May/June 2016 by New Jersey Society of CPAs

Magazine of the

New Jersey Society of Certified Public Accountants

Technology Controlling Access to Data, p. 4 Office 365: The Staple of the Business Cloud?, p. 6 Mitigating Cyber Risk, p. 8 Cloud Computing: Security and Risk Management, p. 10

May â&#x20AC;˘ June 2016

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May • June 2016

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Editorial Advisory Board Daniel R. Arcuri, CPA Neil B. Becourtney, CPA Salvatore A. Collemi, CPA Rebecca B. Fitzhugh, CPA Catherine Z. Horn, CPA Barry S. Kleiman, CPA Victoria Kosuda, CPA Ryan J. Lapinski, CPA David A. Lopez, CPA Anthony F. Marone, CPA Marc D. Mintz, CPA Sean Stein Smith, CPA Michael R. Steiner, CPA Margaret Van Brunt, CPA

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Controlling Access to Data Creating a proactive plan to protect your company from a data breach has become a business imperative. Gain expert knowledge on what it takes to create a plan.

2 Close Up The Anticipatory CPA

Office 365: The Staple of the Business Cloud? 12 A&A Buzz Microsoft Office has been a leading Automating Accounts business software suite for decades. Payable: Reducing Costs Many companies are now moving Associated With Paying Bills toward Office 365. See if this cloud-based email and productivity 14 Best Practices suite is right for your business. Why You Should Hire a Social Media Expert Mitigating Cyber Risk Businesses are faced with the overwhelming task of having strong cybersecurity measures in place. Here’s how your company can employ a resilient and preemptive mitigation strategy against cyberattacks. Cloud Computing: Security and Risk Management Although there are potential risks associated with transitioning to a cloud-based system, there are key strategies you can implement to make sure your move to the cloud doesn’t compromise security.

16 Corporate Finance What’s New in Enterprise Performance Management? 18 Financial Planning Why the Advisory Fee Structure Is at a Crossroads 20 Forensic File Going Concern Issues and Update 24 Small/Sole Practitioner Security Breach Planning and Response

25 Tax Talk IRS Hacking Scandal Implications 26 Tech Center File Sharing Sanity: Who Do You Trust? 36 Young Professionals NJCPA Celebrates Its 56th Scholarship Awards Ceremony 38 Legislative Views Bills Phasing Out Estate Tax and Increasing Retirement Income Exclusion Move in NJ Senate 40 Member Profile Accounting Maven, Zumba Expert, Inspirational Professor Society Pages 2016-17 NJCPA Executive Committee and Board of Trustees, 30 Get Involved, 32 Classifieds, 34

New Jersey CPA (ISSN 1534-6692) is published six times per year by the New Jersey Society of Certified Public Accountants, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068-1723. Issue No. 57 Copyright © 2016 New Jersey Society of Certified Public Accountants. Annual membership dues include $9 for a oneyear subscription to New Jersey CPA magazine. Members may not deduct subscription price from dues. Periodicals postage paid at Roseland, NJ, and at an additional mailing office. POSTMASTER: Send address changes to New Jersey CPA, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068-1723. The materials and information contained within New Jersey CPA are offered as information only and not as practice, financial, accounting, legal or other professional advice. The opinions expressed herein are those of the authors and not necessarily those of the New Jersey Society of CPAs. Publication of an advertisement in New Jersey CPA does not constitute an endorsement of the product or service by the New Jersey Society of CPAs.

The Anticipatory CPA B Y TOM HOOD, CPA, B USI NE SS LE AR NI NG I NSTI T U T E

ecent research from the American Institute of CPAs states that the business environment for CPAs and their clients will be characterized by “unprecedented, massive and highly accelerated change” through 2025. To thrive in this new age of hyperchange and growing uncertainty, it is now imperative to learn a new competency: accurately anticipating the future. Here’s how:

1. Adopt a Mindset That Embraces Continuous Learning I’m not talking about CPE here. Rather, I’m speaking of a concept that Warren Berger calls “serial mastery.” In his brilliant book A More Beautiful Question: The Power of Inquiry to Spark Breakthrough Ideas, Berger says today’s workers “are often left to figure out for themselves what new skills will make them more valuable, or just keep them from obsolescence.” This means “the need to constantly adapt is the new reality for many workers.” Put another way, to paraphrase Fast Company editor Robert Safian: The most important skill any of us will possess going forward is the ability to learn new skills.

2. Become an Early Adopter “Early adopters eat the late,” says Andy Lark, a vice president of marketing at the accounting software company Xero. That’s especially true in a world where technology is advancing at an exponential pace. The problem, as a general rule, is that CPAs are notoriously late adopters. That has to change. Our clients and customers are just as perplexed by the pace of change as we are. They need help making sense of it all. Imagine how valued and relevant CPAs will be if they are the ones who provide that guidance.

Doing so means figuring out the new stuff before anyone else does. What works? What’s valuable? Where do the opportunities lie? The first step is to learn these things on our own. The next step is to help our clients learn them.

3. Anticipate Suppose you could know what’s going to happen before it happens. Would you find that a useful skill to have? Who wouldn’t? With that kind of foresight, we could position our organizations to take advantage of opportunities our competitors can’t even see. Predicting the future may sound like science fiction, but best-selling author Daniel Burrus says it’s a skill anyone can learn. The secret is three-fold: • Identify the “hard trends” (things that will definitely happen) and “soft trends” (things that might happen) that impact our organizations and our clients. • Isolate the opportunities that each of these trends offers. Then ask ourselves, “What do we have to do to take advantage of those opportunities?” • Find the time in our already hectic schedules to do steps 1 and 2. That third task might be the most difficult of all to accomplish. Who has time for this future-focused work when we’re busier than ever just trying to get today’s work done?

Ready to get started? Attend my keynote session at the NJCPA Annual Convention & Expo, June 15-17 in Atlantic City (njcpa.org/conv16) and follow the event on Twitter at #njcpa16. Learn more about the Anticipatory OrganizationTM model — a powerful tool for leaders, emerging leaders, managers, planners and sales teams — at blionline. org/the-anticipatory-organization.

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The fact, though, is that we make time for the important stuff … and friends, this is the important stuff. Just an hour a week will do. Put it on your calendar. Set an alarm. And when that alarm goes off, shut the door, turn off the phone and the laptop, and start thinking about those hard and soft trends and the opportunities they provide. The hard trend is that these things — automation, transformation, complexity, opportunity — are here. They’re real, and they’re here to stay. The soft trend, says Burrus, is this: Will you do anything about it? Tom Hood, CPA, CITP, CGMA, is the executive director and CEO of the Maryland Association of CPAs and the Business Learning Institute. He can be reached at tom@macpa.org or on Twitter at @tomhood.

2015-16 Board of Trustees EXECUTIVE COMMITTEE President – Frank R. Boutillette, CPA President-Elect – Walter J. Brasch, CPA Secretary – Edward I. Guttenplan, CPA Treasurer – Lynn L. Albala, CPA Immediate Past President – Brad E. Muniz, CPA CEO & Executive Director – Ralph Thomas, CGMA TRUSTEES Jean I. Abbott, CPA Sharon J. Bishop, CPA Leonard N. Brooks, CPA Joseph C. DiFalco, CPA Carol Donatiello Iocca, CPA Sarah Krom, CPA Roy H. Kvalo, CPA Edward G. O’Connell, CPA Stephen O. Richard, CPA William J. Ryan III, CPA Audrey J. Sherrick, CPA Lorenzo T. Vanore, CPA

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Controlling Access to Data How do you protect sensitive electronic information? Barely a day goes by without reading or listening to stories related to cybersecurity. Let’s attempt to parse through all the noise and establish some best practices, while formulating a plan for safeguarding the critical digital information that has become the mainstay of our interconnected electronic world.

By Marc D. Mintz, CPA Marc Mintz & Associates LLC

Vigilance must extend beyond our personal information to include the data concerns of our clients, companies, employees and all the interested stakeholders for whom we maintain potentially compromising information. To understand the magnitude of this subject, one need only review the 25th Anniversary North American Top Technology Initiatives. Issued through a joint survey by the American Institute of CPAs and the Chartered Professional Accountants of Canada, all five of the top-ranking results for the U.S. concentrate upon protecting data: 1. Securing the IT environment. 2. Managing and retaining data. 3. Ensuring privacy. 4. Managing IT risk and compliance. 5. Preventing and responding to computer fraud. Sensitive personally identifiable information (PII), in unscrupulous hands, can expose individuals to a plethora of unwanted intrusions ranging N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

from embarrassment to full-fledged identity theft. Social Security numbers, driver’s license numbers, birth dates, parents’ maiden names, and credit card and other account numbers are just some of the data pieces that must be protected by financial professionals. While there is no scheme that can provide 100 percent assurance against an unwanted data breach, following the steps highlighted below will minimize your data’s exposure and allow you to sleep more soundly at night knowing that you have a proactive plan.

Don’t Collect or Save Data That You Do Not Need To state the obvious: Data you don’t have can’t be compromised. Delete and destroy information from thumb drives, external disk drives and computer local hard drives that was created exclusively for transport purposes. Delete multiple copies of the same or similar data (except your backup) which no longer have a useful purpose. Establish wellconstructed retention polices and destroy sensitive information that is no longer required. Finally, don’t collect or in any way store unnecessary PII.

Properly Establish Access to Data Make sure computer administrators adequately establish network drive locations and manage user login scripts so program directories and data access are restricted exclusively to authorized users. This is analogous to restricting

physical building or room access to certain employees. Configure individual program security granularly by user, thereby granting menu, processing, printing, inquiry and reporting functions only to selected roles (e.g., check printing, cash receipts posting, financial reporting). Also, restrict security maintenance and modification roles to as few users as practically possible.

Passwords, Passwords and Passwords Properly establishing and maintaining strong passwords is the single most important line of defense in protecting sensitive data. This has become even more critical with the advent of Internetbased computing (i.e., the cloud). Anyone with a Web browser now has access to your login prompt! Unique usernames and strong passwords are your only protection to thwart unauthorized access. Today’s neartotal reliance on software dictates that individuals take responsibility for constructing a unique string of numbers, special characters, and both upper and lowercase letters which are readily recallable only by the users themselves. Additional password protections include a minimum length of eight characters, periodic resetting, no sharing of passwords, and a system that invokes automatic lock-out after a predetermined number of invalid attempts.

Remove Access to Data as Circumstances Change The economist John Maynard Keynes once quipped, “I change my mind when the facts change. What do you do?” Often when software is upgraded, older or unused versions of the programs remain accessible to users. Employees and independent contractors come and go, but their login credentials and passwords remain intact. Employees change roles within an organization, and they are granted additional access privileges, but access to programs and data is not curtailed for areas where they should no longer be authorized. Most troubling, vendors and customers are granted access to integrated enterprise

resource planning programs, and IT consultants are provided with near unfettered admittance to company systems and resources. All too frequently when these relationships disengage, no one is charged with the immediate responsibility of removing these past users from the appropriate systems and programs. Don’t expose your data to individuals or companies that no longer have a legitimate interest in the goals and objectives of your organization.

Encryption An epic battle is unfolding between the United States government and Apple over an encrypted iPhone previously possessed by one of the San Bernardino terrorist gunmen. While the arguments under consideration in federal court are irrelevant to this discussion, it does present a useful yet rhetorical question. Would you want the highly sensitive PII under your charge to be encrypted? I am reasonably certain that in the near future all forms of PII will be encrypted. We live on the cusp of an evolution where encryption will N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

become as commonplace as locks on our front doors. But at the present time, it is incumbent upon the vendors we select or our own vigilance to make certain that even if our data is hijacked, the perpetrators will require an extraordinary level of technical sophistication to make use of their ill-gotten gains. While a technical discussion of establishing encryption is beyond the scope of this overview, always ask the questions: Is my data encrypted? Do I have ethical, regulatory or legal exposure by not having particular data encrypted? Marc D. Mintz, CPA, CITP, CGMA, is the managing member of Marc Mintz & Associates LLC, a technology consulting firm that assists businesses with strategic planning and the selection and implementation of information technology systems. He is a member of the New Jersey Society of CPAs’ Strategic Planning Committee and the New Jersey CPA Editorial Advisory Board. He can be reached at marc@marcmintz.com or 973-808-9040.

Office 365: The Staple of the Business Cloud? The cloud continues to dominate conversations in businesses of all sizes every day. The application that businesses most commonly bring to the cloud is their email and productivity suite. The two main players in this market are Microsoft, with its Office 365 suite, and Google, with its Apps for Work. Microsoft has invested more than $15 billion in its cloud infrastructure and claims that more than 80 percent of Fortune 500 companies utilize Office 365.

By Thomas M. Angelo, CPA Spire Group PC

So What Is Office 365? Office 365 is the productivity suite from Microsoft. Its most basic feature is email hosting in Exchange. However, its capabilities extend all the way to the full versions of Microsoft Office, OneDrive for Business, Skype for Business, and much more. As with all modern software, it is sold on a monthly per-user pricing model. Microsoft has divided its Office 365 product line for businesses into two areas: Business and Enterprise. Essentially, the difference is that the Business editions have a 300-user limit while the Enterprise editions allow unlimited users. N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

What Is Included in Office 365? Office 365 includes complete email hosting on your business domain name using Microsoft Exchange, which has been around for a very long time and typically was implemented by larger companies. Many businesses tend to move their email application to the cloud first before moving other business applications. One of the primary reasons for doing so is the ease of administration — as well as the ability to pay for only what you actually need. There is no reason to purchase a server or complicated networking equipment to run and maintain email. For about $5 a month per user, you can get enterprise-level email and calendar management. However, email is not where Office 365 ends. As you progress up through the plans, additional features are available — all of which enhance the communication and productivity of your staff. For example, you can add online versions of the entire Microsoft Office suite, including Outlook, Word, Excel, PowerPoint, Publisher and One Note. This allows you to open and edit files in any of these applications from any device. Once you have edited a document, you have the ability to store the files in the Microsoft

How to Move to Office 365

cloud in OneDrive. OneDrive is essentially Microsoft’s version of your “My Documents” folder but in the cloud — a place where you can store 1TB of data to be accessed on any device at any time. Need to get to that spreadsheet on your iPad? No problem. Absolutely have to edit a client memo and email it from your mobile phone? Again, that’s very easy to do with Office 365. In 2011, Microsoft purchased Skype for $8.5 billion and then incorporated it into the Office 365 suite as Skype for Business. Now the product offers tools for growing your business, including the ability to conduct video meetings, collaborate directly in your Office documents using instant messenger, and have audio conferences over the Internet. Recently, Microsoft added a full private branch exchange phone network to Office 365, which allows you to use the cloud to make and receive phone calls. However, this system is still quite new and may not yet match what is available in other Voice over Internet Protocol (VoIP) systems. There are so many diverse features and plans available that I would

recommend doing a needs assessment to determine which would work best for you. You can visit products.office. com to check out all of the Office 365 plans and features.

Cloud or On-Premise? Moving to Office 365 may or may not be the right decision for your business. Our firm has moved many businesses to the cloud and performed multiple migrations to Office 365, and each time we assess what is best for the company and its end users. For example, for a larger company, perhaps 50 users or more, moving to Office 365 may actually cost more than hosting the applications on premise. There is also the issue of storage. Office 365 has limitations on storage per mailbox, although it is adequate for most users. In addition, the ability to manage your own environment comes into the decision-making process. For example, if you choose to host your own email, you need to administer the server, provide backup and redundancy, and maintain it. All of this comes at a cost of either inside or outsourced information technology assistance. N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

Once you’ve made the decision to move your email and productivity suite to Office 365, it is important to carefully plan out the migration. Before you begin, there are various components you should address: • Synchronize all user email accounts prior to cutover. • Consider if there are email accounts no longer being used that can be archived. • Plan out public folders, calendars and other items. • Set up all mobile devices, such as phones and tablets. • Set up Skype, OneDrive and Microsoft Office. Depending on the size of your business, you may want to evaluate whether you have the resources to handle the transition in-house or need some expert assistance. We have all come to rely upon our email and productivity suite as our lifeline, so downtime is not really an option. We always recommend doing the final cutover on a Friday night or over the weekend. This allows some buffer room to fix any problems that may arise prior to the beginning of the workweek. While you certainly can choose either Google Apps for Work or Microsoft Office 365, you may want to consider that most accounting firms have evolved using Microsoft products, such as Outlook, Word and Excel. Therefore, the best choice to collaborate with the products that most CPAs have trusted is Office 365. As much as Google Apps appears to have mass appeal in the younger generation, Office 365 appears to be the winner in the accounting world. Either way, I encourage you to take the first step in your cloud adoption strategy by checking out Office 365. Thomas M. Angelo, CPA, is the managing principal of Spire Group PC as well as the managing principal of Spire IT LLC, the firm’s technology affiliate. He is a member of the New Jersey Society of CPAs’ Technology and Nonprofit interest groups. He can be reached at tangelo@spirecpa.com.

Mitigating Cyber Risk Cyber threats have become one of the leading risks for organizations around the globe. Even with heightened awareness, numerous incidents still go undetected. The potential impact of a cyberattack is daunting. Businesses in all industries are exposed to various risks, including physical loss, potential liability and damage to their reputation.

By Ryan J. Lapinski, CPA

Cyberattacks can take many forms: deliberate attacks, technology issues or negligence. These attacks are originating not only externally but internally as well. As cyberattacks continue to evolve, with attackers becoming more sophisticated in their efforts, businesses are faced with the overwhelming task of mitigating the potential risk. Due to the rapidly changing environment of cyber risk, businesses need to employ a mitigation strategy that is pre-emptive in approach but hinges on the concept of resiliency. To have an effective pre-emptive stance, a business needs to identify the threats it could be exposed to before a cyberattack takes place. This allows a business to implement four key defensive controls: preventing, detecting, obtaining information and enabling a prompt response. Specifically, a business should know N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

what needs to be protected, where it is located and who might want it. Each control should be tested frequently to confirm it is working in its intended form. The most challenging and essential aspect of employing defensive controls is keeping them current with the newest form of cyberattacks threatening businesses. Due to the sophistication of cyberattacks and the rapid pace at which new methods are created, businesses tend to struggle with keeping their controls up to date. As businesses try to incorporate additional security measures intended to protect against the newest form of cyberattack, many tend to miss the mark by incorrectly identifying the actual threat. Having suitable defenses against posing threats is the structure for an effective mitigation strategy, but a business cannot rely on its controls alone to protect it against potential cyberattacks. A business must be resilient in the event an actual cyberattack results in a significant compromise of the business’s key assets or information. Properly implemented pre-emptive controls will allow for faster and more accurate communication regarding the facts of a threat. This will help a business quantify the current and future loss, identify any required disclosures, and ultimately help manage the business’s reputation. A business’s procedures after an attack are equally as important

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as the preventive measures taken in determining the ultimate cost of an attack. Incorporating a resilience model within a business’s overall mitigation strategy can significantly affect the magnitude of a cyberattack’s impact. Developing an effective resilience model requires upper management to set an appropriate tone. A business’s leadership is responsible for managing the company’s overall risk through the development of companywide mitigation strategies. Because so much business is conducted through the use of technology, all employees must participate in the prevention of cyberattacks. If management doesn’t develop strong strategies to mitigate risk, it fails to provide its employees with the tools to do so. With proper policies in place and companywide training, management can start to develop a risk-adverse environment for the business. Human error can cause a breakdown in security procedures, enabling cyberattacks to occur. For example,

if an untrained employee performs a control incorrectly, that could allow an attacker to gain access to a system or an account. Human error is one of the leading threats because it can allow an attacker to obtain access with very little resistance. When there is no human error, if an attacker tries to gain entry to a system or account directly, there are security features in place that will prevent the attack from occurring. Along with setting the tone at the top and providing employees with the necessary training, management needs to ensure that security processes and procedures are performed by capable employees. This helps minimize breakdowns in procedures resulting from human error. The remaining step in developing an effective resilience plan is the creation of disaster recovery procedures. A disaster recovery plan should be created for each main threat posed to each department of the business. The plan should clearly and extensively describe what needs to be done in the event of a cyberattack. It is extremely important N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

that each plan is updated on a regular basis. If an error, even as simple as an outdated phone number, causes a delay in the business resolving the threat, the impact could be significant. Businesses are battling an environment that is constantly evolving, changing faster than they can adapt. They are struggling to update their defenses to prevent the new sophisticated cyberattacks that are continually emerging. Incorporating a resilience model into a business’s pre-emptive mitigating strategy is vital to enable quick reaction and loss prevention. It is essential for management to establish the proper tone, identify capable employees and develop a robust disaster recovery plan for every potential threat. Ryan J. Lapinski, CPA, MBA, is a member of the New Jersey Society of CPAs Technology Interest Group and New Jersey CPA Editorial Advisory Board. He can be reached at ryanlapinski@gmail.com.

Cloud Computing: Security and Risk Management For years, companies have managed costly on-site servers, equipment and software, along with sufficient information technology staff to maintain a seamless operation. Now, many companies are shifting some or all of their on-site functionality to the cloud. For auditors and finance professionals, a switch to the cloud has implications, particularly in maintaining the security and privacy of confidential and sensitive records, both of the company and of its customers.

What Is the Cloud? By Peter J. Kaye, CPA, and Robert G. Korbeck Jr. Accenture

The cloud can be defined as the process of using network access to remote servers to process information, rather than using dedicated on-site servers or computers. There are a variety of cloud infrastructures: private cloud infrastructures serve a single organization; public cloud services have multiple clients accessing and processing information through a shared pool of servers across a common public network; and hybrid cloud services are a combination of private and public or multiple public cloud providers. As with any emerging technology solution, cloud benefits may also come with inherent perceived and real risks. Among the largest benefits are reduced capital expenditures for in-house infrastructure, scalability of solutions and costs based on a “per N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

drink” basis, and improved accessibility of information. On the flip side, the main risks are the large target assumed by grouped data and shared client responsibilities (i.e., breach of one customer’s data allows access for further data incursion attempts); reduced visibility of operations, security controls and information security processes; and a lack of control. Fortunately, you can take steps to mitigate these risks.

What Are the Implications? Say you have been tasked with assessing the risks and benefits of transferring your company’s IT infrastructure from the server room to the cloud. What are the key risks that you must be aware of and be prepared to mitigate? • If your company manages personally identifiable information (PII), you must abide by state laws governing the management of such information. You need to know where the servers reside, as not all states are consistent with how PII is to be managed. • Will your service provider use a subcontractor (also known as a subservice provider)? If so, where will that provider’s servers be located? • What technologies are the providers and subservice providers using, and is this technology consistent with yours and up to date? It is absolutely critical that you and your IT team work closely with the service provider(s) to ensure a seamless transfer of all data from your in-house servers to the provider’s cloud-based

servers. Since the underlying controls at the service provider’s facilities have relevance over the internal controls of your financial reporting, you’re required to audit these controls. If you are performing this assessment for your accounting firm, you have other rules and regulations to follow, as promulgated by the AICPA Code of Professional Conduct and the Internal Revenue Code (IRC). Rule 301 of the AICPA Code of Professional Conduct and IRC Section 7216 require CPAs to protect their clients’ confidential information and prohibit the unauthorized release and/or disclosure of client information. If confidential information is breached, there are federal and state regulations that may apply as well as state board of accountancy rules to abide by. If a CPA outsources the IT function to a cloud service provider, he or she is not relieved of the responsibility to safeguard the confidential information. Note that cloud service providers are classified as data centers; therefore, their services are subject to the Statement on Standards for Attestation Engagements No. 16 (SSAE 16), Reporting on Controls at a Service Organization. You’ll need to obtain an annual SSAE 16 report from the service provider — and possibly from any and all subservice providers as well. You’ll also need to perform an assessment of whether the provider has reasonable controls in place to

prevent an unauthorized release of confidential information and assess the financial viability of the provider. It is strongly recommended that you retain documentation of the diligence procedures performed, the results obtained, and the CPA’s evaluation of the vendor. You should perform subsequent periodic evaluations to confirm the initial assessment. Another major consideration is cost. While you may save significant costs by eliminating or reducing in-house servers, a data room, and staff to manage and maintain such systems, you will incur SSAE 16 audit fees that can be anywhere from $15,000 to several hundred thousand dollars.

participating organization has with its own clients. Whether you are a CPA looking to the cloud to support the storage needs of your clients’ data or you are the CFO of a company, you need to consider the myriad issues inherent in any conversion to a cloud-based system. Understanding who your service provider is, knowing where the data will be housed, and having all SSAE 16 reports in hand will help you ensure that you are mitigating these risks as effectively as possible.

Mitigation Strategies

Peter J. Kaye, CPA, most recently was a senior manager in corporate finance and operations for Accenture in King of Prussia and is a member of the Pennsylvania CPA Journal Editorial Board. You can reach him at peter.j.kaye@verizon.net. Robert G. Korbeck Jr. is global platform manager and information security lead for Accenture’s Procurement As-a-Service offering in King of Prussia. You can reach him at robert.g.korbeck.jr@ accenture.com.

There are mitigation strategies related to cloud technology, including considerations before any cloud services are put in place: • Establish cloud usage policies and information on the procedures related to cloud service infrastructures (such as what sensitivity level of information can be stored in cloud architectures). • Assess the providers’ security controls and score them against your own risk appetite and security standards. • Know the laws and regulations applicable to the information based on the data location as well as the contractual requirements that the N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

To read a more in-depth version of this article, visit njcpa.org/newjerseycpa/ mayjune16.

This article was adapted from a feature that originally appeared in the spring 2016 issue of the Pennsylvania CPA Journal.

A&A

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Automating Accounts Payable: Reducing Costs Associated With Paying Bills B Y DAVID L . EVANS , CPA, ALLOY, SI LVE RSTE I N, SHAPI RO, A DA M S , M U L FO R D, C I C A L E S E , W I L S O N & C O.

ne of the least favorite and most costly steps of the accounting cycle is accounts payable processing. How much does it really cost to pay your bills? Studies claim that it can cost anywhere between $5 and $20 to pay a single invoice. Considering the entire cycle of manual bill paying, as described below, there can be 12 or more steps involved, depending on your organization. 1. Receive order with packing slip. 2. Check in order and compare to packing slip. 3. Compare packing slip to purchase order. 4. Attach packing slip to purchase order and file. 5. Receive invoice. 6. Compare invoice to packing slip/ purchase order. 7. Approve invoice. 8. File invoice with packing slip/ purchase order in unpaid invoices tickler. 9. Process invoice for payment; write check.

10. Attach check to invoice, packing slip/purchase order for signature. 11. Sign check. 12. Mail check with any pertinent documentation. This arduous process has always frustrated business owners because of the labor and resources required. Automation of the accounts payable process can save time and money — and increase accuracy. Automation is also a sustainable, environmentally friendly process because of the reduction in the amount of paper used. Saving time, company resources and natural resources are some of the benefits of accounts payable automation. Paper-oriented business processes are inefficient. Without automation, accounts payable departments are riddled with paperwork, frequently resulting in wasted time filing, copying, mailing or just looking for documents that may have been misplaced or lost. According to Jeanette Martin, an expert in process N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

automation, using a manual system can more than double the cost of invoice processing. Also to be considered are the indirect costs associated with manual systems. Automation involves a substantial reduction of paper, which has the practical benefit of saving space. Depending on the size of the company, accounts payable information can involve drawers, filing cabinets or even rooms full of papers to be stored, both on-site and off-site. That space comes with costs, including rent, heating and air conditioning, security and human resources. Automated accounts payable information storage is done digitally, by way of various automated storage devices or, even more optimally, in the cloud. Cloud storage is efficient and easily accessible. Finding a digital document can take seconds as opposed to the possible hours involved in retrieving paper documents. Another benefit of

cloud storage is security. If there is a disaster such as fire, earthquake or flood, the digital documents stored in the cloud remain safe. Because your documents are accessible from anywhere, even if your office encounters a disaster, you are still able to maintain your accounts payable operations. Automating your processing means less chance of substantial business interruptions. In addition to reduced costs and more secure operations, other benefits of automation include reduced possibility of mistakes or fraud, greater control of the accounts payable process and more time to make informed decisions about purchasing efficiencies.

One of the more overlooked benefits is that bills can be paid more efficiently and timely. This leads to better relationships with vendors, greater credit considerations and more favorable credit references, increasing a company’s purchasing power. And reducing the carrying amounts of accounts payable leads to a better cash flow and a healthier balance sheet. There are many benefits to automating the accounts payable process, including financial, business relationship and environmental advantages. If your company hasn’t done it already, it is time to move toward process automation and even consider process outsourcing. It will

add security, accuracy and financial health, no matter the size of your organization — and the benefits will last throughout the life of the organization. Now is the time to save money and the environment, reduce frustration and add flexibility while increasing your valueadded relationships with current and future vendors. David L. Evans, CPA, is an associate partner and director of small-business services at Alloy, Silverstein, Shapiro, Adams, Mulford, Cicalese, Wilson & Co. He is a member of the New Jersey Society of CPAs Federal Taxation and State Taxation interest groups. He can be reached at devans@alloysilverstein.com.

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Why You Should Hire a Social Media Expert B Y VICKI L . G OETTER, AAAPM , TOB I N & C O LLI NS, C PA , PA

ow do I get business? What is my company reputation? How will we survive the competition? These are the thoughts of all business owners. Small to midsize companies have to work even harder to find their spot, and keep it, in the marketplace. Historically, business grew through reputation as passed by word of mouth. Then advertising was sprinkled in, with some companies even hiring celebrities to endorse them. But in the early 2000s,

word of mouth changed to the word of social media. No longer was it good enough to have your neighbor, banker or lawyer tell you to use this or that company. Now a search of the Internet quickly reveals praise or warning about a product or service, often using no more than 140 characters. Some of the biggest companies, and some of their employees, have had their reputations tarnished by social media posts. Just do a search N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

on Chrysler and its F-bomb or the “social media mistake” by American Rifleman, McDonald’s, Dell, and even a representative of the IRS. Large organizations like these usually have enough money to help correct blunders, but what if you are a small to midsize company without a large marketing budget? How would you recover? That is why it is critical to make sure you have the right people in the right positions in social media to protect and grow your business. To give a little perspective on how important social media has become, here are some important facts: • LinkedIn started in 2002, Facebook in 2004, YouTube in 2005 and Twitter in 2006. • Radio took 38 years to reach 50 million users; Facebook added more than 200 million users in less than a year. • Three-quarters of consumers rely on social media to influence their purchasing decisions. • Almost all (97 percent) consumers search for local businesses online. • The most aggressively growing demographic segment on Twitter is ages 55 to 64. • Facebook’s most aggressively growing demographic segment is ages 45 to 54. • YouTube’s demographic segment of 18 to 34 years views videos online more than television. Regardless of the size of your company, you need to put social media to work for you. Start at the beginning with a solid marketing plan and select someone to implement, maintain and analyze it. Social media is not about putting up a post once in a while; it can take a primary role in delivering the message of your entire marketing plan. Therefore, there should be a person dedicated

The RuTgeRs PRoFessional MasTeR oF accounTing to managing your company’s social media efforts. Here are things you should consider when enlisting the help of a social media expert: 1. New firms: Hire a consultant to develop a solid website and social media presence. The costs can vary, but the benefits will be measurably high. Having someone in the driver’s seat to execute your marketing and social media plan is critical. Make sure that the person you hire not only understands social media but also has a solid understanding of marketing in your industry and can give you proven statistics on his or her successes. Don’t be fooled by someone telling you that success is not measurable: Social media offers analytics that provide important information on market growth and penetration. 2. B e involved! You know your business and culture the best. You need to make sure that you have a clear understanding of and keep an eye on what is being said about your company. Insist that your social media professional consistently show you results. You want to make sure the efforts you are paying for are paying off. 3. Train your employees on how their use of social media can affect your brand. Too often, posts and hashtag comments by employees can negatively impact a company’s overall efforts in social media. 4. Don’t dabble — it’s all or nothing! Posting here and there or not updating your social sites can hurt you more than it helps. Technology has built a virtual road for consumers. You need to stay current on that virtual landscape, or you will quickly find your business unplugged.

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Vicki L. Goetter, AAAPM, is the firm administrator at Tobin & Collins, CPA, PA in Hackensack, NJ. She can be reached at vicki@tccpa.net or 201-487-7744. N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

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CORPORATE

finance

What’s New in Enterprise Performance Management? B Y JOHN O’ROURKE, H O ST ANALY TI C S

Figure 1

nterprise performance management (EPM) is a process and software system designed to link strategies to plans and execution. EPM includes the following management processes: • Financial and operational modeling. • Planning, budgeting and forecasting. • Financial consolidation and close management. • Reporting to internal and external stakeholders. • Analytics, strategy setting, alignment and measurement. EPM solutions are complementary to enterprise resource planning (ERP) systems. They help organizations increase efficiency by eliminating spreadsheets and improving financial and operational planning and reporting processes. They help drive accountability across the organization by aligning strategic, financial and operational goals; enabling more people, such as line managers, to participate in the budgeting process; and empowering managers with selfservice insights (see Figure 1).

and shorten reporting cycles. They need to adopt more dynamic planning processes. They need better analysis and modeling capabilities. And they need to respond more quickly to new user requirements. New technologies, such as cloud and mobile, are providing this much-needed agility and flexibility to many finance organizations.

What’s New in EPM?

EPM Moving to the Cloud

The core tenets of EPM haven’t changed in the past 10 years. What has changed is the environment we are operating in: • New and changing regulatory requirements. • Global competition, shorter product life cycles and more volatility. • More “big data” to analyze from internal systems, websites, social media and other external sources. • More tech-savvy workforce with millennials coming into management. So what are the impacts of this on the finance function? Essentially, to compete in today’s economy, finance organizations need to become more agile. They need to eliminate spreadsheets and manual processes

Cloud computing is the modern way to deliver software, and it’s transforming the enterprise. It’s a huge technology trend similar to the shift from mainframe computers to client/server technology. Companies are voting with their pocketbooks, swapping out their old legacy software to gain the advantages of the cloud. • Sales leaders are using cloud-based customer relationship management to transform their sales departments. • Human resource leaders are transforming their organizations with cloud-based human capital management solutions. • Finance leaders are also transforming their enterprises with cloud-based ERP N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

and EPM applications, replacing their spreadsheets and legacy applications. Finance has been slower than other functions to embrace the cloud. Market penetration today is on the order of 13 percent, according to Forrester Research. But adoption is accelerating as finance teams have grown more confident in the security of the cloud and more aware of the benefits. These benefits include: • Faster deployments. • Autonomy or reduced dependence on IT personnel. • Quicker delivery of new releases and features. • No hardware or software to set up or maintain. • Lower costs than traditional on-premises systems. • Greater security than on-premises systems. Technology analyst firms such as Forrester and Gartner expect the cloud to be the primary deployment model for EPM applications going forward.

Changing Vendor Landscape The shift to cloud-based EPM solutions

is disrupting the EPM market. Evidence of this can be seen in the slower growth and loss of market share by the megavendors — Oracle, SAP, IBM. Fastgrowing cloud-based EPM vendors such as Host Analytics, Anaplan and Adaptive Insights are rapidly gaining customers and market share at the expense of the mega-vendors, who have been slow to introduce their own cloud-based EPM solutions. Other EPM vendors who have traditionally delivered on-premises applications are also now providing cloud-based “hosted” versions of their products. This includes vendors such as Prophix, Tagetik, OneStream and Longview Solutions. Companies that are evaluating cloudbased EPM applications to replace

spreadsheets or legacy applications should look for the following capabilities: • Complete suite — to support current and future needs. • Comprehensive reporting — to meet the needs of different users. • Excel integration — using Excel as a front end for reporting, data entry and analysis. • Advanced modeling — giving users the ability to easily model what-if scenarios. • Multidimensional online analytical processing — for speed-of-thought “slicing and dicing” of information by managers. • Multi-Tenant Software as a Service (SaaS) — to ensure you receive the full benefits of a cloud-based solution.

Cloud-based EPM applications are becoming the preferred way to deliver speed and agility — both in terms of how the systems are deployed as well as how they enable the finance team to streamline reporting and planning and to respond quickly to changes in business. John O’Rourke is vice president of product marketing at Host Analytics. He has more than 30 years of experience in the software industry, including more than 16 years in EPM product marketing at Hyperion Solutions and Oracle. He can be reached at jorourke@hostanalytics.com.

Bank of America recognizes the New Jersey Society of CPAs for investing in a healthy economy Some of our biggest assets are the businesses who call our community home. On their own, or as members of business organizations, they improve our lives with community service and economic initiatives for the future. We’re proud to work with the New Jersey Society of CPAs to help develop our local potential. Together, we’re honoring a commitment to work toward an economy that’s growing stronger day by day. Visit us at bankofamerica.com/newjersey Life’s better when we’re connected®

N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

FINANCIAL

planning

Why the Advisory Fee Structure Is at a Crossroads B Y TERRY S HERIDAN

ccountants, financial planners, advisors and everyone else in the financial services industry know that the business model is changing and, along with it, so is the fee structure. Clients are driving some of those changes, and younger ones are increasingly embracing online moneymanagement and investing tools. Yet others are clueless even about how their financial advisors are paid. Confusing? You bet, and it’s not even close to being resolved. A new report by SEI Advisor Network, Fees at a Crossroads, makes a valiant attempt at describing the quandary. “As financial and investment markets have evolved over the past 25 years, the advice business needs to move ahead as well,” the report states. “We believe the very nature of the advice model is changing. Are we overstating the problem? We don’t think so.” What complicates matters, the authors note, is that the financial services industry is “the only profession that differentiates our services by how we charge for them.” And that can range from commissions to fee-only, retainers, flat fees or a combination of any and all. Other financial professions — and the report breaks out accounting, interestingly enough — “distinguish themselves by the services they offer; their pricing reflects the value clients appreciate and are willing to pay for,” the report states. “We believe that today’s investors — across the economic and generational spectrum — want advice and guidance to manage their increasingly complex financial lives,” the report continues. “The time has come for our industry to adopt a universal advice-based model built on a foundation of professional advice, trust and integrity, and pricing models

that equate to the value investors are willing to pay.” Here’s a sampling of the report’s findings, based on an online survey of 775 respondents in August 2015: • More than half (61 percent) of advisors hadn’t changed their fee structure in more than five years due to a fear of losing clients. Two-thirds have never changed it. Responses were similar whether it was a one- or two-person operation or one with more than 20 employees. • Most (71 percent) advisors said they didn’t expect to change their fee structure within the next two years. • About 75 percent of investors of varying wealth levels never or seldom discuss fees with their primary advisor. The standard fee for services averages about 100 basis points, regardless of what services are actually provided. Many clients don’t know how their advisors are paid. A third of so-called mass-affluent households pay a percentage fee based on the level of assets. Almost a third pay their advisor for each transaction. And about a quarter aren’t sure how their advisor is paid. • Here’s a head-scratcher: 14 percent of mass-affluent clients say they don’t compensate their advisor at all. • A majority (64 percent) of Generation Y clients self-manage their finances using online tools. • More than a quarter (28 percent) of millionaire clients say online tools compete with their advisor, compared to 21 percent of mass-affluent households. Meanwhile, more than half (55 percent) of millennials say online tools are direct competitors of their advisors. • Almost a third (30 percent) of mass-affluent clients said they’d ask their advisor for a reduced fee and N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

would remain a customer if that was granted, while 27 percent said they’d stay even if the advisor said no. So how does it all shake out? That’s for financial professionals to figure out, because there’s no right or wrong model, the report states. Fees will depend on the type of clients that advisors want and their firm’s culture and growth goals. The median age of “full-service” investors is 61, and that age factor increases a year every nine months, the report states. If advisors aren’t feeling any pressure yet, it could be they aren’t dealing with younger clients. But as boomers spend down their retirement portfolios, advisors will have to step up their business model for younger clients. “Next-generation investors have different needs, different financial profiles and different demands,” the report states. “The most successful advisors are devising programs for lower net-worth millennials with a modified fee structure,” the report states. And that can include an annual retainer. To view the complete report, visit seic.com/ docs/Advisors/SEI-Fees-at-a-CrossroardsFull-Report.pdf. Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines and websites.

Originally posted on AccountingWEB. com, Feb. 29, 2016

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Going Concern Issues and Update B Y JA MES M. S AUS MER, C PA, W E I SE RM AZAR S LLP

inancial statement preparation under generally accepted accounting principles (GAAP) includes the presumption that the reporting entity will continue as a going concern unless and until that entity’s liquidation becomes imminent. This is referred to as the going concern basis of accounting. When an entity is faced with cash shortages, is not able to pay its obligations and liabilities as they become due, and has no ability to raise capital or borrow funds, then the going concern presumption may no longer be valid. Previously, management had no requirement under GAAP to disclose in the financial statement’s notes any conditions that raise substantial doubt about the entity’s ability to continue as a going concern. The disclosure of such an issue was left to the independent auditor, based on U.S. auditing standards (AU-C section 570), as a modification to the auditor’s report, alerting statement

users of substantial doubt that the entity would survive for one year from the balance sheet date. A disclosure in the financial statement notes would explain the situation a little more and provide any plans for survival. In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-15, entitled “Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern.” This Update changed GAAP to require management to (1) evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern and (2) disclose in the financial statement notes the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year from the date the financial statements are N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

issued (or are available to be issued). This disclosure is required even if substantial doubt is alleviated. This change is effective for annual periods ending after Dec. 15, 2016; early application is permitted. Substantial doubt exists when it is probable that the company will not be able to meet its obligations as they become due within one year from the date that the financial statements are issued. The Update focuses on two things: 1. When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue in business, it is management’s responsibility to assess whether its plans will be effective to mitigate those conditions or events. Then management must provide extensive disclosure in the notes to the financial statements regarding the conditions or events and the plans to keep the entity going.

When management is able to alleviate the substantial doubt about the entity’s ability to continue, the entity will still need to disclose: • Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern. • Management’s evaluation of the significance of those conditions or events in relation to meeting obligations. • Management’s plans that removed the substantial doubt. When management is not able to alleviate the substantial doubt about the entity’s ability to continue in business, management must include a statement in the notes indicating that there is substantial doubt about

the company’s ability to continue for one year after the date that the financial statements are issued. Additionally, management must disclose information so users of the financial statements will understand the following: • The conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. • Management’s evaluation of the significance of those conditions or events in relation to meeting obligations. • Management’s plans to mitigate the conditions or events. 2. The time period for this assessment starts at the report issuance date, not the balance sheet date. A company

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can no longer wait for the next yearend to issue a financial statement regarding a going concern situation. The assessment from the issuance date will eliminate this loophole. International Financial Reporting Standards (IFRS) require disclosures in the notes to financial statements when there is a material uncertainty about an entity’s ability to continue as a going concern. GAAP has moved closer to IFRS by focusing on management’s responsibility to evaluate and disclose these uncertainties. James M. Sausmer, CPA, ABV/CVA, is a partner with WeiserMazars LLP. He is a member of the New Jersey Society of CPAs. He can be reached at james.sausmer@ weisermazars.com or 732-475-2112.

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SMALL/SOLE

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Security Breach Planning and Response B Y ROBERT RIS K, S ETH DANB E R RY, ROB K LE E GE R AND RYA N C O O P E R

hieves are everywhere these days. You read about data security breaches every day — Target, Home Depot, Anthem, Sony, American Express. These are the big companies that have reported data breaches. But did you know that 94 percent of all breaches occur in companies with fewer than 100 employees? So what are small and midsize companies to do? The answer to this question is to assume you will be breached and to plan for it. The worst thing you can do is not be proactive. From a reactive position, you risk permanently damaging your company brand and setting your company up for lawsuits and compliance issues.

Security Breach Planning and Breach Response Plan Implementation of an effective information security breach response plan enables companies to fulfill their responsibilities to those individuals and entities that entrust the organization with personal information and to maintain overall federal/state/agency compliance. Companies that preemptively create and follow a security breach response plan will be able to: • Comply promptly with legal requirements that apply to the company as an owner or custodian of personal information. • Reduce the risk of a data security breach that causes serious harm to the organization’s reputation and finances. • React quickly to security breaches and not give the appearance of an inadequate response. The plan should be comprehensive and maintained annually, and the planning process should include proactive measures such as security testing and employee security training.

The plan should cover a security breach response, define when you need legal help and include a plan for remediation.

Proactive Preparation: Mitigate Your Level of Risk Proactively discovering and remedying your information security risks is critically important. The most effective method is to bring in an outside professional security firm to perform some level of security audit, such as a vulnerability assessment or penetration test. It is difficult for information technology staff members to objectively look at the systems they build and maintain day to day. Even the most talented employees can overlook issues. Forensic preservation is a critical step because of the potential notification requirements, reputational risks and possible litigation. The earliest stage of any investigation is the most important one to get right. As in emergency medicine, there is a “golden hour” at the very outset, during which there is the highest likelihood that prompt expert response with a clear head and well-thought-out plan can make or break the best defensible position to support investigation or litigation needs.

When Do I Need Legal Help? Legal counsel should get involved from the minute you suspect there has been a breach. Almost every state has a data breach notification statute, and counsel should be consulted to determine whether your breach will require notification of the affected parties. Where such statutes do apply, state attorneys general typically expect notification to begin within 48 hours of the breach becoming public. N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

As time is of the essence, when your company has been breached, it’s important to have that legal counsel at your fingertips. It is wise to plan your representation in advance. You don’t want to be in a breach position and then start interviewing law firms to find the one with certified experts in breach security, litigation and compliance. In conclusion, your best defense is to be proactive. Your company should have a breach plan in place that is reviewed annually. If you do get breached, you should have a solid forensic partner to help you identify what data has been compromised and who needs notification and to set up your remediation team with the information needed to fix the problem. Finally, make sure you have the correct level of cyber insurance and experienced legal representation. To read a more in-depth version of this article, visit njcpa.org/newjerseycpa/ mayjune16. Robert Risk, MSCIS, is director of technical advisory services at Wiss Security Partners; Seth Danberry is president of Grid32; Rob Kleeger is founder and managing partner at Digital4nx Group Ltd; and Ryan Cooper is director of the Privacy and Information Governance Group at Pashman Stein.

TAX

talk

IRS Hacking Scandal Implications B Y NICHOL AS S . GAKO S, C PA, ROSS, RO SE NTHAL & C O M PA N Y L L P

e have all heard about the recent IRS hacking cases in which Internet services are used to file taxes with stolen information. The fact is that everyone is at an increased risk for identity theft. Unfortunately, many taxpayers won’t know whether their personal information was compromised by hackers until their real tax returns are filed and ultimately rejected by the IRS. The process is quite unnerving, and unfortunately it is happening at an alarming rate. The implications from these scandals have placed federal and state taxing authorities on heightened alert and have delayed the refund process. Although not foolproof, there are many measures that consumers can take to protect themselves from becoming victims of identity theft. Some are listed below: 1. Review your credit reports annually. Under federal law, you are entitled to a copy of your credit report from all three reporting agencies — Experian, Equifax and TransUnion — once every 12 months. Each reporting agency collects and records information in different ways and may not have the same information about your credit history. Check your credit reports on a rotating basis throughout the year, choosing a different agency every four months. Doing so will make sure your credit is up to date and accurate. You can also see if any unusual or new accounts have been opened in your name without your authorization. 2. Obtain a security freeze on your credit report to protect your privacy and ensure that credit is not granted in your name without your knowledge. You have a right to place a security freeze on your credit report pursuant to New Jersey law. 3. Protect your electronic information.

If you prepare your taxes online, make sure your home computers have security software, including firewalls and other protections, that updates regularly. Use strong passwords and change them frequently. Resist the urge to use a public computer or public Wi-Fi (e.g., airport terminals, hospitals, hotels) when dealing with sensitive personal data. 4. Don’t fall victim to scam artists. The IRS has warned repeatedly about pervasive phone scams in which callers pretend to be from the IRS. Do not give out personal information over the phone, even if the caller seems legitimate. Take a phone number, and then contact the IRS on your own or have your tax preparer check with the IRS on your behalf. The IRS normally corresponds with taxpayers through postal mail, not by phone or email. 5. Don’t carry your Social Security card or any documents that include your Social Security number or individual taxpayer identification number (ITIN). 6. Review your Social Security Administration earnings statement annually for unusual activity. If your Social Security number has been compromised or you suspect that you may be a victim of tax-related identity theft, take these additional steps: • Respond immediately to any IRS notice; call the number provided. • Complete IRS Form 14039, Identity Theft Affidavit, and mail or fax it according to the instructions. • Notify the local law enforcement authorities. • Continue to pay your taxes and file your tax return, even if you must do so in paper format. • If you previously contacted the IRS and did not have a resolution, contact the Identity Protection Specialized Unit at 800-908-4490. N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

The IRS has greatly reduced the time it takes to resolve identity theft cases, but most of the cases it handles are extremely complex, frequently touching on multiple issues and multiple tax years. Therefore, it can be timeconsuming. A typical case can take about 120 days to resolve. Unfortunately, in today’s society, electronic theft is now at the forefront and main pages of the financial newspapers. It’s important to be aware and take the necessary steps to minimize your risk and exposure. Nicholas S. Gakos, CPA, is a partner with Ross, Rosenthal & Company LLP, where he specializes in tax planning and compliance, accounting and auditing, estate planning and capital transactions. He is a member of the New Jersey Society of CPAs and can be reached at ngakos@rossrosenthal.com.

TECH

center

File Sharing Sanity: Who Do You Trust? B Y A NTH ONY MONG E LUZO, PRO C O M PU T E R SE RVI CE

ou’re on a fly fishing trip, and your client needs a document. It’s on your laptop, which you left at home. She wants it NOW. You see the problem. If you had a file-sharing system, your partner, assistant or designate could tap into your system and gain access. Problem solved, happy client, now back to fly fishing. The essence of file sharing is that anyone that you deem appropriate can access files you wish to share — anytime, anywhere. In short, it is a digital reservoir that allows for an almost unlimited amount of information that is shareable. You must decide precisely what your file-sharing needs are. If you’re a one-

Product

dropbox.com

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person accounting practice, almost any file-sharing service will suffice. But if you are searching for storage, syncing and backup, you might have more sophisticated needs. The chart below provides a thumbnail sketch of potential filesharing choices. There is no substitute, however, for visiting each site and spending a few minutes trawling through the offerings to see which program is the best fit for your accounting practice. A good rule of thumb is to try to anticipate future needs. Push the envelope a bit for potential future use. We all admit needing more memory (or size) than we originally thought. (Does anyone

remember when a 20 MB hard drive was all the memory we’d every need?) Take a free test run or pay a minimum amount that you can cancel easily. This will ensure that you’re not stuck with a service that doesn’t quite match up to the sales hype. Also, check the pricing details. They can change frequently. Anthony Mongeluzo is the CEO and president of the Moorestown, NJ-based information technology service firm Pro Computer Service (PCS). Contact him at anthony@helpmepcs.com or follow him on Twitter @PCS_AnthonyM.

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The granddaddy of them all. While most • of us are familiar with the free, easy-to-use • consumer version, the business version has more — including support for multiple • users, extra security settings and the ability to retrieve previous file versions.

Free: Basic plan and 14-day trial. Pro: $9.99 per user per month (or an annual $99 per year plus tax). Business: $15 per user per month (starting at five users).

Actually it’s about collaboration and not • being in a box. It gives you the storage • and syncing, but it also provides tools for a collaborative approach, such as sharing screenshots and screencasts from the • desktop. Another cool feature is the ability to search text, not just the file name. There are also other third-party features.

Free: 14-day trial. Starter: $5 per user per month for 100 GB storage and a maximum file size of 2 GB. Business: $15 per user per month for unlimited storage and a maximum file size of 5 GB (minimum three users).

Google Drive is Google’s file and storage service linked with SaaS-based productivity tools. If you’re a Google fiend (Chrome browsers, Gmail and Google+), the integration is seamless and familiar.

N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

• • • • • • •

15 GB for free. 100 GB for $1.99 per month. 1 TB for $9.99 per month. 10 TB for $99.99 per month. 20 TB for $199.99 per month. 30 TB for $299.99 per month. No annual pricing.

Product

onedrive.live.com

mozy.com

crashplan.com

carbonite.com

accountantsworld.com/solutions/cloudcabinet

Description

Pricing

Tons of free storage and if you’re a Microsoft devotee, it integrates easily. (There’s a version for Mac, iOS and Android, too.) Allows for collaboration with multiple people in real time from almost any device. As one reviewer noted, a “particularly clever feature is ‘Fetch,’ which lets you pull files off an online PC (Windows only) even if you haven’t previously uploaded them to OneDrive.”

OneDrive: • 5 GB for free. • 50 GB for $1.99 per month. OneDrive and Office 365: • Personal: 1 TB for one user for $6.99 per month. • Home: 1 TB each for five users for $9.99 per month.

There’s a free version, but the Pro version — best for business — automatically backs up all your critical files, regardless of the device or whether it’s Windows or Mac. Mozy charges a flat rate according to how much space you use rather than the number of computers.

Without Servers, 1 Year Plan: • 10 GB for $109.89. • 50 GB for $219.89. • 100 GB for $439.89. • 250 GB for $1,044.89. With Servers, 1 Year Plan: • 10 GB for $153.78. • 50 GB for $296.78. • 100 GB for $582.78. • 250 GB for $1,220.78.

CrashPlan backs up no matter the system: Windows, Mac, Linux or Solaris. It has a • unique pricing scheme that lets you choose • between backing up an unlimited amount • of data per computer or unlimited copies with a limit on data.

Free 30-day trial. $5 per user, per month. $10 per user, per month including cloud storage.

Similar to MozyPro, Carbonite Business backs up files and folders. But consider the Business Premier version — because of its cost per GB per year.

Essentials for $899.99 per year. Advanced for $1,199.99 per year. Advanced Pro Bundle for $1299.99 per year.

• • •

If a software program promises that it’s tailor-made for your business, you should always give it an extra look. Presumably, Cloud Cabinet customized their program • with accountants in mind. It promises to dramatically stream operations, improve productivity and provide “effortless” • recovery. It’s probably worth a first look. Note: They don’t offer a free trial period, but the annual plan comes with an “unconditional money-back guarantee if you cancel within the first 30 days.” N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

$59 per month or $595 per year; includes both document management and client portals. Base storage: 5 GB; purchase an additional 5 GB for just $25 per year.

EXHIBITOR

Marketplace

JUNE 15-17, 2016 BORGATA | ATLANTIC CITY, NJ

ur cornerstone event the annual convention & expo - convenes roughly 1,000 professionals who are beginning to shape the next chapter of the accounting profession: decision-makers, industry leaders and others involved in the buying decisions for their organizations. Join the conversations. Learn more and register at njcpa.org/convention.

CONVENTION & EXPO Connect with more than 75 exhibitors whose products/services are designed to help CPAs. Here are just a few to look out for this year.

Plan Now. Live Happy. Take advantage of your exclusive access to the NJCPA Member Insurance Program.

Contact Stephen Contos, SVP

p: 973-881-5181 e: stephen.contos@pnc.com

See us at Booth 213-216

Practice made perfect. See how ADPÂŽ can provide a more human resource to your firm and your clients: adp.com/cpaoffers The ADP logo and ADP are registered trademarks of ADP, LLC. ADP A more human resource. is a service mark of ADP, LLC. Copyright ÂŠ 2016 ADP, LLC.

Visit Booth #110 for more information! 855.874.0278 www.njcpainsurance.com

ANNUAL CONVENTION & EXPO

JUNE 15–17, 2016

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SOCIETY

pages

2016/17 Executive Committee and Board of Trustees Executive Committee PRESIDENT

PRESIDENT-ELECT

SECRETARY

Walter J. Brasch, CPA PKF O’Connor Davis LLP

Edward I. Guttenplan, CPA, CGMA Wilkin & Guttenplan, PC

Michael VanderGoot, CPA, CGMA BC Compliance Group LLC

TREASURER

IMMEDIATE PAST PRESIDENT

CEO & EXECUTIVE DIRECTOR

Lynn L. Albala, CPA, CGMA InfoSight Partners LLC

Frank R. Boutillette, CPA, CGMA, ABV WithumSmith+Brown

Ralph Albert Thomas, CGMA New Jersey Society of CPAs

To learn more about our Executive Committee members, visit njcpa.org/about/board. N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

Board of Trustees

Jean I. Abbott, CPA Stockton University

Amy Y. Both, CPA Neral & Company, PA

Robert J. Brown Jr., CPA Cowan, Gunteski & Co., PA

Melanie Cobb, CPA, CGMA E. Martin Davidoff & Associates

Carol Donatiello Iocca, CPA Wilkin & Guttenplan, PC

Sarah Krom, CPA, PSA SKC and Co. CPAs LLC

Roy H. Kvalo, CPA, CGMA The Curchin Group LLC

Stephen O. Richard, CPA, CGMA Becton Dickinson & Company

Kyle M. Sell, CPA Deloitte

Audrey J. Sherrick, CPA Friedman LLP

Lorenzo T. Vanore, CPA, CGMA ASDS Consulting Services

William J. Ryan III, CPA EisnerAmper LLP

N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

SOCIETY

pages

Get Involved The Journey to Self-Accountability Lessons From the NJCPA Managing Partner Retreat B Y C A ROLYN H OOK, N J C PA M E M B E R SHI P AND E NGAG E M E N T D I R E C TO R

Sam Allred, CPA, is a director at Upstream Academy and founder of Upstream Academy Network, an international association of accounting firms. Allred is one of the major influencers of the accounting profession and one of INSIDE Public Accounting’s “Most Recommended Consultants.” Hundreds of firms throughout the United States and Canada implement his best practices for success. So when, at the NJCPA Managing Partner Retreat last fall, Allred told of a time when he was his firm’s “least accountable partner,” New Jersey’s CPA firm leadership wanted to know his story. Allred explained: If there was a survey of who was the least accountable partner, it certainly would have been me. I was a good contributor, don’t get me wrong. But that’s what led me to be least accountable. I had the highest production. Everything I touched grew like crazy. Consulting groups I started had 100 percent growth. I’d just decide, “You don’t need to do this. We don’t need to be there. It’s more important for you to do that.” And without realizing it, I became the partner that the administrative people hated. Yes, he said they “hated” him. They constantly had to chase him down to do anything that others were willing to do — even “partner things.” Today he admits to being embarrassed by and oblivious to his “least accountable partner” behavior. Every other year, the shareholders turned in a personal financial statement. An email came in October: “Turn in your personal financial statement by May 15,” with a reminder that we had agreed to do this. I’d promptly delete it. I’d delete each monthly reminder. The frequency of emails increased. “This is really important. Right after busy season, don’t forget…” Then it’s May 16, and the email lists six shareholders. “We need your statement. It was due yesterday.” And I’d think, “I’m not the only guy.” Finally, the CEO came to the door and, with some degree of irritation, said “Are you not getting the emails?” I’d respond, “I’m really sorry. I’ve been really busy. I’ll do it today.” And then I’d do it. Allred confessed this was his system of accountability for all sorts of things. And the most embarrassing part was that the things would usually take about 15 minutes. That personal financial statement? All he had to do was plug new numbers in last year’s spreadsheet. Sounds more like the behavior of your teenager on garbage day. But the worst part was that he and the irritated CEO were best friends. “I made one of my best friends so frustrated. He had to chase me down for something that literally took 15 minutes.” Then in re-reading one of his favorite books, True Professionalism by David Maister, Allred was struck at reading, “You are not a professional

if you make the lives of other people around you more difficult.” Later he recalled a discussion with his dad about how he wanted to be a person of integrity. “If you can’t be counted on to do what you said you would do, you’re not a person of integrity.” And then it all came together. Even though he was successful, he wasn’t a man of integrity. He wasn’t who he wanted to be. Success doesn’t correlate with self-accountability, and success doesn’t correlate with integrity. I could get great results, bring in new clients, generate all kinds of new services. But I wasn’t the person I wanted to be. So I sat down to make a list of all the things I hadn’t done on time. Times I never returned emails or did what I said I was going to do. Times I didn’t show up or follow through. When I chose something I thought was more important. Or I thought my contribution made it all okay. I was completely embarrassed. I owed a lot of people an apology, and I owed it to them to change. It has been 12 years since Allred’s enlightenment — one he had to come to himself. Now he and his firm have adopted this definition of self-accountability: Self-accountability is the personal commitment to do what you’ve agreed to do. It’s the willingness to do it on time, to the best of your ability and without reminders. Today Allred’s system is to first ask, “Can I do it right now?” If not, it goes on the schedule and gets done early without a reminder. He’s careful about what he commits to. “The things I say yes to, I’m self-accountable for.” Being accountable and a person of integrity aren’t things he strives to be. They are his core values, who he is.

N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

T:7.25”

T:5”

Clients come in all sizes. So do their needs. More than likely, your firm is experiencing rising expectations from your clients every year. Working with the right Human Capital Management provider can help your firm rise to the occasion — by offering scalable solutions to help your clients no matter how big or small. See how ADP¨ can provide a more human resource to your firm and your clients: adp.com/njcpa The ADP logo and ADP are registered trademarks of ADP, LLC. ADP A more human resource. is a service mark of ADP, LLC. Copyright © 2016 ADP, LLC.

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VALERIE THORPE, CPA | MEMBER SINCE 2010

Renew your NJCPA membership today!

N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

njcpa.org/renew

CLASSIFIEDS Classified Advertising Replies to ads with file numbers should be sent to: File______________________ New Jersey CPA Classifieds 425 Eagle Rock Avenue, Suite 100 Roseland, NJ 07068-1723 To see additional classified listings or to place an ad, visit njcpa.org/classifieds.

ADVERTISERS INDEX

Mergers/Acquisitions

Real Estate

Morris Merker and Company LLC, a firm in Passaic County, is seeking to acquire/merge with retirement-minded CPA practitioners. Reply in confidence to jpetrella@mmccpanj.com.

Prime building on Route 17, Paramus. 1,000 square feet available in CPA office. Includes shared conference room. Contact George Allen 201-262-7878.

New Jersey practices for sale: multi-location tax franchise, gross $242K; Ewing tax & bkkg, gross $150K (available 4/15/16). For more information, call Bradley Holmes 800-397-0249 or visit accountingpracticesales.com to view all listings and register for free email updates.

Professional office space for lease, includes shared conference room, kitchen, gated parking, security cameras, alarm and utilities. Located on Livingston Avenue in New Brunswick, NJ. Call 908-581-3322 or email beatagall@hotmail. com for more information.

Traphagen & Traphagen CPAs, a well-established firm in Bergen County with diverse client base and credentialed support staff, is seeking small firms and sole practitioners for acquisition or merger. We are looking for firms ranging in size from $300K to $700K. This is an opportunity to align with a quality firm while continuing to provide your clients with exceptional service. To confidentially discuss this opportunity, please email us at carolynn@tfgllc.com.

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Newly constructed executive window offices available in Ramsey, NJ. Rent negotiable. Call Connie at 201-474-4016.

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Accounting Practice Sales 9 accountingpracticesales.com ADP adp.com/njcpa Artha Systems LLC arthasystems.com Bank of America bankofamerica.com Capstan Tax capstantax.com

28, 33 22-23, 29 17 13, 29

Drake Software drakesoftware.com

Exchange Authority LLC exchangeauthority.com

IV Desk ivdesk.com

NAPLIA; North American Professional Liability Insurance Agency LLC 29, 37 naplia.com

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July • August 2015

July/August – Coming Attractions

Next Generation Trust Services nextgenerationtrust.com

Plymouth Rock Assurance plymouthrock.com

PNC Bank pnc.com

Provident Bank provident.bank

Rutgers Business School business.rutgers.edu/taxmaccy

Rutgers University School of Business Camden pmac.rutgers.edu

Business Growth • Having a Business Development Plan

• Sell Isn’t a Four-Letter Word

• Converting Prospects to Wins

• Corporate Finance CPAs Contributing to Business Growth

N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

Thomson Reuters - NJ checkpointcatalyst.com

USI Affinity njcpainsurance.com

Wilkin & Guttenplan, P.C. wgcpas.com

NOMINATE YOURSELF — OR A FEMALE CPA COLLEAGUE — AS AN

NJCPA WOMAN OF NOTE

NJCPA members receive an exclusive discount up to 15% on car insurance!

The NJCPA will spotlight female CPA members who have made a significant impact to the accounting profession. Candidates will be selected based on:

Y CAREER ACHIEVEMENT Y NJCPA VOLUNTEERISM Y ACCOUNTING PROFESSION INVOLVEMENT Y CHARITABLE ACTIVITIES Apply at njcpa.org/womenofnote by May 20, 2016.

Switch to Plymouth Rock Assurance and begin to enjoy these unique services:

• Get Home Safe® taxi reimbursement • Door to Door Valet Claim Service® • One Year Rate Lock Don’t delay taking advantage of these great services and lower rates.

Call us today at 888-391-7220 or visit us online at NJCPAQuote.com for your free quote. Plymouth Rock Assurance is a marketing name used by a group of separate companies that write and manage property and casualty insurance in multiple states. Insurance in New Jersey is underwritten by Palisades Insurance Company, 331 Newman Springs Rd, Suite 304, Red Bank, New Jersey 07701, and its affiliates. Each company is financially responsible only for its own insurance products. Actual coverage is subject to the language of the policies as issued by each company. Certain restrictions and limitations apply. For a full description of the programs, features, and coverages, please visit PlymouthRock.com. Group discounts apply to policies written in High Point Property and Casualty Insurance Company or Palisades Insurance Company. May not be combined with any other group discounts. 2016 Plymouth Rock Management Company of New Jersey. All rights reserved. 8560/032016

YOUNG

professionals

NJCPA Celebrates Its 56th Scholarship Awards Ceremony T

his year the NJCPA Scholarship Fund awarded more than $450,000 to New Jersey college students and high school seniors who are entering college. We applaud our members, chapters and firms for supporting the NJCPA’s efforts in helping secure the future of the CPA profession. Congratulations to these scholarship recipients:

College Awards ($6,000) • Cory Andrews, Rider University • Brian Bednarz, Montclair State University • Brian Carlin, Rowan University • Kathy Chan, Rutgers University – New Brunswick • Nicholas Contey, Montclair State University • Samantha Cummings, William Paterson University • Geannine DeMers, Rowan University • Christine Deskovic, Stockton University • Jeny Eapen, Rutgers University – New Brunswick • Dominque Fortes, Seton Hall University • Michael Habib, Seton Hall University • Thomas Hansen, Rutgers University – New Brunswick • Tameesha Harris, Rowan University • Samorri Johnson, Rider University • Ben Kats, Montclair State University • Alexandra La Fata, Seton Hall University • Drew Pinkston, Rider University • Kevin Schmitt, Seton Hall University • Amanda Stabile, Rutgers University – New Brunswick • Kristan Stack, William Paterson University • Yaroslav Tashak, Montclair State University • Katherine Torpey, Rutgers University – New Brunswick • Zachary Williams, Rutgers University – New Brunswick

High School Senior Awards ($7,000) • Diana Altman, Livingston High School • Amanda Bush, Cranford High School • Kyle Chylinski, Bridgewater Raritan High School • Marley Cohen, South Brunswick High School • Emily Coppa, Kinnelon High School • Jacob Crockett, Livingston High School • James Gleichmann, Whippany Park High School • Erica Healy, Bishop George Ahr/ St. Thomas Aquinas High School • Kristen Kahrer, Academy of the Holy Angels • Nicholas Khalaf, Montville Township High School • Megan Kolides, Montville Township High School • Spencer Mann, Monroe Township High School • Emily Marks, Wayne Valley High School • Michelle Pyatnychuk, Fair Lawn High School • Arynn Rizick, Old Bridge High School • Abby Schwartz, Wayne Valley High School • Teresa Stornelli, Wall High School • Eric Tarkett, Lenape High School • Rachel Touma, Montville Township High School • Edward Vergalasov, Manalapan High School

Minority Scholarships

2015 NABA Eastern Region Scholarship ($1,000) • Justina Ejiofor, Rutgers University – Camden

NJCPA/AICPA ($5,500) • Muhammad Rasheed, Montclair State University

NJCPA/NNJ-NABA ($5,500) • Martino Joshua F. McDowell, Kean University • Abena Manteaw, Rutgers University

“In Name Of” Awards ($6,000) Bowman & Company LLP, In Memory of Lisa A. Donahue • Sarah Donahue, St. Joseph’s University

CohnReznick LLP • Travis Poole, Rutgers University • Brett Sanders, The College of New Jersey

EisnerAmper LLP • Angela Ciallella, The College of New Jersey

Frazer, Evangelista & Co. LLC • Luciano Cundari, Seton Hall University

In Memory of Frederick and Lenore Horn • Karen Espinoza, Rider University

In Honor of John S. Lee • Francesca Esteves, Rider University

Monmouth/Ocean Chapter, in Memory of Joseph DeLeone Jr. • Samantha Palumbo, Monmouth University

NJCPA Council of Past Presidents • Julia Castronovo, Montclair State University

N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

PKF O’Connor Davies LLP, in Memory of Stephen Mannuzza

In Memory of Z. Thaddeus Zawacki

• Carol Chedid, Rutgers University

Smolin Lupin & Co. PA • Anthony Radice, William Paterson University of New Jersey

Chapter College Awards

Union Chapter, in Memory of Art Nathan

• Brett Eisenberg ($4,000), Stockton University • Thao Nguyen ($3,000), Stockton University • Ethan Rutter ($3,000), Stockton University • Dante Orlandi ($4,000), Stockton University

Atlantic/Cape May Chapter

• Anastasia Kolb, Rutgers University – Newark

Untracht Early LLP • Christina Haag, Montclair State University • Jerome Vicks, Rutgers University – Camden

Bergen Chapter

WeiserMazars LLP • Radhika Kapadia, Montclair State University

Wilkin & Guttenplan, In Memory of Jules C. Frankel • Alexandra Wallach, The College of New Jersey

WithumSmith+Brown, PC • April Dellner, The College of New Jersey • Allison Henry, Stockton University

• Michael Al Moustafa ($2,500), Ramapo College • Erin Butwin ($2,500), University of Delaware • Angela Chen ($2,500), Villanova University • Saniya Datwani ($2,500), Boston University • Daniel Carabin ($2,000), Penn State University • Giovanni Lombardi ($2,000), Moravian College • Patrycja Ozga ($1,500), Bergen Community College • Matthew Charne ($1,500), The College of New Jersey

• Andrew Paparelli, Seton Hall University

• Julianne Carlin ($5,000), Babson College • Giovanna DiStefano ($4,000), Quinnipiac University • Katlyn Twomey ($3,500), Bryant University • Nicole Monteleone ($3,000), Clemson University • Kathleen Cericola ($2,500), Seton Hall University • Sang Lee ($2,500), Penn State University

Mercer Chapter • Siheng Yu ($2,500), Rutgers University – Camden • James Maleski ($1,500), Mercer County Community College • Shailly Chanana ($1,500), Mercer County Community College To support the NJCPA Scholarship Fund, visit njcpa.org/scholarship.

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161 Worcester Road, Suite 504, Framingham, MA 01701 | naplia.com N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

LEGISLATIVE

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Bills Phasing Out Estate Tax and Increasing Retirement Income Exclusion Move in NJ Senate B Y JEF FREY T. KAS ZERM AN, NJ C PA GOVE R NM E NT R E LAT I O N S D I R E C TO R

wo tax reform bills strongly supported by the NJCPA were passed by the state Senate Budget and Appropriations Committee on Feb. 29. Senate Bill 1728 would phase out New Jersey’s estate tax over five years, and Senate Bill 998 would increase the personal income tax’s pension and retirement income exclusion fivefold over a three-year period. These bills would help to provide tax fairness, generate economic growth, and stem the out-migration of people and capital from the state. For more than a decade, New Jersey has had the highest death taxes in the nation. A majority of states have no estate tax at all, and six have an inheritance tax, while the Garden State is one of only two states that have both an estate tax and an inheritance tax. (Maryland is the other, and New Jersey’s are more onerous.) And unlike most states that do still have an estate tax, New Jersey never raised its $675,000 exclusion to match the federal exclusion of $5.45 million. A 2015 survey by the NJCPA found that 74 percent of respondents have actually advised clients to relocate to another state because of New Jersey’s estate and inheritance taxes. A strong majority (85 percent) think these taxes impact the state’s middle class just as much as the affluent. For many years, the NJCPA and other pro-taxpayer and pro-business groups have lobbied hard to move death tax reform measures, but they never moved in the Democraticcontrolled legislature because many Democratic lawmakers perceived them as benefitting only the very wealthy. Growing recognition by legislators, especially those representing municipalities with high home prices, that these taxes do burden many

middle-class New Jerseyans and force them to leave the state has created growing support in the legislature for offering relief. Another source of pressure to move death tax reform has come from the governor, who has implied that he won’t support Democratic proposals to hike the gas tax to fund the ailing Transportation Trust Fund (TTF) without Democratic support for death tax relief. Creating a stable source of funding for the TTF has been a top priority for Democratic leaders in both the Senate and Assembly for the past two years. The bipartisan bill, sponsored by Senators Paul Sarlo (D-36) and Steven Oroho (R-24), sets the exclusion on estate taxes to $1 million beginning Jan. 1, 2017. It then increases the exclusion amount to $2.5 million for 2018, $3.5 million for 2019, and $5 million for 2020. For 2021 and thereafter, S1728 provides that there will be no estate tax imposed. The Senate Budget Committee also passed S998, a bipartisan bill sponsored by Senate President Stephen Sweeny (D-3) and the same legislators who sponsored the estate tax bill. This bill would increase the personal income tax’s pension and retirement income exclusion fivefold over a three-year period, making New Jersey more affordable for seniors living off of pensions and other savings. It is a step in the right direction to decreasing the out-migration of New Jerseyans to other states that have more favorable tax treatment of pension and retirement income. New Jersey currently allows residents age 62 or older who make less than $100,000 annually to exempt up to $15,000 of their retirement income from state income taxes. The exemption is capped at $20,000 for couples. On N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

the other hand, the cap for couples is $40,000 in New York, while Pennsylvania does not tax retirement income at all. The tax policies in neighboring states offer a strong temptation for seniors to leave New Jersey. Keeping retirees in the state by providing tax-fairness measures such as S998 is critical to helping improve the state’s economy and business climate. The bill increases the personal income tax’s pension and retirement income exclusion to $100,000 for joint filers; $75,000 for individuals; and $50,000 for married but filing separately. Higher exclusion rates would provide an incentive for those relying on pension and retirement income to stay in the state. To see the text of the legislation, go to these links: • S1728, Phase-Out of Estate Tax: www.njleg.state.nj.us/2016/Bills/ S2000/1728_I1.HTM • S998, Increase in Retirement Income Exclusion: www.njleg.state.nj.us/2016/ Bills/S1000/998_I1.HTM For updates on these and other bills the NJCPA is tracking, visit njcpa.org/advocacy.

UNPRECEDENTED, MASSIVE AND HIGHLY ACCELERATED CHANGE: ARE YOU READY? JOIN THE CONVERSATION AT THIS ANNUAL GATHERING OF YOUR CPA PEERS.

CONVENTION & EXPO

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Accounting Maven, Zumba Expert, Inspirational Professor B Y ELIZABETH QUIÑONE S, NJ C PA C ONTE NT SP EC IAL IS T

ew Jersey native Nicole M. DeRosa, CPA, brings her vibrant energy not only to her role as a tax manager for WithumSmith+Brown but also as a Zumba instructor and as an adjunct professor for Raritan Valley Community College (RVCC). When she was younger, Nicole wasn’t sure what profession she wanted to pursue as an adult. But she did know that her love for math, teaching and dancing could pave a path for her in the future. That love for math transformed into a passion for accounting after Nicole attended an accounting class as a junior in high school. “That’s when I fell in love with becoming an accountant,” recalls Nicole. Her love for teaching led her to become an adjunct professor at RVCC, where she helps students on their paths to becoming accountants. Nicole takes her love for dancing to Gold’s Gym as the Zumba instructor on Tuesday nights. Nicole’s path to success was possible through perseverance, hard work and enthusiasm. While she was pursuing her Master of Science in Accounting at Fairleigh Dickinson University and studying for the CPA exam, she was a full-time tax accountant. After passing the CPA exam, Nicole immediately reaped the benefits of the credential’s prestige. “Being a CPA holds you in higher regard,” she says.

Nicole recalled an experience when she and a partner at an accounting firm sat with a client. The client focused most of his attention on the partner, ignoring her. But once the partner shared that Nicole had just passed the CPA exam, the client’s attention completely shifted. “As soon as he found out I was a CPA, it was like night and day ... the CPA credential is a synonym for respect in the profession,” shares Nicole. “After that meeting, he wanted me to do his taxes!” Zumba was one of the stress-relieving activities that helped Nicole juggle it all. She immediately loved the fitness dance classes, and she seized the opportunity to teach the class after the original instructor left. How did gaining her Zumba license compare with getting her CPA license? “Getting the Zumba license was a joke compared to the CPA exam!” she says. “The smiles and laughs I get from gym members attending my class are what keep me coming back for more.” Nicole has been teaching Zumba since 2011. One of Nicole’s favorite accounting professors at RVCC was looking for accountants interested in teaching Tax Accounting I. She decided to give it a shot. That professor had opened the door for her to work for Withum, so she wanted to give back to her alma mater and help guide students on their accounting paths. But her reason to N E W J E R S E Y C P A • M AY • J U N E 2 0 1 6

teach was bigger than that. “It’s kind of a give-back thing, but I also wanted to get familiar with public speaking,” shares Nicole. While many people dodge public speaking opportunities, Nicole wanted to take it head on, inspiring students along the way. She shared a story about one student who was thinking about giving up accounting. Now that student is an auditor for a small accounting firm. “There is always somebody that makes [teaching] worthwhile,” notes Nicole. Whether she’s leading a class at RVCC, inspiring fitness at a Zumba class or plowing through busy season as a tax manager, what drives Nicole to success is this mantra: Enjoy each opportunity with contagious enthusiasm and positive energy. “Even when things get stressful, I always try to keep a positive attitude and stay enthusiastic,” says Nicole. This NJCPA member is always looking for new challenges, seeking different opportunities and having fun in whatever she does. Her motto certainly stands true: “If you do what you love, you’ll never work a day in your life.” View Nicole’s Member Story and CPA Exam Journey videos at njcpa.org/videos.

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