all plans such as
retirement plans, health savings plans, and childcare plans. Ensure that all administration and reporting is complete. Check for excess contributions. • Help your clients schedule payroll dates, reporting, and monthly/
quarterly/year-end close dates for the fiscal year ahead.
With a bit of advanced planning, year-end payroll planning can help your clients’ reporting, compliance, and paperwork from the previous year go smoothly. It’s also critical to laying the foundation for a successful fiscal year in the months ahead. Finally, advise clients to schedule time with their payroll provider or representative to ensure there are no outstanding issues that need to be resolved by the end of the calendar year or put in motion for the year ahead.
Paychex is the preferred payroll provider for the Alabama Society of CPAs.
27 For More Helpful Tips: visit paychex.com/WORX or call (877) 534-4198
ACCOUNTING FIRMS OF ALL SIZES SHOULD START LOOKING FOR SUCCESS BY VENTURING ABROAD By Sean McCabe Smaller firms often feel that, given their more-limited staff, resources and budgets, certain opportunities are outside their grasp. However, in many cases, with the proper attitude, knowledge and tools, there’s no ceiling on what can be accomplished, and few areas better illustrate this than international business services. With just a little know-how and some direction on where to look, any firm can get in on the global marketplace and the plethora of business it offers.
I THINK I CAN
Many firms may find it tough to get past the consideration phase when thinking of international opportunities. It’s plausible to think that they’re not in the right position — be it firm size, geography or lack of knowledge concerning the area — to take a step onto the international stage. Not only is this notion false, but it’s detrimental to their business and its future.
Alan Deichler, president of international accounting association CPAmerica International, says that a firm’s opportunities are usually right under its nose.
direct investment in the U.S. and outbound investment. The firm is also affiliated with the CPAmerica International and Crowe Horwath International associations.
“The No. 1 enemy of developing an international practice, and the biggest misconception I see, is believing [that] international business is U.S.-bound referrals coming to a U.S. firm, and that if enough of these referrals happen to arrive, the U.S. firm will invest in an international presence,” he said. “Of course, successful international practices are developed in firms’ hometowns with their own clients and prospects looking to become global companies.”
Barnett agrees that international opportunities already exist right here at home. “Many firms may not know where to find the [international] training and referral sources,” he said. “International business does not have to start with working and traveling overseas. It can be as simple as looking at other companies that are in the firm’s current service niche that may have a small percentage of their business that is international.”
Perry Barnett, partner of business services at Gainesville, Ga.-based firm Rushton & Co., is living proof of this notion. With a staff of fewer than 50 professionals, Rushton has come to represent 41 international companies across 16 foreign countries, dealing in manufacturing, service and sales companies including those with foreign
Gale Crosley, a well-known growth consultant and president of advisory firm Crosley+ Co., believes that the only thing stopping firms from international opportunities is themselves.
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“They think that since they don’t have any clients with international operations, or
current international accounting needs, that this market opportunity doesn’t apply to them,” she said. “They are basing their conclusion on what they happen to see or not see with their own client base.” “They often think they are too small,” she continued. “Their perception is that international is only for large firms [and] they don’t realize that two-thirds of all small businesses will have some international operations within the next few years, and these are their current and potential clients!”
GETTING YOUR PASSPORT
Once you and your firm are ready to take on international prospects, first steps can be easier than one thinks. By tapping into the full reach of your clients, your firm is in a great position to start making connections right from the start. “Speak to economic development personnel and join an association related to a country of interest to learn more about international trade,” said Barnett. “What we’ve found is that many countries share the same types of issues that clients have to address. It is just that from country to country the issues may be at higher or lower levels (i.e., value-added tax, accounting standards, tariffs, social issues, culture, employee issues, etc.). So by starting with a country of interest first, learning international business can be fun.” “Chances are pretty good that your best business clients are already involved with international products or services,” said Deichler. “This usually equates to distribution issues, payroll questions and all sorts of international tax requirements. It might be as simple as asking your clients about their international intentions. While you pursue local prospects, you might include discussions about their international requirements. This might be a great entry point to prospect opportunities once you gain the global awareness, including vocabulary and access to expertise.” Deichler also brought up the notion of accounting associations and their international divisions, which can be vital to firms considering a move to international business. “If you are not in an association and want to grow internationally, it is pretty
much a requirement that you pick one and join,” he added. “It is also very important that you get to know the international firms in your association prior to sending your best clients’ business requirements to these firms. Of course, if you are in a network that reviews and ensures standards are being met in your international segment, you have an advantage and degree of confidence in these international firms. However, even within these network firms, it is always better to know the people in the international firms you are referring your best clients to, and the network/ association meetings are great places to meet and build relationships.” Crosley reminded firms not to be deterred, even if they believe that they have no internationally connected clients, as more resources exist to help them find some. “Don’t be concerned that you don’t have international clients,” she said. “There are companies all around you with international operations and needs; you just haven’t looked for them yet.” Crosley suggested visiting a site such as uniworldonline.com to find out which companies have subsidiaries around the world. From there, interested firms can narrow down prospects to a small list of countries and industries with market concentrations in their area. Crosley added that simple Internet research can provide “a map of where to focus, who to interview, how to find early adopter clients, and where to find buyers in great quantities.” Crosley cited examples such as a client researching Uganda and finding the Ugandan Consulate located nearby, or another client discovering medical device manufacturers in Israel to supplement their health care institutions in Minnesota. Of course, all this work and research will pay dividends for one’s firm in the end, adding new depth and opportunities that didn’t exist before. Barnett claimed that adding international service helps “expand and deepen a CPA firm’s current niches, as well as open new service areas. International clients are loyal and can balance down times in other service areas of the firm.”
29
Barnett suggested that international newcomers start with a small business, such as a one-person U.S. sales office, which “allows a firm to understand international issues with a smaller tax and financial impact. With regard to business development, CPAs can begin by educating their current referral sources that they are entering the international business arena. No one will know unless we tell them, then word of mouth will travel.”
IT’S A SMALL (AND LARGE) WORLD
At the end of the day, firms on the fence owe it to themselves to get more involved with international business. There’s simply too much upside to write off the opportunity as too difficult or not a good fit for the firm, and firms already have a great deal of resources at their disposal to get started. “An important consideration is if your clients are contemplating going global — do they even consider you as an option to help them?” asked Deichler. “If they don’t, are they considering another firm and are they open to multiple accounting firms or does that mean your current U.S.-based services might be in jeopardy?” “Second, most midsized accounting firms would like to remain independent,” Deichler added. “Remaining independent requires growth to fuel succession plans — hiring, developing and electing new partners. Most organic growth in the profession today is pretty low, maybe 1 to 3 percent net, at best. A successful international practice would provide a significant opportunity to grow your current clients to the size that may support your plans to remain independent.” “The No. 1 consideration in a growth strategy is good market conditions,” added Crosley. “Market conditions in international aren’t good; they’re excellent. The markets are large and aren’t yet cluttered with competition. So, go for it!” Sean McCabe, senior editor of AccountingToday.com, has previously written and worked for Rolling Stone and their online division. He was also a regular Arts + Entertainment contributor for the alt-weekly DigBoston. He is a cum laude graduate of Emerson College. This article originally appeared in Accounting Today on September 30, 2016.
ZOEBELEIN ON TAX CONTINUED FROM PAGE 15 2018 and Beyond
Partnership Audit Changes November 2015, Congress repealed both the TEFRA and the electing large partnership rules effective 1/1/18. This means that beginning in 2018, absent any elections, the partnerships/LLCs will be liable to pay an imputed tax on deficiencies discovered during an IRS examination of the partnership. The partnership representative will be responsible for representing the partnership during the examination, including responding to IRS Agent’s requests for information. The DOL prescribed tax rate for imputing tax will be the highest individual or corporate rate for the year under examination. Absent clarification by future Regulation, the imputed tax will treat all items the same and be subject to a single tax rate. Thus capital gains will not receive any tax differential nor will tax exempt partners’ share of the deficiency escape tax. Think of this as a federal composite payment. On the bright side, if there is a bright side, the imputed tax will include neither selfemployment tax nor investment tax. Small partnerships with no more than 100 partners will be able to make an annual election out of the new audit regime. This election is limited to partnerships consisting of individuals, estates
of deceased partners, and corporations (S & C). In computing the 100 partner limit where an S corporation is a partner, each shareholder as well as the S corporation itself is counted toward the 100 member limit. For a change in partners/ members during the year, both the new and the leaving partner will be counted (transfers among existing partners are not double counted). Small partnerships that will not qualify to elect out of the new Audit Regime are those partnerships that have as members other partnerships and/or trusts. The partnership may elect within 45 days of the date of final notice of assessment to shift the tax burden to the partners/members. The partnership will issue new K-1s, and each partner will then selfassess his/her tax and pay the additional tax he/ she individually owes in the year he/she receives the new K-1 and not back to the year under examination. The capital accounts of the partners will be adjusted for the impact of audit adjustments for the year under examination. Things to consider during 2017 to get your clients ready for 2018 are as follows: • When to Elect out and when not to elect out • Changing partnership agreements for:
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Trustmark - Alabama CPA Magazine 31 8 x 5 - HP 4C July/August
• Indemnification of the partnership by the partners • Indemnification of the partnership representative by the partnership & partners • How to treat partners admitted after the return year under examination • How to protect the remaining partners when partners leave. • Consider making leaving partners indemnify the partnership for their share of any future adjustments for all open tax years at the time of departure. • Define how to handle the alternative payment election -- when to elect and when not to elect • Partnership representative election & duties • Power to hire representation during examinations My hope is that I have provided some items to think about and discuss with your clients during your year-end planning meetings. My best wishes to you and your families for a happy and healthy holiday season.
REMEMBERING KENDYL DUNN LOWE
president and chief accounting officer (CAO). She was involved in the community, serving as an officer in the Junior League of Birmingham, as treasurer at her church and with her daughters’ soccer teams, Girl Scout troops and school.
November 18, 1971-July 22, 2016 Birmingham, Alabama Certificate 6405
The family has requested that any memorials to Ms. Dunn be made to the cancer research foundation of your choice.
Kendyl Dunn Lowe died at the age of 44 in Houston, Texas where she was undergoing treatment for acute myeloid leukemia at the MD Anderson Cancer Center. She had survived breast cancer only a year before. Dunn was a graduate of Virgil I. Grissom High School and was active in the marching band. She was a talented musician and played piano, flute, oboe, clarinet, bassoon and cymbals! She sang, participating in many choirs, including the A Capella choir at Samford University. She met Chuck Lowe during freshman year and they married in 1995.
DONNA LYNN JONES
January 13, 1959- August 2, 2016 Birmingham, Alabama Certificate 9059
Dunn received her accounting degree from Samford in three years, then got her MAcc at the University of Alabama, where her lifelong passion for ‘Bama football grew even stronger. She was a dedicated professional and began her career as a CPA at Coopers and Lybrand. She spent the last 11 years at BioHorizons Implant Systems, most recently as senior vice
Ms. Jones attended Huffman High School and the University of Alabama at Birmingham. She worked at Roger Barlow, CPA in Birmingham.
ALABAMA SOCIETY CHAPTERS CONTINUE TO SERVE MEMBERS
The eleven chapters of the ASCPA have been busy this summer and fall adjusting to new management policies and procedures. Your Advisory Council members are a vital link between you and the ASCPA’s Board of Directors. Share your concerns and suggestions with them.
BIRMINGHAM
Patrick Barker Daxko pbarkercpa@gmail.com Josh Bowen Carr Riggs & Ingram trojancpa05@gmail.com Kelly Carlton United Way of Central Alabama kcarlton@uwca.org
EAST ALABAMA Alan Craft Machen McChesney acraft@machenmcchesney.com William Hughes Auburn University Foundation whughes@auburn.edu Liz Springer Auburn University enspringer@auburnschools.org
HUNTSVILLE
NORTH ALABAMA
Chris Taylor Anglin Reichmann ctaylor@anglincpa.com
Mandy Barksdale University of North Alabama abarksdale@una.edu
MOBILE
Allison Blair Stack & Blair allisonstackblair@gmail.com
Kyle Beason Wilkins Miller beasonkyle@yahoo.com Allison Hill Mostellar & Shreve ahill@mostellarshreve.com
Greg Carnes University of North Alabama gacarnes@una.edu
Peter Susman University of South Alabama psusman@southalabama.edu
NORTHEAST ALABAMA Kate Condit MDA Professional Group kcondit@mdacpa.com
James Wishon Zoghby Uniforms james@zoghbyuniforms.com
Kim Stallings Bain CPA kstallings@baincpa.com
MONTGOMERY
Marilyn Watson Progress Rail Services marilyhwatson@gmail.com
Amanda Benson Aldridge Borden abenson@abcpa.com
Justin Mitchell Mark Abernathy Warren Averett Warren Averett Justin.mitchell@warrenaverett.com mark.abernathy@warrenaverett.com Will Tucker Kyle Demeester Alabama Housing Finance Authority Beason & Nalley wtucker@ahfa.com kdemeester@beasonnalley.com
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SOUTH CENTRAL Darren Hipps Gibson & Carden darren.hipps@gibsoncarden.com Amanda Paul Troy University anpaul@troy.edu
Billie Ann Taylor Haisten, Shipman, Wiggins billieann@hswcpa.com
SOUTHEAST Andrew Brooks McDaniel & Associates abrooks@mcdanielcpa.com Ryan Hendrix Bevis Eberhart rhendrix@bebws.com Aaron Rascoe Bevis Eberhart arascoe@bebws.com
TUSCALOOSA Betsy Jarnigan JamisonMoneyFarmer bjarnigan@jmf.com Brendan Knowles Tidmore, Lee bknowles@tidmorecpa.com
WHEELER BASIN Ben Adams Byrd, Smalley & Adams badams022@gmail.com Jamie Thomas CDPA j.thomas@cdpapc.com
ASCPA Continuing Professional Education Registration Form Mail form to : ASCPA P.O. Box 242987 Montgomery, AL 36124-2987
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2/23/15
CLASSIFIEDS
Lovoy Summerville & Shelton
YOUR PRACTICE WANTED:
SEEKING FULL-TIME AUDIT SENIOR OR MANAGER:
We are North America’s leader in practice sales. If you are thinking about selling, contact us today for a confidential discussion. PRACTICES FOR SALE: • Huntsville CPA practice grossing $315K *New* • Baldwin County, AL practice grossing $205K *New* • MS Gulf Coast / Harrison County CPA grossing $95K *New* • Greater Jackson, MS EA grossing $60K *New* • Eastern Memphis suburb CPA grossing $175K *New* • Madison County, TN CPA grossing $165K *New* • Upper Cumberland, TN CPA grossing $70K *New* • Mobile CPA grossing $175K *Sold*
Regional public accounting firm in Auburn seeks audit senior or manager with a minimum of 5 years of audit experience. Send cover letter and resume to: jhemard@go2cpa.com
ASSOCIATED BUSINESS SERVICES Established east Montgomery firm has a rare opening for a full or part-time staff accountant. Send your resume to clientservice@abs1040.com
For more info on any of these listings or to sell your practice, contact Lori Newcomer, CPA at 888-277-6040 or LNewcomer@APSLeader.com.
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