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March 31 is World Backup Day. Why March 31? Because you don’t want to be an April fool according to World Backup Day’s organizers.

Human error, equipment failure and theft are just a few ways your organization could be at risk of data loss. Today, no firm or company can afford to be without a cybersecurity risk management program. If you’re like most CPAs, this is not news to you. In fact, if you’re somewhat of a data backup fanatic, you might already be paying for secure offsite storage of paper files as well as digital backups. Still, experts say even the most diligent often have gaps in their backup practices. Let’s look at some of the most common considerations and how to address them.

1. Do you know exactly how to retrieve your backups? For starters, knowing the person in your office who you think knows how to retrieve your backups doesn’t count. Knowing the name of one of your cloud backup vendors is not enough. Retrieval is an often underdeveloped but equally important aspect of backup planning (see #5 below). Unfortunately, there’s no single, all-encompassing solution for backing up your systems. Even in a small firm, you’ll likely need three or four different backup systems. Tax preparation, bookkeeping and auditing software packages often have integrated, cloud-based backup options. There’s the information on your office network and server(s)—here you can choose a cloud-based solution or an onsite backup system that updates each night. Then you have your desktop and laptop PCs. And, finally, you have smart phones, tablets, watches, etc. Organize your retrieval information for ALL systems and test it—like a fire drill. If your test goes off without a hitch, you can skip the rest of this post.

2. Do you back up your smart phone or tablet? 119 phones are lost or stolen every minute according to World Backup Day organizers. Fortunately, phones and tablets are easy to backup for little or no cost. Apple devices can be backed up automatically to iCloud, which is free for the first 5GB. If you have an Android device, you can automatically back up contact and email information and your app data such as calendar, browser, photos, music and things like Wi-Fi passwords. If you want an all-in-one backup solution for your Android device (recommended), Android expert Cory Gunther recommends a third-party app such as Helium or MyBackup (Pro version $6.99).

3. Do you apply a retention policy to your backups? Backups and archives aren’t necessarily the same thing, but for certain systems, you might be able to cover both with one solution. Although retention policy development is beyond the scope of this post, the point is you should have one, and backups should be incorporated into it.

4. Do you back up your PCs? Large and small organizations alike struggle with this one often, because of the challenge of managing PC backups. They’re dismissed on the basis that important files should not be stored on PCs. In reality, important files do get stored on PCs—even if temporarily—and PCs should be backed up. Solutions exist—both in the cloud and with an external hard drive that connects via USB. Both technologies have their pros and cons. Cloud solutions require a good Internet connection, which can be challenging when traveling with a laptop. External drives are easy to use and inexpensive—but they can be lost or stolen. Use both? Maybe, depending on what data you have on your laptop. Consider using encryption, too. It will add an extra layer of security, making your data much harder to access if stolen.

5. Do you have a backup plan? Simply having a system to back up your information is not the same as having a plan. A backup plan should include identifying and prioritizing information that needs to be backed up, mapping that information to the systems and devices where that information is stored daily, and then putting backup systems in place that comply with applicable laws and regulations. Documentation for each backup system and how it is administered needs to be included, complete with authorized users and retrieval procedures.

Of course, being a CPA means more than simply protecting your own data. Increasingly, CPAs are stewards of clients’ personally identifiable information as well. Backing up data securely and regularly is an essential part of a larger data management strategy.

Whether you are just now realizing the need for a backup plan or have a robust cybersecurity risk management program in place, it’s a good idea to familiarize yourself with current methodologies and processes. Technology is always evolving, and the system you put in place yesterday might not be adequate tomorrow. Use March 31 as your day to secure your data and protect your business.

In the coming weeks, you’ll hear more from the AICPA about these kinds of business concerns when we launch our cybersecurity risk management reporting framework. To help educate members about the framework, this spring, the Private Companies Practice Section is publishing a Cybersecurity Toolkit. This practice management resource can help CPAs understand cybersecurity as it relates to their own firms and assist them in starting a new service line offering cybersecurity risk management advisory services or examination services based on the framework. AICPA members can access a preview in A CPA’s Introduction to Cybersecurity.

In the meantime, find more information about addressing cybersecurity risks and protecting client data, plus related news and information on the AICPA’s Cybersecurity Resource Center.

World Backup Day courtesy of Shutterstock.

     

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I used to be afraid of networking. As an avowed introvert with a moderate case of shyness, too often I would pass up opportunities to meet and connect with people. Much later in life I would discover that networking was an acquired skill and was well within my reach. I let go of my fear of rejection when I realized that networking was not about me, but was about building relationships and finding ways to be helpful to others. I can do that. You can too.

Networking, at its essence, is the simple but profound activity of creating, freshening and strengthening an array of mutually beneficial professional relationships with a diverse cross-section of people. Here are a few tips that will help you up your game, especially when meeting people at events or in large groups.

Prepare Your Introduction

When someone asks, “What do you do?” for goodness sake, don’t just tell them what you do. Come prepared to respond with a couple of sentences that will give people a sense of who you are and the impact you aspire to have on the world. Most importantly, assume that their intentions, like yours, are to be helpful and give them something to work with. For example, don’t recite your job title, tell them the kind of people you work with and the ways in which you help them. Try sharing something that you are working on — at home, work or in your career. Good networkers will be intrigued and will try to respond in a helpful way.

Honor Your Personal Preferences

Play to your strengths. Introverts and extraverts should network very differently. At events, for example, it’s natural for extraverts to gravitate to the center of the room, dancing in and out of conversations along the way. This is how extraverts get their bearings and find their energy. It’s no less natural, however, for an introvert to plant themselves near the outside of the room and observe: not paralyzed, but confident; not fearful, but curious. This is how introverts get their bearings and find their energy.

Don’t push yourself to the center of the room unless you are inclined to do so. People will find you where you are. Step out to a less hectic place if the room is too noisy to hold a conversation. On more than one occasion I have retreated to a quiet lobby from a busy conference hall only to have a small cadre of like-minded networkers follow suit. The calmer environment made for much more productive networking.

Watch the Body Language

Not only do individuals tell a story with their body language — arms crossed, shoulders slouched, for example — but groups of people do as well. When you are looking for a conversation to join, read the signals of the group before inserting yourself. For example, when two people are standing face to face, directly across from each other, they are engaged in a closed conversation. Interruptions are not recommended here. Instead, look for two people standing in a ‘V’ formation. The open arrangement of their feet is a subconscious signal that new members are welcome in the conversation.

Similarly, a group of three or more people standing in a closed circle is not open to new members. Look for groups in a ‘U’ shape with an opening at one end. That opening is for you. Feel free to step up and join in.

Ask Good Questions

Show empathy and ask interesting questions. Instead of asking people what they do — an actual dud of a question — try asking, “What are you working on?” This is a wonderful, open-ended question that invites both parties to lean in. It can elicit responses ranging from the trivial to the sublime. As they answer, rack your brain for information, favors or introductions that may be helpful.

Extend a Hand

Shaking hands is an important ritual in America and other western cultures. Lean in to a handshake when meeting someone (“It’s very nice to meet you”) and again as you part (“It has been a pleasure talking with you”).

Keep at least one hand free. Avoid the temptation to laden yourself down with all manner of food and beverage, napkins, notebooks, handouts and handbags. If food or beverages are involved, carry them in your left hand, leaving your right hand free for handshakes and the exchange of business cards.

Follow Up

Follow-up is essential to building good relationships. When speaking with someone, make a special effort to remember names, dates and points of interest. Make notes to yourself as soon as it’s convenient and update your address book when you get back to your desk. Then, send emails, pass on any articles or information and offer to make introductions that seem appropriate or compelling.

Before I Go

An active network is a tremendous asset, the lifeblood of any vibrant career. It’s also uniquely yours, something you carry with you throughout your life. The secret to being a good networker is to embrace it with a spirit of helpfulness: it’s not so much about meeting people as it’s about the creating and freshening of connections, and it’s not focused on getting something, but rather the constant exchange of favors and information.

I wish you success.

Put your networking skills into practice at AICPA ENGAGE, June 12-15. You’ll have the opportunity to mingle with thought leaders, industry experts and your peers from all 6 conferences with one registration fee.

Heather Hollick, leadership, career, team and life coach. Heather is on a mission to make the world a better place to work, and has a knack for helping both introverts and extraverts find their voices and make an impact. She is the author of the upcoming book, What Are You Working On? — A Guide to Life, Careers, and the Art of Networking. You can learn more about Heather at: HeatherHollick.com.

     

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The end of March is here, which means that the end of busy season is just a few weeks away. Congratulations! You have accomplished a great deal so far.  I know it is easy to get discouraged at this point. You are likely feeling sleep-deprived and stressed about your looming deadlines. How will you ensure that you will finish this season strong? Maybe you stay motivated by thinking about the time you will have to catch up on your favorite shows, work out at the gym, or relax with family and friends once April 18 rolls around. Or maybe you push through to the end by turning up the music.

Whether you look for tunes with inspirational lyrics and catchy beats or songs that promote focus, there are numerous options out there, so why not create a motivational playlist?

We surveyed AICPA employees and members currently in the thick of busy season, asking what they choose to listen to during this stressful time of year. Below are some of their favorites. 

1. Don’t Stop Believing by Journey – recommended by Laura Gutteridge Años and Susan Allen
2. Hakuna Matata from The Lion King – recommended by Carol King
3. I Don’t Get Tired by Kevin Gates – recommended by Kari Hipsak
4. It’s the End of the World as We Know It (And I Feel Fine) by REM- recommended by Mike Austin
5. Just Keep Swimming from Finding Nemo – recommended by Sherry Clay
6. Levels by Avicii – recommended by Amanda Black
7. Livin’ on a Prayer by Bon Jovi – recommended by Lori Overholt and Carl Mayes
8. Let Me Clear My Throat (Old School Reunion Remix) by DJ Kool -recommended by Julia Morriss
9. One More Mile by Clarence “Gatemouth” Brown – recommended by Lindsay Patterson
10. Over the Hills and Far Away by Led Zeppelin – recommended by James Collins
11. Piano Concerto No. 21, Andante by Wolfgang Amadeus Mozart – recommended by Hiromi Young and Larry C. Herzog Butler
12. Shake It Off by Taylor Swift – recommended by Carey Mitchell
13. Shape of You by Ed Sheeran – recommended by Ashley Smith
14. Some Nights by Fun. – recommended by Shelly Guzzetta
15. Takin Care of Business by Bachman-Turner Overdrive – recommended by Sheryl Rowling and John Rodgers
16. The Road Goes On Forever by Robert Earl Keen – recommended by Wil Crawford
17. Under Pressure by Queen featuring David Bowie – recommended by Marie DeCicco
18. Walking on Sunshine by Katrina and the Waves – recommended by Cindy Frey
19. Welcome to the Jungle by Guns N’ Roses – recommended by Ashley Britton
20. What I Like about You by The Romantics – recommended by Bill Tzamaras
21. And, it wouldn’t be a tax season playlist without Taxman by The Beatles – recommended by Ed Karl, Mary Riley and Lisa Joseph

It’s the final countdown. What will you be listening to during the busy season homestretch?

 

 

 

Alexis Rothberg, Communications Manager, Association of International Certified Professional Accountants.

Ann Marie Maloney, Communications Manager – Tax and Personal Financial Planning, Association of International Certified Professional Accountants.

Man listening to music at work image courtesy of Shutterstock

     

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March is Women’s History Month, a chance for the world to acknowledge the contributions of women.  

The AICPA is on a mission to shine light on successful, female CPAs who have cracked the proverbial glass ceiling. We interviewed three women who have recently shared their talents with the AICPA by taking on the role of board chair.

Meet the first female chair to be elected in 1998, Olivia Kirtley, fourth female chair, Tommye Barie elected in 2014, and present chair Kimberly Ellison-Taylor, who made history as the first African American woman to be elected. These pioneers discuss their climb to the top and what it took for them to reach their position.

AICPA: How do you get to a position where you’re asked to chair the accounting profession’s premier organization?

Kimberly Ellison-Taylor: You have to be confident and bring your “A” game strategy.

• Attitude – You must be equipped with a positive, can-do attitude that makes people want to work with you. If people know you are enthusiastic, passionate and willing to work diligently to achieve goals, people will be willing to go out on a limb and vouch for you.
• Aptitude – I fully embrace learning as an ongoing journey and not a destination. This is a key attribute of our profession. It is very important to maintain relevant and highly valued skills in order to meet the business needs of not just today but tomorrow.
• Appearance – I pay close attention to my personal brand. To ensure that my brand will allow me to maximize opportunities, I have a personal board of directors who won’t just tell me what I want to hear, but also give me advice that will strengthen my credibility and impact in the marketplace.

AICPA: How do you learn to trust yourself and know that you are more than good enough for a job/leadership role?

Olivia Kirtley: I entered the accounting profession when firms rarely hired women for their professional staff. I knew that there was no substitute for competence, so I was determined to focus on being the best that I could be.

Much of my experience and leadership roles greatly enhanced my confidence.

AICPA: How did you earn respect in the workplace and brand yourself as a trusted leader?

Tommye Barie: I believe assertiveness and authenticity are foundational to being a great leader. Assertive people can choose how to behave, stand up for themselves and others, and maintain their own rights without stepping on others’ rights. Authenticity emphasizes a leader’s legitimacy through honest relationships. I am true to myself and I lead by example, which builds trust and respect.

AICPA: What are some of the greatest challenges you faced as a woman who has been promoted to multiple leadership roles, and how did you overcome those challenges? 

Olivia Kirtley: My greatest challenges came when working outside of the U.S., particularly as a younger corporate executive doing due diligence and leading negotiations for potential acquisitions in countries where women were not present in the executive ranks. There are still many countries today where women are not included in the upper ranks, but I have frankly not encountered any issues with business professionals or government officials respecting my leadership position.

AICPA: How do you cultivate relationships with men in power in order to gain access to mentors and sponsors who can propel your career?

Tommye Barie: Whether looking to develop a professional relationship with a male or female, I have always looked to find common interests. Sports have played a large role in that for me; my dad taught me to play golf at a young age for which I will forever be grateful. You can cover a lot of ground with anyone while playing 18 holes of golf.

AICPA: What impact does being the first African-American woman in this role have on the profession?

Kimberly Ellison-Taylor: I hope that my election as chair of the AICPA surpasses gender and serves as inspiration for people across ethnicities. I truly believe that inspiration leads to aspirations because people have to first know that it’s possible in order to do what others think is impossible. It should also show that the best and the brightest leaders can succeed and do well in our profession.

AICPA: What leadership lessons have you learned on your path to success?

Tommye Barie: Here are three basic lessons I’ve learned that have helped me over the years:

• Embrace opportunities that are outside your comfort zone.
• Aim high. Don’t settle. Be bold, be brave, and be diligent.
• Lead by example. Create a culture of leadership by showing that you’re willing to put in at least as much effort as anyone else.

AICPA: What advice do you have for other women who are seeking to gain an influential voice in the workplace and rise to higher levels of leadership?

Olivia Kirtley: Be prepared, be competent, and never stop learning. Embrace change.  Read, read, read—it will expand your horizons. Get involved inside and outside of work. Engage in conversations with others.  Find ways to volunteer and contribute beyond your current job description. Exceed expectations. Help everyone around you succeed.

Click here to find out more information on the AICPA’s Women’s Initiatives Executive Committee and its commitment to retaining and advancing women in the profession through initiatives such as the AICPA Online Mentoring Program, 2017 Women’s Global Leadership Summit and Women in the Profession Resources.  

Kimberly Drumgo, MBA, PMP, Director, Diversity & Inclusion, Association of International Certified Professional Accountants

Women’s History Month courtesy of Shutterstock.

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During tax season, accountants become accustomed to burning the midnight oil. Our long days turn into nights and nights into weekends. In the midst of our busy routines, it’s hard enough to balance career, family and a multitude of other obligations, let alone give adequate attention to physical exercise.

Carving out time for regular exercise is vital. Not only does it come with a variety of health benefits, but it also helps your mind work more efficiently. By investing in yourself and devoting energy to daily exercise, you will reap the rewards of better physical and emotional health as well as enhanced cognitive function – something we all need in order to conquer the busy season.

Here are some simple tips to fit exercise into your daily schedule and maximize every moment of your day:

1. Change it up.

Many people are reluctant to commit to a particular style of exercise – and that’s okay. Whether you’re heading to yoga class, going for a swim or taking a brisk walk on your lunch break, you’re still getting the benefits of physical activity. Because every activity has its strong points, trying a variety of them will allow you to strengthen your body in many ways, while not reaching a plateau with a single type of exercise.

2. Find your flow.

It can take a month or more to develop a new habit, so make sure you carve out time for physical exercise and stick with it. Some people find that it helps to hire a personal trainer for the first few weeks. Having a set appointment with another person makes it more difficult to skip that daily workout. Many people even have their trainer come to their office on lunch break. Once you have been exercising regularly for a month, you will find that making time for exercise becomes second nature.

3. Pencil it in.

Accountants diligently plug away at their work in a variety of pursuits. We have times of the year when it’s hard to grab a lunch, much less a full workout. In reality, exercise is extremely important work, too, because it will help you be more productive in the long run. Treat it like any other task and pencil it into your agenda. This will ensure that your days don’t fill up and your schedule doesn’t elbow out a healthy habit.

4. Take advantage of each minute.

Do you try to park as close as possible to the office or grocery store entrance? Do you find yourself riding the elevator every day? Taking shortcuts such as these can be detrimental to your health. Allowing just a few extra minutes in the morning to walk into work or go up those five sets of stairs, will certainly pay off in the end. Don’t just work exercise into your life; make it part of your life.

Once you’ve developed a habit of getting physical activity every day, you’ll likely find that the benefits far outweigh the troubles of trying to fit it into your schedule. If you make the time and take advantage of every minute of the day, you will see results. The physical and psychological effects of exercise will make your mind and body stronger while allowing for optimal performance both on the job and outside the office.

Gary M. Kaplan, MAcc, MST, CPA, founder of Gary M. Kaplan, C.P.A., P.A. Gary, practicing as a CPA since 1997, earned a Masters in Accounting at Nova Southeastern University and Masters in the Science of Taxation at Florida International University.

Exercise class courtesy of Shutterstock

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Last Wednesday afternoon, I read that Mark Cuban said he would not want to be a CPA right now because advances in technology mean it isn’t a profession for the future.

Wednesday night, I sacrificed sleep so I could write a lengthy blog post explaining how Mr. Cuban clearly didn’t consider the many ways the accounting profession is getting ahead of change and anticipating the future needs of the marketplace.

And by Thursday afternoon, I was explaining my argument to him in person.

How?

I was editing the first draft of my blog post on Thursday when a colleague walked into my office to announce that, according to rumor, Mr. Cuban was in the lobby of our office building at that very moment. Could life be so serendipitous that I could get a photo with the subject of my blog post? Naturally, I had to investigate.

The lobby of our office building was quite empty that day, so I immediately saw that the rumors were true. Sitting right there in front of me was the individual that had caused my writing fury. He was engaged in a conversation, but made eye contact with me and smiled kindly. I took that as my opportunity to introduce myself.

Initially I simply asked for a photo, to which he obliged. I couldn’t resist the urge to share with him why I wanted the photo, though.

“I have not slept in two days because I have been trying to very quickly write a blog post explaining all the reasons you are wrong.”

It probably wasn’t the smoothest opening line ever, but thankfully he laughed and asked to which comments I was referring. When I reminded him, he – shockingly! – asked me to sit down and explain to him why I disagreed.

Over the next ten minutes, I shared some of the many ways the profession is embracing technology to innovate new services and methods of providing them. Automation actually frees CPAs up to perform higher value services for clients and organizations. It also enables entry level and junior staff to focus on deeper responsibilities than they have in the past.

As Andrew Chamberlain, chief economist for Glassdoor, explained last year, “Even as technology has helped to automate some aspects of the tax and insurance markets, the remaining jobs in these fields require lots of human judgment and creativity that is very difficult to automate.” A study by McKinsey & Company goes further and says that the technology threat is not about whole professions disappearing as some have indicated, but about certain tasks of jobs and professions being automated. For example, McKinsey found that applying expertise as a job function is much less likely to become automated than data collection and processing. Fortunately for the profession, the marketplace is already demanding that CPAs provide advice and analyze data at more sophisticated levels than ever before. Technology is a valued partner in enabling CPAs to deliver higher value services and business insights that the public can rely on.

Case in point: CPAs are becoming a key ally in the fight against cybersecurity threats. In upcoming weeks, the AICPA will release a new reporting framework that companies can use to tell their customers and investors how they are managing cybersecurity risks. In addition, CPAs will be able to provide assurance on management’s description and the effectiveness of a company’s cyber risk management program. The AICPA’s reporting framework provides the first common language in the marketplace, and it aligns with the many different methods organizations are already using to design cybersecurity risk management programs.

Cybersecurity isn’t the only area in which the profession is innovating. In the future, CPAs will also provide assurance on other non-financial subject areas like vendor/supply chain and sustainability. Auditors will be able to provide meaningful assurance on whether a business has met energy goals or emissions requirements, manufactured products in an environmentally safe way, and achieved water recycling benchmarks.

These types of services will require specialized knowledge and abilities, which is one reason the accounting profession will continue to be successful well into the future. And the demand for these new abilities is reflected in the Uniform CPA Examination, which was recently changed to reflect the evolved competencies newly-licensed CPAs need. The Exam has increased testing of higher-order cognitive skills, such as critical thinking, analytical ability, problem solving, professional skepticism and effective communication – all the same skills that Mr. Cuban says are essential if a profession is to thrive in the age of advanced technologies.

At the same time, the AICPA, CPA firms and other stakeholders are also looking at new ways of incorporating technology into accounting and auditing services. This year, the AICPA will release a whitepaper on Blockchain’s potential impact on assurance services and its updated Audit Data Analytics Guide. It’s also working with the Auditing Standards Board, the International Auditing and Assurance Standards Board, and the Public Company Accounting Oversight Board to evolve auditing standards to facilitate the use of analytics in the financial statement audit. In fact, the AICPA is thinking about how the “core of the profession’s core”, the audit, might itself transform 5 and 10 years from now due to technology and other marketplace forces.

CPA firms are embracing the change, too. Many are already incorporating new technologies like artificial intelligence, virtual reality, and drones into their practices to increase efficiency and effectiveness. Advancements in these areas can help reduce time spent pulling information manually, increase collaboration by allowing a team leader in a firm’s home office to see what an auditor in the field sees in real time, and allow CPAs to inspect land and facilities in a safer and more cost-effective way.

With the profession evolving at such a rapid pace, the AICPA launched the Firm inMotion e-Toolkit last October to help firms of all sizes integrate changes into their practices so they can best meet their clients’ changing needs, and even more resources and tools are in the pipeline.

Mr. Cuban is right that technology is changing workforce demands at an unprecedented rate, but the CPA profession is changing, too. With so many future-oriented developments, right now is definitely a great time to be a CPA. And I am thankful that Mr. Cuban was patient enough to listen to a sleep-deprived defender of the profession explain why.

Lindsay N. Patterson, CAE, Senior Manager–Communications and Public Relations, Association of International Certified Professional Accountants

     

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Be sure you put your feet in the right place, then stand firm.

–Abraham Lincoln

On Inauguration Day, President Trump followed through on his campaign position regarding the Affordable Care Act (“ACA”) and issued an Executive Order (“EO”) with the stated intent of minimizing the economic burden of the Patient Protection and Affordable Care Act (ACA) pending repeal. Sec. 2 of the EO Addresses removing certain burdens from both the government and taxpayers surrounding compliance with the ACA. 

Why the Confusion Exists

The IRS’ recent response to the EO has created confusion for many practitioners. The uncertainty arises from the IRS position that they will “. . . make changes that would continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn’t indicate their coverage status.”

Line 61 on Form 1040 asks taxpayers to indicate whether they have minimum essential coverage. If the box is not checked, taxpayers are expected to do one of two things:

1. Claim an exemption from the individual shared responsibility payment on Form 8965; or
2. Calculate and report their individual shared responsibility payment.

Why Compliance is Still Critical

 

Some believe that this means the return can be filed without the exemption information or individual shared responsibility payment. Our personal opinion (the AICPA has no position on this issue) is that this belief is mistaken from two perspectives:

1. The purpose of the EO is to cement the Administration’s position that it would like to pursue an ACA repeal. Pending repeal, the Administration has directed its agencies to minimize associated burdens “to the maximum extent permitted by law.” The law still requires: (a) minimum essential coverage (MEC); (b) an exemption from the individual shared responsibility payment; or (c) reporting of the individual shared responsibility payment.

Also, the IRS response is very clear that “. . . legislative provisions of the ACA law are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe.”

2. The AICPA’s tax ethical standards, the Statements on Standards for Tax Services (SSTS), have several statements that apply to this situation:

 

SSTS No. 1.  Requires substantial authority for the tax position, or reasonable basis with disclosure, when preparing or signing returns. In our personal opinion, the EO together with the IRS response does not rise to the level of reasonable basis.

SSTS No. 2. Provides guidance on answers to questions on a tax return. It is likely that most CPA clients will have minimum essential coverage and will “check the box.”  However, checking the box when you know the taxpayer does not have MEC would likely be a violation. Correctly leaving the box unchecked without providing exemption information or reporting the correct payment would likely be a violation of SSTS No. 1.

 

SSTS No. 3. Concerns the amount of due diligence necessary in tax engagements. For example, are additional steps necessary if your client indicates they do have a Form 1095-A, B, or C? While the CPA may rely on information provided by the client, the CPA should not ignore information available to them, particularly if it contradicts a client assertion.

SSTS No. 7.  States that written documentation of tax advice is always a best practice, but particularly in confusing situations. From a best practice perspective – we suggest that you document conversations and decisions regarding this issue in writing – at least to the client’s file.

The bottom line – as Abraham Lincoln said, is to take a stand. We suggest you explain the EO and the IRS response to your clients, but then follow existing law: (a) minimum essential coverage; (b) an exemption; or (c) reporting the payment. Otherwise, in our personal opinion, you cannot sign the return.

So why did the IRS respond to the EO the way they did? As indicated on their website, the IRS will continue to process returns where coverage status is not indicated to meet the EO’s intent of “minimizing burden on taxpayers, including those expecting a refund.” However, the agency may follow up with taxpayers on these so-called silent returns at a later date.

Abraham Lincoln also said “You cannot escape the responsibility of tomorrow by evading it today.” We suggest you do the right thing today before an IRS notice winds up on your client’s doorstep.

Edward Karl, CPA, Vice President – Taxation, Association of International Certified Professional Accountants

Cari Weston, CPA, Director – Tax Practice and Ethics, Association of International Certified Professional Accountants

ACA courtesy of Shutterstock

     

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Although the Financial Accounting Standards Board’s new not-for-profit financial reporting standard (ASU 2016-14) does not go into effect until 2018, it includes significant changes that both not-for-profits and auditors should begin preparing for now.  

ASU 2016-14 will require several modifications to the existing framework of the financial statements as well as new required disclosures related to liquidity, availability of assets and board-designated net assets. Further, it may require organizations to revise certain policies and procedures, update financial reporting practices and make net asset accounting adjustments. All of this could seem overwhelming. 

If you are an auditor, many of your clients may reach out to you for help and guidance. During a recent Not-for-Profit Section webcast on the new standard, there were many questions about how auditors can help their clients navigate through these changes while maintaining independence. As such, here are some basic guidelines regarding the assistance auditors can provide through this transition, and which activities would be prohibited and impair independence.

In general, independence rules typically do not prohibit auditors from providing routine technical assistance, training, and guidance on best practices. Assisting management with preparing the financial statements, account reconciliations and other bookkeeping services, are considered nonattest services. These services require that auditors put certain safeguards in place to protect independence. The underlying principles of AICPA Code of Professional Conduct section 1.295, Nonattest Services, are that auditors cannot function as management, make management decisions or audit their own work. As such, activities such as designing, implementing and monitoring internal controls and information systems, and assuming management responsibilities, are strictly prohibited for attest clients. Before performing any nonattest services, the auditor should document the objectives of the engagement, and the client’s acceptance of its responsibility for the results of the nonattest service, in the engagement letter or internal firm file.

With proper considerations, there are several areas wherein auditors could help clients implement FASB’s new not-for-profit financial reporting standard. These are outlined below:

• Proactively keeping clients informed and educated about the new reporting requirements and providing training opportunities.
• Preparing the financial statements to incorporate changes for net asset classifications and drafting the new required disclosures based on information provided by management.
• Helping management prepare any net asset reclassification entries that may be required. If an organization has underwater endowments that have previously been netted with unrestricted net assets (now net assets without donor restrictions according to ASU 2016-14), these will need to be reclassified to be netted with net assets with donor restrictions. In addition, if an organization previously had a policy to imply a time restriction on donations of, or contributions restricted for the purchase of, property and equipment, any remaining restricted net assets will need to be reclassified retroactively to net assets without donor restrictions.
• Being available to address compliance questions and periodically check in on the implementation process.

Independence is considered impaired when auditors are acting as management. As such, any decisions about financial reporting policies and changes to internal controls should be made by management and not the auditors. Although auditors may advise on these matters, the following are areas related to the new standard that should be addressed by the not-for-profit’s management:  

• The financial statements will require disclosure of all board designations and similar self-imposed limits on net assets without donor restrictions. As such, management should establish or update policies and practices related to such designations on net assets and make sure any designations are adequately documented.
• Not-for-profits will now be required to add disclosure regarding how they manage liquidity and information about the availability of financial assets to meet cash flow needs. This could require organizations to establish methods for tracking this new information within the financial reporting process.
• Not-for-profits should update endowment spending policies, as the financial statements will require disclosures of policies for appropriating funds from underwater endowments.

So go ahead and get the conversation started! It will be important for not-for-profits and auditors to be resourceful with each other. This will help minimize disruptions to processes that major reporting changes like this can cause and help ensure a smooth and successful implementation.

The AICPA has developed resources including a nonattest services toolkit and a FAQ document that you may find helpful. Additionally, the AICPA Not-for-Profit Section is hosting a webcast entitled Implementing the New Not-for-Profit Standard – Practical Considerations on March 29 that may be of interest to you.

Candi Avery, CPA, Principal, Clark Nuber PS

Professionals working image courtesy of Shutterstock

     

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As you have probably heard, several states have added a request or a requirement for a driver license number (or other state identification number) to be entered into the tax software system for the return to be electronically filed. As practitioners, you likely understand the reasoning for the request – this information helps states confirm the identity of taxpayers, which aids in reducing identity theft. However, the logistics of obtaining the information and explaining this requirement to your clients may prove to be difficult.

Here are some frequently asked questions (and answers) to help you with this issue.

Why am I being asked for my client’s driver license number?

States are making an effort to better protect taxpayers from identity thieves. The thinking is that a thief could have a taxpayer’s name and Social Security number, but they probably don’t have their driver license number. States match the information in their database to confirm the identity of the taxpayer, helping to prevent fraud.

Is a driver’s license or other state-issued ID required to file a federal return?

No, this information is not required in order to file a federal return.

What states are requiring the information for electronically filed returns? 

At this time, only Alabama, Ohio and New York are requiring the driver’s license for electronically filing. California, Kansas, Louisiana, New Jersey, Pennsylvania, Virginia and Wisconsin, are requesting (but not requiring) the information. State policies are constantly changing. The best source for more detailed information will be the client’s state tax agency.

Is the driver license information required for extension requests?

In the case of an electronically filed New York extension, either the document number of the driver’s license or state identification will be required.  New York has stated that if the information is not available at the time of the filing of the extension, then the preparer should check the “No applicable ID” box.  Alabama and Ohio both accept the federal extension; therefore, it is not necessary to file a separate extension.

What information from the driver’s license is required?

This will vary by state. New York taxpayers must provide the ID number, issuing state, issuing date and expiration date for the license or identification card. If the taxpayer’s license/ID is a New York driver license or non-driver ID, the document number found on the license/ID must also be entered. Some of this information may be found on the back of the license, so if you are making a copy of the license, be sure to copy both front and back.

My tax software is asking for this information, but my client does not file in any of the states requiring it. How should I proceed?

If you have the information and your client is aware that you will be using it to file their return, the easiest thing would be to enter it into the software. If you don’t have it or your client does not want to provide it, you should be able to bypass this question. Check with your software provider to determine if input is necessary to process the return. If so, entering all zeros may work to allow you to electronically file the return.

My client is a taxpayer in a state that requires a driver’s license to be entered, but they do not have a driver’s license or other type of state identification. What should I do?

For each of the states that require driver license information to be entered, there is an option to say that no identification is available. This is also the case for deceased taxpayers.

If I do not provide the taxpayer’s driver’s license, will there be a delay in the processing of the return and/or the refund?

This will depend on the state. New York guidance states that failure to provide the information when it is not available (see prior question) will not cause delays. However, the processing of the refund may be delayed if efforts to validate the taxpayer’s identity are unsuccessful. 

My client is refusing to provide their driver’s license for the filing of their return even though their state requires it. What is my alternative?

New York has addressed this question by saying that for this year of transition (the first year in which New York is requiring taxpayers’ driver’s license information), they are permitting preparers to check the “No Applicable ID” box if the taxpayer refuses to provide the required information. They recommend keeping contemporaneous information to document that the preparer used proper due diligence to try to obtain the information and that the taxpayer refused to provide it. Based on my research, Ohio and Alabama do not appear to have addressed this question.

What is a best practice for collecting and safeguarding this information for my clients?

Consider adding a request for a copy of your clients’ driver license to your tax organizer, especially if you file returns in states where the information is required. You should safeguard this information as you would any other confidential client information. For example, client data should be secured at the end of each day so that it is not accessible by visitors (welcome or otherwise) to your offices. And if your office is paperless, proper care should be taken to ensure that the data is stored in a secure manner.  For a reminder on these issues, you should review the AICPA’s Statements on Standards for Tax Services (SSTSs) and Circular No. 230.

Please join me at AICPA ENGAGE from June 12 -15 in Las Vegas to learn more best practices from thought leading experts and network with other practitioners on this and many other topics.

April Walker, CPA, CGMA, Lead Technical Manager – Tax Practice and Ethics, Association of International Certified Professional Accountants

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Tonight on The Bachelor, Nick Viall will presumably propose to one of two women in what the television network promises is the “most dramatic finale yet.” At the start of the season, 30 women were all vying for the bachelor’s attention in the hopes of becoming his fiancé. Each week, as part of the journey to find “the one”, he had the difficult, and sometimes awkward, task of sending women home during the rose ceremony. Even though Nick is a veteran of reality television dating shows (he was the runner-up on two seasons of The Bachelorette and also appeared on Bachelor in Paradise), he often expressed how challenging it is to say goodbye to the women.

Now I know that CPAs do not distribute roses to their clients that they wish to retain, however, like contestants on The Bachelor, practitioners often explain how “breaking up” with a client is far from easy. Luckily, the AICPA’s Private Companies Practice Section (PCPS) has tools to help with this process so that your client isn’t crying in the limo ride home.

Evaluating your clients is key. Reviewing your firm’s client list regularly is a healthy and smart exercise. Just because you’ve worked with a client for several years doesn’t mean that the relationship is ideal for both parties. Ask yourself, where do I envision my firm in a couple of years? Then consider if this client’s needs align with your vision. Do they add value to your firm? Are they easy to work with? Would another firm be better suited to address your client’s concerns? Based on the answers to these questions, rate your clients accordingly. PCPS members have access to a client evaluation tool which helps firms rank clients based on a set of established criteria.

Crafting a disengagement letter. Once you examine your client list and determine which clients to keep and which to part ways with, it’s time to write a disengagement letter stating that you’re ending the relationship. When written effectively, this letter reminds clients that you considered their business needs and acted in their best interest. The PCPS team has developed a sample disengagement letter that you can use as a guide.   

Having the “break up” conversation. This meeting is not all that different than breaking up with a significant other. Think about what you are going to say and how you are going to say it in advance. You may even find it helpful to run through the conversation with a colleague before meeting with the client. Just remember to stress that, “it’s not you, it’s me.” Your firm and your client are moving in different directions and because of this, you are not going to be able to serve the client as you had in the past. 

Disengaging with clients isn’t easy, however it’s important to realize the value of this process. As your firm evolves, so should your client base. Evaluate your client list on a regular basis to determine which clients you will retain and which you will part ways with. Next, you should prepare for the disengagement process by drafting a disengagement letter and planning for the “break up” conversation. In the end, the AICPA is here to support you throughout the process so that your roses don’t turn into thorns.

Alexis Rothberg. Communications Manager. Association of International Certified Professional Accountants- Public Accounting. 

Nick Viall image courtesy of ABC News.

     

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