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To avoid tax surprises Americans should update their W-4

Post author By FFC
Post date December 9, 2020

To avoid tax surprises Americans should update their W-4

Paying taxes is probably low on the list of things that give Americans a warm-and-fuzzy feeling. But getting hit with a surprise tax bill when filing? That makes 34% of Americans feel concerned, 33% frustrated, 32% disappointed and 28% angry, according to a recent AICPA survey conducted by the Harris Poll.

Assuring the correct amount of taxes are withheld from your paycheck can go a long way toward preventing an unexpected tax bill – and the negative emotions that come along with it.

The Tax Cuts and Jobs Act (TCJA) made changes to withholding in early 2018, and those changes were reflected in 2019 in a redesigned IRS Form W-4. Still, nearly half — 45% of tax-filing Americans — have no idea when they last updated their withholding.

To avoid an unpleasant tax surprise and better manage monthly budgets, the AICPA’s 360 Degrees of Financial Literacy program is encouraging Americans to check their tax withholding and make updates accordingly on the updated W-4.

Why is the W-4 form important? And how will federal income tax withholding affect household budgets? To learn more, AICPA Insights spoke with Kim Hardy, CPA/CFF, member of the AICPA’s National CPA Financial Literacy Commission. Below are highlights from the discussion.

What changes to the W-4 form recently took effect? Why do they matter?

In addition to lowering the federal income tax rate paid by most Americans, the TCJA created some new tax exemptions and got rid of some old exemptions, including the personal exemption and the dependency exemption.

The result of these changes is that tax withholding tables — the amount taken out of your paycheck according to how much you earn — were altered. The W-4 form was redesigned to reflect these changes.

Since the TCJA eliminated the personal exemption and dependency exemption, allowances are no longer needed. In the past, the value of a withholding allowance was tied to the amount of the personal exemption.

The updated form also asks about additional sources of income and if someone works multiple jobs — the intention is to make withholdings more accurate.

Married couples must coordinate their W-4 forms because their tax rates are based on the earning information entered on the W-4 from both jobs. Attempting to complete the W-4 without enough information from both individuals could result in an inaccurate withholding figure with too much or too little taxes being withheld. That has the potential to lead to a large tax bill or refund.

What are some of the downsides to withholding too little or too much?

Withholding too little from your paycheck can result in owing taxes when your personal tax return is filed. Depending on the amount owed, a tax bill can eat up a significant portion of an individual’s savings and throw their budget off track for weeks or months.

Our recent survey found that many Americans are not able to pay an unexpected tax bill without borrowing money or using a credit card. And going further into debt to cover your tax liabilities can lead to financial problems down the road.

Withholding too much can result in a refund when filing taxes. Although more Americans say they would rather have a refund than owe money, there are many ways you could use those funds throughout the year instead of waiting on a refund. For example, additional net pay each month can help build an emergency fund, free up additional money to pay down debt or even earn additional income if invested.

Tax withholding is just one part of an individual’s entire financial picture.

Individuals can decide if more take-home pay is preferable to receiving a lump sum from the government once a year. And if they do opt for more net pay on a monthly basis, they need to have a plan in place to pay what they owe when it comes time to file.

How can people update their W-4?

It’s easy. You just need to update the form and submit it to your employer.

If the taxpayer is single with income from only one job, then they only need to complete the personal information section and sign the form.

For married taxpayers, or those with more complicated tax situations — working multiple jobs or having investment income — the information from the most recent tax return should be used to complete the new W-4. For those individuals, the IRS has created a withholding estimator to assist with completing the W-4.

Get a head start on 2020 taxes

The AICPA’s National CPA Financial Literacy Commission recommends that Americans review their last pay slip and compare it the IRS’s withholding tables. If needed, make changes to your withholding while this information is fresh in your mind. Doing this task on an annual basis and whenever there are changes to your financial situation is the best way to keep current.

The 360 Degrees of Financial Literacy website has information to help taxpaying Americans understand the new W-4 form and how their tax withholding impact their financial plan.

AICPA members can help their friends and neighbors avoid unexpected tax bills by using this blog and the 360 resources to spread the word on social media about the importance of updating the W-4 form.

Association Staff

To avoid tax surprises, update your W-4

Post author By FFC
Post date December 9, 2020

To avoid tax surprises, update your W-4

Assuring the correct amount of taxes are withheld from your paycheck can go a long way toward preventing an unexpected tax bill – and the negative emotions that come along with it.

What changes to the W-4 form recently took effect? Why do they matter?

The updated form also asks about additional sources of income and if someone works multiple jobs — the intention is to make withholdings more accurate.

What are some of the downsides to withholding too little or too much?

Tax withholding is just one part of an individual’s entire financial picture.

How can people update their W-4?

It’s easy. You just need to update the form and submit it to your employer.

If the taxpayer is single with income from only one job, then they only need to complete the personal information section and sign the form.

Get a head start on 2020 taxes

The 360 Degrees of Financial Literacy website has information to help taxpaying Americans understand the new W-4 form and how their tax withholding impact their financial plan.

Association Staff

How to audit during a pandemic? You asked. We answered.

Post author By FFC
Post date December 8, 2020

How to audit during a pandemic? You asked. We answered.

This year has been anything but conventional. As auditors prepare to audit clients who’ve found themselves financially affected by the pandemic, we’ve received many questions. To bring a little clarity in the time of COVID-19, this blog presents answers to the most frequently asked questions.

Is it possible and effective to audit remotely?

You’re not prohibited from conducting audit procedures remotely. Auditing standards generally specify what evidence must be collected, but not how it must be collected. In most cases, we can reliably gather audit evidence remotely.

To audit remotely, you must have the necessary infrastructure and resources in place — licenses for videoconferencing technology, staff training, security and privacy protocols, etc.

While certain aspects of an audit, such as observing inventory counts, are harder to do without being physically present, there is a wealth of resources available for auditors to use when working remotely to assure you’re complying with the requirements of professional standards.

How can I audit property, plant and equipment (PP&E) and inventory while working remotely?

While your ability to perform in-person audit work may be limited, auditors are still required to test assertions that traditionally require them to be onsite, like PP&E and inventory existence.

A possible solution to confirm the existence of PP&E and inventory is livestreaming. Using video that is confirmed to be live (as opposed to pre-recorded), management can put their fixed assets on camera so you can verify their existence.

Regarding inventory existence, livestreaming is also a valid solution if COVID-19 has made being physically present for inventory counts impracticable. Another solution is to observe the inventory count on a different date and review and test the inventory roll-forward, assuming adequate controls exist over inventory.

If the client has a perpetual inventory system, you can consider relying on the client’s cycle counts. These counts are often conducted quarterly and include a portion of the client’s inventory on hand. If you’ve been testing those controls and relying on them to establish the existence of inventory, you may be able to go back to the client’s last cycle count and roll forward to year end by testing sales and purchases during that interim period.

If the client’s inventory balance is material but they’re unable to perform a physical inventory count, and alternative procedures to test inventory existence are not possible, you may face a scope limitation in your audit. While other procedures like price testing and obsolescence testing may provide indirect evidence regarding the existence of inventory, they are unlikely to provide sufficient appropriate audit evidence.

The article How auditors can test inventory without a site visit offers more information on how to test inventory remotely.

Will every business have a triggering event?

Given the economic environment in 2020, many entities are likely to conclude that triggering events occurred, causing them to perform impairment testing. To evaluate whether a triggering event has occurred for a client, refer to ASC 350.

ASC 350 defines what a triggering event is and lays out the circumstances that indicate if a triggering event has occurred. It also gives you the order in which you should perform impairment testing with respect to indefinite-lived intangible assets, long-lived assets and goodwill.

FAQs regarding audit and financial reporting matters related to COVID-19 can help.

If COVID-19 is a triggering event for my client, what date will be used to do the evaluation?

March 2020 — the date the World Health Organization declared COVID-19 a global pandemic.

Will COVID-19 lead to a rise of businesses with issues regarding going concern?

I’m hearing from practice that practitioners are anticipating an increase in the number of clients with going concern issues. And because of that, reporting is an area where auditors risk tripping up. If more clients have substantial doubt about their ability to continue as a going concern, there is likely to be an increase in the number of audit reports where an emphasis of a matter paragraph is required.

If management believes their plan alleviates substantial doubt, auditors will have to scrutinize the evaluation, carefully review any supporting materials management used to reach that conclusion and evaluate the adequacy of management’s disclosures in the financial statements before issuing an unmodified report.

There are many more reporting outcomes possible based on specific circumstances. This auditor’s report tool can help you determine which report is required by professional standards based on the circumstances.

Carl R. Mayes, Jr. CPA; AICPA Associate Director – CPA Quality & Evolution, Association of International Certified Professional Accountants

How COVID-19 will affect states’ revenues, taxes and you

Post author By FFC
Post date December 4, 2020

How COVID-19 will affect states’ revenues, taxes and you

The COVID-19 pandemic has had a tremendous impact on the country’s physical health and the economy, including a major impact on states and their revenue.

According to a Center on Budget and Policy Priorities (CBPP) recent report, states, localities, tribal nations and U.S. territories face revenue shortfalls of about $480 billion and $620 billion through 2022. It could reach even higher if there is a double-dip recession. Affected state revenue sources include individual and corporate income taxes, sales taxes and gasoline taxes, as well as local property taxes.

Unlike the federal government, most states require a balanced budget each year. A recent presentation to the National Conference of State Legislatures Task Force on State and Local Taxation (NCSL SALT Task Force) notes that states have $90 billion in rainy day funds. The Federation of Tax Administrators (FTA) estimates that this is 10% of total state budgets.

Some states have acted by:

extending tax filing and payment deadlines

modifying nexus requirements to avoid punishing telework

modifying and extending net operating loss provisions

modifying conformity/decoupling from the Coronavirus Aid, Relief, and Economic Security (CARES) Act

There haven’t been many major state tax increases. That’s likely to change if the federal government doesn’t provide enough state aid.

Some states might consider a sales tax on professional services, such as accounting services. In 2020, such efforts in Montana and Wyoming failed, but Wyoming legislation is expected in 2021. The AICPA continues to work with state CPA societies on a state-by-state basis to oppose a sales tax on accounting services.

According to the Center on Budget and Policy Priorities (CBPP), state and local governments have furloughed or laid off 1.2 million workers, far more than the 750,000 who lost their jobs during the Great Recession. They’ve also imposed spending cuts on public services. Georgia, for example, cut K-12 funding by nearly $1 billion, and California cut higher education by roughly the same amount. If the federal government doesn’t provide more state aid, more state cuts await us — layoffs, tuition hikes and reduced public services.

While states and local governments have received a $246 billion federal stimulus to date, the AICPA believes that states need more federal aid, and we continue to advocate for that. The amount of additional state and local aid is under negotiation with the House Democrats’ Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, including $875 billion ($500 billion for states, $375 billion for local governments). If the states don’t receive the needed federal aid, they likely will slice budgets.

During the pandemic, the AICPA has tracked state tax guidance and provided state CPA societies with recommendations on administrative, filing and payment relief for state and local taxes during the coronavirus pandemic. That resource included recommendations on e-signatures, one additional month state filing after federal filing, and state tax treatment of remote work. The AICPA developed a letter to advise clients on teleworking.

The AICPA also submitted letters to Congress on the remote worker issue in June 2020, July 2020 and August 2020 with a coalition letter with 120 organizations, including 45 state CPA societies, urging the provision be included in the next Congressional pandemic relief effort. In addition, the AICPA testified in Congress on the Wayfair online sales tax issue with suggestions to simplify the rules.

To learn more about the state tax revenue situation and what state tax policies and actions are possible, attend the December 8^th AICPA/UNC Tax Center webcast “Tax Policy & Planning: How States Propose to Bridge COVID-19 Revenue Shortfall.”

Eileen Reichenberg Sherr, CPA, CGMA, MT, Director — AICPA Tax Policy and Advocacy

4 A&A challenges caused by COVID-19

Post author By FFC
Post date December 3, 2020

4 A&A challenges caused by COVID-19

For many public companies, the financial reporting challenges brought on by the COVID-19 pandemic aren’t going to disappear anytime soon. They will continue through year-end, and probably at a minimum for a few quarters after that. We’ve been hearing about the following A&A issues from those of you in the trenches — finance professionals and firm practitioners — and many of these challenges will be discussed at the AICPA Conference on Current SEC and PCAOB Developments next week. Here are some of the topics I’m expecting we’ll hear about.

Impairment related to non-financial assets

There’s no denying that the COVID-19 pandemic has caused disruptions to business operations and led to economic uncertainty. Because of this, many entities that are affected may need to continue testing their assets for impairment — goodwill, indefinite-lived intangibles and finite-lived assets, like property, plant and equipment (PP&E). Many of you have been dealing with this challenge for several quarters now and will continue to do so through year-end.

Fraud

There’s a heightened risk of fraud during recessionary environments and other uncertain times. Tomes have been written on this topic. It’s important to keep an eye out for such situations given the risk. Check out this article highlighting how CPAs can help their clients minimize fraud.

Financial reporting and related auditing processes

Management and auditors have had to adapt to new ways of working. The remote work environment has led to challenges, including those related to counting/inspecting inventory, adjusting to cloud-based systems and using videoconferencing technology. Since many entities will maintain at least some remote work operations going forward, they will need to consider how this new environment will influence how they do their periodic closing of the books, how often management will be in the office, how often auditors will be onsite to conduct audits, and how companies will maintain strong internal controls and IT security. I’d recommend looking at the AICPA COVID-19 audit and assurance and accounting and reporting resources.

Fundamental accounting topics

Accounting and auditing judgements and estimates on some big topics, such as revenue recognition and leases, are challenging enough in “normal” business times. The current environment has magnified the challenges on some of these newer accounting standards. For example, many businesses have had to change their revenue models without much notice, thereby requiring some fresh looks at the accounting under the new revenue recognition standard. Likewise, many businesses have modified their lease arrangements with lessors.

Lessons learned from regulators

Regulators have seen several quarters of reporting in the COVID-19 environment and have observations to share. Likewise, the Financial Accounting Standards Board (FASB) has its ear to the ground and has made some moves, such as delaying effective dates of standards and providing practical expedients, and is considering other changes to help industry and firm practitioners during this time.

The four challenges outlined above, lessons learned from regulators and more will be discussed at the AICPA Conference on Current SEC and PCAOB Developments Dec. 7–9, 2020.

Expect to hear:

Expert analyses of recent changes in standards

Experiences from your peers

Clarifications of complicated regulatory issues

A review of new technology affecting the profession

Discussions of regulatory agendas and priorities

I hope to see you at the conference!

Dan Noll, CPA, Senior Director – Accounting Standards, Association of International Certified Professional Accountants

Cannabis legalization: States continue to take the lead

Post author By FFC
Post date December 1, 2020

Cannabis legalization: States continue to take the lead

Following November’s election, most states have legalized cannabis for either medicinal or personal adult use. Voters in four states — Arizona, Montana, New Jersey and South Dakota — approved ballot measures legalizing cannabis for personal use for adults at least 21 years old. Mississippi and South Dakota legalized cannabis for medicinal use, with South Dakota becoming the first state to legalize medicinal and recreational use cannabis in the same election.

Arizona

Proposition 207 regulates adult-use cannabis and imposes a 16% sales tax to fund community colleges, infrastructure, public safety and public health programs. It allows localities to prohibit cannabis businesses through zoning and bans smoking marijuana in public places.

The Arizona State Board of Accountancy previously issued guidance to CPAs and CPA firms practicing in the cannabis space after the state legalized cannabis for medicinal use.

Mississippi

Initiative 65 allows physicians to recommend medical marijuana to patients with at least one of 22 qualifying health conditions. Patients may possess up to 2.5 ounces, and the measure sets the tax rate equal to the state sale tax, which is currently 7%.

Montana

Initiative 118 allowed the state to set the legal age to purchase marijuana and Initiative 190 put that age at 21. The Marijuana Legalization Initiative regulates the possession and sale of marijuana. It levies a 20% tax on non-medical marijuana with the revenue going to the state general fund, conservation programs, substance abuse treatment programs, services for veterans and local governments. The measure also expunges previous marijuana convictions.

New Jersey

Question 1 legalizes the possession and use of marijuana for adults at least 21 years old. The Cannabis Regulatory Commission, which regulates medical marijuana in the state, will oversee the regulation of adult personal-use cannabis. The measure also sets the tax on personal-use cannabis at the same rate as the state’s sales tax, which is currently 6%. Municipalities, through legislative authorization, may set an additional tax.

South Dakota

Amendment A legalizes the possession and use of marijuana for individuals at least 21 years old. It allows adults to possess up to one ounce of marijuana for personal use and taxes marijuana sales at 15%. The state will use sales revenue for its general fund and public schools. It requires the South Dakota State Legislature to establish a medical marijuana program by April 1, 2022.

Looking ahead to 2021

In addition to legislation required to implement these ballot measures, state legislatures will continue to separately consider marijuana legalization. For example, pre-filed Texas legislation would authorize using cannabis for medical purposes.

To help you confidently and competently support your clients, the AICPA & CIMA Cannabis Industry Conference will present sessions on a wide variety of other topics relating to accounting for cannabis. Join via livestream Dec. 7-8.

James Cox, Associate Director-State Regulation and Legislation, Association of International Certified Professional Accountants

How to be thankful – even in 2020

Post author By FFC
Post date November 25, 2020

How to be thankful – even in 2020

For me, Thanksgiving has historically been an endurance sport. I’ve repeatedly proven to myself that if I can only survive my family’s barrage of questions regarding my singlehood, if I can simply feign an interest in football, if I can laugh off an inebriated uncle’s inappropriate limericks while covering the ears of my innocent siblings, then I will be rewarded with hours of judgment-free gluttony. Turkey with gravy and stuffing. Warm biscuits — split, buttered and steaming. Multiple unnecessary versions of the ever-ubiquitous green bean casserole. Tomato aspic, ostracized and jiggling in a darkened corner of a makeshift buffet table. And pies. Pecan pies. Pumpkin pies. Chocolate chess pies. The delicious bounty makes the familial challenges worth it all.

But this Thanksgiving is different. For many like myself, instead of the bounty and the family, there’ll merely be isolation.

So, in a doldrum, I did what any sane person would do: I called my CPA.

CPAs, after all, have an earned reputation for telling it how it is. For not mincing words. It’s an occupational advantage. Equivocating on the facts, after all, could mean a client’s business folding, a company may not properly address essential cybersecurity risks, a tax client getting a much-dreaded letter from the IRS, a startup’s intellectual properties being undervalued or overvalued… and so on.

I expected to have a partner in sadness — a misery-loves-company companion. Instead, I got a quick rebuke. My CPA reminded me that, regardless of current realities, there’s much for which to be thankful.

I’ve discovered that those in her profession mostly share her sentiment. In a recent AICPA Update Weekly Weigh-in poll, AICPA members were asked to state, in a few words, what they were most thankful for this year. Many answered, and the results showed that accounting and finance professionals aren’t so quick to let current events diminish their gratitude.

Heather Meier, CPA, is one example. Like many in the profession, she began her career at a public accounting firm. She’s since worked in accounting for various higher-education institutions such as Villanova University and now manages five teams at Montgomery County Community College. She can see “MontCo” from her home office. During the pandemic, her convenient commute across the street became even more convenient — at least physically. Now, she walks from one room to the next.

She admits to missing the clatter and chatter of formerly busy hallways, hallways she’s proud to say are bustling with diversity, from first-generation college students to older women pursuing fresh starts and new careers.

There’s a wistful tinge in her voice when we speak, but there’s also plenty of hope. When asked what she’s most thankful for this year, she’s quick to point out what may not have been obvious a year ago: “Accounting can be done anywhere.” For Heather, this flexibility has translated to job security. She admits that there has been a lot of adjusting. She and her teams have had to create new processes for collaborating virtually. It’s involved plenty of mental and procedural agility: scrapping what doesn’t work; keeping what does; and keeping a team of remote workers engaged, committed and connected. Ultimately, they’ve discovered that many virtual processes are more efficient than their traditional, more manual counterparts. She and her teams have also learned that by creating a sunshine fund for birthday cards, holding virtual coffee breaks in the morning and partaking in virtual happy hours in the evening, the distance between doesn’t seem as vast.

Heather is also thankful for this year’s many challenges. She states that the influx of federal dollars and resulting compliance with Paycheck Protection Program and CARES Act requirements have thrust her into a tighter-knitted knowledge-sharing network of accountants across her state’s community college system. “Things are changing so quickly. I don’t even think the government even knows all the rules,” she says. That makes this network irreplaceable. She’s also dealing more with small details, partnering with academic departments in her institution on best ways to save and leverage funds and even helping the culinary arts director get creative with sourcing chickens.

Bill Wood, CPA, also works in education, heading finance for Concordia University Wisconsin. Like Heather, he misses the face-to-face energy that comes with working with and among students. He leads a currently shorthanded finance team. His biggest pandemic-related challenge has been finding and onboarding talent. Yet, despite having fewer people on staff, Bill has recently undergone probably the most seamless audit of his experience. After 17 years with the same auditing firm, the University decided to make a switch, and he’s incredibly thankful for that decision. While many organizations are opting to delay audits during the pandemic, his university’s audit was done ahead of schedule with few, if any, hiccups.

Michael Murray, Director of Finance at the Harrisburg Symphony Orchestra, was also surprised with the ease and seamless level of service of his annual audit. He attributes this largely (and with gratitude) to the availability and affordability of technology such as Zoom and Microsoft Teams, which for nonprofits such as his are free — or close to it. Before the pandemic, Michael led his organization through a thorough digital transformation. For obvious reasons, the digitizing process then has proven serendipitous now. “[COVID-19] drove a lot of this forward, and it’s going to stay in that forward position when all this is over,” he says.

Jean-Luc Bourdon, CPA/PFS, is most thankful this year for his clients. The relationships he forges in the personal financial planning process are truly reciprocal: he helps those he serves secure their dreams and futures and, in return, he enjoys indescribable feelings of fulfillment. He’s even been able to help estranged family members set aside their differences and come together again at long last. He cherishes these memories and achievements, keeping a drawer full of thank-you cards in his office as a reminder of the impact he’s made in others’ lives.

So, despite the pandemic, , social unrest, hurricanes, wildfires, UFOs and — yes — murder hornets, plenty of CPAs (and those they serve) don’t view 2020 as a dystopia but as a year of challenges that can serve to highlight all we have to be thankful for.

For more heartfelt messages of gratitude, be sure to check out this amazing ThisWayToCPA Instagram story, and — above all — have a wonderful Thanksgiving. You’ve earned it.

Association Staff

Your support matters: Give back this Giving Tuesday

Post author By FFC
Post date November 18, 2020

Your support matters: Give back this Giving Tuesday

Many of us take stock of our good fortunes during the holiday season, reflecting on what we’re most grateful for and giving back to help others in need. This year has been trying for most of us. Just as businesses and professionals face economic hardships, many college students face challenges and uncertainties about how to fund their education and secure their futures.

That’s why the AICPA Foundation’s work has never been more important. Established nearly a century ago, the Foundation aims to advance the science of accountancy and accounting education. Through the profession’s generous donations, we equip accounting students with the much-needed support they need to progress in their journeys and reach their ultimate goal of becoming CPAs.

This year, I hope you will consider contributing to the AICPA Foundation to help us build on our efforts to bolster the profession’s future in these difficult times.

Our commitment and support focus on three areas:

1) Scholarships

One of our most significant efforts fund scholarships that provide CPAs with financial assistance toward their education expenses. Fueled by the AICPA Foundation, the AICPA provides more than $700,000 in scholarships, grants and fellowships for accounting students each year.

The AICPA Legacy Scholars program offers several opportunities for outstanding future CPAs of diverse backgrounds. It provides financial assistance to help offset the cost of their education, along with educational and professional development opportunities throughout the year. They include:

The AICPA/Robert Half Student Scholarship Award, which supports those who demonstrate potential to become future leaders in the profession.

The AWSCPA Scholarship Award, which supports the success of women in accounting.

The AICPA Foundation Scholarship for Future CPAs, which supports undergrad and graduate students who demonstrate high potential and commitment to becoming a CPA.

The AICPA John L. Carey Scholarship Award, which assists liberal arts and non-business undergraduate degree holders who are pursuing both graduate studies in accounting and CPA licensure.

The AICPA Scholarship Award for Minority Accounting Students, which provides awards to full-time minority students pursuing an accounting or accounting-related degree.

The AICPA Foundation Two-year Transfer Scholarship Award, which supports students aiming to transfer from a two-year college to a four-year institution to complete their accounting or accounting-related degree.

This year, we also established the COVID-19 Student Hardship Grant to specifically benefit undergraduate and graduate students who faced pandemic-related hardships. We awarded 25 students with $2,000 grants each. This type of support can go a long way to help future CPAs continue their paths forward, as it did for Sammy:

“COVID-19 impacted me in many ways. I lost my internship, and my father lost his job. The grant is extremely helpful since I am better prepared to complete graduate school in December 2021 and pursue a CPA license.” — Sammy, 2020 COVID-19 Student Hardship Grant recipient

2) Diversity, equity and inclusion (DEI)

Additionally, the AICPA Foundation has been a long-time diversity proponent. Increasing diversity within the accounting profession has been one of its long-standing objectives. We support several DEI initiatives, including the Accounting Scholars Leadership Workshop (ASLW), an annual invitational program for minority accounting students, and the AICPA National Commission on Diversity and Inclusion (NCDI), which proposes strategies to recruit, retain and advance underrepresented minorities in the profession.

3) Accounting education

We also support quality accounting education and accounting research. Programs include the Accounting Doctoral Scholars Program, which aims to increase the pool of academically qualified accounting faculty in auditing and tax with recent experience at U.S. universities, and the Accounting Program for Building the Profession (APBP), which trains high school educators to teach a higher-order accounting curriculum and promote accounting as a viable career option.

Your support goes a long way

These are just a few examples of how the AICPA Foundation works hard to build and support the next generation of CPAs. I encourage you to read more about the progress made in these and our many other programs in the most recent AICPA Foundation Annual Report.

If you are willing and able, please consider making a contribution this holiday season to the AICPA Foundation. Any amount makes a difference. Together, we will help empower the next generation of CPAs and ensure the future of the profession remains strong and vibrant for generations to come.

Christopher Radford, Senior Manager — Development & Fundraising, AICPA Foundation

AICPA advocacy makes big impact during pandemic

Post author By FFC
Post date November 17, 2020

AICPA advocacy makes big impact during pandemic

As the accounting profession continues to build trust, create opportunity and grow prosperity amid the global pandemic, the AICPA has implemented numerous advocacy initiatives, built coalitions, created tools and provided leadership that simultaneously propels the profession while addressing its issues and concerns. The AICPA’s advocacy efforts have helped the profession navigate clients’ and businesses’ needs in the United States and abroad. This blog highlights some important recent events in our U.S.-based advocacy.

The AICPA has guided Congress, the Department of the Treasury, the IRS, regulatory agencies, business trade groups and other stakeholders. We offered sound advice, developed practical tools and spearheaded programs related to COVID-19 and small business recovery efforts. The AICPA offered dozens of ideas, feedback and proposals for federal relief bills for small businesses and their employees. We continued to meet with members of Congress and their staffs, as well as officials from the IRS and Treasury, to advocate for commonsense practices that would help the country manage through the pandemic and regain economic stability.

2020 U.S. advocacy highlights

Accounting as an essential service — As state and local governments were requiring businesses to close because of the coronavirus, the AICPA strongly encouraged Treasury to include public accounting as an essential service. CPAs and tax professionals were already in the middle of a busy season and needed access to their offices to complete returns. As an essential service, they could continue to serve clients as local government mandates required businesses to shut down. Following our outreach, the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency included public accounting as an essential service. State and local officials used this guidance to determine which businesses and services were essential.

PPP Coalition facilitates information sharing — The AICPA created a Paycheck Protection Program (PPP) Coalition to support and amplify the AICPA’s advocacy efforts on behalf of small businesses. The coalition communicates information about small business relief programs, assists with gathering required documentation and application processes necessary for PPP relief funds, and is a general resource for overall economic recovery initiatives. For example, in coordination with state CPA societies and over 170 small business payroll providers, the AICPA urged Congress to include a technical correction to address the tax treatment of loan forgiveness under the PPP.

Guidance issued on tax credits and due dates extended — The AICPA successfully urged Treasury and the IRS to issue guidance on the employer retention credit, the sick leave and medical leave credits and PPP loan forgiveness (we still advocate for expense deductibility) and pushed for the broadest income tax filing and payment relief possible. We repeatedly asked that any returns due between March 3 and July 15 be postponed until July 15, until that became a reality.

E-signatures adopted on 18 forms — The AICPA Tax Executive Committee (TEC) requested that the IRS update and modernize its e-filing signature requirements in four areas because of COVID-19. The aim was for the IRS to at least temporarily, and then permanently, adopt the changes to make using electronic signatures easier for taxpayers and tax practitioners. The IRS initially identified a dozen forms for which it would accept e-signatures for the rest of the year. At the AICPA’s request, it then added six more forms. We are still advocating for permanent e-signature acceptance.

State guidance issued and adopted — The AICPA’s Recommendations for Administrative, Filing and Payment Relief for State and Local Taxes during the Coronavirus Pandemic helped state CPA societies that wished to request their state taxation authorities provide automatic acceptance of their returns into the state electronic filing program, if accepted by the IRS. The recommendation asked that states not require a separate signature authorization form other than the IRS Form 8879 series. Fourteen states and several localities now allow for automatic acceptance. We created numerous other tools to support state CPA societies with their advocacy efforts on state and local tax matters, including the regularly updated AICPA chart on State Tax Filing Guidance and resources on one additional month for state filing after federal filing.

Guidance about the e-filing outage — The AICPA informed the IRS about the impact, implications and need for relief from the 15 e-filing outage and provided immediate guidance to practitioners. The AICPA successfully encouraged the IRS to issue a clarifying statement explaining the relief. In a Sept. 24 statement, the IRS acknowledged the e-filing software outage. It announced that a return and any elections filed with that return that were affected by the Sept. 15, 2020, external tax software outage would be timely if e-filed by Sept. 17, 2020.

Mobile workforce initiatives — The AICPA coordinated with key Senate staffs and supported new proposed legislation ( 3995) that refocuses the need for relief from having to file non-resident state income tax returns during the pandemic. It included a key provision in the final coronavirus relief package (AICPA Recommendations Phase Four letter). Additionally, the AICPA coordinated an effort with state CPA societies and other stakeholders that called for passage and inclusion in a larger deal. The joint letter with the Council on State Taxation garnered over 120 signatories, including 45 state CPA societies.

Proceeding with pre-pandemic initiatives — The AICPA has led an initiative on the need for a Practitioner Services Division and continues to send expanded stakeholder letters to Congress and the IRS that highlight support for this proposal. Also, in March, at the request of congressional staff, a member of the Tax Executive Committee testified before the Committee on Small Business’ Subcommittee on Economic Growth, Tax, and Capital Access on South Dakota v. Wayfair, Inc.: Online Sales Taxes and Their Impact on Main Street.

The AICPA is committed to advancing the best interests of the accounting profession. Throughout the pandemic, we have continued to fight for the needs of taxpayers, tax professionals, firms of all sizes and many other stakeholders. After the pandemic is over, we will still advocate for the best interests of our members and the public.

Association Staff

Auditing health-care entities affected by COVID-19

Post author By FFC
Post date November 13, 2020

Auditing health-care entities affected by COVID-19

It’s difficult to overstate COVID-19’s impact on the health-care industry. These changes vary dramatically among individual entities, meaning that there is no one-size-fits-all approach to auditing them. The audit risks vary widely.

Any health-care entity audit should start with a client meeting that covers several COVID-19 variables. They should include whether the client received federal funding, related financial statement implications, remote work arrangements and any furloughs or layoffs.

Here are major considerations to keep in mind during your audits.

Impact of federal relief funds

Most health-care entities received federal funding under the CARES Act, such as funding from the U.S. Department of Health and Human Services (HHS) Provider Relief Fund (PRF) program. It is important to understand and stay up to date on the audit requirements associated with new federal funding, as well as any potential accounting and compliance-related implications. This will involve reviewing the terms and conditions of awards and guidance documents posted on federal agency websites, which are regularly updated and revised. A document on the AICPA Governmental Audit Quality Center (GAQC) website identifies new CARES Act federal programs and details whether they are subject to single audits. The document also provides links to relevant agency guidance postings.

Internal control

At many organizations, accounting employees are working remotely, while others have been laid off or furloughed. Health-care entities are no exception. As a result, longstanding internal control policies may look significantly different than they did a year ago. For example, you may see segregation-of-duties issues for the first time. Auditors must understand the system of controls in place for the entire period, including any changes, and identify areas of heightened risk.

Accounting challenges

Certain nuances of relief funding — such as lost revenue, a new concept under the PRF program — have created accounting challenges in the health-care industry. Updates and revisions of relevant federal guidance that clients have relied upon to make accounting decisions exacerbate the challenges.

The AICPA’s Health Care Expert Panel developed a series of Technical Questions and Answers, CARES Act Provisions Specific to Health Care Entities, that discuss accounting matters for nongovernmental health-care entities. The Governmental Accounting Standards Board issued Technical Bulletin 2020-1, Accounting and Financial Reporting Issues Related to the CARES Act and Coronavirus Diseases, to provide accounting guidance for governmental entities. As things evolve, you should also keep an eye out for any new accounting releases.

Uncertainty and new audit requirements

Many health-care clients receiving HHS funding of $750,000 or more will be subject to single audit requirements, perhaps for the first time. This will also trigger a requirement for the financial statements to be performed under Government Auditing Standards. The U.S. Office of Management and Budget (OMB) is expected to issue an addendum to the 2020 Compliance Supplement by late November, which will include federal expectations for single audits of new CARES programs, including the PRF program. This delay in audit guidance has kept many single audits on hold because of the uncertainty of what the guidance will include.

For auditors with limited or no experience performing single audits, consider referring a portion of the audit to another firm that has the requisite competencies. The AICPA Peer Review Program has a searchable database of subject-matter experts who can help. Otherwise, auditors must gain the needed competencies quickly. The GAQC has posted a no-CPE archive of a single audit fundamentals series of webcasts, and the AICPA periodically offers this series for CPE. The AICPA has many other single audit training programs that can assist.

Resources

As the pandemic’s economic impact evolves, the available information and policies may shift. As it relates to the PRF program, refer to this HHS guidance and periodically check the broader HHS PRF webpage.

There are also helpful resources from the AICPA:

The COVID-19 Audit & Assurance toolkit

The COVID-19 Accounting & Reporting toolkit

A free risk assessment practice aid specific to health-care entities

The GAQC is the place to look for information on single audits, including its COVID-19 Resources page.

A recent Journal of Accountancy article on performing single audits during the pandemic offers other best practice tips.

Be sure to monitor these resources regularly, as they may be updated.

Importantly, from Nov. 30 through Dec. 4, the AICPA will offer a week of webcasts focused on the effects of COVID-19 on the health-care industry. If you practice in this area, you should consider participating to learn the latest.

These are unprecedented times, and there will be many audit challenges. We owe it to our health-care clients to help them navigate this landscape by staying as informed and up to date as possible.

Norman Mosrie, CPA, CHFP, FHFMA; Partner-in-Charge, DHG Healthcare Assurance Services. Norman Mosrie is the partner-in-charge of assurance for DHG Healthcare. He also is chair of the AICPA Health Care Expert Panel and the Healthcare Financial Management Association Principles and Practices Board. Norman has over 30 years of experience serving a variety of health-care clients across the continuum of care.

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