AZ CPA January 2019

AZ CPA January 2019

CFO to CEO Four Tips to Make the Move

Breaking Down Bitcoin The Research & Development Tax Credit Are You Part of the Culture Club?

The Arizona Society of Certified Public Accountants y www.ascpa.com

SIMPLE ONLINE PAYMENTS FOR CPA FIRMS

CPACharge is an easy-to-use practice management tool trusted by more than 50,000 successful professionals, developed exclusively for CPAs to help manage payments and grow revenue in their practice.

DESIGNED FOR CPAs RECURRING BILLING AND SCHEDULED PAYMENTS

PCI COMPLIANCE INCLUDED ($150 VALUE)

SECURE, CUSTOMIZABLE PAYMENT PAGES

SIMPLE REPORTING AND RECONCILIATION

ACH AND ECHECK PROCESSING (OPTIONAL SERVICE)

UNLIMITED SUPPORT

BY PHONE, LIVE CHAT, AND EMAIL

Payment Detail Submit to Smith Johnson, CPA

$1,000 Invoice Number

1005 Card Number

CPACharge is proud to be a preferred provider of the

CVV

**** **** **** 9998

001

Exp.

NOV

Arizona Society of Certified Public Accountants

2021 POWERED

BY

Pay CPA CPACharge is a registered agent of Wells Fargo Bank N.A., Concord, CA and Citizens Bank, N.A., Providence, RI

2

AZ CPA JANUARY 2019

Special offer for ASCPA members Call for details

cpacharge.com/ascpa 877-620-3495

Donate to help children in care and reduce your tax bill dollar for dollar Talk with your tax advisor about a gift to AASK or visit TaxCreditForKids.org

CELE B

RS EA

T RELA

AT 8 TER

“To ensure that every child has someone who cares”

TING 30 Y RA

1

1

9 0 IO 8 8 - 2 NSH IPS M

An Arizona 501(c)(3) Qualifying Foster Care Organization 2019United AZ CPA 3 # 0023 Tax ID JANUARY # 86-0611935; Way ID

AZ CPA The Arizona Society of Certified Public Accountants President & CEO Editor Advertising

Accounting & Assurance Conference January 9, 2019 Black Canyon Conference Center — 8 a.m. to 4:20 p.m.

Also offered as a webcast Gain insights on practice management, accounting updates and the latest innovations impacting your workplace. The Accounting & Assurance Conference will delve into cutting edge topics like blockchain, cybersecurity, AI and more.

• • • • • • •

Accounting and Assurance Innovation: Blockchain and Robotic Process Automation Lease Updates With In-Depth Case Studies Impact of Accounting for Changes in U.S. Tax Reform Working Better Together: The Dynamics of Diversity New Cyber Threats in 2018: How to Protect Yourself, Your Money and Your Family AZ State Board of Accountancy: Peer Review Report to the Nation: CFE Fraud Study

Learn more at www.ascpa.com/aac19

Cindie Hubiak Patricia Gannon Heidi Frei

Board of Directors Chair Mike Allen Chair-Elect Jared Van Arsdale Secretary/Treasurer Ginny DeSanto Directors

Rachael Bertrandt

Tom Duensing

Paul Evans

Kristen French

Alan Gold

Aaron Grant

Tim Hansen

Vanessa Makridis

Karen McCloskey

Alice Pope

Sami Raynes-Houseknecht

Nikki Vogt Immediate Past Chair

Molly Montgomery AICPA Council Members

Rob Dubberly

Greg Nelson Chapter Presidents Southern Chapter Cathy Kinzer Northern Chapter James Shankland Southwest Chapter Helen Greenwell North-Central Chapter Gidget Schutte AZ CPA is published by the Arizona Society of Certified Public Accountants (ASCPA) to provide information, news and trends to the accounting profession. It is distributed 10 times a year as a regular service to ASCPA members. 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 articles or advertisements within this publication. Opinions expressed by contributors are not necessarily those of the ASCPA. Arizona Society of CPAs 4801 E. Washington St., Suite 180 Phoenix, AZ 85034-2040 Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700 www.ascpa.com

4

AZ CPA JANUARY 2019

Volume 35 Number 1

AZ CPA

January 2019

Features

11

Are You a Part of the Culture Club?

Creating your own work culture should be a serious part of your business.

by Gabrielle M. Luoma, CPA, CGMA

13

The Research and Development Tax Credit Uncover ways to help clients and businesses find potential savings.

by Zuilyn Chan, CPA

Columns & Departments Chair’s Message by Michael T. Allen, CPA

6

Member News

7

A Dash of SALT by James G. Busby, Jr., CPA

9

Quick Quiz

21

Classifieds 22

15

CFO to CEO

17

Breaking Down Bitcoin

Are you aspiring to that top leadership role? Here are four things that you can do to help make the move.

The use of bitcoin is prevalent enough today that accounting professionals need to know more about it.

by Diane Opuda, CPA (in NJ)

19

How to Shine When You Are Put on the Spot

Follow these eight tips to help you get out of an uncomfortable situation.

by Rhymer Rigby

Arizona Society of Certified Public Accountants 4801 E. Washington St., Suite 180 Phoenix, Arizona 85034-2040 www.ascpa.com

JANUARY 2019 AZ CPA

5

ASCPA Chair’s Message

Success and Leadership — Top of License One of the best lessons we can learn is we don’t have to come up with all the good ideas. We just need to be bright enough to identify a good idea when we hear one and then adapt it to our situation. I can admit that I am just not creative enough to arrive at unique solutions to every opportunity or problem that I encounter. I am, however, astute enough to recognize when others have successfully managed similar situations and can learn from their experience.

by Michael T. Allen, CPA Do you have an environment that encourages and rewards team members for working at their top of license and transitioning these capabilities to others?

6

AZ CPA JANUARY 2019

Some of the best ideas come from looking outside our own industry. Our firm has a focus on providing services to the health care industry. This industry has been continually forced to deal with turmoil and change. One of the concepts I have seen the health care industry use most effectively is they continually utilize their workforce at “top of license.”

Immediately, we think of the physician and the fact that they are a licensed professional, just like CPAs. While it is true that a primary focus of a successful medical practice includes making sure the licensed medical staff is focused on patient care, and working at top of license, the concept applies to the whole team.

Think about your most recent interaction with the health care industry. Was your physician making copies during your visit? Were they discussing the billing for the services you were being provided? Likely not. They were focused on patient care, which is what they spent such a significant part of their life being trained to do.

As we look at our own aspirations to be successful, we should explore how we might apply this concept in our work environment. As the CFO for your company, do you primarily devote your time to managing the financial health of your organization? As the CEO of your not-for-profit organization, are you primarily focused on fulfilling the organization’s mission? If you can’t answer “yes” to these questions, then you may not be working at your top of license. If your time is occupied by tasks that don’t allow you to maximize your skills, it is likely that these tasks could be accomplished more effectively by others who would be working at their top of license and likely doing a better job.

Even when members of our team gain new skills and are working at the top of their license, we challenge them to continue to provide more value. While it is always exciting to see our team master new skills and apply them to accomplish their daily tasks, that is not where the real value exists. Real value is created when these individuals can transfer the skills they have mastered by training others. This is the concept discussed in Liz Wiseman’s book Multipliers.

It is one thing for me to master a skill, but if I can get my whole team to apply these skills effectively, now I have created real value. Who are the multipliers on your team? Do you have an environment that encourages and rewards team members for working at their top of license and transitioning these capabilities to others? Multipliers can have a dramatic effect on your success.

I want to wish all of you success in the New Year. I look forward to seeing everyone in 2019. n

Member News Karlye M. Broten, CPA, was advanced to principal at CliftonLarsonAllen, LLP. She will join past ASCPA Chair Anita F. Baker, CPA, in leading the Employee Benefit Plan team in Arizona.

Kotzin Valuation Partners senior associates Tyler R. Pennington, CPA, and Kyle W. Andersen, CPA, were selected for the 2018 AICPA Forensic and Valuation Services (FVS) Standing Ovation Recognition program. Josephine Giordano, CPA, director, has been elected as a nonattorney member of the Maricopa County Bar Association board of directors.

Christopher K. Hess, CPA, of TFO Phoenix Inc., received a Personal Financial Planning Standing Ovation from the AICPA. The 2 0 1 8 B u r r a g e Aw a r d f o r Compassion, Collegiality and Character was bestowed upon Kevin Yeanoplos, CPA, of Brueggeman and Johnson Yeanoplos PC. The award was given by the Expert Resource Connection.

Thanks to this year’s newest group of ASCPA Champions and continuing Champions who attended a training session in December: Tom Avery, Patricia Bambridge, Ross Decker, Ryan Hart, Michael Hawthorne, Randy Hyatt, Andrea Levy, Tanya Luken, James McGettigan, Howie Simon, Monica Stern and Kent Utter.

In Memoriam Jon Mitchell, who was previously with CliftonLarsonAllen in Tucson, passed away on November 29.

Send your member news to pgannon@ascpa.com AICPA Fall Council Meeting - (left to right) ASCPA Chair-Elect Jared Van Arsdale, AICPA Vice Chair-Elect Tracey Golden, ASCPA President & CEO Cindie Hubiak and AICPA President and CEO Barry Melancon.

JANUARY 2019 AZ CPA

7

Join the Discussion – ASCPA Connect The interactive online community only for ASCPA members Want to network with your peers? Need to find out the answer to that tricky tax question?

Do you have expertise and information to share? Want to learn more about what YOU are interested in? Then Connect is the right place for you.

What are our members talking about? Some recent topics: • AZ Department of Revenue Payroll Filings • Technology Purchases for Your Office • Payroll Companies and How Can Clients Protect Themselves from Potential Problems • How the New Tax Law Affects Nonprofits

• Section 1061: Application to 1231 Assets in a Real Estate Rental Business • 1099 Reporting for Rental Property Owners • Parking Lot Tax

• IRS Acknowledgement Letter for Donations • Contribution to an AZ Tax Credit Organization Directly from an IRA Account Using RMD

• Drake Macros for 2018 • New Shares in an S-Corp

Comment posted on the AZ Dept of Revenue Payroll Filings Topic: Thank you, Thala, for bringing this to the attention of the Arizona Department of Revenue.

Thanks to everyone who posted on this board, bringing up this issue. Thala brought these comments to the attention of the Arizona Forum for Improvement of Taxation liaison at ADOR and they launched an internal investigation into the erroneous notices.

When you post these issues, you bring them to the attention of the ASCPA. You also bring them to the attention of ASCPA members who belong to other organizations who work to resolve these problems.

It’s a group effort, and Thala is one of the unsung heroes who helps bring about change.

— Laura Lee Laundre, CPA

Join the discussion at http://connect.ascpa.com

8

AZ CPA JANUARY 2019

A Dash of SALT

Arizona Constitutional Amendment Prohibits New Taxes on Services In this month’s state and local tax (SALT) column, Busby explains how Arizona Proposition 126, an initiative that amended the Arizona Constitution to prohibit the state and its political subdivisions from increasing or imposing new taxes on services, may impact legislation enacted in 2018 and the state’s ongoing efforts to clarify which digital goods and services are subject to tax.

On November 6, Arizona voters overwhelmingly approved Proposition 126, which amended the state’s constitution to prohibit the state and its political subdivisions from imposing or increasing any “sales tax, transaction privilege tax, luxury tax, excise tax, use tax or any other transaction-based tax, fee, stamp requirement or assessment on the privilege to engage in, or the gross receipts of sales or gross income derived from, any service performed in Arizona that was not in effect on December 31, 2017.”

Proposition 126 was promoted by a political action committee organized and funded primarily by the Arizona Board of Realtors because Realtors were concerned that lawmakers may expand Arizona’s tax base in a way that would tax their services.

Potential Impact on Education Funding Although probably an unintended consequence, Proposition 126 may impact legislation passed this year that extended for 20 years a tax used to fund educational programs. This 0.6 percent sales and use tax was scheduled to expire on June 30, 2021. To the extent that this tax applies to services that are taxable in Arizona, Proposition 126 may prevent taxing authorities from collecting it on proceeds from services including but not limited to telecommunications services, pipeline operations and construction contracting.

by James G. Busby, Jr., CPA

James G. Busby, Jr., CPA, is a state and local tax attorney at The Cavanagh Law Firm. Busby previously worked in the SALT departments at Arthur Andersen and Deloitte & Touche. Before entering private practice, Busby was in charge of all transaction privilege (sales) tax audits at the Arizona Department of Revenue.

If you have any questions, please contact the author. He can be reached at (602) 322-4146 or JBusby@CavanaghLaw.com.

Potential Impact on Online Lodging Marketplaces Although probably also unintended, Proposition 126 may affect the measure the Arizona Legislature passed this year that would require all online lodging marketplaces to register with the DOR to collect all state and local taxes beginning in 2019.

It is debatable because the legal incidence of this tax is on property owners and the tax went into effect in 2017; however, Proposition 126 may prevent taxing authorities from implementing this measure, which would require online lodging marketplaces to collect and report the tax for property owners. However, under the legislation that went into effect in 2017, online lodging marketplaces may continue to voluntarily collect and remit all state and local taxes levied on online lodging operators for the convenience of property owners.

Potential Impact on Digital Goods and Services Legislation Unlike most states, Arizona has not enacted legislation to specify which digital good and services, if any, are subject to sales tax.

JANUARY 2019 AZ CPA

9

Governmental Accounting Conference February 8, 2019 Hyatt Regency Phoenix at Civic Plaza 8 a.m. to 4:30 p.m.

Also Offered as a Webcast

• • • • • •

Arizona’s Future Growth Prospects Leading the Auditor General’s Office Through Change Anatomy of a Fraud GASB Update and In-Depth GASB Report AZ Future Growth Prospects Thinking the Unthinkable: Real World Lessons From Actual Disaster Recovery Scenarios • Yellow Book Update • Integrating Multigenerational Workstyles

Thank You to Our Platinum Sponsor:

And Gold Sponsors: CLA (CliftonLarsonAllen) Fester & Chapman, PLLC Heinfeld, Meech & Co., P.C. REDW LLC The Pun Group, LLP

Learn more at www.ascpa.com/gac19

10

AZ CPA JANUARY 2019

During its 2018 legislative session, the state House of Representatives approved a bill that would have taxed proceeds from sales of specified digital goods. While the Senate was considering the bill, some suggested that to secure enough votes in the Senate and get Gov. Doug Ducey to sign the bill, it should be amended so that some digital services would be taxable.

However, now that Proposition 126 is in place, providers of digital services probably would challenge any attempt by state or local taxing authorities to impose tax on their services. These include software as a service, platform as a service, infrastructure as a service, application service providers, hosting services, data storage management, data processing and information services, steaming services, digital authentication services and any other cloud-based or other remotely accessed computing services.

How Will Arizona Lawmakers and Ducey Respond?

The tally on Proposition 126 was not even close — nearly two-thirds of the state’s voters objected to the taxation of services. Yet, without statutory direction from the legislature, state and local taxing authorities in Arizona have taken the position in confidential audit assessments and obscure private taxpayer rulings that digital goods and a variety of digital services are subject to tax under the state’s outdated tax code.

So, the question is, how will Arizona Lawmakers and Gov. Ducey respond to Arizona voters’ mandate? Will they act during the 2019 legislative session to specify which digital goods are taxable and, now that they are constrained by Proposition 126, that digital services are not? If clarification is not made, providers of digital goods and services will be in the untenable position of choosing between collecting taxes from their customers that may not be lawfully due, thereby exposing them to potential class action lawsuits, or not collecting taxes from their customers, thereby exposing them to potential audit assessments and legal fees to challenge the same. n

Are You a Part of the Culture Club?

by Gabrielle M. Luoma, CPA, CGMA Culture: a buzzword that is flashy enough to catch our attention but still difficult to define and grasp its true meaning. The up-and-comers in the profession, the emerging leaders, are trying to wrap their heads around what is important about firm culture. We are educated and well-rounded people, but culture seems too “touchy-feely” and not meant to be talked about in the firm or business conference rooms.

The tech companies of the Silicon Valley made culture important with squishy lounge rooms and cool, all-you-can-drink coffee bars ... maybe even craft draft beer bars. I admit those are cool amenities, but to believe that culture is all about those modern conveniences does a serious disservice to a pivotal part of any company.

Culture is “the bling.” It is the place where creative and exciting juices flow. It is the environment and core beliefs that make the dream team a reality.

JANUARY 2019 AZ CPA

11

Let’s take a deeper look into what culture is and how emerging leaders can influence the culture.

What are your core beliefs, and what does it look like to live them out?

Culture is relative and subjective.

This is the hard part. Culture is what your core beliefs are and what you want your workplace to be like. You would hope that every company has a different version of what culture looks like to them. Years ago, and still popular today, businesses are asked about their mission, vision and values. The “MVV” is the statement you hang up in the office, place on your website and never delve into what it really means to you.

Your MVV can’t be just that. There needs to be a “why,” and beyond that, you must be committed to seeing it come to fruition.

How do you make it more than a blanket statement that no one really ever remembers? You live by and through your company culture or MVV. For example, if your key value is learning and continuous improvement, then your environment will incentivize actions that promote the key value. If one person learned a new way to utilize the software and it reduced time with data input, they should share this information with others. This individual might even put together a lunch and learn for their coworkers to teach more at a time.

They are motivated to do this because this is the company culture that they were raised in; they saw others do it and they will do it themselves.

Is the climate in the firm safe for innovation and new ideas to happen?

Of course, it is important that the environment you work in is safe. This is also known as psychological safety, an idea I learned about from an article in the Harvard Business Review written

by Laura Delizonna. Delizonna says, “Studies show that psychological safety allows for moderate risk-taking, speaking your mind, creativity and sticking

12

AZ CPA JANUARY 2019

your neck out without fear of having it cut off — just the types of behavior that lead to market breakthroughs.”

Open cultures may look different depending on where you work. If you want people to thrive, create and try new things, you must create an environment that is susceptible to these conditions. Our firm is completely virtual and our staff have a ton of autonomy to create and do great work for clients; however, the workplace itself isn’t the culture, it’s the “how” or “in the spirit of how” you do your work.

Our firm’s values are to help our clients. Because of this, it’s relatively simple to locate opportunities to help clients. We, as co-workers, communicate regularly on how we plan to increase the value of our services to our clients. Your culture exists in all your team conversations and in how you do your work every minute of the day. Feeling secure enough to offer suggestions, and even accept rejection, is all a part of a safe work environment.

Allowing time for planning your culture is invaluable.

In our own lives, we understand the value of time. Time spent on culture is equally as important as time spent meeting with clients, completing work and even eating and sleeping. Culture is something that must be cultivated, slowly, intentionally and carefully.

Firms that operate on time and billing versus value-pricing model will find a conflict between prioritizing time to work on their culture unless the firm culture values working on culture. This

means the time to work on culture is just as important as billable time.

Leaders who care about firm culture create more leaders who care about firm culture.

When leaders love their culture, they cannot help but want to be involved and be a part of firm growth. These leaders are operating in safe places that help them grow and make a difference in their firms.

Cultivating leaders who love their culture is a wonderful way to ensure that succession plans can take place and security is provided to the clients.

Emerging leaders are traditionally making decisions early in their profession to stay in a workplace or see what else is out there for them. Culture is oftentimes what sways them one way or the other.

Firm culture isn’t just another trendy business phrase; it is one of the most important factors in deciding how a firm operates. Culture is the glue that demonstrates the “how” we do things in our firms and goes way beyond the squishy chairs, tents and napping stations. Culture is who we are as a firm, and everything we do will reflect it.

Culture is a serious part of business that distinguishes what you do from the rest of the crowd. You must make a cultural decision, intentional or not.

I choose to be intentional, and I hope you do, too. n Gabrielle M. Luoma, CPA, CGMA, is an expert in client accounting service practice management and managing partner of GMLCPA PLLC. She can be reached at gluoma@gmlcpa.com.

The Research and Development Tax Credit

by Zuilyn Chan, CPA As a CPA, we are always looking for ways to help our companies and clients provide added value as we keep their best interests in mind. Something as simple as having a conversation with our clients about their activities might uncover ways that could qualify them for potential tax savings through the Research and Development Tax Credit.

The Federal Research and Development (R&D) Tax Credit, also known as the “Research and Experimentation (R&E) Tax Credit,” was passed by Congress in 1981 as a tax incentive to help stimulate the economy, encourage innovation and foster product development in the U.S. The R&D tax credit was permanently extended by the PATH Act of 2015, expanding its provisions to include various size businesses across multiple industries. Additional provisions allow eligible small businesses to offset their alternative minimum tax (AMT) liability for the tax years beginning after December 31, 2015, and allows startup businesses with no federal tax liability and gross receipts of less than $5 million to offset the employer portion of payroll taxes.

When many people think of the term R&D, what comes to mind is the general idea of “white lab coat” work, but the R&D tax credit is actually much broader.

Industries that are eligible include: food and beverage, financial services, agriculture, software, chemicals, pharmaceuticals, medical devices, architecture and

JANUARY 2019 AZ CPA

13

engineering, technology, manufacturing, food sciences and utilities.

The Four-Part Test Internal Revenue Code (IRC) section 41(d) provides a high-level definition of qualified research. First, the activity’s efforts must be for a permitted purpose, meaning the taxpayer developed a new or improved an existing product, formula, process, technique, patent, invention or software, which is to be held for license, lease or sale or used in a trade or business of the taxpayer. If the taxpayer is improving an existing product or process, in order for the activities to qualify, the improvements must: • Improve function • Enhance performance, reliability or quality • Significantly decrease cost Second, from the outset of the project, there must be technical uncertainty such at methodology, capability or suitability of design. Third, the taxpayer must conduct a process of experimentation to resolve the uncertainty considering a systematic testing of alternative solutions or scientific methodology to test and eliminate uncertainties. This may involve testing and analysis of a developed hypothesis, unit testing, systems testing, regression or acceptance testing, simulation, modeling or systematic trial and error. And fourth, the qualified activities must be technological in nature; the process of experimentation must rely on the principles of “hard” sciences (chemistry, physics, biology, engineering, computer science, etc.).

Activities that are not considered qualified research activities include: • Research after commercial production • Duplication • Adaptation • Marketing research • Surveys, studies, or research relating to management functions • Routine data collection • Routine testing • Quality control testing • Funded research • Research conducted outside the United States

14

AZ CPA JANUARY 2019

•

Research that involves social sciences, for example: psychology, sociology, economics, marketing, information science and environmental sciences.

Qualified Research Expenses The R&D credit may apply to taxpayers who incur expenses while performing qualified research activities (QRAs). Qualified research expenses (QREs) are composed of in-house research expenses and contract research expenses.

In-house research expenses include: • Wa g e s p a i d f o r d i r e c t involvement, direct support or direct supervisory activities.

• Supplies used performing QRAs; must be tangible property other than land or land improvements and not subject to depreciation.

• Leased computer expenses paid to a third party for the right to use computers/servers while conducting QRAs. Contract research expenses are expenses paid to a third party and are allowed at 65 percent of the actual cost incurred. The taxpayer has to assume financial risk and retain substantial rights to the work completed by the contractor.

Credit Calculation The R&D credit is incremental in nature and can be calculated under either the regular research credit (RRC) method or an alternative simplified (ASC) method.

Under the RRC method, the credit is calculated as 20 percent of the total QREs for the year that exceeds the base amount. The base amount relies on data as far back as 1984. Using this method results in a maximum net benefit to 7.9 percent of QREs in 2018. The RRC method typically benefits companies that can document a low base amount.

With the ASC method, a taxpayer can claim a credit of 14 percent of the amount by which its QREs for the year exceed 50 percent of its average QREs for the preceding three taxable years.

The ASC method is often beneficial to

taxpayers with recent rising revenue, do not have complete records to determine the RRC base amount, or have organizational changes (mergers, acquisitions or dispositions). Under the ASC method, the benefit typically ranges from five to eight percent of total QREs.

Arizona R&D Tax Credit Many states offer the R&D tax credit, including Arizona. The Arizona R&D Tax credit provides an incentive for Arizona businesses to invest in research and development activities.

The Arizona R&D Tax credit has both a nonrefundable and refundable credit.

The nonrefundable credit, for taxable years beginning from and after December 31, 2017, through December 31, 2021, is equal to 24 percent of the first $2.5 million in QREs plus 15 percent of the QREs in excess of $2.5 million. The Arizona credit is calculated under the RRC method.

The refundable credit is equal to 75 percent of the current year’s tax credit minus the current tax year’s tax liability or the maximum refund amount approved on the Certificate of Qualification from the Arizona Commerce Authority (ACA). To apply to the ACA for the approval of a refund, a taxpayer must be qualified for the nonrefundable R&D tax credit and employ less than 150 full–time employees worldwide.

With our clients’ best interests in mind, CPAs should be on the lookout for ways that the R&D credit can help their clients and obtain benefits from the clients’ efforts towards innovation.

Tax savings can translate into an immediate source of cash for clients and can also help increase a client’s market value. It is important to remember that the R&D credit is not a tax deduction but rather a dollar–for- dollar reduction of federal income tax liability. n Ziulyn Chan, CPA, is an R&D tax associate at Eide Bailly LLP in Phoenix. She is a member of the ASCPA Emerging Leaders Committee. She can be reached at zchan@eidebailly.com.

CFO to CEO: Four Tips for Making the Move

For many CFOs, the aspirational next step along their career path is becoming CEO. It appears many financial leaders are interested in rising to the CEO role: In a Robert Half Management Resources survey, nearly two-thirds (64%) of CFOs said they were either somewhat or very motivated to be the CEO at their company.

It’s only natural for CFOs to aspire to the top leadership job. Excellent fiscal management skills, ideas for improving business efficiency and controlling costs, broad and deep economic and business awareness and experience with investor stakeholder management are just some of the attributes these executives can bring to the CEO position.

CFOs face stiff competition for the CEO’s chair. An executive vice president, the chief operating officer (COO) and the chief information officer (CIO) are often contenders, for example. There might be external candidates in the mix, as well.

So, if you’re a senior-level financial executive who’s eager to take the helm at your company someday, you need to take steps now that can help improve your odds of being considered for the CEO role when the opportunity arises.

1. Deepen Relationships Throughout the Organization CFOs are expected to weigh in on a wide range of business matters their organizations face, including compliance and regulatory issues, internal controls, taxes, major transactions and other significant changes. And in recent years, most CFOs have seen their influence expand beyond the accounting and finance function.

Unfortunately, those in the position of selecting the next CEO might not realize how well-rounded the company’s CFO can be.

Step up your efforts to build a solid understanding of how other teams in the business operate on a day-to-day basis and look for opportunities to help support and collaborate with other top executives in the organization. For example, in many companies today the CFO and CIO work together regularly to make decisions about technology investments and manage risks.

Strengthening your relationship with the firm’s general counsel can be beneficial, too. You can deepen your knowledge of issues such as intellectual property, contracts and business litigation — matters that any CEO should understand well.

2. Prepare Your Successor Being indispensable is not necessarily a positive thing when you’re aiming for the next rung on the career ladder. High-performing CFOs could be skipped over for a promotion simply because the organization feels it can’t do without them in their current role.

JANUARY 2019 AZ CPA

15

Successful senior executives stay informed and keep pace with change by networking with their peers.

Take time to attend or contribute to industry events, get involved with relevant professional organizations, cultivate a strong professional network and raise your visibility online ...

One way to neutralize this obstacle is to groom a successor, which will help to ensure continuity in the finance department. It’s important to be proactive about this process, anyway, because it can take time to find and prepare a promising candidate for a leadership role.

3. Network with Other Executives The more industry leaders you have within your circle, the more you’ll learn about accepting the CEO’s mantle. The CEO’s responsibilities are diverse — and heavy. To handle them adeptly requires not only a thorough understanding of the entire organization, as explained earlier, but also the landscape in which the business operates. That includes the company’s industry and key markets, as well as any dynamics — economic, regulatory, technological and more — that could impact its operations.

Successful senior executives stay informed and keep pace with change by networking with their peers. Take time to attend or contribute to industry events, get involved with relevant professional organizations, cultivate a strong professional network and raise your visibility online by participating in social media outlets such as LinkedIn and Twitter. More than half of CFOs (54%) recently interviewed for a survey by our company said staying on top of professional and industry trends is a key benefit of using these platforms.

Consultants also can provide valu-

16

AZ CPA JANUARY 2019

able insights and best practices they’ve acquired through their work for various organizations. So, building a rapport with the consultants your business engages—and inviting them into your professional network—can be well worth the effort.

4. Take on Consulting Positions If the CEO job in your organization is not likely to be available anytime soon, or you just want to explore other career options, you might want to consider taking the consulting path, too.

Working as an interim CFO is an opportunity to take on new professional challenges, acquire more knowledge, hone existing skills and expand your network. Your experiences as a consultant also could open the door to new career opportunities. For instance, the exposure and relationships you gain could make you a top-of-mind candidate for a CEO role in the future.

Not all CFOs want to be their company’s leader. But if you’re one who does, you need to begin laying the foundation now that can help you reach the top role when the time is right. n Accountemps, a Robert Half company, is the world’s first and largest specialized staffing firm for temporary accounting, finance and bookkeeping professionals.

Accountemps has 300 locations worldwide.

More resources, including job search services and career advice, can be found at roberthalf.com/accountemps. This article was printed in CPA Voice.

Breaking Down Bitcoin

By Diane Opuda

The topic of bitcoin can be confusing and controversial.

Bitcoin is still in the development stage, and some people are skeptical that it will survive. However, the use of bitcoin is prevalent enough today that ac­counting professionals should be aware of what it is, how to account for it and some of its most important implications.

What It Is Although the symbol commonly used for bitcoin is an image of a coin, a bitcoin is not a physical token. It is a unit of virtual “cryptocurrency” that is transacted electronically using encryption technology. It can be exchanged for fiat currencies (legal tender) or used to pay for goods and services. Bitcoin is not backed by any commodity, government or bank. It derives its value by relying entirely upon the mutual trust and acceptance of its users. It was purportedly created with the intention of making centralized banking obsolete by allowing direct payer-to-payer transactions, requiring lower fees and providing faster transaction times. However, eliminating a central bank also has the effect of circumventing measures put in place to prevent illegal activities, such as identification and reporting requirements. As a result, it has

JANUARY 2019 AZ CPA

17

Those who suffer losses from theft or the failure of a Bitcoin exchange have no recourse because the U.S. government does not regulate bitcoin.

18

AZ CPA JANUARY 2019

been criticized for being an instrument of criminals and for posing a threat to global security. In addition, its complexity has made it difficult for users to understand and properly handle their accounts, mak­ing it vulnerable to theft.

Those who suffer losses from theft or the failure of a bitcoin exchange have no recourse because the U.S. government does not regulate bitcoin.

completed the security procedure called the proof-of-work. The blockchain ledger is an important advancement with the potential to be used beyond applications like bitcoin because of its ability to maintain a high level of data integrity. Due to the unique way bitcoin is transacted, special audit techniques are required, and auditors should be given additional training.

How It Works

Speculative Asset

To transact in bitcoins, you must have a software “wallet” accessed by pairs of electronic keys. “Hot” wallets can be maintained on a cryptocurrency exchange via the internet, while “cold” storage wallets are more safely maintained offline. The public key is like your payment address while your private key allows you to access your bitcoin. Public keys are meant to be used only once, so transactions are not easily traceable back to the individual.

“Miners” are people who compete to process blocks of bitcoin transactions in exchange for fees and rewards of new bitcoins. The protocol limits the total creation of new bitcoins to 21 million, making it inherently deflationary. It also regulates their rate of introduction by halving the number of new bitcoins created with each block verification every four years.

Bitcoin transactions are recorded in a blockchain, a digital ledger described as “distributed” because transactions are public and everyone in the worldwide network has a synchronized copy of it.

An algorithm takes transaction information and encrypts it into a standardlength output known as a hash. The hash of a new block of transactions always contains the hash of the previous block, thus “chaining” the blocks together and making the chain very difficult to alter. A block must be validated by a miner who has successfully

In general, businesses have been slow to accept bitcoin as a form of payment, which has limited its ability to scale as a form of currency. However, it has gained popularity as a speculative asset traded by investors. The IRS has determined that bitcoin should be treated like property, subject to capital gain or loss treatment. Bitcoin held for resale would incur ordinary gains or losses. Bitcoin exchanged for goods or services should be measured by its fair market value in USD at the date of the transaction and treated as any other form of payment.

Therefore, bitcoin given as compensation is subject to employment taxes and is reportable on a W-2 or 1099.

Failure to comply with tax laws will have taxpayers facing penalties, though, predictably, the lack of govern­ment regulation over cryptocurrencies like bitcoin has resulted in widespread tax avoidance. Should regulation occur in the future, it is likely to lessen bitcoin’s market volatility, but also its appeal.

It is clear that bitcoin has the potential to have a substantial impact.

Although the future of bitcoin is unknown, its innovativeness warrants our attention. n Diane Opuda, CPA (in NJ), is a manager at RotenbergMeril in New Jersey and can be reached at dopuda@rmsbg. com. (Reprinted from the New Jersey CPA magazine - njcpa.org/newjerseycpa).

Don’t Panic If you are given a question you struggle with, it’s okay. Work is not an oral exam or a quiz show with buzzers.

Hopefully, you’ll have your playing-fortime answer ready so you can scratch your chin thoughtfully and say, “I’ll need to think about this for a moment.”

You might also ask the person a question to clarify what they are after.

If You Know a Bit of the Answer, Give Them What You Do Have Here, there is no point in trying to bluff and pretend you know it all. Just tell them what you do know and what you don’t. Be clear and straightforward.

Finish by saying that, as you cannot give a full answer, you’ll be happy to follow up with more details in due course.

If You Don’t Know, Then Say So

How to Shine When You Are Put on the Spot Be ready, don’t panic, and embrace strategic silence. Follow these eight tips for responding to questions you’re not prepared to answer.

by Rhymer Rigby Nobody likes being put in a situation they’re unprepared for or asked a question to which they don’t know the answer. And, at work, this is doubly bad when you suspect there’s some sort of agenda behind it. But it happens pretty regularly. So how do you deal with it when you’re put on the spot?

Be Ready Being well versed in your subject matter is, in general, a good defense. Obviously, you can’t actually prepare for being put on the spot, because the whole point is you won’t know the answer. But you may have a pretty good idea of the kinds of bosses and colleagues who put people on the spot and even the kinds of questions they may ask. So if you are at least prepared for the situation to occur, you can have a couple of playing-for-time responses ready. Indeed, you might even want to practice quick-fire questions with colleagues (in the way that politicians practice for press conferences). Few things look better than giving a perfect answer to a “gotcha” question.

You might respond with, “I don’t have the information I need to answer your question, but I’m happy to provide an answer for you later.” You might also say, “That’s a good question and one I look forward to answering,” or even ask, “Do you have a view on this?” Finally, you might say, “Unless anyone else can answer this, perhaps we can move on to the next item.” The point here is that, although you cannot answer, you should give a response that is positive, and then, by suggesting you move on, you draw a line under it.

Keep Your Response Short, and Don’t Be Afraid to Leave a Strategic Silence Afterwards Do not get drawn into a long, rambling explanation or apology. You have done nothing wrong. If the person in question keeps pressing you, stay calm and continue to explain that you are happy to prepare an answer for them later. If they try to imply that you are unprepared, just say, “I had not been led to expect this subject would be discussed, but I will happily answer the question later.”

Bear in Mind — It’s Not Always About You If someone nods at you or catches your eye before they call on you, they

JANUARY 2019 AZ CPA

19

might not be trying to stitch you up.

Rather, they could be trying to help someone else, change the subject, or create a diversion. You’re being asked to take one for the team — and if you play along, your tact will be appreciated and remembered.

If the Person is Doing it On Purpose, Consider Your Options

Being put on the spot teaches you how to improve, think on your feet, and, perhaps, develop verbal sparring skills

If it’s a one-time occurrence, let it go. If it’s a regular occurrence, it may be worth speaking to the person in question. As with many office beefs, they may not realize they’re doing it.

Or they may even think that asking tough questions is a desirable thing to do. But, if you really know they are doing it intentionally, you may want to call the person out. One way to do it might be to say, “There seems to be a pattern of you asking me questions I can’t answer in meetings. I’m worried that we’re working at cross purposes

here. So, why don’t you email me a list of the areas you want covered the day beforehand. That way we’ll know what’s expected.” Do this and there’s a good chance they’ll never put you on the spot again.

Remember — It’s Not All Bad Being put on the spot teaches you how to improve, think on your feet, and, perhaps, develop verbal sparring skills. n Rhymer Rigby is an FM contributor and author of The Careerist: Over 100 Ways to Get Ahead at Work. This article first appeared in Financial Management magazine. For more articles, sign up for the daily email update CGMA Advantage at http://bit.ly/2svn2AY.

CGMA. Boost your wow factor.

Make it happen at cgma.org

CGMA, CHARTERED GLOBAL MANAGEMENT ACCOUNTANT, and the CGMA logo are trademarks of the Association of International Certified Professional Accountants.

These trademarks are registered in the United States and in other countries.15484B-326

15484-326 CSSA YCPA Propel Ads_HalfPage.indd 1

20

AZ CPA JANUARY 2019

6/16/14 12:40 PM

AZ CPA Quick Quiz You’ve Read It, Now Get Credit Take this quiz on AZ CPA content online or submit this hard copy.

Receive a score of 70 percent or more and earn one hour of CPE credit in specialized knowledge. It’s that easy!

Fees: Members: $25 Nonmembers: $40 Online Access Go to www.ascpa.com/quickquiz to access links to all active quizzes. Once a quiz is purchased, a link and password will be emailed to you. Your results will be sent immediately after completion, and certificates are emailed within two business days.

Hard Copy Please select one answer for each question. Fill out registration/payment information below and mail or fax to the Society office. Quiz results and certificates will be emailed to the address provided on the registration form. *This quiz will be available until January 2020. Please note that users have three attempts to pass the quiz with at least a 70 percent score.

January 2019 Issue of AZ CPA* 1. A term ASCPA Chair Mike Allen uses in his message to describe optimum utilization of skills is: m Top of your game planning m Top of license m Top-dog thinking 2. What Proposition amended the Arizona Constitution to prohibit the state from increasing or imposing new taxes on services? m Prop 108 m Prop 110 m Prop 126 3. Now that the above Proposition is in place, providers of what service will probably challenge any attempt by state or local taxing authorities to impose tax on their services. m Bee Keepers m Digital Services m Uber Drivers

5. To apply to the ACA for the approval of a refund, a taxpayer must be qualified for the nonrefundable R&D tax credit and employ how many full–time employees worldwide? m Less than 150 m Less than 100 m Less than 75

7. According to the article about moving from CFO to CEO, what step is not one of the four listed: m Prepare your successor m Network with other peers m Leave the company 8. Although the symbol commonly used for bitcoin is an image of a coin, a bitcoin: m Is actually square m Is not a physical token m Changes from time to time 9. Bitcoin derives its value by relying entirely upon the mutual trust and acceptance of its users and is not backed by any government or bank. m True m False

10. The IRS has determined that bitcoin should be treated like: m Foreign currency m Property m A necessary evil

6. In a recent Robert Half Management survey, what percentage of CFOs

Quick Quiz Registration Name: ____________________________________________________ Email:_____________________________________________________ Telephone: _________________________________________________

Payment

m Member: $25 m Nonmember: $40 Checks: Please make payable to: The Arizona Society of CPAs Credit Card:

4. According to Gabrielle Luoma, time spent on planning and developing your culture is just as important as: m Billable time m Vacation scheduling m Planning for retirement

said they were motivated to move up to CEO of their company? m 23% m 55.5% m 64%

m Visa m MasterCard m American Express

Credit Card #: _______________________________________________ Expiration Date: _____________________________________________ Name on Card. _____________________________________________ Mail to: ASCPA, 4801 E. Washington St. Suite 180, Phoenix, AZ 85034-2040; fax to (602) 252-1511 scan and send to ASCPACPE@ascpa.com.

JANUARY 2019 AZ CPA

21

Classifieds Employment TAX PREPARER — Partridge & Associates CPAs, PLC, N-Scottsdale CPA Firm seeking Tax Preparer to prepare business and personal returns. Must have 3-years recent experience in preparing returns, Quickbooks Proficient.

Preference for EA/CPA. Growth Opportunity, Benefits, Competitive Salary DOE. larry@partridgecpas.com.

TAX ASSOCIATE — MRA Associates — Every firm has a culture and the truly inspiring firms have cultures that propel them to innovate and stand out. At MRA Associates, we aim to help people live fulfilled, prosperous lives by being one of those inspired firms. The Tax Associate is an exempt client support position providing administrative, tax compliance, and fiduciary support, within a team concept. Apply today by submitting your resume at www.

mraassociates.com/careers/ or go to this link www.grnh.se/2be87ef82 to see our full ad and apply online.

SENIOR ACCOUNTANT — Partridge & Associates CPAs - N. Scottsdale CPA Firm Specializing in business and personal taxes seeks Accounting Supervisor. QuickBooks proficiency is required. Knowledge of trial balance through compiled financial reports.

Great Benefits. Growth Opportunity, Competitive Salary, DOE. anna@ partridgecpas.com.

FORENSIC ACCOUNTING FIRM SEEKS PARTNER-TRACK CPA — Veriti Consulting LLC - Forensic accounting, business valuation, and economic damages firm in Scottsdale has an opening for a partner-track CPA. We offer generous compensation, 401K, health insurance, paid time off, and other benefits. The ideal candidate has

at least five years of experience in tax and financial statement preparation, financial modeling, economic research, and similar accounting-related areas. We will train the ideal candidate. Professional friendly work environment with casual attire. Partners seek a CPA interested in moving into a partner position and the eventual buy-out of the partners upon retirement. This is the ideal opportunity for a career minded and entrepreneurial CPA. Email responses to jw@veriticonsulting.com.

FAST TRACK TO PARTNERSHIP —Hatcher Financial, PC. Experiencing a barrier to partnership? Interested in joining a holistic accounting and wealth planning firm? We are seeking entrepreneurial senior/manager to join our well-established tax and financial consulting firm. Succession plan is your opportunity for ownership. Send resume to Doug@HatcherFinancial.com.

CPEvening

Eat, Drink and Be Educated Sponsored by Enterprise Bank & Trust

January 30, 2019 5:30 – 8 p.m.

Galvanize in the Warehouse District 515 E Grant St., Ste. 150 Phoenix, AZ 85004-2750

Sponsored by

What is Galvanize? Modern, urban campuses where culture is shaped by first-time entrepreneurs and growing startups.

Join us as we learn about this learning community and the technology making it possible for anyone with fortitude and resourcefulness to change the world for the better.

Meet some of your colleagues from firms and businesses in the Phoenix area and engage in great conversation.

Appetizers and one drink ticket are included with your registration of $25.

www.ascpa.com/cpevening 22

AZ CPA JANUARY 2019

Need Ethics Classes?

Did you know we offer two kinds of ethics training for CPAs? We offer ethics for CPAs in business and for CPAs in public accounting. All of these courses meet the Arizona biennial fourhour ethics CPE requirement for CPAs renewing their licenses.

Go to ascpa.com/ethics and view the listing of upcoming ethics courses for those in business and in public practice.

Emerging Leaders Community Service Event January 26 “In It For the Outcome, Not the Income” with Free Arts (Recommended CPE: 1 hour) Sign up at

www.ascpa.com/service

2019 Arizona Tax Guide Order the only comprehensive guide on Arizona taxes.

Authors: Pat Derdenger, Steve Rodis and Ed Zollars New in the 2019 Arizona Tax Guide:

• MRRA changes to the alteration limitations and exclusion of contractors not required to be licensed by the Registrar of Contractors from the prime contracting classification • Option to bypass OAH and appeal directly to the State Board of Tax Appeals or the tax court • Required registration with the DOR for online lodging marketplaces • Information on dealing with the unknown status of Arizona’s conformity with provision of the Tax Cuts and Jobs Act

The Arizona Tax Guide includes the following guides: • The Arizona Income Tax Guide • The Arizona Sales and Use Tax Guide • The Arizona Personal Property Tax Guide • The Arizona Unclaimed Property Guide

Order online at www.ascpa.com/ taxguide

Spiral-bound, hard copy: Members of ASCPA, Phoenix Tax Workshop, State Bar of Arizona or Enrolled Agents: $95 Nonmembers: $115 Electronic PDF: Members of ASCPA, Phoenix Tax Workshop, State Bar of Arizona or Enrolled Agents: $79 Nonmembers: $99

JANUARY 2019 AZ CPA

23

PRSRT STD U.S. Postage PAID Phoenix, Arizona Permit No. 952

Arizona Society of CPAs 4801 E. Washington St., Suite 180 Phoenix, AZ 85034-2040

ADDRESS SERVICE REQUESTED

BUSINESS BREAKUPS ARE HARD CALLING FOR EXPERTISE ISN’T STEVEN N. BERGER (602) 222-4976

3636 NORTH CENTRAL SUITE 700

24

AZ CPA JANUARY 2019

•

PHOENIX, AZ 85012

•

EBLAWYERS.COM

•

602.271.9090