AZ CPA May/June 2020
Life in COVID-19 Times Exit Strategies for Business Owners Arizona’s Burgeoning Cannabis and Hemp Industry Backup Withholding Primer The Arizona Society of Certified Public Accountants y www.ascpa.com
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of Certified Public Accountants (ASCPA) to provide information, news and trends to the accounting profession. It is distributed six 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.
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Volume 36 Number 4
AZ CPA
May/June 2020
Features
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2020-21 ASCPA Board Members
Meet your new ASCPA Executive Committee and Board of Directors.
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Eight Essential Elements of an Exit Strategy for Business Owners
What should you do when a business owner starts the conversation about transitioning out of their business? by Daniel R. Siburg, CPA, CVA, and Stephen E. Koons, CPA/ABV/CFF, ASA
Columns & Departments Chair’s Message by Virginia E. DeSanto, CPA
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Member News
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Quick Quiz
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ASCPA Membership Information
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Classifieds 22
Arizona’s Burgeoning Cannabis and Hemp Industry In order to address many questions about this industry, the ASCPA’s newly formed Cannabis Special Interest Section held a panel discussion. Discover the top questions. by Josephine Giordano, CPA
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Backup Withholding Primer When it applies, backup withholding requires a payer to withhold tax from payments not otherwise subject to withholding. by Lisa A. Novack
4801 E. Washington St., Suite 180 Phoenix, Arizona 85034-2040 www.ascpa.com
MAY/JUNE 2020 AZ CPA
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ASCPA Chair’s Message
Pandemic – Accounting Through It As I am preparing to begin my term as chair of the board of the ASCPA, I find myself contemplating the ever changing, complex world we live in.This new pandemic crisis has many of us working from home or in changed circumstances.Children are not in school, employees work from home or have other ways for creating social distance, and, through it all, we must continue to be productive, accomplish our goals and provide for our loved ones.
Virginia E. DeSanto, CPA, CGMA
As CPAs, many of us enjoy planning out our lives and following those plans. Times like these will challenge our plans to see if the planned mitigation to various risks that we face actually work to protect our income, assets and lives.
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AZ CPA MAY/JUNE 2020
As CPAs, many of us enjoy planning out our lives and following those plans. Times like these will challenge our plans to see if the planned mitigation to various risks that we face actually work to protect our income, assets and lives. Or will we need to pivot in some way to address this newest challenge and evolve our plans as facts and circumstances continue to change? We are already seeing the impact to financial markets with valuation declines. Companies are engaging their contingency financial strategies through use of reserves, cost reductions when revenue reductions happen, and evaluating employee compensation and benefits.Individuals are looking at their investments and savings, wondering if they have planned well enough to sustain themselves through this situation, questioning how long this will last. In addition to all that, individuals are working hard to ensure they have enough supplies on hand to sustain themselves and their families ... just in case. The power of the plans we made will be exhibited in the coming months.Financial security may or may not come in the form of federal aid, and the timing of any help is uncertain.Normal processes may be delayed and products may be difficult to obtain.However, it is important that, along with financial planning, caring for the mental health of those being impacted is at a high functioning level.Working together, helping each other, and caring for each other is required now more than ever. At my place of business, we have moved to “work from home” status.I’m hoping as we go through this that many of us see increased closeness with our families and friends. Perhaps some of the “busy-ness” of rushing around to activities or responsibilities will decrease, and we will have a better appreciation for spending quality time together.I expect that we will all have a better understanding of how to use technology to continue our work and relationships. Perhaps we will have invented new technologies that become needed due to the circumstances of the time or we will identify old ways of doing things that can be eliminated or improved. In closing and in recognition of timing differences, I am writing this column in late March and by the time you read it, I hope things will be clearer for us all.I expect we will have pivoted our plans as needed and are poised to continue to grow and thrive, showing our resiliency to challenges and growing our ability to persevere.In the meantime, the most important thing is for us all to work together to support each other, find solutions to challenges and persevere. l
Member News Michael T. Allen, CPA, was appointed to the AICPA’s PCPS Executive Committee for the 2020-2021 term. Patricia Joyce Elder, CPA, MBA, has joined HonorHealth Foundation as vice president of Planned Giving. Jennifer Cummings, CPA, was named CFO for Remitter USA Inc. She was recently featured in the Phoenix Business Journal.
Thank You Ed!
(Cover photo: ASCPA staff members meeting via Zoom to help serve our members.)
Life in COVID-19 Times Now, more than ever, it is important for CPAs to work together to advocate for businesses, the community and the profession. It is imperative to stay abreast of new legislation and it can help to access support from the CPA community. The ASCPA has developed new resources and connections to assist you in navigating change and help you provide value and comfort to your organization and clients. Visit our COVID-19 Resource webpage below for more details. Also, be sure to participate in the Connect online community to assist each other, get the latest information and offer support in these unprecedented times.
www.ascpa.com/covid19
The ASCPA staff and members are ever grateful to Ed Zollars for his continued support of the profession. Ed is always at the forefront of pending legislation and prepared to share his knowledge with the community. In response to new legislation related to COVID-19 relief, Ed quickly prepared not one, but three webinars to address the tax provisions. These events filled quickly and were recorded for those unable to attend. Access the recordings at www. ascpa.com/edzwebinar. Watch the webinar and join us in giving Ed a virtual standing ovation!
The ASCPA Annual Meeting Goes Virtual — May 12 This year’s Annual Meeting has gone virtual! Join ASCPA President and CEO Cindie Hubiak and the current and past chairs of the Society, along with last year’s treasurer, on May 12 at 11:30 a.m. During this brief program, you’ll receive a review of the year and be able to converse with other members through our online chat room. Register now at www.ascpa. com/annual. Mark your calendars for next year when we return to the Biltmore to celebrate our honorees and the profession. Make plans to attend on May 13, 2021. MAY/JUNE 2020 AZ CPA
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2020-21 ASCPA Board of Directors Executive Committee Members
Ginny DeSanto — Chair Vice President & CFO ASU Enterprise Partners
Tom Duensing — Chair-Elect Deputy Internal Services Director — City of Tempe
Jared Van Arsdale – Immediate Past Chair Ullmann and Company, P.C.
Andrea Levy Director 2019-2021 CFO —Southwest Autism Research and Resource Center
Keith Cowan Director 2019-2021 CFO Food for the Hungry
Kelly Damron Director 2019-2021 Assist. Professor of Accounting Grand Canyon University
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Rachael Bertrandt – Secretary/ Treasurer Global Corporate Controller & Principal Accounting Officer Insight Enterprises in Tempe
Jessica Estrada Director 2020-2022 Audit Manager — Grant Thornton LLP
Tabitha Fox Director 2020-2022 Director of Finance Southern Arizona AIDS Foundation
David Gephart Director 2020-2022 CFO Town of Oro Valley
Ross Grainger Director 2019-2021 CFO Paradox.ai
Jessica Iennarella Director 2019-2021 Controller — State Bar of Arizona
Anthony Lorenzo Director 2019-2021 Managing Member Lorenzo, PLC
James McGettigan Director 2020-2022 Senior Manager Stoker Ostler Wealth Advisors
AICPA Council Members 2018-2021
Rob Dubberly Audit Partner KPMG LLP Lauren Murro Director 2020-2022 Audit Manager Eide Bailly LLP
Gidget Schutte Director 2020-2022 Partner Schutte & Hilgendorf, PLLC Greg Nelson Principal Nelson CFO Services, PLLC
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Eight Essential Elements of an Exit Strategy for Business Owners By Daniel R. Siburg, CPA, CVA, and Stephen E. Koons, CPA/ABV/CFF, ASA CPAs need to ensure that their clients or employers are strategically positioning their businesses with a pre-transition plan to optimize the potential sale opportunities and minimize exit strategy mistakes. This article provides a starting point for all CPAs when a business owner starts the conversation about transitioning out of their business. All business owners will need to transition their businesses to new owners at some point in time. The new owners could be business partners or family members, and transactions range from management buy-outs to outright sales of the businesses on the open market. Regardless of the circumstances, every business and business owner should have a transition plan implemented before exiting the business. There are steps owners can take right now that will increase the desirability of their businesses. Without a proper exit plan, a business can suffer loss of significant value during any ultimate transfer of ownership. In fact, it’s possible to increase the value of a business by developing and implementing an exit strategy. What’s the Business Worth? An owner can discover the hypothetical value of a business by having a business valuation done by a business valuation expert. To find the real value, the owner would have to actually sell the business. The valuation can help the owner to determine how much the business might be worth on the market. A business valuation also can help the owner to come up with strategic plans for evaluating offers to sell, determine the equity interests of family members, determining the division of assets in marital dissolution, settling disagreements among co-owners, or setting values for a buy–sell agreement between co-owners. In performing a valuation, the analyst typically determines the business’s fairmarket value, which is the amount of cash that would be required for the business to change hands between a hypothetical buyer and hypothetical seller. The cash
that could be received from an actual transaction might be different. After establishing the business’s value, an owner must understand a couple of basic things before selling the business: the selling price of similar-sized businesses in the same market and understanding how businesses are being acquired. Most business sales are asset purchases where the buyer acquires the assets, both tangible and intangible, versus a stock purchase where the owner sells the stock in the business. These two facts are the starting points. From here, a good transition plan can help an owner keep from losing money and actually making some. 1. Understand the Taxes Sellers should have a good understanding of typical deal structures and their consequences in terms of income tax. The most common deal structure is when a transaction is structured as a sale of assets. The seller generally pays tax on the difference between the purchase price received and the tax basis of the assets sold. A gain may be taxed at ordinary income tax rates to the seller. Also, the type of business structure affects how a transaction may be treated. If the assets of the business are owned by a C-corporation, the taxes will be assessed at the corporation level. If the business is structured as a pass-through entity (S-corporation, partnership, limited-liability company, etc.), gains may be taxed as ordinary income to the seller. Other types of transfers may be a sale to an Employee Stock Ownership Plan (ESOP) or gifting to family members. An owner should understand how the form of their organization affects valueand-tax consequences. Pass-through entity structures, such as partnerships, Sub-S corporations, and LLCs, may present simpler tax issues compared to C-corporation structures, where an owner needs to be concerned with double taxation issues. There may be significant tax advantages for an owner of a C-Corp to convert to an S-Corp, which generally
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pays no income taxes. Rather, the shareholders pay tax proportionate to their share of S-Corp earnings, whether or not those earnings are distributed. A conversion from a C-Corp to an S-Corp can also help a seller reduce income taxes on the sale of assets. The full benefit of a conversion from a C-Corp to an S-Corp can take years to realize, which could make the business less attractive to sell for tax reasons during the Sub-S conversion period. A review of the business’s ownership structure should take place as part of the exit-planning process. 2. Personal Expenses Should Be Personal Owners should stop paying personal expenses through the business and cease deducting these expenses from the business’s tax returns. Continuing to pay personal expenses through the business can raise questions in the minds of a potential buyer as to the credibility of the business owner. Also, all non-working family members
should be removed from the company payroll. It is much easier to attract quality buyers when owners have managed the enterprise strictly as a business. 3. Get Everything in Writing A significant part of the value of most businesses is represented by the value of intangible assets, such as trade names, patents, customer lists and business relationships, franchise and license agreements, and similar property. To the extent that any agreement is based on a handshake, with major customers or vendors, it is appropriate to obtain a written agreement. It is important to have loan agreements between the owner and the company documented. And it goes without saying, it is best if the owner can show proof of compliance with the loan agreements. When an owner loans money to the company, he can repay himself, tax free, with proceeds from the sale, as long as the loan agreement has been properly documented and abided.
4. Settle Legal Actions Nothing will lower the value of a company or make it more unlikely to sell than unresolved litigation matters. A potential buyer of a company wants the assets free and clear, with no legal problems after the sale. Most business sales are structured as asset sales. With a stock sale, the buyer acquires the entity in its entirety (not just the assets), including any legal issues. Be prepared for a potential buyer to walk away from a transaction when there is outstanding litigation. 5. Financial Reporting Pays Dividends Good financial reporting always adds value to a business. Internal reporting that provides accurate financial and operational information helps the current management team and makes it easier for the new owners to keep things running smoothly after the purchase is complete. In addition, the quality of the financial data is a factor that valuation analysts and potential buyers use to evaluate value and risk, and thorough
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financial reporting instills them with confidence that they have the information they need to properly evaluate the business. The gold standard for financial reporting is audited financial statements. Audited financial statements add a level of credibility to internally generated financial and operational information that a buyer will request during due diligence. 6. Develop a Strong Transition Team The development of a strong management team is usually a necessary consideration in the preparation of an exit strategy. Strong management teams help to ensure a smooth transition with some continuity of leadership and talent for a potential buyer. 7. Avoid Over-Reliance on Normalizing Entries Sellers should avoid over-reliance on normalizing entries, which are commonly used in business valuation and by sellers to adjust the historical financial statements to economic reality.
There are several types of normalizing entries: removal of non-recurring income and expenses, removal of owner discretionary and personal expenses, removal of income and expenses on assets that have no relationship to the business operations, changes in accounting principles from one period to the next, changes to conform to generally accepted accounting principles, and adjustments of transactions between the owner and the company to the amount at which an independent third party would transact business. Potential buyers can understand the need for some types of normalizing entries, but they also realize that such entries may not reflect economic reality. Buyers determine a purchase price based on actual financial information and performance as presented in the seller’s tax returns, internal financial statements, and audited financial statements, when available. For two reasons, it is difficult for a seller to rationalize certain normalizing entries, especially those that show significant amounts of personal expenses.
First, personal expenses can be difficult to adequately document. Second, a federal tax return likely includes an income-tax deduction for the items in question. All of this may lead the potential buyer to question the credibility of the seller. 8. Have Written Strategic Planning Documents Though a potential buyer is generally buying the assets of the business, they are also buying the future earning potential of the assets. Buyers like to see well-established budgets with goals and objectives as to how the company is planning to achieve their future financial and operational results. Buyers want to know that a seller has a well-established road map for the future of the company. When the owner has a well-defined process for tracking progress, such as budget versus actual income statements, cash-flow forecasts, and ratio analysis related to the company, buyers can quickly gain an understanding of company historical and future performance. Proper strategic planning helps the management of the company to talk with a potential buyer about the future activities and the earnings potential of the business. Be prepared and plan your exit strategy. Transition planning is very important to an owner’s ability to maximize value when it is time to sell the business. Every business needs an exit strategy, as it is better to preserve and maximize value than to leave it to chance.l Daniel R. Siburg, CPA, CVA, is the managing director of The Siburg Company, LLC, a consulting firm that specializing in mergers and acquisitions, strategic planning and financial and operational consulting—www. TheSiburgCompany.com. Siburg is a planning committee chair for the Corporate Finance and Construction Conference on August 28, 2020. Stephen E. Koons, CPA/ABV/CFF, ASA, is director of the Business Valuation & Litigation Support Services Group of Henry +Horne, LLP. He specializes in business valuation and economic damages— stevek@hhcpa.com.
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Arizona’s Burgeoning Cannabis and Hemp Industry ASCPA Cannabis Special Interest Section Formed by Josephine Giordano, CPA As CPAs, we are accustomed to dealing with challenging clients and new situations. The newly formed Cannabis Special Interest Section was formed to bring education and information to better serve our clients while protecting the public in the everchanging cannabis and hemp industry. The Section kicked off its inaugural meeting on February 11, 2020 with a well-attended panel discussion. Panel Discussion: Arizona’s Burgeoning Cannabis and Hemp Industry We had an overwhelming response to our invitation to our first panel discussion. Our attendance included accounting and legal professionals, as well as bankers and state regulators. Our panelists included Gary Smith, Esq. with Guidant Law, Will Humble with the Arizona Public Health Association, J.P. Holyoak. I was with Arizona Natural Selections and Ross Dietrich, CPA, with Price Kong, and the moderator. Our panelists interacted and provided valuable information related to legal and regulatory challenges, dispensary operations and accounting and tax issues. Based on information published by Marijuana Business Daily in January 2020, medical marijuana stores sold approximately 165,722 pounds of product in 2019, a 36% increase from the 121,916 pounds sold in 2018. Based on retail prices advertised by major dispensaries in the Phoenix area, the industry took in more than $400 million in revenue for 2018. Active cardholders increased 18% to 219,817 from 186,002 in 2018. Based on earlier reported retail prices, it was estimated that approximately $547 million was generated in 2019. Medicalmarijuana sales are subject to the state’s 5.6% sales tax equating to an estimated
$30.6 million in revenue to the state (not counting additional city and county taxes ranging from 0.25 to 4%). However, later published reports (March 2020) indicated that the Marijuana Business Factbook estimates Arizona medical marijuana sales reached $715 to $730 million in 2019, which made it the country’s largest medical cannabis program. The Arizona Department of Health Services (DHS) regulates the Act through its Medical Marijuana Program. In Arizona, DHS is the only agency that has the responsibility to oversee and regulate medical marijuana. According to an Arizona Attorney General Report issued in June 2019, in contrast, Colorado, Nevada and Washington divide the responsibility between two agencies — one to regulate the facilities that produce/sell marijuana and the other to oversee patients who use medical marijuana. Will Humble discussed his former role at the DHS and the challenges he faced. He addressed common inspection and licensing/application issues. The panelists discussed Arizona legislative updates, including Governor Ducey signing legislation that requires dispensaries to have all medical marijuana tested by third-party laboratories for potency and contaminants by November 1, 2020 (Marijuana Policy Project 1/3/2020). The new law also makes patient registry cards valid for two years instead of one. Additionally, in May 2019, the Arizona Supreme Court ruled that concentrates, edibles and other infused products are legal under the state’s medical marijuana law, ending a controversy based on an inaccurate reading of the 2010 voter-backed law. Arizona is considered one of the states that could legalize adult-use cannabis this year via ballot measure. Gary Smith provided an update on the status of the SAFE Banking Act of 2019, the proposed legislation regarding disposition of funds gained through the cannabis industry in the U.S. He discussed how bankruptcy is not an option for marijuana businesses and
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the possible options available without recourse to bankruptcy. Smith provided insight into several key court decisions and their impact on businesses and the professionals that service them. J.P. Holyoak, a dispensary owner/ operator, provided valuable insight regarding challenges faced by businesses including hiring and employment, banking, accounting/tax and regulatory compliance. He discussed merger and acquisition activity and a dispensary owner/operator’s perspective of the current state of industry regulation. Ross Dietrich discussed cannabis tax compliance matters and IRS Code Section 280E and its impact on clients and CPAs. 280E, “does not allow a deduction or credit for any amount paid or incurred during a taxable year in carrying on any trade or business if such trade or business consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substance Act), which is prohibited by Federal Law or the Law of any State in which such trade or business is conducted.” Dietrich discussed the
challenges faced in the preparation of audited financial statements and tax returns and recent IRS efforts in conducting their examinations/audits. The panelists also discussed Arizona’s hemp program. The Arizona Department of Agriculture (AZDA) oversees the state’s hemp program, which opened up hemp processing in 2019. Under Arizona law, growers, nurseries, processors, harvesters and transporters are required to obtain AZDA licenses. Notably, the AZDA doesn’t regulate retailers. Like in any other state with regulated hemp, there are fees, compliance rules and penalties for non-compliance. The level of regulation is not even close to what we see for cannabis/marijuana (www.cannalawblog.com June 2019). In January 2020, the Arizona Marijuana News reported that 40% of Arizona’s hemp crops had to be destroyed due to too much THC (the psychoactive substance in cannabis). The panelists provided their 2020 predictions for the overall industry and the impact to the Arizona economy in
SOLUTIONS CALCULATED FOR YOUR CLIENTS
the future. The push for adult-use in Arizona is a matter of time. As CPAs and other professionals serving clients in the cannabis and hemp industries, we need to be educated and informed. If you are a member of the ASCPA and would like to be part of the Cannabis Special Interest Section or have recommendations for upcoming event topics or speakers, we welcome your input. Check us out on the ASCPA’s Connect Cannabis and Hemp Advisory site at www.ascpa.com/cannabis.l Josephine Giordano, CPA, is a director with BeachFleischman PC and chair of the ASCPA’s Cannabis Special Interest Section. Giordano has extensive experience as a financial professional, with a diversified background that encompasses internal audit, banking, tax, business valuation, forensic accounting, bankruptcy and restructuring, court-appointed receiverships, court-appointed Special Master and Compliance Monitor, and other litigation support services. She can be reached at jgiordano@beachfleischman. com or (602) 792-5981.
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Backup withholding also may apply to gambling winnings (Form W-2G (PDF)) that aren’t subject to regular gambling withholding.
Backup Withholding Primer by Lisa A. Novack
When it applies, backup withholding requires a payer to withhold tax from payments not otherwise subject to withholding. You or your client may be subject to backup withholding if you fail to provide a correct taxpayer identification number (TIN) when required or if you fail to report interest, dividend or patronage dividend income. Banks or other businesses that make certain types of payments to you must file an information return with the IRS on Form 1099 showing payments that you received during the year. A Form 1099 includes your name and TIN such as a social security number (SSN), employer identification number (EIN), or individual taxpayer identification number (ITIN). The Form 1099 will also report any amounts withheld under the backup withholding rules. Payments Subject to Backup Withholding Backup withholding can apply to most kinds of payments reported on Form 1099, including: • Interest payments (Form 1099-INT (PDF)); • Dividends (Form 1099-DIV (PDF)); • Patronage dividends, but only if at least half of the payment is in money (Form 1099-PATR (PDF)); • Rents, profits, or other income (Form 1099-MISC (PDF)); • Commissions, fees, or other payments for work performed as an independent contractor (Form 1099-MISC (PDF)); • Payments by brokers and barter exchange transactions (Form 1099-B (PDF)); • Payments by fishing boat operators, but only the part that’s in money and that represents a share of the proceeds of the catch (Form 1099-MISC (PDF)); • Payment Card and Third-Party Network Transactions (Form 1099-K (PDF)); and • Royalty payments (Form 1099-MISC (PDF)).
Withholding Rules When you open a new account, make an investment, or begin to receive payments reportable on Form 1099, you must provide your TIN. For certain types of payments, you must provide the TIN in writing and certify under penalties of perjury that it’s correct. In those cases, the bank or business will give you Form W-9, Request for Taxpayer Identification Number and Certification (PDF) or a similar form. If your account or investment will earn interest or dividends, you must also certify that you’re not subject to backup withholding due to previous underreporting of interest and dividends. You may be subject to backup withholding and the payer must withhold at a flat 24% rate when: • You don’t give the payer your TIN in the required manner. • The IRS notifies the payer that the TIN you gave is incorrect. • The IRS notifies the payer to start withholding on interest or dividends because you have underreported interest or dividends on your income tax return. The IRS will do this only after it has mailed you four notices over at least a 120-day period. • You fail to certify that you’re not subject to backup withholding for underreporting of interest and dividends. How to Prevent or Stop Backup Withholding To stop backup withholding, you’ll need to correct the reason you became subject to backup withholding in the first place. This can include providing the correct TIN to the payer, resolving the underreported income and paying the amount owed, or filing the missing return(s), as appropriate. If you receive a notice from a payer notifying you that the TIN you gave is incorrect, you can usually prevent
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backup withholding from starting or stop it once it has begun by giving the payer your correct name and TIN and certifying that the TIN you give is correct. If you receive a second notice from that payer, you’ll need to provide them with a copy of your social security card that shows your correct name and SSN.
Not-for-Profit Conference Sept. 17, 2020
Desert Willow Conference Center Available In-Person or via Webcast Recommended CPE Credit: 8 hours Get up to speed on the most pressing issues facing not-forprofit organizations today. Plan your perfect day with a mix of auditing, accounting, technology, leadership, strategic planning and tax topics relevant to the changes in the not-for-profit industry due to COVID-19. In a fast-paced accounting world, not-for-profit leaders must know how to operate efficiently and effectively, making the most of their limited resources in an ever-changing and often challenging financial environment. Join us this fall to learn how! Register online at ascpa.com/npc21 by phone at (602) 252-4144. Thank You to Our Sponsors Platinum Sponsor Eide Bailly LLP Gold Sponsors Heinfeld Meech Henry+Horne CBIZ MHM CLA (CliftonLarsonAllen) Your Part-Time Controller Sponsorship opportunities are available. For details, contact Heidi Frei at (602) 324-4743 or at hfrei@ascpa.com.
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Credit for Backup Withholding If your 1099 shows an amount withheld under the backup withholding rules, report the amount as federal income tax withheld on your income tax return for the year you received the income. If you operate as a partnership or subchapter S corporation, any backup withholding can only be claimed by the partners and shareholders. Partners and shareholders should report their respective shares of the withheld amounts on their individual income tax returns. The amounts aren’t refundable to the partnership or subchapter S corporation. Additional Information You can find more detailed information on backup withholding in Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s) (PDF), including the procedures for payers, Backup Withholding and in Publication 505, Tax Withholding and Estimated Tax. l Lisa A. Novack is a senior stakeholder liaison at the IRS. She will be presenting Backup Withholding/Employment Tax Implications & 1099-NEC at the Corporate Finance and Construction Conference on August 28, 2020. Attend her session to learn how to define backup withholding, explain and understand the current processes, and describe payer obligation under IRC §3406.
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 May 2022. Please note that users have three attempts to pass the quiz with at least a 70 percent score.
May/June 2020 Issue of AZ CPA* 1. In this month’s Chair’s message, Ginny De Santo talks about: m Planning /Contingency Plans m Fraud Controls m The Value of Technology 2. What ASCPA member went above and beyond, creating two COVID-19/ Tax webinars for members? m Josephine Giordano m Ed Zollars m Tom Hanks 3. What is different about the ASCPA Annual Meeting this year? m It was rescheduled m It is going Virtual m There will be a musical guest 4. A business owner can discover the hypothetical value of a business by having a business valuation done. In order to find the real value, the owner would have to: m Actually sell the business m Do an eight-step analysis m Hire a BV expert 5. When selling a business, who should be removed from the payroll? m The board members
m Non-working family members m The CEO 6. According to the Cannabis Panel, the state of Arizona is in line to: m Eliminate legalized medical cannabis m Increase taxing of all cannabis use m Legalize adult-use cannabis by ballot this coming year.
7. W h a t d e p a r t m e n t ove r s e e s Arizona’s hemp program? m Arizona Dept. of Agriculture m Bureau of Alcohol, Tobacco & Firearms m Arizona Board of Accountancy 8. Taxpayers may be subject to backup withholding if they fail to: m Provide a correct taxpayer identification number (TIN) when required m Report interest, dividend, or patronage dividend income. m Either of the above. 9. Backup withholding by Partnerships or Subchapter S corporations can only be claimed by: m Partners only m Shareholders only m Partners and shareholders 10. The ASCPA’s advocacy efforts helped stop the move to change the make-up of the Accountancy Board from the current makeup of five CPAs and two public members to: m Four public members and three CPAs m Five public members and three CPAs m Five public members and two CPAs
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:
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.
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Your Connection to the CPA Profession
During these uncertain times, the business community and public are turning to CPAs for answers. Now, more than ever, it is important for CPAs to work together to advocate for the business community and profession, learn the details of new legislation that impacts individuals and businesses, and access support from the CPA community. The ASCPA has resources and connections to your colleagues to assist you in navigating these changes and providing value and comfort to your organization and clients. You have been active on the Connect online community to assist each other, and it is heartwarming to see how the CPA community has come together to support each other. Thank you for your membership in the ASCPA and for being there for your fellow members. We look forward to continuing to be your connection to the CPA profession.
Your CPA Community As a member, you have access to the Connect site, a robust online community made up of your colleagues. They will answer your questions and provide you with resources that will benefit you, your organization and your clients. Ryan Christopher Littleton, CPA The Connect community to me is a game changer. Where else can you access individuals with untold knowledge and experience to answer any question? It has been a resource that I can’t put a value on.
Get connected • Get informed Login now at connect.ascpa.com/home You will also have opportunities to connect with the CPA community this year through Zoom video calls. Watch your email for more details.
Renew Your ASCPA Membership www.ascpa.com/renew • (602) 252-4144 20
AZ CPA MAY/JUNE 2020
Advocating for You
CPAs are impacted by actions by the Arizona State Board of Accountancy, the Arizona Legislature and Congress. We are seeing activity in all of these areas at a much more frequent basis than we ever have before.
Ross M. Grainger, CPA One thing I really like about the ASCPA is that I know it handles the legislative side of things, protecting CPAs, so I don’t have to think about it. I like to know that someone is advocating on my behalf.
•
Here are some of the ways the Society and its membership has had an impact this year: • The Accountancy Board was at risk of losing CPAs as the majority of its members due to legislation that would reduce the current makeup of the Board from five CPAs and two public members to four public members and three CPAs. The ASCPA, with member assistance, worked diligently to educate lawmakers on the necessity of expertise on the Board. Thanks to the Society’s quick action and member outreach, CPAs were removed from proposed legislation. •
The ASCPA, with assistance from DeMenna Public Affairs, hand-delivered letters to all 90 Arizona legislators requesting full conformity in the 2020 session as quickly as possible to make paying taxes easier for Arizonans. Governor Ducey signed the legislation on March 24.
The ASCPA sent a letter to the governor and legislative leadership, requesting that CPAs and accounting services be included in any order related to essential services during the COVID-19 pandemic. Governor Ducey included accounting services under essential professional and personal services in his Executive Order 2020-12. We are grateful our members have the flexibility to continue their important work to support others during this time.
Maximize Your Growth
The ASCPA is responding quickly to the changing laws and business needs in this new environment to bring you education that will assist you, your organization and your clients.
Take advantage of these special offers for members:
Laura S. Leopardi, CPA, ABV, CFF, CGMA It is challenging no matter where you work today. We work in a global interconnected environment in real time. I find that the Society’s CPE courses are what keeps me current and relevant.
Additional 15% off CPE when you register by May 31 8 Hours of Free One-Hour CPE Webinars (announced throughout the year)
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Classifieds Employment DIRECTOR OF ACCOUNTING — Uncommon Giving Corporation - OMNI is retained by Uncommon Giving Corporation (UGC) in the search for a Director of Accounting to function as the day to day resource responsible for all accounting and financial reporting functions. Reporting to the CFO, the incumbent will: • Ensure shareholder/board reporting is properly prepared • Manage work efforts of auditors, regulators and tax preparers • Manage reconciliation/problem resolution with bank and investment account • Support the organization with analysis, problem solving and decision support • Bachelor’s degree. CPA preferred.
• Demonstrated knowledge of GAAP. • Demonstrated success with the development/management of financial and accounting functions • Experience with investment accounting, shareholder reporting & tax. Contact: https://searchcareers-omniemployment.icims.com/jobs/2717/director-ofaccounting/job TROUBLE-SHOOTER and PROJECT CPA available for hire. Construction, SBA loan, real estate, Lacerte tax, AZ Tribal and PEO experience. Work remotely or inhouse, per diem or full time. LinkedIn. AZ brokers license, PWCoopers, bank industry auditing all bonuses. Seasoned. howietax@ gmail.com.
Corporate Finance and Construction Conference August 28, 2020
Office Space Executive Office Space for Lease — Executive office $800. Beautiful garden-style office complex in a great office environment located in north Phoenix. Easy access to SR 51 and SR 101 just north of NWC of Tatum and Shea Blvd. Ample parking, beautiful conference rooms and seminar room. Copier, telephone and internet ready. Includes receptionist to greet your clients. Contact Julie at (602) 953-5000. NORTH SCOTTSDALE OFFICES FOR RENT— 1 - 3 offices & 1 - 3 secretarial stations for rent one block east of Scottsdale Road on south side of Gainey Ranch. 1st floor easy parking and access for clients. Share space with the KEYTLaw, LLC, firm. See pictures by doing a Google search for keytlaw. Call Rick at 480-664-7478 or email rk@keytlaw.com.
For more information on classified advertising, go to www.ascpa.com and go to classifieds.
Desert Willow Conference Center Available In-Person or via Webcast Recommended CPE Credit: 8 hours Enhance your knowledge on a broad range of topics relevant to leaders in the Construction and Corporate Finance industries. Hear from industry experts and get the latest updates and insights on the popular topics such as lien laws, succession planning and cybersecurity. Also offered this year are sessions on the new lease standard, backup withholding/employment tax implications & 1099-NEC, emotional and mental wellbeing, mergers and acquisitions, and an economic update. Personalize your conference experience by choosing sessions from one or both industry tracks.
Register online or by phone at (602) 252-4144. https://www.ascpa.com/cfcc20 This conference is designed to serve the needs of financial professionals in the corporate finance and construction industry. • Corporate CFOs and Controllers • Construction company CFOs and Controllers • Accounting firms who support construction companies Thank you to Gold Sponsors: Paychex • STO4KIDZ • Wallace, Plese + Dreher, LLP.
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New Job? New Address? Update your contact information on your ASCPA profile. Don’t miss out on important legislative information, upcoming events and member benefits. Login and update your organization or make changes to your professional profile.
www.ascpa.com/my_ account
Phoenix Tax Workshop Series 24 Hours of Live CPE for $375 * Added Bonus for purchasing 2020-21 Phoenix Tax Workshop Series! You will gain access to all 2020-21 recorded sessions for later viewing.
Who’s on the agenda? Presentation topics are selected and then matched with the expertise of speakers drawn from the Advisory Committee, members of the Legislature and Arizona government.
The Phoenix Tax Workshop was established in 1961 to educate professionals in all areas of taxation—federal, state and local. We invite you to join this elite group of tax professionals at their Saturday CPE/CLE sessions (eight times per year). This series is also offered as a webcast.
What is the Advisory Committee? The Advisory Committee is comprised of the Valley’s top legal and tax accounting professionals who have agreed to volunteer their time.
What does it cost? The annual fee of $375 (due by the first meeting in May) includes the opportunity to earn 24 hours of CPE/CLE credit per year, which includes eight, three-hour meetings. You may attend individual meetings for $70. (Payment can be applied toward annual fee if you decide to enroll in the series). To enroll in the Phoenix Tax Workshop Series, complete the registration form below or register online at www.ascpa.com/ptw21.
Meeting dates and times The following Saturday meetings are held at the ASCPA offices in Phoenix from 9 a.m. to noon. A full breakfast is included with each meeting. You may also participate by webcast from your home or office.
What’s on the agenda? Topics are drawn from current tax issues, court cases and current legislation on both federal and state arenas. You will have the opportunity to take part in question and answer sessions to ensure you leave with a complete understanding of the material. Updated agendas will be sent prior to each meeting and will be available in the online CPE catalog. Check periodically for updated information.
Name ___________________________________________ Company ________________________________________ Address ________________________________________ City ___________________State _____ Zip ___________ Phone __________________ Fax ____________________ Email ___________________________________________ Check all that apply: r ASCPA Member r Nonmember r CPA r Not a CPA r Attorney r Other I will be attending: r In-person r On Webcast
May 16, 2020
Nov. 21, 2020
June 20, 2020
Jan. 16, 2021
Sept. 26, 2020
Feb. 20, 2021
Oct. 24, 2020
April 24, 2021
Method of Payment: r Check r VISA r MasterCard r American Express Name on Card _______________________________ Card Number ________________________________ Exp. Date ____________ Amount $ Signature of Card Holderr______________________ Please return this form and payment to: Arizona Society of CPAs 4801 E. Washington St., Ste. 180 Phoenix, AZ 85034 Fax credit card orders to: (602) 252-1511 or register online at www.ascpa.com/ptw21. MAY/JUNE 2020 AZ CPA 23
PRSRT STD U.S. Postage PAID Phoenix, Arizona Permit No. 952 4801 E. Washington St., Suite 180 Phoenix, AZ 85034-2040
ADDRESS SERVICE REQUESTED
2020-2021 Annual ASCPA Membership Dues Renewal It is renewal time! If you haven’t already done so, you may use this form to send your renewal payment. Select Dues Category: r Industry or Public Practice.......................................$290 r Government or Educators........................................$215 r Candidate (passed CPA exam, not certified)....$290 r Affiliate (Non-CPA).....................................................$310
r *Retired.................................................................$75 r **Leave of Absence (CPA)..............................$75 r Unemployed........................................................$75 r Full-Time Student.............................................$65
*Retired: Any person who is a CPA, licensed under the laws of any state, or persons who have passed the uniform examination for CPAs may apply. These individuals are completely retired from the accounting practice. **Leave of Absence: Any persons who is a CPA, licensed under the laws of any state or persons who have passed the uniform examination for CPAs may apply. These individuals are currently not working (maternity, military leave, disability).
Amount Enclosed:
$
Save an additional 15% on CPE when you renew on or before May 31, 2020!
Renew Online: www.ascpa.com/renew By Check: Return invoice and make check payable to ASCPA Mail to: 4801 E. Washington St., Ste. 180, Phoenix, AZ 85034 Credit Card: Fax payment to (602) 252-1511 or Call (602) 252-4144 Your membership will auto-renew annually. We’ll remind you about the upcoming payment via email. You can update your payment information or cancel your auto-renewal at any time by logging into ASCPA profile or by calling (602) 252-4144. (ASCPA is PCI Compliant)
r Check here if you do not wish to use auto-renewal. Please charge my: r VISA r MasterCard r American Express Name on Card: ___________________________________________________
Amount $_______________
Card Number: ____________________________________________________
Expiration Date:_____/_____
If you have questions, please contact the ASCPA at (602) 252-4144 or email membership@ascpa.com Contributions or gifts of income to associations are not tax deductible as charitable contributions for income tax purposes. However, they may be tax deductible as ordinary business expense subject to restrictions imposed as a result of association lobbying activities. The ASCPA estimates that the nondeductible portion of your dues for the period of May 1, 2020 through April 30, 2021 is 7%.
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