Tax Season 2016 by Receivables Advisor

ITI

PERFECTING YOUR TAX RESEARCH TECHNIQUES REDUCING IRS PENALTIES 6 TAX TIPS FOR TAX SEASON CROWDFUNDING REQUIRES REVIEWS BY CPAS TAX RAMIFICATIONS OF RECENT SUPREME COURT DECISIONS WILL YOUR CLIENTS RUN AFOUL OF ACA’S LARGEST PENALTY?

LEWIS TESTIFIES AT CONGRESSIONAL COMMITTEE Vol. 16, No. 1

Troy Lewis, CPA

2015 IRS VOLUNTARY DISCLOSURE PROGRAM – 7 YEARS LATER CHANGES IN DEALING WITH THE IRS FAVORABLE TAX RATE ON DIVIDENDS CHECKLIST: TAX PLANNING CHALLENGES PROTECTING YOUR CLIENT’S ASSETS FROM LAWSUITS USING ENTITIES

Tax Season 2016

3 Hours of CPE

CPA Magazine P.O. Box 92342 Southlake, TX 76092

CPA MAGAZINE’S 2016 BUYERS GUIDE

PRSRT STD US POSTAGE PAID COLLECTION ADVISOR

WHEN THE Obtain Form 2848 Power of Attorney

IRS CALLSâ&#x20AC;Ś

Determine Audit Scope

Deficiency? Yes Discuss with Group Mgr.

Settle?

No Submit Freedom of Information Request for IRS Workpapers Arrange Appeals Conference

Settle? No File Tax Court Petition Pre-Trial Conference

Settle? No Tax Court Trial

CONTACT CPA TAX DEFENDER If the IRS contacts a client about an audit, contact CPA Tax Defender, a network of experienced CPAs and Attorneys who handle the IRS audit for you or advise you on the next step. A systematic approach provides reports for you to provide your client to determine the next step...all the way to Tax Court.

888-610-1144

TA X R E P R E S E N TAT I O N SERVICES

2016 TAX SEASON ISSUE

e m o c l e W 6 Sidney Kess CPA, J.D., LL.M

Jerry Love CPA/PFS, CFP, CVA, ABV, CITP, CFF, CFFA

Robert E. McKenzie J.D.

Julie Welch CPA, CFP

T. Steel Rose CPA, Editor

Martin M. Shenkman CPA, MBA, PFS, J.D.

appy New Year and Happy Tax Season from all of us here at CPA Magazine! As the 1040s begin piling up this special Tax Season 2016 issue of CPA Magazine will dispense helpful tax information from some of the top minds in the industry. A great deal of the information in this magazine is summarized by the CPA Magazine Tax Season 2016 CPE Quiz on page 29. The quiz is worth three CPE credits and can be submitted via fax, email, or mail. This issue also features the CPA Magazine’s 2016 Buyers Guide. The Guide, beginning on page 26, features numerous categories of products and services tax professionals can use to make this tax season the best one yet. The Guide is also featured at CPAMagazine.com and is optimized with hot links for easy access to products of your choosing. Among the content featured in this issue, Tax Advisor Sidney Kess, CPA recaps recent changes concerning the end of some IRS programs and the changing of others. Financial Advisor Jerry Love, CPA summarizes four critical items that may impact 2016 and beyond including SSARS 21. IRS Defense Advisor Robert E. McKenzie, J.D. discusses IRS penalties and how a CPA and his/her client might avoid them. Tax Client Advisor Julie Welch, CPA explains dividends and how one might receive a favorable tax rate on them. As your Tax Tips Advisor, I will reveal six quick tax tips that will come in useful during your tax season. Tax Planning Advisor Martin M. Shenkman, CPA discusses how important it is to protect assets in estate planning and how entities can help. Given the detailed nature of some of these articles, portions of them are continued online. The conclusions of these articles as well as a slew of other articles can be found at CPAMagazine.com. Have a wonderful tax season and contact me if you need anything.

T. Steel Rose CPA, ACS Editor

editor@cpamagazine.com

3 I TA X S E A S O N 2 016

www.CPAmagazine.com

CPAmagazine.com

2016 Buyers Guide

ACCESS ONLINE

MANAGE, ENHANCE AND EXPAND YOUR PRACTICE

Tax Season 2016

ADVISORS

FEATURES

TAX ADVISOR

Tax Ramifications of Recent Supreme Court Decisions

2015 IRS Voluntary Disclosure Program – 7 Years Later

Changes in Dealing with the IRS Sidney Kess, CPA, J.D., LL.M

FINANCIAL ADVISOR

Movie Production Tax Incentives

SSARS 21 and Other Critical Changes Jerry Love, CPA/PFS, CFP, CVA, ABV, CITP, CFF, CFFA

SIDNEY KESS, CPA, J.D., LL.M

ADAM S. FAYNE, J.D.

A Practical Guide to Perfecting Your Tax Research Techniques and Achieving Sustainable Tax Return Filing Positions

CHECKLIST: Tax Planning Challenges

PETER J. SCALISE

MARTIN M. SHENKMAN,CPA, MBA, PFS, J.D.

IRS DEFENSE ADVISOR Reducing IRS Penalties

Robert E. McKenzie, J.D. 12

TAX CLIENT ADVISOR

Favorable Tax Rate On Dividends Julie Welch, CPA, CFP

Claim Lifetime Learning Credits

The “Innocent Spouse” Claim

6 Tax Tips for Tax Season T. Steel Rose, CPA

T. STEEL ROSE, CPA

JERRY LOVE, CPA/PFS, CFP, CVA, ABV, CITP, CFF, CFFA

Lewis Testifies at Congressional Committee T. STEEL ROSE

23 C

omplete Paper Trails Boost Collections

Will Your Clients Run Afoul of ACA’s Largest Penalty?

TAX PLANNING ADVISOR Protecting your Client’s Assets From Lawsuits Using Entities Martin M. Shenkman, CPA, MBA, PFS, J.D.

f CPE

so 3 Hour

www.CPAmagazine.com

Crowdfunding Requires Reviews by CPAs

Employee or Independent Contractor?

TAX TIPS ADVISOR

CPAMAGAZINE.COM

18 25 20

26 29 29

IACC

Cover photo: Sam Kittner/kittner.com

4 I TA X S E A S O N 2 016

Volume 16, No. 1

JERRY LOVE, CPA/PFS, CFP, CVA, ABV, CITP, CFF, CFFA

CPA Magazine’s 2016 Buyer’s Guide CPE Quiz

January/February 2016

.com

Movie Production Tax Incentives BY PETER J. SCALISE

hether you’re a publicly held movie studio conglomerate producing and distributing substantial numbers of films annually commanding significant shares of box office revenues worldwide or an independent filmmaker, movie production tax incentives should certainly be considered and incorporated into the tax planning process to properly tax effect the cost of filmmaking.

Synopsis of Movie Production Tax Incentives

Movie Production Tax Incentives (MPIs) are tax benefits offered on a state-by-state basis throughout the United States to entice, as applicable, in-state qualified phases of filmmaking production such as the Qualified Pre-Production Phase, the Qualified Production Phase, and the Qualified Post-Production Phase. It should be duly noted that it is fairly common practice in the movie studio industry to shoot the aforementioned phases of qualified production throughout several locations (e.g., Qualified Production Phase in the City of Los Angeles in California, USA and the Qualified Post-Production Phase in the City of Vancouver in British Columbia, Canada) and consequently it is critical to be cognizant of incentives available, as applicable, not only state by state within the United States but also country by country worldwide. While the applicable Qualifying Production Activities (QPAs) vary significantly from state-to-state, many common QPAs include, but are not limited to, feature films, episodic television series, relocated television series, television pilots, television movie, and mini-series. In contrast, as a caveat, many states generally consider the subsequent productions to be non-qualified production activities and consequently not eligible for MPIs such as documentaries, news programs, 5 I TA X S E A S O N 2 016

www.CPAmagazine.com

interview/talk programs, instructional videos, sports events, daytime soap operas; reality programs, commercials, and music videos. Additionally, while the applicable Qualifying Production Expenditures (QPEs) also vary significantly from state-to-state, many common QPEs include, but are not limited to, salaries, facilities, props, travel, wardrobe, and set construction. It is always critical to establish clear nexus between QPAs and corresponding QPEs. “Approximately forty states currently offer MPIs with most being either transferable (e.g., transferable credits allow production companies that generate tax credits greater than their tax liability to sell those credits to other taxpayers, who then use them to reduce or eliminate their own tax liability) or refundable (e.g., refundable credits are such that the state will pay the production company the balance in excess of the qualified expenses). “ The structure, type, and size of the incentives vary significantly from state to state. Many MPIs may include tax credits, tax rebates and/or exemptions (e.g., sales and use tax exemptions on movie production equipment, sales and use tax exemptions on lodging, etc.) while other state incentive packages may include cash grants, fee-free locations among many other diverse and advantageous incentives. The state-by-state legislative histories and policies driving MPIs are clearly aimed at increasing economic growth at the state and local levels through filmmaking and television production throughout the United States, while curtailing the departure of movie production to other countries.

Approximately forty states currently offer MPIs with most being either transferable (e.g., transferable credits allow production companies that generate tax credits greater than their tax liability to sell those credits to other taxpayers, who then use them to reduce or eliminate their own tax liability) or refundable (e.g., refundable credits are such that the state will pay the production company the balance in excess of the qualified expenses). It is critical to design and implement a sustainable methodology that will incorporate all applicable MPIs to obtain the proper tax effect of the cost of filmmaking regardless of the size and structure of the movie studio or production conglomerate. Tax incentives matter whether your client is one of the “big six majors” (e.g., Paramount Motion Pictures Group (Viacom), Warner Bros. Entertainment (Time Warner), The Walt Disney Studios (The Walt Disney Company), NBC Universal (Comcast), Columbia TriStar Motion Pictures Group (Sony), and Fox Filmed Entertainment (21st Century Fox).) or a leading independent producer/distributor commonly referred to as the “mini-majors” (e.g., Lionsgate Films, The Weinstein Company, Open Road Films, CBS Films, DreamWorks Studios, and MGM Pictures) or a smaller production and/or distribution company known as independents or “indies.” As a direct result of these advantageous MPIs, filmmakers may be able to jubilantly end their productions saying, “Lights, Camera, Action and Tax Cut!” Peter J. Scalise serves as the Federal Tax Credits & Incentives Practice Leader for Prager Metis CPAs, LLC who represents entertainment industry clients for their specialty tax incentive needs including the “Big Six Majors”, the “MiniMajors” as well as many independent production studios and film finance companies.

Changes in Dealing with the IRS

In the 14 years that the program was operational, only two cases were settled through arbitration.

A handful of important changes impact relations between the IRS and taxpayers. The IRS has ended some of its programs while starting a new one; new laws have changed the rules affecting some dealings with the IRS. Here is a roundup of some of those changes.

Six-Year Statute of Limitations

While the IRS usually has three years from the due date of the return to commence an audit (Code Sec. 6501(a), the IRS has six years in which to act when a taxpayer omits 25% from gross income, provided the omission is more than $5,000 (Code Sec. 6501(e)(1)), the question of what constitutes “gross income” for this purpose may not always be clear. In 2012, the U.S. Supreme Court held that the overstatement of basis, which results in an understatement of gain on the sale of property, is not an omission from gross income for purposes of the six-year statute of limitations (Home Concrete & Supply, LLC, 132 S. Ct. 1836 (2012)). Now, however, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (P.L. 114-41) has effectively reversed the Court’s ruling. Under the new law, which became effective on July 31, 2015, an overstatement of basis that produces an understatement of gain constitutes an omission from gross income triggering the six-year statute of limitations. Thus, the change applies to tax returns filed after July 31, 2015. However, it also applies to any returns filed prior to this date that are not closed by the statute of limitations or by consent of the taxpayer. It also applies to cases before the Tax Court that were docketed before July 31, 2015, if the tax year is still open.

Arbitration Program

In 2000, the IRS directed the IRS to start a pilot program offering arbitration to resolve taxpayer disputes (Code Sec. 7123(b) (2)). The IRS followed up with a number of such pilot programs and, in 2006, made the Appeals arbitration program permanent. Now the IRS announced it was terminating the program, effective September 21, 2105 (Rev. Proc. 2015-55, IRB 2015-ADD). The reason for the end to the program was simply lack of interest on the part of taxpayers. In the 14 years that the program was operational, only two cases were settled through arbitration. Alternative dispute resolution with the IRS can still be done through mediation under certain conditions. There are different mediation programs for large corporations, small businesses and self-employed individuals, and tax-exempt organizations; see www.irs.gov/Individuals/Appeals-MediationPrograms for details. 6 I TA X S E A S O N 2 016

www.CPAmagazine.com

Tax Advisor

Sidney Kess, CPA, J.D., LL.M

Get Transcript

About 23 million taxpayers used the online Get Transcript service from the IRS in the past tax return season (http://www. irs.gov/uac/Newsroom/Get-Transcript-Application-Questionsand-Answers). This service enabled taxpayers to obtain their tax account information, a tax return transcript, and certain other information online by providing personal information (e.g., Social Security number, date of birth, street address). In May, the IRS announced that its computers had been breached through its Get Transcript online service (http://www.irs.gov/uac/Newsroom/IRS-Statement-on-the-Get-Transcript-Application). The IRS first reported that about 100,000 taxpayers’ accounts were accessed illegally; the number of affected taxpayers was later expanded to about 330,000 (http://www.irs.gov/uac/Newsroom/ Additional-IRS-Statement-on-the-Get-Transcript-Incident) and many believe the number is much higher. As a result of the breach, the IRS has suspended the online program (http:// www.irs.gov/uac/Newsroom/IRS-Statement-on-the-Get-Transcript-Application). Taxpayers can get a transcript by mail (http://www.irs.gov/ Individuals/Get-Transcript); it takes five to 10 days to receive the transcript in this way. Alternatively taxpayers can obtain copies of their returns by filing Form 4506, Request for Copy of Return, through the mail. Obviously, transcripts by mail take more time than the online option.

This article is continued on www.CPAmagazine.com. Executive Editor Sidney Kess is CPA-attorney, speaker and author of hundreds of tax books. The AICPA established the Sidney Kess Award for Excellence in Continuing Education in his honor, best-known for lecturing to over 700,000 practitioners on tax. Kess is counsel at Kostelanetz & Fink and is consulting editor to CCH.

The “Innocent Spouse” Claim Taxpayer Relief from Joint and Several Liability Under IRC §6015 BY KATHLEEN M. LACH

he decision as to whether to file a joint federal income tax return with one’s spouse is not one to be taken lightly. Yet, it is a decision that is frequently made without sufficient consideration, and the consequences can be devastating for the unsuspecting spouse.

Case No.1: John is a self-employed con-

sultant, and in 1991 married Lisa Sudby. By August of 1993, Lisa and John separated, and in October of 1993, Lisa filed for divorce. The divorce was finalized by June of 1994. The couple filed joint federal income tax returns for 1991, 1992, and 1993. John was audited by the IRS. This resulted in adjustments to income for John’s business and ultimately adjusted the couple’s joint federal income tax obligation. Lisa was jointly and severally liable for the additions to tax and attendant penalties assessed as a result of the audit, with ex-husband John for years 1992 and 1993 since they filed joint returns for those years.

Case No. 2: Bob is an investment bank-

er. His wife Patty is a stay-at-home mom. Bob’s business involves multimillion-dollar transactions, and his balance sheet reflected deposits or withdrawals in any given day that fluctuated by hundreds of thousands of dollars. Patty has no understanding of or interest in investment banking. Bob and Patty have filed joint federal income tax returns since they were married. Patty signs the returns each year prior to filing, without review. In 2001, Bob received notice that the IRS was opening an examination of a transaction he engaged in at the advice of a colleague at the time. Sometime in 2003, the auditor determined that the 7 I TA X S E A S O N 2 016

www.CPAmagazine.com

transaction at issue was a sham. Two of the promoters of the transaction faced prison time. Bob and Patty faced an increase of $1.2 million in tax to their 1998 federal income tax return, plus penalties and interest. The Internal Revenue Code provides relief from joint and several liability under certain circumstances pursuant to IRC §6015. Section 6015(b) is frequently referred to as the “innocent spouse” provision. Section 6015(c) provides for separation of liability, and takes into consideration the allocable income of each spouse on the jointly filed return. Finally, section 6015(f) provides relief under considerations of fairness or “equity.” Section 6015(b) provides relief for all joint filers who satisfy the five requirements listed in that section. A taxpayer must satisfy all of the requirements of subparagraphs (A) through (E) to be entitled to relief under section 6015(b)(1).1 Section 6015(c) allows a spouse who filed a joint tax return to elect to limit his/her income tax liability for that year to his/ her separate liability amount. However, section 6015(c) applies only to taxpayers who are no longer married, are legally separated, or have not lived together over a twelve-month period. A taxpayer may also seek relief under section 6015(f), which authorizes the Service to grant equitable relief from joint and several liability when relief is unavailable under section 6015(b) and (c). Except for the knowledge requirement of section 6015(c)(3)(C) (the provision disallowing election of separate liability to a spouse with actual knowledge of the item giving rise to the deficiency), the taxpayer bears the burden of proving that he/she has met all the prerequisites for innocent spouse relief.2

1. IRC §6015(b)

IRC §6015(b) lists the conditions that must be satisfied in order for relief to be considered. If each condition is met, the requesting spouse is relieved of the tax liability for that year to the extent the liability is attributable to the understatement.3 The code section also provides for apportionment of relief. If the requesting spouse establishes that he or she did not know about a portion of the understatement, relief may be granted to the extent that the liability is attributable to that portion of the understatement.4 Relief under this code section is available only in audit situations, where as a result of an IRS examination of a return, it determined that there was an “understatement” of tax for the tax year under examination.

2. IRC §6015(c)

IRC § 6015(c) provides relief for taxpayers who are no longer married or who are legally separated or not living together. If relief is available under this section, the individual’s liability for any deficiency assessed for the return at issue will not exceed the portion of the deficiency allocable to the individual.5 The requesting spouse has the burden of proof in establishing the portion of any deficiency allocable to him or her.6

This article is continued on www.CPAmagazine.com. Kathleen M. Lach is a Partner in the Tax and Litigation Departments of Arnstein & Lehr LLP. She represents clients before a variety of different tax authorities, including the Internal Revenue Service, the Illinois Department of Revenue, and the Illinois Department of Employment Security.

SSARS 21 and Other Critical Changes SSARS 21 is the biggest "change to a CPA firm’s

write up practice in 35 years.

In this issue, I am going to give you the highlights of four very critical items which may impact you in 2016 and beyond. 1. ACA 1094, 1095, and 1096 2. SSARS 21 3. SSA changes to drop file/suspend and restricted application 4. DOL/FLSA increase in wage base for exempt employees

1. ACA 1094, 1095, and 1096

Financial Advisor

Jerry Love, CPA/PFS, CFP, CVA, ABV, CITP, CFF, CFFA

Forms 1094, 1095, and 1096 are forms you should become fa“All Applicable Large Employer Members (ALE Members) are miliar with and understand which clients may be required to required to file Forms 1094-C and 1095-C for 2015. Purpose file. The Affordable Care Act (ACA) was enacted in March of of the form: Employers with 50 or more full-time employ2010. It is beginning to include more small employers with filees (including full-time equivalent employees) in the previous ing requirements. year use Forms 1094-C and 1095-C to report the information Beginning in January of 2016 these forms are required to be required under sections 6055 and 6056 about offers of health filed with the IRS and given to employees. This a critical step in coverage and enrollment in health coverage for their employimplementing the ACA’s reporting requirements, which will enees. Form 1094-C must be used to report to the IRS summary able the government to track cominformation for each employer pliance with the individual and and to transmit Forms 1095-C employer mandates, and to deterto the IRS. Form 1095-C is used “Engagement letter MUST be signed by both mine eligibility for premium tax to report information about each the CPA and the client.” credits used to purchase health inemployee. In addition, Forms surance coverage through a Health 1094-C and 1095-C are used in Insurance Marketplace. determining whether an employer Essentially employers who are subject to the ACA employer owes a payment under the employer shared responsibility pro“shared responsibility” mandate who use the new forms to report visions under section 4980H. Form 1095-C is also used in health insurance coverage offered under employer-sponsored determining the eligibility of employees for the premium tax plans in accordance with Section 6056 of the Internal Revenue credit. Employers that offer employer-sponsored self-insured Code (IRC) will need to report information on Form 1095 to coverage also use Form 1095-C to report information to the the employees. Form 1094-C must be used to report to the IRS IRS and to employees about individuals who have minimum summary information for each employer and to transmit Forms essential coverage under the employer plan and therefore are 1095-C to the IRS. not liable for the individual shared responsibility payment for ■■ Form 1095-A is completed by the Market Place Exchanges the months that they are covered under the plan.” to report the coverage of individuals obtaining their insurIRS instructions continue: “Who Must File Applicable ance through the exchanges. Form 1095-A from the MarketLarge Employers, generally employers with 50 or more fullplace will be used to reconcile premium tax credits. time employees (including full-time equivalent employees) in ■■ Form 1095-B is completed by insurance companies for the the previous year, must file one or more Forms 1094-C (inemployers who have group policies through them. cluding a Form 1094-C designated as the Authoritative Trans■■ Form 1095-B is also required if a small employer is a sponsor mittal, whether or not filing multiple Forms 1094-C), and of a self-insured group health plan. If you are a small employer must file a Form 1095-C for each employee who was a fullwith no insurance or with a group health insurance plan then time employee of the employer for any month of the calendar the small employer has nothing to file. year. Generally, the employer is required to furnish a copy of ■■ Form 1095-C according to the IRS instructions for the form, the Form 1095-C (or a substitute form) to the employee.” 8 I TA X S E A S O N 2 016

www.CPAmagazine.com

“A preparation engagement is required to have a disclaimer on each page of the financial statement which indicates “no assurance is provided.” Form 1094-C - As noted above, the C Forms consist of a transmittal form and an individualized form. Form 1094-C is the transmittal form, and provides a summary of aggregate, employer-level data to the IRS. For ALEs that are members of a controlled group, separate transmittal forms must be filed for each ALE member that is required to report. Separate transmittal forms for one ALE member may also be filed for different employee groups (e.g., union employees, non-union employees, salaried employees, hourly employees, etc.). However, if there are multiple transmittal forms for ALE employee groups, one form must be designated as the “authoritative” form for the ALE member, which will include aggregate information for the ALE member. Non-authoritative transmittal forms need to include only employer information and the number of individual forms being submitted with that transmittal. For information related to the Affordable Care Act, visit www. irs.gov/uac/Affordable-Care-Act-Tax-Provisions-Home ■■

2. SSARS 21

SSARS 21 is the biggest change to a CPA firm’s write up practice in 35 years. SSARS 21 creates a new level of service known as “preparation service.” SSARS 21 replaces all the previous SSARS. We still have Compilation and Review service and they are essentially the same. The Compilation services have a new Accountants Compilation Report. There are not any significant changes to the Review services. SSARS 21 is in effect for any financial state for a period ending after December 15, 2015. So if you are issuing monthly financial statements for a client, the accounting services you perform for November 30, 2015 would be under the old standards but when you issue the financial statements for the period dated December 31, 2015 it should be in compliance with SSARS 21. One major change every CPA needs to completely understand is SSARS 21 requires an engagement letter and it MUST be signed by both the CPA and the client. An essential change with SSARS 21 is the principle that the type of service you are providing is based on what you are “engaged” to perform in your engagement letter. So many have observed that a preparation engagement and a compilation engagement may be very similar and the resulting financial statement may be exactly the same. However, whether you should put a compilation report with the financial statement is based on what you are engaged to perform. The new concept hinges on what you are engaged to perform vs. the prior concept of “prepare and present.” A preparation engagement is required to have a disclaimer on each page of the financial statement which indicates “no assurance is provided.” If this disclaimer cannot be on every page, then a short disclaimer is required. It should be noted that 9 I TA X S E A S O N 2 016

www.CPAmagazine.com

for anyone who has previously issued financial statements under SSARS 8, that concept is now obsolete and in effect been replaced with the preparation engagement. A CPA no longer needs to be concerned about who the recipients of the financial statements will be (i.e. in SSARS 8 it was restricted to management only) but instead now must only come to an agreement with the client as to the service to be provided by the CPA. SSARS 21 is a very significant change and you must be in compliance as you approach your next peer review. The AICPA Professional Ethics Committee has announced that a Preparation engagement is a non-attest service. For information related to SSARS 21, visit http://www. aicpa.org/InterestAreas/FRC/ReviewCompilationPreparation/ Pages/resources-for-SSARS21.aspx

3. SSA Changes to Drop File/Suspend and Restricted Application

As reported by Michael Kitces on Wednesday October 28, 2015 in Retirement Planning: “When Congress passed the Senior Citizens Freedom to Work Act in 2000, it introduced a new concept called “voluntary suspension” of benefits, allowing those who had already started Social Security benefits to stop their payments and earn delayed retirement credits. In the process, however, the new voluntary suspension rules unleashed several additional Social Security claiming strategies, including various “claim now, claim more later” tactics involved File-and-Suspend and Restricted Applications for spousal benefits. Congress has decided to close these perceived “loopholes” in the Social Security rules. By extending the rules for deemed application, it will no longer be possible to file a restricted application for just spousal benefits. And with an extension of the “suspension” rules that stipulate suspending an individual’s benefits will also suspend any benefits to other people based on the same earnings record, Congress has killed off the various “File and Suspend” strategies to allow spousal and dependent benefits to be paid while still earning delayed retirement credits.” For information related to this issue, visit www.kitces.com/ blog/congress-ends-file-and-suspend-restricted-application-andother-voluntary-suspension-social-security-strategies/ or www. reuters.com/article/2015/10/28/us-retirement-congress-fileand suspend-idUSKCN0SM2UO20151028

4. DOL/FLSA Proposes to Increase the Wage Base for Exempt Employees from $23,660 to $51,000

In March of 2014, President Obama ordered the Department of Labor to revise the federal rules for who must be paid overtime at time and half for working more than 40 hours. See: http://www.nytimescom/2014/03/14uspolitics/obama Continued on page 19

Reducing IRS Penalties

Each year the IRS assesses over 40 million penalties against taxpayers. Of the total number of assessed penalties over 5 million of them are eventually abated by the Service. Generally the IRS only abates penalties when the taxpayer contests the penalty. Since most taxpayers don’t contest IRS penalties the number of abated penalties is artificially low. Most taxpayers and their representatives are unaware that if the taxpayer establishes a reasonable cause for failure to comply with tax laws, the applicable penalties may be abated. Therefore sophisticated taxpayers and their representatives have a much greater chance of reducing tax penalties than the approximately 12% abatement rate for all penalties. It is in a taxpayer’s best interest to contest IRS penalties if she has a reasonable cause for her noncompliance. Chapter 20 of the Internal Revenue Manual provides guidance to IRS employees on the standards for reasonable cause. Reasonable cause is based on all the facts and circumstances in each situation and allows the IRS to provide relief from a penalty that would otherwise be assessed. Reasonable cause relief is generally granted when the taxpayer exercised ordinary business care and prudence in determining their tax obligations but nevertheless failed to comply with those obligations. Reasonable causes is defined by the Internal Revenue Manual in the following manner: “Any reason that establishes a taxpayer exercised ordinary business care and prudence but nevertheless failed to comply with the tax law may be considered for penalty relief.” The most important part of that definition is the term ordinary business care and prudence. Ordinary business care and prudence is defined as follows in the Internal Revenue Manual: “Ordinary business care and prudence includes making provisions for business obligations to be met when reasonably foreseeable events occur. A taxpayer may establish reasonable cause by providing facts and circumstances showing that they exercised ordinary business care and prudence (taking that degree of care that a reasonably prudent person would exercise), but nevertheless were unable to comply with the law.” The Internal Revenue Manual sets forth a series of circumstances that would allow a taxpayer to establish reasonable cause and secure abatement of tax penalties. The following is a partial list of excuses that might establish reasonable cause: • Death, Serious Illness, or Unavoidable Absence • Fire, Casualty, Natural Disaster, or Other Disturbance • Unable to Obtain Records • Mistake was Made 10 I TA X S E A S O N 2 016

www.CPAmagazine.com

Practitioners may be "surprised to learn that

the IRS uses a computer program to review abatement request.

IRS Defense Advisor Robert E. McKenzie, J.D. • • • • • • • • • •

Erroneous Advice or Reliance Ignorance of the Law Forgetfulness Statutory Exceptions or Waivers Undue Hardship Written Advice From IRS Oral Advice From IRS Advice from A Tax Advisor Official Disaster Area Service Error

Practitioners may be surprised to learn that the IRS uses a computer program to review abatement request. The program is known as Reasonable Cause Assistant (RCA). Therefore it is in the best interest of the taxpayer for his representative to submit a letter specifically requesting abatement of penalties which quotes the Internal Revenue Manual with respect to reasonable cause and cites to specific reasons set forth in the manual. The greater the specificity of the reasonable cause letter, the greater the chance that the IRS may abate that penalty. The RCA provides that taxpayers who have not been penalized by the IRS in the past may have their penalties reduced. The IRS Manual sets forth a First Time Abatement Rule. That rule generally allows IRS employees to abate penalties asserted against formerly compliant taxpayers.

This article is continued on www.CPAmagazine.com. Robert E. McKenzie of the law firm of Arnstein & Lehr LLP of Chicago, Illinois, concentrates his practice in representation before the Internal Revenue Service and state tax agencies. He previously served as a member of the IRS Advisory Council (IRSAC) which is a group appointed by the IRS Commissioner from 2009 to 2011.

Tax Ramifications of Recent Supreme Court Decisions BY SIDNEY KESS, CPA, J.D., LL.M

ust before the U.S. Supreme Court closed its 2014 term, two notable decisions were announced. Both have important tax consequences for individuals and businesses, nationwide and on a state level.

Premiums Tax Credit

Under the Affordable Care Act (ACA), an individual who purchases health coverage from a marketplace (also called an exchange), has household income below a set level, and meets certain other requirements can receive government assistance to pay the premiums. The assistance is in the form of the premium tax credit (Code Sec. 36B). The credit can be obtained on an advanced basis to pay the premiums or claimed as a tax credit when an eligible individual files his or her federal income tax return. Eligibility for the credit was challenged because of the wording of the statute, which limits the credit to those enrolled in coverage through “an Exchange established by the State.” It was argued that the word “state” meant the credit applied only to those enrolled through a state-established exchange. At present, 27 states rely entirely on the federal marketplace, seven maintain partnership exchanges (HHS views them as federal exchanges), and three have federally supported state-based exchanges that rely on the federal IT platform; only 13 states have state-created exchanges. Individuals in states that did not set up their own exchanges could obtain coverage through the federal exchange (www.healthcare. gov), but as the argument went, they would be ineligible for the credit. Effectively, these individuals would be unable to afford the coverage. One appellate court said the statute “unambiguously restricts” the tax credit to state-created exchanges (Halbig v. 11 I TA X S E A S O N 2 016

www.CPAmagazine.com

Burwell, CA-DC, 758 F. 3d 390, 394 (2014)). Another held that the credit applied to coverage obtained through any government exchange (King v. Burwell, CA-4, 759 F. 3d 358 (2014)). (The cases were originally brought against then Secretary of Health and Human Services Sebelius.) Now the U.S. Supreme Court has settled the matter in favor of the Administration, which had argued for a broad interpretation (King v. Burwell, S.Ct., USTC ¶50,356). In a six to three decision, the majority concluded that the language of the statute referring to “State” should be read to include federal exchanges. Chief Justice Roberts, in the majority opinion, said “[t]he context and structure of the Act [ACA] compel us to depart from what would otherwise be the most natural reading [of this word].” The effect of the opinion from a tax perspective is to enable otherwise eligible individuals to claim the credit as long as they are enrolled for health coverage through a government exchange. The estimated 6.2 million individuals that would have lost their subsidy had the Court ruled to the contrary can continue to enjoy eligibility for the credit. The decision reflects Chief Justice Robert’s view that, “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.” Strong dissenting opinions considered the majority opinion to be judicially out of line in trying to fix a poorly written statute. While it may have been the intention of Congress to grant the credit to enrollees in all government exchanges, the clear language of the law would appear to limit them to state exchanges. While the decision puts to rest any other challenges to the premium tax credit, it does not end all legal challenges to

ACA. There are more than 100 current cases challenging various aspects of ACA; these challenges include: • House v. Burwell (DC DC, filed 11/21/14) in which the House of Representatives is challenging the costsharing reduction payments to insurers. The House argues that there needs to be explicit appropriations for these payments to be made. The House is also challenging the Administration’s delay of the employer mandate. • Sissel v. HHS (CA-DC, appeal for a rehearing en banc filed 10/6/14) is challenging the constitutionality of ACA on the grounds that its enactment violated the Origination Clause of the U.S. Constitution, which requires bills that raise revenue to originate in the House of Representatives. Note: Another case making a similar argument was dismissed for lack of standing (Holtz v. Burwell, CA-5, 4/24/15). • Post-Burwell v. Hobby Lobby Stores, Inc. (S. Ct., 2014-2 USTC ¶50,341), which allowed a privately held company to object to paying for some forms of contraception for their employees, did not end the matter. There are more than 100 active cases challenging the requirement that insurers and employers provide contraceptive coverage for enrollees without any accommodations on religious grounds. • Kawa Orthodontics LLP v. Lew (CA11, 12/2/14) is challenging the delay of the employer mandate. The Eleventh Circuit dismissed for lack of standing, but Kawa is appealing to the U.S. Supreme Court (writ of certiorari filed 5/19/15).

This article is continued on www.CPAmagazine.com.

Favorable Tax Rate On Dividends

Capital gain distributions are taxable even if reinvested and do not actually generate cash.

Generally dividends you receive on stock you own are taxable. Most dividends are taxed similar to capital gains at a rate of 15% (20% if clients are in the 39.6% tax rate bracket). Dividends that qualify for this reduced tax rate include most dividends received from domestic corporations and some foreign corporations. This includes dividends received from mutual funds if the distribution is otherwise a qualified dividend. Dividends that do not qualify for this reduced tax rate include dividends from stocks owned for fewer than 60 days in the 120-day period surrounding the ex-dividend date, dividends that you include in investment income for purposes of claiming the investment interest deduction, and certain other dividends in special circumstances. EXAMPLE: A client in the 28% tax rate bracket owns 100 shares of ABC Company bought two years ago. She receives $500 of dividends on ABC stock. Her Federal tax on the dividends is $75 ($500 x 15%). Thus, she saves $65 (($500 x 28%) - 75) by having her dividends taxed at the reduced 15% tax rate rather than the 28% ordinary income tax rate. If in the 15% tax rate bracket, she would pay no tax on the $500 of dividends. The benefit of this reduced tax rate on dividends only applies to dividends received. Any amounts received in individual retirement accounts or retirement plans are taxed at ordinary income tax rates when they are withdrawn. Recommend a review of investment allocation between taxable accounts and retirement plan accounts.

The Following Dividends are Taxable: ■■

Some dividends are really interest income. Some income on deposits that are called dividends should be reported on Schedule B as interest income. Examples include dividends from: • Cooperative banks • Credit unions • Savings and loans • Mutual savings banks On the other hand, the income from money market fund accounts, which is often called interest income, should be reported as dividend income although such amounts will not qualify for the lower tax rate on qualifying dividends. The

12 I S U M M E R 2 015

www.CPAmagazine.com

Tax Client Advisor Julie Welch, CPA, CFP

■■

proper reporting of interest and dividend income is important because misreporting this income can trigger a notice from the IRS when the IRS cannot match what is reported with the information they have received. Responding to these notices is time consuming. Capital gain distributions. These are distributions you get from your mutual funds. They are taxable as long-term capital gains. Many mutual funds make these payments in December. Capital gain distributions are taxable even if reinvested and do not actually generate cash. Reinvested dividends. Many publicly held corporations maintain dividend reinvestment plans which permit additional share purchases through reinvestment of dividends and, in some cases, through optional cash payments. The amount of dividends reinvested is treated as a dividend received and is taxable. The dividends are taxable even though the client does not physically receive cash or the stock.

Some Dividends are Not Taxable. The Most Common Taxable Dividends are: ■■

Stock dividends and stock splits. These are additional shares of stock received from a corporation. They are not taxable if they do not increase the percentage of ownership in the corporation. If the client receives a stock dividend or stock split, the client must allocate the basis of the old shares between the client’s old shares and the new shares. The holding period for the stock received from a stock dividend or a stock split goes back to the time when the client bought the original shares. The holding period is important because it determines if the client qualifies for the 15% (0% if in the 10% or 15% tax rate bracket) long-term capital gain tax rate. If the stock dividend or stock split is taxable, then the basis in the new shares is the fair market value of the stock when it is received. The holding Continued on page 19

2015 IRS Voluntary Disclosure Program – 7 Years Later BY ADAM S. FAYNE, J.D.

he IRS has had an Offshore Voluntary Disclosure Initiative (OVDI) now for approximately seven years. What began as a temporary OVDI program is now indefinite until further notice. However, seven years later, taxpayers have more options to choose when deciding the best method to disclose their foreign activities.

Traditional OVDI Program – 27.5% penalty or greater

Under this program, the taxpayer is eligible to make an OVDI if he/she is not currently under audit, the money in the foreign account or asset was earned legally, and the IRS does not already know about the taxpayer’s foreign account or assets. The wild card is whether the IRS already knows about the taxpayer. This can be confirmed in advance by doing a pre-clearance request with the IRS OVDI centralized office. Once accepted to this program, the IRS will provide the taxpayer a letter stating that it is their policy to not recommend criminal proceedings as long as the taxpayer remains truthful and transparent during the OVDI process. The IRS does not (and cannot) grant immunity, but it is their policy not to seek criminal charges in an OVDI. Once the taxpayer is accepted to the OVDI, the taxpayer must prepare and file eight years of amended (or original) income tax returns and the same amount of Forms 114a (FBARs) to report the income and the bank account, respectively. The taxpayer will be required to pay the tax, a 20% penalty on the tax, and interest. The taxpayer will also be required to pay a minimum 27.5% penalty on the highest value of the account over the eight-year period, but it could be 50% if the bank is a “listed bank.” The IRS has a list of banks that have cooperated to such 13 I TA X S E A S O N 2 016

www.CPAmagazine.com

an extent that the value of the taxpayer’s OVDI is not as great and, in turn, it penalizes the taxpayer and requires her to pay a 50% penalty.

IRS OVDI Streamlined Program

Beginning in the summer of 2014, the IRS introduced the Streamlined Program. This program is designed for non-willful taxpayers. That is, taxpayers who did not intentionally fail to report the existence of the foreign asset or its income. Under this program, a taxpayer must submit three years of amended income tax returns (or original income tax returns for non-residents) and six years of Form 114a (FBARs). A taxpayer that resides in the United States must pay the tax, a 20% penalty on the tax, and interest. This taxpayer must also sign a statement under penalties of perjury and pay a 5% penalty on the highest year-end value of the foreign bank account. A taxpayer that does not reside in the United States must pay the tax and interest only. This taxpayer is also required to sign a statement under penalties of perjury that she did not intentionally fail to report the income and the assets. This program is a relief for those non-compliant taxpayers that are able to sign the required statement under penalties of perjury.

Quiet Disclosure

A taxpayer that does not want to participate in the above programs, but desires to come into compliance, may do what practitioners call a “quiet disclosure.” This type of disclosure is where the taxpayer prepares a certain number of amended income tax returns or original returns, and a certain number of FBARs and simply files the materials in the ordinary course.

This type of disclosure may still qualify as a voluntary disclosure under the IRS’s Internal Revenue Manual and provide the same level of criminal protection as any other choice listed above, but the unknown is the penalties. If a taxpayer is selected for examination or civil audit, there are many penalties that may apply. The IRS Agent has great discretion in the assertion of penalties. There is a penalty ceiling but no minimum amount. The examiner may determine that the facts and circumstances of a particular case do not justify a penalty. If there was an FBAR violation but no penalty is appropriate, the examiner will issue the FBAR warning letter, Letter 3800. However, when a penalty is appropriate, the IRS has established penalty mitigation guidelines so that the penalties determined through the examiner’s discretion are uniform. The examiner may determine that a penalty under these guidelines is not appropriate, or a lesser amount than the guidelines would otherwise provide is appropriate. To qualify for mitigation, the person must meet four criteria including: 1. The person has no history of criminal tax or Bank Security Act (BSA) convictions for the preceding ten years and has no history of prior FBAR penalty assessments.

This article is continued on www.CPAmagazine.com. Adam Fayne is a partner with the law firm of Arnstein & Lehr LLP. Fayne was an attorney with the IRS Office of Chief Counsel. He may be reached at 312-876-7883 or asfayne@ arnstein.com.

Manage, Enhance and Expand Your Practice S U M M E R 2 015 I 13

6 Tax Tips for Tax Season only way for the IRS "The to collect an unpaid fee

for not having health insurance is to withhold it from a possible refund after the tax return is filed.

The dawn of a new year brings a fresh opportunity to help clients make tax-optimized decisions. Here are six tips and tricks to help tax professionals manage, enhance and expand their practice this tax season.

Tax Tips Advisor

IRS Tax Tools

Reliable resources to answer common tax questions are worth their weight in gold. Two such tools are the IRS Tax Map and the IRS Interactive Tax Assistant tool. The Tax Map provides tax law information integrated with related tax forms, instructions and publications. While both resources are slow to the point of timing out, they are reliable and worthy of a spot in a tax professional’s toolbox.

AICPA Marginal Tax Rate Calculator

Helpful tools are available to enhance the work you already perform. The AICPA provides a Marginal Tax Rate Calculator to show clients and new staff members the effect of deductions and tax credits on the actual tax rate: http://www.360financialliteracy. org/Calculators/Marginal-Tax-Rate-Calculator. Whether clients are in the 15% or 39.6% tax bracket, it helps to show them their effective tax rate on tax decisions. This calculator is one of several provided by the AICPA at http://www.360financialliteracy.org.

Electronic Fund Transfer

The fastest way for a client to receive their refund is to combine e-file with Direct Deposit. About eight in 10 taxpayers use direct deposit. This is likely because the IRS issues nine out of 10 refunds in less than 21 days. If money is to flow the other direction because your clients owe taxes, the best way to make the payment is with IRS Direct Pay. This free service can transfer money using the client’s checking/savings account, debit/credit card, or Electronic Funds Withdrawal. Refer to the “Payments” tab at www. irs.gov for further guidance on transferring money electronically.

Late Payment

If a client owes money to the IRS and cannot make the entire payment, they should pay as much as possible to reduce interest and penalties for late payments. They may file Form 9465, Installment Agreement Request, with their tax return requesting to pay in installments. They may also use the Online Payment Agreement tool to request more time to pay. You may file this for them if you have power of attorney. 14 I S U M M E R 2 015

www.CPAmagazine.com

T. Steel Rose, CPA

Affordable Care Act

Provisions of the Affordable Care Act can cost clients in the form of additional taxes and penalties without the “minimum essential coverage.” The fee increases each year until it is near the price of the cheapest available health plan. One such provision is the Individual Shared Responsibility Provision. In 2015, the fee was $325 for an uninsured adult and $162.50 for an uninsured child (up to $975 for a family) or 2% of the person’s taxable income, whichever is greater. In 2016, the fee is $695 per adult and $347.50 per child (up to $2,085 for a family), or 2.5% of household income above the tax return filing threshold for filing status, whichever is greater. Your client may pay 1/12 of the total fee for each full month in which a family member went without coverage or an exemption. See Individual mandate for more details on the fee. The IRS cannot enforce the Individual Shared Responsibility Provision with liens or the typical methods of IRS collections. The only way for the IRS to collect an unpaid fee for not having health insurance is to withhold it from a possible refund after the tax return is filed. The easiest way to qualify for an exemption is to go to HealthCare.Gov and sign up for a marketplace account which automatically determines if a client qualifies for exemptions. One such exemption is the hardship exemption which can be used to enroll in the catastrophic plan. A catastrophic plan features lower premiums.

This article is continued on www.CPAmagazine.com. Publishing CPA Magazine since 2002, T. Steel Rose began his career with Price Waterhouse leading to the start of Rose & Cash, CPAs. He was a VP for Solomon Software, now owned by Microsoft, and launched CPA Software News in 1991.

A Practical Guide to Perfecting Your Tax Research Techniques and Achieving Sustainable Tax Return Filing Positions BY PETER J. SCALISE

n order to maximize your accounting firm’s overall effectiveness in connection to researching and resolving a tax issue and determining the sustainability of the tax return filing position, the appropriate tax research processes must be meticulously executed. These five steps will guide you in establishing an allinclusive tax research effort on behalf of your client base while properly ascertaining the likelihood of success should a tax position(s) taken on a tax return be challenged by the IRS upon examination.

Tax Research Methodology

Establish the Facts and Circumstances The first step in the tax research process is to establish all of the facts and circumstances provided by your client in order to determine which tax laws(s) apply to your client’s fact pattern. At this initial stage, it is imperative not to overlook any of your client’s facts and circumstances whether appearing material or immaterial. Always be guided by the axiom that facts and circumstances appearing to be immaterial individually may, in fact, be material in the aggregate. Determine All the Issues - The second step in the tax research process entails determining all of the tax issues affecting your client’s specific circumstances and any mitigating factors. Normally, complex tax issues evolve through several stages of development. For instance, an experienced tax professional based upon his or her prior knowledge of the tax laws, can normally determine most of the initial pertinent issues in terms of general tax laws. However, after performing an initial search of the authorities to answer the initial issues, a tax professional often discovers additional specific technical questions 15 I TA X S E A S O N 2 016

www.CPAmagazine.com

of interpretations must be resolved before the initial issues can be fully addressed. Consequently, at this stage, a tax professional may need to obtain additional facts from the client. Accordingly, the tax research process may have to move back from step two to step one. In addition, you may learn that facts initially not considered to be important may prove critical to the resolution of your client’s tax issues. Identify Statutory, Administrative, and Judicial Authority - The third step in the tax research process entails identifying the specific authorities to support all of your client’s tax issues while appropriately weighing authorities that may be contrary to your supporting position. Generally, this process begins with consulting statutory authority (e.g., the Internal Revenue Code) and quickly expands to encompass administrative authority (e.g., Proposed Treasury Regulations, Temporary Treasury Regulations, Final Treasury Regulations, Revenue Rulings, Revenue Procedures, Private Letter Rulings, Technical Advice Memorandum, General Counsel Memorandum, Circular 230, Internal Revenue Manual, Internal Revenue Bulletins, IRS Field Service Advice Memorandum, IRS Determination Letters, and IRS Notices) and judicial authority (e.g., decisions by the U.S. Tax Court, U.S. District Court, U.S. Court of Federal Claims, U.S. Circuit Court of Appeals, U.S. Court of Appeals for the Federal Circuit, and the U.S. Supreme Court). In addition, at times, you the tax professional may have to consult the legislative history (e.g., the Public Laws and Congressional Committee Reports from the House of Representatives and the Senate) of a particular Internal Revenue Code section to fully address what Congress’s intent was

in passing a particular bill. Lastly, you may also want to consult the voluminous range of editorial interpretations (e.g., Tax Treatises, Tax Journals, etc.) available to assist in the interpretation a particular tax issue. However, it must be duly noted that editorial interpretations are generally impressible sources of authority before the IRS and the judicial system. For clarification purposes, the subsequent synopsis will elaborate upon the aforementioned statutory, administrative, and judicial interpretations:

Statutory Authority

The Internal Revenue Code - All federal level tax statutes passed by Congress into law are compiled and published in Title 26 of The United States Code. As it should be recalled, Title 26 of The United States Code contains the specific statutes that authorize the IRS to collect taxes for the federal government. Generally, the tax research process begins with consulting the Internal Revenue Code and quickly expands to encompass administrative and judicial authorities based upon the complexity of the tax issue under analysis.

Administrative Authority

The Treasury Regulations - The Treasury Regulations provide the official interpretations of the Internal Revenue Code by the Treasury Department and have the force and effect of law. The most common forms of Treasury Regulations include: • Proposed Treasury Regulations (e.g., binding only on the IRS and not the taxpayers);

This article is continued on www.CPAmagazine.com.

Protecting your Client’s Assets From Lawsuits Using Entities

of owning "theInstead property jointly,

Helping clients to protect their assets from lawsuits, malpractice claims, divorce, and other risks is a vital part of any estate plan. With the waning importance of estate taxes to the process, practitioners can give increased attention to this type of planning. Every practitioner should be able to provide some level of planning service in this regard. However, recognizing the limitations of knowledge and those issues for which a specialist might be advisable to involve will be prudent. Even practitioners with limited knowledge in this area can provide valuable service being the catalyst for this type of planning. Also, being independent of the client, the client’s business and risks, will assure the practitioner the objectivity clients cannot have for their own issues. Bringing a “new eye” of an outside professional alone will often enable practitioners to identify a range of issues for the client to address. Planning can range from the simple (you have to keep independent records for a business) to the much more complex (how might you structure a self-settled asset protection trust to minimize the risks involved). There is much ground in between. The following checklist might be a helpful starting point. But in all instances, use common business sense, general accounting knowledge, an understanding of the client’s business endeavors, and objectivity to identify issues and planning opportunities. Asset protection planning should be undertaken in a broad context looking at every aspect of a client’s business, investments, insurance, estate planning and more. This checklist focuses only on the use of entities in this context.

√ Operate Safely

it should be held in a limited liability company.

Tax Planning Advisor Martin M. Shenkman CPA, MBA, PFS, J.D.

(S corporation, LLC, etc.) surprisingly many are not. Many clients buy investment real estate, rent that real estate to a tenant and do not realize that the potential liability associated with that common investment. Instead of owning the property jointly, it should be held in a limited liability company. Don’t assume that clients have addressed this obvious planning step.

√ Entity Format Provides Limited Liability

Not every entity will provide limited liability for the client/equity owner. A general partnership provides no liability protection. The use of a limited partnership usually provides liability protection for the limited partners but not for the general partnership. If a client has used a limited partnership entity to own a business or real estate investment and serves as the general partner there will be no protection. It may be feasible to restructure the general partner so that it is an entity owned by the client to address this limitation.

Is the client operating their business, investment and personal affairs in a safe and rational matter? Many clients become so focused on growing a business that they neglect a myriad of common sense “safe” practices. Has the client reviewed resources made available from business and industry trade organizations on safe practices (have you reviewed articles and materials available from the AICPA on minimizing liability risk? Have you kept current with new ethics pronouncements and cases?). There is a wealth of literature that can provide practical planning ideas for every business.

√ Governing Documents Support Intended Result

√ Operate Under Entity Solution

Martin M. Shenkman is the author of 35 books and 700 tax related articles. He has been quoted in The Wall Street Journal, Fortune, and The New York Times. He received his BS from the Wharton School of Pennsylvania, his MBA from the University of Michigan, and his law degree from Fordham University.

Is the particular business endeavor operated in an entity format to minimize liability exposure in the event of a suit or claim? While larger businesses are typically operated in entity format 16 I TA X S E A S O N 2 016

www.CPAmagazine.com

A properly structured entity may still not achieve the intended results. For example, an LLC may have been formed to hold a real estate investment. Ideally the governing legal documents should have been prepared with an objective to provide and enhance liability protection.

This article is continued on www.CPAmagazine.com.

√ CHECKLIST: Tax Planning Challenges By MARTIN M. SHENKMAN, CPA, MBA, PFS, J.D.

√ SURTAX/KIDDIE TAX PLANNING: The

3.8% Surtax may be avoided by distributions to children subject to the Kiddie Tax (persons under age 19 and full-time students under age 24 with unearned income over $2,000 for 2013) will be taxed at the parent’s tax rate. However, each child’s AGI is viewed separately from the parent’s AGI for purposes of testing whether the Medicare tax on passive income applies. IRC Sec. 1411. If the child’s AGI is under $200,000 the child will not be subject to the Medicare tax. For this tip to succeed a separate income tax return must be filed for the child. Do not report the child’s unearned income on the parent’s income tax return. If the child’s unearned income is reported on the parent’s return, the parent’s MAGI will be considered and the Surtax may apply. The challenge with this planning is the risks of putting significant income in a child’s hands to save a 3.8% tax.

√ SELF-RENTAL EXCEPTION:

The selfrental exception for the net investment income tax (NIIT) can be illustrated as follows. A manufacturer has interests in FLP that rents building to her dental practice. The self-rental exception to the IRC Sec. 469 passive loss rules applies and the income in the FLP from the rental to the professional practice is deemed active. This characterization also avoids the NIIT 1411 Surtax. Estate planning may bifurcate ownership tainting the selfrental exception. For example, the dentist may transfer her interests in the FLP owning the practice building to trusts for her children. If those trusts are grantor trusts they will be ignored for income tax purposes and the manufacturer will continue to be treated as subject to the self-rental exception. However, if the grantor trust status of those trusts is turned off (by an action to avoid the settlor/manufacturer continuing to be taxed on the income, the death of the settlor, etc.) the trust will be 17 I TA X S E A S O N 2 016

www.CPAmagazine.com

respected and the identity of ownership of the manufacturer and the rental FLP will be broken. The self-rental exception will no longer apply and the NIIT Surtax will apply. This can be a challenge to continue to avoid the NIIT. What can be done? Shift interests to requalify by having trusts sell interests.

that the option of an outright bequest is certainly simpler, less costly and might result in a better overall tax result. However the challenge to that tax planning is that should the surviving spouse remarry, prove fiscally irresponsible or be sued all of the assets the credit shelter trust could have protected might be lost.

√ GIFTS UNDER A POWER OF ATTORNEY: √ 754 BASIS ADJUSTMENT: The tax foPowers of attorney, which authorize an agent to act when the client is unable to do so, are an essential estate planning document. Most powers of attorney include a provision authorizing the agent to make gifts almost always up to the annual exclusion amount. In 2015 this amount is $14,000. For clients that face either a state or federal estate tax a gift provision can be quite valuable. Even for clients not subject to any transfer tax concerns a gift provision may be valuable to enable the agent to help support family members the client has helped out. The challenge with a gift provision is how to minimize the risk that the agent will abuse the power to enrich himself or herself. Elder abuse is rampant. Is the potential benefit of such a provision worth the risk? What can be done to protect the client from this risk? The challenge of a tax oriented gift power, is much more difficult than mere tax planning.

√ CREDIT SHELTER TRUSTS: Traditional

estate planning has often been based on distributing assets on the death of the first spouse to a credit shelter trust. These assets would be available to the surviving spouse but not included in his or her estate. The problem using credit shelter trust is that the assets excluded from the survivor’s estate will not receive a basis step up on the survivor’s death. The simple and inexpensive solution to this is to bequeath assets out right and rely on portability and the inflation adjusted exemption to avoid estate tax on the surviving spouse’s death. The problem is

cus of estate planning for all estates, taxable or smaller, has shifted to increase income tax basis by having appreciated assets included in the decedent’s estate. When a limited partnership or LLC taxed as a partnership is included in the decedent’s estate a Code Section 754 basis adjustment must be made by the entity in order for the increase in the tax basis to be effective. The challenge with this oft assumed tax result is that the managing member of the LLC or the general partner of the partnership may not be willing to make a 754 election. The challenge to practitioners will be to convince clients that are able to, to negotiate provisions in current partnership and operating agreements to mandate that a 754 election has to be made. √ MINIMIZING STATE ESTATE TAX: Many states that have decoupled from the federal estate tax system can present costly estate taxes to a client’s estate. The only state which has a gift tax is Connecticut (although New York effectively has an estate tax as part of his re-coupling with the federal estate tax). Thus, it may be feasible for a client to gift assets thereby removing them from the reach of his or her state estate tax. The challenge for many clients is that while they are desirous of saving state estate tax they are worried and uncomfortable about losing access to their assets.

This article is continued on www.CPAmagazine.com.

Crowdfunding Requires Reviews by CPAs BY T. STEEL ROSE, CPA

he need for CPA reviews may explode when Jumpstart Our Business Startups (JOBS) Act stock offerings begin this May. Section 4 of the Securities Act of 1933 is amended to permit crowdfunding investments in emerging growth companies (EGC) of up to $1,000,000 annually. Signed April 5, 2012, the JOBS Act recognized equity crowdfunding as an offering of unregistered securities through registered websites. After four years of deliberation the SEC will issue its final standards for crowdfunding in 2016. The time for CPAs to begin preparing is now. Four years is a long time for an Act of Congress to take effect. At least one good thing came from the wait. Originally, if an EGC planned on raising between $500,000 and $1 million their financial statements would have to be audited. Now crowdfunders may proceed with a review of financial statements for the first offering. The rules already permit reviews of financial statements for campaigns raising between $100,000 and $500,000. Prior to enactment of the JOBS Act entrepreneurs and charities had success on the Internet raising money from contributors in exchange for rewards or completed products. This Kickstarter type of funding, referred to as Reward Crowdfunding is famous for launching the Pebble Watch and Oculus Rift virtual reality glasses. The problem is supporters put up money and received a product; with equity crowdfunding investors get a piece of the company. Title III of the JOBS Act entirely revolutionizes the eight decades old 1933 SEC Act. For CPAs with an entrepreneur interest, it’s a brave new world. The JOBS Act permits securities-based crowdfunding and permits Internet funding platforms that facilitate the offer and sale of securities without registration with the SEC as brokers. There are still no significant investor protections that purportedly 18 I TA X S E A S O N 2 016

www.CPAmagazine.com

delayed the rules for four years; so much for an Act of Congress. The JOBS Act also prevents states from policing crowdfunding offerings until an alleged fraud has been committed. This means investors will need to do more research before they use the online sites. “The two largest sites for reward crowdfunding, Indiegogo and Kickstarter have not experienced a high fraud because of the daylight effect that the Internet brings,” according to David Marlett, founder of the National Crowdfunding Association.

CPA Involvement

CPAs know the SEC wants to protect the small investor, which is why equity crowdfunding is so revolutionary. Anyone can invest at least $2,000. Beyond that amount, an investor is still restricted based on income or net worth. Issuers can use email, Facebook, and Twitter to offer an investment in their company as long as they hit 100% of their funding target. “Anyone with over $100,000 annual income can invest 10% of yearly income.” said CPA firm audit director Mike Sharp. “If under $100,000 the investor can invest 5% of annual income or up to $2000. They already lifted the ban on advertising. “For our firm, we will focus on startups and established companies who are looking to expand for these emerging growth companies. Certain sites will focus on different specialized areas. You really have to do some due diligence on how the accounting comes together. It may be the owner themselves. They may have only kept cash books.” “They may not have any books,” said Don Pfluger, CPA, audit partner with Gallina. “We may help them select their accounting system. It will be all along the gamut. They may have QuickBooks or they may be pure startups with no trans-

action history to speak of.” A review of financial statements reduces the cost and the assurance provided by an audit. “A review provides limited assurance that is limited to inquiry and analytics to evaluate whether the statements have material misstatements and correcting them,” said Angie Moss, CPA, formally an audit partner with Sanford, Baumeister & Frazier. “There is no confirmation, or third party verification. You don’t confirm anything. You make inquiries whether cash was reconciled. You ask, was accounting consistent? You perform analytics on the numbers themselves. Then you write up the statements.” “A review is a different level of service,” said Pfluger. “You do ratio analysis and ask questions. You get limited assurance that things are not materially misstated. With an audit you get reasonable assurance there are no misstatements. The general rule is; if an audit is $1, a review is 60 cents because you don’t have to do the audit tests.” For clients interested in equity crowdfunding they must realize they are selling securities which is a highly regulated activity. Clients need to understand what they cannot do in order to keep them out of trouble. Each offering must include a business plan for a bona fide business and not an investment vehicle. Failing to comply with the rules could mean the loss of their exemption. Clients cannot list their offering on more than one platform. Offering investment advice by the funding portal is not allowed. A launch party to promote your client’s offering is not permitted unless the portal is also a registered broker-dealer.

This article is continued on www.CPAmagazine.com.

“The final regulation may have a wage benchmark higher than the current $23,660 but lower than the proposed $51,000.” Critical Changes Fast Approaching

Continued from page 9 -orders-rule-changes-to-expand-overtime-pay.html?_r=0 Here is a link to the President’s remarks at the press conference: https://www. whitehouse.gov/the-press-office/ 2014/03/13/remarks-president-overtimepay To develop a good foundation about this change, a good source is: http:// www.nolo.com/legal-encyclopedia/ overtime-pay-rights-employee-30142. html. This article will help you understand how this change will affect CPA firms and the “professional employee” classification does not exclude you from this change. Also you can read the proposed rule at this link: http://www.regulations.gov

/#!documentDetail;D=WHD-20150001-0001 This link is specifically addressing redefining the exemptions for Executive, Administrative, and Professional employees. Another foundation article on the progression of the executive order to implementation is found at: http:// abcnews.go.com/Politics/obama-boostwages-millions-overtime-eligibility/ story?id=31650687 You will clearly see in this article the proposed threshold is that any employee making less than $51,000 per year will be subject to overtime pay requirements. This is up substantially from the current $23,660. As of the writing of this article, I cannot find any confirmation that the DOL has issued the final regulations

after the comment period. There have been articles indicating DOL has received considerable concern that the wage limit is jumping too high too fast. There is speculation the final regulation may have a wage benchmark higher than the current $23,660 but lower than the proposed $51,000. This is a topic of great significance to our clients and to CPA firms. Keep this one on the radar to watch in the coming weeks and months. Jerry Love is the sole owner of Jerry Love CPA, LLC in Abilene, Texas. He graduated from Abilene Christian University. In addition to being a CPA, he has also earned the designations of PFS, CFP, CVA, ABV, CITP, CFF, and CFFA. In 2006-07, Jerry was the Chairman of the Texas Society of CPAs.

“Return of investment dividends are not taxable.” Paying a More Favorable Tax Rate On Dividends Continued from page 12 period for the new stock would then start on the date of receiving the new stock. See example. ■■

■■

Insurance policy dividends. These are rebates from premiums paid on life insurance policies. They are not taxable unless the total rebates received are more than the premiums paid for the policy. Return of investment and liquidating dividends. Return of investment dividends are amounts received on stock owned when the company has no accumulated earnings. They are not taxable since taxable dividends must be paid from a corporation’s earnings. Public utility stocks, besides paying dividends at a high rate of return, often distribute return of investment dividends that are not currently taxable. Liquidating dividends are distributions received in a partial or complete

19 I TA X S E A S O N 2 016

www.CPAmagazine.com

liquidation of the company. Both return of investment dividends and EXAMPLE: A client owns 100 shares of XYZ Company bought two years ago for $1,000 ($10 per share). XYZ Company declares a 2-for-1 stock split and the client receives 100 additional shares of XYZ Company stock. This stock split is not taxable because all of the shareholders of XYZ own the same percentage of the corporation as they did before the stock split. They just own twice as many shares. The new basis in the stock is $5 ($10/2) per share, for a total basis in the 200 shares of $1,000. Since the client owned the old stock for two years, the client is treated as if he or she owned the new stock for two years. Thus, if the client sells the stock at a gain, it will be a long-term capital gain.

liquidating dividends are treated as a nontaxable recovery of capital and reduce the basis in the stock. Once the basis is reduced to zero, any future distributions are taxed as capital gains. ■■

Patronage dividends. These are dividends received from cooperatives. The most common recipients are farmers and students. The dividends are treated as purchase rebates and reduce the cost of items purchased from the cooperative, such as feed or books. They may be taxable if the client previously deducted the cost of the items.

Julie Welch (Runtz) is the Director of Tax Services for Meara, King & Co. She graduated from William Jewell College with a BS in Accounting and obtained a Masters in Taxation from the University of Missouri-Kansas City. She serves as a discussion leader for the AICPA National Tax Education Program. She is co-author of 101 Tax Saving Ideas.

Employee or Independent Contractor? BY JERRY LOVE, CPA/PFS, CFP, CVA, ABV, CITP, CFF, CFFA

he question of when a person can be paid and classified as an independent contractor or must be classified as an employee has received renewed attention. As smaller businesses are faced with the implementation of the Affordable Care Act (ACA) if they have more than 50 full-time equivalent employees, there is a renewed interest in the proper classification of employees. ACA aside, this is an important distinction for both parties. Worker classification affects whether an employer is Jerry Love responsible for withholding federal income tax, social security and Medicare taxes as well as other employer benefits, which may include retirement contributions. Over the years this matter has been taken to the courts to provide clarification and interpretation. In prior court cases, many factors have been considered to determine when a person is an independent contractor or an employee. Many of these court cases have focused on aspects of the degree of control the employer has over the person. Reliable resources are Supreme Court cases, Department of Labor, and the IRS.

IRS Guidance

The IRS has refined their approach to this classification question as explained in the IRS’ current guidance in the form of Topic 762 - Independent Contractor vs. Employee: http://www.irs.gov/taxtopics/ tc762.html For federal employment tax purposes, the usual common law rules are applicable to determine if a worker is an independent contractor or an employee. Under common law you must examine the relationship between the worker and the business. 20 I TA X S E A S O N 2 016

www.CPAmagazine.com

You should consider all evidence of the degree of control and independence in this relationship. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control and the Relationship of the Parties. Behavioral Control covers facts that show if the business has a right to direct and control what work is accomplished and how the work is done, through instructions, training or other means. Financial Control covers facts that show if the business has a right to direct or control the financial and business aspects of the worker’s job. This includes: • The extent to which the worker has unreimbursed business expenses, • The extent of the worker’s investment in the facilities or tools used in performing services, • The extent to which the worker makes his or her services available to the relevant market, • How the business pays the worker, and • The extent to which the worker can realize a profit or incur a loss. Relationship of the Parties covers facts that show the type of relationship the parties had. This includes: • Written contracts describing the relationship the parties intended to create: • Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay, • The permanency of the relationship, and • The extent to which services performed by the worker are a key aspect of the regular business of the company. The IRS has also issued guidance in Publication 15A: To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the

business must be examined. In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties. These facts are discussed next. Why does it matter? If an employer misclassifies a person as an independent contractor they may have a number of consequences. If it is determined that the person you classify as an independent contractor meets the legal definition of an employee by either the IRS or DOL, you may be required to: 1) reimburse them for wages you should’ve paid them under FLSA, including overtime and minimum wage; 2) pay back taxes and penalties for federal and state income taxes, Social Security, Medicare and unemployment; 3) pay any misclassified injured employees workers’ compensation benefits; and 4) provide employee benefits, including health insurance, and retirement. There is a “perfect storm” brewing related to worker classification. As the smaller employers with more than 50 FTEs will be required to offer affordable healthcare insurance or pay a penalty and the potential change of the requirements related to payment of overtime, there will be huge incentive for business owners to avoid one or both of these by classifying workers as an independent contractor vs. an employee. I expect this question is one that many CPAs both in CPA firms and those employed in business and industry will be facing. I have made a conscious effort in this article to give you information verbatim from DOL and IRS vs. giving you commentary or opinions.

This article is continued on www.CPAmagazine.com.

EXPAND YOUR PRACTICE WITH CROWDFUNDING SERVICES

FUND THEIR DREAM Full Service Crowdfunding Support  Logo Design  Video  Press Release CROWDFUNDING SERVICES

 Annual Report  Business Case

Call today for a free consultation 888-610-1144 | cpacrowdfunding.com 21 I TA X S E A S O N 2 016

www.CPAmagazine.com

Lewis Testifies at Congressional Committee BY T. STEEL ROSE, CPA

hairman of the AICPA Tax Section’s Tax Executive Committee, Troy Lewis, CPA, testified before the Small Business Committee of the U.S. House of Representatives in July of last year to advocate on behalf of the profession and the US taxpayer. As the most visible CPA tax advocate for the profession, CPA Magazine reached out to get his perspective on the state of today’s CPA tax firms. Lewis is the sole proprietor of Lewis & Associates, CPAs, LLC and a VP and chief enterprise risk management officer at Heritage Bank in St. George, Utah. He acts on behalf of the Institute in tax matters. He manages 14 tax committees and technical resource panels of the Tax Section.

The U.S. Government Accountability Office needs to come in and determine what the balance is between service and enforcement. The current output is unacceptable.

What do you foresee for the future of CPA tax practices? Considering FASB ASC

Section 1411 created a tax on Net Investment Income for more affluent taxpayers. There was not enough time to address it. It was painful for the CPA firm but not well known because it was considered a rich person problem. Implementing ACA is broad based, so each company has to ask each person to determine if they had insurance for each month. So the question came up in the CPA office and CPAs became administrators. The ACA website is good, but CPAs are stuck in the middle; we felt we were in the policing business. So now these 1095 forms are required for most but not all. Calculating the FTEs is not perfectly clear. Individuals will receive a 1095 and ask what to do with it. I felt like a junior deputy of the IRS to be compliant, and still remain professional. There is a dilemma for those who claimed credits for a decision made two years prior, and then getting a lower refund based on over-claiming credits. This leaves a gap. The ACA is a wide applicability issue. No one gets a pass. You have to determine if you are compliant.

740, accounting for income taxes, is the leading cause of restatement of financial statements the tax practice of the future is more reliant on technology and less dependent on human capital. Taxes practices are growing as clients use taxes for business decisions.

What was the most burdensome problem this year? The inability for us to

serve clients is burdensome. I waited for over an hour, was transferred and got a reset instead of a courtesy disconnect. It got to the point that regional firms hired seasonal workers to have people just call the IRS repeatedly, which says there is a problem with the IRS. The AICPA committee pleaded with Congress to study it. Congress believes there is waste at the IRS. Whoever is at fault, it impacts the front line CPA. The IRS is losing the battle for confidence in the IRS. It will take a generation to correct the perception. 22 I TA X S E A S O N 2 016

www.CPAmagazine.com

What do you see as the best and worst technology? I think firms are making better utilization of cloud and document management to become the norm. You can’t be cost competitive if you are not using compliance tools. You map the General Ledger to the tax return once rather than every year. We still suffer from information overload to get the right information at the right time. It is a time drain; just finding it is a problem.

Do you have any comments on ACA’s affect on CPA firms’ tax practice? In 2013,

Do you have any comments on DOL interpretation of the overtime affect on CPA firms? The new rules would increase from $23,660 to $54,400 annual salary for employees that would be required to be paid overtime. The AICPA sent a letter to Mary Ziegler at the U.S. Department of Labor commenting on the proposed rules. The significant impact is on the smaller firm for the increased payroll cost. It could impact the overall impact of hiring. There is also an impact of complying with the rule. It would most affect the small firms and NFPs who are less likely to handle it.

Does your firm represent clients before the IRS? Do you have any comments on how to be effective in that area? Just

like the phone service, the correspondence audit is not timely. Clients don’t understand why it takes so long to solve it. Try explaining to them how we have to go back to the 70’s and can’t email. It’s like pull out the lava lamp and put a stamp on it and wait. Olsen (Taxpayer Advocate) said the IRS will never be loved but should be respected. It could take the IRS four to six months to handle a situation that could be solved in a few minutes over email.

What made you specialize in tax? In college I had to make a decision like Yogi Berra. I noticed very smart people were struggling with taxes. It was saying to my soul, not religious, but it just felt right. We (CPAs) have to be credible and independent. In tax we can advocate with clients to become tax efficient to enable good business decisions. What do you do in your free time? Now it’s long distance running; I’m a reformed drummer from college.

Complete Paper Trails Boost Collections

new International Association of Commercial Collectors (IACC) survey, “What I Wish My Clients Knew, What I Wish They Told Me,” suggests that by closing any gaps in record-keeping and consistently following credit and collection procedures, commercial creditors would eliminate some of the biggest obstacles to collection. IACC electronically administered the survey to its members – all of whom are commercial collection professionals - in October. The goal: Identifying actions commercial creditors should and shouldn’t take to ease both in-house and third-party collections. Nearly 37% of survey respondents chose missing records as the greatest barrier to successful debt collection. “Documents detailing what the debtor ordered, and what was delivered and when, are commonly missing from the information a commercial collector receives,” said Joe Batie, chief commercial officer at Caine & Weiner in Woodland Hills, CA, in a post-survey interview. “This creates an unnecessary dispute for the debtor that the balance that is placed for collections is wrong, and allows the debtor to prolong the collection cycle.” said Al Watson, national collections manager at Altus Global Trade Solutions in Kenner, LA. Batie conservatively estimates that 55% to 60% of clients provide his company with incomplete records. Ironically, pressure to save money contributes to the missing document, money-losing situation, he said. “Companies are trying to give good service, keep prices down and be profitable. So they either don’t hire as much administrative help, or they hire less experienced help and hope they’ve found a diamond in the rough.” Sometimes the documents were never generated, he said. “Sometimes the information 23 I TA X S E A S O N 2 016

www.CPAmagazine.com

may be there, but no one has time to go and find it for us,” he said.

Two Collectors are Not Better Than One

Nearly a third of the IACC members who took the recent survey identified the hiring of multiple collectors to pursue the same debt as the biggest roadblock to successful collection. Usually, the doubleteaming is not intentional, but is also tied to gaps in record keeping. “We have seen clients place accounts with competing agencies to put pressure on debtors (but) it appears that poor record keeping may be the biggest culprit,” said Altus Global Trade Solutions Manager Rose Hill. “This would include lack of communication inhouse between client contacts, where one places the account but another wants it kept in house.” “At times, more than one collections professional is working the same account because a client isn’t familiar with, or isn’t following, the Triadic Rule,” Batie said. The Triadic Rule is the collections organizing principal that says a creditor contacts a collections agency, and the agency will bring in an attorney if necessary. However it happens, it never makes the process go more smoothly. “One person could be demanding payment in full, and then someone else calls and agrees to a protracted payment arrangement,” Batie said. “Of course debtors are going to go for the protracted agreement even if they have the ability to pay in full. The frequency of debtor contacts by multiple collectors not aware of the others’ efforts can also result in a harassment complaint,” he said. Contributed by the International Association of Commercial Collectors. For more information, visit www.commercialcollector.com.

The Commercial Collection Corp. of NY, Inc.

SERVING THE CREDIT INDUSTRY’S PROFESSIONALS

Specialists in national and international corporate financial recovery. CCC of NY offers customized programs which provide the highest quality of professional collection and focus on superior customer service. The company has been based in Buffalo, NY for over 50 years with satellite offices in Florida, Indiana, Pennsylvania, Minnesota and Quebec, Canada. We continue to grow as the premier provider of collection services throughout the nation. We are trusted by our clients and associates for our proven commitment to a profitable partnership.

Will Your Clients Run Afoul of ACA’s Largest Penalty? BY JERRY LOVE, CPA/PFS, CFP, CVA, ABV, CITP, CFF, CFFA

ailure to read this article and understand it could cost your client or company a penalty of $100 per day per employee under Code § 4980D. The penalty could be $36,500 per year per employee for employers who do not offer insurance coverage, but instead seek to reimburse their employees for insurance purchased on the individual market. This penalty could put Jerry Love you or your small business clients out of business. This IRS Revenue Ruling went into effect on July 1, 2015. This is a very serious matter which many professionals have been hoping the IRS would further delay or Congress would fix, however neither has happened. I am finding many small employers think because they have less than 50 employees there is nothing in the Affordable Care Act (ACA) which will impact them. However, this penalty can be assessed to employers with as few as two employees. The IRS is sending a strong and clear message to employers who are sending their employees to a health insurance exchange or the open insurance market with a tax-free contribution to help them pay premiums. Many small employers have used payment arrangements such as reimbursing the employee for premiums or making the payment directly to the insurance company to help employees obtain health coverage without the hassle and expense of furnishing a full-fledged company group health insurance plan. Sometimes employers have done this because they could not obtain an affordable group policy or they may not have enough 24 I TA X S E A S O N 2 016

www.CPAmagazine.com

employees to meet the insurance companies’ criteria. According to the IRS, this penalty can be assessed to employers for simply offering plans which reimburse employees for premiums paid by them for individual health insurance policies. The penalty can also apply to direct employer payments of premiums for employees’ individual health policies. National Federation of Independent Business (NFIB) reported this summer (June 18, 2015): “Businesses of all sizes will have to pay a daily $100 penalty if they are reimbursing their employees for individual market health insurance premiums starting July 1, 2015. Unlike early reports that the Affordable Care Act would only affect larger companies, this penalty applies to any company that reimburses more than one employee. The penalty is $100 per day per employee, up to $500,000. This penalty is just one of many ACA changes that biz owners have to look out for in the near future.” http://www.nfib.com/article/biz-owners-avoid-a-100-per-day-penalty-69862/ The NFIB continued its reporting of this issue on June 29, 2015 in an online article by Jack Mozloom: An obscure IRS rule takes effect on Wednesday under which small businesses that get caught helping their workers buy insurance or pay medical bills can be fined 18 times more than larger employers that don’t provide coverage at all, warned the National Federation of Independent Business (NFIB) today. “It’s the biggest penalty that no one is talking about,” said NFIB Policy Director Kevin Kuhlman. “The penalty for compensating employees for healthcarerelated expenses is enough to destroy most small businesses.” Under the rule, which appears

nowhere in the Affordable Care Act, employers who do not offer a group health plan, but give their workers additional pay to compensate for the purchase of health insurance or direct medical expenses can be fined $100 per day, per employee. Over the course of a year that’s $36,500 per employee up to $500,000 in total. “It’s hard to believe Congress or the President intended to punish employers much more severely for actually helping their workers,” said Kuhlman. “Nevertheless, that’s the consequence and most small businesses don’t know it.” In fact, according to NFIB research 14% of small businesses that don’t offer group insurance reimburse their workers instead. They think they’re doing a good thing but they’re walking into a minefield. “Reimbursing employees for the cost of insurance or medical services is a way for small businesses to help their workers without the administrative headache of setting up a costly group plan,” said Kuhlman. “Most small employers don’t have HR departments or benefits specialists, so this is a simpler, easier way to help their employees.” http://www.nfib.com/ article/suranc-69940/ This penalty is huge. It is more than 18 times greater than the $2,000 employer-mandate penalty under ACA for not providing qualifying health insurance for employees. It is very important to note employers with fewer than 50 workers are not exempt. The basic issue is how an employer may be paying for an employee’s health insurance. Many small employers will reimburse their employees for premiums on their individual health insurance policies or the employer may pay the premium directly on behalf of the employee.

This article is continued on www.CPAmagazine.com.

You Can Claim Lifetime Learning Credits For Continuing Education Courses BY JULIE WELCH, CPA, CFP

ou can offset the costs of higher education with two credits: the Lifetime Learning credit and the American Opportunity tax credit. The Lifetime Learning credit provides for a broader range of learners than the American Opportunity tax credit, since the American Opportunity tax credit is only available for the first four years of postsecondary education. Full-time or part-time students in undergraduate, graduate, professional, or continuing education programs at a higher education institution may use the Lifetime Learning credit. The Lifetime Learning credit provides a nonrefundable credit equal to 20% of up to $10,000 of qualified expenses you pay. This credit is per taxpayer return, not per student like the American Opportunity tax credit. Qualified expenses include tuition and fees necessary for the enrollment or attendance of you, your spouse, or any of your dependents at a higher education institution. Expenses do not include books, sports fees (unless they are part of the degree program), activity fees, insurance expenses, transportation costs, or room and board. You must reduce your qualified expenses by scholarships, grants, and other tax-free educational benefits, but you do not need to reduce your qualified expenses by gifts, bequests, or inheritances. Higher education institutions include accredited postsecondary educational institutions that offer degree programs and are eligible to participate in student financial aid programs, i.e., colleges, community colleges, and many vocational schools. There are limitations on using the 25 I TA X S E A S O N 2 016

www.CPAmagazine.com

Lifetime Learning credit. First, the credit is phased out if you are single with adjusted gross income (AGI) between $55,000 and $65,000 or married filing jointly with AGI between $111,000 and $131,000 ($110,000 and $130,000 for 2015). These amounts may be adjusted annually for inflation. Second, if you are married filing separately, you cannot claim either the Lifetime Learning credit or the American Opportunity tax credit. Third, you may elect either the American Opportunity tax credit or the Lifetime Learning credit with respect to one student. However, if you have more than one student at the same time, you can use the American Opportunity tax credit to offset the expenses of one student and the Lifetime Learning credit to offset the expenses of the other student.

You may claim the American Opportunity tax credit or the Lifetime Learning credit for some educational expenses and use tax-free Coverdell Education Savings Account earnings for educational expenses for which no credit is taken. NOTE: The effective rate of the Lifetime Learning Credit is 20%. If you are in the 25% tax rate bracket or higher, you may receive a greater tax benefit by claiming your education expenses as a business deduction on Schedule C or an employee business expense on Schedule A, if applicable to you. Education expenses you deduct as employee business expenses are subject to the 2% floor. Because of the credit phase-outs, self-employment tax, and miscellaneous itemized deduction limitations, you must decide the best way for you.

EXAMPLE: You are single with adjusted gross income (AGI) of $34,000 in 2016. To maintain your license in your profession, you must obtain 40 hours of continuing education. You attend a week-long continuing education program. Your tuition is $1,000, books are $100, room is $300, travel is $380, and meals are $200. You may claim a Lifetime Learning credit of $200 (20% x $1,000 for the tuition). The $980 of books, room, travel, and meals do not qualify for the credit. However, if you are an employee who itemizes deductions, in addition to the credit of $200, you can deduct $200 (($100 books + 300 room + 380 travel + 100 (200 x 50%) deductible meals) – 680 (34,000 AGI x 2%)) giving you an additional $30 ($200 x 15%) of tax savings. If you are self-employed, your total tax rate on your business income is 30.3% (15% income tax rate plus 15.3% self-employment tax rate). Rather than claiming the credit, you could deduct the education as a business deduction. Your tax savings from the deduction would be $570 (($1,000 tuition + 100 books + 300 room + 380 travel + 100 (200 x 50%) deductible meals) x 30.3% total tax rate).

CheckMark Payroll

ACCOUNTING

MultiLedger

(Accounting Software)

1099 1095 Forms, Checks & Envelopes

CheckMark’s Consultant Program for CPAs CheckMark has been providing Payroll & Accounting Solutions to Small Businesses in the U.S. and Canada since 1984 for Macintosh and Windows platforms. Our Consultant Program is highly successful because we value and provide our Consultants the best support possible. By becoming our Consultant, you will receive the following benefits: A c o p y o f C h e c k M a r k Pa y r o l l , MultiLedger Accounting, 1099 and 1095 software every year for your own use A copy of CheckMark Payroll Software for resale Free updates and tech support for all software packages throughout the year Complimentary samples of checks and forms for your customers Up to 40% off the list price for all resale copies of software Free listing of your services in CheckMark Consultant Directory on our website To apply, download the Membership Enrolment Form at http://goo.gl/hdQOOP, complete and send it in with your $399 payment or call us at 970.225.0522. Once selected, you will receive software and support worth well over $1,000 including software that you can immediately sell for $329.

/checkmark-inc-

/CheckMark_Inc

/+Checkmark1

323 W, Drake Rd, Ste. 100, Fort Collins, CO 80526. Tel: 970.225.0522 www.checkmark.com | sales@checkmark.com

26 I TA X S E A S O N 2 016

www.CPAmagazine.com

Greatland Yearli Desktop W-2, 1099 & 1095 Software www.yearli.com | greatland@greatland.com 800-968-1099 Yearli ® Desktop is a complete federal, state and recipient W-2, 1099 & 1095 reporting platform designed to help you generate, file, print and mail all related forms.

CLOUD ACCOUNTING ExpenseWatch, Inc. ExpenseWatch

CONSTRUCTION & ACCOUNTING Foundation Software, Inc. FOUNDATION ® Construction Accounting Software www.foundationsoft.com info@foundationsoft.com 800-246-0800 FOUNDATION ® is job cost accounting, project management and scheduling software for contractors. It’s available traditionally installed or on the cloud and offers integrated mobile applications. Management Information Control Systems. Inc. (aka MICS, Inc.) Builder Information System (BIS)

PAYROLL 24Hour Payroll, Inc. Payroll Software for Service Providers www.24hourpayroll.com sales@24hourpayroll.com 844-667-2424 Payroll software for Service Providers. Simple to use, Comprehensive, Affordable, No Maintenance or Check Fees! Advanced Micro Solutions, Inc. 1099–Etc. CheckMark, Inc. CheckMark Payroll Service www.checkmark.com sales@checkmark.com 800-444-9922 Engineered for small businesses on Macintosh or Windows, our software is the most complete solution for do-it-yourself payrolls, accountants and professional payroll services. CYMA Systems, Inc. Financial Management Systems Paymate Software Corporation Clarity-Integrated US Payroll/HR Time & Attendance and Employee Self Service

Consultants’ Training Institute™ (CTI™) Live, Online, and Self-Study Training in the Accounting and Financial Consulting Specialties

Payroll4 Construction.com Payroll4Construction.com info@payroll4construction.com 800-949-9620 Payroll4Construction.com is a payroll processing and reporting service built just for contractors, to make it easier to tackle certified payroll, union, prevailing wage and more.

FINANCIAL PLANNING SERVICES

PERSONAL FINANCIAL STATEMENT

CPE

MasterPlan Financial Software MasterPlan: The Analyst www.masterplanner.com 800-229-5080

HUMAN RESOURCES AND PAYROLL BASE Section 105 HRA, Integrated HRA

KISS Computer Company Net Worth Express www.networthexpress.com bay.gruber@networthexpress.com 888-848-8105 Net Worth Express PRO Edition offers CPAs personal financial statement accounting software that compiles a statement of financial condition for individual clients based on GAAP.

2016 Buyers Guide

PRACTICE MANAGEMENT

CPAmagazine.com

CPA Magazine‘s

ACCESS ONLINE

TAX PREPARATION

AFSB Accounting & Financial Site Builder Website builder for Accounting Firms www.afsb.net mail@afsb.net 800-888-5803 AFSB.net is an industry leading website builder for accounting firms established in 2000. Our commitment to accounting, tax and financial industry means you are partnering with a service that understands your needs and those of your clients.

Wolters Kluwer CCH Access

TIME AND BILLING HMS SOFTWARE TimeControl www.timecontrol.com info@hms.ca 647-478-8332 TimeControl is the multi-purpose timesheet system from HMS Software. TimeControl’s flexibility has made it one of the most popular timesheet systems in the world.

Pascal Workflow

Pascal Workflow www.pascalworkflow.com getorganzied@pascalworkflow.com Complete Practice Management, CRM & Workflow Software. Stay organized with an easy to use solution. Proposals, Projects, E-Signatures, Document Management, & Portal. Start with our Free-Forever Plan.

PRACTICE SALES Accounting Practice Sales, Inc. Practice Sales www.accountingpracticesales.com garyh@apsleader.com 888-847-1040 We are the largest marketer of CPA firms in North America, helping both buyers and sellers find the right opportunity to suit their needs.

PROFESSIONAL LIABILITY INSURANCE Herbert H. Landy Insurance Agency Professional Liability Insurance www.landy.com | johnt@landy.com 800-336-5422 The Landy Agency has been providing exceptional insurance solutions to Accounting professionals since 1962. Offering the broad coverage features for today’s practices and firms of all sizes, count on us for superior coverage, service and value. Now offering protection for the risk of cyber and data breach occurrences

TAX PREPARATION eFile4Biz.com All inclusive print, mail and e-file service www.efile4biz.com Accountants and businesses can quickly and easily prepare 1099 and W-2 forms. Deliver copies to recipients and file with the IRS in eFile4Biz.com Tenenz Tax and Accounting Supplies www.tenenz.com | mail@tenenz.com 800-888-5803 For over 40 years Tenenz Inc. has provided high quality, low cost products and services to accountants and tax preparers across the US. Our quality is unsurpassed and we won’t be undersold. We offer a lowest price guarantee and 100% satisfaction.

SWK Technologies, Inc. Time and Billing Exact Continued on page 28

27 I TA X S E A S O N 2 016

www.CPAmagazine.com

CPA Magazine‘s

2016 Buyers Guide Tax Season 2016 Volume 15, No. 1

Continued from page 27

TIME AND BILLING

VIRTUAL OFFICE

TPS Software, Inc. TPS Time & Billing www.tpssoftware.com sales@tpssoftware.com 888-877-2231 TPS- trusted by more than 16,000 accountants in small and mid-sized firms to look after time tracking, billing and provide management tools.

Managing Editor Joshua Fluegel josh@cpamagazine.com Copy Editor Myrna Nelson Advisory Board/Columnists Sidney Kess, CPA, J.D., LL.M Jerry Love, CPA/PFS, CFP, CVA, ABV, CITP, CFF, CFFA Robert E. McKenzie, J.D. Julie Welch. CPA, CFP Martin M. Shenkman, CPA, MBA, PFS, J.D.

TRUST PROBATE ACCOUNTING Delta Data, Inc. Trust Accountant www.deltadatatrust.com info@deltadatatrust.com 888-760-8039 Trust Accountant ™ , considered the premier trust and probate accounting program in its price range, is a real-time portfolio accounting software program designed to enable CPAs and attorneys etc. to easily and cost effectively manage fiduciary and individual accounts.

Publisher Angie Rose angie@cpamagazine.com Advertising Brandon Bates brandon@cpamagazine.com

PRACTICE WORKFLOW

Production Andrea Bergeron Paul andrea@cpamagazine.com

Pascal Workflow Pascal Workflow www.pascalworkflow.com getorganzied@pascalworkflow.com Complete Practice Management, CRM & Workflow Software. Stay organized with an easy to use solution. Proposals, Projects, E-Signatures, Document Management, & Portal. Start with our Free-Forever Plan.

VIRTUAL OFFICE Abacus Data Systems, Inc. Abacus Private Cloud www.abacusnext.com/finance info@abacusnext.com 855-446-9213 Abacus Data Systems provides Turn-Key Technology Solutions that guarantee integrity, security and ultimate performance to help professionals build and grow their business successfully.

28 I TA X S E A S O N 2 016

www.CPAmagazine.com

Editor T. Steel Rose, CPA, ACG cpa@cpamagazine.com

Subscription Changes Joshua Fluegel josh@cpamagazine.com

WRITE UP PC Software Accounting, Inc. Client Write Up

www.pcsai.com pcmail@pcsai.com 800-237-9224 Our client write up program was rated 2nd behind QuickBooks in CPA Practice Advisors Readers Choice Survey 7 years in a row. Sophisticated reports, yet very fast and easy to use. Great Interfaces including QB. We are owned, programmed and supported in the United States and very reasonably priced.

The opinions given by contributing authors are their own and are not necessarily the opinion of our staff and management. All trademarks used are the property of their respective owner. CPA Magazine (ISSN# 2378-7481) is published four times a year by CPA Magazine, P.O. Box 92342, Southlake, TX 76092, 817-416-6650 and 888-610-1144 Standard Mail postage paid at Sussex, WI 53089 ©2016 All Rights Reserved Magazine Publishing Group, Inc. Printed in the U.S.A.

If you need CPE, study this issue, answer the questions and fax your answers to 817-756-7252 today. Instructional Method: Self-study Field of Study: Taxes (3 hours) Program Prerequisites: A basic understanding of tax preparation Recommended CPE Credit: 3 hours CPE Quiz Expiration: December 31, 2016 Quiz Title: IRS Penalty Relief and Deductions Update

You may earn CPE by studying the articles in CPA Magazine. To be eligible for continuing professional education credit, you should spend approximately three to six hours reading, reviewing and studying the material in the current issue. Then answer the self-study test questions. Certify that you have completed the study requirement for this exam by submitting the test online, or mailing or faxing a signed copy of the test to 817-756-7252. A certificate documenting the CPE credits will be issued for each examination score of 70% or higher.

Certified Public Accountants: Your State Board of Accountancy has final authority on the acceptance of any course for CPE credit for CPAs. Contact your state board if you have any questions concerning their CPE requirements. The student is responsible for selecting courses which meet the board requirements. The CPA Magazine CPE sponsor ID is shown where applicable: AK, AL*, AZ, CA, CT, DC, DE, GA, HI, IA, ID, IN, KY, MA, MD, ME, MI, MO, MT*, ND, NE, NM, NV, OH, RI, SD, UT, VA, VT, WA, WI, WY *Report 50% of the CPE credit shown on CPE certificate

Tax Season 2016: Answer the following 15 questions and complete the answer sheet on page 31. 1. Innocent spouse relief, Section 6015(c) of the internal revenue code, only applies to taxpayers if they: A. are no longer legally married B. have not lived together over a 6 month period C. have obtained a marriage license D. have reported spousal abuse 2. Which of the following is incorrect regarding innocent spouse relief, IRC §6015(b)? A. Relief under this code section is available only in audit situations. B. It provides for separation of liability, and takes into consideration the allocable income of each spouse on the jointly filed return. C. If each condition is met, the requesting spouse is relieved of the tax liability for that year to the extent the liability is attributable to the understatement. D. If the requesting spouse establishes that he or she did not know about a portion of the understatement, relief may be granted to the extent that the liability is attributable to that portion of the understatement. 29 I TA X S E A S O N 2 016

www.CPAmagazine.com

3. Essentially employers who are subject to the ACA employer “shared responsibility” mandate who use the new forms to report health insurance coverage offered under employer-sponsored plans in accordance with Section 6056 of the IRC will need to report information on Form 1095 to the employees. Form 1094-C must be used to: A. to report the coverage of individuals obtaining their insurance through the exchanges B. report to the IRS summary information for each employer C. transmit Forms 1095-C to the IRS D. Both B and C 4.

SSARS 21 requires an engagement letter and it must be: A. signed by the CPA and a client B. signed by a CPA firm employee C. signed by the client or the client’s spouse D. signed by the client and submitted by the CPA no later than 30 days Continued on page 30 before a review

for 3 $25 CPE Hours

If you need CPE, study this issue, mark the answers on page 31 and fax to 817-756-7252 today.

Continued from page 29

5. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 has effectively reversed the U.S. Supreme Court’s ruling that the overstatement of basis is not an omission from gross income for purposes of the six-year statute of limitations when a taxpayer omits 25% from gross income, provided the omission is more than $5,000. Under the new law, in which an overstatement of basis that produces an understatement of gain constitutes an omission from gross income triggering the six-year statute of limitations applies to tax returns suiting any of the following situations except: A. tax returns filed after July 31, 2015 B. any returns filed prior to July 31, 2015 that are not closed by the statute of limitations or by consent of the taxpayer C. returns filed no more than 30 days after July 31, 2015 with expressed consent by the IRS via email with accompanying verification D. cases before the Tax Court that were docketed before July 31, 2015, if the tax year is still open 6. Which of the following would not possibly establish reasonable cause for the abatement of tax penalties? A. A mistake was made B. Emailed advice from the IRS C. Oral advice from IRS D. Unable to obtain records 7. What are Dividends from things such as cooperative banks and credit unions that should be reported on Schedule B called? A. reinvested dividends B. capital gain distributions C. general dividends D. interest income 8. Stock dividends and stock splits are not taxable if: A. the basis of the old shares is allocated between the client’s old shares and the new shares B. they do not increase the percentage of ownership in the corporation C. the basis in the new shares is the fair market value of the stock when it is received D. both A and C 9. A taxpayer may be eligible to make an offshore voluntary disclosure through the Offshore Voluntary Disclosure Initiative if: A. he or she is currently under audit B. the money in the foreign account or asset was earned legally C. the IRS knows about the taxpayer’s foreign account or assets D. the money in the foreign account or asset was not earned legally and moved from a domestic account 10. Under the Offshore Voluntary Disclosure Initiative, the Streamlined Program has non-willful taxpayers submit _______ of amended income tax returns. A. 78% B. 3 years 30 I TA X S E A S O N 2 016

www.CPAmagazine.com

C. 7 years D. the current value 11. What will happen if a child’s AGI is under $200,000? A. The child will not be subject to the Medicaid tax. B. A code section 754 basis adjustment can be made. C. The child will not be subject to the estate tax. D. The child will not be subject to the Medicare tax. 12. If an employer misclassifies a person as an independent contractor they may have a number of consequences. If it is determined that an employer misclassifies a person as an independent contractor but meets the legal definition of an employee by either the IRS or DOL, the employer may be required to: A. pay back taxes and penalties for federal and state income taxes, Social Security, Medicare and unemployment B. reimburse them for Medicare premiums the employer should’ve paid them under FLSA, including overtime and minimum wage C. pay any misclassified injured employees workers’ compensation benefits going back no further than 8 months D. None of the above 13. In determining if an employee qualifies as an independent contractor or an employee you must observe the facts of the situation. Which one of the categories for these facts is not considered: A. whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay B. the extent to which the worker makes his or her services available to the relevant market C. if the business has a right to direct what work is accomplished and how the work is done, through instructions, training or other means D. the extent to which the worker can attend accredited post secondary educational programs 14. Which of the following statements is correct regarding the Lifetime Learning credit? A. It provides credit equal to 20% of up to $15,000 of qualified expenses paid. B. This credit is per student like the American Opportunity tax credit. C. Qualified expenses include tuition necessary for enrollment. D. Qualified expenses include books, activity insurance expenses and transportation costs. 15. Which of the following is incorrect regarding the Lifetime Learning credit? A. The credit is phased out if you are single with AGI between $55,000 and $65,000 or married filing jointly with AGI between $111,000 and $131,000. B. The Lifetime Learning credit is refundable up to 60 days after it has been filed. C. If you are married filing separately, you cannot claim either the Lifetime Learning credit or the American Opportunity tax credit. D. You may elect either the American Opportunity tax credit or the Lifetime Learning credit with respect to one student.

■

ACCESS THIS QUIZ OR PRIOR CPE QUIZZES ONLINE AT CPAMAGAZINE.COM Course title: IRS Penalty Relief and Deductions Update Mark your answers here.

1. A ❍ B ❍ C ❍ D ❍ 2. A ❍ B ❍ C ❍ D ❍

for 3 $25 CPE Hours

Total due: $25 for 3 hours of CPE credit. Fax this page to 817-756-7252, and if preferred, call 888-610-1144 to follow up with credit card number. If paying by check, payee is: CPA Magazine. Mail to: CPA Magazine, P.O. Box 92342, Southlake, TX 76092. Name Company/Firm PTIN _______________________

CPA

Street address

3. A ❍ B ❍ C ❍ D ❍

City/state/zip

4. A ❍ B ❍ C ❍ D ❍

Email (required)

5. A ❍ B ❍ C ❍ D ❍

Phone

6. A ❍ B ❍ C ❍ D ❍

Card number

7. A ❍ B ❍ C ❍ D ❍ 8. A ❍ B ❍ C ❍ D ❍

Check

Expires

Name on card By signing here, I submit this quiz for CPE credit confirming that I personally studied the material for the required amount of time listed on the exam. ___

Signature

9. A ❍ B ❍ C ❍ D ❍ 10. A ❍ B ❍ C ❍ D ❍

3 Hours of CPE

11. A ❍ B ❍ C ❍ D ❍ 12. A ❍ B ❍ C ❍ D ❍ 13. A ❍ B ❍ C ❍ D ❍ 14. A ❍ B ❍ C ❍ D ❍ 15. A ❍ B ❍ C ❍ D ❍ Certified Public Accountants: Your State Board of Accountancy has final authority on the acceptance of any course for CPE credit for CPAs. Contact your state board if you have any questions concerning their CPE requirements. The student is responsible for selecting courses which meet the board requirements. You can review your state CPA CPE requirements online using links to state boards and state CPA societies.

31 I TA X S E A S O N 2 016

www.CPAmagazine.com

ACCESS MORE COURSES ONLINE Obamacare and Tax Technical Update

ACA Forms and Deductions Favorable Tax Treatment for Special Groups Obama Care Reporting and Tax Planning Tactics

CPAMAGAZINE.COM

YOUR LAST DECISION IS THE BIGGEST. When it is time to transition out of your practice you want to do it right. We are the largest facilitator in North America for selling accounting and tax practices. We provide a free estimate of your firm’s value, market extensively, assist in negotiations and find you the right situation. Contact us today so your last decision will be your absolute best.

1-888-847-1040