February—For a Short Month, It Certainly Seems Long

Congress passed legislation that extends the 2% employee payroll tax cut for another 10 months without significant tax offsets. As you may recall, the 2-percentage point cut was slated to expire on March 1, 2012. The bill also extends federal unemployment insurance benefits and prevents a scheduled cut in payments to Medicare providers from occurring during the remainder of 2012. The President signed the payroll tax cut bill on February 22. Last week, the President submitted his Fiscal Year 2013 budget and revenue proposals. It will be interesting to see what happens to these proposals as they work their way through Congress.

Since it is an election year, it is sometimes difficult to predict how Congress will react to proposals from the White House. In contrast to the rancor and political skirmishes that occurred on Capitol Hill in 2011 when Congress debated raising the federal debt ceiling limit and when Congress extended the 2% payroll tax cut for two months at the end of December 2011, last week seemed relatively calm inside the Beltway. For a couple of days, I thought that there was a big snow storm on the East Coast and that the Washington had shut down due to wintry weather. Instead, members of both parties decided to work towards a common goal—their re-election.

Although it is an election year, most individual taxpayers are more concerned about the filing deadline for their Form 1040. By now, taxpayers have received most of their 1099 forms. Some of us have also had the privilege of receiving a 1099 in their mailbox and an email later that same day from the payer indicating that an amended 1099 is going to be issued by the end of February. One point for the procrastinators who do not file their tax returns too quickly.

The full brunt of the busy season has arrived. Luckily, there was not a lot of major tax legislation in 2011. This is unlike the previous tax season where tax legislation was passed into law during a lame duck session of Congress in late 2010. The final 2010 federal tax forms were released later than normal as a result of that last minute legislation. The companies that produce tax preparation software are probably breathing much easier this year. If I were a betting man, I would say that they will not be so lucky next year.

Speaking of tax form changes, some taxpayers have probably noticed line 1a, Merchant Card and Third-party Payments, in Part I on Schedule C (Form 1040). For 2011, the IRS deferred the requirement to report gross receipts received via merchant cards (credit and debit cards) and third-party network payments on line 1a. Taxpayers are supposed to enter zero on line 1a for 2011 and report all gross receipts on line 1b, including any income reported to them on Form 1099-K. It will be interesting to see what legislative and regulatory changes will occur in this area before the 2012 federal tax returns are filed in 2013. As always, the lobbyists will be busy.

In addition to the line for merchant card and third-party payments, taxpayers may have noticed some changes to Schedule D (Form 1040) this year. In general, taxpayers reporting 2011 capital gains and losses will first report the gains and losses on the new Form 8949, Sales and Other Dispositions of Capital Assets. The totals from Form 8949 are then carried over to Schedule D. Once there, the taxpayer will be on more familiar ground.

While preparing their Form 1040, some taxpayers may notice that the Making Work Pay credit has disappeared. This credit expired and cannot be claimed on the 2011 federal individual tax return. The 2% employee payroll tax cut might reduce the sting of no longer having the Making Work Pay credit, but most taxpayers would prefer having both benefits.

How do you keep up with these changes? For those individuals with Smartphones, the IRS recently announced the availability of their updated Smartphone application, IRS2Go 2.0. This is an expanded app designed to provide taxpayers with easier access to tools and information. The new app is available for both the Apple and Android platforms. It has a new YouTube feature, news feeds, and tax transcript service. You can also check the status of your refund using the app.

Last week, there was another item of interest from the IRS. The Service issued its annual “Dirty Dozen” ranking of tax scams. There were no big surprises. Number one on their list was identity theft, and number three was return preparer fraud. The Preparer Tax Identification Number (PTIN) requirement and Registered Tax Return Preparer (RTRP) program should help reduce return preparer fraud in the future. Many articles in the print and electronic media have started to educate taxpayers about seeking qualified tax preparers and asking for their PTIN.

One last item came to my attention this morning. There is a lot of talk in Washington about corporate tax reform. There is also some talk about individual tax reform in speeches by various presidential candidates. However, most tax professionals are currently concerned with filing 2011 tax returns. By April 17, many of us will have formed our own opinions on how to best reform the tax system, but the various tax provisions that expire at the end of 2012 will be foremost in our minds. It looks like the real fun begins when the lame duck session of Congress carefully deliberates how to handle that issue after the general election in November.

CPE and Me

I had a birthday this month. Now, I am not going to tell you how old I am, but it did remind me that, in addition to being one year older, my annual Continuing Professional Education (CPE) reporting deadline had arrived. I am licensed in a state that requires CPAs to report the number of hours of CPE completed in the twelve-month period ending on the last day of the month in which they were born. The requirement is usually stated in terms of minimum required number of hours of credit and specific requirements such as number of hours earned from technical and non-technical topics and ethics. Failure to complete the minimum hour requirement as well as the specific course requirements can result in suspension of your license to practice.

A summary of CPE reporting deadlines for the 50 states and 4 territories are as follows:
• 28 – December 31st.
• 12 – June 30th.
• 8 – Other
• 5 – Birth Month
• 1 - None

The Wisconsin state board does not require its CPAs to obtain CPE: however, most Wisconsin CPAs voluntarily take CPE in order to stay current with the ever changing accounting and tax rules and regulations.

Five states have birth month reporting periods. These are mainly the large states; California, New York, and Texas. Arizona and New Mexico have also adopted reporting based on the month you were born.

The majority of the states-(74%) have either June 30th or December 31st-as their reporting date.

Often reporting periods do not correspond to the license renewal date, so you need to be careful to complete the required number of hours of CPE within the renewal period. Also, limits on the number of hours of credit you may report for a specific type of CPE (self-study vs. instructor led or technical vs. non-technical) need to be carefully monitored so you do not run afoul of the requirements.

If you are licensed in only one state, keeping up with your CPE requirements may not be that challenging. However, if you are licensed in multiple states, it can become a daunting task. The good news is that there is help available. Thomson Reuters CE Tracking, available on Checkpoint Learning©, tracks over 70 organizations that regulate licensing and certification requirements, including all 50 states. Just follow the link for more information.

https://checkpointlearning.thomsonreuters.com//Courses/CpeTracking

Features of CE Tracking include:

• Automatic determination of compliance periods.
• Enforcement of limits/prohibitions on credits earned.
• Notification of rule updates and changes.
• Monthly e-mail reminders to keep you informed of your CE compliance status.

Check it out for yourself. It can save you time and ensure that you meet all of the continuing education requirements mandated by each of your licensing bodies.

Do Mondays (Whether Rainy or Not) Always Get You Down?

Do Mondays (Whether Rainy or Not) Always Get You Down?

• Do you wake up Monday morning and wish the weekend was one day longer?
• When your boss pops into your office, do you think, "What now?"
• Are you working more but enjoying it less because of longer hours and demanding deadlines?

Does this sound familiar? The recession impacts both the employed and unemployed as every top-line and bottom-line dollar is squeezed out of business financial statements. In addition, attrition policies and restructuring may have blocked your career path, overwhelmed you with responsibilities, or even pushed you into a promotion that has you struggling. You used to love your job! Now the lack of options has you feeling desperate.

Before you change your LinkedIn setting to “Actively Looking,” consider one of your best options. In order to succeed in a down economy you may need better or different skills. To obtain those skills you will need training. Unfortunately when an organization tightens its budget belt, training is often the first area to be cut. This is not the time to give up; it is the time to invest in yourself—your career. After all, if your knowledge and skills stay the same, then your skills are falling behind. Staying current with industry standards and expanding your skills will show your employer that you want your job (Let’s be frank, you may feel that you hate your job, but you would hate being unemployed even more!). The benefit to the firm will not be lost on your employer; the investment in yourself should convince your employer that you are a keeper. So how are you going to get this training? Here is how.

Online training can equip you with the skills needed to meet or exceed your client’s expectations. Thomson Reuters has a deal that will knock your socks off—access to hundreds of course for a one year period for one set fee - $299. That is less than $25 a month ($.82 per day). Are you ready to hone your skills or acquire new ones? How many topics could you tackle? Which courses would give you the edge that you need?

The Premier CPE Package (https://checkpointlearning.thomsonreuters.com//Bundle/Index ) provides a terrific range of learning options designed specifically for accounting professionals like you.

So, are you ready to tackle Monday, now?

IRS MID-YEAR RATE INCREASE

IRS mid-year rate increase. Usually, when I hear the term rate increase, I cringe, but this latest one is actually a good thing. The IRS has announced a mid-year increase to the standard mileage rates for tax purposes. They typically revise the mileage rates only once a year, but Congress has been pressuring them to increase the mileage rates in light of the significant increase in the cost of gasoline.

The standard mileage rate for business use of your automobile increases 4.5 cents from 51 cents per mile to 55.5 cents per mile for business miles driven from July 1, 2011 through December 31, 2011. For the period from January 1, 2011 through June 30, 2011 the rate remains 51 cents per mile.

It is interesting to note that this is the first increase in the standard mileage rate since 2008. In both 2009 and 2010 the rate actually decreased. The new rate is only one half of a cent higher than the 2009 rate and is three cents below the 2008 rate. In case you’ve forgotten the average price of gasoline hit an all time high of $4.11 per gallon in 2008. I didn’t remember either. How soon we forget!

The new rate for use of your vehicle related to medical or moving expenses is 23.5 cents per mile, also an increase of 4.5 cents per mile. The rate for charitable purposes remains 14 cents per mile since it is set by statute.

Here is a breakdown of the 2011 rate changes:

PURPOSE: BUSINESS
…January – June Rate: 51 cents
…July – December Rate: 55.5 cents

PURPOSE: MEDICAL/MOVING
…January – June Rate: 19 cents
…July – December Rate: 23.5 cents

Happy motoring!

COMMUNICATING EFFECTIVELY

I like numbers more than words. That’s natural for an accountant, right? Not necessarily. When I graduated from college and began my career in public accounting, I soon learned that understanding numbers was a requirement, but having the ability to communicate well was critical to my success as a professional.

Effective communication can be a challenge, especially for those who are new to the profession. Communication skills are not usually emphasized in most major college accounting curriculums. However, written and oral communication is just as important to the accountant or tax professional as knowledge of tax and accounting rules and regulations. Almost everything you do as a professional accountant results in some form of written or verbal communication to your client or staff. If that communication is not well written or delivered, it reflects poorly on you and the firm you represent. Cultivating effective communication skills will help you advance more quickly than those without good communication skills. Most firms could benefit significantly by providing training to help its professionals develop effective communication skills.

A little over 20 years ago I was hired as a technical editor for Practitioners Publishing Company. I had always thought that I had pretty good communication skills, but I was in for a big surprise. I wrote a chapter about governmental accounting and submitted it to my copy editor (an individual with a journalism degree), expecting rave reviews on my writing skills. When she returned the chapter, I knew she needed a transfusion because she had bled all over my manuscript. I had never seen so much red ink in my life. I was crushed, but I tried to learn from the experience. I never seemed to know where the comma should go or if I should use “which” or “that.” Learning to write correctly is a difficult process, but over the next five years she continued to point out ways to improve my writing and in the process made me a much better writer.

If you want to improve your writing skills, here are some books that I highly recommend:

“The Elements of Style,” by William Strunk, Jr. and E.B. White
“100 Ways to Improve Your Writing,” by Gary Provost
“The Kings English,” by W. Fowler and F. G. Fowler

Speaking in front of an audience has also been part of my job for over 30 years. It has been said that public speaking is feared more than death. Toastmasters helped me to overcome that fear, or at least control it. It taught me to eliminate mannerisms such as continually saying “Uh” to fill my pauses and to look at my audience when speaking. Accountants don’t just sit in their offices crunching numbers. Public speaking is a large part of the job. Accountants must present audit reports and discuss tax findings, among other things. Being able to address a group clearly and with confidence will only enhance an accountant’s professional image. So, if you are interested in improving your oral presentation skills, I recommend joining your local Toastmasters International club. It is one of the best things I ever did.

CARBON ACCOUNTANT – THE NEXT HOT JOB FOR ACCOUNTANTS?

When I first came across the term “Carbon Accounting,” I had no idea what they were talking about, so I looked it up. According to Wikipedia, “Carbon Accounting is the accounting process undertaken to measure the amount of carbon dioxide equivalents that will not be released into the atmosphere as a result of Flexible Mechanisms projects under the Kyota Protocol.” The Kyota Protocol identifies six greenhouse gases that are to be accounted for: carbon dioxide, methane, nitrous oxide, HFCs, PFCs, and sulfur hexafluoride. Carbon accounting consists of the process of using software programs and actual observations to account for the six greenhouse gases noted above. A quick search of the Internet produced some thirty-eight software programs called enterprise carbon accounting (ECA).

So, who sets the standards for the carbon accountant? The American Carbon Registry (ACR) is the standard setter for carbon accounting. They publish standards, methodologies, protocols, and tools for greenhouse gas (GHG) accounting; which are all based on ISO 14064. The process for development and approval of the standards and methodologies is very similar to the process followed by the FASB for setting financial accounting standards.

There are a number of Fortune 500 companies including Coca Cola, Google, and Wal-Mart who already voluntarily track and report their yearly greenhouse gas emissions. Wal-Mart has announced that they also want all of the products they sell to have an eco-label. So, when Wal-Mart’s 100,000 plus vendors start monitoring their CO-2 emissions they will all need carbon accountants and auditors. According to the Greenhouse Gas Management Institute, “The world faces a shortage of greenhouse gas professionals with the skills needed to meet current measurement, reporting and, verification needs. Some industry experts believe that a substantial majority of all U.S. public companies will need at least a part-time GHG accountant or consultant in the near future.

Measuring, accounting, and auditing greenhouse gas emissions potentially have opened up a whole new line of work for accountants. What do you think?

CAN YOU DEFINE “CHURCH” – NEITHER CAN THE IRS

Can You Define “Church” – Neither can the IRS. A church has several tax advantages over other types of publicly supported Section 501(c)(3) organizations. It is automatically tax-exempt without applying for exempt status on Form 1023 and is also exempt from filing any annual information return. In addition, a church can be audited by the IRS only in limited circumstance and only in accordance with specific procedures (IRC Sec. 7611). Finally, a church has 15 years, instead of 10 years for other organizations, to use debt-financed real property for expansion purposes before income is taxable under IRC Sec. 514.

Neither the Internal Revenue Code nor the regulations formally define church. Therefore, the IRS developed and uses a list of 14 criteria to determine whether a religious organization is a church. Those criteria are as follows:

1. Distinct legal existence
2. Recognized creed and form of worship
3. Definite and distinct ecclesiastical government
4. Formal Code of doctrine and discipline
5. Distinct religious history
6. Membership not associated with any other church or denomination
7. Organization of ordained ministers
8. Ordained ministers selected after completing prescribed course of study
9. Literature of its own
10. Established places of worship
11. Regular congregations
12. Regular religious services
13. Sunday schools for the religious instruction of the youth
14. Schools for the preparation of its members

The IRS generally uses a combination of these characteristics, together with other facts and circumstances, to determine whether an organization is considered a church for federal tax purposes. Moreover, the 14 criteria are not of equal importance and all of them need not be met for an organization to be deemed a church. According to the IRS there is not a bright-line test for determining whether a religious organization is a church or simply a religious organization. Rather the determination is made based upon the facts and circumstances in each case. So you might say that trying to define church for tax purposes is similar to trying to define “pass interference.” It’s difficult to describe but the IRS knows it when they see it.

For exempt organization purposes, the term church is applied generically as a place of worship that includes, for example, mosques and synagogues. One thing is clear, an organization’s religious beliefs have no bearing on whether it is a church – any inquiry into those beliefs could run afoul of First Amendment religious protections.