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- Written by: CPA Magazine
On his Inauguration Day, President Trump issued an Executive Order which caused the IRS to not reject tax returns due to lack of health coverage indication on the 1040.
While the AICPA has no position on this issue, its VP of Taxation Edward Karl uses the AICPA’s tax ethical standards to determine that compliance is still critical. The IRS’ response is very clear “…legislative provisions of the ACA law are still in force until changed by Congress, and taxpayers remain required to follow the law and pay what they owe.
Karl suggests you explain the IRS’ response to your clients, but then follow existing law such as minimum essential coverage, an exemption or reporting the payment. Otherwise, you cannot sign the return.
In other news...
Rev. Procedure 2017-25 formally establishes the Small Business/Self Employed Fast Track Settlement program (SB/SE FTS) to provide an expedited format for resolving disputes with SB/SE taxpayers.
When the parties agree that SB/SE FTS is appropriate, the taxpayer and the examiner must jointly complete and sign Form 14017, Application for Fast Track Settlement, and prepare the Application Package, which must include the Form 14017, properly documented work papers supporting the examiner’s position, and the taxpayer’s written response.
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- Written by: Tiffany Couch, CPA/CFF, CFE
It’s that time of year again. You are fully in the swing of tax season, counting the days until April 18, frustrated that your clients are not bringing in their financial documents. Have you considered that the delay may be the result of their inability to get financial information from their trusted bookkeeper?
I recently had a conversation with a potential client whose bookkeeper stalls each time he asks her for documents. He described it as “pulling teeth” to get anything from her. His CPA urged him to call me because the client feels that cash flow “just doesn’t seem right” even though sales have increased in the last year. When I told him I’d be happy to help and perhaps we should just start with the bank statements, cancelled check images and QuickBooks, the phone went silent.
“I can’t ask her for that,” she said. “She’ll think that I don’t trust her if I start asking questions.” When I told him that I was concerned that some of what he was telling me are common indicators of employee embezzlement, he scoffed. “She would never do that to me.”
These comments are not uncommon for me to hear in my forensic accounting office and they are the primary reason why frauds go undetected for so long.
The first rule in understanding employee embezzlement is understanding that perpetrators rely on their ability to be liked and trusted to gain access to your client’s funds. If you asked any of my clients, before the fraud was found, who the most trusted employees in their organization were, the fraudster would be at the top of the list.
The second rule in understanding employee embezzlement is understanding that fraudsters will use everything from, “I’m too busy” to “How dare you ask me questions” to “You don’t trust me?” to resist providing documents to the very business owners who provide them steady employment. Our clients are nice people who are relieved to have someone so trustworthy to do the involved work of daily accounting necessary to run a business. They are so nice, in fact, that they are often afraid to “rock the boat” with their trusted bookkeepers.
On average, asset misappropriation schemes are in excess of $150,000 and have been ongoing for 18 months before they are detected. It is my contention that CPAs who prepare taxes for small business could be serving as a first line of defense in uncovering these schemes faster. As your small business clients come in this year to drop off documents or pick up their tax returns, I encourage you to consider adding value to those engagements, and your clients’ businesses, by considering the following as part of your annual tax engagement:
1. If the client uses QuickBooks, consider running an Audit Trail Report before you run their trial balance report. The features within this report bold and italicize transactions that have been changed or deleted. Identify whether any changed or deleted transactions look unusual or may indicate fraud could be occurring (e.g. deleted deposits, a check written to an employee or suspicious vendor with the payee name later changed to a legitimate vendor, payroll checks changed).
2. Ask the client to bring in their bank statements and cancelled check images for the 12-month tax period. Review those statements to ensure that all debit transactions and payee names on cleared checks are for your client’s business purposes (i.e. verify there is no unauthorized use of your client’s funds).
3. Verify that sales posted to your client’s ledger match deposits to their bank account. If there are shortages, could this be a sign of a potential cash/check skimming scheme?
4. Have a brief conversation with your clients on the importance of simple but effective controls for the prevention of fraud (e.g. review bank statements and cancelled check images, separating customer invoicing from banking duties, reviewing payroll reports after payroll is processed).
You may receive pushback from your clients at first, but arm yourself with the facts and remind them that these steps are necessary to avoid suffering the heartbreak or financial loss associated with a thief in their company.
Tiffany Couch, CPA/CFF, CFE is a nationally-recognized forensic accountant and author of The Thief in Your Company, an intimate look at the financial and emotional impacts of insider fraud. For more information, visit www.tiffanycouch.com
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- Written by: CPA Magazine
There are several tax credits expiring and it would be prudent of CPA to take notice. Such expiring credits include the exclusion of up to $2 million of forgiven debt on primary residences. More are the credit for installing energy-efficient windows and exterior doors in one’s house, the write-off for private mortgage insurance and the 30% credit for geothermal heat pumps.
PEOs
PEO – Professional Employer Organization. What is a PEO you ask? It is your Health Insurance, Workers Comp., Retirement and HR department.
Think of it this way, would it be cheaper to outsource every aspect of your employee benefits to separate companies? The retirement, the health insurance, the payroll, the workers comp? It’s possible. However, what would employees think of those benefits? Would the employees receive higher quality benefits from a PEO? It’s likely.
A PEO takes your company of 12 employees and puts them under their umbrella, so instead of getting pricing for health insurance, workers comp and retirement for only 12 employees, you get the pricing for the cream of the crop benefits (depending on which PEO you select) at the rate of hundreds of thousands employees. Plus, most handle the 1094-1095C Reporting.
It is worth taking a look at how clients currently flesh out company benefits and evaluating some of the other options available. Also, it’s important that even if you currently have a PEO, to evaluate every year.
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- Written by: CPA Magazine
President Trump has undergone some criticism for not releasing his tax returns to the press and public as presidents have done in the past. Here are five reasons why President Trump may not want or be unable to release his returns.
1. Some of President Trump’s returns are under audit. Public opinion on tax returns while the IRS is reviewing the returns would complicate the audit for Trump and the IRS.
2. Releasing returns to the public who often do not understand a simple 1040 would create questions on topics ranging from AMT to NOLs with no definitive answers.
3. Carryforward and carryback losses and gains could be impacted. Oponents of President Trump could recommend IRS action on closed items.
4. It is not legally required that candidates for public office release any tax returns.
5. Trump once suggested the IRS is targeting him. One theory says he ran for president to help reduce the IRS’ harassment of his businesses.
Learn more about what information previous presidents have provided the public at http://www.taxhistory.org/www/website.nsf/Web/PresidentialTaxReturns
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- Written by: Joshua Fluegel
The Affordable Care Act, or Obamacare, has made just as much of an impact in the accounting world as it has politically. Tax professionals and software vendors alike have scrambled to implement processes and products in payroll processing software to ease the transition and stay on top of this fluctuating regulation. There are several key points software vendors have offered to make sure tax professionals keep their clients safe and free from costly fines.
“One very important thing to remember is that, for employers who need to comply with ACA Reporting (Obamacare), tracking employee information, as well as employee family information, is a necessity within the accounting software,” said Ken Hilton, president of Red Wing Software.
“While the ACA may be a moving target for the foreseeable future, until the law changes, employers need to comply. One example is preparing Forms 1094-C and 1095-C,” said Vic Saliterman, senior vice president of ADP Health Care Reform. “In fact, a recent ADP study showed that about 40% of organizations reported spending more time on Forms 1094-C and 1095-C than IRS estimates. And about 40% of employers handling ACA compliance internally did not meet the original deadline for distributing Form 1095-C to their employees.”
“The IRS continues to remind taxpayers who have Marketplace coverage to go to the Exchange when their income changes or when they qualify for workplace coverage, otherwise they’ll need to pay part or all of the ACA subsidy (Advance Premium Tax Credit) back,” said Mike D’Avolio, tax specialist and customer liaison with ProConnect Group. “IRS figures show 51% of filers hit the income cap and had to repay an average of $860. Taxpayers may be unaware they still had Marketplace coverage because they 1) are auto-reenrolled by Healthcare. gov or State Marketplace; 2) have a lowcost plan with no additional contribution; and 3) the subsidy is transmitted directly to health plan.”
“A valuable function to keep in mind when it comes to accounting and payroll is to make sure the program you’re using to track FTE requirements can integrate with your payroll solution,” said Ray Barlow, vice president of Sage Accountant Solutions. “The ability to automatically track FTE requirements and determine who qualifies, then roll this information directly into an accounting solution, will eliminate the need to manually calculate and re-enter this information into existing payroll software.”
Various functions throughout the software cannot only guide clients through the process of managing government- mandated healthcare but stop them from accidentally falling into legal entanglement.
“An integrated ACA solution can help track employee work status for each month, who was offered coverage, and whether that coverage met affordability standards,” said Saliterman. “It also will ultimately provide several years of employee data which may be needed to respond to an IRS inquiry.”
“The trick comes down to whether software can organize that data in useful ways,” said Fred J. Ode, chairman and CEO of Payroll4Construction. com. “For example, measurement groups and measurement periods are a new dimension to payroll tracking brought by the ACA. Users need to be able to define and control these easily so they can track eligibility without resorting to complex spreadsheets or guestimates.”
“For individuals, the tax return implications of the passage of Affordable Care Act are extensive, and software packages are critical for reporting the new requirements accurately,” said Mark Luscombe, JD, LLM, CPA, principal federal tax analyst at Wolters Kluwer Tax and Accounting. “Increased taxes reported on Form 8959, Additional Medicare Tax, and Form 8960, Net Investment Income Tax, calculate the additional tax automatically, with Form 8960 including an allocation of state tax payments to net investment income to reduce the taxpayer’s net investment income tax.”
“Forms 1094-B and 1094-C and Forms 1095- B and 1095-C to employees— the disbursement date has been extended to March 2, 2017,” said James Paille CPP, director of operations for Thomson Reuters myPay Solutions. “The date for forms filed to the IRS on the AIR system is still March 31, 2017.
“The ACA as we know today will change (specifics to be determined). Will 1095 forms cease? More than likely, and it’s unknown what will replace them. One thing is certain—the 2018 Trump budget proposal, which will come out in early spring 2017, will be eye-opening.”
Much possibility looms with a new president in office. This possibility will require flexibility from both tax professionals and software.