the
briefcase
the official newsletter of the massachusetts society of eNrolled agents
Volume 22 | Number 5 | june/july 2011
president’s message
T
hank you all for the opportunity to serve as MaSEA president for the past two years. I was so fortunate to have worked with great board and committee members. It was also invaluable to have a dedicated group of past leaders to rely on for advice when needed. Together, we accomplished a lot these past two years to move MaSEA forward. Here are some highlights:
Terry Durkin, EA, MBA
Of the five goals and numerous objectives, the group focused on three areas: leadership, technology, and membership.
Updated Strategic Plan A group of 20 current and past leaders met in the summer of 2010 to update MaSEA’s strategic plan. Our mission statement was revised to be, “To position enrolled agents to successfully serve their clients.” Of the five goals and numerous objectives, the group focused on three areas: leadership, technology, and membership. The leaders of these efforts, Dale Lewis, Lenny Rea, Alice McElhinney, and Charles Belanger, have done a great job working on these initiatives. You will see a leadership program available to our members and an updated website. Also, at last report, we have over 400 members in our organization! In the coming years, there are plenty more strategic goals and objectives to focus on. For those of you interested in more details, you can find the whole MaSEA strategic plan on our website at www.maseaonline.org. Improved Professional Image With the hiring of The Warren Group (TWG),
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MaSEA has definitely updated its image. TWG was responsible for setting up our meeting reminders with Constant Contact, for updating the Briefcase newsletter publication, for inviting us to exhibit and present at the FirmFuture seminar event in Boston, and for producing several public relations podcasts. Thanks to Joyce Mohr for her efforts in coordinating this effort. And, thanks to Shanti Patel for his tireless work in any and all areas that needed attention. Leveraged Technology We took advantage of technology by offering our monthly meetings via teleconference, by sending monthly meeting reminders via Constant Contact, and by providing the Briefcase newsletter electronically. This not only helped us more efficiently reach more members but also helped save the society money by going green. Thanks to Catherine White for keeping our teleconference attendees connected. And, thanks to Kay Cassidy and her education committee for providing quality education opportunities that were worth dialing into. I look forward to working with the new board and to help move this great society to even bigger accomplishments. n Terry Durkin, EA, MBA MaSEA President
Inside this issue: President’s Message............................................................................................................. 2 Sunshine committee report:................................................................................................... 3 MaSEA Minutes of the Board Meeting.................................................................................. 4 Affiliate Presidents Exchange Meeting (APEX) Report............................................................ 6 OFFICERS & DIRECTORS,
NAEA’s 3rd Annual Fly-in day................................................................................................. 9
2010/2011
Business Owners, Financial planners and Accountants Face Large IRS Fines for Retirement,
President:
Welfare Benefit and other Plans........................................................................................... 12
Terry Durkin, EA
MaSEA Coming Events:...................................................................................................... 16
1st VP: Joyce Ann Mohr, EA 2nd VP:
Notes from the Briefcase Editor Shanti Patel:
Shantilal T. Patel, EA
On June 14, 2011, Karen L. Hawkins, Director of OPR sent a letter to EAs whose social security
Treasurer: Janet L. Foote, EA
number ends in 4, 5 or 6 explaining the Renewal process for the EA license. I was able complete the renewal form 8553 and pay the $30 renewal fee on the website at www.pay.gov/paygov/ within 20 minutes.
Secretary: Stephen B. Jordan, EA Immediate PP: Randy F. Hull, EA Board Of Directors: Leonard Rea, EA Catherine White, EA Dale Lewis, EA Kay L. Cassidy, EA
2011 MaSEA Annual Conference on June 4 2011 with Beanna Whitlock at the Sturbridge Host Hotel & Conference Center was a great success. The members of MaSEA are thankful to the generous support from our sponsors, the AspenCross Financial Group and The Warren Group. As usual, the June Conference committee members and more than dozen volunteers helped to make a perfect flawless educational event. Sunshine committee report: Deb Willman is recovering well from hip surgery on April 27th. We all wish her continued progress. Submitted by Peg Larsen
Charles A. Belanger, EA The Briefcase is published by the Massachusetts Society of Enrolled Agents, P.O. Box 2263, Peabody, MA 01960-7263 for the benefit of MaSEA members and associates. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that neither the publisher nor author is engaged in rendering specific legal, tax or accounting advice or other professional services. If specific advice or other expert assistance is required, the services of a competent professional
In Memoriam of Harvey Resnik Harvey Resnik, EA passed away on Friday July 8, 2011. Harvey served as Treasurer, Finance & Budget Committee stalwart and member of several other committees over the years. We will miss his quick wit and straight shooting advice and comments. A graveside funeral service took place on Tuesday, July 12, 2011 at 12:30 pm at the Mountain View Cemetery 100 Maple Ave. in Shrewsbury, MA. MaSEA will send a memorial donation to the Wayside Hospice, Parmenter VNA, 266 Cochituate Road,
person should be sought. MaSEA, P.O. Box 2263 Peabody, MA 01960-7263 Email: MSEAOFFICE@AOL.COM Telephone: 800-342-0031 Fax: 978-535-1954
Wayland, MA 01778 Photo by Phil Wachsler.
Cards and expressions of grief may be sent to Bruce Stone, 423 Old Connecticut Path, Framingham, MA 01701. May he find comfort in knowing that warm thoughts and sympathy are with him at this difficult time.
Internet: http://www.maseaonline.org
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MaSEA Minutes of the Board Meeting Board Members: Present: Charles A. Belanger, Kay L. Cassidy, Theresa Durkin, Janet L. Foote, Randy F. Hull, Jr., Stephen B. Jordan, Dale Lewis, Joyce Ann Mohr, Shantilal T. Patel, Leonard D. Rea and Catherine G. White Absent: None. Guest(s): Maria Lucas, Lorry Sorgman Quorum present? Yes Proceedings: Meeting called to order on Thursday, April 21, 2011 at 3:06 pm by President and Chair, Terry Durkin. President Durkin’s remarks: • Thank you for helping out on Board matters during the tax season • Budgets due the beginning of May • Membership needs to approve the Budget at the June meeting • MaSEA Annual meeting will be on June 04th 2011. • Next week Board meeting at NAEA. Mohr, Patel and Durkin will attend. Caroline Wu
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Thursday, April 21, 2011
and Walter Drenen are going to Fly-in Day. Potential EA name change will be a hot topic at Board meeting. • February 17, 2011 meeting minutes were reviewed. No further corrections noted, approved as distributed via email by President and Chair Durkin.
by 34.8%, or $7,646. • Foote reported $200 was paid to Commonwealth of Massachusetts for sales/ use tax related to $3,000 in book sales. • Mohr, Patel, Durkin and Foote (Finance Committee) will meet to review next year’s Budget.
Treasurer’s Report provided by Treasurer Janet Foote: Foote reported the Financial Statements for the nine-month fiscal period ending March 31, 2011. Overall, Foote noted, the Society’s Fiscal YTD total gross income was $80,887, an unfavorable variance to budget of $(17,303) or 82.4% of budget and a favorable variance to the preceding year of $4,346 or 5.7%. Foote noted the Society’s Fiscal YTD net income/ (loss) was $8,903. This represented a favorable variance to budget of $-0- or 100.0% of budget and a favorable variance to the preceding year of $6,799 or 339.0%. Foote reported that the Society’s cash and cash equivalents balance as of March 31, 2011 is $29,612. This is up from the preceding year
MOTION by Mohr to accept March 2011 fiscal YTD Financial statements, Seconded by Patel; accepted. Strategic Planning Focus Areas provided by Terry Durkin: Durkin lead a discussion of three focus areas (top 3 objectives). • Lenny Rea (MaSEA website): • Rea provided an overview of a proposal from Clark Howell of Howell Marketing regarding MaSEA website update. Rea will speak to Sean at NAEA on ideas for hosting our website. Rea will continue his research on methods to use in updating MaSEA website as well as searching for a web designer. We extended the link for Tax Legislation to
Continued from previous page
our website. • Rea reported as of April 21st 2011, our website has had 81,442 hits since inception. The average number of visitors per month at www.maseaonline.org since October 2010 has been 1,186 per month. From October 2010 through January 2011, the average number of visitors per month was 1,060. The actual visitor counts for February through April are listed below: February 2011: 1,303 March 2011: 1,250 April 2011: 1,513 • Charles Belanger (Membership drive): • Membership committee is just getting on track to meet the goals of the organization. • Dale Lewis (Leadership program): • Lewis stated leadership training is about positioning our Society as a leader in the field. MOTION by Lewis to appropriate $2,000 in next year’s budget for the Leadership Workshop to be held this summer for the benefit of all members. Seconded by Patel; approved. The Warren Group Task Force Report provided by Joyce Mohr: • Mohr requested group and individual photos of the Board for TWG purposes. • Mohr stated TWG is requesting members to contribute articles in MS Word or JPEG format. • Sponsors for our June Conference are expected to include one bank and one insurance company. • Administration of Constant Contact is underway. Bentley LITC Partnership Report provided
by Joyce Mohr: • According to Mohr, Jack Lynch at Bentley LITC is happy with MaSEA’s participation in the program. Mohr can email an enrollment form to members who wish to participate in the Bentley Low Income Taxpayer Clinic (BLITC) Partnering Initiative. • The next BLITC training orientation at Bentley will be in May. Review of meeting cancellation due to inclement weather policy provided by Randy Hull: • Hull reminded the Board that the President is responsible for notifying committee Chairs in the event of a meeting cancellation. MOTION by Hull to adopt meeting cancellation due to inclement weather policy as SOP, Seconded by White; approved. Review of registration desk policy provided by Janet Foote: MOTION by Foote to adopt registration desk policy as SOP • 1. Monthly meeting check in procedure reflecting current registration fees • 2. Membership Committee table for member advertising and networking materials at monthly meetings and • 3. Continuing education attendance sign-in procedure. Seconded by White; approved. Review of Monthly and Conference meeting cancellation and substitution policy provided by Janet Foote: MOTION by Foote to adopt Monthly/ Annual Conference meeting cancellation and substitution policy as SOP. Seconded by White; approved.
June Convention Committee provided by Lorry Sorgman: • Sorgman submitted a resolution regarding the June 04th 2011 Annual convention. • Durkin stated this year’s annual meeting and conference are budgeted together at breakeven. MOTION by Mohr to accept Sorgman’s resolution with clarification that 50% of June conference profit related to the conference will remain with the following year’s June Conference prepaid expenses. Seconded by White; approved. Review of Scholarship Restricted Fund provided by Maria Lucas: • Lucas reviewed the history of the Scholarship Fund and stated it is restricted for member education. The funds are not issued on a need basis, but rather based on the merit of essay written by member applicant as to what the member believes they will derive from the desired program. • Lucas summarized there are two full NTPI and one full NCPE annual scholarships available and if more money comes in we could offer more scholarships. Unfinished Business • Discussion of the income generators and logo colors was deferred until the May meeting. • Review of Income generators • MaSEA logo discussion on colors There being no further business, the Thursday, April 21, 2011 Directors’ meeting was officially adjourned by President Durkin at 5:30pm. Respectfully submitted by Secretary, Stephen B. Jordan n
MaSEA COMING EVENTS NCPE* 2011 Spring-Summer Seminar Series Corporations (C&S) and Partnerships (LLCs) Workshop (2 Days, 16 Hours CPE) at Holiday Inn Dedham, MA on August 8 & 9 2011.
1040 Individual Income Tax Workshop (2 Days, 16 Hours CPE) at Holiday Inn Dedham MA on Nov 16 & 17 2011.
A Fiduciary (Form 1041) Workshop (1 Day, 8 Hours CPE) in MA on August 25, 2011.
To register call NCPE 1-800-682-2163 or go to www.ncpeseminars.com
Federal Estate (Forms 706 and 709) Workshop (1 Day, 8 Hours CPE) in MA on August 26, 2011.
*Massachusetts Society of Enrolled Agents is a proud sponsor of these NCPE seminars.
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AFFILIATE PRESIDENTS EXCHANGE MEETING (APEX) REPORT – JOYCE MOHR, EA I (Joyce Mohr), President Terry Durkin and Vice President Shanti Patel attended the affiliate presidents exchange meeting (APEX) hosted by NAEA on April 28 & 29; NAEA board meeting on April 30 and the NAEA Fly-In day on April 27, 2011 in Washington, DC. It was my first time to attend an APEX meeting and I was really blown away by the experience. I came away with new ideas, new acquaintances and a deeper appreciation for the National Association as well as our Massachusetts Society. A report on the Fly-In day was submitted by Shanti Patel. Terry Durkin has reported on the board meeting. I’ll only add that both were interesting, exciting, had me feeling more proud about being an Enrolled Agent and more appreciative of the wonderful colleagues I have here at the Massachusetts Society of Enrolled Agents and now at the national level as well.
April 2011
parliamentary procedure is used. Some of the reasons give were to have orderly, fair and efficient meetings; to keep the majority from overrunning the minority. He said that organizations shouldn’t be forced into doing something harmful or absurd because of Robert’s Rules. The rules are there to help run meetings not to become a problem themselves. Part of the presentation was about the details of the gavel and its uses; when the chair should transfer authority; fill in the blank motions; the differences and definitions of point of order – point of information and parliamentary inquire; the order of debate / motions and voting and lots more. The other part of the presentation had volunteers from the workshop act as chair and as a nominating committee. I still feel I have a lot to learn and practice when it comes to parliamentary procedure but I found the presentation very valuable.
Part of the presentation was about the details of the gavel and its uses; when the chair should transfer authority; fill in the blank motions; the differences and definitions of point of order – point of information and parliamentary inquire; the order of debate / motions and voting and lots more. On Thursday morning there was an optional Exchange “Extra” session on Parliamentary Procedure, Mock Board Meeting led by Loren Kropat, the Practical Parliamentarian. Thanks to our secretary Stephen Jordan I have and brought with me a copy of “Robert’s Rules of Order In Brief ”. Most of the factual information that was presented by Loren Kropat and in his handout is available in this handy little book. However, what made Loren Kropat’s presentation so valuable for me is that although he has vast knowledge on the subject he made it clear that parliamentary procedure does not need to be so overwhelming and complex. Also that it is something that you continue to learn the nuances of over many years. He encouraged us to remain focused on why
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Affiliate Exchange Welcome and Public Awareness session The 1st official Apex session, on Thursday April 28, was began with Sam Matlick, CAE Deputy Director of NAEA giving introductions and overview information and leading participants in a small group exercise where each group came up with the 3 most important things they wanted to get out of this experience. I think that much of what the group said they were hoping to get was provided. Issues that people wanted information about: Leadership development, member benefits, membership ideas (retention, reaching out to non EAs, attracting new members), education, communication, name change, networking and new ideas.
Presentation by Gigi (NAEA Staff) on Public Relations and member resources In addition to sharing specific tips about working with the media and getting more media attention for affiliates or individual businesses she reviewed the “samples and examples” area of the NAEA website where there are many resources to help individual members in their own practices and leaders in affiliates. A particular document she focused on was the Media Training Guide (http:// www.naea.org/NR/rdonlyres/23032CCC3E89-4029-A057-EC604CBE81DD/0/ Media_Training_Booklet.pdf ) This document provides many tips on topics such as preinterview preparation, interview strategies and do’s and don’ts of what to wear in an interview. Gigi also demonstrated the Tax Research benefits including encouraging all members to sign up for the Tax Research Newsletter. Presentation by Peter Bullock of Gleim Publications. This was a discussion of SEE Review and Prep Programs offered by Gleim. Peter wanted to thank NAEA for the partnership and has increased the number of SEE Prep scholarships to 40. He also demonstrated the website, teacher tools (including quiz making and calendar) and interactive chat features that are available for instructors and students. He also wanted to discuss a different model for NAEA and affiliates to consider either instead of or in addition to the affiliate run SEE Prep Courses. He suggested partnering with local community colleges and encouraging them to take on the SEE Prep Course as part of their offerings and have it taught by their professors, bringing in Enrolled Agents to talk about the profession. He expressed his amazement at the time and commitment of so many individuals but wondered if by partnering with community colleges there could be more students reached. He obviously said that he hoped these partnerships would consider using Gleim products but felt that regardless of the company producing the learning materials it would be a good
Presentation by Todd Kuehn, Total Administrative Services Corporation (TASC) http://www.tasconline.com/ – HRA /105 Medical Reimbursement Plan Todd spoke about the services his company has to offer NAEA members and our clients particularly small business owners. Also through NAEA he sent an email with many links to HSA, Health Care Reform and other similar resources (webinars / newsletter).
IRS Commissioner Douglas Shulman at APEX lunch meeting April 29, 2011.
way for NAEA and affiliates to attract more members and raise more public awareness about the profession. Friday April 29, 2011 On Friday we had more NAEA Program updates. Sam and Julie (NAEA staff) went over member benefits and resources. Rather than list them here I just want to encourage members who may have been like me “too busy” to really try to understand what is available from NAEA. Honestly I became a member of NAEA because I wanted to be a member of the Massachusetts Society of Enrolled Agents and as an Enrolled Agent needed to become a member of NAEA. I am very grateful for the opportunity to go to the APEX meeting because the variety and number of resources available through NAEA is really impressive. Also the staff is very competent and eager to help. If you are also “too busy” or haven’t taken the taken the time to investigate the opportunities available through NAEA I encourage you to browse the website (which admittedly is challenging to navigate, plans in the works to make this better) or take a look at the Affiliate Manual – table of contents: http:// www.naea.org/NR/rdonlyres/AA39521FE99D-4AA4-ACF4-97464375AFC2/0/ Affiliate_Manual_April_2011.pdf
Lunch with invited guest Doug Shulman, IRS Commissioner – Directly following the Board of Directors and Exchange participants lunch Commissioner Shulman spoke. He seemed sincere in his appreciation of Enrolled Agents as leaders and advocates for taxpayers. Affiliate marketing Workshop with Sheri Jacobs, CAE, Avenue M -- Sheri presented the findings of research she (working for Avenue M) was contracted by NAEA to do about the perceptions of the general public and Enrolled Agents about the name “Enrolled Agents” as well as other possible names. Because of the upcoming revision of
Circular 230 and the IRS suggesting that if there was to be a name change this would be a good time for transition there has been discussion of this issue and the hiring of Avenue M to do the market research. It isn’t likely a surprise to any Enrolled Agent that 87% of consumer survey respondents “had never heard of the term” Enrolled Agent. Of all the options presented to Enrolled Agents in the survey there was no single name that was a clear winner – the highest was “Federally Licensed Tax Practitioner” 29% and the next was “Licensed Tax Professional” 25%. As Terry reported the board voted to not change the name. My impression of the whole process is that there was recognition that a more descriptive name would make it easier for marketing at the business, affiliate and national level but that in the absence of consensus on what the name should be changed to there just wasn’t enough support to make a change. Sheri also shared many useful marketing tips from that are also included in her book “199 Ideas: Powerful Marketing Tactics that Sell” Continued on page 8
NAEA 2011-12 newly sworn members April 29, 2011.
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Continued from page 7
Presentation by Shari Lawson Phelps, Thomson Reuters, PASS online / Checkpoint Learning -- Shari showed on the Thomson’s website the tool that is available for storing and keeping track of CPEs and the variety of courses available. Wrap-up presentation by NAEA staff – Available very soon is going to be “Presentation in a Box”. These are presentations developed and peer reviewed by EAs on a variety of topics (tax benefits of home ownership, virtual workers and taxation, COD, Ethics and bankruptcy). These presentations will be available on the NAEA website for FREE. They will include a power point presentation, handouts, speaker notes, evaluation form and registration form. These can be used by affiliate organizations. Also there are materials available for the “member get a member” promotion. Installation Dinner (Friday night) – It was an honor to be present for the installation as a director of the national board of our President Terry Durkin, EA. In addition to installation of board members awards were given out including the membership awards. During the afternoon affiliate session, in error Massachusetts was announced as one of the winners – Shanti and I stood and grinned while people applauded although pretty certain that despite the great work done this year on membership we had not in fact managed to get the top increases. We brought it to the attention of staff and by the time the actual awards were presented at the installation dinner the correct winners received their cash prizes. MaSEA was given kudos for high ethics. I appreciate the opportunity to go to the APEX meeting and can highly recommend the Fly-In day (open to all members) and / or NAEA Affiliate Presidents Exchange Meetings (must be president recommended and board approved) to anyone who has the opportunity. n
Terry Durkin with all newly sworn in NAEA Directors.
Joyce Mohr, Terry Durkin, and Shanti Patel at NAEA Installation Dinner April 29, 2011
Thank you, Joyce Mohr, EA Vice President, MaSEA Joyce Mohr, Bob Goggin, Terry Durkin, Edward Laurenzo, and Shanti Patel at Installation Dinner April 29, 2011.
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NAEA’s 3rd Annual Fly-in day
on April 27, 2011 in Washington, DC
I
took the 6:00 a.m. flight from Boston to Washington D.C. arriving at 7:35 a.m. The travel from Regan airport was a short 10 minute taxi ride to reach 101 Constitution Avenue NW, DC as there was no morning traffic. While waiting in the registration line, I met Terry Durkin, Joyce Mohr, Walter Drenen and Caroline Wu who all reached Washington, DC on Tuesday afternoon. The Fly-in day orientation meeting started with, NAEA president Gina Jones welcoming the group. She appreciated the increased participation from 15 members in the first Fly-in day to 50 members in 2nd year to about 100 participants in this years event. The orientation training or policy briefing was provided by Jeffery Trinca of Van Scoyoc Associates, a lobbying firm hired by NAEA, and Bob Kerr, the Senior Director of NAEA Government relations. The orientation package included a map of Capital Hill Buildings, Gina Jones’ April 15 letter to IRS commissioner Douglas Shulman requesting two tiers testing for the oversight of the return preparer review process and a copy of a draft letter requesting a legislator to sign and send the letter to IRS commissioner explaining the NAEA’s position on tiered testing. The Flyin day participants were grouped into 34 separate teams. These teams were scheduled to meet their respective legislative assistant for 20 to 30 minutes meeting, between 10:00 am to 4:00 pm, as congress was on a short 2 weeks Spring break and a majority of Representatives and senators were out of Washington; visiting their home districts or travelling to a resort location on a fact finding mission or celebrating the wedding of prince William & Kate. The agendas for the meeting were to educate the law makers about enrolled agents as competent professional tax representatives. Advocate for tax code stability as many tax provisions are not permanent, Taxpayers (our clients and their constituents), both businesses and individuals, cannot plan and discuss return preparer oversight by asking staffer
Massachusetts Team members Walter Drenen, Shanti Patel, Terry Durkin, Joyce Mohr, and Caroline Wu on Fly in Day
to have legislator sign onto NAEA draft letter to IRS Commissioner and IRS should make sure every paid preparer has demonstrated competency on the return (s)he prepares and need to distinguish between limited and unlimited preparers. Our team members Joyce Mohr, Walter Drenen, Al Thomson and I met at 11:00 am with Cara Camacho, the legislative assistant for Stephen Lynch, congressman from the 9th district of Massachusetts at Rayburn House Office building room 2348. Cara was very much interested in what we had to preach. She will forward the information to the congressman. The second meeting at 4:00pm was with Noelle Melton, senior legislative assistant and Andrew Eaton, legislative assistant of Congressman Michael Capuano from the 8th district of Massachusetts at Longworth house Office building room 1414. The team members for the meeting were Joyce Mohr, Caroline Wu and Shanti Patel. Noelle Melton was familiar with House ways and means committee’s work on taxation. Both meetings were educational to the participants and the legislative assistants. Both congressmens assistants were willing to listen to our advocacy issues and spent enough time with us. For the majority of
us this was a learning experience dealing with the law makers in Washington DC on subject matters important to enrolled agents. We learned that seniority of congressmen determines the location of the office (s)he receives. If a congressman resigns, loses an election, dies or is censored (all are rare occurrences), the vacant office is assigned based on seniority of congressmen remaining in office. So it is like a big musical chair game for 635 offices in the congress buildings. At 4:30pm there was a Fly-in day reception at Capitol Hill club located at 300w First Street, SE Washington DC. The reception was great a way to meet other state affiliates members and leaders and exchange ideas and problems. It was a spring day with nice weather in Washington DC. During the break period between two meetings Joyce, Walter and I took a one hour guided tour of the capitol building which was a great educational experience about our democracy and history. The expense for Fly-in day is a lobbying, nondeductible personal out of pocket, cost to the participants. Submitted by Shanti Patel, EA n
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2011-12 Scholaship Winners: Lory Sorgman, Leonard Rea, Margaret Wood , Kay Cassidy, Judith Kellogg, and John Spellman(not in picture) with Chair Maria Lucas. Photo by Phil Wachsler.
May 2011 Meeting on Ethics
Terry Durkin Adressing May monthly meeting in Hawaiian shirt May 19, 2011 photo by Phil Wachsler
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Carol Thompson, EA Our Speaker of May 2011 meeting on Ethics. Photo by Phil Wachsler.
Tax Audit Specialist
Focus on Your Core Business Charles A. Belanger, EA Let me relieve you of the burden of audits and collection issues so you can concentrate on your core business. Your referrals are always welcome. Together we can make a difference.
The Tax Professionals Professional 508-407-8025 Charles@taxauditprofessionals.com 5 Whitney Circle Auburn, MA 01501 the briefcase | 11
Business Owners, Financial planners and Accountants Face Large IRS Fines for Retirement, Welfare Benefit and other Plans.
L
ast year I received over a thousand phone calls from business owners, accountants and others who were in trouble with the IRS over a recent large fine. If you were in what the IRS considers an abusive, listed or similar to transaction, you face a hundred thousand dollar IRS fine under IRS code 6707A. Thousands of people, are being attacked by the IRS for either being in, selling or advising about various types of plans which are primarily marketed by insurance professionals. Accountants, insurance agents and others sell 419 Welfare Benefit, 419, captive insurance and section 79 plans to unsuspecting professionals and business owners. Since the IRS is calling many of these plans abusive tax shelters, many small business owners are getting audited and getting penalties under IRC 6707A. They have even fined material advisors and accountants for their participation.. Their former business owner clients then sue the sellers of these plans. The accountant who signed the tax return also gets sued. I have been an expert witness
me with the big problem. The clients loses his tax deduction, pays interest and penalties and is facing a large fine for failing to properly file form 8886. Sometimes the accountant is also facing a $100,000 fines as a material advisor. The IRS calls accountants material advisors if they get paid and give tax advice, or sign tax returns with abusive or similar plans on them. The accountant can also be referred to the office of professional responsibility. Insurance companies through Insurance agents and others sell 412i, 419, captive insurance and section 79 plans to unsuspecting business owners. The IRS considers many of these plans abusive tax shelters, listed transactions, reportable transactions, or what it calls “similar to,” which allows them to target the plan. Many or the business owners then get audited by the IRS, lose their deductions, and pay interest and penalties. Then comes the bad news. The IRS comes back and fines the business owners a large amount of money for not properly filing under IRC 6707A. They
Taxpayers must report certain transactions to the IRS under Section 6707A of the Tax Code, which was enacted in 2004 to help detect, deter, and shut down abusive tax shelter activities in some of these cases, and my side has never lost. For the accountant, this is an unbelievable situation. First he signed the tax return and did not know that anything was wrong. Then he sometimes, stupidly tries to help his client with the 8886 form. Because he has no experience with the form he will make mistakes. The IRS treats these improperly filed and or filled out forms as if they had never been filed. My office sometimes gets a phone call from the accountant. When I try to explain the problem the accountant usually does not believe it. Why would a legitimate insurance company that vetted the plan allow something abusive to be sold? Why hasn’t the accountant heard about these types of problems etc. Usually a few years later the accountant, or his client calls
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have even fined hundreds of business owners who have filed. The IRS says that they prepared the forms incorrectly or filed improperly, or lied to the IRS. As I write this article the situation becomes worse for the participants. Taxpayers must report certain transactions to the IRS under Section 6707A of the Tax Code, which was enacted in 2004 to help detect, deter, and shut down abusive tax shelter activities. For example, reportable transactions may include being in a 419,412i, or other insurance plan sold by insurance agents for tax deduction purposes. Other abusive transactions could include captive insurance and section 79 plans, which are usually sold by insurance agents for tax deductions. Taxpayers must disclose their
participation in these and other transactions by filing a Reportable Transactions Disclosure Statement (Form 8886) with their income tax returns. People that sell these plans are called material advisors and must also file 8918 forms properly. Failure to report the transactions could result in very large penalties. Accountants who sign tax returns that have these deductions can also be called material advisors and should also file forms 8918 properly. The IRS has fined hundreds of taxpayers who did file under 6707A. They said that they did not fill out the forms properly, or did not file correctly. The plan administrator or a 412i advised over 200 of his clients how to file. They were then all fined by the IRS for filling out the forms wrong. The fines averaged about $500,000 per taxpayer. A report by the Treasury Inspector General for Tax Administration (TIGTA) found that the procedures for documenting and assessing the Section 6707A penalty were not sufficient or formalized, and cases often are not fully developed. TIGTA evaluated the IRS’s effectiveness in identifying, developing, and applying the Section 6707A penalty. Based on its review of 114 assessed Section 6707A penalties, TIGTA determined that many of these files were incomplete or did not contain sufficient audit evidence. TIGTA also found a need for better coordination between the IRS’s Office of Tax Shelter Analysis and other functions. “As penalties are meant to encourage voluntary taxpayer compliance, it is important that IRS procedures for documenting and assessing them be well developed and fully documented,” said TIGTA Inspector General J. Russell George in a statement. “Any failure to do so raises the risk that taxpayers will not receive consistent and fair treatment under the law, and could further reduce their willingness to comply voluntarily.” The Section 6707A penalty is a stand-alone penalty and does not require an associated income tax examination; therefore, it applies regardless of whether the reportable transaction results in an Continued on page 14
1040 Fun Page
Submitted by Nancy E. Goedecke, EA.
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Continued from page 12
understatement of tax. TIGTA determined that, in most cases, the Section 6707A penalty was substantially higher than additional tax assessments taxpayers received from the audit of underlying tax returns. I have had phone calls from taxpayers that contributed less than $100,000 to a listed transaction and were fined over $500,000. I have had phone calls from taxpayers that went into 419, or 412i plans but made no contributions and were fined a large amount of money for being in a listed transaction and not properly filing forms under IRC section 6707A. The IRS claims that the fines are non appealable. On July 7, 2009, at the request of Congress, the IRS agreed to suspend collection enforcement actions. However, this did not preclude the issuance of notices of assessment that are required by law and adjustment notices that inform the taxpayer of any account activity. In addition, taxpayers continued to receive balance due and final notices of intent to levy, and demands to pay Section 6707A penalties. TIGTA recommended that the IRS fully develop, document, and properly process
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Section 6707A penalties. The IRS agreed with TIGTA’s recommendation and plans to take appropriate corrective actions. I think as a result of this many taxpayers who have not yet been fined will shortly receive the fines. Unless a taxpayer files properly there is no statute of limitations. The IRS has, and will continue to go back many years and fine people that are in listed, reportable or substantially similar to transactions. If you are, or were in a 412i, 419, captive insurance or section 79 plan you should immediately file under 6707A protectively. If you have already filed you should find someone who knows what he is doing to review the forms. I only know of two people who know how to properly file. The IRS instructions are vague. If a taxpayer files wrong, or fills out the forms wrong he still gets the fine. I have had hundreds of phone calls from people in that situation. Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, financial and estate planning, and abusive
tax shelters. He writes about 412(i), 419, and captive insurance plans. He speaks at more than ten conventions annually, writes for more than 20 publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Pubic Radio's All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education's CPA's Guide to Life Insurance and Federal Estate and Gift Taxation, as well as AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and his side has never lost a case. Visit www.section79plan. org for more on this subject. n Submitted by Lance Wallach. The information provided herein is not intended as legal, accounting, financial, or any other type of advice for any specific individual or other entity.. You should contact an appropriate professional for any such advice.
National Association of Enrolled Agents I am applying for: Name:
Application
___ Regular Membership (EA # required; membership in state and national required) ___ Associate Status
________________________________________________________________________________________
Firm: __________________________________________________________________________________________ Street Address:
_________________________________________________________________________________
City, ST Zip: ____________________________________________________________________________________ Business Phone: ___________________________ Fax: ________________________________________________ Email: _________________________________________________________________________________________ IRS Enrollment Number (if applicable):____________ Referred by: ________________________________________ National Dues: Membership renews on an anniversary basis. NAEA bylaws require 30 hours of CPE per calendar year, including 2 hours of Ethics. CPE requirements for new members will be pro-rated, 2 hours for each month of membership during the calendar year with at least 2 hours of Ethics. CPE is reported at the time of renewal. Affiliate Society Dues: If your practice is located in a state listed below, the amount of your Affiliate Society dues is noted. Enrolled Agents must maintain membership in both national and state associations. For information on joining a second state affiliate, please contact NAEA. *Second dues rate listed is for Associates.
___ Alabama Society of Enrolled Agents (AL) ................ $25 ___ Alaska Society of Enrolled Agents (AK) ................... $0 ___ Arizona Society of Enrolled Agents (AZ).................. $50 ___ Arkansas Society of Enrolled Agents (AR) .............. $30 ___ *California Society of Enrolled Agents (CA) ............. $170/$119 ___ Colorado Society of Enrolled Agents (CO) .............. $35 ___ Connecticut Society of Enrolled Agents (CT)........... $40 ___ Florida Society of Enrolled Agents (FL) ................... $60 ___ Georgia Association of Enrolled Agents (GA) .......... $55 ___ Hawaii Society of Enrolled Agents (HI) .................... $40 ___ Illinois Society of Enrolled Agents (IL) ..................... $55 ___ Indiana Society of Enrolled Agents (IN) ................... $25 ___ Iowa Society of Enrolled Agents (IA) ....................... $25 ___ Kentucky Society of Enrolled Agents (KY) ............... $15 ___ Louisiana Society of Enrolled Agents (LA)............... $30 ___ Maryland/DC Society of Enrolled Agents (MD/DC).. $35 ___ Massachusetts Society of Enrolled Agents (MA) ..... $50 ___ Michigan Society of Enrolled Agents (MI) ................ $35 ___ Minnesota Society of Enrolled Agents (MN) ............ $45 ___ Mississippi Society of Enrolled Agents (MS)............ $30 Application Fee ..................................... $ 28.00 National Dues ...................................... $ 185.00 Affiliate Society Dues ............................. _______ Total Submitted .................................... _______ Check
Visa/Mastercard/Amex/DC
Cash
CC #: ___________________________Exp: _______ Name on Card: ______________________________
___ Missouri Society of Enrolled Agents (MO) ................... $25 ___ Nevada Society of Enrolled Agents (NV) ..................... $75 ___ New Jersey Society of Enrolled Agents (NJ) ............... $35 ___ New Mexico Society of Enrolled Agents (NM) ............. $30 ___ New York State Society of Enrolled Agents (NY)......... $40 ___ North Carolina Society of Enrolled Agents (NC) .......... $30 ___ Northern New England (ME/NH/VT) ............................ $25 ___ Ohio State Society of Enrolled Agents (OH) ................ $60 ___ Oklahoma Society of Enrolled Agents (OK) ................. $50 ___ Oregon Society of Enrolled Agents (OR) ..................... $35 ___ Pennsylvania Society of Enrolled Agents (PA) ............ $50 ___ Rhode Island Society of Enrolled Agents (RI) .............. $30 ___ *South Carolina Society of Enrolled Agents (SC) ........ $35/$50 ___ Tennessee Society of Enrolled Agents (TN) ................ $30 ___ Texas Society of Enrolled Agents (TX) ........................ $50 ___ Utah Society of Enrolled Agents (UT) .......................... $40 ___ Virginia Society of Enrolled Agents (VA) ...................... $65/75 ___Washington Society of Enrolled Agents (WA) ............... $65 ___ *Wisconsin Society of Enrolled Agents (WI) ................ $45/$25 Return to: National Association of Enrolled Agents 1120 Connecticut Avenue NW, Suite 460 Washington, DC 20036-3953 202-822-NAEA (6232); 202-822-6270 fax Benefits and requirements of membership are outlined in the NAEA Bylaws. I understand these requirements, and that this membership may be terminated by me at any time, or by the Association or Society, according to the circumstances outlined in the Association’s Bylaws.
______________________________________________ Signature and Date
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MaSEA COMING EVENTS Massachusetts Society of Enrolled Agents Leadership Workshop Thursday, July 21st
MaSEA Leadership Workshop
Tess will facilitate a discussion with members management styles, their advantages and about planning for attracting new members, disadvantages, and the situations in which each based on their experience and what they have just style would be the most effective. learned about group membership theory. Management Case Study Participants apply Pros and Cons of Delegation: A facilitated what they have just learned through the use of Full-day workshop conducted by Tess George discussion about the advantages and case studies. of Speakwell Training disadvantages of delegating. Thursday, July 21st • 8:00 AM to 5:30 PM Goals versus Time Use Exercise: Participants will 10:00 A.M. Break Holiday Inn Select Boston-Woburn be invited to explore, though a brief activity, how Middlesex Canal Park Road DISC Personality Test: Tess will present the they spend most of their time related to MaSEA theory and participants will assess their own Salon A • Woburn, MA 01801 membership. personality type. • Please register by Wednesday, July 20th Team Exercise Using Personality Types: 3:00 P.M. Break Participants will group by personality type Delegation Exercise: Practice of delegation skills and will work together to answer questions • $30.00 in a brief exercise. and report out as a group. This will help Agenda Facilitated Discussion of 2011-2012 Goals: participants to gain a fully understanding of Tess will facilitate planning for the coming year. how Personality Theory works. 8:00 A.M . Continental Breakfast Summary, Next Steps, Live Feedback and Group Membership Theory: Tess will review Evaluations: Tess will lead and/or facilitate these the research and theories about why people 8:30 A.M. Convene activities and discussions. join groups and what elements influence their Introductions and Ice Breaker: Get to know each other and “break the ice” with a quick activity. decision to become active members or to leave 5:30 P.M. Adjourn the group. Guided Discussion on Leadership and Management: Tess will discuss the difference Register Now! Improved leadership skills 12:00 P.M. Lunch between Leadership and Management. benefit every aspect of your business, career Group Membership Exercise: Activity in which Participants think about and reflect on which and personal life. Please join us in becoming participants apply what they have just learned role they want to play at what times. a better leader and making MaSEA a stronger about group membership. Learning about Management Styles: Tess will leader in the tax profession. Action Planning for Attracting New Members: present research and theories, four specific If you’ve ever wondered what makes a good leader or how a leader can help our group meets its full potential -this workshop is for you.
BOSTO MARROTT ETO, 23 OMMOEALT AE., ETO, MA. TO OF MASS PE, ROTE 12 ROTE 30. Mail checks to MaSEA, P.O. Box 2632, Peabody, MA 01960 or BOSTO MARROTT ETO, 23 pay by PAYPAL on line. OMMOEALT AE., ETO, MA. TO OF MASS PE, ROTE 12 ROTE 30. Mail checks to MaSEA, P.O. Box 2632, Peabody, MA 01960 or pay by PAYPAL on line. prtat te e E prtat te e E Advertising in The Briefcase:
Advertising in The Briefcase: Advertising in The Briefcase For information or to place an ad, contact Leon Rudman, EA Please patronize our advertisers. In this issue: CFS Tax Software, Small Business Accounting Services, Tax Audit Specialist and Tax Research Services. Be sure to mention you saw them in MaSEA’s Briefcase. For information or to place an ad, contact Leon Rudman,EA. For information or to place an ad, contact Leon Rudman, EA MaSEA’s The Taxpayers Tax Expert MaSEA’s The Taxpayers Tax Expert 16 | the briefcase