AZ CPA October 2018 by ASCPA

AZ CPA October 2018

Tech Issue Using Social Media to

Improve Your Business SOC Report Framework Rentals as a Trade or Business

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OCTOBER 2018 AZ CPA

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

Don Farmer is Coming to The Camby on October 26 Let Don Farmer bring you up to date on the Tax Cuts and Jobs Act developments Don Farmer’s Tax Update will prepare you for year-end planning and for the 2019 tax season. Almost all the provisions of the Tax Cuts and Jobs Act are first effective for 2018 returns. The Treasury Department estimates the 20% §199A deduction alone will affect more than 10 million taxpayers. Farmer will bring you up to date on the IRS releases and regulations explaining the Tax Cuts and Jobs Act provisions affecting individuals and businesses, including: the regulations explaining the 20% §199A deduction and the 100% §168(k) depreciation deduction and IRS releases explaining the home mortgage interest deduction, switching to the cash method of accounting, and the many other provisions of the Tax Cuts and Jobs Act. In addition, Don’s material will include a review of the partnership audit regulations and other key developments for 2018.

Go to www.ascpa.com/taxup to register for in-person or webcast.

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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

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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

AZ CPA OCTOBER 2018

Volume 34 Number 8

AZ CPA

October 2018

Features

Rentals as a Trade or Business

Find out under what circumstances a rental may be considered a trade or business.

by Edward K. Zollars, CPA

New SOC Report Framework Addresses Emerging Risks With new and more complex risks emerging, the AICPA has changed the criteria used in system and organization reports (SOC). by Michael S. Nyman, CPA

Columns & Departments Chairâ&#x20AC;&#x2122;s Message by Michael T. Allen, CPA

Member News

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

Quick Quiz

Using Social Media to Improve Your Business

Build your online presence through platforms such as LinkedIn and Facebook. Find out five things you can do today to grow your business. by Patty Gannon

Classifieds 22

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

OCTOBER 2018 AZ CPA

ASCPA Chairâ&#x20AC;&#x2122;s Message

AI and the Brooklyn Bridge As a fellow CPA, I am continually reminded that our future relevance will be impacted by the advancement of technology. New technologies may displace many of the services we currently provide and the way that we provide them.

by Michael T. Allen, CPA The future is truly bright, and as CPAs we are in a unique position as the ultimate trusted advisor to assist those we serve in understanding the application of these new technologies.

AZ CPA OCTOBER 2018

Innovation has always been a core competency of our profession. While many view technology as a threat, I share the view that these new technologies will provide an opportunity for all of us to expand our services. The application of these technologies can make us more relevant than ever. We recently visited our daughter in Brooklyn, and I had the chance to check off one of my bucket list items. Since reading The Great Bridge by David McCullough, the story of the building of the Brooklyn Bridge, I have wanted to experience walking across the Brooklyn Bridge on a beautiful Sunday morning. What was once referred to as the eighth wonder of the world, the Brooklyn Bridge was a marvel of architecture and innovation that has now evolved into a work of art. As I walked the bridge with our daughter on that Sunday morning, thoughts of artificial intelligence, data analytics, blockchain and more came to mind, and I realized how lucky we are to experience these miracles of innovation.When the Brooklyn Bridge was built, the electric light and telephone, two technologies that are now just basic parts of our everyday life, were yet to be invented. Had these technologies been in place, they would have completely transformed the experience of those involved in the construction of the bridge and likely saved many lives. New technology will clearly change our experiences as we provide our services, and yes, will likely become part of or our everyday lives, but it shouldnâ&#x20AC;&#x2122;t change the foundation of the value we bring as CPAs. Our intuition, business acumen and unique insights will be enhanced by the use of technology, not replaced. The greatest challenge to me is not the new technologies, but rather the pace at which we are being asked to comprehend them. The proposition that technological advancement will never be this SLOW again, is a daunting thought, but likely true. There simply is no way to absorb it all. The ASCPA can be instrumental in facilitating our membersâ&#x20AC;&#x2122; ability to implement new technology. Many of our members regularly communicate about these new technologies and the opportunities they provide using the Connect Site, committee meetings, CPE and other venues sponsored by the Society. I encourage all of us to continue this collaboration and to support each other in these exciting and quickly changing times. The future is truly bright, and as CPAs we are in a unique position as the ultimate trusted advisor to assist those we serve in understanding the application of these new technologies. I encourage all of you to continue to check items off of your bucket list. There are so many amazing things to be experienced and embraced! n

Member News Monica Stern, CPA, was recently quoted in The Wall Street Journal in the article,“IRS Clarification Eases Deduction Limits for Some Business Owners.” Alexandra L. Miller, CPA, will lead Beta Alpha Psi as the new 2018-2019 president of the organization’s board of directors.

In Memoriam

Dennis “Denny” E. Mitchem The ASCPA honors the passing of Dennis “Denny” E. Mitchem, a leading member of the Society whose outstanding and immeasurable service to the profession paved the way for us all.

Award Winning Documentary

All The Queen’s Horses Viewing and Discussion October 18 — 4 – 6 p.m. ASCPA Learning Center Recommended CPE: 2 hours Think goblins and ghouls are scary? Afraid of lurking witches, werewolves and monsters? Learn the truly terrifying story of a woman stealing millions and be left shaking in your boots. As city comptroller of Dixon, IL, Rita Crundwell stole $53 million of public funds over 20 years — making her the perpetrator of the largest case of municipal fraud in American history. She used the funds to build one of the nation’s leading quarter horse breeding empires, all while forcing staff cuts, police budget slashing, and neglecting public infrastructure. All The Queen’s Horses investigates her crime, her lavish lifestyle and the small town she left in her wake.

Mitchem’s career was as distinguished as it was varied. After retiring from public accounting after 40 years, he took on various government and community projects. These activities took him to Moscow to manage a local privatization center project for the U.S. government; he spearheaded NAU’s corporate development activities; and he served on public company, community and governmental boards. Mitchem’s passion for the profession was unmatched, and even in retirement he believed strongly in the importance of advocacy for the profession and involvement with the Arizona Society of CPAs. Mitchem came to the Valley from Chicago in 1958 to help open the Arthur Andersen office in Phoenix. He retired as an active Arthur Andersen partner in 1993. He graduated with distinction from the University of Nebraska in 1952 and became a CPA in 1953. Mitchem had four different careers over 40 years. He was a CPA, auditor and consultant. He was a project manager of major Federal government projects, and he was manager of the Resolution Trust Corporation financial processing center in Denver. Finally, he was manager of Local Privatization Center project for U.S. Agency for International Development in Russia. After completing his project in Russia, Mitchem returned to Phoenix where he served as executive director of Habitat for Humanity, Valley of the Sun. In 1998, he joined Northern Arizona University as director of Corporate Relations. During his years in the Valley, Mitchem was very active in community and professional activities. He helped found Valley Leadership, Greater Phoenix Leadership, Herberger Theater, ASU College of Business Council of 100, Economic Club of Phoenix, Citizens Transportation Council, Downtown Crime Task Force, Phoenix Community Alliance, Downtown Phoenix Partnership and YES on 400. His past chairmanships include: Greater Phoenix Chamber, Visitors and Convention Bureau, Citizens Bond Committee, Residents for Safe and Efficient Transportation and the Valley of the Sun United Way Campaign. Mitchem was a Life Member and past chair of the Arizona Society of CPAs. His gracious and friendly presence will be missed within the CPA profession and in the community.

OCTOBER 2018 AZ CPA

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A Dash of SALT

Legislation to Fix Arizona’s Power of Attorney Problems In this month’s state and local tax (SALT) column, Busby describes how recent legislation (S.B. 1385) should resolve the Department of Revenue’s (DOR) concerns — and the problems taxpayers have been having — with the forms DOR requires taxpayer representatives to provide before it will communicate with them regarding their corporate clients’ tax issues. The author helped draft Senate Bill 1385 that went into effect on August 3, 2018 and is retroactive to May 23, 2015 – the date DOR’s interpretation of the prior law was issued. For years taxpayers and their representatives have complained about the DOR’s narrow interpretation of the law regarding who may sign POA forms for corporate taxpayers. The DOR, on the other hand, believed that it was being as flexible as it could under the law. The problem got so bad that the DOR recently claimed that a seven-figure tax refund claim was invalid because it was submitted by a practitioner whose POA form was not signed by someone authorized to sign it. The Arizona Legislature unanimously passed S.B. 1385 to fix this vexing problem, and Gov. Doug Ducey signed it on April 12, 2018.

How the Problem Began Like most states, Arizona has strict laws that prohibit DOR officials from releasing confidential taxpayer information to unauthorized individuals. It is a felony for DOR officials to knowingly disclose confidential information and a misdemeanor if they do so mistakenly. Accordingly, when the DOR took an official position on who “principal officers” are for purposes of Arizona’s statute that permits the agency to release confidential information to the principal officers of corporate taxpayers, they played it safe and limited the term to CEO, president, secretary, treasurer and vice president. Of course, taxpayer representatives for large corporate taxpayers have had a difficult time getting such high-level corporate officers to sign the POA forms.

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.

Who May Sign POAs Now? S.B. 1385 defines “principal officer” to include “chief executive officer, president, secretary, treasurer, vice president of tax, chief financial officer, chief operating officer or chief tax officer or any other corporate officer who has the authority to bind the taxpayer on matters related to state taxes.” Essentially, the legislature tried to list all of the titles of individuals that the DOR claims normally sign POA documents for corporate taxpayers. Then to be safe, the legislature added that, “[i]f a corporate officer signs a statement under penalty of perjury representing that the officer is a principal officer, the department may rely on the statement until the statement is shown to be false.” Based on this provision, the DOR recently modified its POA forms to include such a statement so it now accepts POA forms signed by any authorized corporate officer regardless of title. n

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Rentals as a Trade or Business by Edward K. Zollars, CPA One question not directly addressed in the proposed regulations is the question regarding under what circumstances a rental is considered a trade or business. This is important because in order for any activity to qualify for the §199A deduction, it must rise to the level of a §162 trade or business per the definition in the proposed regulations.

Existing Law on Rentals as a Trade or Business A rental could be either a trade or business or simply a transaction entered into for a profit. The Supreme Court recognized this distinction and gave us a “fact and circumstances” based test to determine the difference in the 1987 case of Groetzinger v. Commissioner, 480 US 23. Of course, not every income-producing and profit-making endeavor constitutes a trade or business. The income tax law, almost from the beginning, has distinguished between a business or trade, on the one hand, and “transactions entered into for profit but not connected with . . . business or trade,” on the other. See Revenue Act of 1916, 5(a), Fifth, 39 Stat. 759. Congress “distinguished the broad range of income or profit producing activities from those satisfying the narrow category of trade or business.” Whipple v. Commissioner, 373 U.S., at 197 . We accept the fact that to be engaged in a trade or business, the taxpayer must be involved in the activity with continuity and regularity and that the taxpayer’s primary purpose for engaging in the activity must be for income or profit. A sporadic activity, a hobby, or an amusement diversion does not qualify. In the past, the issue didn’t matter often for a rental, since expenses related to the rental would be deductible in computing adjusted gross income in either case: • Under IRC §62(a)(4) if the rental was “merely” an activity entered into for a profit or • Under IRC §62(a)(1) if the rental rose to the level of a trade or business. In those cases where the issue has arisen, most often the courts have found the taxpayer’s rental rose to the level of a trade or business. In the case of Fackler v. Commissioner, 133 F.2d 509 (1943) a taxpayer renting a single office building was found to have a trade or business activity. In the case of Hazard v. Commissioner, 7 TC 372 (1946) a single-family residence was held to be sufficient to constitute the conduct of a trade or business. However, the Second Circuit Court of Appeals has contrary authority in the case of Grier v. United States, 120 F.Supp. 395 (1954), affd, CA2 218 F. 2d 603 (1955) where renting a single property was held by the trial court not to rise to a trade or business due to the following: In this case, the activities with relation to this single dwelling, although of long duration, were minimal in nature. Activity to rent and re-rent was not required.

No employees were regularly engaged for maintenance or repair. What has consistently not been found to be rentals rising to the level of a trade or business are a triple-net lease rental. In Revenue Ruling 73-522, which looked at the very similar definition of a trade or business under IRC §871, the IRS held: In the instant case, the taxpayer’s only activity in the United States during the taxable year ended December 31, 1971, was the supervision of the negotiation of leases covering rental property that he owned during that year. No other activity was necessary on the part of the lessor in connection with the properties because of the provisions of the net leases. The taxpayer’s supervision of the negotiation of new leases is not considered to be beyond the scope of mere ownership of real property or the mere receipt of income from real property since such activity was sporadic rather than continuous (that is a day-to-day activity), irregular rather than regular, and minimal rather than considerable. Accordingly, the taxpayer in the instant case is not considered to be engaged in trade or business within the United States during the taxable year ended December 31, 1971, within the meaning of section 871 of the Code. The problem with a triple-net lease is that the taxpayer nor his/her agents do not have enough activity to be considered in a trade or business as opposed to merely being an investor. In this case, aside from mentioning treating self-rentals to controlled businesses as a trade or business, the IRS is silent in the proposed regulations regarding this issue. Certainly, outside the 2nd Circuit, it appears most leases that are not triple-net leases will be deemed to be trades and businesses and thus part of the QBI calculation. Similarly, triple-net leases, unless they are self-rentals covered by the rule described below, will not become part of QBI. However, we may still see guidance come. The last time the issue arose, as part of the §1411 net investment

OCTOBER 2018 AZ CPA

income regulations, the IRS added a safe harbor rule that applied to certain real estate professionals in the final regulations, even though no special guidance had appeared in the proposed regulations.

Self-Rentals A key definition found in Proposed Reg. §1.199A-1(b) relates to what is a trade or business for purposes of IRC §199A. That definition is key, because only income from a trade or business qualifies for this deduction. The definition provides:

Trade or business means a section 162 trade or business other than the trade or business of performing services as an employee. In addition, rental or licensing of tangible or intangible property (rental activity) that does not rise to the level of a section 162 trade or business is nevertheless treated as a trade or business for purposes of section 199A, if the property is rented or licensed to a trade or business, which is commonly controlled under §1.199A4(b)(1)(i) (regardless of whether the rental activity and the trade or business are otherwise eligible to be aggregated

Arizona Federal Tax Institute Conference Nov. 1-2 Black Canyon Conference Center 8 a.m. to 4:30 p.m. Now Also Offered as a Webcast Day 1 • 10 Things You Need to Know About International Tax Now • Recent Developments in IRS Collection Practices • Choice of Entity After Tax Reform • Another Year: More Ethics Lessons Learned • Estate Planning After the Tax Cuts and Jobs Act • Partnership Audit Rules: What You Need to Know Now

Day 2 • Sales Tax Reform – Nexus is Everywhere • The CPA’s Role in a Client’s Bankruptcy • Politics, Policy & Practicality • The State of Our Tax Law and Relevance to Practice • 2018 Tax Update: The First Year of TCJA

Learn more at www.ascpa.com/tic2018 12

AZ CPA OCTOBER 2018

under §1.199A-4(b)(1)). The inclusion of rentals that do not rise to the level of a trade business as a trade or business if they are rented to a business that is commonly controlled is an important provision in these regulations. As the IRS explains in the preamble: Solely for purposes of section 199A, the rental or licensing of tangible or intangible property to a related trade or business is treated as a trade or business if the rental or licensing and the other trade or business are commonly controlled under proposed §1.199A-4(b) (1)(i). It is not uncommon that for legal or other non-tax reasons taxpayers may segregate rental property from operating businesses. This rule allows taxpayers to aggregate their trades or businesses with the associated rental or intangible property under proposed §1.199A-4 if all of the requirements of proposed §1.199A-4 are met. In addition, this rule may prevent taxpayers from improperly allocating losses or deductions away from trades or businesses that generate income that is eligible for a section 199A deduction. The level of common control necessary to combine the rental with the other business activity is defined at Proposed Reg. §1.199A-4(b)(1)(i) as follows: The same person or group of persons, directly or indirectly, owns 50 percent or more of each trade or business to be aggregated, meaning in the case of such trades or businesses owned by an S corporation, 50 percent or more of the issued and outstanding shares of the corporation, or, in the case of such trades or businesses owned by a partnership, 50 percent or more of the capital or profits in the partnership … n Edward K. Zollars, CPA, is a partner with the firm of Thomas, Zollars & Lynch, Ltd. He is a Life Member of the ASCPA. Zollars presents courses for Loscalzo Associates and is involved in producing the Current Federal Tax Development Update Podcast and website, dealing with current tax issues. He can be reached at edzollars@thomaszollarslynch.com.

New SOC Report Framework Addresses Emerging Risks by Michael S. Nyman, CPA With new and more complex risks emerging, the AICPA significantly changed the criteria used in system and organization control (SOC) reports. In 2017, the American Institute of Certified Public Accountants (AICPA) announced major changes to its trust services criteria (TSC), which affects the controls that must be included in SOC 2, SOC 3, and SOC for cybersecurity reports. To date, most of the SOC 2 and SOC 3 reports published by service organizations have continued to use the trust services principles (TSP) reporting framework that was released in 2016: TSP Section 100A. That’s been an acceptable reporting framework, because the newest reporting criteria has been optional since it was released last year. But that’s changing in the near future. The new criteria will be required for reports with end-periods that close on or after December 15, 2018. However, for reports with end-periods that stop on the November 30 reporting period, you can still use the old TSP framework. If you aren’t already using the new report, the general reporting concepts are largely similar to the existing framework, but the structure itself and level of detail are more transparent. Here’s what the changes are all about.

OCTOBER 2018 AZ CPA

•

• •

The AICPA integrated the trust services criteria with the widelyused and well-respected Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework. The update clarifies confusion by updating the framework name. The Trust Services Principles and Criteria is now simply Trust Services Criteria. The updates better address evolving cybersecurity risks. The framework allows for greater

flexibility in how the trust criteria are applied.

The New Trust Service Criteria Generally, TSC control criteria are for use in attestation or consulting engagements to evaluate and report on controls over the security, availability, processing integrity, confidentiality and privacy of information and systems. The new criteria provide a more flexible framework. Now it can be applied (a) across an entire entity; (b) at a subsidiary, division, or operating unit level; (c)

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AZ CPA OCTOBER 2018

within a function relevant to the entity’s operational, reporting, or compliance objectives; or (d) to a particular type of information used by the entity.

Alignment with COSO The 2017 TSC update integrates with the 2013 COSO framework, which applies the internal control framework to the entire entity or a segment of an entity. Integrating this well-respected framework into the TSC makes sense because, like COSO, the TSCs are used to evaluate internal controls — specifically, controls over security, availability, processing integrity, confidentiality, and privacy. The COSO framework uses 17 principles to refer to the elements of internal controls that must be present or functioning for the entity’s internal control to be considered effective. The 2016 update did not use the same terminology. To avoid confusion, the AICPA renamed its framework “trust services criteria.” The same five principles (security, availability, processing and integrity, confidentiality and privacy) are still used but now are denoted as “trust services categories.”

The 17 COSO Principles COSO’s 17 principles are incorporated into the TSC common criteria and categorized into the following classifications: • Control environment (CC1 series) • Communication and information (CC2 series) • Risk assessment (CC3 series) • Monitoring activities (CC4 series) • Control activities (CC5 series) As seen in previous versions of the TSP, there are common criteria for all five of the trust services categories to avoid some of the redundancies. The security category consists of the complete set of the common criteria, and then there are additional criteria specific to availability, processing integrity, confidentiality and privacy.

Addressing Cybersecurity Risks To better address cybersecurity risks, the AICPA further modified the 17 principles into four groupings: • Logical and Physical Access Controls — How an entity restricts logical and physical access, provides and removes that access and prevents unauthorized access (CC6 series). • System Operations — How an entity manages the operation of the system(s) and detects and mitigates processing deviations, including logical and physical security deviations (CC7 series). • Change Management — How an entity identifies the need for changes, makes the changes using a controlled change management process and prevents unauthorized changes from being made (CC8 series). • Risk Mitigations — How an entity identifies, selects and develops risk mitigation activities arising from potential business disruptions and the use of vendors and business partners (CC9 series).

A More Flexible Application The COSO framework has had “points of focus,” characteristics important to that criterion, but the points are new to TSC and SOC reporting. Each criterion is presented with several points of focus to help the organization evaluate whether the controls are suitably designed and operating effectively. The 2017 TSC consists of 33 common criteria with almost 200 points of focus. For all five categories, there are 61 criteria with almost 300 points of focus. Do not be worried about the numbers listed above, because service auditors or the practitioner (i.e., CPA firms) are already reviewing the majority of the points of focus. The points of focus are spelled out in this way to distinguish it from prior TSP updates. Applying the TSC in actual situations requires the organization to use judgment when applying the criterion, based on understanding the facts and

circumstances of the organization and its environment in the actual situation. In addition, not all points of focus are suitable or relevant to the entity or engagement. The guidance at TSP 100.04 also mentions that an assessment of whether all points of focus were addressed is not required.

Points of Focus Example Points of focus can be illustrated with an example of logical and physical access control (CC6.2). That criteria says: “Prior to issuing system credentials and granting system access, the entity registers and authorizes new internal and external users whose access is administered by the entity. For those users whose access is administered by the entity, user system credentials are removed when user access is no longer authorized.” The Trust Services Criteria then list the following points of focus: • Controls Access Credentials to Protected Assets — Information asset access credentials are created based on an authorization from the system’s asset owner or authorized custodian. • Remove Access to Protect Assets When Appropriate — Processes are in place to remove credential access when an individual no longer requires such access. • Review Appropriateness of Access Credentials — The appropriateness of access credentials is reviewed on a periodic basis for unnecessary and inappropriate individuals with credentials.

Where to Find the New Trust Services Criteria The AICPA website has a complimentary criteria mapping document, which shows how each of the new criteria and points of focus relates to the 2016 trust services principles and criteria. Each organization’s situation is unique, and mapping it out will provide a general idea of the relationship between the 2016 TSP and the 2017 TSC. The 2017 trust services criteria itself can be purchased from the AICPA store.

Your Next Steps If you have already issued a SOC 2 or SOC 3 report or are planning for a future SOC 2, SOC 3 or SOC for cybersecurity report, you’ll need to gain an understanding of the new trust service criteria to evaluate the organization’s current control posture, identify potential gaps and incremental required controls, establish a timeline for completion, and secure organizational resource commitments for the next examination under the TSC criteria. n Michael S. Nyman, CPA, CISA, SSP, CITP, CRISC, is with CliftonLarsonAllen LLP. This article was originally published on CLAconnect.com. For more information, visit CLAconnect.com.

More on this topic will be discussed at the Technology for Accounting Conference on December 7, 2018. www.ascpa.com/tech2018

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• 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 is a comprehensive reference that highlights the differences between Arizona and Federal income tax law and provides references to the Arizona Revised Statutes for a more in-depth analysis. It highlights the differences between individual, corporate, partnership and trust taxes, includes tax tables, and is arranged in a way that facilitates research on any topic. • The Arizona Sales and Use Tax Guide is a resource for anyone preparing or filing city sales and use tax returns. The guide details the various sales tax classifications, exemptions, deductions and rates as well as compliance, audits, refund claims and administrative appeals. • The Arizona Personal Property Tax Guide provides an overview of Arizona’s personal property tax system, including exemptions, the classification structure and assessment rates, reporting, valuation and appeals. • The Arizona Unclaimed Property Guide explains what unclaimed property is, reporting requirements for holders of unclaimed property, how owners of unclaimed property can claim their property and audits.

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Order online at www.ascpa.com/taxguide Name ______________________________________________ Company ___________________________________________ Address ___________________________________________ City _____________________State ______ Zip ____________ Phone _____________________ Fax ____________________ Email ______________________________________________

r CPA r Attorney r EA r Other: _____________________

Method of Payment: r Check r VISA

r MasterCard r American Express

Name on Card ______________________________________ Card Number _______________________________________ Exp. Date ____________ Amount $ _____________________ Signature of Cardholder_______________________________

Please return this form and payment to:

Arizona Society of CPAs 4801 E. Washington St., Ste. 180 Phoenix, AZ 85034-2040 Fax credit card orders to:

(602) 252-15112018 AZ CPA OCTOBER

Sales tax, standard shipping and handling prices are included.

*The ASCPA will be processing checks submitted in payment as an Electronic Funds Transfer (EFT) transaction. Funds may be withdrawn from your account as soon as the same day we receive your payment.

Using Social Media to Improve Your Business Building Your Online Presence

The Benefits of Being Social You might not be comfortable with promoting yourself on social media, but getting over some of those fears might be the best way to increase your business at little cost to you. Newer businesses rely on social media for most of their interactions with others, and CPAs need to keep up with the times. Like it or not, social media is your online identity, and you should control it. Here are several platforms that you should become familiar with:

LinkedIn One of the easiest and most professional social media sites for CPAs is LinkedIn. Hopefully, you already have a profile set up on this here. If not, get started by setting up your profile. There are a few ways you can make the most of your LinkedIn experience: • Create/Update Your Profile: Make sure your picture is professional and up-todate, as well as your list of work experience and education. • Make sure you have a professional summary. Within this summary, make sure to include the keywords for which you’d like to be known, like tax specialist or small business coaching. Your summary should let people feel like they know you, and it should inspire them to want to know you better or use your services. • Next, add additional items (articles, videos, blogs) if you have them. LinkedIn

OCTOBER 2018 AZ CPA

has an area where you can post articles or write a blog. This is a great place to let potential clients know about your expertise. You can write about current law changes, financial management or planning advice or any topic where you might have some special knowledge or insight. • List your volunteer positions and service. • Create your own personal URL. LinkedIn allows you to do this under the profiles edit tab. When you are done with your profile, be sure to connect with your colleagues and clients on LinkedIn. LinkedIn can be a powerful networking tool — if you let it. Instead of just saving the connections you’ve met throughout your professional life, actively engage with contacts by liking, sharing and commenting on their activity. Join professional group pages and post to them if you have something

you can add. Join the ASCPA LinkedIn group just for our members.

Facebook Business Page Make sure you are not using a personal profile for your business, instead of an actual Facebook Business Page. A Business Page provides you with content creation tools, paid promotional opportunities and analytics/insights. Plus, a personal profile requires people to send you a friend request in order to engage with you, and the last thing you want to do is make it more difficult for your clients or customers. Here are some tips to help you get started, or make the most of your page: • Add an engaging profile photo. Use a professional photo if possible. If you have a CPA firm, hire a professional photographer to take a picture of your staff. • Add a Call to Action button — even something as simple as Contact Us works.

•

Post photos or videos to your page when appropriate. It may seem challenging to find something fun or unique to post about your business, but you could post your staff volunteering at a local animal shelter, pictures of your clients’ businesses (with their knowledge and permission of course), pictures of an article you published, etc. • Create an editorial calendar where you decide what and when to post. Content creation can be key to keeping people coming back to your page. Look at other similar company pages for ideas, and make sure to follow the ASCPA Facebook page as well (www. facebook.com/ASCPA).

Twitter Tweeting has definitely become more of a news phenomenon in the last few years. CPAs who want to be distin-

So You Want to Buy or Sell an Accounting Practice? Here are the Keys! If your 2018-19 goals include selling your practice to begin to enjoy your well-deserved retirement plans or you’re confident that now is the time for you to grow and prosper by acquisition. Now is the time to talk!

Recently Sold Arizona Practices Through Able Tax and Accounting Practice Sales

Location Phoenix Flagstaff Tucson Flagstaff

License Gross Revenue CPA $ 400,000 CPA 415,000 CPA 890,000 CPA 260,000 (… and more are currently in negotiations)

Visit our web site at www.ableta.com Gary W. Hankins, CPA* hankins@ableta.com (817) 738-3287 *Licensed in Texas

Visit our web site at www.ableta.com for further discussion of the process of buying and selling accounting and tax practices plus review our success story, principles of operation and how our customers appreciate our services. THIS IS ONE OF THE MOST IMPORTANT DECISIONS OF YOUR CAREER! We can answer all your questions.

AZ CPA OCTOBER 2018

guished as thought leaders or provide great up-to-date information can use this venue successfully. To do this, follow these rules: • First, make the best use of Twitter’s custom profile background — this is an opportunity to add more information about your business. Create a professional background image (reuse your Facebook Business Page image perhaps?) Do not leave the background image blank. • In your profile description, create a brief, effective summary of your business and include relevant keywords (for Twitter search) and a link back to your Facebook Business page and website. • Follow others in accounting — like the AICPA, Journal of Accountancy and the ASCPA Twitter feed. Retweet information that has something to do with the profession or the types of businesses you serve. • Follow your customers and clients (and retweet their content when appropriate). They will appreciate it, and you will get to know more about their businesses. • Publicize your Twitter account — and all of your other social media accounts — on your website, in your email signature, on your Facebook Business page, etc.

Instagram, YouTube and other Social Media Sharing Sites There are a lot of sites out there where you can connect with clients, and new ones are being created all of the time. You need to evaluate what type of sites are used by your customer base and what will serve you the best. If you have a large client base made up of millennials, it might be worth your time to investigate using Instagram. If you have content that can be portrayed well on video, such as presentations or speaking engagements, then you should try posting on YouTube. There is a lot of

Five Ways to Master Social Media (and Help Grow Your Business) Today! 1. Use Connect Connect is an online network for ASCPA members only that allows you to interact and communicate with your peers. Members who use this site frequently get referrals and business from other members. Try out Connect today. (connect. ascpa.com)

2. Make a Comment Become a valued contributor to a social community, either on Facebook, LinkedIn or Twitter. Soon people will respect your opinion and seek out your advice. Local business and community groups will benefit from your expertise. They are also more likely to recommend your services when someone they know is looking for a good CPA. Support others by liking or sharing their posts.

3. Give Back Joining a group, committee or organization in your community gives you a chance to not only give back and participate in other interests; it also gives you a whole new group of possible clients and business connections, all while making a difference. Once you join, make sure to follow and post to their social media groups and make yourself known.

4. Become an Expert Writing for local sites or guest blogging about financial planning or tax tips or other topics of expertise is a good way to get your name out in the public. Discussing topics on Connect, or writing articles in AZ CPA magazine or on the ASCPA LinkedIn group, can help you get referrals from other CPAs. Writing a blog can also help you establish yourself as an expert.

5. Picture This A picture is still worth a thousand words — post fun or meaningful photos on your Facebook Business page. Good examples include: volunteer activities, staff changes or promotions, fun vacation pictures, attendance at conferences, client activities or causes.

information available online to help you get started and give you ideas on how to grow your business. As long as you make sure to present your information in a professional manner that suits your business, you are well on your way. n — Patty Gannon

ASCPA Social Media Sites ASCPA Website — www.ascpa.com Facebook — www.facebook.com/ ASCPA Twitter — twitter.com/ASCPA Connect — connect.ascpa.com ASCPA LinkedIn — www.linkedin. com/groups/962417

OCTOBER 2018 AZ CPA

AZ CPA OCTOBER 2018

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 October 2019. Please note that users have three attempts to pass the quiz with at least a 70 percent score.

October 2018 Issue of AZ CPA* 1. What bucket list item did ASCPA Chair Mike Allen mention in his column on technology? m Climbing Mt. Kilimanjaro m Walking on the Brooklyn Bridge m Seeing Cats the Musical 2. The Arizona Legislature passed S.B. 1385 to fix what problem? m DOR’s narrow interpretation of the law regarding who may sign POA forms for corporate taxpayers. m High tax penalty fees m Auditor rotation issues 3. Senate Bill 1385 went into effect on August 3, 2018 and is retroactive to: m May 23, 2015 m April 15, 2016 m August 3, 2017

m Proposed Reg C m Proposed Reg §1.196 5. The definition found in Proposed Reg. §1.199A-1(b) is key, because only income from a trade or business qualifies for this deduction. m True m False 6. The new criteria for SOC reports will now be required for reports with

7. Where can you find a complimentary criteria mapping document, which shows how each of the new criteria and points of focus relates to the 2016 trust services principles and criteria? m IRS.gov m TSCs R Us. com m The AICPA Website 8. What is the name of the ASCPA’s online networking group for members only? m ASCPA Internet m Tax Talk m Connect 9. When promoting your company o r f i r m o n Fa ce b o o k , i t i s recommended that you use: m Adobe InDesign m A Facebook Business page m An outside agency 10. If you have a large client base made up of millennials, it might be worth using: m Facebook m Instagram m Direct mail

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. The level of common control necessary to combine a rental with another business activity is defined at: m Proposed Reg. §1.199A-4(b)(1) (i)

end-periods that close on or after: m January 15, 2019 m December 1, 2018 m December 15, 2018

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.

OCTOBER 2018 AZ CPA

Classifieds Employment CPA/EA NEEDED — Seeking a seasoned professional with 5-7 years of experience to prepare and be responsible for all tax returns for an accounting office. Knowledge of individual and business returns is required. The ability to interact with clients and existing personnel is also a requirement. A good client base exists with potential for growth and earnings. This could be a performance base (productivity and collections) position. This established accounting office has been in Mohave county for over 20 years. Please send resume to mikeresume@yahoo.com. SEEKING SEASONED FINANCIAL CONTROLLER — SCOTTSDALE, AZ — Post Harvest Technologies, Inc. Manage finance and accounting departments providing information, primarily,

financial in nature, about all company activities that will assist management in making educated economic decisions about the company’s future. This is a hand’s on position requiring knowledge of quick books enterprise wholesale and manufacturing version.This is a full-time salaried position. Required Education and Experience: 1. Bachelor’s degree in accounting or finance. 2. Ten years of hands-on accounting managerial experience in agriculture industry. Please email for full job description: anne@jlwhiteinternational.com.

Office Space CPA FIRM OFFICE SPACE IN CENTRAL PHOENIX (16TH STREET CORRIDOR) — Possibility of shared resources/services with 8 other CPAs in the building. Recently renovated office

space approx. 2,300 SF with separate entrance available in a premier professional location with great visibility. Call Jason at (602) 850-5100, or e-mail jason@azcre.biz. OFFICE BUILDING FOR SALE — DOWNTOWN PHOENIX — 550 W. Portland St — Historic Roosevelt District. Historic bungalow beautifully restored and converted to 5 offices, spacious conference room, reception with fireplace, kitchen and bath. Covered parking for 6. Wood floors, exposed brick, built in oak bookshelves and window seat. Approx. 1700 sq.ft. Presently owner occupied law office. Not a typical redo! Shown by appointment only. Sherry Rampy (602) 571-5032. HIGHLY DESIRABLE OLD TOWN SCOTTSDALE OFFICE SPACE — Two offices available with covered

CPEvening

Eat, Drink and Be Educated Sponsored by Enterprise Bank & Trust November 14 5:30 – 8 p.m.

Blanco’s Tacos

2502 E Camelback Rd., Ste. 122 Phoenix, AZ 85016