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Written by: CPA Magazine

Published: 20 March 2016

The 21st century has replaced the brick and mortar locations of most CPA firms and replaced them with websites. While many CPAs still have an office where they meet with clients and conduct business, a great deal of the emphasis of curb appeal and customer service has been allocated to a website. The options available from website builder vendors is ever growing making the selection of one more difficult. The following are descriptions of some of the unique functions each vendor offers CPA firms.

The AccountantsWorld website builder allows the user to create surveys to get client feedback with survey links on the user’s website which can help enhance client relationships. The Website Relief product is also continually adding newsletter content that can be useful to clients and can help establish the user as a trusted source for accounting news.

Build Your Firm’s website builder provides retargeting advertising in addition to pay per click advertising. Retargeting is designed to pull prospects back to the user’s website. There is also a niche website service for accountants (by industry and/or type of service) so accountants can acquire higher quality leads.

ClientWhy’s websites are fully mobile-responsive and Google mobile compliant – this means they will look appealing on all screen sizes, including mobile devices. It also means users’ websites will be rewarded by Google for this mobile-friendly design. Also, one login allows the user to manage and update their website, manage client communications and share and receive secure documents.

CPAsites websites are custom designed from scratch. CPAsites encourages firms to find a website (or several) they like, whether it’s another CPA firm or a law firm or an architectural firm and provide it to them as an example. A website will be designed based on the example.

CPASiteSolutions’ website builder features custom design services with more than 250 site styles and over 100 responsive designs. The designs are built to adhere to Search Engine Optimization (SEO) best practices. The websites allow for unlimited pages and users have access to over 150 tools and calculators.

Service2Client’s datacenter is SOC 2 Type II and a copy of the SOC report can be requested by current paying ICFiles users after signing NDA. Service2Client does not resell any software and they claim to have never had a data breach.

Tenenz’s Account & Financial Site Builder (AFSB) allows users to edit content, add links to other tools or resources or embed applications inside the site at any time. The financial calculators and monthly client newsletters make a website a regular resource for clients. Members get a discount on physical products like W-2s and 1099s, tax return folders and marketing materials.

Thomson Reuters’ Web Builder CS sets up and manages the website. Users also receive personalized service from their own website account manager, as well as a dedicated tech team to launch and update the site as needed, plus unlimited technical support.

Wolters Kluwer Tax & Accounting’s CCH Site Builder includes the ability to create a “Careers” page on the user’s site. This tool allows firms to post jobs and accept resumes through the website. Users can also create job categories to help classify and organize open positions.

The following chart provides the website, technical issue phone number and pricing for each vendor:

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Written by: T. Steel Rose, CPA, ACS Editor

Published: 17 March 2016

The dawn of a new year brings a fresh opportunity to help clients make tax-optimized decisions. Here are additional three tips and tricks to help tax professionals manage, enhance and expand their practice this tax season. Click HERE to view my 3 previous tax tips for this tax season

IRS Tax Tools

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

AICPA Marginal Tax Rate Calculator

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

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

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Written by: Dean Zerbe and Steven Miller

Published: 28 January 2016

In all of the talk surrounding the $600 billion plus tax bill signed into law by the President last month, an underreported change within the deal could have the greatest impact of all for U.S. businesses. We are of course referring to the changes made to the Research and Development (R&D) Tax Credit, which was not only made permanent as part of the Protecting Americans from Tax Hikes (PATH) Act of 2015, but also includes two key adjustments that will greatly expand the number of businesses able to take advantage of the credit.

Last year alone, the R&D Tax Credit provided over $10 billion in tax savings to U.S. companies. Taking into account the enhancements made to the credit, enhancements that were designed to allow startups and small businesses previously barred from the credit to now claim its tax benefits just as larger corporations currently do, it is estimated that the research credit could provide an additional $2 billion to U.S. businesses.

Considering the value on the table for U.S. companies, CPAs and tax practitioners should be getting in front of their clients now to discuss this tremendous opportunity to grow their businesses. To understand the full ramifications of the new and improved R&D Tax Credit, let’s explore three modifications in detail: (1) permanency, (2) the turnoff of the AMT bar and (3) the new startup provision.

1. Permanency

To begin, let’s start with those companies that were already claiming the credit, and what certainty can mean for tax practitioners and CPAs when planning for the future. Since its introduction over three decades ago, the R&D Tax Credit has, until now, been a temporary business credit. Although the credit has been renewed and its reach expanded multiple times, the constant (and often deadline-driven) extensions have prevented companies from being able to truly strategize the future of their businesses around its availability.

Since the beginning, the R&D Tax Credit was designed as a financial incentive for innovative companies that were investing time, money, and U.S.-based man hours into improving their products and processes. And while the words “R&D” may bring to mind the kind of research taking place in a lab, the credit is also very much about rewarding applied science as well—the steps taken to make a product or process cheaper, cleaner, faster, greener or more efficient. The credit was intended not only to reward this kind of technical problem solving, but to ensure businesses continue to invest in new and improved products and processes for years to come, while keeping well-paying technical jobs on U.S. soil.

As most business owners will tell you however, it is very difficult for them to plan and invest in future endeavors (and in this case, R&D endeavors) if they are unsure what the laws and regulations are going to be beforehand. Now, with respect to the R&D Tax Credit, those worries are a thing of the past. With permanency comes certainty, and businesses will now be able to tailor their future processes and investments knowing full well the credit will be around to offset the costs.

2. AMT Turnoff

Now, let’s move to the expansions—starting with the AMT turnoff.

Old Policy Shortcomings
In the past, the greatest hurdle preventing small and medium businesses from claiming the R&D Tax Credit was the alternative minimum tax (AMT) bar provided in sec­tion 38(c) of the tax code. As tax advisors working in this area will tell you, the AMT barrier has long prevented owners of pass-through entities from using the research credit to reduce their taxes below their tentative minimum tax (TMT).

Let’s take a basic example—if business owner Bob was paying AMT in tax year x, he could not take the R&D Tax Credit for tax year x. If Bob was paying regular tax (and paying no AMT because his regular tax was above his TMT), he could reduce his tax liability, but only to his TMT level. So, in effect, a business owner would often get little to no benefit when filing for the research credit.

Many tax advisors have found that it is a good idea not to have any breakable ob­jects within arm’s-reach of a client when explaining that yes, the client has en­gaged in activities that make them eligible for the R&D Tax Credit, but no, the client cannot use the credit to reduce his or her taxes this year (or only a much re­duced portion of the taxes) because of the limitations of section 38(c). And, of course, this impacts Bob’s views on whether and to what extent he invests in future innovation.

Given that a strong majority of small and medium businesses are organized as pass-through entities (the owners of which are often subject to AMT), the reality of the AMT bar has been that tens of thousands of businesses are effectively pre­vented from taking full advantage of the credit. In our experience, under the old law, the vast majority of businesses that we talk to that would have qualified for the R&D Tax Credit could not utilize it due to the AMT bar in section 38(c).

Policy Solutions
In an effort to address this shortcoming and to provide an incentive to innovate while providing tax relief for small and medium businesses, the law was changed starting in 2016. The recently passed tax extenders bill effectively turns-off the AMT bar for “eligible small businesses” (defined by the PATH Act as businesses with less than $50 million in average gross receipts for the prior three years) that otherwise qualify for the R&D Tax Credit.

When it comes to calculating the credit, the tentative minimum tax is treat­ed as being zero for those qualifying companies defined as “eligible small businesses,” meaning they can use the credit to offset within parameters both regular and alternative minimum tax liability. The policy is very similar (although with some technical differences that we would highly recommend you review with a qualified tax advisor) to the AMT turn-off that was implemented as part of the Small Business Jobs Act of 2010. That year, we saw firsthand the game-changing impact this provision had in helping keep the doors open for businesses in the midst of a then challenging economy. With the removal of the AMT barrier, we foresee a similar positive economic impact, and estimate a ten-fold increase in the number of small businesses that can utilize the R&D Tax Credit.   

3. Startup Provision

Now, on to the startup provision.

For years, one of the real oddities of the R&D Tax Credit was that many of our nation’s most innovative companies were unable to claim the credit as they were just opening their doors. Taking into account that the majority of startups are not immediately profitable, and thus pay no federal income taxes, it follows that the majority of our nation’s most cutting-edge companies were essentially barred from a credit designed to reward business ingenuity—clearly, an obvious disconnect from the intent of the credit to its real-world application. And this disconnect occurred at the most sensitive time of a company’s life cycle, its nascent phase when every dollar is most essential.

An important amendment—the startup provision—changes all of that. Now, starting in 2016, startups (defined by the legislation as businesses with gross receipts of less than $5 million a year) will be able to take the credit, capped at $250,000 against certain payroll taxes, beginning in 2017. This is obviously big news for software and technology companies that, due to the innovative nature of their work, are among the best candidates for the R&D Tax Credit.

To show the provision in practice, let’s take a real-world example. One software development company whose R&D activities alone would have qualified them for around $100,000 in federal credits was unfortunately barred from their projected federal tax savings, largely a result of the company simply not being around long enough to generate profits for taxable income.

However, under the new provision, this same company with an annual payroll of $1.75 million­, that also pays $108,500 in payroll taxes, would be able to use the credit to reduce their payroll taxes down to $8,500. The net gain, $100,000 in added tax savings, could be reinvested in any way the business deems fit.

Impact on CPAs and Tax Advisors
As you can see, the benefits of this legislation regarding the research credit are massive. Quite frankly, this is probably the biggest news on taxes for startups and small businesses in years, and tax practitioners with clients in fields as diverse as computer software, pharmaceuticals, chemistry, biology, nanotechnology, robotics, energy, engineering, architecture, construction, manufacturing, food processing, and agriculture (and that’s just to name a few) should take a second look when evaluating their clients’ eligibility for the credit.

Now, it is up to CPAs and tax consultants to ensure their clients are taking advantage of every opportunity afforded under the R&D Tax Credit.

Dean Zerbe is alliantgroup’s National Managing Director and the former Senior Counsel to the U.S. Senate Finance Committee.

Steven Miller is alliantgroup’s National Director of Tax and the former IRS Acting Commissioner.

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Written by: Adam S. Fayne, J.D.

Published: 27 January 2016

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

Traditional OVDI Program – 27.5% penalty or greater

Under this program, the taxpayer is eligible to make an OVDI if he/she is not currently under audit, the money in the foreign account or asset was earned legally, and the IRS does not already know about the taxpayer’s foreign account or assets. The wild card is whether the IRS already knows about the taxpayer. This can be confirmed in advance by doing a pre-clearance request with the IRS OVDI centralized office.

[This article is course content for the Tax Season 2016 CPE quiz, worth 3 CPE credits! Reach the quiz and additional content HERE.]

Once accepted to this program, the IRS will provide the taxpayer a letter stating that it is their policy to not recommend criminal proceedings as long as the taxpayer remains truthful and transparent during the OVDI process. The IRS does not (and cannot) grant immunity, but it is their policy not to seek criminal charges in an OVDI.

Once the taxpayer is accepted to the OVDI, the taxpayer must prepare and file eight years of amended (or original) income tax returns and the same amount of Forms 114a (FBARs) to report the income and the bank account, respectively. The taxpayer will be required to pay the tax, a 20% penalty on the tax, and interest.

The taxpayer will also be required to pay a minimum 27.5% penalty on the highest value of the account over the eight-year period, but it could be 50% if the bank is a “listed bank.” The IRS has a list of banks that have cooperated to such an extent that the value of the taxpayer’s OVDI is not as great and, in turn, it penalizes the taxpayer and requires her to pay a 50% penalty.

IRS OVDI Streamlined Program

Beginning in the summer of 2014, the IRS introduced the Streamlined Program. This program is designed for non-willful taxpayers. That is, taxpayers who did not intentionally fail to report the existence of the foreign asset or its income. Under this program, a taxpayer must submit three years of amended income tax returns (or original income tax returns for non-residents) and six years of Form 114a (FBARs).

A taxpayer that resides in the United States must pay the tax, a 20% penalty on the tax, and interest. This taxpayer must also sign a statement under penalties of perjury and pay a 5% penalty on the highest year-end value of the foreign bank account.

A taxpayer that does not reside in the United States must pay the tax and interest only. This taxpayer is also required to sign a statement under penalties of perjury that she did not intentionally fail to report the income and the assets.

This program is a relief for those non-compliant taxpayers that are able to sign the required statement under penalties of perjury.

Quiet Disclosure

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

This type of disclosure may still qualify as a voluntary disclosure under the IRS’s Internal Revenue Manual and provide the same level of criminal protection as any other choice listed above, but the unknown is the penalties. If a taxpayer is selected for examination or civil audit, there are many penalties that may apply.

The IRS Agent has great discretion in the assertion of penalties. There is a penalty ceiling but no minimum amount. The examiner may determine that the facts and circumstances of a particular case do not justify a penalty. If there was an FBAR violation but no penalty is appropriate, the examiner will issue the FBAR warning letter, Letter 3800.

However, when a penalty is appropriate, the IRS has established penalty mitigation guidelines so that the penalties determined through the examiner’s discretion are uniform. The examiner may determine that a penalty under these guidelines is not appropriate, or a lesser amount than the guidelines would otherwise provide is appropriate.

To qualify for mitigation, the person must meet four criteria including:

1. The person has no history of criminal tax or Bank Security Act (BSA) convictions for the preceding ten years and has no history of prior FBAR penalty assessments.

2. No money passing through any of the foreign accounts associated with the person was from an illegal source or used to further a criminal purpose;

3. The person cooperated during the examination; and,

4. IRS did not determine a fraud penalty against the person for an underpayment of income tax for the year in question due to the failure to report income related to any amount in a foreign account.

The following is a chart from the IRS’s Internal Revenue Manual:

Normal FBAR Penalty Mitigation Guidelines for Violations Occurring After October 22, 2004 - Per Person Per Year

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