AZ
CPA DECeMber 2011
The Arizona Society of Certified Public Accountants
Minimizing Risk in Financial Planning Clarifying Common Fiduciary Problems Lien Release vs. Lien Withdrawal Top iPad Apps www.ascpa.com
Tell Your Clients About Scholarship Tax Credits.
2 AZ CPA y DECEMBER 2011
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1.800.803.8367 Š 2011 Robert Half. An Equal Opportunity Employer. 0911-9011
DECEMBER 2011 y AZ CPA
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AZ
CPA DECEMber 2011
Volume 27 Number 10
Lien Release vs. Lien Withdrawal
15
For many people, a tax withdrawal may be a better alternative to a tax lien. by Brian Mahany
The 4 C’s of Business Development
17
Consider these four important characteristics when hiring someone involved in your business development. by Roy Keely
Features
Top Ten iPad Apps Minimizing Risk in Financial Planning
20
9
by Val Steed
Special services such as personal financial planning produce higher losses than standard services because of the high level of judgment and advice required. Find out how you can minimize your risk. by Randy R. Werner, J.D., CPA
Clarifying Common Fiduciary Questions
12
by Eric Sholberg, CPA
Arizona Society of Certified Public Accountants 4801 E. Washington St., Suite 225-B Phoenix, Arizona 85034-2021 www.ascpa.com
Columns & Departments 6
Chair’s Message by Mark Anderson, CPA
7
Focus on Members
18
Building Your Connections Event
22 Classifieds
www.ascpa.com
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AZ
CPA
The Arizona Society of Certified Public Accountants
President & CEO
Cindie Hubiak
Editor
Patricia Gannon
Copy & Advertising Deadline The first of the month one month prior to publication date. Board of Directors Chair Chair-Elect Secretary/Treasurer Directors
Mark Anderson Armando Roman Karen Abraham Anita Baker Rob Dubberly Megan Faust Barb Muller Julie Norton David Richardson Craig Robb Elva Vivas David Walser Corrine Wilson Neal Young Kevin Yeanoplos
Immediate Past Chair Julie Klewer AICPA Council Members Jim Buhr Rick Goldenson Chapter Presidents Southern Chapter Northern Chapter Southwest Chapter North-Central Chapter
Flo Zenblu CW Payne Jayne Wright Alyx Cohan
Tax Planning
Accelerated Tax Planning Depreciation (Cost Segregation)
- Accelerated Depreciation (Cost Segregation)
A Viable Tax Strategy for Commercial Property Owners A Viable Tax Strategy for Commercial Property Owners
“First Class Results from a First Class Firm—Bedford’s cost segregation overClass $200,000 incomecost tax “First Classstudies Results enabled from a First Firm — in Bedford’s segregation studies enabled over $200,000 in Income Tax refunds for us.” refunds for us.” Barry & Georgia Sepic Barry & Georgia Sepic Commercial Property Owners, Mesa Commercial Property Owners, Mesa
www.bedfordint.com
480-626-2727
Bigger is Better
AZ CPA is published by the Arizona Society of Certified Public
Accountants (ASCPA) to provide information, news and trends in the profession of accounting. It is distributed 10 times a year as a regular service to members of the Society. The ASCPA, its members, board of directors and administrative staff assume no responsibility for advertisements herein. The ASCPA and the above people also assume no liability for business decisions made by readers in reference to statements and/or claims in advertisements within this publication. Opinions expressed by correspondents and contributors are not necessarily those of the ASCPA.
Arizona Society of CPAs 4801 E. Washington St., Suite 225-B Phoenix, AZ 85034-2021 Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700 Fax (602) 252-1511
www.ascpa.com
Call 1.800.584.4595 Ext. 05 www.accountingpracticesales.com
Gary Hankins, CPA Member Arizona Society of CPAs
DECEMBER 2011 y AZ CPA
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Chair’s Message
by Mark Anderson, CPA
Private Company Financial Reporting As the CFO for a non-public company, I have taken particular interest in the recent activities around the Private Company Financial Reporting proposals from the Blue Ribbon Panel (BRP). Like many of my colleagues, as the BRP announced earlier this year its recommendations for 1) a U.S. GAAP model with exceptions and modifications for private companies, and 2) a separate private company standard-setting board under the Financial Accounting Foundation (FAF), I felt that it was a done deal and was anxious to start hearing about the various exceptions and modifications for private companies. To put the issue into context, the BRP determined that there are approximately 28 million private companies in the United States. Many are small businesses that have no reporting requirements other than filing income tax returns. However, a significant number of private companies are required to prepare GAAP financial statements by lenders, bonding companies, regulators, and others, in addition to the approximately 14,000 public companies, which have SEC reporting requirements. Most of the private companies preparing GAAP financial statements (including the one I work for) do not have the accounting resources that public companies have, especially larger public companies. The BRP has concluded that the current U.S. accounting standard-setting process has issues involving an insufficient understanding of the needs of users of private company financial statements and the cost/benefit of GAAP for use in private company reporting. For example, a number of accounting standards such as those on uncertain tax positions, fair value measurements, and goodwill impairment are irrelevant for many users of private company financial statements. And since many of
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the least relevant standards for private company users are often the most complex, the BRP believes (and I concur) that private companies are incurring unnecessary costs for GAAP financial statement preparation. In addition, the increase in costs to prepare statements based on potentially irrelevant standards has led to more users who are willing to accept qualified opinions. The concern about the overall complexity of GAAP expressed by many private company preparers (and their CPA practitioners) has led the BRP to conclude that, at a minimum, the current standard-setting system needs to be improved to better address the needs of users of private company financial statements in a cost-effective manner. The Panel further concluded that the ultimate authority to approve the exceptions and modifications should reside with a new board under the FAF. To my surprise and dismay, the FAF rejected the second recommendation by the BRP and countered with a subcommittee of the FASB that would still be subject to ratification by the FASB. AICPA Board Chairman Paul Stahlin stated, “We don’t think the concerns of smaller private companies can be fully
appreciated until there is an independent board dedicated and focused solely on the needs of private companies.” I personally agree with this statement and feel that the FAF is making a tactical mistake by not following the BRP’s recommendation. The proposed process in FAF’s counterproposal does not really change what we have today as the FASB would continue to have veto power. As the BRP points out, the FASB has historically been geared toward public companies and in order for real modifications to be made for private companies, a new board with extensive private company representation (possessing the perspective of those stakeholders) and the authority to make modification and exceptions is essential to the success of Private Company Reporting. In a letter to the FAF, I have requested that they establish a new independent standard-setting body as the only way to make meaningful changes to financial reporting for private companies like mine. I urge those of you with a similar AZ CPA position to do the same.
Focus on Members Clifton Gunderson and LarsonAllen announced plans to merge into one of the top 10 accounting firms in the U.S. Pending final approvals, the merger will take effect Jan. 2, 2012. The firm will be named CliftonLarsonAllen (CLA). Debra A. Hunter, CPA, of Hunter Hagan & Company, Ltd., has been appointed to the Board of the International Association of Practicing Accountants (IAPA) for a two-year term. Ed Dupke, CPA, has been honored with the AICPA Sustained Contribution Award for his more than 20 years of significant volunteer service to the profession.
NASBA Honors Daggett Mike Daggett, CPA, was honored at the National Association of the State Boards of Accountancy Annual Meeting for his leadership this year as chair. PCAOB Chair James Doty and FASB Chair Leslie Seidman also spoke at the meeting. Here Daggett, and his wife, Sharon, receive a standing ovation at the gala, topping off the week’s meetings.
Andie Sotomayor, CPA, has joined the accounting and tax firm of Roediger Hoff, PLC in Tucson. Armando G. Roman, CPA/PFS, managing director of AXIOM Financial Advisory Group LLC, has been appointed by Roman Catholic Bishop of Phoenix Thomas J. Olmsted to the Audit Committee of the Diocesan Finance Council. Roman is also chairelect of the ASCPA. Glasper Honored by Anti-Defamation League
Christine P. Engel, CPA, has joined Busby Sanford Brady, CPAs, PLC, as a senior tax manager. Heinfeld, Meech & Co., P.C. has been ranked in 2011 Great Places to Work: Entrepreneur.com’s Best Small & Medium Workplaces for the fifth consecutive year. In addition, they were the only accounting firm recognized on the list for small workplaces (100 employees or less). Mark Eberle, CPA, of Henry & Horne, LLP, recieved the Frank W. Hodges Alumni Achievement Award from Scottsdale Leadership. Minniti CPA celebrated the opening of their new offices in Phoenix. In honor of the opening, Minniti CPA presented a check to OCJ Kids.
ASCPA members attended the event honoring Glasper. (L to R) George Cohen, CPA, Cindie Hubiak, CPA, and Rick Goldenson, CPA.
Several Arizona CPA firms received the Alfred P. Sloan Awards for Business Excellence in Workplace Flexibility, including: Clifton Gunderson LLP, Henry & Horne, LLP, Keats, Connelly and Associates, LLC McGladrey - Phoenix, AZ, and Morrison & Associates CPAs. Kevin McHolland, CPA, was elected to the board of directors of the Boys & Girls Club of Metropolitan Phoenix.
Rufus Glasper, Ph.D., CPA, chancellor of the Maricopa Community Colleges, was awarded the Jerry J. Wistosky Torch of Liberty Award, the highest honor awarded by the Arizona Region of the Anti-Defamation League.
Henry & Horne, LLP, acquired Mazza, Spero, Hougham and Schultz. The merger was effective on Nov. 1. Richard Schultz, CPA, will be joining Henry & Horne, LLP, as a partner. Dennis Mazza, CPA, Larry Spero, CPA, and Robert Hougham, CPA will join the firm as Partner Emeritus. Cheryl Dickerson, CPA, will be a manager and Vicki Plein will be a supervisor. All six will be working out of the Scottsdale Location.
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ASCPA PAC Contributions
Advocacy for CPAs
August 11, 2011 – September 30, 2011 for contributions of $100 or more.
Sharon Lechter, CPA, State Treasurer Doug Ducey and Cindie Hubiak, CPA, met at the State Capitol to discuss financial literacy.
(L to R) Mark Anderson, CPA, Sen. Richard Crandall, CPA, Cindie Hubiak, CPA and Jon Gale, CPA.
2011 Professional Issues Updates Thanks to the following companies for allowing us to visit and provide a Professional Issues Update to your employees. We have reached more than 350 people through this program. Apollo Group APS Blue Cross Blue Shield of Arizona Clifton Gunderson Freeport-McMoRan Gaintner Bandler Reed & Peters Grant Thornton
Henry & Horne LarsonAllen Lohman Company McGladrey Moss Adams Schmidt Westergard
Contact José Herrera at (602) 324-4741, if you are interested in having a group of your staff learn more about the latest issues impacting the accounting world.
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Karen Abraham Charles Inderieden Jeffrey Anderson Janis Isaacson Cord Armstrong Colette Kamps Corey Arvizu Julie Klewer Alan Augenstein Joel Kramer Anita Baker Mark Landy Steven Bandler Rob Leslie Christine Brueser Donna Laubscher Ron Butler Aaron Marks Debra Callicutt Tony Maki Brian Campbell Marilyn Mays Thomas Christie Julie McCollum Diane Costantino Kevin McHolland Sandra Cronstrom Charles McLane Andreas Coumides Salvatore Mileti Adam D’Angelo David Miller, Jr. David Damron Tylan Miller Marianne DeVries Reed Mittelstaedt Michael DeVries Glenn O’Keefe Bradley Dimond Dennis Osuch Scott Donaldson Connie Peter Rob Dubberly Wendell Peters Jessica Duff Jennifer Phillips Mark Eberle Bradley James Preber Mark Engstrom Victor Puchi Donna Esposito Stephen Ralbovsky Dean Fear David Richardson Kathryn Ferron Craig Robb Michael Finnegan LeAnn Rudolph Debbi Fitzgerald Sheila Shanovich Randy Fitzpatrick Layne Simmons Gary Fleming John Sizer Michael Fleming Bradley Smith LeRoy Gaintner Jeremy Smith Jon Gale Andy Spillum Ken Garrett Leslie Stackpole David Gifford Michael Straneva Charles Goodmiller John Taylor Stephen Harris Laurie Taylor Joshua Hayes Candace Tooke Chuck Heimerdinger Jackie Unger R. Dale Hensley Elva Vivas David Hopkins Carlos Wagner Barbara Horner Scott Wallace Kathy Hostetler Miranda Wendlandt Terry Hothem Corinne Wilson Cindie Hubiak Kevin Yeanoplos
When considering ways to minimize areas of risk in Personal Financial Planning (PFP) services, keep in mind that CPAs are subject to a number of professional liability concepts that will impact the way CPAs and their services are perceived by clients and others. This is true no matter what services the CPA provides. Examples of those concepts include: CPAs are not judged by professional standards in the liability world. The way they are judged depends upon the perceptions of jurors—average, hard-working individuals who, for the most part, understand little if anything about what CPAs do in their profession. CPAs may also be judged by other professionals, such as judges or arbitrators, who are hampered by the same ignorance or lack of experience. The length of the CPA’s relationship with the client, multiplied by the breadth of services, equals the amount of risk exposure to the CPA. This formula, also known as the “geometry of duty,” means that the CPA at a certain point becomes a trusted financial advisor with fiduciary responsibilities to monitor the client’s financial resources. Clients expect CPAs to advise them of opportunities and warn them of risks. If a claim involves any type of fraud, clients generally believe that the CPA should have known that it was occurring, and jurors generally believe that a CPA’s job is to catch fraud, or at least to warn the client of the risks.Special services such as PFP and fiduciary services produce higher losses than standard services because of the high level of judgment and advice required in special services. If the client suffers a loss, the client is more likely to call into question the CPA’s judgment and advice than they would with standard services. By Randy R. Werner, J.D, CPA
Minimizing Risk in Financial Planning Services
DECEMBER 2011 y AZ CPA
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As a trusted financial advisor, the CPA’s risk comes primarily from the types of services performed as well as client characteristics and the involvement of other professionals. The two general types of financial planning services are the planning function and the implementation of the plan.
Planning The planning function addresses the following questions: What are the facts, circumstances and current situation concerning the client now? What are the client’s objectives? What is the plan you are to provide to the client? For example, a synopsis or summary of: a) their current situation, b) their objectives, and c) the plan to get from their current situation to their objectives, based on information the client has given the CPA. Incidentally, never tell the client what his or her objectives should be, as this will raise your risk exposure. The client will say they relied on your knowledge and recommendations when something goes awry. Complex engagements often require expertise from other professionals such as estate planning attorneys, insurance agents and investment advisors, thereby creating more risk exposure for the CPA. When financial planning leads to the need for estate planning, claims can arise when there is a gap between the client’s expectations and the services the CPA thought were being provided.
Implementation The implementation function addresses the following areas: investment advice, investment management, investment monitoring, tax aspects and insurance. The best risk management approach for a financial planner is to keep the planning function separate from the implementation function. Implementation should be considered separate from PFP services, so it’s important to avoid drifting into implementation when you document the financial plan to the client. A good loss prevention rule is “don’t do both,” as implementation brings with it
a different set of risks. For example, if the CPA chooses a compensation structure other than fee-only and accepts a percentage fee or a commission, the CPA’s interest will be considered adverse to the client’s in the event of a lawsuit. This type of fee structure is often chosen in the implementation stage. Another risk comes from inadvertently becoming the client’s “quarterback.” In other words, if asset management has been turned over to other professionals but you continue to receive reports from them, the client may have the expectation that you are analyzing the reports—that you’re their quarterback and calling the shots. Clarify in writing with the client that you will charge for reviewing reports for certain time periods, at least quarterly. If the client is unwilling to pay you for reviewing reports, you can lower your risk exposure by simply not receiving them. If the client is willing to pay you for reviewing reports, and you are considered the quarterback, review the performance and fees of the professionals who are responsible for implementing the plan against benchmarks and goals. At least annually, reassess: 1) the fees charged for the services, and 2) the assets and whether they are underperforming or meeting the goals. If you implement the client’s plan, regularly report back to the client, pegging the reports to their goals and benchmarks. Implementation is a full-time job: If your firm has limited resources (e.g., staffing capabilities, qualifications, experience) for this type of work, you might not have the appropriate oversight of the work and will have significant risk exposure as a result.
Client Characteristics Determining your client’s characteristics is an integral part of the client screening process, whether you are preparing a financial plan or implementing it. You need to know whether this client is a good fit for your firm, including responsible staff. The client’s financial IQ is crucial to acceptance. The less a client understands
about basic concepts of the financial markets, the less responsibility the client will take for their decisions regarding recommendations. A similar pattern is seen with clients who do not want to be involved in the details of the process or the decision making. They may blame the CPA for “steering� them in the wrong direction if a problem develops later on. Even client personality is a factor. If the client is too litigious, demanding, unrealistic, indecisive or irresponsible, you may not want them as a client. Age is also becoming more of an issue in our aging society. If there is a perception that the CPA did not appropriately advise or warn older clients, a jury will be more inclined to punish the CPA. This is especially true if the CPA had a longterm relationship with the client and provided extensive services (geometry of duty); even more so if third-party beneficiaries are involved. Hidden clients can also emerge in the form of dysfunctional children and other beneficiaries, including charitable organizations.
Involvement of Others
Document and Communicate
If you are going to be working with other professionals, due diligence is recommended in order to have sufficient information about the people involved and to help avoid fraud and incompetence. Documentation of the understanding with the client and the other professionals will help maintain clarity and avoid confusion. Also make sure that other professionals carry errors and omissions insurance to protect the client and you from losses and claims.
Good documentation ultimately means that the CPA is more likely to win a case or a claim if one is made. When communications with the client and third parties are not documented, the CPA is more likely to lose a claim. Documentation is a vital function for PFP, because so much of what CPAs do is fact-dependent and calls for judgment based on those facts. Use engagement letters, document the planning process, document all advice to the client and important interactions, and keep the client informed throughout the process. By staying informed and in control, you will help safeguard your firm from potential litigation and maintain good client relations. When problems begin to develop, contact your professional AZ CPA liability carrier or attorney.
Maintain Independence There are almost always large dollar amounts involved in PFP claims, and conflicts of interest will be perceived by jurors if the CPA is a co-investor or accepts a commission. Relationships between the CPA and others who are involved with the investments should be disclosed in writing. Better yet, maintain your independence: Avoid investing in deals with your client, be careful with commission-based fees, and beware of quid pro quo referrals.
Randy Werner is a loss prevention specialist with CAMICO . She can an be contacted at rwerner@camico.com. She based this article on a recent ASCPA webinar that she led on financial planning engagements.
AC CCOUNTANT MALPRACTICE
WR RONGFUL LEVY DEFENSE
OFFFERS IN COMPROMISE
REEF EFUND CLAIMS
TAX COURT AND FEDERAL COURT REP EPRESENTATION
REEFUND LAWSUITS
IRS APPEALS TR RUST FUND PENALTY DEFENSE
INN NNOCENT SPOUSE CLAIMS REEPRESENTING CPAS & CLIENTS TH HROUGHOUT ARIZONA
AU UDIT REPRESENTATION TEFRA AUDITS TE
LAW W OFFICE OF F ARTHUR R L. L WEISS, P.C.
5363 East Pima Street, Suite 101 | Tucson, AZ 85712 (520) 319-9057 | weiss60@msn.com www.ArtWeissLaw.com
DECEMBER 2011 y AZ CPA
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Clarifying Common Fiduciary Questions by Eric Sholberg, CPA In the financial industry, there is an ongoing discussion around fiduciaries, typically centered on whether or not someone is a fiduciary. What companies and their retirement plan teams should really be asking and discussing is: Have the fiduciaries been identified? Do they have the necessary knowledge and training to successfully abide by fiduciary laws and standards? A lack of clarity around these two questions can lead to struggles with qualified retirement plans and frustration over the process and results of those plans. This article will answer these questions and identify the six common sins of fiduciaries, to help you and your teams identify opportunities for success.
Who actually is a fiduciary? By definition, a fiduciary is somebody that holds a position of trust or confidence over the welfare of others. Although the word fiduciary is used predominantly in the
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context of dealing with others’ finances, there are other examples in society. One example would be a commercial pilot. A pilot is the ultimate fiduciary every time they climb into a cockpit – we trust them with our lives. We trust that the pilot can competently fly the plane and that their training is up to date. There are also laws that govern pilots to protect the safety of the public. Pilots are required to have ongoing training, a requisite number of flight hours and expertise on the equipment. If pilots violate these policies, rules or laws, they face the loss of their license and job. Because of these laws and oversight, the public has confidence in the safety of the industry.
What should fiduciaries know? Similar to the rules and regulations in the airline industry for pilots, there are fiduciary rules and laws that govern trustees and other stewards of retirement plans. These rules and laws exist for the safety and confidence of the investing public, which in this case means 401(k) participants. If being a fiduciary means holding a position of trust or confidence, what is the fiduciary standard of care? Simply put, the fiduciary standard of care requires that you must put the interests of your beneficiaries (the people downstream from yourself) first. Therefore, fiduciaries should strive to conduct themselves in accordance with this fiduciary standard of care. However, some fiduciaries are better “pilots” than others. Often, the ones who are missing the mark simply are not as familiar as they should be with the rules or the often counter-intuitive standards of conduct. Fiduciary laws have generally been interpreted on the basis of the prudent man rule; was the fiduciary’s conduct in accordance with actions that would have been taken by a prudent person faced with the same situation? Under ERISA, the set of laws governing 401(k) and other retirement plans, the expected standard of a fiduciary’s conduct gets raised from that of a prudent man to a prudent expert, which essentially means “become an expert or hire one.” Therefore, a fiduciary not only must be familiar with the rules and laws under which they are being held accountable, they also must set up a process by which they can monitor themselves or the experts they hire in the areas of plan design, investments, and administration. As part of the fiduciary standard of conduct, an investment policy statement written by, or in conjunction with the plan’s advisor directs this monitoring process. The process uses a scorecard to oversee investment performance – typically on a quarterly or semi-annual basis. The process also frequently includes a benchmarking tool to ensure fees for investments, administration and advisory services are appropriate given industry averages for plans with similar demographic characteristics. If we were to ask, most employees that participate in a 401(k) plan believe or at least hope that those in charge of their retirement plan are taking their fiduciary responsibility seriously. Unfortunately, many are not. This begs the question: where do fiduciaries to retirement plans typically go wrong?
The 6 Common Sins of Fiduciaries: They believe “we have offered our employees a diversified fund lineup” and so they may disown their liability in the investment decisions their employees make.
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While the list of rules and regulations may seem as daunting as flying a jumbo jet, fiduciaries around the country have taken on this challenge by educating themselves, getting good advice and finding the right partners to help them navigate the retirement plan process.
In fact, this belief and the corresponding “head-in-the-sand” mentality that it perpetuates increases their liability. Without the proper procedures in place to select, monitor and replace investments, the liability to fiduciaries can be significant. Fiduciaries also sometimes neglect to take advantage of the protections available under ERISA when working with service providers.
They do not understand their duties and responsibilities. The rules and laws that govern the conduct of plan stewards, known as ERISA, exist to benefit plan participants. Good plan governance, which includes a well-conceived monitoring process, has been proven to increase the retirement plan account balances of the participants within these plans over the long term. Therefore, it is critical for fiduciaries to know, understand and practice good fiduciary conduct, however, they don’t always ask for the help they need, because they don’t know what they don’t know. Under ERISA, people with responsibility over retirement plans either must hire an expert or become one. That does not mean plan trustees must become market experts adept at predicting its future trends. It means they must acquire or purchase the knowledge and tools to build a wellconceived fiduciary process and follow it. A fiduciary is not evaluated based on whether the investments went up or down. Instead, they are evaluated on
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the process that was followed in arriving at their decisions. Keep in mind, good plan governance, which includes a well-conceived monitoring process, increases the retirement plan account balances of the participants over the long term. They do not understand the role and qualifications of their advisor While there are many people who report to be qualified to advise in retirement plan space, not all of them are held to the same level of responsibility. Registered Investment Advisors (RIA) are held to a fiduciary standard of care. They must always act in the best interests of their clients without regard for personal gain. Brokers registered through a broker dealer are only held to a standard of suitability. They must only ensure that an investment is suitable for their clients. For example, a client is in need of a Large Cap Value mutual fund to fill out their asset allocation portfolio. Under a suitability standard of care, a broker would only have to go out to their list of investment selections and select the fund that pays them the most commission. It does not matter that the fund is a poor performing fund in comparison to other Large Cap Value funds. Nor does it matter that the fund may have cost the client more than other Large Cap Value funds. Under a fiduciary standard of care, a Registered Investment Advisor must make the same investment selection with only the cli-
ent’s best interests in mind. Therefore, they must do the research to determine a Large Cap Value fund that possesses the highest potential for outperforming other like funds and that can be acquired at a lower cost. They do not understand the complexities of the plan including: They fail to control and account for investment expenses. Plan fiduciaries must know and understand all cash flows that are coming out of the accounts of the plan participants. With the new 408(b)2 Regulations that require compliance by April 1, 2012, most plan sponsors believe they will receive disclosure on these fees, but in reality 408(b)2 is simply a good start.
They fail to monitor the activities of their advisor and other prudent experts with influence over the plan. When acting for the benefit of others, i.e. employees, a fiduciary should be very careful with whom they entrust decisions. Under ERISA, people with responsibility over 401(k) and other types of 401(k) plans must act in the sole benefit of plan participants. Decisions made for the benefit of the company or decisions made by plan service providers that may seem innocuous could be considered dealings of self-interest. Under ERISA, dealings in self-interest are prohibited transactions – the consequences of which could be the loss of the plan’s qualified status and big tax bills for all involved. While the list of rules and regulations may seem as daunting as flying a jumbo jet, fiduciaries around the country have taken on this challenge by educating themselves, getting good advice and finding the right partners to help them navigate the retirement AZ CPA plan process. Eric Sholberg, CPA, is a director at 401(k) Advisors. He can be reached at info@401kadvisorsarizona.com.
Lien Release vs. Lien Withdrawal By Brian Mahany Tax Liens. Our clients dread them. Many will say that the IRS or their state revenue department are unresponsive large bureaucracies, but boy do tax liens get people’s attention. During my term as state revenue commissioner in a northeastern state, I quickly learned that nothing got people’s attention faster than liens and levies. A tax lien can make it nearly impossible to sell one’s home or obtain credit. Although the formula for credit scores is proprietary and somewhat secret, everyone agrees that a tax lien will cause a major decrease in your credit score. Anecdotally, clients say their credit score dropped an average of 100 points when a tax lien was filed. Immediately paying the tax debt will help one’s credit score improve; however, it takes a long, long time to get one’s score back to where it was. In other words, having a tax lien may cause your score to drop 100 or more points overnight but subsequently paying those taxes doesn’t make the lien filing go away – it remains on your credit history for years. People who were laid off or businesses with cash flow problems may not be able to simply pay the taxes off right away anyway. For most taxpayers with tax liens, the historical fix is to pay the tax and obtain a lien release. Obviously, paying the tax and getting a lien release is better than not; but in terms of credit score, the lien release only scores a C-.
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Are there alternatives? The IRS will say that addressing the tax problem before it gets to the lien stage is always the best solution. In our profession; however, our clients often come to us when liens have already been filed. For many taxpayers, the better route is a lien withdrawal. A lien withdrawal is much different than a lien release. Lien releases are automatically filed once a tax debt is paid. Lien withdrawals; however, are not automatic and you have to ask. (Of course there is a form, Form 12277 – Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien). But if you are successful in obtaining one for your client, his or her credit score can be restored overnight. The withdrawal erases or “pulls back” the original lien as if it was never there. (For more information, see sec. 6323(j) of the IRC). Better yet, you can sometimes obtain one even if your client’s taxes are not fully paid! The IRS is obligated to provide a withdrawal if the debt was liened in error. As we all know, tax agencies do make mistakes. There are very strict notice requirements and time deadlines that must be followed before the IRS or most state tax agencies can file a lien. If you can show a mistake, you get a lien withdrawal and your client’s credit can be repaired quickly. The IRS is also permitted to provide a withdrawal if doing so “facilitates the collection of tax.” A similar criterion says that the lien can be withdrawn if it can be shown that withdrawal is in
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the “best interest of the government and taxpayer.” What does that mean? Admittedly, these criteria are quite broad and often, a good tax lawyer or accountant can craft a winning argument with the IRS collections representative. Keeping one’s professional license (for example, in many states mortgage brokers can lose their license if they have liens on their records) and keeping the doors open on a business are two arguments that we have used successfully in the past to persuade the IRS to issue lien withdrawals even though a debt was not fully paid. To qualify before all tax debts are fully paid, there must be an installment agreement in place and all current taxes must be paid. Involving the taxpayer advocate is also helpful. Convincing clients that your services are essential may be the hardest thing to do. Navigating the collection process, avoiding seizures and other enforced collections, and seeing if clients qualify for an offer in compromise or lien withdrawal is best left to AZ CPA professionals. Brian Mahany is a tax and fraud recovery attorney with a national practice and offices located throughout the U.S. He is the former head of Maine’s state revenue department and a former officer of the Multistate Tax Commission. Mahany is active with the Wisconsin Bar Association and Wisconsin Institute of CPAs. He welcomes comments. Contact him through his firm’s website, www. mahanyertl.com
The 4 C’s of Business Development By Roy Keely
Business Development (BD) seems to be the buzzword of 2011 (probably fourth behind Cloud, Social Media and Merger). As new business has been difficult to find, even harder to win, and harder still to be profitable on, the profession has started turning over new rocks in search of some answers. The quest for good professional services business development people is underway at many firms. In other cases firms are looking to partners to pick up their BD efforts as part of their role in being a partner. Either avenue your firm takes, it’s important to consider the basic qualities needed in a BD role. I have found four qualities (conveniently all C’s) that are needed to make for a successful business development person…which leads to the fifth C – cash.
First, what exactly is business development? Business development comprises a number of techniques and responsibilities which aim at attracting new customers and penetrating existing markets.
Next, what should you look for in people (the Four C’s)? Connector The person who acts like they are in “timeout” at a cocktail hour is probably not the best person for a business development role. This doesn’t mean
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Building Your Connections Annual Neworking Event Thanks to our sponsors and to all the CPAs, lawyers, bankers and other professionals who attended this year’s outstanding event.
a Connector is an incessant storyteller who can’t shut up, but rather a person who rarely meets a stranger, and when they do, they LISTEN more than they talk. This trait is wired into an individual and, best I can tell, cannot be taught. Sure someone can get better and improve, but a person who is not a good connector should not have BD as their primary role.
Content Creator The Arizona Society of CPAs, State Bar of Arizona and Risk Management Association of Arizona welcome you to...
Building Your Connections
Networking Event
Special Thanks to Our Sponsors: Alliance Bank of Arizona Economic Concepts Enterprise Technology Services LarsonAllen LLP Perkins Coie The Rainmaker Institute Special Signature Sponsor
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Yes, content. The ability to present thoughts, concepts and value propositions in both oral and written forms is a must for today’s environment. The reasoning is three-fold: In the professional services environment, a person must be able to go at it alone, not taking away time from a billable professional. To be seen as an expert begins with being seen. Fancy that. The fact is that in this content-starved world, if you are the one creating/delivering content, you are seen as the expert. In some cases, it’s a complete farce and those are easily sniffed out; however, you must create content to gain the perception of being an expert. It’s leverage. An article for the local paper, a presentation to 30 people, or a one-on-one pitch can all be leveraged if you look at it as content. This is an aptitude one must learn in the years ahead, firms must learn this too for that matter.
Collaborator The ability to work as fluidly as possible across multiple teams, departments and with all types of people in order to pull together an answer for a client/ prospect in a timely fashion, equals collaboration in a professional services environment. This requires a level of emotional intelligence to push things
along internally, but not in a way that ruffles (too many) feathers. This value must not be underestimated because, as we all know, one sour grape can ruin the whole bunch—and many a projects go sour due to the lack of buy-in from internal resources.
Conscious Ever been in a corn maze? If so, you have probably witnessed an individual darting around corners in an attempt to find something other than a dead end. Perhaps this was you, and it has definitely been me before. You feel lost and can’t make sense of where you are going or where you came from. So it goes with business. It’s confusing and maze-like at times. However, most corn mazes have a stand where you can step back (above) and take a look at where the path starts and stops, barriers and dead ends. An individual in charge of your business development must have the innate ability to step back from the grind and have a conscious understanding of where the business is and where it’s going. This means shareholders must take time to transfer both the vision and DNA to their BD person. If the shareholders lack the vision themselves, it’s okay to have the BD person help supplement here, but ultimately this is on the AZ CPA shareholders to own. Roy Keely is director of marketing at Xcentric, which specializes in Cloud Computing and IT consulting for CPA firms. Roy graduated from the University of Houston with a degree in Marketing and has extensive experience in marketing, branding and sales. Roy can be reached at (678) 297.0066, ext. 525 or info@xcentric.com. For more about Xcentric, go to www.xcentric.com or follow them at www.xcentric.com/blog and www.twitter.com/xcentric.
Order Your 2012 Arizona Tax Guide
TM
Order the only comprehensive guide on Arizona taxes from the leaders in tax education, the ASCPA’s Phoenix Tax Workshop. Tax experts Ed Zollars, Ira Feldman and Pat Derdenger are contributors to the guide. The Arizona Tax GuideTM includes: Arizona Income Tax, Sales and Use Tax, Arizona Property Tax, and Unclaimed Property in a printed book or a pdf document. Pre-order by Dec. 15, 2011 and save. Spiral-Bound Book: Pre-Order by Dec. 15, 2011 Members of ASCPA, Phoenix Tax Workshop, State Bar of Arizona or Enrolled Agents: $79 Nonmembers: $99 After Dec. 15, 2011 Members of ASCPA, Phoenix Tax Workshop, State Bar of Arizona or Enrolled Agents: $89 Nonmembers: $109 Electronic PDF: Members of ASCPA, Phoenix Tax Workshop, State Bar of Arizona or Enrolled Agents: $79 Nonmembers: $99 *Call 602-324-4743 for special pricing on orders of five or more.
Go to www.ascpa.com/taxguide to order
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GoodReader GoodReader is a well-known document reader. I prefer GoodReader to any other one as it is cheap, fast, and easy to work. I can easily annotate a PDF and store the annotations in the file or as a separate file.
Dropbox
Top Ten iPad Apps by Val S teed
Free for up to 2GB, Dropbox is probably the best synchronization tool I have ever used. I have it loaded on my iPad, laptop, and desktop. All files sync in seconds and are available across all systems. Be sure to have strong Windows passwords and invoke the security keys on the iPad. In seconds I can create a file on my desk system, access it in Dropbox on my iPad, and then open it in GoodReader.
Speed Test – Ookla Free speed test. There are many speed test apps so be sure to get the right one. Only the one from Ookla is this good; great graphics and reliable results. You would be surprised at how often the speed of your internet connection changes.
FaceTime No doubt one of the best communication tools ever invented. The only issue is that the person on the other end of FaceTime must have an iPad or iPhone 4 or newer. Despite the fact this is an Apple app, and comes with your iPad, do not overlook its power and capabilities.
Photobucket 2GB of free cloud storage and an interface that works great across all devices. The key to Photobucket is that it becomes your library of photos and videos that you can easily link to for Facebook, LinkedIn or any other website posting.
MLB.com I am a baseball fan, so this ranks high on my list despite the fact that you have to buy an annual subscription to the service each year for around $15. You get to see any game, not blocked by blackouts, in HD (internet connection permitting).
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Intellicast HD Weather I love weather and especially like to know what I am headed for when traveling. This is the best of the weather apps to date as it gives you HD radar. Try zooming in/out and you can examine the world in detail, even ocean beds!
Keynote Not free, Apple app. This is a pay for app that is the PowerPoint of the Apple line. If you want to do presentations from your iPad, this is the tool. Create the presentation in PowerPoint on your PC, transfer the file with Dropbox, open with Keynote, and present. It is that easy but it will cost you $9.99.
Dragon Dictation Free app - best voice recognition to date. You talk, it types; this can help with email responses especially when they become lengthy on the iPad.
Concur
Highlights of Board of Directors’ October Meeting Among other actions at its October 19, 2011 meeting, the ASCPA Board of Directors reviewed the following: Consent Agenda The consent agenda, which included the board minutes and financial statements, was approved. Strategic Plan Update Cindie reminded the board of the strategic planning session scheduled for November and meetings scheduled with legislators Robson & Carter. Managing Thoughts & ‘Wondering’ exercise Cindie lead a discussion that included board members reflecting on thankfulness and wondering about new possibilities for the ASCPA. Debrief AICPA Horizons 2025 The board appreciated the work the AICPA did to look into the future of the profession and create and/or validate the core competencies and values that CPA professionals will need to continue to be successful in the future.
The app is free; the account with Concur will not be free. You can get a personal free account by signing up for the Concur Accountants program. See http://www. cpafirmsoftware.com/cpaprograms.html click on the Concur Accountants Program and join. Then you can use this app on your iPad to help track and report expenses. We have our entire company signed up and this AZ CPA is a great tool.
Debrief Private Company Financial Reporting The board voted to send an official letter to the Financial Accounting Foundation in support of the recommendations made by the Blue Ribbon panel on creating a separate board to oversee policies and accounting procedures for private company financial reporting.
Val Steed is with K2 Enterprises.
If you have questions or would like additional information, please contact Cindie Hubiak at (602) 324-2888; AZ toll free at (888) 2370700, Ext. 203; or chubiak@ascpa.com.
A Day in the Life Board members appreciated hearing from Rob Dubberly on the challenges and joys he experiences in his job.
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Classifieds Business Opportunities/ Practices for Sale WE BUY CLIENTS—Our CPA firm is seeking to buy clients in increments of one to a small practice in the Scottsdale and Phoenix Metropolitan area. Our staff has been practicing in public accounting for over 30 years and specializes in the small to medium size business needs. We emphasize on business accounting and taxes. We are located in North Scottsdale. If you are downsizing or retiring and want an easy transition, please call us today. Ask for Kara at (480) 990-2727. ACQUISITION WANTED: CPA PRACTICE—A financial advisory practice in Tucson is interested in acquiring a small CPA practice. Looking to retire or expore the possibility of sharing in investment management fees? Contact Clay Frey at (520) 795-0095 or email cfrey@clayfreyfinancial.com.
Merger Opportunity—We are a small, casual CPA firm in Tempe seeking 5 year transition of ownership with CPA experienced in tax and QuickBooks. Sharing of office, equipment and staff, as well as per diem work during transition. Please email sherylsacry@ thetaxlady.biz.
Employment Opportunities STAFF ACCOUNTANT—CPA, at least 3 yrs experience, accounting and tax. Send resume to Robert H. Rogers, Ltd. at roberthrogerscpa@msn.com. www. roberthrogerscpa.com. TAX PREPARER—Our 11-member Tucson firm has a position for an experienced tax preparer. This position is a permanent seasonal position, with a minimum of 20 hours/week, beginning February 1 and ending April 15. Some flexibility as to work schedule is available. Activities include preparation of
After 25+ years serving non-profits, closely held businesses and the individuals who run them, Brenda Blunt is pleased to announce the establishment of her own firm
Brenda A. Blunt, CPA, PLLC
Call José Herrera at (602)324-4741 or e-mail: advertise@ascpa.com
Brenda offers a wide variety of tax, accounting and business consulting services including tax planning and compliance, strategic planning, multi-entity structures, and planned giving. Brenda has especially deep experience in the not-for-profit area working with hundreds of local and national not-for-profit organizations, consulting with attorneys and other CPA’s regarding their NFP clients and recently having served on the steering committee for the NFP practice group of a top-10 national accounting firm. As a result, she is recognized for her expertise addressing exempt status, UBIT, public charity status, private foundation, compensation reporting, related entities and other issues unique to not-for-profit entities. Brenda is a member, and the initial chair, of the ASCPA NFP Section Steering Committee and a frequent national and local speaker on topics of interest to not-for-profit organizations.
Brenda A. Blunt, CPA, PLLC One East Camelback Road, Suite 860,Phoenix, AZ 85012 602-692-6856 – BrendaBluntCPA@cox.net
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AUDIT MANAGER—Part Time— Assist with compilations and reviews in Phoenix. Preferably experience in Prosystem FX. Join a dynamic team and have total flexibility. Small firm practitioners are welcome to apply. Please email resume and contact information to auditmanager2@yahoo.com. Staff Accountant/Tax Preparer—Tucson firm seeking experienced (5 years+) CPA to join our team. This position is full-time tax season from February 1 through April 15 (40–50 hours per week). There is also the potential for additional off-season hours. Activities include preparing business and individual tax returns, and may include direct client contact. Experience with Lacerte tax software is helpful, but not required. Salary and benefits are competitive and depend on experience.Please submit resume to carleen@klbdtucson.com, or mail to our address at Kleinhans, Lashbrook, Butler & Davis, PLLC, 4534 E. Camp Lowell Dr., Tucson, AZ 85712. Our telephone number is (520) 327-8530.
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Is your firm moving? Did you get a promotion? Do you have a new hire in your firm? Announce it here with discounted ads in the AZ CPA for our members only. We will even create the ad for you at no additional charge. “Thank you to the ASCPA for the beautiful ad. I have already received a number of comments on it and have even been contacted (within days of it hitting the street!) by a potential new client.” —Brenda Blunt, CPA
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individual income tax returns. Experience with Lacerte tax software is helpful but not required. Salary and benefits are competitive and depend on experience. Please submit resume to carleen@ klbdtucson.com or mail to our address at 4534 E. Camp Lowell Dr., Tucson, AZ 85712. Our telephone number is (520) 327-8530.
Seeking talented CPAs and Consultants—Heinfeld, Meech & Co., P.C., established leaders in governmental and non-profit accounting, auditing and consulting, seeks motivated individuals with at least 4 years of experience specializing in governmental accounting and/or auditing for our growing offices in Phoenix, Tucson & Flagstaff. Recognized on the “25 Best Small Companies to Work for in America” list for the past five years, our firm is committed to providing a superior work environment and career opportunities for our staff. B.S. in Accounting required. CPA or CPA candi-
Upcoming ASCPA Conferences date preferred. Travel within the state of Arizona required. Email resume to: recruit@heinfeldmeech.com.
Miscellaneous Entrepreneurial CPA Network (eCPAn)—Wednesday January 11, 2012, Piercing “The Cloud” (Can it lift your business?) Why Cloud Computing? presented by Bruce Newman of CMIT Solutions (1 hour CPE). Regular luncheon meetings are 11:30-1:30; all meetings located at DoubleTree Suites, 320 N. 44th St, $25 members and $35 nonmembers. For information email us at info@ecpan.org or go to www. ecpan.org.
Office Space
Accounting & Reporting Standards Conference Jan. 13
Black Canyon Conference Center, Phoenix Recommended CPE Credit: 8 hours
ASCPA Member $255 – Nonmember $355 Course Code: AAC Don’t let accounting and reporting issues keep you up at night. Stay up-to-date with the following sessions: • Health Care Reform: Past, Present and Future • A & A Update/Private Company Financial Reporting • IFRS Update • What’s New with the State Board of Accountancy • Transitioning from SAS 70 to SSAE 16 • Preventing and Identifying Fraud
OFFICE ADDRESS WANTED— Space wanted in north Scottsdale CPA office by retired CPA with small tax practice. Needs mailing address, occasional reception and conference room, and research facilities. May have time available for tax assignments. Call (480) 251-6858 or e-mail pop6787efr@ yahoo.com.
Governmental Accounting Conference
FINANCIAL PLANNER AND BENEFITS AGENT LOOKING TO SHARE OFFICE SPACE—Independent Financial Planner and Group Benefits Agent looking for a CPA and Estate Planning Attorney to share office space and refer clients. Relocating to I-17 and 101. We advise Business owners, Doctors, Government employees, and Retirees. FortressFinancialStrategies.com. AlphaAzInsurance.com.
Hear from your favorites and get new perspectives in governmental accounting. David Bean returns with an update on new standards that affect governmental accounting, David Cotton will lead a fun and interactive activity where participants will solve a fraud case, Dan Anderson will give you an economic update specific to government agencies, and John Arnold will deliver a state of the state at this year’s conference. You can also choose from a variety of break-out sessions throughout the afternoon: • Dig Deep into GASB • Maximize a Successful Retirement Plan • Are all Recessions the Same? • Clarity Standards • Enterprise Risk Management in a Down Economy • How Can You Use LinkedIn to Help Your Government Agency?
NORTH CENTRAL PHOENIX CPA FIRM—Bethany Home & 7th St; CPA firm looking to sublease space to another CPA. Great opportunity for a start-up firm, or someone seeking a more professional environment than their home office. Options include the use of office space, conference rooms, telephone, internet, Drake Software (with purchase of additional license), and taking overflow work during tax season. Email info@sascpa.net for more information.
Feb. 3
Arizona Biltmore Resort, Phoenix Recommended CPE Credit: 8 hours
ASCPA Member: $225 – Nonmember $325 Course Code: GAC
Special thanks to luncheon sponsor: Heinfeld, Meech & Co., P.C.
Register online at www.ascpa.com
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PRSRT STD U.S. Postage PAID Phoenix, Arizona Permit No. 952
Arizona Society of Certified Public Accountants 4801 E. Washington St., Suite 225-B Phoenix, AZ 85034
ADDRESS SERVICE REQUESTED
Take your bottom line straight to the top. You’re not afraid of a little hard work - but you don’t want to fill your day with it. From payroll to HR and benefits administration and beyond, ADP® has the expertise and experience to handle your clients’ changing needs.That means you’ll spend less time on day-to-day administration and more time on your strategic and bottom line goals.
480.477.8992
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adp.com
ADP is a Recommended Payroll Provider for the Arizona Society of CPAs. Call 480.477.8992 today. The ADP logo and ADP are registered trademarks of ADP, Inc. In the Business of Your Success is a service mark of ADP, Inc. ©2011 ADP, Inc.
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