Blog Timeline – Page 70

News

Benchmarking Helps Not-for-Profits Achieve Greater Impact

Post author By FFC
Post date April 4, 2016

Benchmarking Helps Not-for-Profits Achieve Greater Impact

When I was first introduced to the not-for-profit world, I knew there would be a steep learning curve. I read everything I could find on nonprofit finance, but it wasn’t until I got involved in a networking group of peer organizations that I felt totally at ease in my new role. When a peer recommended that I participate in a benchmarking study, I had no idea what to expect. It turned out that the experience was very valuable. The goal of the project was to explore ways to provide apples-to-apples comparisons and trending reports on key data. The overall lesson was that by comparing operating data and identifying areas where relative performance can be improved, we can make our organizations stronger.

Our group’s first attempt at providing data in a comparable measure was difficult. Fortunately, we had the advantage of meeting face-to-face to explain anomalies in the data and discuss the qualitative aspects behind it. A decade later, our results have been refined for the benefit of everyone in the group and our respective organizations.

I frequently speak on the topic of benchmarking, and folks ask, “How do you get started?” Often, they do not realize that benchmarking is quite simple. It can typically be performed in six steps:

Why – Frame why you are undertaking a benchmarking project.

What – Define what type of benchmarking study is needed to meet your objectives.

Who — Gather individuals who need to be involved and organizations with which to compare your organization.

Collect Data – Identify and collect the relevant data. More on this below.

Analyze – Crunch the numbers and analyze the results. Discuss lessons learned.

Repeat – Benchmarking is most effective when it’s part of an ongoing effort of continuous learning and improvement. Most organizations will end up fine-tuning their objectives, leading them back to step 1 to repeat the process.

Now, let’s talk about the data. Sometimes accountants are surprised to discover that the juiciest data can’t simply be gleaned from their organization’s financial statements. So what, then, is typically benchmarked? Well, of course it depends on your objectives (see steps 1 and 2 above), but here are some examples:

Current operating reserves

Investment allocations and returns for prior periods

Breakdowns of philanthropic revenue sources

Donor-dependency (operational surplus subtracted from donations)

Percent of planned gift maturities that are used for operations vs. quasi endowments

Percent of donations left after subtracting the cost to get them

Percent of expenses directly used in programs vs. operations and fundraising

Volunteer retention and recruitment stats

Number of participants or beneficiaries served

Volume of program activities initiated and successfully accomplished

What makes benchmarking especially challenging in some not-for-profits is that social impacts and constituents’ benefits can be more difficult to measure than purely financial results, because they are often intangible. That’s why participation in peer-to-peer networking groups is so beneficial. No matter what your not-for-profit does –education, advocacy, social justice, or [insert your good cause here] – there is a peer networking group that exists for you, so go find your tribe.

Through conversations with peers, not only will you identify best practices, you will get information by direct observation rather than inference. Benchmarking is a byproduct of the value of relationships. Through peer-to-peer learning, you will find out what actually works! The data is extremely useful, but there’s even greater value that comes from discussions on the qualitative aspects – basically, comparing the data and then learning from each other. Ultimately, this shared information enables us to make a difference in our workplaces, in our communities, and for those who depend on us to achieve our vital missions.

Want to learn more about benchmarking? Check out this webcast that is coming up on Wednesday, April 20. It is being hosted by the AICPA’s Not-for-Profit Section.

Bob Mims, CPA, CGMA, Controller and Director of Investments, Ducks Unlimited Inc. Bob serves on an Environmental Not-for-Profit Roundtable and frequently presents on the topic of strategic planning and business plan development. He is among the many speakers presenting at the upcoming AICPA Not-for-Profit Industry Conference. Follow him on Twitter @bobmims.

Data analysis image courtesy of Shutterstock

Source: AICPA

News

In the News: CPAs Say Presidential Election Will Have an Impact on Business Planning

Post author By FFC
Post date April 1, 2016

In the News: CPAs Say Presidential Election Will Have an Impact on Business Planning

It’s election season in the U.S. – perhaps you’ve heard?

As we inch closer to the picking our next president, the AICPA recently conducted a survey of CPAs who serve as CEOs, CFOs, controllers and other leadership positions in companies to learn their thoughts on the potential impact of the election on their businesses.

According to the survey, nearly two in three (64 percent) of business leaders said that the election will impact business planning forecasting or budgeting for the next fiscal year. Survey respondents also said that the election ranked fourth in overall impact, behind changes in economic conditions, outlook for their specific industries, and interest rates and borrowing cost.

A CFO.com article quoted Arleen Thomas, AICPA’s senior vice president for management accounting and global markets, as saying: “Company executives are clearly monitoring the potential business impact of the presidential election. But, overall economic conditions and challenges for their particular industries are weighing more heavily in their calculations right now, and that’s likely why we’re seeing little election-cycle impact on such key categories as hiring or capital spending.”

Also noted by CFO.com, 81 percent of respondents said the election is not a consideration in staffing and that they plan to continue hiring at their current pace. That is compared to 13 percent who will defer hiring until after the election, five percent who will reduce hiring prior to the election, and one percent who will increase hiring before Election Day.

Reporting on the survey, The Business Record noted that the perceived impact of the election on businesses was greater than the potential for volatility in equity markets and was tied in with potential ramifications of the strong dollar.

An article from the Washington bureau of The Business Journals noted that more than half of those surveyed said the election will not be a factor in their capital spending plans. Only 10 percent said they would wait on the election results before deciding whether to spend more money on growing their businesses.

Other findings of the survey:

* Eight percent of companies will reduce capital expenditures prior to the election.

* Only two percent of companies will increase capital spending before the election.

The election impact questions were included in the first quarter AICPA Economic Outlook Survey, which released its general results in March. The survey was conducted Feb. 6–24, 2016, and included 540 qualified responses from CPAs who hold leadership positions within their companies. The overall margin of error is less than three percentage points. A copy of the full report can be found on aicpa.org.

–James Schiavone, Senior Manager – Public Relations, American Institute of CPAs

4 Cybersecurity Pitfalls to Avoid

Post author By FFC
Post date March 30, 2016

4 Cybersecurity Pitfalls to Avoid

You might break out in a cold sweat at just the thought of criminals on the other side of the world stealing your clients’ or customers’ account information. After all, if some of the largest corporations and agencies of the federal government can’t prevent their systems from being breached, what can a Main Street CPA firm or medium-sized business possibly do against such a threat?

Reality is that as a CPA you can probably do more than you think. At a minimum, as a trusted business adviser, you should help your clients or employer avoid these common pitfalls:

Classifying cybersecurity as an IT issue. Although IT has a support role involving intrusion detection and prevention, cybersecurity involves much more than IT. Today’s hackers increasingly focus their attacks on human rather than technical vulnerabilities. Cybersecurity is an enterprise risk management (ERM) issue. With some specialized training, CPAs are uniquely qualified to systematically assess and report on cybersecurity risks and implement controls to mitigate those risks.

Dismissing cybersecurity as a large organization problem. Breaches at large organizations make the evening news, but 60% of all targeted attacks in 2014 hit small- and medium-sized organizations, according to Symantec’s 2015 Internet Security Threat Report. You want to be sure your small and medium-sized business clients or employer know the gravity of the threat and are taking appropriate measures to protect themselves. In many cases you may need to refer them to a firm that specializes in cybersecurity.

Looking for a silver bullet to fix the problem. There is no single cybersecurity solution. Products are components of a cybersecurity program—not a program in themselves. Many of the most effective components of cybersecurity involve process improvements and staff training. This is where the CPA skillset provides value. CPAs who specialize in cybersecurity can serve in an advisory role helping companies build sound cybersecurity risk management programs. The AICPA is also developing guidance for cybersecurity assurance engagements.

Relying on static solutions to dynamic threats. “We’ve taken care of it” is the most dangerous attitude any organization can take toward cybersecurity. Attackers are constantly developing new strategies and techniques. Business processes also change. Cybersecurity controls need to be implemented and updated regularly in response to changes in business processes and emerging threats. Once controls are in place, an assurance engagement by a qualified CPA firm can help management and board members with the risk management process.

Learn more about cybersecurity opportunities for CPAs at the new AICPA resource center. You’ll find news and information about protecting client information, and starting advisory and assurance services related to cybersecurity. You can also learn more by attending the AICPA’s Cybersecurity Webcast Series produced with Ridge Global. The first webcast, Understanding Cybersecurity, will be held May 12 at 2:00 PM ET.

Like other practice areas, CPAs should not accept an engagement until fully competent in the subject matter.

Jeffrey Streif, CPA, CISA, PCI-QSA, CFE, heads the cybersecurity consulting and assurance practice for the St. Louis office of UHY LLP.

Bruce Sussman, CPA, CISA, CIPT, CISSP, is PCI Global Executive for AIG in New York. Streif is a member of and Sussman is co-chair of the AICPA’s Information Management and Technology Assurance Section’s Cybersecurity Task Force.

Hacker courtesy of Shutterstock.

7 Ways to Make Busy Season More Fun

Post author By FFC
Post date March 29, 2016

7 Ways to Make Busy Season More Fun

Although it can be a daunting and stressful time, busy season is also an extremely lucrative and productive one for tax practices, one that can be just as rewarding for them as the holidays are for retailers. What may be overlooked, however, is that it can also be a great time to build a sense of camaraderie and team spirit because a shared challenge can bring people together. That’s especially true if you add in some enjoyable activities that help maintain your team’s positive outlook and demonstrate your concern for their well-being.

To find out how CPAs are keeping the season upbeat—and even adding some fun to it—the AICPA recently engaged our social media audience and asked two questions: “How does your firm show appreciation for staff during busy season?” and “You get three wishes: What are the best ways to show staff appreciation during busy season?” We then put together the tips below based on their responses and what we’ve heard from other practitioners.

Be nice. This is the easiest and least expensive stress reliever available, so be sure to make the most of it by expressing appreciation for hard work and complimenting or publicly acknowledging outstanding efforts.

Feed us. Food was one of the most popular perks mentioned by our commenters. Some practices offered periodic free dinners for those burning the midnight oil, while others might have hot catered lunches and salad bars. Speaking of salads, while it’s nice to indulge in pizza or wings, at least one respondent noted that firms should remember to include healthy offerings when they do provide meals.

Don’t forget snacks! If sponsoring a meal isn’t feasible, offering an array of free snacks gives people a chance to reduce stress by getting away from their desks for a few minutes and to socialize or trade war stories with their colleagues. Commenters appreciated the chance to grab a cup of tea, coffee or a bottle of water, plus maybe some chocolate, cookies or a granola bar. Another idea is to surprise staff with random deliveries of coffee, donuts or smoothies. One firm charges a minimal fee for the food it serves and donates what it collects to a local charity, which can help everyone feel good about being part of a team that gives back even during a hectic time.

Keep them in shape. Keeping fit, especially during demanding times, can help employees recharge their energy and give them a more positive perspective on the challenges they face. Some employers bring in exercise bikes or other equipment for staffers to use in a break room or offer temporary memberships at local gyms.

Roll out the massage chairs. Your entire team has bent over laptops for hours and your shoulders and back are aching. What’s the perfect solution? Bringing in masseuses with massage chairs sounds like just the right answer. Massages can refresh tired workers and go a long way toward raising morale. Firms can also rent or purchase electronic massage chairs that can be made available throughout busy season.

Play games. A little friendly competition can make the long hours go faster. Ideas include holding trivia challenges during break times, with staff working in teams or individually. The topics can come from pop culture or be based on interesting details from the lives of team members. Other fun games can include golf putting contests, ping-pong games or bean bag tosses.

Go out with a bang. Once the season is over, a happy hour or dinner can commemorate all the work that’s been done and congratulate your team for coming through with flying colors. If feasible, staff members will also value a day off at the end of the season and additional time off during the slower months as a reward for all their efforts.

Have any of these approaches been a success for you? Are there others that have made your busy season fun? Please let us know by commenting below.

Massage image courtesy of Shutterstock

Acting Today for a Strong Profession Tomorrow

Post author By FFC
Post date March 28, 2016

Acting Today for a Strong Profession Tomorrow

Every member of the AICPA plays a role in shaping the accounting profession.

The CPA’s reputation and profession’s success rely upon the actions each and every one of us takes every day. Our collective contributions can be seen in many forms. We collaborate to address the evolving needs of our clients and organizations, and to maintain the relevance of the services we provide. Through peer review, standard setting and other activities, we all contribute to helping firms maintain quality in an increasingly complex environment. And in the corporate environment, we work to embed our core values of quality, competency and integrity to improve management accounting which, in turn, enables stronger audits and financial reporting.

Now, there’s a new opportunity for us to play our part in the profession’s vitality for the future. Last week, the AICPA governing Council voted to proceed with a member ballot on a proposal that would enhance our profession across public and management accounting. Specifically, the Institute will be asking members to support a proposal to create a new association with The Chartered Institute of Management Accountants representing the entire accounting profession, while preserving our respective membership bodies. It will enhance advocacy and expand member resources and education opportunities.

I believe wholeheartedly that this is the right move for the future. The proposal fits within a broad portfolio of activities to promote, protect and grow the profession. These initiatives include programs to strengthen the CPA culture on campuses, promote the value of CPAs as trusted business advisers, enhance audit quality, transform the audit for the future, help firms identify and remedy issues during A&A engagements, evolve the Uniform CPA Exam, attract the next generation of talent, and meet the information and educational needs of members. The proposal will accelerate and elevate our efforts.

Already, there is broad support: 51 state CPA societies; leaders from many small, medium and large CPA firms; and finance leaders from numerous businesses and organizations worldwide. It’s easy to see why. AICPA members would not only gain access to enhanced resources, insights and educational opportunities to better serve their clients and organizations, they would also benefit from broader advocacy. The AICPA has celebrated numerous successes in our efforts to speak out on members’ behalf, and this proposal would give us an even stronger voice. The new association would represent 600,000 current and next-generation accounting professionals in 91% of the world’s countries. With that scope, we would be better able to monitor and influence regulations abroad that may serve as a model for the U.S., providing a strong defense against onerous and unnecessary ones that are not in the public interest.

Voting, which will take place online, will begin after busy season. You will receive your personal and confidential electronic ballot information the week of April 18 from an independent third-party voting administrator under the name of “AICPA Independent Tabulator.” In the meantime, I urge you to visit www.aicpa.org/horizons for more information.

Our profession is revered because each of us has played a role in building the public’s trust in and perception of CPAs. Let’s join together to shape a future that upholds what we have and paves the way for new opportunities we may not yet have even imagined.

Timothy L. Christen, CPA, CGMA, Chairman of the AICPA Board of Directors

Appearances are Not Deceiving: Powering CPAs as Premier Tax Service Providers

Post author By FFC
Post date March 24, 2016

Appearances are Not Deceiving: Powering CPAs as Premier Tax Service Providers

The way to gain a good reputation is to endeavor to be what you desire to appear.

–Socrates

When I started college at the University of Maryland, I went in as a pre-med major, intending to be a pediatrician. I wanted something meaningful, and I wanted to make a living, but all the sciences did me in. Luckily for me, my sister had just married a CPA and I spoke to him about becoming an accounting major. The rest is history. I thought, “Maybe it’s not the most glamorous job in the world,” but I had a very positive impression of CPAs and my brother-in-law reinforced that positive impression when I spoke to him.

Fast forward to my role at the AICPA, where a key mission is to position CPAs as the premier providers of tax services. This is not just about appearances – it’s about realities. It is why the AICPA Tax Section is the home for CPA tax professionals seeking the edge they need to achieve success – premier status, if you will – through the tax practice resources and the ethical guidance we provide. We believe “premier’ is defined by the high quality services and uncommon ethical conduct CPAs provide; and the AICPA has to do its part in helping CPAs achieve the reality.

But the appearances part is important too. It’s critical. I know that CPAs are the premier tax service providers, but I want the rest of the world to know it too. And so for a number of years, the AICPA has supported a public-facing communications campaign to position CPAs as the premier service provider. Two years ago, that campaign morphed into a social media push to engage consumers to tell their #CPAPOWERED life moment stories of financial success or goals met thanks to their CPA. Last year, the #CPAPOWERED campaign focused on establishing CPAs as essential to small business success and a strong economy. The campaign helped business owners and entrepreneurs understand how much the advice of a CPA can help them start, grow and thrive.

Part of that campaign showcased CPA expertise and tips through the “CPA Secrets to a Better Business” video series. This year, the push when the consuming public has taxes on its mind began on March 4 and will run during busy season. We will again be using the Tax Tip video series on YouTube and Facebook.

In addition to this, we need CPAs to promote themselves as the premier providers as well – to play an important role in leveraging the message. Our Tax Practitioner’s Toolkit is one vehicle to engage in the message. The Toolkit contains important resources to help CPAs: (1) define your firm’s value; (2) engage with clients; and (3) promote your practice to prospective clients, and gives step-by-step advice on how to do it. A detailed, easy-to-use implementation checklist tailored by practice size – sole/small, medium, and large – can help you establish or reinforce a value-centric culture for your practice.

The #CPAPOWERED campaign has taken the CPA brand message to the marketplace in an innovative and successful way. We have achieved record levels of social media engagement from consumers, exceeding 400,000 likes, shares, comments and retweets. The CPA Secrets to a Better Business video series has been viewed close to 3 million times, and the cpapowered.org microsite has proved to be a popular destination for additional information with more than 14,000 visits.

Brian Koslow, the best-selling author, speaker, and personal coach has said “There is no advertisement as powerful as a positive reputation traveling fast.” I’m so glad I joined a wonderful profession where our reputation has strong roots and continues to flourish every day. Help us spread the message.

Edward Karl, Vice President-Taxation, American Institute of CPAs.

The Insanity of Inheritance: How to Keep Your Clients Civil and Practical

Post author By FFC
Post date March 23, 2016

The Insanity of Inheritance: How to Keep Your Clients Civil and Practical

When you handle inheritance issues for bereaved clients, stop and put yourself in their shoes. Try to understand their emotions…loneliness, sadness, fear and possibly anger.

As a CPA financial planner, your role is to support your clients throughout their lives, including during the loss of a loved one. When it comes to inheritance, people’s judgment can become clouded. Even if dealing with an inheritance brings out the worst in your clients, you are helping them prepare for a secure retirement. Take a deep dive into their lives and look for an understanding of what they’re going through.

When clients lose a parent, they also lose their security blanket, leading them to cling to possessions that remind them of their loved one, such as a silver set, a gun collection or a folded veteran flag from military service. While these are all reminders of loved ones, lasting security really comes down to financial stability. Consider these three factors:

Favoritism. As financial advisers, you must try to help your clients eliminate favoritism when deciding who gets which assets. Help your clients create an environment where their family is not going to be at each other’s throats. You can suggest leaving equal amounts to children and appointing fiduciary responsibilities – trustee, personal representative and powers of attorney – on a logically, supportable basis, such as starting with the oldest, the child who is closest geographically or whatever arrangement makes most sense for your client’s family.

Family rivalries. In my experience, the majority of inheritance disputes involve stepchildren and stepparents, but in the United States, unlike most other countries, a person has no legal obligation to leave any family members an inheritance. In fact, it is entirely discretionary. As a result, family members may fight among themselves and vie for the most attention to receive a larger portion of the inheritance. Nevertheless, it’s important for the financial planner to help protect the children and the spouse, such as encouraging clients to make their wishes known in advance or appropriate use of trusts. Estate planning is about balancing the needs of these two groups and creating estate plans that do not pit one against the other.

Financial elder abuse. When we think about elder abuse, we think about the door-to-door salesmen or an Internet scam, but the vast majority of financial elder abuse is perpetrated by families. Unfortunately, elder abuse often goes unreported, so a definitive percentage of exactly how much elder abuse is caused by families is unavailable.

There are many scenarios that lead to elder abuse, but one, in particular, occurs when family members feels they will not receive an inheritance. As a result, radical behavior can ensue. They may offer to move into the house and take care of an ailing parent, when in reality, the objective is to take advantage of the parent’s physical or mental health to benefit monetarily. In essence, family members who do this are trying to change history in their favor, going on a preemptive strike to ensure they get their fair share, and feel justified in doing so.

This scenario can create conflict in the family. Greed and fear frequently take over and family members can drift further apart, fighting for their part in the will. If you can get feuding family members to understand that fighting is not the solution and is ruining their parents’ legacy, you will do a lot of good.

Encourage Equality and Fairness

Parents need to invest the time to thoughtfully prepare a will and trust to preserve the special relationship they have with family members, as well as the relationship family members will have with each other in the future. Equality and fairness are key ingredients.

More information on estate planning can be found on the PFP Section website. Members of the PFP Section can listen to a rebroadcast of Mark Accettura’s 2015 Advanced PFP Conference session on this topic. Section members also have access to other estate planning webcasts in the PFP Learning Library and the four volume set, The CPA’s Guide to Financial and Estate Planning.

Mark Accettura, Elder Law Attorney. Mark specializes in the areas of elder law, estate planning, estate and trust administration, Medicaid planning, Aid and Attendance Veteran’s planning, and family inheritance dispute resolution. Mark is a frequent lecturer on estate planning topics and is an author of four books. His book, Blood & Money: Why Families Fight Over Inheritance and What To Do About It, addresses this topic in more depth. Contact Mark through his website, www.elderlawmi.com.

Answers to 5 Common Cloud Questions for Not-for-Profits

Post author By FFC
Post date March 22, 2016

Answers to 5 Common Cloud Questions for Not-for-Profits

With cybersecurity in recent news headlines, more clients are coming to us for advice on accounting software solutions. Cloud systems, especially, have increased in popularity among businesses in the private sector and not-for-profits alike. Organizations with decentralized operations, or with many remote workers that need access to information, can benefit the most from using a cloud system.

Here are the most common questions we encounter in our practices.

Q: What (and where) is the cloud?

A: When we talk about the cloud, it just refers to a system or application that is hosted somewhere outside of your office—usually accessed over the Internet. The term “cloud” comes from the shape used to represent the Internet on network diagrams.

Some people may also be familiar with the term Software as a Service (SaaS). The “as a Service” (aaS) suffix also refers to the cloud. There are several flavors of this: Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and more keep coming up as additional services are delivered via the cloud.

Another term also often associated with the cloud is “hosted solutions.” This can be software, servers, or even desktop services. Unlike the “as a Service” model, which would be considered “pure” cloud and accessible directly from the Internet in a web browser, hosted solutions usually require a VPN network connection or specially configured client software to access. However, for most intents and purposes, we can consider hosted solutions as part of the “cloud.”

Q: How does pricing work for cloud software?

A: Pricing for cloud software varies a lot, but the predominant standard is a monthly subscription. Many cloud vendors offer a discount when purchasing an entire year’s subscription upfront. Some vendors also offer different tiers of subscriptions and allow you to have different users on different tiers depending on what type of access they need for entry, approvals or viewing. Many cloud vendors also have discounted pricing for not-for-profits, including free lower-tier subscriptions with low-cost upgrades to higher tiers. Some cloud vendors also provide free implementation or other services from their staff as part of their corporate giving programs.

Q: How is the cloud different from an on-premise or a hosted solution (pros and cons)?

A: In general, the cloud reduces the need for hardware and its associated maintenance and replacement. Many cloud solutions are either completely web-based or emulate the in-office software. Sometimes there are usage differences (for example, the ability to open multiple windows) that may impact the way you work when using a cloud solution, but other than that the functionality is the same.

One benefit is that cloud providers often take responsibility for both hardware and software: maintenance, upgrades and other routine tasks like performing backups. So when implementing a new cloud solution or migrating to a cloud solution, there is usually cost savings.

Cloud providers utilize teams of security experts to ensure that they are secure. A single system breach at a cloud provider may result in the breach of many of their customers’ data, so cloud providers take information security very seriously, and you should as well. It’s important to ensure that your cloud provider is reputable, and you should obtain and carefully review their SOC 2®service auditor’s report and implement all recommended user entity IT controls.

Q: Are there privacy and information security risks I need to be aware of, such as protecting my data?

A: Anytime you store data electronically, there are risks involved. Information security and privacy are related, but not the same. Privacy is often mandated by law or industry regulation, the violations of which can carry hefty fines and have additional risks like reputational impact. Data breaches related to privacy are usually required to be communicated to those affected. Information security involves the protection of data and systems from inappropriate access.

The AICPA’s Not-for-Profit Section has a number of resources on information security and IT controls. Check out this article to learn more.

Cheryl R. Olson, CPA, CGMA, Director of NFP Consulting at Clark Nuber. Cheryl serves on the AICPA Not-for-Profit Advisory Council. For more than 20 years, she has dedicated her career to the not-for-profit sector as a volunteer, consultant, Assistant Executive Director, CFO, auditor and tax accountant. Her personal mission is to help organizations find the best possible outcomes to whatever financial and operational challenges they face.

Donny Shimamoto, CPA, CGMA, CITP, is Managing Director at IntrapriseTechKnowlogies. Donny was part of the inaugural class of the AICPA’s Leadership Academy program and was awarded the AICPA’s Maximo Mukalebai Award for Outstanding Service to the CPA Profession. His CPA firm is dedicated to helping small businesses and middle market organizations leverage strategic technologies, proactively manage their business and technical risks, and enable balanced organizational growth and development.

Cloud image courtesy of Shutterstock

Social Security File and Suspend: Important Deadline and Changes

Post author By FFC
Post date March 17, 2016

Social Security File and Suspend: Important Deadline and Changes

Up until now, file and suspend has allowed a married couple with one spouse at full retirement age (66 or older), to enjoy short- and long-term benefits for themselves and their spouse or dependent. But as of April 29, 2016, this will no longer be the case. After this date, if a spouse suspends his or her benefits, benefits for everyone involved – including the other spouse or qualifying dependent – will be suspended, too. Thus, a filer must take benefits and abstain from delayed retirement credits for the other person to also receive benefits.

With the file and suspend strategy, a married person – typically the one who makes the most money – can file for his or her own Social Security benefits at age 66 or older, and then immediately suspend those benefits, while their spouse can still file for spousal benefits. As a result, the couple collects an ongoing Social Security check, and, at the same time, the spouse earning the most money sees his or her benefits grow by 8% each year, allowing for a potentially higher benefit for the surviving spouse.

This brings into play a number of scenarios and strategies. Before April 29, 2016, the old rules still apply: anyone 66 or older can still file and suspend. There is no disadvantage to taking this approach, so you should help your clients consider using this strategy as the deadline nears. In addition, if you have clients who are already using this strategy, they will be grandfathered in until age 70.

Restricted Application

Restricted application is another strategy that will also change as of April 29. This allows a spouse age 66 or older who had not received any benefits to restrict their choice to receive their spousal benefit only and delay their own personal benefit until the future (no later than age 70). With the new law, this option will only be available to those who turned 62 on or before January 1, 2016, thus keeping the luxury of restricting their claim to their spousal benefit if they wait until 66 at full retirement age.

However, let’s say they are eligible under the new law to file a restricted application at their full retirement age. If their spouse is not receiving their own retirement benefit or has not filed and suspended by April 29, 2016, then there is no spousal benefit available on which to file the restricted application. For example, if Tom is age 62 or older by January 1, 2016 and his spouse, Helen, is at her FRA or older by April 29, 2016, Helen would either need to file and suspend by April 29, 2016 or, failing that, file and receive her own retirement benefit to enable Tom to receive a spousal benefit on Helen’s record at his full retirement age.

Lump Sum Voluntary Reinstatement of Benefits

Another important change is the ruling on lump sums. Currently, a person who files and suspends at full retirement age can ask for all suspended payments to be paid in one lump sum at a later age up to age 70. And, through April 29, 2016, individuals at full retirement age can still use this strategy, as long as they file and suspend benefits. After the deadline, lump sum payments are no longer allowed.

What This All Means

Individuals will no doubt be upset about these changes because they can no longer maximize their combined Social Security benefits under the file and suspend strategy. However, according to a U.S. News and World Report article, some experts feel that the file and suspend strategy was never the actual intent of the original rules, and that the new rules will save the Social Security Trust Funds money and close previous loopholes in the Social Security program.

Help your clients understand these changes, especially with the April 29 deadline coming up so quickly.

For more information on Social Security planning: Ted Sarenski has recorded two podcasts on this subject. PFP Section members, inclusive of PFS credential holders, can consult The CPA’s Guide to Social Security Planning by Sarenski and additional resources on Forefield Advisor’s Social Security Resource Center, all available on the AICPA’s PFP Section website.

Ted Sarenski, CPA/PFS, Blue Ocean Strategic Capital, LLC. Ted Sarenski is chief executive officer and president of Blue Ocean Strategic Capital, LLC, in Syracuse, New York. Ted is a frequent presenter on webcasts and at conferences, and recently authored the newly updated CPA’s Guide to Social Security Planning for the AICPA’s Personal Financial Planning Section.

Clock courtesy of Shutterstock.

Why “Extension” is not a Four-Letter Word for Tax Season

Post author By FFC
Post date March 16, 2016

Why “Extension” is not a Four-Letter Word for Tax Season

Up until January, I worked in public accounting and remember all too well the feeling when the calendar flipped to March; it seemed like all I was hearing from my individual clients was that they still had not received their 1099s from their brokerage accounts. It seems every year the compression of when these 1099s are received and the deadline to file gets closer and closer. Not to mention the frustration of getting those amended 1099s right after the client’s tax return has been assembled. Talk about adding fuel to the fire!

There are strategies and processes you can implement to encourage your clients to bring in all of their tax return data (with the exception of the late 1099s) so that you will have everything ready to go and can quickly finish the return once the 1099 arrives. However, despite these well intended strategies, the reality is that it feels nearly impossible to move all the returns that have complicated, late arriving 1099s through the entire process before April 18^th (or April 19^th in the case of residents of Maine or Massachusetts).

As you are try to manage the workflow in your office, it is a good time to give your clients an education about the extension process, and why it might be the best choice for some of these clients.

Proactively address concerns and questions

If I file an extension, will it increase my audit risk? Does an extension increase my tax return fee? When will I receive my return if I file an extension? Why do I have make a payment if I am filing an extension?

I’m sure you have heard these questions as well as others related to the extension process. To help practitioners, as part of the Tax Practitioner’s Toolkit the AICPA developed a tool for members to help communicate the answers to these questions. FAQs from the Tax Practitioner’s Toolkit (My CPA says “Extend” – What Does That Mean to Me?) will save you valuable time with those clients who need encouragement and maybe a little handholding if this is the first time you have brought up the topic of extending their tax return.

Draft talking points for clients about the benefits of filing an extension

Clients do not want to hear the primary reason for filing an extension is that it will help your firm smooth out the workload. So, use the “WIFM” principle (What’s in it for me?) to help them see it really is in their best interest to file an extension.

Their return will be reviewed and completed when everyone has had a little time to rest and recharge their batteries. We are all humans and understand that when we are tired, we make mistakes. So, fresh eyes on a tax return might catch something that would otherwise be missed, or even better, might see a different way of structuring a transaction that would be better for the client.

If the client is not expected to receive a refund, and will continue to be paying estimated tax payments, filing an extension will not affect the client’s cash flow situation.

If all the information has been received, make the promise (and stick to it), that the return will be completed prior to the June 15^th estimated tax due date. That way, the client still has an expectation about when to expect the tax return and they will be able to make their quarterly estimated payments with good information about the previous year’s results.

Develop a letter or memo that prompts clients about what you need from them in order to file an extension

Creating templates is another way to automate processes and help you be more efficient in this busy time. The AICPA’s Tax Section has created a sample letter that may help you gather necessary information from clients without having to make phone calls to procrastinators–we all know a few of those!

Design a workflow process for filing extensions

Determine the procedures and communicate them to your staff and your clients so that the process will move along as efficiently as possible. Try to think of every scenario and what makes the most sense for your client base. For example, how will you handle extensions with payments due? How will you indicate in your due date monitoring system that the tax return has been extended?

Develop a plan for work needed on extended tax returns

So, you have convinced your client to file an extension. Now, what? You must develop a process for determining if a payment will be due with the return, since the client will not be happy paying late payment fees just because you did not have time to properly estimate their tax due.

Remember to incorporate 1^st quarter estimated payments

At my previous firm, we would often include a safe harbor amount for first quarter with the extension payment (with rounding done based on client sensitivity). That way, your client has a little cushion if an estimate turns out to be incorrect. If that’s the case, you can always catch up the quarterly payments with the June 15^th payment.

Right after filing season is a great time to compile a list of what went right and what went not so right in your practice, including extension workflow. Be strategic in thinking about how you could better communicate with clients before, during and after filing season. This might save you time and energy when

In the meantime, I wish you a successful completion to Tax Season 2016!

April Walker, CPA, Lead Technical Manager – Taxation, American Institute of CPAs.

Tax extensions courtesy of Shutterstock.