New Jersey CPA - Spring 2021 by New Jersey Society of CPAs

SPRING 2021

WHAT JUST HAPPENED? HOW DO WE MOVE FORWARD?

PROFESSIONAL ISSUES UPDATES IMPACTING CPAs AND FINANCIAL PROFESSIONALS Watch our panel of public policy experts analyze elements of Governor Murphy’s proposed budget and discuss their potential impact and political viability.

MONDAY, MARCH 15 Webcast Replay

WEDNESDAY, MARCH 17 Webcast Replay

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Hear the latest legislative and public policy developments impacting CPAs and the business community. Listen in bi-weekly. Listen now. Subscribe in your favorite podcast app. Or listen online at njcpa.org/podcast. 2

SPRING 2021 | NEW JERSEY CPA

contents SPRING 2021

THE MAGAZINE OF THE NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

4 RALPH ALBERT THOMAS, CPA (DC), CGMA Chief Executive Officer & Executive Director rthomas@njcpa.org

RACHAEL BELL Managing Editor rbell@njcpa.org KATHLEEN HOFFELDER Senior Content Editor khoffelder@njcpa.org DIANE ESPIRITU Senior Graphic Designer despiritu@njcpa.org

The Pandemic’s Impact on NJCPA Members

Accounting professionals rose to the challenge of 2020 with an “all-hands-on-deck” mentality. An NJCPA member survey revealed the many hoops that CPAs go through daily to keep their clients, offices and organizations afloat. CPAs also worried about their staff — both mentally and physically.

New Sheriff in Town: Biden to Focus on Reversing Trump Policies

While sweeping changes to the tax code may take time and follow additional coronavirus stimulus relief, with the Democrats now controlling the White House and both chambers of Congress, President Biden could be poised to implement an agenda that may affect millions of taxpayers.

THERESA HINTON Chief Operating Officer thinton@njcpa.org DON MEYER, CAE Chief Marketing Officer dmeyer@njcpa.org

Tax Challenges Loom for New Jersey’s Cannabis Industry

Future cannabis challenges regarding Internal Revenue Code §280E could be on the horizon given the dissent of Judge David Gustafson in a 2019 U.S. Tax Court ruling involving a California cannabis business. Find out what arguments could play out.

10 Staying on Target to Pass the CPA Exam

Future CPAs need to continue to adapt with the profession. Though some of the more comprehensive changes to the CPA Exam have been pushed back due to the pandemic, there have been changes to testable topics in all four sections.

2 CLOSE UP

Setting the Course for Future CPAs THE NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS 105 EISENHOWER PARKWAY SUITE 300, ROSELAND NJ 07068 973-226-4494 | NJCPA.ORG #NJCPAMAG READ NEW JERSEY CPA ONLINE AT NJCPA.ORG/ NEWJERSEYCPA

12 ACCOUNTING, AUDITING & ATTEST

Internal Audit: To Yield Value, We Must Collaborate 14 BECOMING A CPA

Making the Most of Post-Grad CPA Exam Summer Studies 15 BUSINESS MANAGEMENT SPONSORED CONTENT

TO ADVERTISE OR P R OV I D E S PONSORED CON T EN T IN NEW J E R S E Y C PA Visit njcpa.org/advertising or contact Eileen Proven at eproven@njcpa.org or 862-702-5640

7 Tips for Creating a Modern Policy Manual Using Data Analytics to Manage the Pandemic

18 FINANCIAL PLANNING SERVICES

Finding Balance: Asset Allocation in a Post-COVID Economy 19 LITIGATION SERVICES & BUSINESS VALUATION

23 TECHNOLOGY

5 Simple Tech Tools to Increase Effectiveness and Efficiency 24 NJCPA NEWS

y 30 Under 30: Then and Now

The Impact of COVID-19 on Business Valuations

y Ovation Awards Open for Nominations

20 PROFESSIONAL DEVELOPMENT

y In Memoriam

6 Ways to Grow Your Network by Giving Back to the Profession 21 RISK & COMPLIANCE

Preventing Unauthorized Data Access in the Cloud 22 TAX

International Tax: The Basics of Income Sourcing

y Student Loan Debt Lottery Winners Announced y Virtual High School Presentations Are A Hit 27 CLASSIFIEDS 28 MEMBER PROFILE

Alan E. Gumeny, CPA

CLOSE UP

Setting the Course for Future CPAs BY RALPH ALBERT THOMAS, CPA (DC), CGMA, CEO AND EXECUTIVE DIRECTOR, NJCPA

The role of the CPA continues to change for the better. With each new technological advancement, tasks become more efficient and CPAs become more strategic, specialized and customer- and data-centric. Though the COVID-19 pandemic has altered our sense of day-to-day normalcy, CPAs have risen to the challenge and become better analysts, planners and business partners. Going forward, the use of technology, artificial intelligence and robotic process automation will enhance those skills — and enable more to develop. The Illinois CPA Society’s (ICPAS) insightful report, CPA Profession 2027: Racing for Relevance, shows just how much influence technology will have on CPAs over the next few years and what implications there will be for the profession. The report explains why CPAs “need to be looking at the turns ahead and positioning themselves to race toward relevance.” And making the shift towards being the most trusted and strategic business advisors is how CPAs “stay in the race for relevance.” We at the NJCPA could not agree more. The report has seven key predictions for what the CPA profession may look like in 2027. These include: 1. Tech races ahead. As firms, companies and consumers pour more energy and investments into technology solutions for everything from simple cashless payments to bookkeeping and tax prep, HR, supply chain management and more, not only must CPAs implement the technologies relevant for their firms and companies now, they must keep pace with what’s to come for them — and those they serve. 2. Worker demand and demands change. Long term, the automation and displacement of so many jobs promises to reshape CPAs’ firms and the organizations they serve — and so will the social and generational changes unfolding before us. Workers will mostly be agile digital natives who demand

SPRING 2021 | NEW JERSEY CPA

greater flexibility. They’ll participate in a much larger project-based and gig economy, and they’ll be more socially conscious than ever before — and they’ll expect their employers and the brands (i.e., companies and organizations) they support to be the same. 3. Expectations evolve. CPAs will be expected to better leverage their deep insights into companies’ and clients’ financial lives. Companies and clients will need and expect their CPAs to proactively provide strategic guidance and insights in all areas of their businesses and lives that are based on their unique needs and goals. 4. CPA firms retool. Apart from the highly specialized niche firms chugging along for a few more laps, the CPA firm as we’ve known it will soon run out of gas and be forced from the race. Moving forward, firms are likely to continue racing down the merger, acquisition and rebranding path as they jostle to position themselves for new growth opportunities in advisory, consulting and other professional services. 5. Corporate finance refocuses. Technology systems will generate data that organization leaders will look to CPAs and corporate finance staff to analyze and use to build further strategic insight, thus marrying finance and management into a partnership focused on driving profitability and growth.

6. CPAs reset skills. Digital and soft skills will be the top requirements of CPAs in the future — strategic thinking problem solving, analyzing and interpreting data, communicating high-level insights, technology aptitude and agility, creativity and curiosity, innovative thinking and business acumen. This follows in line with the AICPA’s “CPA Horizons 2025 Report,” which describes the CPA as the trusted advisor who, in addition to providing core CPA services, develops solutions to complex problems. 7. The CPA population stalls. There will be significantly fewer CPAs in 2027 than in 2019. They’re facing increasing competition for positions they’ve typically held in both public accounting firms and in the corporate sector — all while AI and automation are reducing the overall demand for human talent.

READ MORE CPA PROFESSION 2027: RACING FOR RELEVANCE

icpas.org/cpa2027

CPA HORIZONS 2025 REPORT

aicpa.org/research/ cpahorizons2025

New Jersey CPA (ISSN 1534-6692) is published four times per year by the New Jersey Society of Certified Public Accountants, 105 Eisenhower Parkway, Suite 300, Roseland, NJ 07068. Issue No. 86 Copyright © 2021 New Jersey Society of Certified Public Accountants. Annual membership dues include $9 for a one-year subscription to New Jersey CPA magazine. Members may not deduct subscription price from dues. Periodicals postage paid at Roseland, NJ, and at additional mailing office. POSTMASTER: Send address changes to New Jersey CPA, 105 Eisenhower Parkway, Suite 300, Roseland, NJ 07068-1640. 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.

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THE PANDEMIC’S IMPACT ON NJCPA MEMBERS By KATHLEEN HOFFELDER

NJCPA SENIOR CONTENT EDITOR

In a year like none other, some CPAs fared surprisingly well as they adapted to remote auditing, learning, hiring and everything in between. But for others, the pandemic took a toll that will not easily be forgotten and could take years to recover from.

SPRING 2021 | NEW JERSEY CPA

At the end of 2020, the NJCPA surveyed more than 800 members about the implications of the coronavirus pandemic. Of the respondents who are partners at CPA firms, 33 percent said their firm had a decrease in revenue in 2020, and 31 percent expect to have a decrease in 2021. Though 45 percent anticipated revenue staying the same, it’s a sharp sign that not all organizations are operating smoothly or at the same pace. This was also evident when looking at the respondents who work in businesses or at government jobs, as 38 percent soured on their revenue prospects for 2021. And almost half (48 percent) of those respondents saw their organization’s revenue decrease in 2020. Business uncertainty and client challenges were the main reasons for the negative take on 2021 cited by those working in public practice. Respondents noted client business interruptions, such as restaurant closures in New Jersey, as potential problem areas as well as the inability for clients to pay rent. Worries also centered on an inability to grow their company’s operations and a lack of networking opportunities during the pandemic. Networking was important, they said, since it is necessary to reach both new clients as well as diversify themselves if certain client businesses

began to flounder. Acknowledging the resurgence of the second wave of the pandemic in the Garden State and what it means for economic recovery also kept CPAs on edge. SILVER LININGS Despite obvious concerns for expansion and growth during the pandemic, CPAs also worried about their staff — both mentally and physically. Most CPA firms and businesses developed ways to motivate employees and keep staff engaged during an extremely difficult 2020. At a time when many felt disconnected from family and friends, creating ways to connect with staff was an important tool in retaining employees. For those lucky enough to be on the upside of that, things were bright — sometimes very bright. As survey respondents noted, companies promised more flex time, less structure, more paid time off and employee incentives. Some even absorbed increases in health insurance instead of passing that onto staff or gave out turkeys and free lunches for the holidays. Others acknowledged that while they felt connected, better communication was still needed internally and with clients. As increased workloads and complexity related to the Coronavirus, Aid, Relief and Economic Security (CARES) Act

As one student noted, “It’s harder to teach things online rather than if I was in person. So, I haven’t done as much as I have during previous in-person internships.”

mounted, challenges were abundant, which made communicating with staff and clients even more important. Regular Zoom calls and weekly check-ins became the norm — whether everyone was dressed for it or not. And most organizations plan to keep their communication lines more open after the pandemic subsides. Respondents particularly mentioned town hall meetings were a boon to keeping all staff informed in such turbulent times. ACADEMIC WOES Few felt the impact of remote working during the pandemic more than teachers. At the college and high school level, that meant following school protocols, social distancing and switching to hybrid and fully remote plans at a moment’s notice. Of the college accounting professors surveyed, 90 percent said it was more difficult to teach remotely. Student enrollment in accounting courses has remained steady, but not all students are on the right track for taking the CPA Exam. As one respondent commented, “The strong students who plan to take the Exam are still able to perform well with the change in course delivery format, so they are still on track. Weaker students are not performing as well and will not be prepared to take the Exam.”

Socially, the students are also missing out. According to one professor, “Students have internet/technology issues which limit the use of cameras and limit the creation of relationships.” Indeed, relationship building is a big part of college, and particularly important for accounting students who need internships. Whether based on finances or some other issue, students were not welcoming of remote-style teaching for all levels of accounting. In one example, a respondent noted, “I have had many more students disappear/drop during the semester than I have in a traditional class. It’s too easy for them to ‘black screen’ and then disappear.” Students, themselves, noted their frustration. Out of more than 80 NJCPA Student members who took the survey, 58 percent said that it was more difficult to learn accounting remotely. Respondents noted that their learning would improve if they had more opportunities to discuss topics with peers to gain a better understanding of the material, but that was not occurring in with the current learning environment. Internships were also harder to come by. Some were not able to take advantage of internships due to the pandemic restrictions and office closures, and those who did have them learned less on the job than usual.

PERSONAL REFLECTIONS When asked from a personal standpoint how respondents were coping during the pandemic, the responses varied by age and career. Surprisingly, CPA candidates and students gave their handling of the pandemic some of the lowest ratings with an average of 5.5 and 5.75, respectively, on a scale of 1 (struggling to cope) to 10 (managing very well). CPA candidates traditionally have a lot to deal with on a normal 18-month test completion window for taking the CPA Exam, but add in a pandemic and things get much more complicated. While those survey respondents who are CPA candidates did not overwhelmingly halt pursuit of becoming a CPA during the pandemic, it was decidedly more burdensome. They cited longer work hours that impinged on their study time and test centers not being readily available or open at all. Those who had completed their test taking were also affected. The New Jersey State Board of Accountancy had a reduction in staff during the pandemic which extended durations for license processing among other requests. The NJCPA recommends that any members who have made an email or written request to the board on a licensing matter and have not received a response within one month should reach out to membership@njcpa.org. Educators ranked next in rating the weight of the pandemic heaviest with a collective 6.3 out of 10, followed by respondents in the business, industry and government sectors at 7.26 and accounting professionals in public practice at 7.27. The respondents cited everything from hardships relating to the virus and elderly parents to remote working difficulties and worries about client businesses. Those at the highest ratings on a personal level noted improved family time during the pandemic, getting used to remote working, putting more focus on the business of the CPA firm and getting more efficient.

NEW JERSEY CPA | SPRING 2021

NEW SHERIFF IN TOWN: BIDEN TO FOCUS ON REVERSING TRUMP POLICIES By MATTHEW S. RHEINGOLD, ESQ., AND GARY R. BOTWINICK, ESQ.

EINHORN, BARBARITO, FROST & BOTWINICK, PC

With Democrats now controlling the White House and both chambers of Congress, President Biden could be poised to implement an agenda that may affect millions of taxpayers. During his presidential campaign, President Joe Biden, in an effort to raise revenue by nearly $3.5 trillion over the course of the next 10 years, laid out his plan to raise taxes on corporations, estates and high-income households, as well as reverse key parts of the Tax Cuts and Jobs Act (TCJA). At the same time, he repeatedly assured voters that individuals earning less than $400,000 would not see an increase in their tax bills. While sweeping changes to the tax code may take time, with the Democrats

SPRING 2021 | NEW JERSEY CPA

now controlling the White House and both chambers of Congress, President Biden could be poised to implement an agenda that may affect millions of taxpayers. Although Biden has already set forth numerous tax proposals, at the time of this writing he has not released detailed tax policy on many of his changes. The following is a summary of the current law, as well as Biden’s core proposals: ORDINARY INCOME TAXES Current law: Following the TCJA, seven tax brackets apply for individuals ranging from 10 percent to 37 percent, with the top rate for ordinary income in 2021 beginning at $523,600 for single taxpayers and $628,300 for joint filers. Proposal: Biden has proposed raising the top income tax rate from 37 percent to 39.6 percent. CAPITAL GAINS AND DIVIDENDS Current law: The maximum federal income tax rate on net long-term capital gains and qualified dividends recognized by individual taxpayers is 23.8 percent (20 percent plus an additional 3.8-percent net investment income tax (NIIT) for certain high-income households). Proposal: Under the Biden plan, taxpayers earning more than $1 million would face higher taxes on the sale of capital assets. The top tax rate for long-term capital gains and qualified dividends would increase from 20 percent to 39.6 percent. Therefore, with the additional 3.8-percent NIIT, the maximum effective rate on net long-term gains would be 43.4 percent.

ITEMIZED DEDUCTIONS Current law: The TCJA prohibits taxpayers from claiming a deduction for state and local taxes in excess of $10,000. In addition, the TCJA eliminated the Pease limitation which reduced a taxpayer’s total itemized deduction by 3 percent for each dollar of income that exceeds $400,000. Finally, the TCJA eliminated the cap on a taxpayer’s itemized deduction. Proposal: Biden has indicated that he would cap the tax benefit of itemized deductions at 28 percent for those taxpayers earning more than $400,000. Biden’s proposal would also reinstate the Pease limitation for taxpayers who earn more than $400,000 and eliminate the $10,000 cap for state and local taxes. SOCIAL SECURITY TAXES Current law: Taxpayers are required to pay a 12.4-percent Social Security tax on the first $142,800 of 2021 wages or net self-employment income. While employers and employees split the tax, self-employed individuals must pay the entire tax on their own (however, self-employed taxpayers may deduct one-half of the tax on their individual tax return). Proposal: Biden has proposed to restart the 12.4-percent Social Security tax on wages and net self-employment income on earnings in excess of $400,000. Therefore, Biden’s approach would create a “donut hole” where income in excess of $137,700, but below $400,000, would not be subject to the tax. Over the years, the donut hole would gradually close as the lower threshold creeps closer to the upper threshold due to inflation.

ESTATE TAX Current law: The current lifetime federal estate and gift tax exemption is $11.7 million per person and $23.4 million for couples. An individual’s estate in excess of the exemption is taxed at a rate of 40 percent. Any taxable gift made during an individual’s lifetime (prior to death) simply reduces the amount of his/her exemption. However, it is important to note that the individual exemption is scheduled to sunset to a reduced amount of $5 million at the end of 2025 (indexed for inflation). In addition, the federal income tax basis of an inherited asset is stepped up to fair market value as of the decedent’s date of death. Therefore, if an heir sells an inherited asset, the heir will owe capital gains tax only on the post-death appreciation. Proposal: Biden has indicated that he would decouple the estate and gift tax regime. His plan would reduce the amount that an individual can transfer tax-free at death from $11.7 million to $3.5 million and limit the amount of aggregate tax-free lifetime gifting available to an individual at $1 million. In addition, Biden’s plan would increase the estate tax rate to from 40 percent to 45 percent. Finally, Biden would eliminate the basis step-up for inherited assets. As a result, any inherited asset would be taxed based upon the decedent’s basis, which means more taxes on wealth would be passed on to heirs. CORPORATE TAX Current law: The TCJA reduced the corporate tax rate from 35 percent to a flat 21 percent. Proposal: The corporate tax rate would increase from 21 percent to 28 percent. Additionally, Biden would implement a new minimum tax on corporations with at least $100 million in annual book income. Such corporations would pay the greater of their federal income tax bill or 15 percent of reported book income. QUALIFIED BUSINESS INCOME (QBI) Current law: A taxpayer may generally deduct 20 percent of the domestic QBI earned from a partnership, S corporation or sole proprietorship.

Proposal: The QBI deduction would be phased out for taxpayers with taxable income in excess of $400,000. REAL ESTATE Current law: Taxes on the gains of certain real property may be deferred if the property is exchanged for like-kind property in a valid §1031 exchange. Proposal: The Biden tax plan would 1) eliminate §1031 like-kind exchanges which permit deferral of capital gains taxes on swaps of appreciated real property, 2) eliminate the $25,000 exemption from the passive loss rules for rental real estate losses incurred by middle-income individuals and 3) eliminate rules that permit faster depreciation for certain real property. TAX CREDITS Biden has indicated a willingness to offer a number of new and/or expanded tax credits for low- and middle-income taxpayers, including the following: y Expansion of the child and dependent care credit to $4,000 for one qualifying child or $8,000 for two or more qualifying children. The credit would be fully refundable but would begin to phase out once gross income exceeds $125,000 and be completely phased out once income exceeds $400,000. y Expansion of the child tax credit to a maximum of $3,000 per child for children ages 6 to 17, plus a $600 bonus for children under six. The entire credit would be fully refundable. y Expansion of the earned income tax credit from approximately $530 to $1,500 for taxpayers without children. Biden has also proposed to increase the income limit to $21,000 and eliminate the age cap for older workers. y A new $5,000 credit for “informal caregivers” of aging family members. y A new refundable credit of up to $15,000 for first-time homebuyers. The credit could be collected when a home is purchased rather than requiring taxpayers to wait until they file their tax returns. y A new refundable tax credit for low-income renters. The credit would be intended to hold rent and utility

payments to a maximum amount of 30 percent of monthly income. With the federal budget deficit now over $3.3 trillion (and growing) and the need for additional stimulus spending due to the COVID-19 pandemic, new tax laws could initially face an uphill battle, regardless of Democratic control of Congress. Nevertheless, if Biden’s proposals are implemented, low- and middle-class wage earners stand to benefit, while affluent taxpayers, business owners and large corporations will likely pay substantially more. Matthew S. Rheingold, Esq., is a partner in the Wills, Trusts & Estates and Taxation practice groups at Einhorn, Barbarito, Frost & Botwinick, PC. He can be reached at mrheingold@ einhornlawyers.com. Gary R. Botwinick, Esq., is co-managing partner and chair of the Wills, Trusts & Estates and Taxation practice groups at Einhorn, Barbarito, Frost & Botwinick. He can be reached at gbotwinick@einhornlawyers.com.

NEW JERSEY CPA | SPRING 2021

TAX CHALLENGES LOOM FOR NEW JERSEY’S CANNABIS INDUSTRY By MELISSA A. DARDANI, CPA

LEADER OF THE NJCPA CANNABIS INTEREST GROUP

A 2019 U.S. Tax Court ruling involving Internal Revenue Code §280E and a California cannabis business was not a win for taxpayers, but Judge David Gustafson’s dissent, along with other arguments, may lay the groundwork for future challenges against the law.

SPRING 2021 | NEW JERSEY CPA

Due to the classification of cannabis under the Controlled Substances Act (CSA), medicinal and commercial cannabis businesses are considered illicit enterprises under federal law. This introduces a range of business issues for industry operators, among the costliest being the imposition of Internal Revenue Code (IRC) Section 280E, which bars cannabis businesses from deducting business expenses in computing taxable income. IRC §280E spans a mere single paragraph in a concise and seemingly straightforward manner. Yet the application of this law has been complicated by arguments against it, some of which challenge the technical and linguistic interpretations of the IRC while others deem the law to be unconstitutional. SIXTEENTH AMENDMENT — RIGHT TO TAX The Sixteenth Amendment to the U.S. Constitution grants Congress the unquestionable right to tax income from whatever source derived, which includes income earned illegally. In 1981, the owner of an illicit enterprise was subject to a jeopardy assessment and resulting tax due. In computing his taxable income as any taxpayer would, he took account of deductions for ordinary and necessary business expenses such as rent, mileage and travel, among others. In realizing there was nothing to prevent the taxpayer from claiming these deductions and fearing a lack of deterrent was encouraging illegal activity, Congress enacted §280E as part of the Tax Equity and Fiscal Responsibility Act of 1982. It is worth noting that “gross income” as defined by the Code of Federal

Regulations (CFR) means total sales less the cost of goods sold. This definition has U.S. Supreme Court case law precedent supporting its application and has been held as a taxpayer’s constitutional right as it applies to cannabis businesses (see Eisner v. Macomber and Alpenglow Botanicals, LLC v. United States). It has been held that deductions from gross income above and

beyond cost of goods sold are not the right of the taxpayer, rather a matter of “legislative grace” of the Congress (see New Colonial Ice Co. v. Helvering). This theory has been relied upon by judges in affirming the application of §280E in court challenges. In the U.S. Tax Court ruling, Northern California Small Business Assistants Inc (NCSBA) v. Commissioner of Internal Revenue, Judge David Gustafson challenged his colleagues’ interpretation of “legislative grace,” citing the difference between disallowance

of a certain deduction and the outright disallowance of all deductions. Judge Gustafson expressed concern that the imposition of §280E causes tax to be assessed on more income than the taxpayer may have earned, in some cases taxing income where there is none. For example, consider a taxpayer who has a net loss after considering ordinary and necessary

expenses yet a net gain when only reducing income by the cost of goods sold. As a result, this taxpayer would have a tax liability but no wherewithal to pay the tax. Judge Gustafson argues this to be a distorted application of Congress’ right to tax under the Sixteenth Amendment. EIGHTH AMENDMENT — PROHIBITING EXCESSIVE FINES OR PENALTIES In the Senate Finance Committee’s report on the Tax Equity and Fiscal Responsibility Act of 1982, they acknowledged “a sharply defined public policy against drug dealing” related to §280E’s enactment. It appears lawmakers took issue with allowing drug dealers the benefit of business expense deductions while U.S. citizens lose billions of dollars per year to the black market, stating “such deductions must be disallowed on public policy grounds.” This serves as the basis for the argument — which has been rejected by numerous courts — that §280E is unconstitutional as it is a penalty imposed on a particular industry (see The Green Solution Retail, Inc. v. United States, Alpenglow Botanicals, LLC, v. United States and NCSBA v Commissioner). Judge Gustafson dissents from his colleagues in the NCSBA ruling, asserting that an assessment is a penalty if it is intended as a punishment for an unlawful act. To this argument, the Senate Finance Committee’s report serves to emphasize Congress’ desire to deter and punish the sale of illicit drugs. Assuming this constitutional hurdle were cleared, Judge Gustafson points out that the next issues to analyze are whether the protections of the Eighth Amendment extend to corporate taxpayers, and whether the imposition of tax under §280E is “excessive.” OTHER CONSTITUTIONAL PROTECTIONS In his dissent, Judge Gustafson also highlights that the disallowance of deductions is limited to one industry because of the federal and state law disconnect. He compared the disallowance of all deductions for one industry to the idea of offering tax-exempt status to organizations of one religion but not another. His concern was that in Congress exercising the right to tax

granted by the Sixteenth Amendment, it may be stepping on the taxpayers’ First Amendment rights. Taxpayers have also sought protection from self-incrimination granted by the Fifth Amendment, claiming that the IRS is effectively conducting criminal investigations in enforcing the IRC (see Alpenglow Botanicals, LLC v. United States). This has not proven to be a strong Constitutional argument, and courts have held on numerous instances that the IRS may determine if the taxpayer is engaged in illegal activity as defined by the CSA in order to determine the applicability of §280E (see High Desert Relief, Inc. v. United States). In responding to this argument, one court reframed the question from whether the IRS is conducting a criminal investigation to whether the IRS has the authority to enforce the IRC. The court determined that the IRS did have this authority. To date, none of the Constitutional arguments discussed herein have been successful in emancipating taxpayers engaged in a cannabis business from §280E, but the NCSBA case could pave the way for future arguments. The IRC is working as Congress intended when §280E was enacted, yet the legalization of state-regulated commercial cannabis markets has created a disparity between federal and state law that is unfairly impacting those businesses. §280E continues to be relevant so long as the classification of cannabis as a Schedule I substance under the CSA remains intact. Melissa A. Dardani, CPA, is the leader of the NJCPA Cannabis Interest Group, a member of the Student Loan Debt Task Force and a member of the Emerging Leaders Council.

CANNABIS-RELATED NEWS AND RESOURCES

njcpa.org/topics/cannabis

DO MORE JOIN THE CANNABIS INTEREST GROUP

njcpa.org/groups

NEW JERSEY CPA | SPRING 2021

STAYING ON TARGET TO PASS THE CPA EXAM By KIM CONDURSO

NJCPA MEMBERSHIP DEVELOPMENT SPECIALIST

Just as the business world continues to evolve, so does the CPA Exam. From minor updates to significant overhauls, the goal is to ensure that future CPAs are equipped with the skillsets necessary for an adapting profession.

SPRING 2021 | NEW JERSEY CPA

Every six months or so, the Uniform CPA Examination undergoes revisions that help to maintain the relevancy of the CPA Exam content. In most cases, these changes are minimal, like the addition of a new topic resulting from recent legislation or removal of subject matter that has become obsolete. Other times, the changes are more substantial and affect multiple sections, such as the inclusion of more tech-focused concepts across all sections to address analytical and critical thinking. These more significant revisions could even have an impact on education and eligibility requirements to sit for the CPA Exam. RECENT CPA EXAM CHANGES While 2020 was a challenging year in many respects, updates to the CPA Exam were relatively modest. Adoption of a continuous testing model resulting in the elimination of testing windows garnered the most attention when it was implemented in July. Continuous testing was a positive and welcome change, especially after pandemic-related testing center closures last spring. The continuous testing model not only allows for year-round testing with very limited restrictions; it also resulted in the elimination of testing windows in addition to the two-week blackout window at the end of each quarter where testing was previously prohibited. Before this rule was implemented, candidates who failed a section of the Exam would be required to wait until the next testing window to retake the section and could not sit for the same section twice in one testing window. Now that these testing windows have been removed, candidates can apply for a new Notice to Schedule (NTS) and, in most

cases, retake an Exam section immediately after scores are released. The removal of the testing windows is permanent and was not a direct result of the pandemic. The good news for candidates sitting for the Exam during the first part of 2021 is that the more comprehensive changes that were originally set to go into effect in the first half of 2021 have been pushed back because of the pandemic. Future CPAs sitting for the CPA Exam in 2021 should be aware of the following updates: y As of Oct. 1, 2020, the Coronavirus, Aid, Relief, and Economic Security (CARES) Act has become a testable topic, mainly in Regulation (REG) and Financial Accounting & Reporting (FAR). y There is more focus on technology, particularly in Auditing & Attestation (AUD) and Business Environment & Concepts (BEC), in the areas of data analytics and SOC reports. y IFRS versus GAAP has been removed from FAR. y Estate taxation has been removed from REG. There are a handful of other minor changes that can be learned about at aicpa.org/becomeacpa/cpaexam/ cpa-exam-announcements.html. CPA EVOLUTION The most significant modification coming to the CPA Exam since 2017 will be the implementation of CPA Evolution, an entirely new licensure model, with proposed changes going into effect in 2024. The goals of this initiative, spearheaded by the National Association of State Boards of Accountancy (NASBA) and the American Institute of CPAs (AICPA), are to “enhance public protection” by producing candidates with deep knowledge and to redesign the model to be “adaptive and flexible, helping to future-proof the CPA” as a foundation for the changing profession. This new model will allow all Exam candidates to demonstrate knowledge in four core areas: accounting, auditing, tax and technology. In addition, candidates must elect to specialize in one of three disciplines: tax compliance and

planning; business analysis and reporting; or information systems and controls. All candidates will earn the same license, regardless of the chosen specialization. Despite selecting one of the three disciplines, future CPAs will not be required to practice in their specialized area so long as they have the education, skills and capabilities to practice in the area(s) of their choice.

To help address this issue among NJCPA members, the Student Loan Debt Task Force, chaired by Melissa Dardani, CPA, and Zachary Cohen, CPA, submitted a proposal to the NJCPA Scholarship Fund to request that the Fund set money aside to help NJCPA members reduce their student loan debt. The Fund agreed to allocate funds to establish the NJCPA

to each receive $1,200 paid directly to his or her student loan provider. These winners alone had combined student loan debt of over $425,000. For more than 60 years, the NJCPA Scholarship Fund has awarded dozens of scholarships annually to high school seniors planning to major or concentrate in accounting and college juniors and seniors majoring in accounting. Two years ago, the Fund began offering a CPA Exam Fee Lottery that annually awards 10 NJCPA Student and CPA Candidate members with $750 vouchers to help cover registration and other fees associated with sitting for the CPA Exam. Kim Condurso is a membership development specialist at the NJCPA. She can be reached at kcondurso@njcpa.org.

ASSISTANCE FOR NJCPA MEMBERS From education to the CPA Exam, the cost of becoming a CPA can be significant. According to a 2020 article by ROI-NJ, New Jerseyans have the twelfth-highest student loan debt balance as compared to all U.S. states, with an average of $35,000 per borrower.

Student Loan Debt Lottery, with the first lottery drawing occurring in November 2020. The lottery was open to NJCPA Fellow and Associate members who had at least $1,200 of student loan debt. A total of 172 members, with cumulative debt exceeding $5.8 million, submitted an entry. Ten winners were randomly selected

READ MORE CPA EXAM INFORMATION AND RESOURCES

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CPA EVOLUTION

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CPA EXAM BLUEPRINTS

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NJCPA SCHOLARSHIP FUND

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NEW JERSEY CPA | SPRING 2021

ACCOUNTING, AUDITING & ATTEST

Internal Audit: To Yield Value, We Must Collaborate BY JOSE M. BORBON, CPA, KEARNY BANK

While internal auditors must remain independent to provide objective assurance, to add value they must also deliver expert advice to improve an organization’s operations. Consulting activity, by its very nature, is collaborative, and internal auditing is no exception. By fostering collaboration, internal auditors can expect to receive desired behavior, quality information/support and expanded explanations for select business transactions from their auditees. To establish the rapport necessary to enable collaboration throughout the company, it is recommended to start with “why,” offer a value proposition to auditees and encourage inclusive real-time information sharing. START WITH “WHY” Most people within an organization need to motivate others to act for some reason or another, this is particularly true for internal auditors. Although auditees

SPRING 2021 | NEW JERSEY CPA

are required to provide information, fulfill requests and answer questions, the way in which auditors communicate can determine how promptly the information will be provided as well as the quality and depth of said information. One way that auditors can communicate with their auditees is by using the concept of The Golden Circle. Introduced by author and motivational speaker Simon Sinek, The Golden Circle essentially states that individuals and companies are inclined to achieve more if they start with “why” before stating “how” and “what.” For instance, instead of sending a request to “provide off-balance-sheet commitments by xx date” one could instead say, “In order to properly assess the company’s cash flow, we are in need of the off-balance-sheet commitments as of xx date.” This may sound simple, but it is highly effective in conveying purpose and inciting action. This is very important when people have

competing priorities and operating constraints due to the ongoing pandemic. OFFER A VALUE PROPOSITION Internal auditors must highlight the value that can be achieved by contributing to business activities such as being involved in a core system conversion, consulting when acquiring a company or participating in corporate training. By welcoming internal auditors as active participants when these business activities take place, auditees benefit from having a person who is independent from the activity, has a bird’s eye view of the event and is risk-minded ready to opine and consult. Internal auditors benefit from having a seat at the table by receiving material information in real time, thereby enabling them to plan the audits of the impacted business lines accordingly, adjust risk assessments and aid with continuous auditing efforts.

ACCOUNTING, AUDITING & ATTEST

On a personal note, I’m very proud of the collaboration between my organization’s finance department and internal audit as we adopted the new measurement of credit losses on financial instruments. In a joint effort, we engaged a firm to validate the bank’s current expected credit loss (CECL) model. Internal audit interviewed several competing firms, gathered recommendations from existing clients and ultimately provided the finance department with a recommendation as to which firm to select. Management agreed with the recommendation. This coordinated effort allowed management to focus their time on an acquisition and the ongoing adaptation of CECL. Meanwhile, internal audit benefited from being involved in the engagement as we received valuable information that will explain and document management’s assumptions with regard to the qualitative factors of the bank’s allowance for credit losses under CECL. It was a win-win for all. REAL-TIME INFORMATION SHARING As the profession continues to strive for a more proactive audit methodology in continuous auditing, auditors either need to have access to the source of the data or be the recipients of the same

data that is provided to management. Examples include having read-only access to the accounting system to review general ledger and accounts payable activity, the company’s data warehouse and other pertinent systems such as loan origination systems for banks. Having read-only access rights to critical systems will facilitate the gathering of audit evidence while preventing any possible disruptions to management’s day-to-day operations. The importance of collaboration cannot be overstated, and its benefits cannot be overlooked. At the same time, internal auditors must be mindful not to compromise their independence. As with many aspects of the accounting profession, exercising professional judgment at all times is key. Jose Borbon, CPA, CRC, is an assistant vice president and senior auditor at Kearny Bank. He is a member of the NJCPA Emerging Leaders, Federal Taxation and Accounting & Auditing Standards interest groups and can be reached at jborbon@kearnybank.com.

IF YOU ARE READInG THIS...

So Is Your Buyer! CONNECTING MORE SELLERS AND BUYERS

LEARN MORE March 19, Webcast

PURCHASING, INVENTORY AND CASH DISBURSEMENTS: COMMON FRAUDS AND INTERNAL CONTROLS

March 25, Live Webcast

REVENUE AND CASH RECEIPTS: COMMON FRAUDS AND INTERNAL CONTROLS

March 31, April 5 or June 11, Webcast

MAKING INTERNAL AUDIT AN ASSET FOR THE CFO

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DO MORE JOIN THE ACCOUNTING & AUDITING STANDARDS INTEREST GROUP

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Delivering Results One Practice At a time

Bradley Holmes Bradley@APS.net

800-397-0249 www. APS.net

NEW JERSEY CPA | SPRING 2021

BECOMING A CPA

Making the Most of Post-Grad CPA Exam Summer Studies BY BRIGID D’SOUZA, CPA, SAINT PETER’S UNIVERSITY

The post-graduate summer is a limited window of time to maximize efficient, effective CPA preparation. The momentum to study can dissipate as candidates start to work full time and their plates fill up with on-the-job deliverables. Passing the CPA Exam as soon as possible after graduation should be a core aim for an accounting graduate. I teach undergraduate accounting at Saint Peter’s University, and each semester I ask my advanced students, “what do you think the CPA Exam pass rates are?” I give them a few seconds to think about it, then share the latest pass rates from the American Institute of CPAs (AICPA) which, depending on the quarter, can hover as low as 45 to 55 percent (for Auditing and Financial Accounting and Reporting) and stretch as high as the mid-70-percent range (for Business Environment and Concepts and Regulation). The pass rates are available at aicpa.org/becomeacpa/cpaexam/ psychometricsandscoring/passingrates. html. I’ve seen this information take some students by surprise. My goal in quizzing my students about CPA Exam rates is not to deflate their hopes, but rather to level set the rigor, discipline and strategic focus they will need to pass. That focus should ideally begin immediately after graduation. Preparing for the CPA Exam is like a part-time job unto itself. As such, it’s critical to build structure and expectations around the process. UNDERSTAND THE STRUCTURE, FORMAT AND PROCESS A good place to start is the National Association of State Board of Accountancy’s (NASBA) Candidate Bulletin (nasba.org), a roadmap providing guidance about the process of taking the test, from application to receiving your scores. The Candidate Bulletin will also help candidates navigate among the organizations they’ll come into contact with as they apply for and take the Exam, including AICPA, NASBA,

SPRING 2021 | NEW JERSEY CPA

Prometric and the local state boards of accountancy. Next, review the CPA Exam Blueprints (aicpa.org/becomeacpa/ cpaexam/examinationcontent.html) which provide a topical outline of each exam section. Finally, learn about the test itself; two key resources are the AICPA’s CPA Exam Structure (aicpa.org/becomeacpa/ cpaexam/forcandidates.html) and CPA Exam Sample Tests and Tutorials (aicpa.org/ becomeacpa/cpaexam/forcandidates/ tutorialandsampletest.html). Having this baseline knowledge squared away before the summer hits will help candidates maximize summer hours for test prep. CREATE A WEEKLY STUDY PLAN Candidates who are already working will need to find study time outside of their work hours. Finding regular, habitual times to study will be critical. Create a regimen and stick to it; in this way, the study habits from undergrad can be an asset. Also schedule downtime; the CPA Exam is a marathon, not a sprint, and one’s regimen must be sustainable over months. INVEST IN A CPA EXAM PREP COURSE Completing an undergraduate accounting program is the baseline needed to sit for the Exam. But to aid in passing the Exam, CPA Exam review companies offer many value-adds, two of which I’ll note here. First, a review course will provide a structured, outlined review of topics that serve as a distillation of the topics provided in the AICPA’s Blueprints. Second, a review course will provide access to test bank questions which can serve as the core of a candidate’s preparation. Review courses typically offer these two resources as part of a baseline package, but additional tools and resources can also be purchased. Review courses will also offer tips and guidance around how to pace a study plan, which will vary with each candidate’s preferred target timeline to sit for all four parts.

PRACTICE, PRACTICE, PRACTICE Practice the test bank multiple choice questions and simulations. Again. And again. And then again. The test bank questions arguably offer the biggest bang for the buck when it comes to CPA Exam prep because they kill two birds with one stone: learning the content and learning how to take the Exam. By answering questions, candidates are immediately discovering what they do or don’t understand; they’re also learning how they’ll be tested, in terms of the types of questions, the range of answer choices and so on. If a candidate doesn’t understand a question or why a particular answer is the correct option, he or she can refer back to the structured outlines. This is an efficient process of preparation. Graduating from college is an incredible milestone, and the post-grad summer is a time to celebrate and take stock of what one has accomplished. It also can be a time to add a capstone achievement: passing the CPA Exam. Brigid D’Souza, CPA, MBA, is assistant professor at the Frank J. Guarini School of Business in the Department of Accountancy & Business Law at Saint Peter’s University. She is a member of the NJCPA and can be reached at bdsouza@ saintpeters.edu.

DO MORE SAVE ON CPA EXAM PREP COURSES

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BUSINESS MANAGEMENT

SPONSORED CONTENT

7 Tips for Creating a Modern Policy Manual BY LANCE HAFFNER, HEARTLAND

Do you dream of writing up a company policy manual on a Saturday night? No? You’re not alone. But operating without a well-written policy manual can put any business in a bind. Policy manuals, which translate into employee handbooks for team members, have a variety of benefits. Whether it’s documenting workplace policies, complying with regulations or establishing team norms, the manual really is a must for any employer. Here are seven tips for creating a modern policy manual: 1. Start simple. Using a template will save you valuable time. You can check with government resources, like your state’s small business association or the Occupational Safety and Health Administration. However, if a template isn’t cutting it, start small! Jot down a few bullet points on the topics most relevant to your business. 2. Prioritize compliance. Research which laws are applicable to your business at the local, state and federal levels. Don’t forget that many laws and regulations become applicable based on industry and number of employees. It’s always wise to have an attorney review once you have a draft. But no matter your location or size, you’ll likely want to include boilerplate statements on compliance topics such as: y Sexual harassment y Discrimination y Wage and hour (overtime) y Workplace health and safety guidelines 3. Address attendance. Setting expectations around attendance keeps employees from being surprised or frustrated. Can they miss a shift as long as they get it covered, or do they need manager approval? What documentation is needed for an

unexpected sick day? Establishing the minimum expectations when it comes to attendance will save you and your team members a lot of frustration. 4. Review the dress code. No one wants to have the awkward conversation about an inappropriate clothing choice. So be sure your dress code policies are straightforward. Provide both a category (business casual, professional, etc.) and examples that your staff can easily reference. 5. Tell them what matters. Your manual can be more than just policies and employment standards. Workplace cultural norms and company values are most effective when laid out clearly from the start. For example, is relationship building the most important thing when your employees are working with clients, or do you prioritize efficiency first? 6. Clarify social media boundaries. We’ve all seen viral videos where a post that was intended to be funny goes awry, resulting in reputational harm to the business and a terminated employee. If you aren’t comfortable with employees publishing anything they want online, a social media policy is a necessity. The goal isn’t to be overly restrictive, but rather to set clear boundaries (i.e., no making TikToks in the office).

7. Give it a good name. While it’s perfectly fine to call your collection of policies and employment standards a policy manual or an employee handbook, consider something a little less bureaucratic. Have some fun with it and make the title fit the ethos of your company. Be sure to perform an annual review to keep things up to date; certain employment laws are triggered as you meet certain thresholds. When you need to adjust a policy or create a new one, simply note it in your master copy and work on it when time allows. What’s most important is that you make a plan. To quote famous author Simon Sinek, “The hardest part is starting. Once you get that out of the way, you’ll find the rest of the journey much easier.” Lance Haffner is the president of payroll solutions at Heartland, a financial technology company. He can be reached at heartlandpayroll@heartland.us.

Heartland is a financial technology company that has affiliations with regional partners such as New Jersey-based Provident Bank to offer innovative business solutions in a variety of industries. Learn about Heartland at heartlandpaymentsystems.com.

NEW JERSEY CPA | SPRING 2021

BUSINESS MANAGEMENT

Using Data Analytics to Manage the Pandemic BY MARC D. MINTZ, CPA, MARC MINTZ & ASSOCIATES, LLC

While the use of data analytics had been slowly gaining acceptance, the financial effect of the coronavirus pandemic has elevated data accumulation and analysis into the mainstream for a variety of businesses. From industry segments that have been decimated by the virus (lodging, tourism, airlines, dine-in restaurants and small brick and mortar retail establishments), to businesses that have greatly benefited (online sales, PPE manufacturers, delivery services and pharmaceutical companies), the need to swiftly analyze data has never been greater. Once unimaginable weekly and monthly swings in revenues, and business metrics of every type, have necessitated the accumulation of business data so that actionable decisions can be made in near real time. Legacy systems that were developed to provide judgements based on data that is months, quarters and even a full-years old is no longer as meaningful an approach to manage business.

SPRING 2021 | NEW JERSEY CPA

IMPROVED DECISION MAKING Unable to purchase your favorite menu item at the McDonalds drive thru lane? Can’t get that bougie pocketbook in the exact shade to match your shoes? The pandemic has inspired dramatic operational adjustments as businesses reacted to uncontrollable customer, employee and supply line changes. Using real-time data provided from point-of-sale registers and online sales transactions, businesses are now attempting to maximize sales while conserving cash, reducing payroll cost and enhancing rates of return on assets. Leveraging data analytics, fast food restaurants moved to reduce item choices while maintaining revenue. Providing everything to everyone at any time has been upended with a more strategic approach; eliminating slow-moving and less-profitable menu items simplifies multiple aspects of the fast-food business model. Likewise, reducing stock-keeping units (SKUs) of a high-priced luxury item

from hundreds to a few dozen improves a retailer’s profits by decreasing inventory carrying costs, simplifying consumer decision making, and reducing product returns and exchanges. No matter how long this strategy of offering less remains viable, data analytics will guide assessments of when to begin offering more again. Employee staffing can also be enhanced with the use of data analytics. Instantaneous review of call center and online shopping activity allows human resources departments to schedule customer service representatives on a shift-by-shift basis. Using the Internet of Things (IoT), fuel storage tanks at retail gasoline stations are continuously monitored. Fuel truck deliveries can be efficiently scheduled, factoring into account such diverse priorities as fuel grades required, delivery truck availability and road traffic conditions. By adding small increments of efficiencies to more and more of the

BUSINESS MANAGEMENT

individual data points affected, asset utilizations of every type can be increased. INCREASED EFFICIENCY Utilization of data analytics to increase efficiency can be introduced into a plethora of business activities and processes. In manufacturing, the monitoring of each step in the production process affords an opportunity to identify and react to many different scenarios. Examples include the following: y Decrease direct costs by scrutinizing outsourced component rejects and selecting vendors accordingly. y Decrease direct labor costs by tracking employee time to assemble products and taking the corrective actions to improve low performers’ completion times. y Decrease working capital requirements and increase customer satisfaction by tracking and reducing the time from receipt of customer orders to delivery of finished goods. y Identify where problems occurred in the manufacturing process by following and documenting warranty claims and product returns. y Reduce unexpected manufacturing interruptions by electronically monitoring production machinery to schedule suggested maintenance and track equipment down time.

Critical to any data analytics project is the prerequisite to capture the right information. Additionally, this same information must be available for evaluation within a timeframe that allows for rapid response. One would be hard pressed to find a single industry or company that cannot be improved or benefit from the application of properly applied data analytics. An emerging trend is the pairing of data analytics with artificial intelligence. Under this type of integrated system, data is analyzed and solutions are suggested with little need for time-consuming human analysis. While the pandemic is a mere inflection point for the reintroduction of management techniques and data sciences that existed well before the emergence of the deadly virus, their expanded use will lay the foundation for even more sophisticated systems that will then be available for the next black swan event.

LEARN MORE March 4 or April 27, Webcast

ROADMAP TO EXCEL’S DATA ANALYSIS AND POWER BI STRATEGY

March 19, Live Webcast

CFOs AND CONTROLLERS CONFERENCE

March 25 or April 15, Webcast

DATA ANALYTICS — PRACTICAL INSIGHTS FOR TODAY’S ACCOUNTANT

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LISTEN TO THE NJCPA TECHTALK PODCAST

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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 former NJCPA Trustee and a past president of the Passaic County Chapter. He can be reached at marc@marcmintz.com or 973-808-9040.

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NEW JERSEY CPA | SPRING 2021

FINANCIAL PLANNING SERVICES

Finding Balance: Asset Allocation in a Post-COVID Economy BY DAVID TEPP, CPA, TEPP FINANCIAL PLANNING

The coronavirus pandemic has caused countless small businesses to close, and unemployment numbers are staggering. At the same time, the S&P 500 index is strong and recently reached its all-time high. On the surface, this seems difficult to reconcile, but the stock market has always been a leading indicator. Investors have historically looked three to six months into the future, hoping to identify sources of profits. Now it seems that Wall Street is looking at least six to 12 months ahead, and it is pinning economic hopes on a successful launch and distribution of the coronavirus vaccines. Moreover, the Federal Reserve has made a commitment to keep interest rates at their current lows for years. If there is a spike in economic activity, this will increase the likelihood of looming inflation over the next few years. The challenge for yield-seeking investors is to determine exactly how to properly allocate their accounts while facing so much uncertainty. DIVERSIFICATION CHALLENGES Maintaining diversification is always a primary investing objective, but today’s market conditions make this trickier than usual. The basic tenet of diversification requires that investors hold varying securities with low correlations. The complication for wealth managers is to identify diversifying securities without sacrificing too much in way of return. In times of great uncertainty, investors have typically fled to the shelter of the

SPRING 2021 | NEW JERSEY CPA

“blue chip” sectors such as banks and pharmaceuticals. In 2020, investment money was heavily channeled to the largest internet technology and consumer stocks such as Amazon, Apple, Facebook, Google and Microsoft. Meanwhile, traditional large cap value stocks slowly plodded along. It was not until late October, and particularly after Pfizer announced that it had a viable vaccine, that value stocks began to reclaim their previous highs. Even so, the ongoing debate continues as to whether value or growth stocks will provide better returns in the coming months and years. EVALUATING THE OPTIONS Aside from the stock market, investors have fewer appealing choices to balance their portfolios. With interest rates at their current level, the traditional option of purchasing bonds for safety offers only limited prospects for income. Depending on the type of bond, duration and term, interest rates are essentially the same as the current inflation rate, which translates to a miniscule real rate of return. Bond mutual funds, which can offer both income and capital gains, are generally low to moderately correlated with broader stock market price fluctuations. These funds performed reasonably well in 2020 as interest rates plummeted to near zero percent. However, it is uncertain whether these bond funds can sustain their returns now that interest rates have reached their floor. Preferred stocks can also be an excellent choice for those seeking income, especially in taxable accounts. Cryptocurrency is an interesting option, but its price volatility makes it optimal only for those investors who have the stomach for risk and the ability to grasp its inherent complexity. A portion of portfolios can also be allocated to commodities and precious metals, but these investments typically do not generate income. With this landscape, alpha-seeking investors must find a way to diversify their

equities in order to reduce risk. While most equity prices tend to move concordantly, certain industries such as health care and pharmaceuticals, can be less correlated with the broader market, and others, such as utilities and energy, are often barely correlated. Both international-developed and emerging-market equities can offer excellent opportunities for investors to further diversify their largely U.S. portfolios. MIND THE RISK As is always the case, wealth managers would do well to revisit the topic of risk tolerance with their clients. Additionally, caution should be applied to avoid making too many drastic changes in portfolios that could result in drifting away from clients’ long-term interests and objectives. Crises give rise to innovation, and it can be tempting to steer client assets too far toward unproven technologies with the aim of generating rapid growth. Care should be taken to prevent overconcentration in any industry sector. Following these guidelines, diversification through proper attention to correlation can help clients navigate any potential financial market volatility in 2021. David Tepp, CPA, PFS, MBA, is the founder of Tepp Financial Planning. He can be reached at dtepp@teppfp.com.

DO MORE EARN AN AICPA PERSONAL FINANCIAL PLANNING CERTIFICATE

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LEARN MORE March 11, Live Webcast

BLOCKCHAIN FOR FINANCIAL ADVISORS

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LITIGATION SERVICES & BUSINESS VALUATION

The Impact of COVID-19 on Business Valuations BY DONALD KAISER, CPA, McCARTHY & COMPANY

The coronavirus pandemic has impacted everything and everyone. Businesses are closing, being sold or merging into other companies. Valuations are being impacted by instabilities in the economy as well as government mandates and legislation. It is important that CPAs keep current on how laws such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Consolidated Appropriations Act affect a valuation. FACTORS TO CONSIDER Valuators must consider the following factors: y Valuation date. Valuators need to consider the timeline of the coronavirus outbreak in the U.S. and what was known or knowable as of the valuation date. Most experts agree that little was known about COVID-19 as of Dec. 31, 2019, so it should not be considered in the valuation. By January, more news was available about the coronavirus spreading to the U.S., so it could be considered. As of March, it was a certainty and should be reflected in the valuation. y Subsequent events. Subsequent events related to the impact of COVID-19 on the company’s value should be disclosed in the valuation report. Valuators should include a timeline, explanation of each event and its impact on the performance and value of the company. y Valuation methods. Three methods are used to value a company: income approach, market approach and asset-based approached. Since COVID-19 caused an economic disruption, a valuator may consider using the discounted cash flow (DCF) method which is an income method. DCF studies the future performance of the business each year until conditions are no longer affected by COVID-19. When conducting a market approach

and comparable companies benefited from provisions of the CARES Act, valuators need to consider how that alters their multiples. y Cash flow. Valuators look at the company’s cash flow to determine if there is enough money coming into and going out of the business to maintain operations. This is especially important now that government mandates are impacting businesses. The valuator must consider how long the company can continue under the uncertain conditions caused by COVID-19. FINANCIAL PROJECTIONS No one really knows how long the pandemic will continue. A key consideration is near- and long-term financial projections. Valuators should run different scenarios to try to project what might happen if the coronavirus is under control in three, six, nine and 12 months, as well as one, two and five years into the future. FINANCIAL REPORTING Impairment or the permanent reduction in the value of a company’s assets needs to be considered. Valuators should study how COVID-19 impacted fixed assets and intangible assets such as goodwill, brand recognition and intellectual property (patents, trademarks and copyrights). Long-lived assets or any asset the business expects to retain for at least one year must also be studied. ASC 350 requires an entity to consider whether an interim “triggering” event has occurred. If so, a quantitative analysis would determine if the carrying amount of goodwill exceeds its implied fair value. INSIGHT FROM THE AICPA Last June, the AICPA issued insight on valuing a business affected by COVID-19. Frequently asked questions (FAQs) were developed to help CPAs and valuation professionals make adjustments based on the CARES Act and other legislation.

The FAQs address provisions that professionals should consider when evaluating businesses that received funding or support under the CARES Act. This includes the Paycheck Protection Program (PPP), Emergency Economic Injury Grants/ Economic Injury Disaster Loans (EIDL) and the Small Business Debt Relief Program. As explained by the AICPA, provisions of the CARES Act have the potential to create one-time events that alter income and market inputs to value. The FAQs detail these issues and steps for valuation professionals to consider in the current environment. In addition to discussing the impact of tax law changes on valuation, the FAQs specifically cover how the PPP, EIDL and other short-term small business support provisions could impact valuations, such as PPP loan forgiveness. The FAQs are intended to provide a consistent approach. The AICPA suggests practitioners also rely on their experience and professional judgement. Visit the AICPA’s coronavirus resource center (aicpa.org/coronavirus) and the Valuation Services COVID-19 resource page (future.aicpa.org/topic/valuation-services/ covid-19-valuation-services) to learn more. Donald Kaiser, CPA is a principal with McCarthy & Company, a leader in construction accounting. He is a member of the NJCPA and can be reached at Donald.Kaiser@MCC-CPAs.com.

LEARN MORE

March 2 or April 2, Live Webcast

COST OF CAPITAL DETERMINATIONS FOR BUSINESS APPRAISAL

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DO MORE JOIN THE FORENSIC AND VALUATION SERVICES COMMUNITY

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NEW JERSEY CPA | SPRING 2021

PROFESSIONAL DEVELOPMENT

6 Ways to Grow Your Network by Giving Back to the Profession BY NICOLE DeROSA, CPA, WISS

The accounting profession is no stranger to efficiency, with CPAs constantly juggling multiple tasks. Oftentimes accounting professionals find themselves in the position of choosing to do one thing at the cost of another. By being more intentional with what is chosen, one can effectively kill two birds with one stone — in this case, giving back to the accounting profession while growing a personal network. Here are six ways to do just that:

day-to-day basis. Virtual happy hours, trivia/game nights, cooking demonstrations and book clubs became a common substitute for in-person networking events. Fortunately, technology has enabled people to react and pivot effectively without missing a step. Planning events became much more seamless, and the cost of hosting events significantly declined. Attending virtual events is now much easier, and, as a result, more people are likely to attend.

1. BE A MENTOR A mentor-protégé relationship does not always have to be formal and does not always have to be with somebody in your company. Think outside the box. Those who are in the earlier stages of their career should consider forming a relationship with somebody they admire in the profession. Those who are already established should consider reaching out to somebody they may have previously met who showed interest in their career path. Initiate a conversation, connect on LinkedIn and go from there. Depending on the comfort level, perhaps meet virtually for lunch once a month.

6. PERFORM ACTS OF KINDNESS Most of us are not just accountants, we have hobbies and interests to help keep us balanced. Finding a way to incorporate one’s hobby into an act of kindness is such a rewarding experience, especially when sharing that experience with other colleagues. Form a work team and run a 5K for a cause, collect food and donate to a food pantry, or teach a fitness class “just because” — and get as many accountants involved as possible. The opportunities are endless.

2. TEACH A WEBINAR The knowledge accountants possess is highly sought after. Over the past year, there has been a significant uptick in webinar-based education. Teaching opportunities naturally present themselves throughout the year, sometimes when and where one least expects them to. Taking the initiative to teach a webinar to others inside or outside of the profession will open the door to growing a network, which naturally can lead to future opportunities. 3. SPEAK TO FUTURE ACCOUNTANTS There are many opportunities to get in front of possible future accountants to talk about the profession and answer any questions students may have. High school

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and college business and accounting classes regularly seek out guest speakers to provide informal presentations to raise career awareness. Some high schools and most colleges also have an accounting club for which guest speakers are in high demand. In addition, both high schools and colleges host career fairs at which an accountant can be present. You never know who you might be inspiring — to this day, I still remember speaking with the CPA at the “accounting” table my junior year of high school during the career fair. 4. WRITE AN ARTICLE Writing an article might sound like a tedious task, but when one writes about a topic that genuinely interests him or her, it usually ends up not being difficult (it might even be enjoyable). There are so many relevant topics to write about in the accounting profession from auditing standards, to tax updates, to professional development. Not only does writing an article get one’s name out there, but it also can help teach others something they don’t already know; it also establishes the writer as a potential subject matter expert. Talk about a win-win-win! 5. PLAN AN EVENT This past year caused everyone to get creative with the way they interacted on a

Nicole DeRosa, CPA, MAcc, is a senior tax manager at Wiss. She is chairperson of the NJCPA Emerging Leaders Council and can be reached at nderosa@wiss.com.

DO MORE WRITE OR SPEAK FOR THE NJCPA

njcpa.org/sme

BECOME A MENTOR OR CAREER AWARENESS PRESENTER

njcpa.org/volunteer

READ MORE CAREER DEVELOPMENT ARTICLES AND RESOURCES

njcpa.org/mycareer

RISK & COMPLIANCE

Preventing Unauthorized Data Access in the Cloud BY SHERRYLL PENNEY, MSPC CERTIFIED PUBLIC ACCOUNTANTS & ADVISORS, PC

When clients trust their CPAs with financial data, it’s the CPAs’ responsibility to ensure they do everything possible to protect against breaches that could compromise personal, sensitive and confidential information. However, with the COVID-19 pandemic causing a substantial increase in remote work, people may unintentionally be letting their guards down when it comes to cloud computing. According to ZDNet and cybersecurity firm Kaspersky, cyberattacks using remote desktop protocols (RDP) grew 400 percent in March and April 2020 alone. Furthermore, phishing attacks are now more prevalent and sophisticated than they were a year ago. RDP attackers use credentials to penetrate a system. This, combined with employee negligence and misuse of employee credentials, are some of the biggest threats to cloud security. With remote employees free to log in to cloud solutions from home computers and mobile devices, it’s more important than ever to consider what additional processes are needed to secure sensitive data against unauthorized access and theft. Companies must consider not just what sort of data is stored on the cloud, but also who is authorized to access, alter and share it. They must also consider which devices can be used to download and edit this data. These are also critical issues to consider when choosing an outsourced provider. For example, if a company outsources its payroll services, what assurances are put in place to prevent hackers from accessing and compromising social security numbers and private financial information stored on the cloud?

It is important to remember that while cloud computing is a great way to manage costs by reducing the need to manage on-premise, in-house network solutions, there are security concerns to consider prior to signing a contract with a cloud solutions provider. Here are some ways a company can perform its own due diligence: y Review the provider’s System and Organization Controls (SOC) reports, which reveal all the security compliance processes a cloud solution provider has in place. y Inquire about the provider’s malware detection and encryption capabilities, including data monitoring, file scanning and network traffic analysis. y Examine the sufficiency of the different types of backups a provider may offer to prevent data loss, including assessing where they are stored and how often they occur. PROACTIVE APPROACH While no system is 100-percent secure, a company can take action to keep its data as secure as possible. For example, a company can, and should, set virtual limits as to what employees can do inside a cloud environment. This process entails classifying and controlling data for privileged access, ensuring only certain authorized users or even certain devices can view or alter specific files and applications on the cloud. Next, everyone needs to understand their role in data security. For example requiring multifactor authentication is the easiest and possibly most crucial step in protecting a company’s data. This is often accomplished by approving employee access via secret questions, personal identification numbers, emailing or texting codes to separate mobile devices or platforms, or continuously changing codes to companyprovided fobs. Therefore, if someone were to steal an employee’s credentials or even their mobile device in an attempt to access client information, the employee could prevent them from doing so after receiving an alert for the attempted login.

Lastly, follow these commonly overlooked security suggestions for preventing unauthorized data access: y Mandate employees change and choose more complex passwords on a regular basis, taking care not to use personal identifiers such as names of family members or pets, addresses, birthdays and more. Passwords should also never be saved to personal computers or mobile devices. y Instruct employees to avoid public WiFi and internet hot spots when accessing cloud data. Companies may also want to invest in more robust remote capabilities and networks for their remote employees. y Provide anti-virus and anti-malware software for employees or, better yet, provide designated mobile devices for remote employees. Cloud computing is undoubtedly beneficial to an increasingly remote workforce, but it is important to stay informed about how to secure data. When in doubt, reference the security guidelines recommended by Cloud Security Alliance (cloudsecurityalliance.org), a global nonprofit dedicated to defining and raising awareness of best practices that ensure more secure cloud computing environments. Sherryll Penney is a manager at MSPC Certified Public Accountants & Advisors, PC, and can be reached at spenney@MSPC-CPA.com.

LEARN MORE March 8 or April 1, Webcast

CYBERSECURITY DISRUPTION — WHAT CPAs NEED TO KNOW

March 16 or April 14, Webcast

GUIDE TO CYBERSECURITY PLANNING

njcpa.org/events

NEW JERSEY CPA | SPRING 2021

TAX

International Tax: The Basics of Income Sourcing BY PATRICK J. McCORMICK, ESQ., CULHANE MEADOWS PLLC

A foundational consideration in the international tax realm is rules regarding income sourcing; for nonresidents, whether income is U.S.-sourced ultimately dictates the extent of American tax exposure. This article explores sourcing considerations under the Internal Revenue Code (and associated regulations) for some of the most common income categories earned by multinationals. It does not address income tax treaty relief available to nonresidents residing in a treaty party jurisdiction. While the same general sourcing rules are applicable to treaty party residents, treaties can substantially modify the rates and scope of American tax. INTEREST Under American rules, interest on notes, bonds or other interest-bearing obligations of residents or domestic corporations are sourced to the United States. Interest for sourcing purposes includes original issue discount and amounts treated as interest on certain deferred payments. Irrespective of sourcing, however, expansive exceptions exist to American tax of interest income earned by a nonresident. Portfolio interest received by nonresidents from

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American sources is not subject to American taxation; interest paid to nonresidents on deposits with banking institutions, savings and loan associations, and specified interest paid by insurance companies are also excluded from tax.

use an intangible and (2) actually uses the intangible. Where a nonresident generates royalties from foreign markets, the income is foreign-sourced even if conversion of the intangible into its tangible end user format occurs in the United States.

DIVIDENDS Under statutory U.S. rules, dividends whose beneficial owners are nonresidents are subject to tax by the U.S.; dividend income is sourced to the place of incorporation of the payor. The rule is applicable for payments normally considered dividends under the Code — distributions from corporate entities with either accumulated or current earnings and profits. Income generally treated as dividends under Code provisions — like constructive dividends — is treated as dividends for sourcing purposes.

PROPERTY DISPOSITION Income from the sale of non-depreciable personal property by a U.S. resident is sourced to the U.S., with special rules applicable for depreciable property (discussed separately below); personal property sold by a nonresident is sourced outside the U.S. Depreciable personal property is sourced under separate rules. Gain not in excess of depreciation adjustments from the sale of depreciable personal property is allocated by treating the same proportion of the gain as sourced in the U.S. as U.S. depreciation adjustments bear to the total depreciation adjustments; the remaining portion is treated as sourced outside the U.S. Gain in excess of depreciation adjustments is sourced as if the property were inventory. For inventory property, gains, profits and income derived from the sale of inventory property within the U.S. create U.S.-sourced income. Conversely, gains derived from the purchase of inventory within the U.S. and sold outside the U.S. is foreign-sourced income.

PERSONAL SERVICES Income from the performance of services — whether as an employee or on an independent basis — is sourced to the country where services are performed. Where a nonresident receives income for personal services performed both inside and outside the U.S. (i.e., an employee compensated through an annual salary who splits workdays in a given year between the U.S. and Mexico), allocation between countries based on workdays is required; in most cases, apportionment on a time basis is appropriate. Similar sourcing rules apply to multinational, multiyear compensation arrangements — where compensation is taxed to an employee in one taxable year but is attributable to services performed in multiple years. RENTS/ROYALTIES Income from the use of property — primarily rents and royalties — are covered under Sec. 861(a)(4), with both rents and royalties sourced based upon the property’s place of use. For intangible property, sourcing focuses on where the licensee (1) maintains the legal ability to

Patrick McCormick, Esq., is a partner at Culhane Meadows and practices exclusively in the area of international taxation. He can be reached at pmccormick@cm.law.

LEARN MORE On Demand

REPORT OF FOREIGN BANK AND FINANCIAL ACCOUNTS

UNDERSTANDING THE FOREIGN ACCOUNT TAX COMPLIANCE ACT

njcpa.org/events

TECHNOLOGY

5 Simple Tech Tools to Increase Effectiveness and Efficiency BY ANTHONY MONGELUZO, PCS

One of the most frequent questions clients ask me — especially if they know my background — is about organizing. They believe I’m a maestro at personal organization. (I’m good at it.) They presume that because I own the largest IT firm in the Delaware Valley and have eight other companies, I should know about being organized. (Don’t forget commitments to family and friends.) Let’s be transparent. No matter how good your memory is or how reliable that devoted assistant is (if you even have one), you need more help. Here are five solutions that I use to stay organized and manage my time. Remember that beyond organizing your life more efficiently, the ultimate goal is to make the process easier. y Followupthen (followupthen.com) is a service that “cleans” your inbox and helps you to set reminders. I use this service at least 50 times a day. This app allows you to use the snoozer button (think: reminder) then it appears at the top of your email inbox. By allowing you to forward the email to review it at a time of your choosing, you eliminate the email scrounge, one of our most wasteful production practices. There is a free version and modest prices for advanced versions.

This app puts real teeth into that promise: “I’ll follow up with you later.” y TurboScan (turboscannapp.com) is a free app that uses the camera on your phone to make a PDF. It allows you to save documents and photos and manipulate them at your convenience. You can download a free version and then decide whether to try the “pro” version. The free version allows you to scan, store and send up to three documents. The pro version is $5.99. y Docs To Go (dataviz.com/docs-to-go) is a free app that allows you to take Microsoft Office wherever you go. You can view, edit and create Office files (Word, Excel, PowerPoint) and review Adobe PDF files on a phone or tablet. It turns your phone into a portable Office with a few finger taps and is available in both Apple and Android versions. What makes it particularly appealing is its compatibility with other apps, including Dropbox, Box, Google Drive and SkyDrive. y MyFitnessPal (myfitnesspal.com) is fantastic at tracking calories and is a good accountability partner. Everyone knows someone who’s gained a few (maybe lots) of pounds during the

pandemic, and this app is the ideal tool for combatting those eating impulses. It’s helped me lose close to 30 pounds just by tracking my diet. Even if you’re not a “health nut,” staying fit and remaining healthy allows you to operate as an accountant. Consistently monitoring what and how much you eat is fundamental in losing weight. You can chart it with this app. Exercise matters, too. You enter the exercise routine to which you’ve committed (you do have one, right?), and it gives you the calories burned. The app is $9.99 per month or $49.99 annually. y SugarSync (sugarsync.com) is a file-sharing, cloud-based service that lets you share virtually anything in your folders. Forget about the memory stick. With SugarSync, you can work with your documents from that laptop to photos lodged in your phone library and still collaborate in realtime regardless of the device. Wherever you go, your files go. You can test it free for 30 days with pricing starting at $7.49 for 100 GB for personal use. For business use, it is $18.95 for 500 GB per month. Anthony Mongeluzo is the CEO of PCS, an IT managed services and support firm that provides technology solutions to a national client base. He can be reached at Anthony@helpmepcs.com on Twitter at @PCS_AnthonyM or online at helpmepcs.com.

LEARN MORE March 30 or April 27, Webcast WORKING SMARTER: POWER-UP YOUR PRODUCTIVITY

March 15, Webcast

AUTOMATION SURVIVAL GUIDE FOR ACCOUNTANTS

njcpa.org/events

NEW JERSEY CPA | SPRING 2021

NJCPA NEWS

30 Under 30: Then and Now 2011

Ten years ago, we named a group of young NJCPA members to our inaugural “30 Under 30” list in recognition of their leadership, success and drive. We recently checked in with them to see what they’ve been up to since 2011. In this first in a series of updates, here are five past 30 Under 30 Award winners who continue to inspire us today. Look for more updates in upcoming issues of New Jersey CPA. BRAD CARUSO, CPA, CFE Partner at Withum A speaker at the NJCPA Nonprofit Conference for several years, Brad is noted for becoming a leader in Withum’s not-forprofit niche and developing/expanding its infrastructure as well as mentoring and developing staff. He is also well known for starting and publishing more than 20 episodes of Withum’s Civic Warriors, its not-for-profit podcast. Brad notes that having the ability to make quick decisions and accepting the consequences of those decisions without overthinking them is a leadership skill.

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SARAH KROM, CPA Managing Partner at SKC and Co. CPAs The friendships from almost two decades of involvement with the NJCPA and the opportunities for growth and leadership have had a huge impact on Sarah’s professional development and personal growth. Her two biggest career accomplishments in the last 10 years have been making managing partner of her firm and serving as president of the NJCPA for the 2018/19 term. She’s discovered that continuing to learn has to be part of any plan, and listening is key to successful leadership. SEAN MARIKAKIS, CPA Partner at KPMG LLP The NJCPA provides a community of people with whom Sean can interact and share meaningful relationships. That’s

important since he would tell himself back in 2011 to focus even more on relationships as they benefit not only one’s own career but others’ as well. Sean’s journey towards making audit partner at KPMG in its Metro New York audit practice involved serving several great clients in a variety of industries and places. Looking back, he would have liked to have had a healthier work/life balance years ago. ANTHONY MEZZASALMA, CPA, CFP Partner at Mezzasalma Advisors The NJCPA has supported Anthony in his continuing education and networking. Over the past 10 years, Anthony became a partner and was able to successfully identify and acquire another firm from a retiring practitioner which helped to exponentially grow his book of business. Obtaining the Certified Financial Planner (CFP) credential enabled him to offer a comprehensive tax and investment/ financial strategy to clients. He wishes he pursued it earlier. EDDIE L. RIVERA, CPA, MST Partner at Citrin Cooperman Eddie’s first professional position was a job posting he replied to in the NJCPA JobBank. From there, he never looked back. With support from his wife, Eddie built an internal tax department from the ground up and assisted in the rebuild of the accounting department at one of the largest private real estate companies in the New York metro area. He also made partner at the age of 33. Understanding psychology and communicating effectively are important skills he wishes he learned earlier.

NJCPA NEWS

Ovation Awards Open for Nominations Is there someone at your firm or accounting department who deserves recognition for going above and beyond to mentor others? Is there a professor at a New Jersey-based college you consider an unsung hero? What about an emerging leader who continuously makes inroads in moving the profession forward? Nominate him or her for an NJCPA 2021 Ovation Award. The Ovation Awards recognize the following seven categories of excellence:

y y y y y y y

Emerging Leaders Diversity, Equity & Inclusion Innovation Exceptional Educators Women to Watch Impact Lifetime Leader

“The Ovation Awards are a great way to acknowledge and celebrate those individuals who you work with everyday who may deserve recognition among their peers.

In the midst of everything that workers endured this past year, the Ovation Awards bring an awareness of outstanding achievements,” said Theresa Hinton, chief operating officer at the NJCPA. Self-nominations and nominations from NJCPA members and nonmembers are all welcomed. Visit njcpa.org/awards to learn more about the qualifications for each award category and to submit nominations. The nomination deadline is May 3.

In Memoriam The NJCPA is saddened to announce the passing of a long-time staff member and two of the Society’s past presidents. They will all be remembered for their enduring commitment to New Jersey’s accounting profession. DANIEL S. GOLDBERG 1979/80 NJCPA president Daniel (Danny), who passed away on Jan. 11, 2021, was the former chair of several NJCPA committees including the NJ-CPA-PAC, the Nominating Committee, the Professional Conduct committee and the Government Relations Committee. He was also a former director of the Essex Chapter. Danny is survived by his wife, Matty, and his children, Susan, Mitchell and Richard, along with three grandchildren and one great grandchild.

MARYANN BARONE NJCPA accounting manager Maryann, who passed away on Feb. 8, 2021, joined the accounting department in 1989. Over her nearly 32-year career with the NJCPA, she implemented and oversaw the important accounting and internal control processes that are the backbone of nearly everything the Society does. Her dedication to her job never wavered even during her valiant, multi-year battle with cancer. Maryann is survived by her father Clodomiro “Claude” and brother Tony.

JOHN S. LEE 1985/86 NJCPA president John, who passed away on Dec. 23, 2020, was a trustee of the NJCPA Scholarship Fund from 1986 to 1996 and is credited with initiating campaigns that significantly increased the Fund. He also was a former president of the Mercer Chapter. John is survived by his children, Randall, Wendy and Daniel, along with five grandchildren and one great grandchild.

“I’ve never met a more dedicated or harder-working individual in my life. More than that, however, I’ve never met a better person. Maryann cared more about everyone around her than herself, even while facing the most daunting challenge of her life. Her loss is tremendous, and she will be missed greatly,” said Gordon Smith, CPA, chief financial officer of the NJCPA.

“Our members, staff and colleagues remember Danny and John fondly; the work they started at the NJCPA will continue for years to come,” said Ralph Albert Thomas, CPA (DC), CGMA, CEO and executive director of the NJCPA. “And our hearts are broken by the loss of our dear friend and colleague, Maryann. It was truly a privilege to work with her; her kindness, humor, warmth and faith will be missed by everyone she touched.”

NEW JERSEY CPA | SPRING 2021

NJCPA NEWS

Student Loan Debt Lottery Winners Announced The NJCPA congratulates 10 members who were randomly selected in December to receive $1,200 each towards their student loan debt. The inaugural NJCPA Student Loan Debt Lottery was conceived by the Student Loan Debt Task Force, which initiated the Lottery together with the NJCPA Scholarship Fund to assist NJCPA members who have amassed a significant amount of debt on their way to becoming a CPA. The winners included: y Kevin S. Feeney, CPA, MST, owner at Feeney CPA LLC y William S. Howell, CPA, owner at a William S. Howell, CPA y Jheanelle T. Jackson, CPA, fund operations at Prudential Financial y Allen Raevsky, CPA, manager at Allen Raevsky & Company LLC y Belinda Scott, CPA, senior tax associate at SKC & Co., CPAs, LLC y Philip Sookram, CPA, MAcc, assistant professor of accounting, at Saint Peter’s University y John ( Jack) A. Taylor Jr., CPA, owner, THT Tax and Accounting

y Juli-Ann Truppi, CPA, accounting manager at Charterhouse USA Inc y Jacqueline Justine Vavoules, CPA, senior auditor at Ernst & Young LLP y John Verdonck III, CPA, audit senior associate at KPMG LLP The 10 winners, who were chosen out of 172 applicants, have a combined student loan debt of more than $425,000 ranging from $5,130 to $125,000 or an average of more than $42,000 each. That amount is higher than the average student loan debt for all New Jersey borrowers of $35,000, according to a 2020 Smartest Dollar report (smartestdollar.com). In its ranking of states with the greatest student loan debt per borrower, New Jersey came in 12th. Maryland ranked the highest at $41,000. “Student loan debt can be crippling for young professionals looking to get themselves settled into life after graduation. In our profession, this is compounded by the stress of studying for and passing the CPA Exam. A concerted effort by schools and organizations is needed to assist students pursuing a career in accounting,” said Melissa Dardani, CPA, a member of the NJCPA Student Loan Debt Task Force.

Zachary Cohen, CPA, a member of the Student Loan Debt Task Force, added, “Student loan debt has skyrocketed to the point that it is hindering not only career choices but life choices. It is a real problem that needs real solutions. This inaugural program is a step in the right direction in addressing this issue, and hopefully this will pave the way for other organizations to implement similar programs.” According to a December 2020 NJ Spotlight article, New Jersey’s $47.8 billion in student loan debt is shared among 1.4 million borrowers. In a survey of NJCPA members in 2019, more than 75 percent of the 623 respondents considered it a “major problem” that student loan debt tallied $1.6 trillion in the U.S. overall. The NJCPA continues to advocate for better student loan debt management. It supports a bill that would mandate that high school graduation requirements include instruction on tuition assistance programs and student loan debt. It would also require high school students to meet with a guidance counselor to discuss tuition assistance and dual enrollment. Learn more at njcpa.org/studentloandebt.

Virtual High School Presentations Are a Hit The NJCPA provided more than 60 virtual presentations to local area high schools last fall as part of its Career Awareness Program. Due to the pandemic, the presentations were virtual instead of in person, but they were just as effective. Member volunteers from CPA firms, nonprofits and corporations espoused the benefits of becoming a CPA, discussed career opportunities for those with a CPA license and explained how the profession has changed over the years. Students were able to ask questions or send email inquiries to the speakers, many of whom had affiliations with the schools or neighborhoods. More than 3,000 students have attended the presentations in the past.

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“It was such a pleasure making the virtual presentation to the students. It was certainly a rewarding experience,” said Danielle Traina, CPA, senior staff accountant at WilkinGuttenplan, who spoke at Somerville High School. Jose Borbon, CPA, CRC, an assistant vice president and senior auditor at Kearny Bank and regular presenter in the program, added that “whether its recorded, virtual or in person, it’s an important message that needs to be told to students. Many are not aware of what it means to be an accountant and how rewarding a career in this field can be.” According to Ralph Albert Thomas, CPA (DC), CGMA, CEO and executive director at the NJCPA, “the Career

Awareness program is all about the students. They need to know where an accounting career can take them and what steps are necessary to get there.” The presentations also included information about the NJCPA Scholarship Fund, which has distributed more than $7 million since inception in the 1960s. The Fund awards $1,500 scholarships to college-bound New Jersey high school seniors who intend to major in accounting or obtain a concentration in accounting. It also awards $6,500 one-year scholarships to accounting students at New Jersey colleges and universities. In 2020, the Fund awarded more than $380,000 in scholarships to high school and college students. Learn more at njcpa.org/scholarships.

CLASSIFIEDS

MERGERS/ACQUISITIONS

Traphagen CPAs & Wealth Advisors, 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 peer- reviewed firm, while continuing to provide your clients with exceptional service. To confidentially discuss this opportunity, please email us at carolynn@tfgllc.com. Accounting Practice Exchange, the online marketplace dedicated exclusively to the purchase, sale and merger of CPA and accounting practices across the USA. View opportunities here: www.accountingpracticeexchange.com. Whitman Business Advisors www.whitmanbiz.com has been helping CPA firms with their M&A needs since 2008. We are working with several non-NJ headquartered firms that are looking for a foundational firm to expand their foot-print into NJ. If your revenues exceed $3MM annually then we should talk today! To confidentially discuss this opportunity, please email us at pw@whitmanbiz.com.

Matthews, Panariello P.C., a well established full service Bergen County firm located in Paramus, is looking to acquire firms, sole practitioners, or accounts (audits, reviews, and tax preparation) ranging in size from $100,000 to $750,000. We are a peer reviewed firm with a strong track record of client satisfaction and retention. We have been successful in prior acquisitions; let’s talk. Please visit our website at www.mpcpas.com. To confidentially discuss this opportunity, email Peter at pmanetta@mpcpas.com. Experience counts. We have buyers right now looking for businesses. For 27 years First Choice Business Brokers have transitioned $8 billion in business sales of all sizes. Principal broker, Gregory J. Carafello, has owned and operated businesses for 39 years in NY/NJ region. Call Greg to assist your clients transition business ownership at 973-632-2192 or gcarafello@fcbb.com.

PROFESSIONAL SERVICES

Quality Review for CPA firms: audit review, compilation, employee benefit plans, Yellow Book, revenue recognition. Contact James M. Sausmer, CPA at 732-261-7710 or james.sausmer@gmail.com.

TO SEE ADDITIONAL CLASSIFIED LISTINGS OR TO PLACE AN AD, VISIT NJCPA.ORG/ CLASSIFIEDS.

New Jersey practices for sale: gross revenues shown: Bordentown, NJ CPA practice − $220K; Toms River metro area CPA $690K; Bergen Co. CPA $330K; Gloucester Co. CPA $615K; Southern Middlesex Co. CPA $1.075M. For more information, call 800-397-0249 or visit www.aps.net.

NEW JERSEY CPA | SPRING 2021

MEMBER STORY

Becoming a CPA — Still a Mother’s Dream BY KATHLEEN HOFFELDER, NJCPA SENIOR CONTENT EDITOR

While a mother may dream of many careers for her children, becoming a CPA often lands somewhere on that list. Just ask Alan E. Gumeny, a semi-retired CPA of Clifton, whose mother, Penny, proudly professed that wish publicly — long before Alan ever thought of becoming a CPA. Was it a premonition? Coincidence? Oddly, it would seem to be a bit of both. In preparing to become a CPA, Alan, who was then a student soon to be graduating from Rutgers University in the late 1970s, opted to take a Becker Review course. On the wall in the classroom was an ad featuring a woman boasting, “My son, the CPA. It’s enough to make a mother cry.” When he looked up, he realized that it was his mother who was smiling with pride in the ad.

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A DIFFERENT PATH While Alan didn’t actually take the CPA Exam at that point in his life, he did eventually become a CPA through a non-traditional route. As soon as he was of age, he joined the Army, since his parents taught him and his four brothers the importance of having a “service mentality.” That sentiment came from his mother, he says, who was raised in the Great Depression. He recalls her saying, “When good things happen to you, turn around and give back.” Alan says his mother made some “good decisions,” noting that both parents acted and modeled to take advantage of New York’s burgeoning film industry and its close proximity to Nutley, where they lived. Penny mainly took care of the children

and worked at the Associated Press in New York but also did “side gigs” modeling and acting when she could. Alan also had a knack for making good decisions. After working three years as a combat engineer building bridges and other structures in the Army, Alan utilized the GI Bill to attend Rutgers University. There, he enjoyed both engineering and accounting classes but decided on accounting as a major. Between his job with the IRS, where he worked for three years after graduating from college, the commute as well as a new baby on the way, he was unable to finish studying for the CPA Exam. He then went on to accept a job with the FBI, where he worked for 22 years and honed his investigative and forensic accounting skills involving mostly white-collar crimes. “Many of the cases you would have were bust-out scams (where organizations would end up closing shop and selling inventory on the black market), bankruptcy scams, Ponzi schemes and insurance fraud. I had to track these guys down and get the money back,” he explains. While at the FBI, he eventually ended up going back to a Becker Review course, taking the CPA Exam in 2002 and passing all four parts in one sitting. Imagining how his mother, who had passed away by that time, would have reacted to the news of his passing the CPA Exam, he says, “I’m sure she would have been delighted and proud over the course of events that actually came true.” And that “dream” came true in spades — not only did Alan become a CPA, but his son, Bryan, is working towards that goal at a CPA firm in New York and his daughterin-law, Kristen, and son-in-law, Keith, are both CPAs. He and his wife, Barbara, have two other non-CPA children, Eirik and Kristen, as well as five grandchildren. Looking back, Alan speaks highly of his past job experiences, noting that having the right accounting skills helped him in all steps of his career. Alan eventually left the FBI for a six-year stint at a Wall Street law firm, retired in 2011 and later started his own consultancy.

Take One Easy Step

GAIN AN EXCEPTIONAL NJCPA MEMBERSHIP EXPERIENCE Review your NJCPA member profile at njcpa.org/profile. Customize your areas of interest to receive the most relevant news, resources and learning opportunities.

areas of interest to choose, including:

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NEW JERSEY CPA | SPRING 2021

We’re honoring the people who have made significant efforts in advancing New Jersey’s accounting profession. Nominate someone (or yourself) today! AWARD CATEGORIES:

DIVERSITY, EQUITY & INCLUSION

INNOVATION

EMERGING LEADER

LIFETIME LEADER

EXCEPTIONAL EDUCATOR

WOMAN TO WATCH

IMPACT

NJCPA.ORG/AWARDS

Nomination deadline is May 3.

New Jersey CPA - Spring 2021

Articles inside

Becoming a CPA — Still a Mother’s Dream

NJCPA News

30 Under 30: Then and Now

5 Simple Tech Tools to Increase Effectiveness and Efficiency

International Tax: The Basics of Income Sourcing

Preventing Unauthorized Data Access in the Cloud

6 Ways to Grow Your Network by Giving Back to the Profession

The Impact of COVID-19 on Business Valuations

Finding Balance: Asset Allocation in a Post-COVID Economy

Using Data Analytics to Manage the Pandemic

7 Tips for Creating a Modern Policy Manual

Making the Most of Post-Grad CPA Exam Summer Studies

Internal Audit: To Yield Value, We Must Collaborate

Staying on Target to Pass the CPA Exam

Tax Challenges Loom for New Jersey's Cannabis Industry

New Sheriff in Town: Biden to Focus on Reversing Trump Policies

The Pandemic's Impact on NJCPA Members

Setting the Course for Future CPAs