January/February 2013 - Florida CPA Today | Volume 29, Number 1 by Florida Institute of CPAs

F L O R I D A

JANUARY/FEBRUARY 2013

florida C P A

TODAY

contents JANUARY/FEBRUARY 2013

VOLUME 29, NUMBER 1

A P U B L I C AT I O N O F T H E F LO R I DA I N S T I T U T E O F C E R T I F I E D P U B L I C A C C O U N TA N T S

cover story

20 Florida’s Principal and Income Act Piecing Together the Changes

features

6 8 10

16 Must-have Apps Identity Theft Explodes in Florida Protect and Educate Your Clients

Letter to the editor

16 18 30

S corporations Update

Chair’s message

Robert Half offers 2013 salary guide

President’s message

The Taxonomy of Florida Entities New Legislation Now in Effect

14 News briefs

LLCs Alive and Well in Florida…but Owners Beware

New Internship Database to Connect Students, Employers

10 FLORIDA CPA TODAY

departments

25 DOR update 26 Staff reports 34 Marketplace 36 On the move 38 FICPA staff profile

Meet Larry Cohen, CPA www.ficpa.org

F L O R I D A

Access Florida CPA Today Archives Online For your convenience, Florida CPA Today articles from 1997-present are posted on the FICPA’s website at www. ficpa.org/ficpa/Members/Tools/Publications/FCT/Archives. The archives provide a variety of previously published information, including technical articles written by member CPAs, legislative updates, DOR and IRS updates and much more.

PRESIDENT/CEO Deborah L. Curry, CGMA SR. DIRECTOR OF MARKETING & COMMUNICATIONS Jan Dobson, CAE EDITOR Suellen D. Wilkins GRAPHIC DESIGNER Loleta K. Bolden PUBLICATIONS COORDINATOR Dianne Dearduff EDITORIAL COMMITTEE Walter C. Copeland, CPA, chair Michael S. Kridel, CPA, vice chair Matthew P. Behnke, CPA • Douglas E. Day, CPA Lynda M. Dennis, CPA • David J. Hochsprung, CPA Troy Y. Manning, CPA • Vicki H. Meyer, CPA William C. Quilliam, CPA, Ph. D. All articles submitted to Florida CPA Today are subject to technical review, Editorial Committee review, space availability and editing requirements and restrictions. Please contact the editor before submitting unsolicited manuscripts. Florida CPA Today publishes letters to the editor in its Members’ Forum. For information about the guidelines, visit www.ficpa.org/letterstoeditor. Statements expressed herein are those of the identified authors and not necessarily those of the Florida Institute of Certified Public Accountants, Inc., nor should statements be considered endorsements of products, procedures or otherwise. The FICPA reserves the right to reject any editorial material or paid advertising that does not meet Florida CPA Today criteria or detracts from its ethical and professional standards. Florida CPA Today is published bimonthly by the Florida Institute of Certified Public Accountants, Inc., P.O. Box 5437, Tallahassee, FL 32314. Telephone: (850) 224-2727 or (800) 342-3197. (Street address: 325 West College Ave., Tallahassee, FL 32301.) Visit our website at www.ficpa.org. This magazine is provided to members of the FICPA. No specific amount of your dues, either expressed or implied, is for this publication. This magazine is not available for purchase by either FICPA members or nonmembers. For display advertising information, contact the FICPA Marketing Department at (850) 224-2727, Ext. 270. © 2013 by the Florida Institute of Certified Public Accountants, Inc. All rights reserved. Reproduction in whole or part is prohibited without the express written consent of the FICPA.

JANUARY/FEBRUARY 2013

chair’s M E S S A G E

Strike it up

Stepping up our lifestyles in 2013 Scott Price, CPA

dedicate this Chairman’s column to my uncle, Phillip Wayne Price, CPA, who passed away on Dec. 2, 2012. He was a city councilman in Crystal River for many years and an active member of the FICPA. He will be sorely missed. As the stressful busy season cranks up for many of us, taking care of ourselves makes especially good business sense. Abraham Lincoln said, “Give me six hours to chop down a tree, and I will spend the first four hours sharpening the ax.” I think he had it right. Making the most of 2013, professionally and personally, requires plenty of ax sharpening. Are you and your organization prepared? Seven years ago, my sister (the doctor) told me I needed to change my over-stressed life. She challenged me to get off the statins and start making health a priority. Like many in our demanding profession, my eating habits weren’t ideal and I exercised sporadically. I committed to sharpening my physical ax the oldfashioned way – through diet and exercise. I lost 35 pounds, lowered my cholesterol levels and began triathlon training. So far I’ve completed four triathlons and two half-marathons, and have plans for more competitions. Most importantly, I feel good – and well prepared to make my business thrive. Are you one of those people who say you can’t spare the time? It isn’t so hard when healthful habits become an extension of what you already do. I think you’ll see improvements in your productivity and health if you commit to these activities in 2013: • Make gradual lifestyle improvements. • Schedule personal time on your calendar. • After you accomplish something difficult, take time out for fun. • Pack your lunch and spend a few minutes eating outside. We live in the Sunshine State, for goodness sake! • Get up and walk around during each work day, even if it’s just down the hall. • Take a mental break. Read, or watch a funny video clip. How does your business prepare and communicate its goals? Although A-lign CPAs is a boutique, 15-member firm, we use a multi-day staff retreat to sharpen our business ax. I invest in the staff retreat because faceFLORIDA CPA TODAY

time is a critical part of taking our business to the next level. The annual event is a large investment and highlight of the year, creating a deep sense of ownership within my team and big returns for A-lign. I began preparing for the November 2012 retreat by gut-checking our draft strategic plan with my senior management team. Next, we polled employees about what they want to see happen at the organization. During the retreat we combined serious strategy discussions with fun, team building, celebration and getting to know each other outside of the office. As we discussed each employee’s role in advancing the company, the huge importance of strong interpersonal communications became apparent. It’s the simple communications stuff that we, and you, already know – and that we so quickly push aside in this hurry-up, deadline-driven business world: • Practice active listening. Opt for Skype over email when you can’t have a face-to-face discussion. • Be more articulate. Ask specific questions to illicit more specific responses. • Respond to the purpose. Focus on the issue, rather than reacting emotionally when you don’t agree. • Use “I” rather than “you” statements. • Make and work your plan. Each night, prepare a written list of five things to do the next day. Don’t let interruptions derail your plan. • Hold each other accountable. Set task assignments, realistic deadlines and progress reviews. • Be proactive rather than reactive. Walk down the hall and initiate a crucial conversation. • Be kind and caring. Say thank you, and take an interest in colleagues’ personal lives. • Smile. If you show enthusiasm, so will the receiver – and smiling feels better anyway! Gordon Spoor’s timely cover story in this issue on the Florida Income Tax Act illuminates how our responsibilities have changed as fiduciaries. It’s imperative that CPAs remain well-oiled machines, in body and in mind. Our profession is the gatekeeper, and often the last defense for our clients, stockholders and owners. Are you ready to put up a strong defense? Here’s wishing you good health, prosperity and preparation in 2013! FCT www.ficpa.org

16 Must-have Apps

Letter to the Editor

Get the latest smartphone as a holiday gift? Here are the FICPA Technology Team’s top picks of the coolest apps around.

Re: FICPA President/CEO Deborah Curry’s Message in the September/October 2012 issue of Florida CPA Today, “Bring One On.”

Calorie Counter iPhone, Android, BlackBerry Log calorie intake by voice or the swipe of a barcode.

OpenTable iPhone, Android, BlackBerry Make and confirm a restaurant reservation instantly!

Dropbox iPhone, Android, Blackberry Store files in the cloud and sync them across all your devices.

OurGroceries iPhone, Android, BlackBerry Sync your grocery list with other family members’ smartphones!

Evernote iPhone, Android, Windows Phone, Blackberry Take notes with photos and audio.

RedLaser/ShopSavvy Barcode Scanners iPhone, Android Scan the barcode of any product – these apps will search to make sure you’re getting the best price. BlackBerry version: Scope

Find My iPhone, Where’s My Droid iPhone, Android GPS and ringer features help you find your phone. Flashlight iPhone, Android, BlackBerry Use your device as a flashlight in a pinch. FlightTrack iPhone, Android Track your flight and see baggage claim and gate info. GasBuddy iPhone, Android, BlackBerry Find the cheapest gas on the go. Instagram iPhone, Android Snap pictures and easily share them through social media. LastPass iPhone, Android, BlackBerry Store all your passwords in one secure location – and use one password to log into stored websites.

Shazam iPhone, Android, BlackBerry Identify any song playing and purchase it! Skyview iPhone Explore the sky with interactive stargazing and more. Great for kids. TripIt iPhone, Android, BlackBerry This travel organizer turns all of your confirmation emails – for flights, hotels, rental cars and more – into a digital itinerary you can easily share with friends and family. Yelp iPhone, Android, BlackBerry Read reviews from other consumers on restaurants, bars, cafes and more.

To see a longer list of useful apps, visit the Business Technology section of the FICPA website at www.ficpa.org/apps. 6

JANUARY/FEBRUARY 2013

I was struck by the statistic presented that of the approximately 27,000 licensed Florida CPAs, only 15,300 are FICPA members. I am an out-of-state member who passed the CPA exam while living in Florida in 1991. I think I have a slightly out-of-the-mainstream view of membership. I have worked in industry since 1991, specifically the technology industry – not the typical place you’d see a CPA. However, I find that in fact, both the CPA and the FICPA membership provide significant benefits. Let me explain. In my career of software sales and consulting, I have found that software salespersons often get grouped in the same (unsavory) category as used car salesmen, which makes it especially challenging to build credibility when there are “two strikes against you” before you even walk in the door. I have developed a sales technique where, even though I don’t introduce myself as a CPA, I eventually work that fact into the conversation. It is remarkable how much credibility that instantly gives me. Being a member of the FICPA – and especially your wonderful website – allows me to stay current on accounting and financial issues, and I often work them into my sales pitches and general conversations as well. Your organization might try several ways to recruit new members: 1) contact out-of-state residents who have received a Florida CPA license and inform them how your magazine and website could assist them in their careers; and 2) reach out to CPAs in nontraditional accounting jobs. I think there is a definite feeling that state CPA organizations are just for accountants who “do” traditional accounting jobs. Thank you and good luck! Andrew B. Simmons Lake Forest, Ill.

president’s M E S S A G E

FICPA Receives Positive Words from a Member

t was one of those days that I know is just part of working in the association world, a day when problems (or as I refer to them, “challenges”) were popping up left and right. As you might imagine, tackling the desires of more than 18,500 members isn’t always a walk in the park. The FICPA is involved in so many different areas in that I’m often jumping from one subject to another rather quickly. My goal is to help our members achieve success in their careers, businesses, legislation and community outreach, so I must wear many hats. I like the challenge and strive to satisfy our members’ needs. When our director of communications told me that a member had submitted a letter to us, I certainly expected it to be another “challenge” to address. How pleasantly surprised I was to find the letter at left from FICPA member Andrew Simmons. We are so thankful for his positive feedback, and it couldn’t have come at a better time. What I found most gratifying in Andrew’s letter was that being a CPA lends substantial creditability to his career and enables him to reach his audience. And that is true for all of us. Not only does our education and certification give us the technical skills necessary to perform our jobs, it bestows on us a level of integrity and professionalism that is respected by so many. FLORIDA CPA TODAY

Deborah L. Curry, CGMA

I completely agree that we need to bring more CPAs serving in nontraditional careers into the FICPA. We constantly brainstorm about how best to reach them, and how to provide what they need in their careers. One of our difficulties is locating them. Often, our only contact information is an address on the Florida Board of Accountancy rolls. So, when I received such a positive letter from one of our non-resident CPAs, I felt a sense of pride and accomplishment in knowing that the FICPA does make a difference. Here’s where we can use your help. If you know a CPA who isn’t a member, ask why. Let him or her know we’re here to meet the diverse needs of CPAs throughout the state. And most importantly, that strengthening our voice through increased membership is vital to protecting our professional license and advocating for positive legislation, or against legislation that is counterproductive for CPAs or the public we serve. Please know that we are trying our best to serve each of you; to meet the numerous goals set for us each year; to evolve to meet the ever-changing needs of our profession; and to attract new and young CPAs to join those who already understand the value of FICPA membership.

“What I found most gratifying in Andrew’s letter was that being a CPA lends substantial creditability to his career and enables him to reach his audience. And that is true for all of us.”

Remember, the strength of our organization lies in you – so please, help us Bring One On! FCT www.ficpa.org

New Internship Database to Connect Students, Employers

By Brenda Hubbard, director of academic relations and student initiatives

o you remember what it was like finding an internship when you were a student? Now, as an employer, do you hire student interns? Student internships are an invaluable part of the process of becoming a CPA. “Students have difficulty relating to accounting without practical experi-

ence,” said Will Quilliam, accounting professor at Florida Southern College. “I’ve seen internships transform students into active and engaged learners. Interns understand why accountants do the things we learn about in class.” The FICPA is introducing a new student initiative – the Internship Opportunity

Engine, a free internship database. It will provide student members with a web-based directory of internships available in Florida, and employer-members with a place to post positions. The service is a direct member benefit, and FICPA membership is required to use the site. “The Internship Opportunity Engine will allow our members in industry, government and public practice to promote internship opportunities to our student members throughout the state,” said FICPA President/CEO Deborah Curry, CGMA. The FICPA will launch the first phase of the database – students searching for internships – in early 2013. Subsequent versions will include entry-level jobs (positions requiring experience of one year or less) and will allow employer-members to search for student candidates. Members may post internship opportunities using the easy, online form. Firms with multiple offices can link an internship to a specific office. Internships must be located in Florida; may be paid or unpaid; and may be offered at any time during the year. It’s free to search for or post internships, and they may be posted for up to 90 days. Students will see a brief description of the position; the location and hours per week; and contact information. The Internship Opportunity Engine isn’t designed to compete with job databases such as CareerBuilder. com, LinkedIn or Monster.com. It

JANUARY/FEBRUARY 2013

GET LISTED IN SECONDS! The Internship Opportunity Engine is ready to roll – all we need is you. Get to it! Be the first company to get your name out to students throughout the state. Go to www.ficpa.org/ OpportunityEngine to post your internship opportunities now!

also won’t contend with campus programs such as career centers, job-assistance programs or businessschool events. The goal is to provide another (free) resource for members, including student members seeking internships. “This new initiative will help students and firms who are unable to attend face-to-face events on campus find each other,” said Karen Mosteller, a partner with Markham Norton Mosteller Wright & Company, PA in Fort Myers. Most faculty members know local employers and are familiar with recruiters who visit their campuses. But it’s more challenging to help a student in Northwest Florida find an internship in Miami, for example, when he or she goes home for the summer. “As a student, it would have been so nice to have an online resource to search for internship opportunities,” said Maclain Benton, a business manager at Florida State University and a young CPA. “In the past, the best way to find an internship was to go through the formal recruiting process, often beginning with a job fair, in the hopes of landing an internship with a big accounting firm. The new database will allow students to easily browse opportunities, and hopefully will provide interns to firms and businesses that may not have the resources to recruit the ‘old fashioned’ way.” FLORIDA CPA TODAY

“At a small school such as mine, we don’t have a large number of employers who come to us,” Quilliam said. “Internships are a vital way for us to introduce our students to them, and to help students find jobs after graduation. Many of our students have obtained great jobs after graduation as a direct result of internships.” Currently, there are about 8,200 fourth- and fifth-year accounting students in Florida. Many of them are or will be seeking internships. Last year, about 3,650 graduated with bachelor’s or master’s degrees in accounting. “Internships are a win-win,” Mosteller said. They allow students to see if a public accounting career is really their passion before they graduate. They also meet a seasonal staffing need in our firm. “Many of our team members started as interns and came back to work for us after college, or worked for our firm while finishing school,” she said. “I can see this new program really connecting students with the right firms.” FCT For more information about the student internship database contact Brenda Hubbard, director of academic relations and student initiatives, at (800) 342-3197 (in Florida); (850) 224-2727, Ext. 419; or hubbardb@ficpa.org. www.ficpa.org

Identity Theft Explodes

P R OT E CT A N D E D U CAT E YO U R C L I E NTS

he year was 1995. Windows 95 and the Internet were beginning to revolutionize our daily lives. That also was the year Sandra Bullock starred in “The Net,” a movie about a software engineer who found herself the victim of a then-unknown concept – identity theft. At that time, the fear of losing everything of value in your life because someone had access to your information simply was material for a good thriller movie. Since then, identity theft has become a leading fear of millions of Americans. Almost all of us bank and/ or make financial transactions online. And with today’s technology, almost any shred of our information – legal or otherwise – can be relatively easy to obtain. In the last five years, identity theft has moved into the public sector. Governments now are victims of fraudulent tax refunds, paid to identity thieves who tie up valuable resources. Tax return identity theft is growing exponentially. A recent U.S. Government Accountability Office (GAO) report said the IRS had identified 641,690 incidents of identity theft involving tax fraud as of Sept. 30, 2012. That’s an increase of 62 percent from the 232,142 incidents reported in 2011. The dollar volume of fraudulent refunds isn’t known, according to the GAO. Financial institutions recognized and returned to the IRS $754 million in tax refunds they found suspicious between January and Sept. 30, 2012. The GAO said that figure is only a fraction of the total amount of refund fraud.1 Florida leads the nation in identity-theft cases, and Miami and South Florida are far ahead of the rest of the state. In 2011, Florida’s identity-theft rate was 178 1 2

complaints per 100,000 residents. This is bad enough, until you compare it to the City of Miami’s rate of 324.1 complaints per 100,000 residents.2 Miami’s rate of bogus returns is 46 times the national average. A report by the Treasury Inspector General for Tax Administration (TIGTA) reports that, so far this year, 74,496 potentially bogus returns have been filed in Miami alone, costing taxpayers $280 million in false refunds. Two factors are considered the driving force behind identity-theft explosion. First, the use of prepaid debit cards has increased dramatically during the last few years. The IRS permits refunds to prepaid debit cards, rather than requiring direct deposits to bank accounts. Thieves simply can request that the refund be sent by debit card when filing their own returns through software programs such as Turbo Tax and Tax Cut. Then, they have the refund without any corroborating taxpayer information embedded in the card. Adding insult to injury, criminals even use the IRS website and file for free. It’s easier, less traceable and more profitable than other forms of crime. Second, taxpayers’ ability and desire to get their refunds fast also has mushroomed during the last several years. Taxpayers expect their refunds yesterday, thanks to direct deposit. And, with the evolution of e-filing and Refund Anticipation Loans (RALs), taxpayers can get their refunds in days instead of weeks. IRS regulations require that wage and income information be delivered to taxpayers by Jan. 31. Taxpayers then race to the nearest preparer to get their refund deposited directly into a bank account or on a debit card. However, W-3, 1096, 1099, 1098 and other

Michael Cohn, “40 Defendants Charged in Florida Identity Theft Tax Fraud Cases,” Accounting Today.com, October 2012. “Alarming Rise in IRS Refund ID Thefts, Few Prosecuted: GAO Report,” abcnews.go.com/Business, Dec. 3, 2012.

10 JANUARY/FEBRUARY 2013

in Florida information may not reach the IRS until early May. A full IRS record of a taxpayer’s activity, also known as the Wage and Income Transcript, generally is not complete until mid- to late May. Criminals use this lag time between the opening of the IRS e-file system and the compilation of taxpayers’ transcripts to file false returns. Their main objective is to get a refund before the IRS can input and cross-reference the return with the transcript. Consequently, fraudulent reporting of refundable credits, such as the education credit and energy credit, is growing.

FLORIDA CPA TODAY

By Keith E. Johnson, CPA, CIA

Fortunately, technology to defeat identity theft is improving. Practitioners’ best defense strategies against identity theft are relatively low-tech and inexpensive to implement. Some steps practitioners can take to prevent theft of clients’ personal information include: • Ensure that your computer/networks have the latest and best anti-virus software programs installed, and ensure they are continually updated. ➡

www.ficpa.org

• After scanning client documents, use a commercial-grade shredder or a reputable shredding service. Many services are mobile and may cost less than you think. • For client files and backups, use a good software program that will encrypt your client information if your computer/network are attacked. • Use encrypted client portals on your website, to allow clients to access their records safely and remotely. • When communicating with clients, use an encrypted client portal or email encryption to prevent clients’ personal information from going into the cloud and potentially being intercepted. Clients’ best defenses against identity theft are information and common sense. CPAs can help educate clients about current scams and protective measures – and to know that if something sounds too good to be true, it is. Some ways clients can protect themselves include: • The IRS does not initiate contact with individuals in person, by phone or by email, under any circumstances. The only way the IRS initiates dialog is through the mail. A client can safely assume any 12 JANUARY/FEBRUARY 2013

communication from “The IRS” by any means other than mail is bogus, and should be reported to the IRS Fraud Center. • If clients do their own tax returns (I have a few clients for whom I file an 1120 or 1065, but not the 1040), advise them to save the return on a flash drive and delete it from their hard drive to avoid intrusion by malware programs. • Remind clients to get a good anti-virus software program, such as Norton, McAfee or AVG, and keep the program updated through patch downloads the manufacturer sends periodically. Virusinfected operating systems should be professionally cleaned immediately. • Advise clients to destroy all unnecessary documents containing personal information. They can obtain a good shredder, use the fireplace on a cold winter night (I’ve found this method easy and effective) or take the documents to a reputable shredding service. Look into non-profits that periodically provide shredding services for individuals at no cost. • If a client is a victim of identity theft, he or she should file an IRS Form 14039, Identity Theft Affidavit, which can be found at www.irs.gov/pub/ irs-pdf/f14039.pdf. The

client should complete the form and submit it, with a copy of his or her driver’s license or passport, to the IRS. Don’t give your client an estimated processing time. Processing this form and obtaining the refund can take more than a year. To help clients resolve the matter, you may prepare the Form 14039 for their signature, along with Form 2848, Power of Attorney. • Clients who think they’ve been subject to identity theft may call the IRS Identity Theft toll-free number, (800) 908-4490. • Clients who suspect identity theft should check their credit reports through the three major credit bureaus – Equifax, Trans Union and Experian. They should put fraud blocks on their accounts if necessary. • Report suspicious activity to the Federal Trade Commission at www.ftc. gov. FCT Keith E. Johnson, CPA, CIA is owner of Keith E. Johnson CPA, PA in Jacksonville. He is a member of the AICPA Joint Trial Board and serves on numerous FICPA committees and sections. He also is a member of the Institute of Internal Auditors, Institute of Managerial Accountants and American Certified Fraud Examiners. He is a Certified Internal Auditor and a part-time instructor at the University of Phoenix campus in Jacksonville.

FLORIDA CPA TODAY

www.ficpa.org

NEWS

briefs

Carr Elected to AICPA Council AICPA Council determines programs and sets policies for the Institute. It is comprised of approximately 260 members with representatives from every state and U.S. territory.

Bethany Carr, CPA The AICPA recently accepted the appointment of Bethany B. Carr, a manager for Cavanaugh & Co., LLP in Sarasota, to the AICPA Council. Carr was elected by the FICPA Board of Governors. The

Carr began her FICPA service in 2004 as a member of the Young CPAs Committee and as a trustee for the FICPA Educational Foundation. Currently a member of the Executive Committee, Carr is serving her fifth term on the FICPA Board of Governors. She also has served on various FICPA committees and has chaired the Audit Committee and Women’s Leadership Committee. FCT

FICPA, DBPR Announce Student Video Contest Winners The FICPA and the Florida Department of Business and Professional Regulation (DBPR) recently announced the winners of their The Impostulators student video contest. Students from throughout Florida entered videos about the importance of using a licensed CPA. Team Gazzillo/Flynn came in first place, receiving a grand prize of $1,000 with an additional $350 contribution to the University of Florida. In second place,Team JJD received $500 with a $250 contribution to the University of South Florida. And in third place, the NSU Accounting Club received $250 with a $150 donation to Nova Southeastern University. “It’s been gratifying to partner with the DBPR and 14 JANUARY/FEBRUARY 2013

Florida accounting students to increase awareness about unlicensed activity,” said FICPA President/CEO Deborah Curry, CGMA, “This issue is a serious concern for the general public, particularly as we enter tax season. Projects like this are vital in our efforts to advise the public about the benefits of hiring CPAs.” The judging panel consisted of representatives from the FICPA, DBPR, the Florida Board of Accountancy, the public-relations field and an accounting program at a Florida college. FCT For more information about the contest or to view the videos, visit www.ficpa.org/ Content/news/whatsnew/ impostulators/vote.aspx.

FICPA rolls out new logo for 2013 On Jan. 1, the FICPA began using its new logo on all communications, including Florida CPA Today; NewsFlash; the website, www.ficpa.org; social media; and membership materials. The emphasis on “i” and the accompanying tagline, “I am a CPA,” represent the organization’s member-centric identity.

The updated logo and tagline embody the FICPA’s goals for 2013 and beyond, as the Institute strives to serve members’ changing needs, develop innovative tools for Florida CPAs and advocate on the profession’s behalf. To access a members-only downloadable version of the new logo, go to www. ficpa.org/Content/Members/ Tools.aspx. FCT

Robinson Appointed to State College of Florida, ManateeSarasota District Board of Trustees Gov. Rick Scott recently announced the appointment of FICPA member Eric W. Robinson, CPA to the State College of Florida, Manatee-Sarasota District Board of Trustees. “We’re pleased to see that the unique value of our profession is promoted in service to Florida, and that Gov. Scott has appointed a CPA to serve on a board providing critical infrastructure,” said FICPA President/CEO Deborah Curry, CGMA. “We

congratulate Mr. Robinson on his appointment.” Robinson is a managing partner of Robinson, Hanks, Young, and Roberts, PA in Venice. He has served on the Board of Workforce Florida and the Sarasota County Airport Authority. He also has served on the Florida Board of Accountancy since 2010. Robinson is appointed for a term that began Oct. 22, 2012 and will end May 31, 2016. The appointment is subject to confirmation by the Florida Senate. FCT

From FICPA staff reports

FICPA members receive Key Partners Awards The South Florida Business Journal recently honored several FICPA members at its 7th Annual Key Partners Awards ceremony in Coral Gables. The awards honor the area’s top attorneys and and accounting specialists in their trusted role of providing sound advice, strategy and counsel to business people. Congratulations to these FICPA members: Cynthia Borders-Byrd, CPA •

Jamie Byington – Cherry Bekaert & Holland

•

Alan Fiske – Fiske & Co.

•

Cecelia Garber – Marcum, LLP

•

Blain Heckaman – Kaufman, Rossin & Co.

•

Gary Jenkins – McGladrey

•

William Knibloe – Crowe Horwath, LLP

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Jeffrey Kramer – Goldstein Schechter Koch

•

Richard Pollack – Berkowitz Pollack Brant

•

Sheri Schultz – Fiske & Co.

•

Michael Torres – Perez Abreu Aguerrebere Sueiro & Torres, PL FCT

Florida CPA/PAC Corrects, Increases Contributor List In the November/December 2012 issue of Florida CPA Today, the Florida CPA/

correct name of Gold Club firm CliftonLarsonAllen.

& Stuart. The article also

The PAC is pleased to announce that Crowe Horwath, LLP, with managing partners Hugh Reynolds in Fort Lauderdale and Ron Sompels in Tampa and Lakeland, has been added as a Gold Club Firm.

should have noted the

FCT

PAC article on pages 12-13 should have noted James G. Newman as the managing partner of Silver Club firm Gregory, Sharer

Mia A. Thomas, CPA

FICPA members named among Most Powerful Women in Accounting CPA Practice Advisor and the American Society of Women Accountants (ASWA) recently named two FICPA members – Cynthia Borders-Byrd, CPA and Mia A. Thomas, CPA – to their inaugural list of the Most Powerful Women in Accounting. The list included 25 accounting and tax professionals, consultants and technology developers from throughout the United States. The awards were presented at the 2012 ASWA Annual Conference in San Diego. “The FICPA is thrilled to have two members included on this prestigious list,” said FICPA President/ CEO Deborah Curry, CGMA. “We congratulate them on making a difference in the profession and their

own organizations, and for their personal leadership and mentorship of future women leaders.” Borders-Byrd is immediate past chair of the Florida Board of Accountancy. She also is an FICPA studentoutreach speaker and a member of Institute’s State and Local Government Section. Thomas is a past president of the FICPA Educational Foundation and currently serves as a Foundation trustee. She serves on the Florida CPA/PAC as a Central Region trustee and as the FICPA Central Florida Chapter legislative liaison. She also serves on several of the Institute’s committees and sections. FCT

Call for Nominations 3rd Annual Women to Watch Awards Nominate an outstanding woman in accounting. Nominations accepted beginning Feb. 1, 2013 Award winners announced June 13, 2013 during the FICPA Women’s Leadership Summit at the Mega CPE Conference. www.ficpa.org/womentowatch FLORIDA CPA TODAY

www.ficpa.org

By Sydney S. Traum, BBA, JD, LLM (Tax), CPA

corporations Update PAYROLL TAXES OF S CORPORATIONS

Iowa supporting the IRS re-characterization of a large part of the distributions and determin-

Salaries Disguised as Distributions On Oct. 1, 2012, the United States Supreme Court denied certiorari in David E. Watson PC v. Us. The issue involved was re-characterization of distributions from an S corporation as salary. Watson was a CPA who received $24,000 of compensation for each of the years 2002 and 2003. In addition to his salary, Watson received over $200,000 in dividend distributions for 2002 and approximately $175,000 as dividend distributions for 2003. The Eighth Circuit of Appeals had affirmed the District Court of the Southern District of

ing that the reasonable amount of Watson’s remuneration for services was $91,044. The lower court decision is reported at 757 F. Supp. 2d 877 (Dist. Ct., SD Iowa, Dec. 23, 2010), and the Eighth Circuit opinion can be found at 668 F. 3d 1008 (8th Cir. Feb. 21, 2012). The denial of certiorari means that the Eighth Circuit opinion is final.

16 JANUARY/FEBRUARY 2013

Salaries Disguised as Rental Payments Bobby D. Perry v Commissioner, TC Memo 2012-237 (Aug. 16, 2012), involved several issues regarding petitioner’s S corporation. The first three issues involved disallowances of deductions. The fourth issue is whether certain payments the corporation made to petitioner were rental payments or executive compensation. Regardless of whether they were rental payments or executive compensation, they are still includable in petitioner’s taxable income and deductible by the company. However, their characterization as rental payments or as executive compensation relates to the issue of whether federal employment taxes will apply. Petitioner argued that payments he received from the company were for rental of a portion of his home to the company. Petitioner did not produce any rental agreement between himself and the company. He did not provide any checks or documentation demonstrating that the company paid him rent for the use of his home. Furthermore, there is no documentation in the record reflecting that the company rented a portion of petitioner’s home. The only evidence supporting his claim that the company rented a portion of his home was his oral testimony. The court is not required to accept petitioner’s self-serving, unverified, and undocumented testimony, and the

independent contractors, and two factors which carried no weight. The court concluded that the masons and laborers should be legally classified as the S corporation’s employees. Accordingly, the corporation was held liable for federal employment taxes, additions to tax, and penalties. Because the corporation did not file any information returns with IRS, including forms 1099-MISC, it was not able to receive section 530 relief or show reasonable cause to avoid penalties. Factors to Determine Employee Status Twin Rivers Farm, Inc. v. Commissioner, TC Memo 2012-184 (July 2, 2012), involved the question of whether an S corporation’s two farm workers were employees for purposes of federal employment taxes. During the years involved, the S corporation hired two farm workers to work on the property. The workers lived in a trailer on the property and did not pay rent. The corporation purchased workers’ compensation and employer liability insurance covering the workers. Their job duties included cleaning stalls, the barn area, the barn offices, the restroom, the tack room, grooming horses, watering horses, and moving horses between pastures. FCT

court declined to do so. Accordingly, the Tax Court held that the payments were executive compensation subject to payroll taxes.

This information is an excerpt from a longer article. To read the entire article, visit www.ficpa.org/Content/Members/Tools/

EMPLOYEE OR INDEPENDENT CONTRACTOR Worker Classification Atlantic Coast Masonry Inc. v. Commissioner, TC Memo 2012233 (Aug. 13, 2012), used the Twin Rivers Farm tests discussed below to determine whether masons and laborers should be legally classified as employees or as independent contractors for purposes of employment taxes. Petitioner was an S corporation owned by Mr. and Mrs. Dempsey. In its post-trial brief, petitioner admitted that for purposes of federal employment taxes, its two corporate officers who were also the shareholders should be legally classified as employees. The issue remaining for decision was whether the masons and laborers should be treated as employees. These individuals were hired on a per-job basis. The masons and laborers provided their own equipment and were paid on a piece work basis. Using the factors set forth in Twin Rivers Farm, Inc. v. Commissioner. the court found four factors weighing in favor of classifications as employees, one factor in favor of classification as FLORIDA CPA TODAY

Publications/FCT/Technical.aspx.

Sydney S. Traum, BBA, JD, LLM, CPA practices law in Miami-Dade County, Florida. His professional association is “Of Counsel” to the law firm of Levey, Filler, Rodriguez, Kelso & Magilligan, LLP. He is author of The S corporation: Planning & Operation and The S corporation Answer Book, published by Aspen Publishers Inc. He received the FICPA Editorial Committee’s 2011 Writing Excellence Award for his article, “Update on S corporations,” which appeared in the January/February 2011 issue of Florida CPA Today. A licensed CPA and attorney in New York and Florida, Traum is Board chairman of the Florida Association of Attorney-CPAs and treasurer of the Harvard Club of Miami. He is a member of the American Association of Attorney-CPAs Executive Committee; the American Bar Association Tax Section S corporations Committee; The Florida Bar Probate Rules Committee; the FICPA Federal Taxation Committee; and the FICPA Miami-Dade County Chapter Board of Directors. www.ficpa.org

Robert Half offers 2013 Corporate Accounting Chief Financial Officer a Company Sales in Millions $100-250K $ 50-100K

$132,750 - $190,500 $137,250 - $198,000 $110,000 - $154,500 $113,500 - $160,750

3.7% 3.7%

Controller a Company Sales in Millions $100-250K $ 50-100K

$97,500 - $129,250 $100,750 - $135,000 $80,000 - $110,250 $82,500 - $116,000

4.0% 4.3%

Public Accounting 2012 2013 Tax Services - Mid-size Firmsd,e Senior Manager/Director a $99,000 - $149,000 $101,500 - $155,250 Manager a $82,500 - $108,250 $84,250 - $113,250 Senior $65,000 - $85,500 $67,000 - $88,750

% change

Audit/Assurance Services Mid-size Firmsd,e Senior Manager/Director a Manager a Senior

2012 2013 % change

$98,500 - $147,000 $100,750 - $153,000 $81,750 - $106,500 $83,500 - $111,250 $64,250 - $84,500 $66,500 - $87,500

Fort Myers Jacksonville 2013 2013 $120,094 - $173,250 $127,643 - $184,140 $99,313 - $140,656 $105,555 - $149,498

$88,156 - $118,125 $72,188 - $101,500

$93,698 - $125,550 $76,725 - $107,880

3.5% 3.5% 3.5%

$88,813 - $135,844 $73,719 - $99,094 $58,625 - $77,656

$94,395 - $144,383 $78,353 - $105,323 $62,310 - $82,538

3.4% 3.5% 3.5%

$88,156 - $133,875 $73,063 - $97,344 $58,188 - $76,563

$93,698 - $142,290 $77,655 - $103,463 $61,845 - $81,375

Bonuses and incentives reflect an increasingly large part of overall pay at this level and are not included in the salary ranges listed above. Advanced degrees or professional certifications also are assumed at this level. Unless otherwise noted (see footnote “a”), add 5-10 percent to graduate degrees or professional certifications. a

$25 million to $250 million in sales Salary does not reflect overtime or bonuses, which are significant portions of compensation for these positions. Unless otherwise noted (see footnote “a”), add 5-10 percent to graduate degrees or professional certifications. d e

*West Palm Beach data added for 2013.

obert Half International recently published its 2013 Accounting & Finance Salary Guide, which features starting-salary ranges for almost 300 positions in the accounting, finance, banking and financial-services fields.

“The hiring environment is more competitive in areas such as technology and accounting, so companies are raising starting salaries to help attract these professionals,” said Ryan Skubis, Robert Half’s district director for Florida. “Among the positions for which starting salaries are increasing, many deal with increasing efficiencies and improving service and profitability.”

In-demand Credentials and Skills The certified public accountant (CPA) designation remains the most frequently requested and versatile credential. CPAs who have experience with a Big Four accounting firm are in particularly high demand. As technology and finance continue to overlap, employers increasingly seek the certified information systems auditor (CISA) designation. Companies also seek professionals who can assist with upgrades of the most widely used enterprise resource planning (ERP) systems. Small and mid18 JANUARY/FEBRUARY 2013

size firms often request experience with software packages such as Microsoft Dynamics GP (formerly Great Plains) and QuickBooks. Other sought-after skills include financial reporting and analysis, forecasting and budgeting. Organizations also look for professionals with outstanding interpersonal abilities. Employers need staff skilled at using a variety of media to communicate financial information to diverse audiences. Robert Half’s 2013 Salary Guide includes local variances for many U.S. cities. Readers can use the variance numbers to calculate local salary ranges based on national ranges. Above are national salary averages for eight positions in corporate and public accounting, along with local-variance calculations for nine major Florida cities. To access Robert Half’s Salary Calculator, or to order or download a free copy of the 2013 Accounting & Finance Salary Guide, visit www.roberthalffinance.com/ salarycenter. Portions of this article are reprinted from the 2013 Accounting and Finance Salary Guide with permission of Robert Half International.

salary guide

Miami/Ft. Lauderdale Melbourne 2013 2013

Orlando 2013

St. Petersburg 2013

From FICPA communications staff reports

Tampa 2013

West Palm Beach* 2013

$146,446 - $211,266 $122,839 - $177,210 $135,191 - $195,030 $129,015 - $186,120 $132,446 - $191,070 $136,564 - $197,010 $121,105 - $171,520 $101,583 - $143,871 $111,798 - $158,339 $106,690 - $151,105 $109,528 - $155,124 $112,933 - $159,946

$107,500 - $144,045 $88,028 - $123,772

$90,171 - $120,825 $99,239 - $132,975 $73,838 - $103,820 $81,263 - $114,260

$94,705 - $126,900 $77,550 - $109,040

$97,224 - $130,275 $100,246 - $134,325 $79,613 - $111,940 $82,088 - $115,420

$108,301 - $165,652 $89,895 - $120,838 $71,489 - $94,696

$90,843 - $138,949 $99,978 - $152,921 $75,404 - $101,359 $82,986 - $111,551 $59,965 - $79,431 $65,995 - $87,419

$95,410 - $145,935 $79,195 - $106,455 $62,980 - $83,425

$97,948 - $149,816 $100,993 - $154,474 $80,880 - $108,720 $83,829 - $112,684 $64,655 - $85,644 $66,665 - $88,306

$107,500 - $163,251 $89,095 - $118,704 $70,956 - $93,363

$90,171 - $136,935 $99,239 - $150,705 $74,733 - $99,569 $82,248 - $109,581 $59,518 - $78,313 $65,503 - $86,188

$94,705 - $143,820 $78,490 - $104,575 $62,510 - $82,250

$97,224 - $147,645 $152,235 - $152,235 $80,578 - $107,356 $83,083 - $110,694 $64,173 - $84,438 $66,168 - $87,063

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Florida’s Principal and Piecing Together the Changes

ractitioners in the fiduciary accounting and income tax areas must be familiar with the provisions of Florida’s Principal and Income Act to properly prepare fiduciary accountings and income tax returns. Fortunately, or unfortunately, this

is an ever-changing Act that practitioners must monitor to avoid substantial liability exposure. Florida adopted its version of the National Conference of Commissioners on Uniform State Laws (NCCUSL) 2000 Uniform Principal and Income Act in 2002, as codified in Florida Statute 738 (Act), effective Jan. 1, 2003 (2002 Act). Since the adoption of the 2002 Act, there have been three separate “glitch bills” to fix various problems with the Act.i During the 2012 Legislative Session, Florida adopted its fourth glitch bill in Chapter 2012-49, Laws of Florida, effective Jan. 1, 2013 (2012 Revisions). This article focuses on some of the more important 2012 revisions to Florida’s Principal and Income Act.

FIDUCIARY DUTIES; GENERAL PRINCIPLES Although most of Florida’s Principal and Income Act is intended to apply to all fiduciaries, including trustees and personal representatives,ii certain sections of the Act that pertained to all fiduciaries contained the word “trustee.” Additionally, the word “fiduciary(ies)” was used in certain sections that were only intended to apply to “trustee(s).” The 2012 Revisions uses the word trustee, rather than fiduciary, in all sections intended to apply only to trusts.

ADDITION OF “CARRYING VALUE” Prior to the 2002 adoption of the Act, Florida operated under its version of the 1962 Uniform Principal and Income Act (1962 Act). The 1962 Act included a definition of “Inventory Value.”iv The definition was used only one time in the 1962 Act in “F.S. 738.11 – Other property subject to depletion.” The original adoption of the Act in 2002 removed this definition because it no longer was used to determine income allocations for “Other property subject to depletion.” However, F.S. 736.08135(2)(d) requires, to the extent feasible, that trust accountings present a carrying value for each asset the trust owns. With the removal of the definition from the Act, the only definition of carrying value was found in Florida Probate Rule 5.346, Appendix B (IV), when referencing the inclusion of carrying values in the preparation of a fiduciary accounting. With the 2012 Revisions, the definition of carrying value now is referenced in multiple sections of the Act.v Carrying value means the fair market value at the time the fiduciary receives the assets. For the estates of decedents, and trusts described in F.S. 733.707(3) after the grantor’s death, the assets are considered received as of the date of death. If there is a change in fiduciaries, a majority of the continuing fiduciaries may elect to adjust the carrying values to reflect the fair market value of the assets at the beginning of their administration. If such election is made, it must be reflected on the first accounting filed after the election. For assets acquired during the administration of the estate or trust, the carrying value is equal to the acquisition costs of the asset.vi

Additionally, the Act now provides that “All provisions of this chapter also apply to any estate that is administered in Florida, unless the provision is limited to a trustee rather than a fiduciary.” 20 JANUARY/FEBRUARY 2013

iii

Carrying value does not have the same meaning as cost basis, which is defined in the Internal Revenue Code (IRC).

Income Act By F. Gordon Spoor, CPA, PFS, CGMA

CHANGES TO UNITRUST PROVISIONS When the Act was adopted in 2002, it included a “unitrust provision”vii that is not included in the NCCUSL version of the Uniform Principal and Income Act. Under Florida’s unitrust provision, an existing trust can be converted to a unitrust, or a settlor may provide for an “express unitrust,” when drafting the governing instrument. Since its adoption, the unitrust provision has gained wide acceptance because of its ease of administration. Recent market fluctuations have impacted the value of trust assets, resulting in fluctuations

unitrust

payments

beneficiaries. To minimize these fluctuations, the 2012 Revisions incorporate a “smoothing rule” to be used when computing the fair market value of the unitrust. The smoothing rule incorporates “Average Fair Market Value,”viii which requires that fair market value for purposes of the unitrust computation be computed using the Average Fair Market Value of the trust’s assets at the beginning of the current year and the prior 20 years. Additionally, any principal additions to the unitrust during the periods used in computing the average fair market value are taken into account as illustrated in Examples 1 and 2 (see page 22).ix

➡

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The changes to F.S. s. 738.1041 clarify that the smoothing rule applies to express unitrusts unless another method is directed in the governing instrument. To avoid the default rules for computing Average Fair Market Value, the grantor must provide that a unitrust approach is desired; how the fair market value will be computed; what percentage (between 3 percent and 5 percent for IRS reasons) is to be used to calculate the unitrust amount; and which assets, if any, are to be excluded from the computation.x

DISTRIBUTIONS TO RESIDUARY AND REMAINDER BENEFICIARIES The 2002 Act required that distributions of income to pecuniary devisees in trust and remainder beneficiaries be computed in proportion to their respective interests in the trust principal using fair market values as of date of distribution. This approach was cumbersome in that it required revaluing all assets when each income distribution was made. This also caused the allocation of income to be different from the taxation of distributable net income. The IRC requires that distributable net income be allocated to beneficiaries based upon the lesser of fair market value or carrying values.xi The 1962 Act, in existence prior to 2002, provided that income be allocated based on carrying values. The 2012 Revision requires that accounting income be allocated to beneficiaries based on carrying values, except in cases where disproportionate distributions are made. This greatly simplifies trust administration by not requiring valuation of trust assets each time a distribution is made, unless disproportionate distributions are made.xii Examples 3 and 4 (see page 23) illustrate the application of this revision when disproportionate distributions are made.xiii 22 JANUARY/FEBRUARY 2013

Example No. 1 (For illustration purposes, market fluctuation has not been reflected) The trustee of a unitrust wants to compute the unitrust distribution for calendar year 2013. This computation will involve averaging the market values of 20112013. On July 1, 2012, the trustee receives an addition to principal in the amount of $1,000,000. Average Fair Market Value (FMV) would be computed as follows: 2011 2012 2013 Beginning Market Value $1,000,000 $1,000,000 $2,000,000 Principal Addition 07/01/12 1,000,000 1,000,000 Total FMV $2,000,000 $2,000,000 $2,000,000 Average FMV= $2,000,000 In 2014, assuming no further additions to principal Beginning Market Value Principal Addition 07/01/12 Total FMV

2012 2013 2014 $1,000,000 $2,000,000 $2,000,000 1,000,000 $2,000,000 $2,000,000 $2,000,000

Average FMV= $2,000,000 The principal addition in 2012 was added to 2012 and to all prior periods used in the computation. Because the addition occurred after Jan. 1, 2012, the addition would be to the 2011 and 2012 balances. However, in the 2014 computation, it is included only in the 2012 balance because it is already included in the 2013 and 2014 balances.

Example No. 2 Same facts as Example No. 1, with the addition of a principal distribution of $500,000 to a beneficiary in 2012. 2011 2012 2013 Beginning Market Value $1,000,000 $1,000,000 $1,500,000 Principal Distribution (500,000) (500,000) Principal Addition 07/01/12 1,000,000 1,000,000 Total FMV $1,500,000 $1,500,000 $1,500,000 Average FMV= $1,500,000 Computation for 2014 (adds in market appreciation in 2014) 2012 2013 2014 Beginning Market Value $1,000,000 $1,500,000 $2,000,000 Principal Distribution (500,000) Principal Addition 07/01/12 1,000,000 Total FMV $1,500,000 $1,500,000 $2,000,000 Average FMV= $1,666,667

Example No. 3

The total principal of a trust remaining after all debts and expenses is $12,000,000. A pecuniary devise of $7,000,000 is to be held in further trust for the benefit of Beneficiary A, with the residue left outright to Beneficiary B. From the onset, the trust for beneficiary A is entitled to 7/12 of an income earned during administration, and Beneficiary B is entitled to 5/12. Prior to the funding of the trust or payment of any of the residue, Beneficiary B receives a principal distribution of $1,000,000. As of the date of this principal distribution, but prior to the actual distribution, the fair market value of the trust assets is $20,000,000. The fractional interests are recomputed as follows: Beneficiary A Beneficiary B Date of death values $7,000,000 $5,000,000 Fair Market Value adjusted at date of disproportionate distribution 7,000,000 13,000,000 Disproportionate principal distribution (1,000,000) Remaining Principal 7,000,000 12,000,000 Recomputed Fractions

7/19

12/19

Example No. 4

The total principal of a trust remaining after all debts and expenses is $12,000,000. The residue is to be split equally between Beneficiary A and B. From the onset, both beneficiary A and B are entitled to 50 percent of any income earned during administration. Prior to the disbursements of the residual devises, Beneficiary B receives a principal distribution of $1,000,000. As of the date of the principal distribution, but prior to the distribution, the fair market value of the trust assets is $20,0000. The fractional interests are recomputed as follows: Beneficiary A Beneficiary B Date of death values $6,000,000 $6,000,000 Fair Market Value adjusted at date of disproportionate distribution 10,000,000 10,000,000 Disproportionate principal distribution (1,000,000) Remaining Principal 10,000,000 9,000,000 Recomputed Fractions

10/19

9/19

DISTRIBUTIONS FROM ENTITIES

year- end financial statements immediately

The 2002 Act provided that cash distributions from entities not in liquidation were income. In determining if a distribution was in liquidation, absent a representation from the entity, there was a default rule providing that any distributions the entity made in excess of 20 percent of the entity’s gross assets, as shown on the entity’s

to be made in liquidation. This posed a

FLORIDA CPA TODAY

preceding the initial receipt, was deemed problem for service entities, which have a very small investment in infrastructure, and regularly distribute in excess of 20 percent of their gross assets. A similar problem arose when Microsoft declared its very first dividend, which

exceeded 20 percent of the company’s gross assets. Although it was clear that the distribution was from accumulated earnings and profits, it was treated as a liquidating distribution under the default rule. Additionally, the 2002 Act contained separate rules for two classes of passthrough entities. Targeted entities were defined as pass-through entities that were not “investment entities.” Investment entities were defined as pass-through entities that derived in excess of 50 percent of their annual cumulative net income from passive sources (i.e. dividends, interest, rents, royalties, etc.). Additionally, the 2002 Act contained separate rules for two classes of passthrough entities. Targeted entities were defined as pass-through entities that were not “investment entities.” Investment entities were defined as pass-through entities that derived in excess of 50 percent of their annual cumulative net income from passive sources (i.e. dividends, interest, rents, royalties, etc.). Distributions from targeted entities were treated as income only to the extent of cumulative undistributed income the targeted entity earned while the trust held an interest in the entity. Distributions from investment entities were treated as income to the extent that the cumulative undistributed income the entity earned represented traditional income items (i.e. interest, dividends, rents and royalties), and principal to the extent that the cumulative undistributed income represented traditional principal items (i.e. long- and short-term capital gains). The allocation was made in the same proportion of the income and principal items included in the entity’s cumulative undistributed income. The 2012 Revisions attempt to simplify these computations and clarify the ➡ www.ficpa.org

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application of the 20 percent rule used in determining liquidating distributions. For non-publicly traded entities, cash distributions are treated as income unless they are determined to be in liquidation. If the entity’s total distributions exceed 20 percent of its gross assets as shown on the entity’s year-end financial statements immediately preceding the initial receipt, the distribution will be allocated to income to the extent that total distributions the entity received, for the number of years or portions thereof while it was subject to the trust, have not equaled a cumulative annual return of 3 percent of the entity’s carrying value computed at the beginning of each period included in the measuring period. Distributions in excess of this amount are treated as principal.xiv For publicly traded entities, cash distributions are treated as income unless they are determined to be in liquidation. The 20 percent default rule is replaced by 10 percent of the entity’s fair market value as of the beginning of the measuring period. If total distributions exceed this 10 percent threshold, they will be income to the extent that amounts allocated to income for the number of years, or portion of years that the trust held an interest in the entity, have not equaled a cumulative return of 3 percent of the entity’s fair market value at the beginning of each measuring period.xv This article has not covered all of the changes made to the Act in 2012. Changes

also were made to F.S. s. 738.602 – payments from deferred compensation plans, annuities and retirement plans or accounts; F.S. s. 738.603 – liquidating assets; F.S. s. 738.705 – Income Taxes and; F.S. s. 738.801 – application with respect to apportionment of expenses.

Example #1 and #2 are excerpted from the White Paper written for the 2012 changes. ix

F.S. s. 738.1041(10)

IRC §643(e)(2)

xii

F.S. s. 738.202

Examples #3 and #4 are excerpted from the White Paper written for the 2012 changes. xiii

To read the complete text of the revised Act, visit www.flsenate.gov/Laws/Statutes/ 2012/Chapter738/All. FCT

Endnotes: i

Chapter 2003-43, Laws of Florida, effective

05/23/03; Chapter 2005-85, Laws of Florida, effective 07/01/05 and Chapter 2006-217, Laws of Florida, effective 07/01/07) “Fiduciary” is defined as meaning a

personal representative or trustee. The term includes an executor, administrator, successor personal representative, special administrator, or a person performing substantially the same function. [F.S. s. 738.102(4)] iii

F.S. s. 738.103(3)

F.S. s. 738.01(2) [Applied prior to 01/01/03]

F.S. ss. 738.202, 738.401(6), and 738.603

F.S. s. 738.102(3)

vii

F.S. s. 738.1041

viii

F.S. s. 738.1041(1)(a)

xiv

F.S. s, 738.401(5)(b)

F.S. s. 738.401(3)(e)

Gordon Spoor is a member and past chair of the FICPA Federal Tax Committee and serves on the Institute’s Investment Policy and Legislative Policy committees. He is chair of the AICPA Fiduciary Accounting Task Force and a member of the AICPA Tax Executive Committee. He also serves on a joint committee of the FICPA, The Florida Bar and the Florida Bankers Association regarding revising Florida’s Principal and Income Act. Spoor is co-author of The Fiduciary Accounting Answer Book (CCH) and Fiduciary Accounting for Florida (FICPA). He serves as a discussion leader for CPE courses and has been named an Outstanding Discussion Leader every year since 1992. He received a 2000-2001 FICPA Presidential Service Award for his service on the FICPA’s Florida Uniform Principal and Income Act Task Force.

“Fortunately, or unfortunately, this is an ever-changing Act that practitioners must monitor to avoid substantial liability exposure.”

24 JANUARY/FEBRUARY 2013

DOR

update This is the second of a three-part series of articles on Florida’s documentary stamp tax, and commons issues or questions.

By Tim Phillips, revenue program administrator

or a purchaser and thus not subject to documentary stamp tax in section 201.02(1).” This ruling allows entities that directly or indirectly own 100 percent of another entity to transfer unencumbered property to the other entity and pay only the minimum documentary stamp tax. However, in Department of Revenue v. PMR Resorts Inc., 868 So.2d 621 (Fla. 2nd DCA 2004), a husband and his wife purchased a parcel of land in 1999 that was financed by a mortgage signed by the husband and wife and guaranteed by PMR Resorts. In 2000, the property was transferred by warranty deed to PMR Resorts. The 2nd DCA ruled that, based on the plain language of the statutory definition of consideration, the amount of the encumbrance constituted consideration and that documentary stamp tax was due on that amount.

Florida Requires Doc Stamp Tax on Real Property Transfers

document that transfers an interest in real property is subject to documentary stamp tax imposed under s. 201.02(1), Florida Statutes. It is based on the consideration for the property interest transferred. Consideration includes, but is not limited to, items such as: the amount of any lien, mortgage or other encumbrance; the discharge of an obligation; the change of one’s beneficial interest in the entity; or the value change of one’s interest in the entity. Where the consideration is other than money, the consideration is presumed to be equal to the fair market value of the property. In Crescent Miami Center, LLC v. Dep’t of Revenue, 903 So.2d 913 (Fla. 2005), the Florida Supreme Court stated that “… the transfer of property between a grantor and its wholly owned grantee, absent any exchange of value, is without consideration

FLORIDA CPA TODAY

According to the PMR Resorts case and application of the statutes, when property subject to a mortgage is transferred into or out of an artificial entity, the amount of the mortgage is consideration for the transfer and documentary stamp tax is due based on 100 percent of the mortgage balance. If there also is a transfer of beneficial interest in the property, the consideration would include the percentage of the transferred property’s equity equal to the percentage of beneficial interest transferred. A transfer of beneficial interest would include those transfers where the grantors are not the sole members of the grantee entity, or where the grantors do not have an interest in the grantee entity equal to his or her interest in the property at the time of the transfer. FCT For more information about documentary stamp tax, including Tax Information Publications (TIPs); Technical Assistance Advisements (TAAs); links to statutes and rules; and court cases, visit DOR’s Tax Law Library @ www.myflorida.com/dor. Or, call the Office of Technical Assistance and Dispute Resolution at (850) 617-8346. www.ficpa.org

STAFF

reports

Governmental Affairs By Rivers Buford, FICPA director of governmental affairs and Justin Thames, FICPA governmental affairs manager

CPA Caucus Forms in Florida House

uring the 2012 elections, two more FICPA members were elected to the Florida House of Representatives. Dan Raulerson (R-Plant City) and David Richardson (D-Miami) join incumbent Rep. Michael Bileca (R-Miami), creating the first threemember CPA caucus in the House. “I would describe having three CPAs in the Florida House as a huge victory for the people of Florida and the business community,” said FICPA member Fred Brummer, a former House of Representatives member who practices at Brummer and Rogers in Apopka. “CPAs’ business education, experience and background are excellent credentials for legislative service. Three CPAs will be better able to deal with the huge volume of budget and business issues the Legislature must address during each session.” Historically, the Florida Legislature has had many attorneys, physicians, agriculture businesspeople and local government officials. Florida citizens have never had a group of CPAs to advocate for the fiscal responsibility, financial 26 JANUARY/FEBRUARY 2013

stability and regulatory framework necessary to allow the state’s business community to grow in a global economy. “We’re pleased to have three strong accountingprofession leaders and FICPA members serving in the House of Representatives,” said FICPA President/CEO Deborah Curry, CGMA. “I know each will represent the profession and the Institute well as they serve our great state. We look forward to assisting them in any way we can as they work to move our state and CPAs forward.”

Rep. Michael Bileca, CPA

Incumbent Representative and FICPA member Michael Bileca, CPA, serves as State Representative of House District 115. Bileca was elected to the House of Representatives in 2010. He is the founding partner and President of Towncare Dental Partnership Inc., founded in 1995.

Bileca’s committee assignments include the Education Committee and the Finance & Tax; Veteran and Military Affairs; Choice & Innovation; and Health Innovation subcommittees.

Government Operations subcommittees.

Rep. David Richardson, CPA

Rep. Dan Raulerson, CPA

FICPA member Dan Raulerson, CPA, serves as State Representative of House District 58. Raulerson, an eighthgeneration Floridian, and his family have been a part of the Plant City community and the district he represents since 1983. Raulerson’s strong roots in Florida include his firm, Raulerson & Company, a full-service public accounting and business consulting enterprise established in 1985. Raulerson’s committee assignments include the Regulatory Affairs and Joint Legislative Auditing committees and the Finance & Tax; Health Quality and

FICPA member David Richardson, CPA, serves as State Representative of House District 113. Richardson began his accounting career at the Department of Defense and then worked with Ernst and Young. He now owns an advisoryservices firm that focuses on accounting and finance issues related to government contracts. Richardson’s committee assignments include the Health Care Appropriations; Finance & Tax; Transportation & Economic Development Appropriations; Health Innovation; and Rulemaking Oversight & Repeal subcommittees. Along with these FICPA members, 92 percent of Florida Senate candidates and 89 percent of Florida House candidates supported by the Florida

New Members

The FICPA happily welcomes many new members

From FICPA staff reports

throughout the year. To see a list of members who have recently joined, visit the FICPA website at www.ficpa.org/meetnewmembers.

CPA/PAC won their elections. During the 2012 election cycle, the Florida PAC contributed more than $210,000 to candidates who best understood the profession and were willing to discuss the FICPA’s legislative priorities.

The PAC helped elect these candidates with the continued financial support of CPAs throughout Florida. To learn more about how to ensure the CPA profession has a voice in Tallahassee, visit www.ficap.org/ paccontribute.

Now that the elections are over, the FICPA is looking for members to join the Key Person Contact Program. This grassroots outreach program helps educate new and re-elected state legislators about FICPA representation in their district. To learn more about the program, visit

www.ficpa.org/Content/ GovernmentalAffairs/ KPC.aspx, or contact Governmental Affairs staff at (850) 224-2727, Ext. 202, or govaffairs@ficpa. org. Have you ever wanted to run for office? Give us a call. We can help you learn how. FCT

Educational Foundation By Jason Zaborske, FICPA educational foundation development director, and Brittany Butler, event coordinator

1040K Becomes Money Run Dade County’s first African-American CPA. Davis was a community leader and co-founder of the Greater MiamiSouth Florida Chapter – National Association of Black Accountants Inc.

ince 1989, the FICPA Educational Foundation has hosted a 5K Run/Walk in South Florida. In 2013 we’ll start a new tradition and host our 24th annual race, the FICPA Educational Foundation Money Run.

The Money Run (formerly the 1040K) has raised more than $250,000 in scholarship funds. Last year’s race had more than 400 participants – and with hopes for sunny skies, we plan to double those numbers!

The Money Run will be held the Saturday after tax day – Saturday, April 20, 2013 – at 7:45 a.m. in Bill Baggs State Park in Key Biscayne. Event proceeds will be awarded to African-American accounting students in South Florida in memory of Lewis Davis, Miami-

Thanks to our sponsors, the Foundation has increased the amount and number of scholarships it awards each year. At last year’s race, the Foundation presented several $3,000 scholarships. The Money Run Board of Directors thanks the

FLORIDA CPA TODAY

runners and walkers who will contribute to the future of the CPA profession by participating in this race. This annual event has tremendous local support. It’s a great way for families and co-workers to get together for fun and exercise and contribute to a worthwhile cause. We hope you’ll join us in Key Biscayne!

For more information about the race or sponsorship opportunities, contact FICPA Educational Foundation Development Director Jason Zaborske at (800) 342-3197, Ext. 417 (in Florida) or (850) 251-7274; or Money Run Board of Directors President Ken Strauss at (954) 712-7099. Or, visit www.moneyrun.org. ➡

Save the Date!

What: FICPA Educational Foundation Suncoast Scramble When: Friday, May 3, 2013 12:30 p.m. – Shotgun Start Where: East Lake Woodlands Country Club, Oldsmar Information: www.ficpa.org/golf www.ficpa.org

Thank You, 2012 Scholarship Wranglers!

Student Outreach

Thanks to these firms, the 2012 Jeans for Scholarships event raised thousands of dollars for the FICPA Educational Foundation! This easy, fun event has been very successful and we’re excited to announce the 2013 dates – May 17 and Oct. 25.

Accounting Careers Committee Awards Outreach Efforts

This year, the Foundation awarded 68 scholarships totaling $136,000 to Florida accounting students. This wouldn’t be possible without our friends and supporters, and we look forward to increasing those numbers in 2013 with the help of our Scholarship Wranglers! Ahearn, Jasco + Company, PA Appelrouth, Farah & Co., PA BKHM, PA CliftonLarsonAllen Daszkal Bolton, LLP Davidson & Nick, CPAs Ferlita, Walsh & Gonzalez, PA GAG Consulting Inc. Glickstein Laval Carris, PA Goldstein Schechter Koch Grau & Associates Ira M. Herschbein, CPA, PA KPMG, LLP MARCUM, LLP Markham Norton Mosteller Wright & Company, PA Mia A. Thomas, PA Moore Stephans Lovelace, PA Ocariz, Garrastacho, Hevia & Mercer, LLP OwenWise & Company Saltmarsh, Cleaveland & Gund Sharff, Wittmer, Kurtz & Jackson, PA Thomas Howell Ferguson, PA FCT 28 JANUARY/FEBRUARY 2013

By Brenda Hubbard, director of academic relations & student initiatives

During Fiscal Year 2011-12, more than 600 FICPA members volunteered at their local schools and in their communities to advance the accounting profession. Students from elementary school through college learned about basic accounting principles and personal finance. More than 5,000 students met CPAs and learned about the profession and accounting-career options. Each year, the Accounting Careers Committee recognizes an individual’s outreach efforts. For her contribution to the Accounting for Success (AFS) educational initiative, the committee named Kathlyn “Kitty” Jordan, a partner with Adams & Harper, PA, CPAs in Orange Park, the AFS Speaker of the Year.

ensure their successful financial future,” Jordan said. “The FICPA gives me the forum and the opportunity to participate in something I believe is important in these uncertain financial times.” Jordan has educated youth and recruited/ trained volunteers through the St. Johns County Public Library System’s Financial Education for Young Adults seminars. She is a key member of the Jacksonville MoneyWise Week planning team, coordinating outreach efforts for the FICPA, and the St. Johns and Jacksonville chapters. Jordan also has worked on tax presentations, for individuals and

small businesses, that are available for FICPA volunteers to use. Jordan has shared her story and discussed the accounting profession, as well as the value of networking, with students at the University of North Florida. “None of it would be possible without the partners at my firm,” Jordan said. “They’ve given me total support and the time. They believe in the community and allow staff to be a part of it.” “We’re honored that the FICPA selected Adams & Harper, PA as a firm of the year,” said Gary Harper, managing partner. “We believe in our efforts to teach the

The committee also recognized Adams & Harper, PA, CPAs as the AFS Firm of the Year for their communityoutreach efforts. This is only the second time the committee has given this award. “Educating people about the importance of making smart financial decisions helps

The staff members of Adams & Harper, PA, CPAs receive the Accounting for Success 2011-12 Firm of the Year Award.

youth and adults in our community. Who knows – a spark may start a fire in their quest for financial knowledge.” During the 2011-2012 school year, FICPA members from the firm shared their passion for personal finance by: • Making presentations to teens through the St. Johns County Library System. Since 2008, the firm has educated more than 500 students about personal finance through this program. • Making presentations to consumers as part of Jacksonville’s MoneyWi$e Week • Promoting, recruiting and training volunteers to make financial literacy presentations “We encourage all Florida CPAs and firms to consider serving in this valuable effort,” Harper said. “Most of our staff members have made community presentations, and everyone has contributed in some way. Each has demonstrated a passion for what they do.” FCT Accountants, accounting and personal finance are boring? If you’d like to help change that view, contact Brenda Hubbard, director of academic relations & student initiatives, at (800) 224-2727, Ext. 419, or hubbardb@ficpa.org. FLORIDA CPA TODAY

FICPA Thanks Volunteers We sincerely thank these fantastic FICPA outreach volunteers, who reported presentations they made during FY year 2011-12. Bettie Adams; University of North Florida John Adams; Adams & Harper, PA, CPAs Donna Adams; Adams Air & Hydraulics Inc. Stephanie Adams; Geller, Ragans, James, Oppenheimer & Creel Judy Albano; Bollenback & Forret, PA, CPAs John Amrhein; Moore Stephens Lovelace, PA Azuree Ashby; Ashby Consulting, LLC Tom Bazley; Crowe Horwath, LLP Donna Blaes; Crippen, Trice, Hornby & Ford, LLP Patricia Blue; Internal Revenue Service Kristen Brand; Brand Tax Group, PLLC Stacey Brannan; Geller, Ragans, James, Oppenheimer & Creel Michele Brockhum; Michele Brockhum, CPA Elliott Buchman; Elliott Buchman, CPA Christine Burke; RSM McGladrey Inc. T. Shepard; Burr Glickstein, Laval, Carris, PA Maria Byrd; Figueroa Byrd, CPA Thomas Daly; CliftonLarsonAllen Mamie Davis; Mamie L. Davis, PA Megan Diaz; Berkowitz Dick Pollack & Brant Kathleen Dulko; Halifax Health Jennifer Egan; Crowe Horwath, LLP Rebecca Fraser-Miller; Ennis, Pellum & Associates, PA Sarah Funk; Trilogy International Angela Gantt; AH Gantt CPA & Associates, PA Hubert Gill; University of North Florida Marshall Gunn; GunnChamberlain, PL Kim Hall; Cyprexx Services, LLC Dan Henn; Dan Henn, CPA, PA Claude Hobbs; Claude Hobbs Jr., CPA Linda Howard; Orlando Utilities Commission Megan Hubbuch; Johnson Lambert & Co. Tarsha Jacobs; BKHM, PA Steven Janssen; Crowe Horwath, LLP Eric Jolly; Jupiter Medical Center Inc. Patricia Jones; Jones & Company CPAs PA Kathlyn Jordan; Adams & Harper, PA, CPAs Jeff Jordan; Adams & Harper, PA, CPAs Celina Jozsi; University of South Florida Andrew Judd; University of Central Florida Stephen Kuiper; Business Navigator, LLC Trey Lamb; Rayonier Inc. John Ledgerwood; Embry Riddle Aeronautical University Bonnie Mackey; Levin, Silvey, Zelko & Mackey, PA Pete Maharaja; Moore Stephens Lovelace, PA Gary Margolis; Callaghan, Glassman & Margolis, LLC Kathy Masterson; Flagler College

Patty McMaster; Honeywell Inc. Scott Meckley; Hunt Real Estate Service Inc. Jennifer Mila; Marcum, LLP Karen Mosteller; Markham Norton Mosteller Wright & Company, PA Mary Murawski; JLR Medical Group Uday Murthy; University of South Florida Tim Naddy; Homes & Land Christopher Parsotan; Goldstein, Zugman, Weinstein & Poole, LLC Rachel Perlmutter; Johnson Lambert & Co. Chuck Peterson; Caspers Company K. Drew Pfeifer; PricewaterhouseCoopers, LLP Amy Powers; Acosta Tax & Accounting Services, PA Tom Reilly; Holland & Reilly, CPAs Rob Roccapriore; Johnson Lambert & Co. Thais Rodriguez-Caez; Ernst & Young, LLP Lisa Ronchetto; Morrison Brown Argiz & Farra, LLC Michael Sapp; Girl Scouts of West Central FL Jeremiah Saunders; PricewaterhouseCoopers, LLP Terry Seaton; Seaton Financial Advisors, LLC Dan Sokoloff; Marcum, LLP Michael Songer; Michael Songer, CPA Ellen Spradley; Lombardo, Spradley & Klein, CPAs Carole Stewart-Heron; Sanson, Kline, Jacomino, Tandoc & Gamarra, LLP Cheri Swain; Carr, Riggs & Ingram, LLC Andrew Taubman; Friedman, Cohen, Taubman & Company CPAs, LLC Thuy Tra; Thuy N. Tra, CPA, PA Betty Viamontes; Tampa General Hospital Kim Wilmoth; Wilmoth & Associates, PA Nate Woodrum; Adams & Harper, PA, CPAs Kitty Jordan receives the Accounting for Success 2011-12 Speaker of the Year Award.

www.ficpa.org

To r e a d t h e s e a r t i c l e s i n t h e i r e n t i r e t y, v i s i t t h e

The Taxonomy of Florida Entities New Legislation Now in Effect

lorida is a business-friendly state. Forming the entity is quick and inexpensive, state income taxation is minor and our bankruptcy laws are debtor friendly. When you combine these benefits with the inexpensive “right to work” labor market, great weather and stable population, Florida is a good place for business. This article will discuss the business structures available in Florida, including sole proprietorship; general partnership; limited liability company; limited liability partnership; professional service corporation (PA); limited liability limited partnership; C corporation; and S corporation. In some instances, single-owner entities may be “disregarded” for income tax purposes, but treated as separate legal entities. This provides some liability protection for the owner. The Olmstead case imposed additional challenges for single-owner businesses that now require additional planning (see the related article Characteristics on page 31). New tax legislation will apply to business structures in Florida and other states. The Affordable Care Act provides that beginning in 2013, Schedule K-1 earnings from investment entities (except personal service corporations) for taxpayers with AGI in excess of $250,000 (married filing jointly) or $200,000 (single) will be subject to Medicare tax of 3.8 percent

Sole Proprietorship A sole proprietorship is not a separate taxable entity. The earnings are reported on Schedule C of the Form 1040, and the net earnings are subject to self-employment tax. A sole proprietorship provides no liability protection for its owner. 30 JANUARY/FEBRUARY 2013

By Carol Vance and Gary Laursen

General Partnership (GP) The general partnership is not subject to income taxation. The general partnership files an information tax return (Form 1065) with the IRS, and each partner reports his or her respective share of partnership ordinary income, capital gains, non-taxable income, etc., according to the Schedule K-1 received from the partnership. The individual or entity partner reports this share of income whether or not the partner received any actual distribution of cash. Partnerships may dictate special allocation arrangements to support capital, risk and ownership differences if the economic substance of the arrangement aligns with the terms of the partnership agreement. However, individual general partners are subject to the self-employment tax on net income. ➡ Pg. 32

Sole Proprietor

General Partnership (GP)

Limited Partnership (LP or LTD)

Limited Liability Company (LLC)

Limited Liability for Owners

GP – No LP – Yes

Single Member No Multiple Members Yes

Subject to SE Tax on Net Income

Yes

Generally No

Yes

Entity Subject to Income Tax Owner's Title Type of Tax Return Minimum Number of Owners Maximum Number of Owners Publicly Traded Loss Basis is Determination

Capital Loans Guarantees

No – Owner No – Partners No – Partners

Generally yes, but members may elect C status

Individual

Partner

Members

1040

1065

1040 or 1065 or 1120 or 1120s (Election-based)

2 – 1 GP, 1 LP

Unlimited

No C L G

Generally No Yes – Can Be C L G

C L G

Usually Not Depends on tax elected

F I C PA’s w e b s i t e a t w w w. f i c p a . o r g / F C T / Te c h n i c a l .

LLCs Alive and Well in Florida...but Owners Beware

ntity planning for taxation, asset protection, gifting or succession planning is complex and fascinating. CPAs are forced to work with existing and evolving entity structures, court decisions and the tax code. Each situation is unique, and no set model can be established. CPAs’ experience, breadth of knowledge and attention to detail make them excellent planners in this area. Based on recent cases and legislation, we must continue to plan defensively for our clients. In 2010, the Florida Supreme Court allowed the Federal Trade Commission (FTC) to seek monetary foreclosure remedy against defendants Olmstead’s and Connell’s singlemember LLC (Limited Liability Company) interests for a judgment of restitution in a credit-card scam case. The LLCs in question were single-member limited liability companies (SMLLC) held entirely by either Olmstead or Connell.

The Florida Legislature quickly responded by amending Florida Statute 608.433. The Legislature clarified that, although the courts have power to enforce a charging order with a foreclosure if the judgment cannot otherwise be satisfied in a reasonable time, the courts shall not have any power beyond the charging order to foreclose upon a member’s interest in a multiple-member LLC (MMLLC). In its decision, the Court appears to align a singlemember LLC interest with that of corporate stock, and the Legislature has aligned the MMLLC interest with that of a partnership. Under partnership law, partners are permitted to “pick their partners.” They are not required to accept an “assignee partner,” typically the result of a partner’s judicial proceeding, into the management of the partnership. Corporate stock is deemed fungible, interchangeable and impersonal, so foreclosure long has been an accepted practice.

Envelope Limited FL Limited Liability FL Limited Liability C-Corporation S-Corporation Liability Company Limited Partnership Partnership (LLP) (Inc. or Corp.) (Inc. or Corp.) (LLC) (LLLP) Yes

Yes

GP – Generally

Yes

Generally No

LP Generally No GP Generally Yes

Generally Yes

Yes

Generally No

No – Partners

No – Members Election based

Shareholders

Partner

Member

1120

1120s

1065

1120s

2 – 1 GP, 1 LP

Unlimited

100

Unlimited

Yes – Can Be

Generally No

Usually Not

C L G

C L

Yes – Sometimes Usually Not C L

C L

FLORIDA CPA TODAY

By Carol Vance and Gary Laursen

Do we still prefer LLC over corporate or partnership entities in Florida? Certainly for multi-member LLCs, business may proceed as originally planned. However, it might be important to consider with whom the membership interest is shared. Let’s say, for instance that, a husband and wife own several rental-property LLCs and are jointly indicted for tax fraud or similar breach resulting in a judgment and demands for restitution. It is probable that those LLCs could be foreclosed upon to satisfy the judgment in Florida, in light of the Olmstead decision and reasoning. Since the ownership of the assets was held in the same manner as the restitution liability, the Court’s reasoning could apply and allow a distribution, as per Olmstead. ➡ Pg. 33 www.ficpa.org

The general partnership requires at least two general partners. The general partnership is not a good choice from an asset-protection perspective, and isn’t the entity of choice under most circumstances because of the shared negligence and contract liability partners must bear. A negligent partner is personally liable for his or her own negligence (an unintentional tort) and for intentional torts. The entity, the general partnership, also is liable for the partner’s negligence and intentional torts under the doctrine of respondeat superior. A non-negligent partner is personally liable for the negligent partner’s negligence and intentional torts. All general partners are personally liable for partnership contracts.

32 JANUARY/FEBRUARY 2013

Limited Liability Partnership (LLP) The LLP is not a taxpaying entity. The LLP that elects to be taxed as a partnership is treated like a general partnership with limited liability for the partners. A limited liability partnership requires two or more partners who each are liable. The negligent partner is personally liable for his or her negligence and intentional torts. The LLP entity also is liable for the partners’ negligence and intentional torts under the doctrine of respondeat superior. The non-negligent partner who did not review or supervise the negligent partner is not personally liable for the negligent partner’s negligence or intentional torts.

Partners are not personally liable for the LLP’s contracts.

Limited Liability Limited Partnership (LLLP) The Florida LLLP requires at least one general partner and one limited partner. The limited partners may participate in management and retain their limited-liability protection. In addition, the general partner is limited as to liability. These entities are afforded the best creditor protection in Florida when coupled with the same income-tax treatment as general partnerships. FCT To continue reading, visit www.ficpa. org/FCT/Technical. Author bios on pg. 33.

This line of reasoning would be consistent with Florida bankruptcy laws where Tenants by the Entirety (TBE) property is available to pay the debts of the filing spouse if a single joint creditor exists.1 For single-member LLCs, the best practice may be to name an unrelated third party as a minority member. Naming a family member or friend simply will subject the LLC to all the litigation that may ensue against family or friends. We have no case law to tell us how close a relationship or control would impair the status of a MMLLC. We also have little guidance for a husband and wife holding the LLC interest as TBE. Could the TBE be severed in a charging order judicial foreclosure or a bankruptcy action? To create the most prudent structure for husband and wife, each spouse should individually hold 1 percent; should jointly hold 98 percent as TBE; and should avoid joint debt. Albeit far more expensive and complicated, for those who want more protection, an Irrevocable Trust and Florida Limited Liability Limited partnership (LLLP) is worth considering. This single-member structure could be handled by using a Florida LLLP to hold a large interest in the Florida LLC. The owner controls the general-partnership interest through another general-partner LLC, and an Irrevocable Dynasty Trust holds a small percentage of the LLC for the benefit of family with a third-party Trustee (see the diagram at right). This structure is overly complex and an LLLP alone may be a wiser choice. FLORIDA CPA TODAY

The LLC flexibility for tax purposes (basis determination, distributions, transfer and liquidation) will allow Floridians to continue their love affair with LLCs, now with more entity complexity (and probably with more tax returns filed).

Recommended Single Member LLC Structure

Owner 100%

LLC GP 1%

LP 99%

LLLP

99% Under current law, which may change soon pursuant to the LLC Affordable Care Act, one huge disadvantage for closely held LLCs, particularly those set up for operating companies, is the selfemployment taxation imposed on all profits. Limited Liability Partnerships (LLPs) and General Partners in Limited Liability Limited Partnerships (LLLP)s suffer the same fate unless the underlying activity is free from selfemployment tax, namely rental realestate holding; investment activities; or oil and gas activities.

LLCs can avoid selfemployment tax by electing S corporation status. We can avoid subjecting the LLC operating company profits to the selfemployment tax burden by electing S corporation status for our LLCs on Form 2553 under the “check-thebox” rules. This sometimes is referred to as an LLC envelope. However,

Irrevocable Dynasty Trust 3rd Party Trustee 1%

with more than 100 owners; any foreign owners; or a complicated distribution and allocation scheme, this election is not available. Carol Vance is a member of the Florida Bar and the California Bar, and is a CPA in Florida and California. She is a member of the FICPA and the AICPA, and is a tax and law instructor at the University of South Florida Sarasota/ Manatee. Gary Laursen is a Florida attorney at law and a Florida CPA. He is an associate professor of accounting and law at the University of South Florida in Tampa. He is an FICPA member and serves on the Institute’s Federal Taxation Committee. To continue reading, visit www.ficpa. org/FCT/Technical. www.ficpa.org

MARKET

place

Positions available Part-time CPA consultant (Doral Area) – mid-size engineering firm seeks CPA consultant w/exp working w/Axium’s Ajera job cost accounting software system. The ideal candidate has working knowledge of Government Auditing Standards (FAR) for architecture and/or engineering firms. Applicants need to be proficient in Ajera. Send your resume via email w/”Ajera Experience” in the subject line to info@bpamiami.com. Charlotte County CPA firm needs staff accountant, CPA or CPA candidate w/ 4-6 yrs A&A exp required. Exp w/PPC, CSA, paperless workpapers desirable. Competitive salary. Benefits. Full or part time. Send resume to info@webblorah.com or fax to (941) 639-8962. Tax & small business principal – Maitland CPA firm seeks principal w/small client base for ownership possibility. Provide tax review of returns as well as preparation & tax planning. Excellent fringe benefits & working conditions. Please mail, fax or email resume to Taylor, Lombardi, Hall & Wydra, PA, Attn: Van Taylor, 875 Concourse Parkway S., Suite #100, Maitland, FL 32751. Fax (407) 539-2383. Email vtaylor@tlh-cpa.com. Tax manager – salary $5,833.33-$9,002.41 monthly; requirements – bachelor’s degree from an accredited college or university in accounting, 5 yrs of professional exp in the preparation of federal & state income tax returns & an active CPA license. Visit our website at http://www.myfloridacfo.com/receiver/ to apply. Tax manager/supervisor – James W. Walker, PA in Naples – a small, growing CPA firm w/a diverse tax, auditing & accounting practice – is looking for an individual who has previous mgmt, tax & communication skills. The qualified individual will be responsible for the preparation & review of bookkeeping services, corporate, partnership, LLCs, individual, trust & estates, gift tax & nonprofit tax returns. The qualified individual will supervise & review staff in

the preparation of year-end bookkeeping, compilations, reviews & preparation of income tax returns; assist clients & staff; work directly w/clients & partners as needed; perform tax research; obtain clients for firm; & provide administrative assistance for firm activities as necessary. Auditing background a plus, but not a requirement. Email resume to info@jameswalkercpa.com. Sr tax professionals for South Fla. Top 25 CPA firm. Excellent career opportunity. International tax exp a plus. Please visit our website at www.kanecpas.com. Email resume in complete confidence to jbutler@kanecpas.com or mail to Kane & Company, PA, 1221 Brickell Ave., Suite 800, Miami, FL 33131, Attn: Jeanne Butler. Jacksonville firm seeks motivated professional to fill CPA position, preferably w/strong audit/review & tax exp (3-5 yrs). Excellent opportunity for growth w/hardworking team of professionals whose focus is serving our diverse client base. Resumes to mail@stevens-powell-cpa. com. The Ladies Professional Golf Association is seeking an assistant controller responsible for the financial statements of the LPGA & LPGA Foundation. The ideal candidate will have strong supervisory, analytical & organizational skills. Key duties include: a/p supervision, financial statement preparation, tax research, budgeting & audit preparations. Bachelor’s degree in accounting, CPA preferred. 3-5 yrs exp, public accounting field desirable. Submit resume & salary requirements to employment@lpga.com. The LPGA is an EOE. Duggan, Joiner & Company, an established CPA firm in Ocala, seeks an experienced CPA or CPA candidate w/ recent exp in tax and/or audit services. We embrace work/life balance & offer excellent compensation, benefits & flexible hours. Visit us at www.djcocpa. com. Fax resume to (352) 867-1370, attn: C. Wright.

Positions Wanted Fla. CPA w/20 yrs of tax & accounting experience in large firm tax departments provides excellent per diem tax & accounting services. Responsible, accurate, timely & affordable. Services include tax return preparation, tax planning, tax consulting, tax research, accounting services, Quickbooks consulting & IRS representation. Areas of professional experience include domestic & international individuals, businesses, trusts & estates. Please call (305) 6312350, Ext. 180. West Palm Beach – semi-retired licensed CPA (FL, NY) & attorney (NY) specializing in taxation available for per diem work preparing or reviewing tax returns, consulting, IRS & state representation. Please call (561) 8333440 or write LGinsbergEsqCPA@ comcast.net. Broward/Palm Beach – Bilingual licensed Fla. CPA 20 yrs exp seeking per diem work. Exp in taxation & financial statements (audits, reviews, compilations). Please reply to per_diem_ cpa@yahoo.com.

Office space Beautiful professional ofcs to share in Fort Lauderdale. Fully furnished. Internet access, phones, copier, fax machine & additional services available. Conference room. Parking. Full kitchen. Kane & Company, PA. (954) 767-0440. Miami/Dadeland area ofc available for lease in CPAs suite. Furnished ofc, floor to ceiling windows, conference room, kitchen, telephone & other ofc equipment, filing cabinets, Internet. Free parking. Inquiries please call (305) 598-4478 or email ronweintraubcpa@bellsouth or cmf16cpa@aol.com.

Practices wanted for purchase or merger CPA looks to purchase tax through review practice in South Fla. Revenue $150,000 to $500,000. Reply to info@ joegormleycpa.com.

For complete classified policies, visit www.ficpa.org/Content/CPAResources/ClassifiedsJobs/Classifieds.aspx. 34 JANUARY/FEBRUARY 2013

Growing South Fla. CPA firm looking to purchase a practice in Broward County or Palm Beach counties. Please contact us at (954) 224-1949 or info@ficpa.org.

For sale

Successful transitions require experienced, confidential, professional services you can trust. This is what Akins Professional Brokerage provides. Specializing exclusively in the brokerage of CPA firms, we have no upfront fees. List your firm w/a professional. Call David Akins, CPA at (877) 2770272. Visit our website at www. ProfessionalCPAbroker.com. Retiring sole practitioner is seeking an individual for the purpose of succession planning. Requirements will include accounting & tax expertise as well as business acumen. No audits or reviews.

FLORIDA CPA TODAY

Practice revenue is in the high six figures. Send interest & background to gjj1947@ gmail.com.

Miscellaneous Request for Financial Services â&#x20AC;&#x201C; The Greater Boca Raton Beach & Park District (the District), an independent special district, will receive proposals for comprehensive accounting & finance functions for the year ending Sept. 2013 w/the option for renewal for subsequent yrs. Information relating to min specifications of services, data to be included in the proposal, evaluation criteria & selected information relating to the services can be obtained from the District offices located at 300 S. Military Trail, Boca Raton, FL 33486, telephone number (561) 417-4599. All costs incurred in preparation of a proposal responding to the Request for Proposals will be the responsibility of the firm & will not be reimbursed by the District. Sealed proposals will be accepted until 1 p.m. EST Monday, Feb. 4, 2013. Proposals should be mailed

or delivered to: Arthur C. Koski, Legal Counsel; Greater Boca Raton Beach & Park District; 300 S. Military Trail; Boca Raton, FL 33486. Those submitting sealed proposals should indicate on the outside of the envelope, in the lower left-hand corner, that it is a sealed proposal for said services & the name of the firm submitting the proposal. Failure to do so may result in premature disclosure of our proposal & therefore disqualify you from further consideration. It is the responsibility of the firm to insure that the proposal is received by the District by the date & time specified above. Questions regarding the requirements of the Request for Financial Services or necessary information for the proposals may be mailed to the District at the address above or faxed to (561) 347-3945 & must be received by 2 p.m. EST on Jan. 14, 2013. Responses to all requirements & proposal questions will be emailed to all firms that have submitted a letter notifying the District of their intent to submit a proposal.

www.ficpa.org

ON THE

move Transitions

Ron Finkelstein of Morrison, Brown, Argiz & Farra, LLC in Miami recently was appointed to the AICPA Health Care Expert Panel for the 20122013 year.

Fort Lauderdale: Keefe, McCullough & Co. LLP welcomes William Gates II, Anthony Mariano, James Obenour and Daniel Rodriguez as staff accountants. Paul Dumm

Blain Heckaman

Ron Inge

Jacksonville: Gunn & Company, PA and Chamberlain + Associates, PA announce their merger to form one of the largest accounting firms in North Florida. The new firm is named GunnChamberlain, PL. Miami: Cherry, Bekaert & Holland, LLP announces the promotion of Darla Thompson to the position of tax partner. Miami: Kaufman, Rossin & Co. announces that Blain Heckaman has been appointed managing principal as part of an ongoing succession plan. Additionally, Accounting Today recently announced the winners of its annual Best Firms to Work For ranking, and first place went to Kaufman, Rossin & Co. in the large firm category. Orlando: Morrison Valuation & Forensic Services, LLC announces that Paul Dumm joined the firm as director – valuation & forensic services.

Daniel Rodriguez

36 JANUARY/FEBRUARY 2013

Darla Thompson

Kelsey Thompson

Orlando: Saltmarsh, Cleaveland & Gund announces that Denice G. Miller and Glenn S. Cox have joined the firm through the acquisition of Averett, Warmus, Durkee, Osburn, Henning. West Palm Beach: Carl Domino Inc. announces that they have relocated their offices to Northbridge Centre, 515 North Flagler Drive, Suite 808.

Who’s News Basil L. Bain of The Bain Law Firm, PL in Naples has been appointed to the Executive Council of the Trial Lawyers Section of The Florida Bar.

Cecelia Garber of Marcum, LLP in Fort Lauderdale has been honored with a Key Partners Award in recognition of her leadership as one of South Florida’s leading CPAs. The award was presented by South Florida Business Journal and Linq Financial. Winston Howell of Thomas Howell Ferguson, PA in Tallahassee was introduced as the new Chamber chair at their annual breakfast meeting in October. Howell outlined his strategic vision for the coming year, focusing on business growth, advocacy, leadership and sustainability. Ron Inge of Inge & Associates Inc. in Fort Myers received the 2012 Lifetime Achievement Award from the Lee County Horizon Council. Kerkering, Barberio & Co. announces it has launched a new version of the firm’s website at www.kbgrp. com. The redesigned site is more user-friendly, provides links to social media and is device ready.

For more news about members and other Florida CPAs, visit CPAs in the Spotlight at www.ficpa.org/Content/News/Spotlight.aspx. The space for Who’s News, Transitions and other announcements published on this page is limited to news focusing on promotions and new hires for FICPA members; speeches by members at professional conferences; and other firm news, such as recognition of business achievements. We do not publish FICPA committee appointments as a part of this feature because of space limitations. Submissions for On the Move can be emailed to communications@ficpa.org.

Markham Norton Mosteller Wright & Company, PA in Fort Myers had more than 30 women participate in the five-part Women in Business education series, which the firm hosted in conjunction with the Small Business Development Center at Florida Gulf Coast University. Michael P. Miller of Michael P. Miller CPA, PL-SanCap CPA in Sanibel has been elected to the Board of Trustees of the Edison & Ford Winter Estates in Fort Myers. Employees of Myers, Brettholtz & Company in Fort Myers volunteered

FLORIDA CPA TODAY

their time cleaning the beach at New Pass Bridge on Estero Boulevard. The firm worked from 9 a.m. to noon and collected 100 pounds of garbage. Pender Newkirk & Company, CPAs announces its sponsorship of WEDU’s 8th Annual Be More Awards.™ The Be More Awards were created to pay tribute to the many unsung heroes in the community that WEDU serves. Alex Ralicki of Ralicki Wealth Management & Trust Services in Stuart attended the 16th Annual CPAlliance Roundtable.

Rick Reeder of Reeder & Associates, PA in Tampa has been appointed AICPA Peer Review Board Chair through October 2014. Reeder also serves on the AICPA Government Audit Quality Center Executive Committee. Mandi Someson of Kerkering, Barberio & Co. in Sarasota has been awarded the Certified Fraud Examiner (CFE) credential by the Association of Certified Fraud Examiners. Gene Solomon of Gene R. Solomon, CPA in Fort Myers was presented with the 2012 John

W. Sheppard Award at the Southwest Florida Community Foundation’s annual meeting and reception at Harborside Event Center. Kelsey Thompson of Markham Norton Mosteller Wright & Company, PA in Fort Myers recently passed the AICPA exam and met the requirements to become a licensed CPA in Florida. Rebecca Umschweis of Marc Egot, CPA, PA in Hollywood passed all sections of the CPA exam and now is licensed to practice in Florida.

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F I C PA

staff profile

Meet Larry Cohen, CPA From FICPA communications staff reports In 2012, Larry Cohen joined the FICPA as director of business development. In this role, he is responsible for developing professional relationships with CPAs in public firms and private industry throughout South Florida. He telecommutes from his home office in Delray Beach. “I spend a lot of time getting to know Florida CPAs, and learning about their professional challenges and needs,” Cohen said. “Since our headquarters office is in Tallahassee and many of our members are in Central and South Florida, it’s important that we have someone in the area. I’ve met many loyal members who aren’t aware of the extensive services and professional support the FICPA offers. “I want to meet as many members as I can, at the firm and individual levels, and try to engage them in the Institute. I hope to make the FICPA something they care about, and in doing so, help increase retention. I also want to help the Chapters and Committees create events in which members are interested in participating. “My goal is to help members and their firms take full advantage of FICPA membership,” Cohen said. A Florida-licensed CPA, Cohen holds a bachelor’s degree in accounting from Florida State University and a master’s degree in accounting from the University of Miami. Currently, he’s an adjunct professor at the University of Phoenix, South Florida Campus and a visiting professor at DeVry University and Keller School of Management in Miramar. 38 JANUARY/FEBRUARY 2013

Cohen began his career as an auditor in the Miami office of Deloitte Touche. After three years in public accounting, he left to pursue a career in the private sector. He held the position of controller for several notable companies, including National Computer Distributors, the Florida Marlins and the Florida Panthers. Cohen entered the staffing business in 1995 as a directhire placement specialist for a new company, CFS. In 1998, he was recruited to help open the Orlando office of Acsys Inc., a new, publicly traded staffing company. In 2000, Cohen founded EXP Staffing Inc. He served as President/CEO of the company until AccountAbilities Inc. acquired it in 2006. Cohen then became vice president of business development for AccountAbilities. In 2009, Cohen opened a consulting practice that served the staffing industry in the areas of business development, training and acquisition due diligence. He also provided consulting services to small businesses. “I’m happy about the way my career has evolved, first working in accounting and now more with people,” Cohen said. “As an employer, when determining which candidate is the best fit for a position, it’s important to make sure the person fits well with the corporate culture. And don’t overlook the value of soft skills. “As a candidate, salary is important, but that won’t make you like your job better. Look at the job responsibilities. Will

Cohen works as a photo messenger during Super Bowl XXXVII. The Tampa Bay Buccaneers played the Oakland Raiders at Qualcomm Stadium in San Diego.

you be doing what you like? Also, make sure the company’s advancement opportunities are in line with your professional goals,” Cohen said. And find a company that has a culture in which you’d be comfortable working.”

Off the clock • I was born in Toledo, Ohio and grew up outside Washington. • I met my wife, Ann, at a social event in North Miami. She’s a CPA and has worked in accounting for most of her career. Currently, she’s the CFO of a Country Club in South Florida. We’ve been married 25 years. • We have two daughters who are 20 and 18. The oldest is a junior at Florida State University, majoring in public relations. She serves as an officer in her sorority and for Dance Marathon. Our youngest is a freshman, attending Tulane University on an academic scholarship. She’s an honors student majoring in legal studies. • Last summer, we spent two weeks in London and Paris.

We attended Wimbledon and explored France by car. I love driving trips, so it was great to enjoy one in another part of the world. • We have a 12 -year-old yellow Labrador retriever named Baylee. She’s a great dog! • My parents were very influential in my life, always encouraging me to be independent and not to be afraid to be myself. They showed me it was O.K. to make mistakes, and to learn from them. My wife has shown me that hard work really does pay off in all aspects of your life. • In 1989, I had the opportunity work on the sidelines of the first Super Bowl at the new Dolphins Stadium (now Sun Life Stadium). I was a volunteer “runner,” assisting game photographers for a large media organization. I’ve attended every super bowl since, and now work as the coordinator of all photo runners. I’ve also done this at the World Series, NBA Finals, college bowls and other events. FCT

e h t t u O t g e n i p ll Car o R ed R

ach year, the FICPA awards the Outstanding CPA in Business & Industry, the Outstanding CPA in Government, the Outstanding CPA in Public Service and the Outstanding Educator. The Florida Institute of CPAs invites you to nominate one or more candidates for these awards. All candidates must be FICPA members, and candidates for the Business & Industry, Government and Public Service awards must be voting members of the FICPA. (Educator candidates do not have to be a voting member). The nominations deadline for all four awards is April 5, 2013. Award application and supporting materials must be sent to LeAnne Spell, Florida Institute of CPAs, P.O. Box 5437, Tallahassee, FL 32314; faxed to (850) 222-5137; emailed to spellL@ficpa.org; or submitted online via the FICPA website at www.ficpa.org/FicpaAwards. Winners of this yearâ&#x20AC;&#x2122;s four Outstanding Awards will be recognized during the 2013 Mega CPE Conference, held June 12-15, 2013, at Disneyâ&#x20AC;&#x2122;s Contemporary Resort in Orlando, Florida. Winners of the FICPA Outstanding awards are often entered into the AICPA Outstanding awards program. Nomination criteria and award applications are available online at

www.ficpa.org/FicpaAwards FLORIDA CPA TODAY

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Florida Institute of Certified Public Accountants P.O. Box 5437 Tallahassee, FL 32314-5437