AZ CPA March/April 2019
ASCPA Life Member Debra Davenport
Protecting Your Employees From Sexual Harassment Form 1099 Best Practices for Nonprofits The Arizona Society of Certified Public Accountants y www.ascpa.com
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2019 Annual Meeting & Awards Luncheon—May 8 Join us for the 2019 Annual Meeting & Awards Luncheon on May 8 at the Arizona Biltmore Resort from 11:30 a.m. to 1:30 p.m. Eric Hansen, past chair of the AICPA and the COO of BKD, will be our keynote speaker. We will honor Debra Davenport, former Arizona Auditor General, with ASCPA Life Membership and recognize our Excellence in Teaching Award recipient. Tables of 10 are available for purchase with two options, the regular table option for $750, and our premium table sponsorships for $1,000. This sponsorship level includes a $250 donation to the Arizona CPA scholarship fund. The fund assists accounting students on their paths to becoming CPAs. As a premium sponsor, your firm will also receive special recognition at the event. Purchase your table by emailing Gretchen Pacheco at gpacheco@ascpa.com or calling (602) 324-4745. Thank you to sponsors: CPACharge, Enterprise Bank & Trust and Paychex.
www.ascpa.com/annual2019
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AZ CPA The Arizona Society of Certified Public Accountants President & CEO Editor Advertising
Cindie Hubiak Patricia Gannon Heidi Frei
Board of Directors Chair Mike Allen Chair-Elect Jared Van Arsdale Secretary/Treasurer Ginny DeSanto Directors Rachael Bertrandt Tom Duensing Paul Evans Kristen French Alan Gold Aaron Grant Tim Hansen Vanessa Makridis Karen McCloskey Alice Pope Sami Raynes-Houseknecht Nikki Vogt Immediate Past Chair Molly Montgomery AICPA Council Members
Rob Dubberly Greg Nelson Chapter Presidents Southern Chapter Cathy Kinzer Northern Chapter James Shankland Southwest Chapter Helen Greenwell North-Central Chapter Gidget Schutte AZ CPA is published by the Arizona Society of Certified Public Accountants (ASCPA) to provide information, news and trends to the accounting profession. It is distributed 10 times a year as a regular service to ASCPA members. The ASCPA, its members, board of directors and administrative staff assume no responsibility for advertisements herein. The ASCPA and the above people also assume no liability for business decisions made by readers in reference to statements and/or claims in articles or advertisements within this publication. Opinions expressed by contributors are not necessarily those of the ASCPA. Arizona Society of CPAs 4801 E. Washington St., Suite 180 Phoenix, AZ 85034-2040 Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700 www.ascpa.com
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Volume 35 Number 3
AZ CPA
March/April 2019
Features
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Debra Davenport Honored With Life Membership on May 8 Davenport will be recognized for her contributions to the state and the profession at the ASCPA Annual Meeting. by Patty Gannon
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Protecting Your Employees
The broad scope of protection against sexual harassment. by Richard K. Mahrle
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Columns & Departments Chair’s Message by Michael T. Allen, CPA
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Member News
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A Dash of SALT by James G. Busby, Jr., CPA
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Collectively Serving Our Country Read about IRS Commissioner Charles P. Rettig’s priorities for his four-year term. by James Sean McGettigan, CPA
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Form 1099 Best Practices for Nonprofit Organizations
ASCPA Board Highlights
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Quick Quiz
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Requirements and exceptions, penalties considerations and best practices for submitting a 1099.
Classifieds 22
by Jason Cullari, CPA (in NJ)
Arizona Society of Certified Public Accountants 4801 E. Washington St., Suite 180 Phoenix, Arizona 85034-2040 www.ascpa.com
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ASCPA Chair’s Message
Reflections Your ASCPA has had an active year. Our team, led by Cindie Hubiak, is as good as they come and functions at a high level to achieve our established goals and objectives. In recognition of your participation, volunteerism, dues, PAC and Foundation contributions, and all that you do to support the ASCPA, I am providing a brief synopsis of some of the impactful ways your ASCPA has supported your CPA designation in Arizona. It has been an amazing year.
by Michael T. Allen, CPA So much of the value of being a member of the ASCPA relates to the advocacy efforts that occur on behalf of our members.
Advocacy So much of the value of being a member of the ASCPA relates to the advocacy efforts that occur on behalf of our members. Senate Bill 1443 “the CPA Bill” significantly reduced the regulation surrounding being a CPA in Arizona. The services tax has been an ongoing area of focus for the Society, and during the most recent election cycle, Arizona became the second state in the nation to ban services tax through the passage of a constitutional amendment. The Society’s current advocacy focus relates to conformity and communicating the importance for members and the citizens of Arizona that we have a clear understanding of how to properly file our State of Arizona tax returns. The Society has engaged actively with our members in local, as well as national, issues that affect our profession and our license. Significant time was spent gathering input and feedback on the ABV credentialing process the AICPA was pursuing. We supported our broad base of members who had strong opinions surrounding this matter. Our members are a passionate group who strongly represent the profession.
Continuing Professional Education CPE assures that our members have access to the information and knowledge we need to effectively do our work. It started early this year with passage of the new tax law and your Society was immediately on the ball providing training in how to deal with so many unknowns. This effort continues as we are just beginning to understand the impacts of this new law. The Society continues to provide a forum for our members to meet and learn through our many annual conferences. These serve as a great venue for members to meet and renew the strong relationships they have built over the years. To assure as much access to our CPE offerings as possible, most of our Societybased trainings are made available online and many of our members take advantage of these web-based offerings.
Member Outreach Another primary objective of our Society is to stay in communication with our members. One of the greatest tools members really appreciate is our Connect site. I encourage you to take a look and even if you don’t want to participate, you can still learn from the conversations.
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Member News We have had several Behind the Scenes events, and other social gatherings, which provide a great opportunity to meet so many loyal and active members. We have spent time traveling to visit our various chapters throughout the state. Our members are big supporters of the CPA profession in Arizona and are actively involved in the communities where they live. Attending chapter meetings has been a real source of enjoyment for me. Thank you for your support of our Society. I would like to ask for your continued support of the ASCPA through your membership and active participation, but just as importantly, with your PAC and Foundation contributions. We simply can’t do all that we do without you. I have enjoyed meeting so many of our members and appreciate each of you who have taken the time to introduce yourself. All the best, Mike. n
2019 Ambassadors: Welcome to our newest ASCPA/AICPA Ambassadors. We are grateful to the members who participated in our media training program. Left to right: Gabrielle Luoma, Ben Field, Lisa Lumbard, Corey Arvizu, Paul Kern, Kelly Damron, Anthony Lorenzo, Andrea Levy, Ross Grainger and Helen Greenwell. Paul Evans, CPA, senior vice president Finance, corporate controller at IMH Financial Corporation, was named the 2019 Controller of the Year from the Financial Executives International, Arizona Chapter. Provident Consulting has merged with Four Leaf Financial & Accounting, PLLC. Four Leaf was founded by Jill T. Foley, MAFM, CPA, and Provident Consulting, was previously owned and operated by Jennifer Dimeck, MBA, CNAP. Heinfeld, Meech & Co., P.C. recently announced the promotions of Shauna R. Brewster, CPA, to senior associate and Bryce Kozlowski and Stewart Watkins to staff associate II.
Giving Back: Sixteen Morrison, Clark & Company team members painted and cleaned a Save the Family home, getting it ready for a homeless family in need of safe housing. Save the Family helps families end the damaging effects of family homelessness with access to safe, permanent housing, improving their education and employment opportunities and building family competencies.
David Kimball Walser, CPA, is now the national tax director, estate, gift & trust at Moss Adams. Brendan James Kennedy, CPA/ABV/ CFF, CVA, ASA, is now a partner at ATLAS CPAs & Advisors PLLC.
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Donate to help children in care and reduce your tax bill dollar for dollar Talk with your tax advisor about a gift to AASK or visit TaxCreditForKids.org
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A Dash of SALT
Will Arizona’s Legislature Finally Specify Which Digital Goods are Taxable? In this month’s state and local tax (SALT) column, Busby discusses an issue taxpayers hope to see addressed in 2019: Will Arizona lawmakers finally specify which digital goods are taxable and clarify that digital services are not? Unlawfully Taxing Digital Goods and Services For years, taxpayers have been blindsided by sales tax assessments alleging that proceeds from various digital goods and services are subject to tax in Arizona. Although Arizona lawmakers have not addressed the issue, state and local taxing authorities argue in confidential audit assessments and obscure private taxpayer rulings that proceeds from digital goods and services are subject to tax as rentals of tangible personal property under the state’s antiquated tax code.
The 2017 Legislative Study Committee In 2017, a Joint Legislative Ad Hoc Study Committee explored the issue and issued a report. At the time, legislative leaders stressed the need for clarity, acknowledged that the state’s tax statutes have not kept pace with the digital economy and emphasized that the state’s tax code must be “predictable, transparent and fair for all taxpayers.”
Legislature Fail and Voters’ Mandate
by James G. Busby, Jr., CPA
James G. Busby, Jr., CPA, is a state and local tax attorney at The Cavanagh Law Firm. Busby previously worked in the SALT departments at Arthur Andersen and Deloitte & Touche. Before entering private practice, Busby was in charge of all transaction privilege (sales) tax audits at the Arizona Department of Revenue. If you have any questions, please contact the author. He can be reached at (602) 322-4146 or JBusby@CavanaghLaw.com.
H.B. 2479, which the Arizona House of Representatives passed by a comfortable margin early in the legislative session, would have clarified that prewritten computer software and a specified list of digital goods are taxable, but prohibited the Department of Revenue and Arizona municipalities from taxing some digital services. However, Senate leaders opted not to call for a vote on the bill after opponents questioned how it might affect the state’s budget and 50,000 Arizona teachers marched throughout the state demanding a 20 percent pay raise. In November, an overwhelming majority (nearly two-thirds) of Arizona voters passed Proposition 126, which amended the Arizona Constitution to prohibit the state and its political subdivisions from increasing or imposing new taxes on services not in effect on December 31, 2017.
What to Expect in 2019 The November election also resulted in a smaller Republican House majority. Given this dynamic, insiders believe that the business community will back a bill
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Phoenix Tax Workshop Series 24 Hours of Live CPE for $375 * Added Bonus for purchasing 2019-20 Phoenix Tax Workshop Series! You will gain access to all 2019-20 recorded sessions for later viewing. We invite you to join this elite group of tax professionals at their Saturday CPE/CLE sessions (eight times per year). This series is also offered as a webcast.
this year that will allow Arizona taxing authorities to collect tax on most digital goods but, given the passage of Proposition 126, insist that lawmakers clarify digital services are not taxable. With Proposition 126 in place, how will lawmakers and Gov. Doug Ducey respond? Will they act in 2019 to specify which digital goods are taxable and, now that they are constrained by Proposition 126, that digital services are not? Or, will there be no action, forcing providers of digital goods and services into the untenable positon of choosing to collect taxes from their customers that may not be lawfully due, thereby exposing themselves to potential class action lawsuits — or not collect taxes from their customers, thereby exposing themselves to potential audit assessments and legal fees to challenge the same? Stay tuned. n
What does it cost? The annual fee of $375 (due by the first meeting in May) includes the opportunity to earn 24 hours of CPE/CLE credit per year, which includes eight, three-hour meetings. You may attend individual meetings for $70. What’s on the agenda? Topics are drawn from current tax issues, court cases and legislation on both federal and state arenas. You will have the opportunity to take part in question and answer sessions to ensure you leave with a complete understanding of the material. Updated agendas will be sent prior to each meeting and will be available in the online CPE catalog. Meeting dates and times The following Saturday meetings are held at the ASCPA offices in Phoenix from 9 a.m. to noon. A full breakfast is included with each meeting. You may also participate by webcast from your home or office. Meeting Dates for 2019-20 May 18, 2019
Nov. 16, 2019
June 22, 2019
Jan. 18, 2020
Sept. 21, 2019
Feb. 15, 2020
Oct. 19, 2019
April 25, 2020
Save the Date Upcoming ASCPA Conference Dates: June 6 Financial Planning Conference Desert Willow Conference Center
June 20 Not for Profit Conference Black Canyon Conference Center
August 27 Corporate Finance and Construction Conference Desert Willow Conference Center
Register online at www.ascpa.com/ptw 10
AZ CPA MARCH/APRIL 2019
Debra Davenport Honored with Life Membership on May 8 Debra Kay Davenport, CPA (retired), will be honored for her contributions to the state and the accounting profession when she receives Life Membership at the ASCPA Annual Meeting and Awards Luncheon. Davenport served as Arizona Auditor General from 1999 until 2018 and is now retired. When asked about her responsibilities as Auditor General, she says they were many. “My job as Auditor General entailed overseeing an office of more than 200 people,” says Davenport. “We performed both performance and financial audits. And we also have a special investigative fraud unit that works with prosecutorial
agencies to help build cases behind the scenes used to prosecute people who have stolen taxpayer money. We also help with the city and town offices and school districts to help with their accounting methods and principals. Most offices have either financial or performance, and we have both. That means that the really fun things for me were when we delved into the efficiencies and effectiveness of agencies and how they are doing their job, not just the financial items, but how they perform their mission-critical functions. We do that with independence and must be unbiased.” “For example, with Child Protective Services, we look at how those case workers perform their job out in the field, what kind of a workload they have and if they have sufficient resources to help them.” “We are not the policymakers; the legislature sets the policy, the governor executes the policy and we are the gatekeeper for the state. We tell the Legislature how the agencies are fulfilling their policies. We are careful not to take sides, but just present the facts. Gathering evidence to support everything you say in a report is critical, otherwise you lose your integrity and their trust. For every person that you make happy with a report, you also often make someone unhappy.” “I spent a lot of time down at the Legislature and it was very interesting. The special fraud investigations were also always quite interesting.There is a lot of turnover in the Legislature and our office provided the backstories and history for them. We are the institutional memory, to help them make better policy decisions.” Davenport has seen a lot of changes in the profession over the span of her career as Auditor General. “We saw changes on many levels,” says Davenport. “We saw changes in technology, in how our clients do their work and how we, as auditors, perform our functions. Technology has allowed so many ways to gather data and more ways that we can test. We have seen a lot of changes in independence and
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ethics, as we saw companies fail out there. Enron had just happened as I became Auditor General. Soon after, I worked on a project with the AICPA on an ethical decision tree, which tells you what to do if you believe something unethical has happened.” “I also think we have seen a lot of changes in transparency – on the side of our clients. They are more transparent, whether it is through more footnote disclosures or even in government requirements for clients to put more information on the internet so that people can get into the databases and see where taxpayer money is going. When you look at the state’s financial statements, they are often 300 pages long, due to all the footnotes. There is a lot of information out there for the individual who wants it and can understand it. There have been a lot of positive changes.”
Prior to her appointment as Arizona Auditor General, Davenport served as Arizona’s Deputy Auditor General, held management positions in the Office’s Financial Audit and Accounting Services Divisions, and was the Special Assistant to the Auditor General. She also served as audit manager with a national CPA firm. She has a Bachelor of Science degree in Business Administration (Accounting) from Arizona State University. What is in the future for Davenport? She and her husband recently moved to a house on a Scottsdale golf course, as they wanted an active retirement. “We were fortunate to travel quite a bit before our retirement,” says Davenport. “We traveled around the world. We went on a safari in Africa, we played golf at Saint Andrews and we walked the Great Wall of China. Now, after my husband fully retires, we
want to see this country. We want to see the national parks and the presidential libraries and do some local and national travel.” Davenport is grateful for the Life Member honor saying: “The ASCPA is a great organization. It is such an honor to be acknowledged by your colleagues for your efforts. It makes you stop and reflect on everything we accomplished over these past years. I really appreciate it.” Join us as we celebrate and honor Debra Davenport on May 8 at the Arizona Biltmore Resort. Go here to learn more or sign up for the event: www.ascpa.com/annual2019 n — Patty Gannon
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Protecting Your Employees The Broad Scope of Protection Against Sexual Harassment by Richard K. Mahrle You are just finishing up on a call from a client who is giving your staff rave reviews for their work and the reasonableness of the cost. What a great way to start your day. Just as you hang up, your receptionist sticks her head into your office and asks, “Do you have a minute?” The brightness of your day is about to change. Your receptionist tells you that a delivery service that comes to your office every day recently assigned a new person to your account. According to your receptionist, this new delivery person keeps asking her out for lunch or a drink, and she keeps telling him she is not interested. Sometimes, he asks her about her bra cup size or brags about his sexual exploits. Despite your receptionist’s attempts to make it clear that these interactions are inappropriate and make her uncomfortable, they have continued.
Note: Sexual harassment is not just male on female harassment. It can be just the opposite, or it can be same-sex harassment, or harassment based on sexual orientation or gender identity. However, the vast majority of sexual harassment situations are males harassing females, so the examples used in this article will follow the more common situations.
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Is this your problem? The delivery person is not your employee. Of course it is still your problem. Under Title VII of the Civil Rights Act of 1964, as the employer, you are required to provide your workers with a workplace that is free from all types of harassment or intimidation based on race, color, sex, religion and national origin. This obligation extends to preventing harassment by supervisors, co-workers, customers, and vendors. (29 CFR § 1604.11(e).) Your receptionist is not required to tolerate this boorish behavior. The delivery service needs to be contacted about reassigning the person on your account. The next question is whether to tell the delivery service why you are requesting that its employee stop coming to your office. Under the circumstances here, you probably should. The delivery person’s actions
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are egregious enough that you should tell the delivery service about the problem. Maybe the day can now get back to normal. Not so fast. Next up at your door are the two female employees who had been onsite all week at the office of the client who had just called you to praise your services. “Do you have a minute to talk?” According to your employees, one of the guys they worked with in the client’s accounting department gave them a “creepy feeling.” You probe further. Why? What did he do? Well, he didn’t really say anything inappropriate, except that on the first day he said he was lucky to be working with two such beautiful ladies. But, he stared at them a lot. When he walked by, he would try to look down their blouses. There was no touching or anything like that. He just freaked them out with his attention.
Just like your need to protect your receptionist from harassment occurring in the office, you have an obligation not to expose your employees to harassment when they are working for you offsite. (Little v. Windermere Relocation, Inc. 301 F.3d 958 (9th Cir. 2001) (service manager raped by potential customer that her employer was pursuing); EEOC v. Cromer Food Services, 414 Fed. Appx. 602 (4th Cir. 2011) (employer failed to protect employee who was harassed at client’s location when filling vending machines.)) But is what your employees are complaining about really sexual harassment? From a legal standpoint, probably not. That doesn’t mean that your employees’ reactions are not genuine. If that is all that happened, maybe you just send male employees to that site in the future. On the other hand, if this is an important client, are you harming your female employees by taking them off the account?
What if there had been more serious harassing behavior? If so, a different approach is needed. Truly egregious acts, such as cornering one of your workers and kissing or fondling her, require immediate action. That certainly should be reported to the client, and maybe even the police. In between the two extremes described above, there is an entire range of potentially harassing activities. No two situations are likely to be the same. Talking things through with your legal counsel is advisable to create a plan of action. Regardless of the scenario, it is critically important to take any claims of harassment or intimidation seriously. “Boys will be boys” is not an appropriate response. Any harassment claim needs to be carefully investigated, either internally, or by bringing in a trained professional from the outside.
An additional factor to consider is whether you are exposing yourself to a possible defamation claim if you report suspected harassment activity to either the delivery service, or to your client. Maybe. But when balancing actions and reactions, your duty to your employees should come first. Although reporting has risks, if your report is accurate, truth is a defense to potential defamation claims. The key is not to embellish in the reporting. Just stick to what has been reported to you. The more serious the unwelcomed behavior, the greater the need to report it to the employer of the bad actor. The employer presumably is unaware of the problem and needs to know. Your report may help that employer prevent a serious problem, either now or in the future. Reporting inappropriate behavior to a client might result in the loss of
that client. On the other hand, it also might lead to a strengthening of the relationship with that client. However, regardless of the business outcome, your first duty is to your employees. n Richard K. Mahrle is an attorney with Gammage & Burnham. A significant part of his practice is representing both employers and employees in employment law matters of all kinds, including discrimination and sexual harassment claims, drafting and enforcing covenants not to compete, drafting employee handbooks, protecting trade secrets, wage and hour claims, immigration law compliance, effectively terminating employees and matters arising under the Americans With Disabilities Act. He is currently a mediator and arbitrator on the employment law panel for the American Arbitration Association. Contact him at rmahrle@gblaw.com.
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www.brophyfoundation.org The Brophy Community Foundation has NEVER accepted donor designated contributions. Arizona law now requires all school tuition organizations to print the following notice on all printed material and websites: A school tuition organization cannot award, restrict or reserve scholarships solely on the basis of donor recommendation. A taxpayer may not claim a tax credit if the taxpayer agrees to swap donations with another taxpayer to benefit either taxpayer’s own dependent.
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Collectively Serving our Country
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By James Sean McGettigan, CPA/PFS, CFP®, CGMA Describing the duty of the IRS, Mortimer Caplin in Rev. Proc. 64-22 outlines that the Service’s duty is to administer the Internal Revenue Code and to perform this work in a fair and impartial manner, with neither a government nor a taxpayer point of view. This duty is how IRS Commissioner Charles P. Rettig views the intricately delicate balance between the IRS, taxpayers and tax practitioners (yes, practitioners, too). Rettig spoke at the AICPA National Tax Conference in November 2018. This was his first public speech since he was appointed in late 2018. He outlined the following priorities for his four-year term: • • • •
The Underrepresented Population – Both in Language and Socioeconomic Status Implementation of Tax Reform Taxpayer Assistance, Enforcement and Prosecution Computer Modernization, Staffing and Budgets
It is no surprise why and how Rettig settled on these priorities. His ultimate priority: change the culture of the IRS both with internal and external stakeholders. He believes that the AICPA as well as state CPA societies and other professional organizations are pivotal to fill a “be there first” mentality of the IRS. He expressed how our comments on proposed regulations are thoroughly reviewed, evaluated and ultimately implemented or respectfully disagreed. It was immediately apparent that Rettig believes he is serving our country alongside IRS employees. He offered an alternative reality for our courtesy disconnects, long hold times and overall resource constraints: • In times of national disasters, IRS call centers transform: Over the preceding six years, 9,000 IRS call center employees answered 1.3 million calls for FEMA, helping fellow Americans find shelter amid tremendous tragedy • 25 IRS criminal investigation special agents worked 12-hour security shifts for transportation convoys and hospitals in hurricane-ravaged areas of the U.S.
The IRS has made significant inroads for those impacted by identity theft and fraudulent tax returns, acknowledged the significance of identity theft and the sensitivity to verify As we interact with the Service, show compassion and patience: every person at the IRS is operating at their best and are dedicated, committed individuals who care about serving our country. Looking forward, use of data analytics, blockchain technologies, crypto virtual currency exchanges and computer modernization, the IRS is leaping from 1960s & 1990s technologies. With respect to tax reform, informal guidance issued by the IRS is a key indicator of formal guidance. Review the training materials provided on IRS. gov and anticipate more collaboration with practitioner communities. Rettig expressed that being more transparent where the IRS can be is a best practice. Ultimately, accompanying our success and war stories, we all have a varying array of experiences with the IRS. The more inefficient our experiences continue to be, the higher the fees are for our clients. Rettig’s transformational leadership and practitioner focus are two metrics to watch. n James Sean McGettigan, CPA/PFS, CFP®, CGMA, is senior manager with Stoker Ostler Wealth Advisors. He is an ASCPA Champion and member of the ASCPA’s Emerging Leaders Committee.
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1099 Best Practi Form 1099 Best Practices for Nonprofit Organizations by Jason Cullari, CPA (in NJ) Nonprofit organizations have particular requirements when it comes to the IRS. They are required to file information returns such as Form 1099-Misc. All vendors that do business with nonprofits should be treated as independent contractors (exceptions apply) and issued a 1099. However, employees and independent contractors that perform a one-time service are excluded. Companies that do business with nonprofits must issue the organization a 1099. The IRS looks at three factors to determine if someone is an independent contractor: 1. Behavioral. Does the company control or have the right to control what the worker does and how the worker does their job? 2. Financial. Are the business aspects of the worker’s job (e.g., how they are paid, expense reimbursements, supplies) controlled by the payer? 3. Type of Relationship. Are there written contracts or employee benefits (e.g., pension plan, insurance, vacation pay)? Is the relationship ongoing and the work key to the business?
Requirements and Exceptions 1099-Misc is the most commonly used form to report payments to any person, partnership or LLC during the year as follows: • $600 or more paid for services (including parts and materials), rents, prizes and awards, other income (certain reimbursable expenses), as well as medical and health benefits • $600 or more paid to attorneys, law firms, medical and other healthcare providers • $10 or more in royalties or broker payments in lieu of dividends or taxexempt interest
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ices Exceptions include the following: • Payments to corporations, S corporations or LLCs (unless they are a law firm or medical/ healthcare provider) that elect to be taxed as a corporation • Payments for merchandise, telegrams, telephone and freight • Payments for rent to real estate agencies • Payments made by credit card • Generally, Form 1099-Misc must be filed with the IRS and issued to the payee by Jan. 31. All other types of 1099s must be filed by Feb. 28 (mail) or March 31 (electronic). Organizations that file 250 or more 1099s must file electronically.
Penalties Penalties for not filing and filing incomplete or incorrect 1099s step up to $260 per form for 2018 and are capped at $3,218,500 annually (depending on the filing date). These penalties apply to both sending 1099s to payees and filing with the IRS. So, the fine could be as high as $520 (annual cap $6,437,000) for each instance. Penalties increase to $530 per return with no annual cap for the intentional disregard of 1099 filing requirements. Late forms filed within 30 days of the due date are assessed a penalty of $50 or $100 if filed on or before Aug. 31 (caps apply). If the
IRS sends a notice regarding missing or incomplete information on a 1099 and the information is not corrected, backup withholdings are required at the rate of 28 percent.
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Best Practices
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It is important that your organization is in compliance with IRS regulations on 1099s. Best practices include the following: • Require new vendors to complete Form W-9 before they are paid. • Request that the vendors you do business with submit a new W-9 annually. • Check each W-9 upon receipt to ensure the information is complete and accurate. • Follow up promptly with vendors. • Use the IRS Taxpayer Identification Number (TIN) Matching Program to ensure that the TIN provided is correct. If a discrepancy is found, notify the vendor immediately. Individuals or sole proprietors use their Social Security Number (SSN). • Ask vendors about questionable or inconsistent information. • Designate potential vendors to receive 1099s in your accounting system. Check annually for possible duplicate or inactive vendors.
Adopt internal policies and procedures to make sure there is a W-9 on file for each vendor and a 1099 is issued and filed with the IRS. Consider quarterly or mid-year W-9 reviews. Take a conservative approach to 1099s. Whenever there is a doubt, send one out.
Nonprofit organizations are also required to submit Form 1098-C to donors of motor vehicles, airplanes or boats; Form 1099-R for distributions to employees from its retirement plan; and Form W-2G to people that win more than $1,200 annually in bingo and $600 or more in 50/50 raffles or sweepstakes. It is therefore important for nonprofits to track payments throughout the year to be in compliance. n Jason Cullari, CPA (in NJ), is the managing partner of Cullari Carrico LLC. He is a member of the NJCPA Nonprofit and Federal Taxation interest groups. Jason can be reached at 973-406-3955 or jcullari@ cullaricarrico.com. From the New Jersey CPA magazine (njcpa.org/newjerseycpa).
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Highlights of January Board of Directors Meeting Among other actions at its January 23, 2019 meeting, the ASCPA Board of Directors reviewed the following: Consent Agenda The consent agenda, which included the board minutes, financial statements and the Foundation’s 2019-20 budget was approved.
2019-2020 Measurements Approval The strategic plan measurements for the next fiscal year were reviewed and approved.
Nominating Committee Report Jared Van Arsdale, chair of the nominating committee, thanked committee members and shared the names of members nominated to the board who would take office on May 1, 2019.
Branding Update
Strategic Plan Update
Heidi Frei shared an update on the Society’s branding project, which included information about the meeting with and selection of LAVIDGE, research activities and the upcoming workshop. She facilitated a conversation with the board about future activities.
Cindie provided an update on the Society, including advocacy activities and PAC contributions.
Dialogue with our AICPA Board Liaison Anita Baker, the Society’s AICPA Liaison, presented information on the latest AICPA initiatives and discussed topics relevant to the profession with the board.
Legislative/Advocacy Dialogue Ryan and Kevin DeMenna thanked the board for their support of PAC activities, shared how favorably the Society is viewed by legislators and talked with the board about the current legislative session.
A Day In The Life Rachael Bertrandt and Kristen French each shared a view of the challenges and joys they experience in their life and job.
Other Business No other business was conducted. If you have questions or would like additional information, please contact Cindie Hubiak at (602) 324-2888; AZ toll free at (888) 237-0700, ext. 203; or chubiak@ ascpa.com
Watch for a Member Survey in April The challenges and opportunities for CPAs continue to evolve. It is important for the ASCPA to learn more about how we can provide value to lead and support your success. As part of this process, we are working with a local marketing agency, LAVIDGE. The first step is hearing directly from you about what is important to you as a CPA and what your professional association should look like. All members will receive an online survey toward the end of April. We encourage you to provide your honest feedback and thank you for your commitment to the profession. If you have a new email address, please be sure to update us with this new information to ensure you receive the survey. You can send your new email address to membership@ascpa.com.
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AZ CPA Quick Quiz You’ve Read It, Now Get Credit
Take this quiz on AZ CPA content online or submit this hard copy. Receive a score of 70 percent or more and earn one hour of CPE credit in specialized knowledge. It’s that easy! Fees: Members: $25 Nonmembers: $40 Online Access Go to www.ascpa.com/quickquiz to access links to all active quizzes. Once a quiz is purchased, a link and password will be emailed to you. Your results will be sent immediately after completion, and certificates are emailed within two business days. Hard Copy Please select one answer for each question. Fill out registration/payment information below and mail or fax to the Society office. Quiz results and certificates will be emailed to the address provided on the registration form. *This quiz will be available until April 2020. Please note that users have three attempts to pass the quiz with at least a 70 percent score.
March/April 2019 Issue of AZ CPA* 1. In his Chair’s message, Mike Allen refers to Senate Bill 1443 as the: m CPA Bill m Conformity Bill m Realtor Bill 2. I n 2 0 1 7, l e g i s l at i ve l e a d e r s acknowledged that the state’s tax statutes have not kept pace with the digital economy and: m Should be totally overhauled m Need to be eliminated m Must be predictable, transparent and fair 3. The Senate decided not to call a vote on H.B. 2479 after opponents questioned how it would affect the budget, and: m Digital companies lobbied against it m 50,000 teachers marched demanding a pay raise m They believed voters were not in favor of the Bill 4. Who is being honored as a Life Member at the ASCPA Annual Meeting in May? m Layne Simmons m Ed Zollars
m Debra Davenport 5. What Act requires an employer to provide workers with a harassmentfree workplace ? m The Civil Rights Act m The Full Employment and Balanced Growth Act m The Fair Labors Standards Act
when they are working for them offsite? m Yes m No
7. Over the preceding six years, 9,000 IRS call center employees answered how many calls for FEMA? m 3 million m 1.3 million m 100,000 8. W h o i s c u r r e n t l y t h e I R S Commissioner? m Walter Haig m Louis K. Reed m Charles P. Rettig 9. What is not one of the factors the IRS looks at to determine if someone is an independent contractor: m Type of Relationship m Financial m Length of Service 10. Penalties for not filing and filing incomplete or incorrect 1099s stepped up to how much per form for 2018? m $230 m $260 m $1,000
6. Do employers have an obligation to protect employees from harassment
Quick Quiz Registration Name: ____________________________________________________ Email:_____________________________________________________ Telephone: _________________________________________________
Payment
m Member: $25 m Nonmember: $40 Checks: Please make payable to: The Arizona Society of CPAs Credit Card:
m Visa m MasterCard m American Express
Credit Card #: _______________________________________________ Expiration Date: _____________________________________________ Name on Card. _____________________________________________ Mail to: ASCPA, 4801 E. Washington St. Suite 180, Phoenix, AZ 85034-2040; fax to (602) 252-1511 scan and send to ASCPACPE@ascpa.com.
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Classifieds Business Opportunities SCOTTSDALE CPA TAX AND ACCOUNTING SERVICE FOR SALE $750K+ IN BILLINGS - Scottsdale based 35+ year practice, partner seeks retirement. Consistent growth, 77% business related work, $750k in billings/$370k in discretionary owner in come. Owner will help transition, can be flexible on deal structure, and is seeking a sale this year. Contact cpapracticearizona@gmail.com.
Employment A S S I S TA N T R E G I O N A L CONTROLLER — Grand Canyon Railway/Xanterra Travel Collection. Based at the Xanterra Parks and Resorts Flagstaff Regional Accounting Office. The Assistant Regional Controller oversees the accounting operations in the Flagstaff, Williams and Tusayan
locations and is responsible for the financial activities of the Grand Canyon Railway, The Grand Hotel, Tusayan Trading Post and the Regional office’s portion of the financial activities of the Grand Canyon and The Oasis. Requires; BA degree in accounting or finance; 5 years’ accounting experience, preferably in hospitality accounting management, and a valid Arizona driver’s license. BENEFITS: Medical, Dental, Vision, 401K, Paid Vacation, Sick Time, Competitive Wage, and Much More! Company Website: https://www.xanterra. com/who-we-are/careers/
Office Space for Lease BEAUTIFUL GARDEN-STYLE OFFICE complex in a great office environment located in north Phoenix. Easy access to both the SR 51 and SR 101 just north of NWC of Tatum and Shea Boulevard. Executive office $800; interior office $650. Ample parking, beautiful conference rooms, seminar room, and copier, telephone and internet ready. Contact Clara or Mary at (602) 953-5000.
TAX PREPARERS — North Scottsdale CPA Firm seeking Tax Preparer to prepare business and personal returns. Must have 3-years recent experience in preparing returns. QuickBooks Proficient. Preference for EA/CPA. Growth Opportunity, Benefits, Competitive Salary DOE. Joy@partridgecpas.com
For information about classifieds and display advertising, go to www.ascpa.com.
Free Webinar for Members
CPE Requirements and Reporting Find out more about nano learning! April 30 - Noon to 1 p.m. One CPE Credit Learn details about CPE requirements and reporting from A. Carter Smitherman, CPA, the current chair of the CPE Advisory Committee for the Arizona State Board of Accountancy. Although this topic may seem simple, there are details that even the most seasoned practitioners can trip over, which cause unneeded administrative headaches. This course will provide a refresher on CPE requirements, describe the CPE audit process, discuss the most common mistakes found during an audit and potential consequences of those mistakes. Nano learning with also be discussed.
www.ascpa.com/fw9
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Arizona CPA Foundation for Education & Innovation Donors Thank you to our members for your generous contributions to the Arizona CPA Foundation for Education & Innovation in 2018. Your donations support accounting students on their path to becoming CPAs.
$10,000
Karen K. Abraham Cindie Hubiak
Tess L. Ridgway Carolyn S. Sechler Layne R. Simmons James M. Susa Nancy L. Thomas Nicole K. Vogt
$500
$50-$99
Deloitte
$1,000
Michael T. Allen Randy G. Fletchall Mark L. Landy Vanessa R. Makridis Leslie B. Stackpole
$100-$400
Todd A. Barnhart George M. Cohen Virginia E. DeSanto Rufus Glasper Elizabeth A. Goff Alan Gold Adela E. Jimenez Karen K. McCloskey Robert McKay Molly E. Montgomery W. Gregory Nelson Michael J. Suriano Allen L. Nahrwold Bruce J. Nordstrom Ron D. Pittman Dawn D. Rector
Charles J. Aton Kazue H. Balint Gilbert B. Blumenthal Randolph L. Boles Priscilla A. Chesler Ann M. Couch Thomas F. Duensing Patricia J. Elder LeRoy M. Gaintner Vincent R. Gosz Diane Groover Nickolyn Hansen Kent D. Krueger Gregory T. Leopard Susan M. Spaur Linda S. Tansik Jean M. Vock Michael J. Wagner
We also thank our members who donated other amounts throughout the year and with their annual dues renewal. To learn more and donate, go to www.ascpa.com/ foundation
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PRSRT STD U.S. Postage PAID Phoenix, Arizona Permit No. 952
Arizona Society of CPAs 4801 E. Washington St., Suite 180 Phoenix, AZ 85034-2040
ADDRESS SERVICE REQUESTED
BUSINESS BREAKUPS ARE HARD CALLING FOR EXPERTISE ISN’T STEVEN N. BERGER (602) 222-4976
3636 NORTH CENTRAL SUITE 700
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AZ CPA MARCH/APRIL 2019
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PHOENIX, AZ 85012
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EBLAWYERS.COM
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602.271.9090