Disclosures: Fall 2021

THE OFFICIAL MAGAZINE OF THE VIRGINIA SOCIETY OF CPAs

FALL 2021

VSCPA.COM/DISCLOSURES

SPOTLIGHT ON employee CLASSIFICATION

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Single audits Effective websites Virginia tax changes

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CONTENTS

Features 18

Employee or contractor?

Classification matters.

12

Taxation Virginia tax updates

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Professional Development

A rise in remote work has reinvigorated the classification debate.

Departments

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Make a stellar online reputation

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Single audits may be necessary

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Columns

Latest single audit guidance

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From the CEO

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Line Items

8 Advocacy 32

VSCPA Financials

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VSCPA News

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Spotlight

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Classifieds

FIND US...

WEBSITE vscpa.com CONNECT connect.vscpa.com TWITTER @VSCPANews LINKEDIN tinyurl.com/ LinkedInVSCPA FACEBOOK facebook.com/VSCPA INSTAGRAM instagram.com/VSCPA PODCAST vscpa.com/podcast

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FROM THE CEO

4309 Cox Road Glen Allen, VA 23060 (800) 733-8272 vscpa.com

disclosures vscpa.com/disclosures disclosures@vscpa.com FALL 2021 Volume 34, No. 4 Managing Editor Jill Edmonds disclosures@vscpa.com Editorial Task Force Olaf Barthelmai, CPA Cheri David, CPA Melisa Galasso, CPA Genevieve Hancock, CPA Karen Helderman, CPA Harold Martin Jr., CPA Anthony Otaigbe, CPA David Peters, CPA Mark Plostock, CPA Zach Shoaf, CPA Barbara Sukramani, CPA Disclosures is published four times a year by the Virginia Society of Certified Public Accountants (VSCPA). The magazine’s mission is to communicate information of value to VSCPA members, including professional issues and VSCPA initiatives.

The materials and information in Disclosures are offered as material only and not as practice, financial, accounting, legal or other professional advice.

Statements of fact and opinion are made by the authors alone and do not imply an opinion on the part of VSCPA officers, members or editorial staff. Publication of an advertisement in Disclosures does not constitute a VSCPA endorsement of the product or service. Copyright © 2021 Virginia Society of CPAs.

VSCPA Preferred Providers

Why single audits are such a hot topic For the past several months we’ve

been communicating with you about single audits, which are becoming an increasingly important issue for CPAs and their clients. We’ve included information on single audits in several issues of The Account, and this Disclosures issue contains two features.

Why? Because it’s incredibly important that as thousands of companies embark on single audits for the first time due to federal COVID relief, CPA firms make certain they are providing the highestquality audit possible.

Many recipients of pandemic funding have never had a single audit before and may not know what is required. Your existing clients may need a single audit for the first time, or you may begin working with new clients who have never even had a financial statement audit.

It’s important to first talk to your clients about what kinds of federal funding they received and keep open your lines of communication. The rules for who qualifies for an audit or other administrative requirements can be tricky.

(The American Institute of CPAs released a non-authoritative chart matrix to help untangle the requirements; find it at vscpa. com/audit-resources.)

Single audits have a significant public interest component as they involve taxpayer dollars and federal agencies rely on them as part of their administrative responsibilities for determining compliance with the requirements of federal awards. So, this makes single audits a great opportunity for the CPA profession to show the public its commitment to high-quality auditing work.

If you have never done one before, you may want to consider referring your clients

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to another person in your firm or outside firms with more experience. Single audits are complex and require specialized knowledge of rules and compliance requirements. If you need more education on the issue, we have several online learning options.

Finally, we are collecting information on CPAs and firms who have single audit expertise so we can develop a referral list for your use. If you complete single audits, please let us know by completing a quick survey at surveymonkey.com/r/ SingleAuditSurvey.

Find CPE, news, resources and more in our Audit Resource Center at vscpa.com/ audit-resources, and we will continue to keep you up to date as more information becomes available. n

Stephanie Peters, CAE, has served as VSCPA’s president and CEO since 2007. speters@vscpa.com @StephPeters

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LINE ITEMS

Wellness matters: Mental health help You asked for it! In member surveys and conversations with CPAs around the

state, you told us you want more programming and resources on mental health topics.

The American Mental Health Counselors Association predicted that by the end of 2020, more than 103 million U.S. adults would suffer from mental health disorders.

The pandemic increased its own havoc on our mental well-being, with 54% of people saying they were more emotionally exhausted and 53% reporting increased sadness in day-to-day life.

To help you address mental health and wellness in your own lives and that of your staff, we launched the following: • Mental Health Toolkit: Resources like tips for leaders, a PowerPoint presentation on eliminating the stigma behind mental health, and more are included in our free toolkit for members.

• Learning opportunities: Various roundtables, webinars, conference sessions, and other training addressed a variety of topics like mental health first aid, stress hardiness, benefits, and others. Several are recorded for you to watch anytime.

• Mental Health & Wellness Resource Center: We’ve spun off a section of the Coronavirus Resource Center to create a brand-new space online for you to download the toolkit, read articles, watch videos and more. Find it at vscpa.com/wellness.

• Podcast episodes: VSCPA COO Maureen Dingus, CAE, interviewed experts in these areas on the VSCPA Leading Forward podcast. You can find all episodes at vscpa.com/podcast, where you can listen or read the transcripts.

• Mental Health Empowerment Kick-Off: In January we had a free virtual event of sessions that tackled how to create a mentally healthy work culture, CPA perspectives on wellness, and mindful leadership. If you liked that program or missed it, we’re bringing in back! Mark your calendar for Jan. 21, 2022. We’ll also have a Mental Health First Aid program on March 4.

Find all resources at vscpa.com/wellness.

BURNING QUESTION

What does the VBOA say about serving cannabis clients?

As state regulators begin the process of developing the Cannabis Control Authority to oversee marijuana legalization in the Commonwealth, you may wonder if you or your firm is in jeopardy of investigation by the Virginia Board of Accountancy (VBOA) if you serve clients in these industries. The VBOA gave the following guidance on May 21, 2019: “In the absence of such a determination by the courts (that a Virginia CPA or CPA firm has violated drug laws) the Virginia Board of Accountancy will not pursue independent disciplinary action against Virginia CPAs or CPA firms solely on the basis of providing services to a business involved in the sale or distribution of marijuana, provided that the business is operating legally under applicable state law.”

If the VBOA revisits this issue at a future meeting now that legalization has passed, we will update you with any further guidance.

ACCOUNTING AS STEM? CPAs SAY YES! Should accounting be included as part of the science, technology, engineering and math (STEM) career pathway? CPAs across the country believe so, and the VSCPA joined with the American Institute of CPAs and other stakeholders to encourage state representatives to cosponsor bipartisan H.R.3855, the “Accounting STEM Pursuit Act.” Including accounting in STEM legislation makes sense as the connection between accounting and technology becomes clearer. In addition, this supports long-standing efforts to create more diversity in the accounting workforce. “The Accounting STEM Pursuit Act signals the importance of expanding the pipeline of a diverse accounting profession that supports industries across the United States. It also reinforces our digital-first efforts to educate, upskill and reskill the profession,” said Susan Coffey, CPA, CGMA, CEO of Public Accounting at the Association of International Certified Professional Accountants.

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LINE ITEMS

TICKER 39 The number of Virginia-based companies who made Fortune magazine’s 2021 Fortune 1000 list, with 22 making the Fortune 500.

57 The percentage of Americans who have felt at least some stress over their financial situations since the beginning of 2020.

75 The percentage of 18–34-year-olds who experienced financial worry during that timeframe.

New VSCPA scholarship will support underrepresented students Did you know that 2021 is the Black

CPA Centennial? It’s been 100 years since John W. Cromwell Jr. became the first Black CPA in the United States. In honor of this milestone, the VSCPA Educational Foundation is establishing the Curtis C. Duke and Dr. Ruth Coles Harris Scholarship.

Curtis C. Duke and Dr. Ruth Coles Harris were the first Black male and female CPAs in Virginia.

According to the last available statistics (from 2019), only 2% of CPAs and only 9% of bachelor’s and master’s accounting enrollees are Black. The new scholarship seeks to encourage and support underrepresented students in the pursuit of the CPA profession.

We need to reach our $100,000 goal to fully fund this new scholarship! Help us build a more diverse CPA pipeline by joining us. More information on how to donate is available at vscpa.com/ef-donation, and check out page 31. And to learn more about the Black CPA Centennial, visit icpas.org/BlackCPAcentennial.

50 The percentage of design capacity lost in Norfolk’s stormwater infrastructure due to rising sea levels.

$26 MILLION The amount per year that Virginia Beach spends due to recurrent flooding.

$400 BILLION The approximate amount in Paycheck Protection Program (PPP) loans forgiven by the federal government.

$12.8 BILLION The amount of PPP loans forgiven for companies with one employee, at an average cost of $11,497 per job.

102 The percentage increase in ransomware attacks in the first half of 2021 over the previous year at the same time.

ERC giving you a headache?

The Employee Retention Credit (ERC) initiated in the Coronavirus Aid, Relief, and Economic Security (CARES) Act was made available for all four quarters of 2021 under the American Rescue Plan Act (ARPA).

Despite being included in legislation passed months ago, taxpayers and tax practitioners still had questions and concerns related to the ERC. Here are some updates as of press time, as well as where to go for help: • In August, the IRS issued Notice 2021-49 to amplify prior ETC guidance in Notices 202-20 and 2021-23. 2021-49 provides guidance on the definition of full-time employees, treatment of tips as qualified wages and more. Visit irs.gov to review.

Additionally, Revenue Procedure 2021-33 from the U.S. Treasury and IRS provides a safe harbor permitting employers to exclude certain amounts from gross receipts solely for determining eligibility for the ERC. • There are several areas ripe for misunderstanding, such as if clients can claim ERC if they received a forgiven Paycheck Protection Program (PPP) loan, among many others. Read about 10 mistakes you could be making at vscpa.com/ article/10ERCmyths.

• More information and guidance is available in the ERC resource center from the AICPA at future.aicpa.org.

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ADVOCACY

Comments and recommendations galore VSCPA volunteers have been hard at work this year, providing a flurry of comment and position letters to state and national stakeholders since July.

The VSCPA is lucky to be able to call on its wealth of knowledgeable volunteer experts to help staff and leaders craft position letters on a variety of topics. The Accounting & Auditing Advisory Committee and Tax Advisory Committees have tackled several issues.

Below are the positions we have taken in the latter half of 2021. Want more info? Read our full positions any time at vscpa.com/positions.

AICPA AUDITING STANDARDS BOARD: QUALITY MANAGEMENT FOR ENGAGEMENTS EXPOSURE DRAFT The A&A Committee reviewed the Proposed Statement on Auditing Standards — Quality Management for an Engagement issued by the Auditing Standards Board and gave feedback on a wide variety of areas. This far-reaching exposure draft will have serious implications for engagements. A sample of the VSCPA’s feedback is below.

• The Committee’s main concern with implementing these new standards is related to over- or under-designing the

framework of the quality management system. Without proper guidance, many firms will try to think of every possibility without determining the quality of the risk, so the iterative risk assessment process should emphasize that updating the firm’s quality management system should not be overly burdensome while always being aware of new risks or changes to quality risk. Peer reviewer training will be crucial.

• While there should be increased emphasis on governance and leadership in the proposed quality management system, small firms with limited staff and high costs could have trouble meeting the standard.

• Small firms will incur the most significant hit to their bottom lines — both monetary and human. Smaller firms need help to ensure they do not include non-relevant areas and exclude relevant ones incorrectly.

GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB): EXPOSURE DRAFT ON ACCOUNTING CHANGES AND ERROR CORRECTIONS The VSCPA responded to GASB’s exposure draft, Accounting Changes and Error Corrections, by generally supporting the Board’s decision to clarify guidance to address diversity in practice.

TOP LEGISLATIVE ISSUES AROUND THE NATION The mid-year legislative session summary from the American Institute of CPAs (AICPA) summarizes the top issues facing state legislatures, from occupational licensing to taxes on services and threats to CPA independence. Here are state trends: Occupational licensure: “The CPA profession, as with all professions, must defend the legitimacy and efficacy of state licensure against threats to reduce or eliminate occupational licensure,” the AICPA report states. Nationwide, 200 bills were introduced in 46 jurisdictions that threatened licensure, but only 46 were enacted. In Virginia, we lobbied against a bill that would have given the governor power over regulatory licensing decisions; that legislation died in Committee.

Taxes on professional services: CPAs fought legislation to tax professional services in Louisiana, Nebraska, Oregon, West Virginia and Wyoming, with the West Virginia Society of CPAs putting up a significant fight. All proposals died.

Contract monitoring: Legislation was introduced in several states that contract with certain service providers to monitor keystrokes, mouse clicks, and take screenshots to collect data on contractors’ use of time on key projects. The Virginia Department of Human Resource issued what the AICPA calls a “scathing report” striking down the need for such services.

Noncompete agreements: The AICPA is always watching non-competes, which “chip away at independence rules for CPAs.” Non-compete legislation can cause unintended consequences for CPAs and their firms.

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ADVOCACY

VIRGINIA BOARD OF ACCOUNTANCY (VBOA): CPA EVOLUTION The VSCPA reviewed the changes to Rule 5-1 of the Uniform Accountancy Act (UAA) Model Rules with respect to CPA evolution, as well as the VBOA’s comments. We recommended the VBOA conduct some additional research and analysis prior to making a final decision regarding whether changes will be needed.

VIRGINIA CONGRESSIONAL DELEGATION: SUPPORT STEM LEGISLATION We urged all Virginia representatives in the U.S. House to support the Accounting STEM Pursuit Act to establish accounting as a career pathway in science, technology, engineering and math (STEM). See page 6 for more on this initiative!

VIRGINIA DEPARTMENT OF LABOR & INDUSTRY (DOLI): STANDARD ON CORONAVIRUS PREVENTION On July 29, 2021, the VSCPA requested revocation of the Final Permanent Standard (FPS) for Infectious Disease Prevention of the

SARS-CoV-2 Virus because it did not adequately account for the constantly evolving coronavirus and ongoing revisions to federal guidance. We recommended Virginia rely solely on the federal guidance available as the standard for workplace safety measures.

VIRGINIA DEPARTMENT OF TAXATION (TAX): SALT CAP WORKAROUND The VSCPA asked for a ruling request related to credit for state income taxes paid to another state by Virginia residents who are owners in pass-through entities (PTEs) that make an election to be taxed at the entity level. Legislation enacted by Maryland was the impetus for the request.

IFRS FOUNDATION: EXPOSURE DRAFT ON REGULATORY ASSETS AND LIABILITIES The VSCPA generally agrees with the objectives and the requirements of IFRS Exposure Draft ED/2021/1 on Regulatory Assets and Liabilities, which would help set the stage to align financial reporting under IFRS and regulatory reporting requirements. u

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ADVOCACY

TAX: R&D TAX CREDIT APPLICATION DEADLINES After receiving feedback from VSCPA members regarding the new timelines associated with the Research & Development tax credit application process, the VSCPA let TAX know the new timeline creates some unintended consequences and challenges for certain users of the program and their tax professionals. We gave recommendations to allow users to claim the credit prospectively or revert the application deadline to July 1 for smaller entities as well as simplify the application process. n

SAVE THE DATE: CPA ASSEMBLY DAY Want to meet your Virginia legislators and advocate for the issues most important to you and your clients?

Join us on Jan. 13, 2021, for CPA Assembly Day. At press time, details of the day had not been determined due to the pandemic. Information will be posted at vscpa.com/CPAAssemblyDay and sent via The Account and CPA Voice e-newsletters, so watch your in box!

MAKING OUR ADVOCACY POSSIBLE: MEMBER VOLUNTEERS A huge thank you to the members who work diligently to survey international, federal and state regulatory landscapes for proposals and changes and then spend hours reading drafts to craft well-written responses and positions.

makes recommendations to the VSCPA Board of Directors on regulatory and legislative issues.

2021–2022 Accounting & Auditing Advisory Committee The A&A Committee reviews and responds to exposure drafts and alerts the VSCPA staff to important changes in accounting and auditing regulations or interpretations, including governmental.

Vice Chair: Sarah Adams, CPA, Adams & Co.

Chair: Tamara Greear, CPA, Rodefer Moss & Co., PLLC Vice Chair: George Crowell, CPA, Harris, Hardy & Johnstone, PC Zach Borgerding, CPA, Auditor of Public Accounts Scott Davis, CPA, PragerMetis CPAs Bo Garner, CPA, PBMares LLP Joshua M. Keene, CPA, Johnson Lambert Nick Kinsler, CPA, WellsColeman Daniel Martin, CPA, Riveron Consulting, LP Michael Phillips, CPA, University of Virginia Chris Smith-Christian, CPA, Department of the Navy Charles M. Valadez, CPA, Inter-American Development Bank Natalya Yashina, CPA, Capital Accounting Advisory, LLC 2021–2022 Tax Advisory Committee The Tax Committee seeks feedback from VSCPA members on tax issues and provides information to the VSCPA on tax issues and legislation. This Committee also conducts policy analysis and

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Chair: Vivian Paige, CPA, Christopher Newport University

Elil Arasu, BDO USA, LLP Art Auerbach, CPA, consultant Robert Baldassari, CPA, Mathews, Carter & Boyce, PC Desiree Bryan, CPA, Meadows, Urquhart, Acree & Cook, LLP Melissa Flieg, CPA, CST Group, CPAs, PC Stephen Kimberlin, CPA, Dixon Hughes Goodman Lori Roberts, CPA, PBMares, LLP Laura Seal, CPA, Fitz & Co., PC, CPAs Kristofer Thomas, CPA, Ernst & Young Catherine Stemple, CPA, KWC CPAs Timothy Todd, CPA, Liberty University Advocacy Kitchen Cabinet This newly formed group provides guidance on items that fall outside the purview of the Tax and A&A committees. They will provide feedback on the Society’s legislative positions and review our advocacy philosophy, legislative and regulatory agenda and standing positions.

Damon DeSue, CPA, PRA Group Inc. Monique Ford, CPA, sole proprietor George Forsythe, CPA, WellsColeman Vivian Paige, CPA, Christopher Newport University Gary Wallace, CPA, Keiter

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HELP UR YOU O R E P A H U S YO E W ARE O R R C O M I O T VO TERS VITAL T MA

CPAs feel the impact of legislative decisions on the business community and the accounting profession from the federal level all the way down to the local level.

The Political Action Committee (PAC) financially assists state and local candidates and legislators who actively support CPA business issues — people we need in office to support the CPA profession. Every contribution is vital to create maximum impact and give a clear, pro-business message to legislators — shaping our own tomorrow. Consider making a contribution to the VSCPA PAC to help us further our voice and impact together.

Contribute today! vscpa.com/PAC

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TAXATION

Virginia tax legislation: What you need to know After two years of trying tax seasons, Virginia CPAs are gearing up for a more normal (we hope?) tax season.

A variety of legislation was passed by the Virginia

General Assembly this year. The below items all went into effect on July 1, 2021, unless otherwise noted. For a full report on all the changes, as this list is not allinclusive, read the “2021 Legislative Summary” from the Virginia Department of Taxation, available as a PDF at tax.virginia.gov.

CONFORMITY OF VIRGINIA’S TAX CODE TO THE INTERNAL REVENUE CODE After many conversations among legislators on how to handle conforming with federal coronavirus relief legislation, conformity was passed effective March 15, 2021, and advanced from Dec. 31, 2019, to Dec. 31, 2020. Virginia generally conforms to the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Consolidated Appropriations Act of 2021 (CAA), with certain exceptions. Ultimately, Virginia does conform to: • COVID-19-related retirement distributions.

• Above-the-line charitable contributions deduction.

• Deduction limitations for certain charitable contributions.

• Extension of the 7.5% floor in the medical expense deduction.

• Provisions of CARES Act related to the net operating loss (NOL) limitations and carryback.

• Excess business losses for noncorporate taxpayers.

• Business interest deduction limitations.

• Deductibility of business expenses funded by PPP loan and Economic Injury Disaster Loan (EIDL) fund proceeds except as described above.

Further guidance on EIDLs

• Depreciation of certain residential rental property over a 30-year period.

The Virginia-specific tax deductions and subtractions in the conformity bills are limited to Paycheck

• Enhancing the charitable deduction for individuals for certain contributions.

• Temporary full business meals deduction.

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With respect to forgiven Paycheck Protection Program (PPP) loan expense deductibility and Rebuild Virginia grant income, Virginia allows a deduction of up to $100,000 for tax year 2020. All previous deconformity remains in place, such as bonus depreciation, and Virginia also does not conform to the following:

• Extension of exclusion for certain employer payments of student loans.

• Extension of the $300 deduction for nonitemizers to taxable year 2021.

DISCLOSURES

• Repeal of the deduction for qualified tuition.

TAX let us know that Virginia will conform to the tax-free treatment of such loans by generally conforming to section 278(c) of the CAA. In addition, the conformity legislation would deconform from §§ 278(b)(2) and 278(c)(2) of the CAA, which authorize deductions for expenses paid with emergency EIDL grants, targeted EIDL advances, and subsidies for certain loan payments. As a result, a fixed date conformity addition would be required for any deductions claimed on a federal return for expenses for which the taxpayer has been reimbursed by such grants, advances or subsidies.

• Exclusion of educational payments.

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• Temporary enhancement of the EITC.

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TAXATION

Protection Program loan recipients and Rebuild Virginia grant recipients only. Such proposed subtraction and deduction do not apply to recipients of EIDL grants, targeted EIDL advances, and subsidies for certain loan payments.

ELECTRONIC PAYMENT REQUIREMENT FOR ESTIMATED TAXES Certain taxpayers who pay estimated taxes must make all income tax payments electronically on or after July 1, 2021, if those payments exceed $2,500 or if their total tax liability exceeds or can reasonably be expected to exceed $10,000.

INTEREST WAIVERS IN EMERGENCIES Effective April 1, 2021, if the governor declares a state of emergency, the tax commissioner can waive interest for any class of taxpayers who would receive undue hardship due to the imposing interest.

TAX CREDIT CHANGES • Coal: Several coal-related credits like the Coalfield Employment Enhancement Tax Credit are repealed.

• Conservation Tillage Equipment and Pesticide and Fertilizer Application Equipment: Nonrefundable credit eliminated and replaced with new refundable credit for individuals and corporations.

• Agricultural Best Management Practices: 50% of the first $100,000 expended for agricultural best management practices and enhanced for certain taxpayers with an approved resource management plan.

• Research and Development: Credits to the Bank Franchise Tax expanded.

• Port of Virginia: Sunset dates extended for International Trade Facility Tax Credit, Barge and Rail Usage Tax Credit, and the Port Volume Increase Tax Credit.

RETAIL SALES AND USE TAX EXEMPTIONS FOR PERSONAL PROTECTIVE EQUIPMENT (PPE) A variety of PPE is exempt from sales and use tax for qualifying businesses, such as face coverings, gloves, signs related to COVID-19, and much more.

MARIJUANA RETAIL TAXES As non-medical marijuana is legalized in Virginia, stores that sell retail marijuana and marijuana products will have to pay retail taxes as of Jan. 1, 2024. The tax will be administered by the new Virginia Cannabis Control Authority.

ISSUES UNDER STUDY: TAX POLICY, UNITARY COMBINED REPORTING AND MORE Legislation has established groups to investigate certain tax-related issues: • A Joint Subcommittee on Tax Policy will evaluate the fiscal impact of amendments to tax brackets, rates, credits, etc.; evaluate factors relevant to making Virginia’s tax system more equitable; give

tax code amendment recommendations; and more.

• A working group will assess the feasibility of transitioning to a unitary combined reporting system for corporate income tax purposes.

• TAX will evaluate establishing an online portal for tax practitioners, including looking at comparable services offered by other states and estimated costs.

• The Joint Legislative Audit and Review Commission (JLARC) will study increasing the progressivity of Virginia’s individual income tax system by evaluate the fiscal impact of amendments to tax brackets, tax rates, credits, deductions, and exemptions, as well as any other factors it deems relevant to making Virginia’s individual income tax system more progressive and fair in response to economic dynamics.

The VSCPA will reach out to stakeholders to communicate CPAs feedback on these issues. n

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PROFESSIONAL DEVELOPMENT

Want to reach peak performance?

Start with your mindset.

As we navigate a post-pandemic life and change long-held work beliefs, it’s a great time to refocus our mindsets and create healthy habits that support our mental well-being.

Sarah Elliott, CPA, co-founder of Intend2Lead, a VSCPA Center for Innovation partner, discussed ways to reach your peak performance with VSCPA COO Maureen Dingus, CAE, in a 2021 VSCPA Leading Forward podcast episode.

CPAs face a serious threat of burnout, Sarah says. “We tie up our value and worth to our hours. And I know because I did it … for so many years.” Sarah says a focus on only billable hours not only leads to burnout but inhibits leadership because CPAs cannot perform at their peak.

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So how do you tackle this challenge head on as a driven CPA to ensure you are reaching your peak performance, even in times of stress? It starts first with changing your mindset.

“Our mindset is our thought habits,” Sarah says, “And we are creatures of habits.” Our mindsets model our belief systems, which can defeat us and not allow us to make a change. To begin to change your mindset: • Tell yourself you are worthy of taking care of. “When we take care of ourselves and when

PROFESSIONAL DEVELOPMENT

“We have to be okay with breaking the mold of what we see a lot of in the profession. Even if that feels really uncomfortable and hard at first, we have to be willing to do the hard thing.”

we put ourselves first, everyone around us benefits … so it’s not selfish.”

• Recognize your unconscious beliefs, patterns and systems that are driving toxic behaviors and not allowing you to give yourself permission to take care of yourself.

• Once your patterns are identified, understand that you can choose something better. “We can actually begin to logically connect that when we feel better, we perform better.” In turn, everyone and everything around you will benefit.

Practical ways to change your mindset include meditating, using a mantra and journaling. However, you need to make space to connect with yourself and ensure it’s a priority. Also, working with a coach or talking with a friend about these topics can be helpful.

“The more that we bring it out of the brain where it’s unconscious and into the world, around us, whether we’re writing it down, or whether we’re saying it to someone else over time, we truly do change the thinking patterns,” Sarah says. “We actually change the way that our brains are wired.”

Once you have begun to shift your mindset, you can incorporate new skills and practices into your daily routine that support and nourish you, whether mentally, physically, or emotionally. This can help you move beyond time management to energy management. Time is scarce but your energy is infinite, Sarah says.

One final tip: Don’t go it alone. It’s easy to slip out of new habits without accountability, so support from teammates, family and friends is crucial. Enlisting a crew helps shift the burnout culture and collective belief systems as well. n

Sarah Elliott, PCC, CPA, co-founded Intend2Lead, a leadership development company that coaches accountants to access the #DimensionOfPossible, with VSCPA member Brian Kush, CPA, in 2016.

Because Intend2Lead is a VSCPA Center for Innovation partner, you can receive 10% off their services. Check out more at intend2lead.com.

CHECK OUT OUR PODCAST! Hear more from Sarah in our January 2021 episode of VSCPA Leading Forward. Not interested in listening? That’s okay! Our recent issues have video recordings and you can always check out the transcripts. Find everything at vscpa.com/podcast.

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PRACTICE MANAGEMENT

Classify new hires right.

If your business is growing or your clients’ needs are expanding, make sure you know which classification is correct.

Hiring independent contractors can make a

lot of sense in business. Contractors often bring a different level of expertise to certain projects, and they’re typically a more affordable alternative to fulltime employees. They don’t require all the same forms of compensation as traditional employees, including insurance and fringe benefits.

If you’re experiencing rapid growth, you might be tempted to hire contractors over employees, thinking they’ll scale up quickly to meet demand. But if it makes so much financial sense to pass up W-2 employees for independent contractors, why aren’t more business owners doing it?

Randy Johnston

There’s a big reason, and it’s called the IRS. If you’re caught misclassifying employees (however unintended), you could be in hot water with your state labor department, federal labor department, or both! These lawsuits can be costly and particularly crippling to business owners working on thin margins.

The most tragic part is, like many business owners, you won’t know you’re doing anything wrong until you’re slapped with a Fair Labor Standards Act (FLSA) lawsuit.

What’s more, misclassifications are preventable. That’s why it’s so important for you to know the difference between a W-2 employee and a 1099 independent contractor and be aware of the penalties for confusing the two.

WHAT ARE SOME TELL-TALE SIGNS I’M TREATING CONTRACTORS LIKE EMPLOYEES? Maybe when you started, you only needed workers for 10 hours a week, but now things are scaling up, and you need them all week long. Over time, you’ve increased your oversight, and your contractors have lost elements of control they used to have, like the ability to set or negotiate their hours.

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You also need workers to go off-site for certain projects, so you give your contractors access to a company car. Sure, they could use their own, but you’re not reimbursing them for gas or mileage, so why bother? And when one of them reveals they’re working for another company in your niche on the weekends, you discourage or prohibit them from working with the competition.

Each of these actions may indicate you’ve misclassified your workers. If your independent contractors aren’t free to work when, where or how they like and aren’t reimbursed for their expenses, you may be treating them more like employees. One of the most dangerous mistakes you can make is failing to recognize when an employee who started as an independent contractor has changed responsibilities and fallen out of the 1099 safe zone.

WHAT ARE THE CONSEQUENCES FOR MISCLASSIFYING WORKERS? Perhaps the biggest consequence for business owners who misclassify workers is payroll tax issues, and that’s beside it being an FLSA violation. Companies that improperly classify employees as independent contractors can face state and federal penalties. Wage and hour claims are usually initiated at the state level but can easily progress to the federal level, depending on the size and nature of the business. And let’s not forget the IRS. They would be involved in a case like this as well. (See page 18 for a more in-depth look at the IRS ramifications of worker classification.)

HOW CAN I MAKE SURE MY NEW HIRES ARE CLASSIFIED CORRECTLY? An ounce of prevention is worth a pound of cure.

Pay for an hour or two of consultation time with an attorney. If you go in with all your ducks in a row, you can get an efficient analysis of your situation. If you’re considering making some new hires but aren’t sure

PRACTICE MANAGEMENT

One of the most dangerous mistakes you can make is failing to recognize when an employee who started as an independent contractor has changed responsibilities and fallen out of the 1099 safe zone. whether to classify them as employees or contractors, there are some things you should bring with you to your consultation.

• Each position’s job description.

• Descriptions of the type of work the new hires will be doing.

• An estimation of how many hours your hires will be working.

• A list of the equipment they’ll be using, including the equipment they’ll need to bring with them, such as a laptop.

If your attorney recommends you classify your new hires as independent contractors, ask the attorney to provide you with an independent contractor agreement. They should have a template you can tweak, so you can still protect your business interests and competitive advantages. It’s important your new hires understand and respect your confidential information. You can require independent contractors to execute confidentiality agreements as part of onboarding with your company.

Once you’ve worked out which positions require contractors and which require employees, you’ll want to adjust your job postings to reflect that information.

THREE HIRING SECRETS TO PROTECT YOU FROM COMMON MISCLASSIFICATION PITFALLS

The second option is to learn and internalize these three hiring secrets: 1. Know your company.

2. Know your needs.

3. Know what your workforce is doing.

It’s just good practice. And always ask if the duties you hired people for are still the ones they are currently doing. Just because you got it right the first time doesn’t mean you’re going to keep getting it right — and that’s ok! Every business owner should take the time to circle back on this to make sure everybody is classified as they should be.

Sure, correctly classifying employees doesn’t sound like a big deal at first but getting it wrong can wreak some serious havoc on your business. n

Randy Johnston is the executive vice president of K2 Enterprises. In his role at K2 Enterprises, Randy develops and delivers technology-focused learning opportunities for accounting, financial, and other business professionals. You may contact Randy at randy@k2e.com and you may learn more about K2 Enterprises by visiting www.k2e.com. randy@k2e.com www.k2e.com

In the end, you have two options when it comes to protecting yourself from misclassifying workers. The first is only hire W-2 employees. That’s the safe zone, even if it’s sometimes inconvenient and more expensive.

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EMPLOYEE OR CONTRACTOR? Classification MATTERS. A rise in remote work and contracting during the pandemic has reinvigorated the employer versus contractor classification debate, and the IRS has a say.

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TAXATION

Classifying workers as either employees or

Art Auerbach, CPA, CGMA

independent contractors is important. The correct worker categorization has a profound impact on businesses because it affects not only how workers are paid, but how the government gets paid. Because of the latter reason, this is an issue that will not be going away any time soon. In fact, it’s been thrust into the forefront more than ever due to changing economic environment, technological revolutions, and recent legislative and administrative actions. This can also affect the calculations of Section 199A, the amount of Paycheck Protection Program (PPP) loans received, and the amount of the PPP loans that are forgiven. Classification also has a profound effect on the calculation of the various employment credits (retention, family leave and sick pay).

WHAT’S THE DIFFERENCE BETWEEN THE CLASSIFICATIONS? WHY DOES IT MATTER? The IRS has long had a voice in the categorization discussion.

In 1987, based on an examination of cases and rulings, the IRS developed a list of 20 factors to consider when determining whether a worker should be classified as an employee or independent contractor. The IRS’s next steps included the identification of three categories of evidence that may be relevant in the determination in “Independent Contractor (Self-Employed) or Employee?” You can find that information at https:// tinyurl.com/IRSclassifications.

1. Behavioral control — Is there a written agreement between the parties? Who controls what the worker does and how the worker does his or her job? Is it the company or the individual? The pandemic has complicated this decision with many working remotely.

2. Financial control — Who provides the tools and supplies? Who controls how the worker is paid? Can the worker perform work for other businesses? Who provides the materials? Where is the work to be performed? (This brings the nexus decisions into the mix, as to where the individual files a return or seeks approval of a business [licensing]. Paying licensing fees and local taxes is very important.)

3. Other factors — Is the worker entitled to benefits (i.e., pension plan, insurance, vacation

pay, etc.)? Who is to perform the services? Can assistants be engaged? If so, with approval? How was the worker counted when determining fulltime employees for the PPP loan process or the employee retention credit?

But why does this matter? In a nutshell, employees receive a Form W-2, Wage and Tax Statement, and are taxed on this income at the federal and state levels. Employers must withhold these income taxes from employee paychecks and remit them to the IRS on the employee’s behalf. These aren’t the only taxes that are withheld, though. Employers must also withhold Social Security and Medicare taxes (together known as the Federal Insurance Contributions Act [FICA] taxes). The FICA tax is 15.3%, and the employer and employee each pay 7.65%. Then, there is the Federal Unemployment Tax Act (FUTA) tax. Only the employer pays FUTA tax; it is not deducted from the employee’s wages. The FUTA tax rate is 6%, but it could be higher as a result of pandemic choices.

Those treated as independent contractors have received Form 1099-MISC is the past and will receive Form 1099-NEC for amounts paid in excess of $600 beginning with the year 2021.

It’s easy to understand why businesses, from a financial perspective, might prefer workers classified as independent contractors: they wouldn’t have to withhold income tax and would not be liable for employer share of the FICA taxes and 100% of FUTA taxes for the worker (state unemployment tax is also an issue complicated by nexus), and the reduction in benefit expenses is an added bonus.

To help with the classification, firms and workers can file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, to request a determination of the status of a worker for purposes of federal employment taxes and income tax withholding. Workers file Form SS-8 and a formal determination is sent to both the payer and worker and will be binding with the IRS. This form has been the same for years and is not reflective of the current economy. State decisions are a separate matter.

In addition, this determination affects the calculation of the Section 199A deduction and if the taxpayer obtained a PPP loan, the calculation of the u

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amount of the loan forgiven, and the amount of the loan. Remember that 60% of the PPP loan must be spent for payroll and related payroll expenses.

CHANGING ECONOMIES DON’T FIT THE MOLD The traditional factors used to assess worker classification do not translate easily in today’s economy given how businesses are changing their models to offer different services to customers. For example, do you still get into your car, drive to the grocery store, shop, check out and drive home? Or do you download your favorite grocery store’s app, add your items to your virtual shopping cart, press the “submit button,” and wait a few hours for those groceries to arrive on your doorstep? Is the worker who shopped and delivered the items to you an employee of your favorite grocery store? Or is he or she an independent contractor? Traditional classification criteria might not result in the perfect answer.

A NEW GIG FOR THE GIG ECONOMY The gig economy is expanding rapidly as internet platforms are used more to connect service providers to customers. The gig economy generally includes industries in which workers complete tasks on an on-demand or client-by-client basis, such as Uber and Lyft drivers or restaurant home-delivery services. The emerging gig economy has raised questions about how to classify workers for tax purposes.

An important side note here — make sure you are appropriately inquiring of your individual clients if they are involved in the gig economy before you prepare their returns, perhaps asking if they “occasionally” drive for Uber or Lyft. If the answer is yes, make sure that receipts and other documentation are available for support. For the business clients, inquire if they have filed the appropriate Forms 1099.

LEGISLATION AT PLAY Many states use some form of an “ABC test” to aid businesses in the classification of a worker. This is an ever-changing environment. California has a notable adoption of an ABC test that garnered mainstream attention in the state’s Supreme Court ruling in April 2018 in the case of Dynamex Operations West, Inc., v. Superior Court. The ruling established that companies must use a three-pronged test to determine how to classify workers. This test assumes

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that workers are employees unless the company that hires them can prove otherwise.

In September 2019, California legislatively followed up on the decision with the passage of Assembly Bill 5 (AB-5), popularly known as the “gig worker bill.”

Effective Jan. 1, 2020, the law requires companies that hire independent contractors to reclassify those workers as employees, with a few exceptions.

Many states have started to pattern themselves after California, and we may see in the upcoming year many state legislatures engaged in renewed or new discussions regarding the gig economy.

In its spring term, the U.S. Supreme Court refused to hear the case of New Hampshire v. Massachusetts, a squabble between those states over nonresident income tax — effectively leaving nexus up to the individual states.

In related federal news, on Jan. 9, 2020, the IRS released IR-2020-04 and announced the launch of a new GIG Economy Tax Center at irs.gov/businesses/ gig-economy-tax-center to help people involved in the gig economy area meet their tax obligations.

YOUR RESPONSIBILITIES AS THE ADVISER As if the classification topic wasn’t complex enough, another very big aspect for CPAs to consider involves the ethics of advising clients about classifying workers.

Keep in mind that the potential for unauthorized practice of law (UPL) if you are advising clients on worker classification and have not been licensed or admitted to practice law in a given jurisdiction. Check your state rules to find out where all these situations occur and what you can or cannot do regarding giving any advice. n

Arthur Auerbach, CPA, CGMA, is an independent tax consultant located in Atlanta, Ga., specializing in tax consulting and estate and financial planning for individuals and closely held businesses. He is affiliated with the Asbury Law Firm as a consultant. Arthur is a member of the VSCPA Tax Committee and a former member of the AICPA’s Tax Executive Committee. He is currently chair of the Georgia Society Federal/State Task Force and a member of AICPA’s Tax Practice and Procedure Committee. auerbacharthur@gmail.com

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3. ALLOWS FOR SOCIALLY DISTANCED PAYMENTS QR codes let your clients submit payments in person while still adhering to social distancing guidelines. By using their phones or mobile devices, your client never has to hand you their card or payment data, and can safely submit a payment entirely with their device.

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1. MAKES PAYMENTS FASTER AND EASIER By implementing QR code payments into your firm, you can give your clients several easy opportunities to pay your bill, increasing the rate you get paid and increasing your revenue stream as a result.

For example, you could display your QR code within your office, allowing your clients to submit a payment before they step out the door. You can also print your QR code onto your mailed invoices, allowing your clients to make electronic payments without needing to type in your payment page URL.

2. MODERNIZES YOUR PAYMENT EXPERIENCE

Any time your client scans your CPACharge QR code, they’re sent to your payment page that is hosted on our secure networks, ensuring their payment data is kept as safe as possible. Our systems work to encrypt it, and the data is kept safe in our secure vault rather than stored locally.

Plus, since your client enters their own information, you can reduce your firm’s liability since you aren’t required to handle and store their data yourself.

5. ENHANCES THE CLIENT EXPERIENCE Accepting QR code payments is an excellent way to expand your payment options, make payments more convenient, and ensure payments are processed as safely as possible. By offering easyto-use and modern payment options, you can position your firm as one that values the time and interests of its clients and can be flexible to accommodate their needs.

The more you can demonstrate this level of attention to your clients, the more likely they will return to you with more work, either of their own or by way of referrals.

To learn more about CPACharge’s new QR code payment feature, as well as all the other great features CPACharge can provide to your firm, schedule a personalized demo today at cpacharge.com! n

A recent study from Mastercard showed that almost 80 percent of today’s consumers use contactless payments (such as QR code

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MAKE A STELLAR online IMPRESSION Are you giving your customers and potential clients what they want when they visit your website? Use these tips to design your site for maximum usability.

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MARKETING

David Peters, CPA

It has often been said that you never get a second chance to make a first impression. While no one is quite sure where this quote comes from (some say Oscar Wilde, others say Will Rogers), most everyone seems to agree it is true. While clients and business partners might not remember every word that was said, they generally remember how they felt before meeting with you, and more importantly, how they felt when they left. They remember being impressed or a negative feeling in the pit of their stomach. First impressions help us decide whether we want to keep going back to a company — or when it is time to walk away.

That’s why it is so baffling when we see a business with a bad website. Websites often are our first impression to clients, vendors, employees, prospects, and the business community in general. During the pandemic, we have relied on technology more than ever. Unless your target client or stakeholder can look out his or her window and see your office, your storefronts and office signs have become less important. The company’s personality and philosophy are expressed through their website. Even before the pandemic, Google search has made websites the main way people look for services. Some might still drive by an office, see a sign and stop in, but this has become exceedingly rare. People almost always check a company’s website before interacting with any employees. While many website designers will advocate expensive full-scale improvements to get more value from your website, small improvements to strategy and usability can often make all the difference between a good first impression and a poor one.

DECIDE ON A PURPOSE One of my college friends used to often say, “There is too much information in the world.” While he would say this as an excuse for why he did not use his turn signal when changing lanes on the interstate, I often think of this whenever I look at a financial professional’s website. As I click my way through buzzword-filled, non-descriptive “About Us” pages, I wonder why this information is even here. Is this website even telling me anything? Or did the company launch this website because they felt it was something that businesses do?

Business websites should have a distinct and easily understood purpose. It should be clear from the

homepage why the site exists and what you want the visitor to do. If the goal is to get people into the office for in-person appointments, then information about your location, office hours, and how you can make an appointment should be obvious. On the other hand, if the goal is to provide clients with recent GAAP or tax law updates, links to the most recent articles should be square in the middle of the home page.

Some financial professionals might be uncomfortable with this idea. They worry about coming across too blunt or “salesy.” One accounting firm that I used to work with was very concerned about making a “hard sale” to their clients. As a result, they made it so their contact information could only be seen if you scrolled all the way down to the bottom of the page. Needless to say, they were highly disappointed in their website’s performance and felt it was a waste of money.

Poor communication of purpose can actually dissuade people from your services. If we want our website to bolster our business, we must make it clear why it is there. Simply put, clients want to know what to do. A clearly communicated purpose can help them understand.

MAKE IT EASY Early in my career, I remember being called into my boss’s office to help with a “tech issue.” After spending several minutes telling me about the evils of technology and belittling the world’s IT geniuses, he finally revealed his problem: He couldn’t get an online payment to go through on a vendor’s website. After I helped him navigate a website maze and enter his credit card information, he imparted some advice that still speaks volumes to me: “Never make it difficult for your customers to pay you, Dave.”

The frustration my boss felt on that day is common among many of us. We go to a website to do a simple task, like look up a transaction, make a payment, or just find contact information, only to find this action impossible. It makes us frustrated. It makes us angry. It makes us not want to do business with that company anymore.

People want websites that are simple to navigate and make it easy to accomplish common tasks. While flashy websites might catch our eye, our feelings quickly u

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turn negative if we can’t do the things we want to do.

Perhaps that is why there is such an emphasis now on mobile websites. According to Statista, 81% of all worldwide online traffic in 2020 was generated through mobile devices. In short, if your visitors want to access your site using their phone, the goal should be to make it easy for them to do this. How we design our website should be in line with its purpose for existing.

Let’s say you are an insurance company and the purpose of your website is to drive new customers. The way you will drive new customers is by helping them get quotes (which will lead to policy binds) and providing easy answers to common questions. You might place a button that says “Get a Quote” on every page in an obvious place. You might provide answers to common questions along the side of each page. You might also have a chat box that is open, in case the visitor wants to interact with an insurance agent in real time.

On the other hand, if you are an accounting firm and your website exists to generate new tax clients, then you might want to consider incorporating functionality into your website that will allow clients to schedule their appointments online. While these items might seem small, they improve the user’s experience. Since websites are an extension of your firm, a good first interaction with your website is a good first interaction with you!

One other thing — people don’t scroll. As funny as it might sound, every website marketer will attest to this. Make it clear what you want the visitor to do, and make it so they don’t have to scroll down to do it!

MEASURE EVERYTHING (OR AT LEAST AS MUCH AS YOU CAN) When I was the CFO of an internet-based insurance business, I learned quickly that website visitors who give you feedback are often at the extremes. They have either had a terrible experience and want to complain about it (more common), or they have had a wonderful experience and want to praise you for it (less common,

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but it still happens). What about those people who fall in the middle? Maybe with one or two tweaks, they will become clients for life. They don’t leave feedback because their experience was not a train wreck — but it didn’t leave them in a state of euphoria. Wouldn’t it be good to know about them?

While surveys can generate feedback about our website, it often doesn’t reflect the average visitor. Therefore, we need to develop detective skills to get indirect feedback on our average group. For this reason, it is good to come up with reliable metrics to figure out what people are actually doing on your website. Tracking where people click to most often, how long they spend on particular pages, and where they drop off can lead to deeper insights on why people use your site. This information can help you adapt your website in a way that will be more in tune to your purpose.

Let’s say the purpose of your site is to drive more clients through greater in-person meeting appointments. You begin tracking where people are falling off the website, and you notice that people are leaving once they reach the appointment page where you ask for preliminary information about them. It may be the webpage is too cumbersome to complete (too much information is being asked for).

It could be the page design is confusing. It could be that people don’t trust you enough yet to start giving you information. In the same way that you use ratios to tell where problems with financial statements might exist, tracking where people fall off can help focus your attention on the problem area. From there, you might try shortening your online form, or providing a phone number to call if people need help. While the exact problem might not come through immediately, you at least know where to look. However, before you can do that, you must begin tracking and monitoring.

While it would be ideal to track everything, too many monitoring tools can slow your website’s performance.

Therefore, prioritize the most important components of your website.

MARKETING

BUILD A BETTER WEBSITE Websites are how businesses make a first impression in today’s world. While a site’s look and feel are important, these qualities take a backseat to clearly defined purpose, functionality and user experience. People who can easily find what they want and get the information they need will return time and time again. n

David Peters, CPA, CFP®, CLU, CPCU, is the founder and owner of Peters Tax Preparation & Consulting PC, a financial advisor for Peters Financial LLC in Richmond, and a frequent

VSCPA speaker and writer. He has more than 16 years of experience in financial services. david@davidpetersfinancial.com Peters Financial, LLC 1657 W. Broad St. #5, Richmond, VA 23220 804-332-1373 Registered Representative offering securities through Cetera Advisor Networks LLC, member FINRA/SIPC. Advisory services offered through Carroll Financial Associates, Inc., a Registered Investment Adviser.

Carroll Financial and Cetera Advisor Networks, LLC are under separate ownership and are not affiliated with any other named entity.

Reprinted with permission from the South Carolina Association of CPAs.

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SPREAD THE WORD: A SINGLE AUDIT MAY BE necessary If you don’t have experience with single audits, it’s a good idea to refer clients to a CPA who does.

Federal financial assistance

during the COVID-19 pandemic was a lifesaver for many businesses. But in its wake, companies may be required to complete a single audit for the first time.

Whether your need to educate your clients about this possibility, or you work in corporate finance and must help your employer navigate a single audit, here are details you need to know.

WHAT IS A SINGLE AUDIT? A single audit is normally required by the Office of Management and Budget’s Uniform Grant Guidance (UGG) for a nonprofit or governmental entity that expends $750,000 or more of federal assistance during its fiscal year. The auditor reviews the organization’s financial statements and federal awards to ensure the money was spent according to its stipulations.

Because of monetary relief programs implemented by the federal government during the pandemic, many for-profit organizations that received federal funds are facing their first-ever single audit requirement. Some

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organizations may not have even been aware of the requirement when they accepted the funds.

WHAT FEDERAL FUNDING PROGRAMS TRIGGER A SINGLE AUDIT? Experts admit that determining which funding triggers an audit is confusing. “…There’s been so much funding that’s come out so quickly, and some of the guidelines were delayed in actually coming out to the public in understanding what counts and what does not count,” said Deetra Watson, CPA, CGMA, on a July 8 Journal of Accountancy podcast episode on the topic.

Funds received from one of the highest-profile programs, the Paycheck Protection Program (PPP), do not trigger single audits. However, Economic Injury Disaster Loans (EIDL) do. To help navigate the requirements, the American Institute of CPAs (AICPA) Governmental Audit Quality Center (GAQC) released a chart matrix (PDF) describing which assistance programs trigger an audit and which do not, along

AUDITING

with links to relevant agency information. You can find it at aicpa.org/interestareas/governmentalauditquality.

Last year, the Office of Management and Budget issued a compliance supplement addendum for single audits to help guide practitioners, but it came much later in the year than usual. Thousands of single audits for year-ends earlier in 2020 were delayed.

It’s imperative that CPAs deliver the highest quality single audits to maintain their reputations as trusted business advisors. Check out this comprehensive article from the Journal of Accountancy, “Single Audits: Deliver High Quality in a Challenging Time,” at https://tinyurl.com/ qualitysingleaudits, for help.

WHO CAN PERFORM A SINGLE AUDIT? An independent auditor must perform an organization’s single audit through a licensed CPA firm enrolled in peer review; it cannot be done by an in-house auditor. If you are a CPA who does not perform audits, or does not have experience performing single

audits, you need to advise your clients to engage with a reputable auditor who has experience and meets all the competency requirements established by the Government Accountability Office (GAO), including completion of all the CPE, necessary to perform these types of engagements. n

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THE LATEST GUIDANCE ON SINGLE audit REQUIREMENTS As of press time, CPAs still faced questions about how to handle single audits. Here is a breakdown of current regulatory updates.

Unfortunately, the Financial Accounting Standards Board (FASB) Accounting Standards Codification is virtually mum about contracts between government agencies and for-profit entities. According to subpart F part 200 of the Office of Management and Budget (OMB) Uniform Guidance (aka CFR):

“A Non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single or programspecific audit conducted for that year in accordance with the provisions of this part.”

Anthony O. Otaigbe, CPA

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In June 2020, the OMB published memorandum M 20-26 stating that “payroll costs paid with the Paycheck Protection Program (PPP) loans or any other Federal CARES Act programs must not be also charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice.”

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In other words, funds received via PPP loans are not eligible costs under federal awards.

SUMMARY OF CORONAVIRUS RELIEF FUNDING SUBJECT TO SINGLE AUDIT In December 2020, the OMB released an addendum to its 2020 Compliance Supplement. According to Addendum 93.498, hospitals and other health care providers are required to list eligible expenditures in the Schedule of Expenditures of Federal Awards.

The funding will be evaluated for its compliance to Subparts B, D and E. Addendum 21.019 states that the Uniform Guidance will apply to funds received from the Coronavirus Relief Fund, which was established to provide direct payments to state, territorial, tribal, and certain eligible local governments to cover necessary expenditures

AUDITING

incurred due to the public health emergency brought on by COVID-19. The funding will be evaluated for its compliance to Subpart D Sections 200.303-200.332.

Addendum 84.425 indicates that the Uniform Guidance will be applied toward funds used in connection with the Education Stabilization Fund (ESF). The ESF is composed of three funds. First, the Governor’s Emergency Education Relief (GEER) allocates funds to governors to allot to local education agencies, state institutions of higher education, and other education institutions within the state. Second, the Elementary and Secondary School Emergency Relief Fund (ESSR) is awarded to states to provide funding to local educational agencies. Lastly, 90% of the appropriations for the Higher Education Emergency Relief Fund (HEERF) are awarded directly to institutions of higher education. Specifically, Subparts B, C, D and E will apply.

Funds used in association with the Coronavirus Food Assistance Program (CFAP) will not be subject to the Uniform Guidance. The Coronavirus Emergency Supplemental Funding Program was also included in the OMB addendum to the 2029 Compliance Supplement. This fund provides assistance to state and local governments and tribes. Subparts B, C, D and E will apply.

The Coronavirus Relief — Pandemic Relief for Aviation Workers was not included in the addendum. Funds used in association with The Emergency Rental Assistance Program are subject to the Uniform Guidance Subparts B, C, D and E. This program provides funding to states, U.S. territories, local governments, and Indian tribes to assist households that cannot afford rent and utilities due to the COVID-19 pandemic.

The OMB and the U.S. Treasury department jointly confirmed that the Employee Retention Credit program is not subject to the single audit. The COVID-19 Telehealth Program is included in the Addendum as subsection 32.006. Expenditures used in connection with this fund will be evaluated based on Subparts B and E. This program was established to assist health care entities provide telehealth services.

Expenditures used in connection with the Economic Injury Disaster Loan Emergency Advance are

not subject to single audit, however the disaster assistance loans will be subject to the Uniform Guidance. While it is clear that subpart F will be used to evaluate funds used in connection with this program, the AICPA’s Government Audit Quality Center has made an inquiry with the SBA regarding the relevance of Subparts B–E. The Office of Entrepreneurial Development Resource Training Portal will not be subject to the Uniform Guidance, but the Shuttered Venue Operations Grant Program will. Expenditures will be evaluated for their compliance to Subparts B, C, D and E. This grant was established to assist shuttered venues, theaters and museums.

Recipients of Education Stability funds were asked to exhaust those funds first and maintain CARES Act Project Serv (School Emergency Response to Violence) funds in reserves.

The Uniform Guidance also applies to expenditures in connection with the COVID-19 Testing for the Uninsured program, which provides claims reimbursements to health care providers for conducting testing and treatment for uninsured individuals.

Additionally, the Uniform Guidance will apply to the Grants for New and Expanded Services under the Health Center Program. Specifically, the expenditures will be evaluated based on their compliance to Subparts B, C, D and E and part 7, since the program was not added to the Addendum. COVID-19 Testing for Rural Clinics was not added to the Addendum but will be subject to the Uniform Guidance. This program provides funding for COVID-19 testing in rural areas. The expenditures used in connection with this program will be evaluated based on their compliance to Subparts B, C, D and E and part 7 since the program was not added to the Addendum.

The Emergency Grants to Address Mental and Substance Use Disorders was not included in the OMB’s addendum. This program assists states, territories and tribes with providing increased mental and substance use disorder services. The expenditures used in connection with this program will be evaluated based on their compliance to Subparts B, C, D and E and part 7, as the program was u

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AUDITING

not added to the Addendum. It is important to note that the addendum and related coronavirus relief programs were all recently legislated during a state of malaise brought on by ever-changing events caused by the pandemic. To date, several funds such as the EIDL, PPP, and others have been reopened in efforts to help protect the public.

Since COVID-19 has not yet been fully neutralized globally and new strands are appearing, we should continue to review authoritative sources such as the AICPA’s Government Audit Quality Center, OMB guidance memoranda and Small Business Administration updates. n

Anthony O. Otaigbe, CPA, is a principal member of The Otaigbe Group, in Manassas. The Otaigbe Group specializes in public, nonprofit, internal and forensic audit. Anthony also teaches accounting and business courses as an adjunct professor. anthony@otaigbe.com @theotaigbegroup @theotaigbegroup @theotaigbegroup

Ethics COURSES FOR CPAS Just because you might be required to take an annual ethics course doesn't mean it has to be boring. In fact, our courses are just the opposite. We have a variety of offerings based on hot topics and practice areas so you're sure to find a course appealing to you:

Visit CPAethics.com to sign up today.

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+++++++++++++ ++++++++++

Diversity, equity and inclusion Regulatory ethics Tax Government Corporate finance

INVEST IN IN THE THE INVEST FUTURE OF OF THE THE FUTURE PROFESSION PROFESSION by donating to THE CURTIS C. DUKE

D N A

DR. RUTH COLES HARRIS SCHOLARSHIP!

It’s been 100 years since John Cromwell Jr. became the first Black CPA in the United States. In honor of this milestone, the VSCPA Educational Foundation is establishing the Curtis C. Duke and Dr. Ruth Coles Harris Scholarship. Curtis C. Duke and Dr. Ruth Coles Harris were the first Black male and female CPAs in Virginia.

This new scholarship seeks to encourage and support racially and ethnically underrepresented college students in the pursuit of the CPA profession, but we need your support.

Help us build a more diverse pipeline for the profession by donating today.

Did you know...

Only 2% 9%

Visit vscpa.com/ef-donation

of CPAs and

of bachelor’s and master’s accounting enrollees are Black?

DISCLOSURES

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VSCPA

Statements of Financial Position & Statements of Activities The following Statements of Financial Position and Statements of Activities reflect the VSCPA’s and VSCPA PAC’s financials for the 2020–2021 fiscal year. The full audited financial statements are available online in the “About the VSCPA” section of vscpa.com. More information on the VSCPA’s 2020–2021 programs and initiatives is available in the “State of the VSCPA” report, also at vscpa.com/StateoftheVSCPA.

APRIL 30,

2021

2020

ASSETS Assets Cash and cash equivalents

$

Trade accounts receivable Other receivables Investments Prepaid expenses Property and equipment – net Total assets

2,848,164 55,173 107,497 1,993,235 229,277 2,456,953 7,690,299

$

1,592,392 109,441 1,582,997 291,733 2,108,698 5,685,261

519,300 30,041 289,239 403,831 1,066,298 197,251 2,505,960

$

20,311 243,197 244,401 494,485 194,662 1,197,056

LIABILITIES AND NET ASSETS Liabilities Paycheck Protection Program Loan Accounts payable Accrued expenses Deferred compensation Deferred revenue Accrued retirement Total liabilities

$

Net Assets Without donor restrictions: Invested in property and equipment Board designated for facility and technology Board designated for operating expenses Undesignated With donor restrictions (VSCPA PAC) Total net assets

32

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2,456,953 780,277 1,021,791 863,175 5,122,196 62,143 5,184,339 $ 7,690,299

$

2,108,698 697,805 949,452 688,703 4,444,658 43,547 4,488,205 5,685,261

VSCPA YEARS ENDED APRIL 30,

2021

2020

716,669 367,680 1,096,347 388,583 28,538 2,597,817 354,685 51,993 2,490,456 46,235 14,681 37,088 5,592,955

$ 946,460 578,414 1,104,058 317,441 17,805 2,964,178 343,425 36,930 2,520,285 56,053 18,462 58,584 5,997,917

120,830 153,380 8,290 (3,226) 2,500 5,874,729

129,472 34,817 16,817 (58,908) 2,500 6,122,615

2,166,789 316,639 227,024 772,128 287,970 118,563 70,696 240,122 37,088

2,397,206 323,461 315,667 919,034 360,792 249,992 76,270 287,125 58,584

960,172 5,197,191 677,538

972,180 5,960,311 162,304

55,684 (37,088) 18,596 696,134 4,488,205 $ 5,184,339

47,324 (58,584) (11,260) 151,044 4,337,161 $ 4,488,205

Change in Net Assets Without Donor Restrictions Revenue Program Revenue:

Continuing education Seminars Conferences Ethics Online Other Learning Total continuing education Peer review Innovation Membership Communications Students & Educators Net assets r eleased from restriction, VSCPA PAC Total program revenue Other: Affinity income Investment income, net Rental income Gain (loss) on disposal of property and equipment Miscellaneous Total support and revenues without donor restrictions

Expenses

Program Services: Learning Governance Peer review Membership Innovation Students & Educators Public Relations Government Affairs VSCPA PAC Supporting Services: Administrative and general Total expenses Change in net assets without donor restrictions

Change in net assets with donor restrictions

Contributions to the VSCPA PAC Net assets released from restriction, VSCPA PAC Change in net assets with donor restrictions Change in net assets Net assets — Beginning of year Net assets — End of year

$

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VSCPA

Congratulations to the following members!

NEW HIRES Melinda Hancock, CPA, was hired by Sentara Healthcare in Norfolk as senior vice president and chief administrative officer.

Richard Harpe, CPA, is a new principal at Matthews, Carter & Boyce in Fairfax.

Rusty Jones, CPA, has joined Cary Street Partners as a financial advisor in its Wytheville office.

Earl Rimel III is a new staff accountant at Mitchell Wiggins in Petersburg.

PROMOTIONS Brown Edwards has announced the following new partners: Megan Argenbright, CPA, and Matt Heatwole, CPA, in Harrisonburg, and Jared Brown, CPA, in Bristol.

Kristen Baietti, CPA, is now an audit manager at Kimble in Richmond.

Nicole Boyce, CPA, and Martha Floyd, CPA, have been named directors of estates and trusts at Mitchell Wiggins in the Richmond and Petersburg offices, respectively. Also in the Richmond office, Andrew Jones, CPA, and Brendon Maturey, CPA, were promoted to senior accountant.

Sasha Howard, CPA, was promoted to vice president at TowneBank in Suffolk.

At Meadow, Urquhart Acree & Cook in Henrico, Robin Neas, CPA, has been promoted to director; Jordan Maynard, CPA, to senior accountant; and Ridge Motley and Hui-Ju Tsai to in-charge accountants.

Ronnie Johnson, CPA, was named a tax partner at Cherry Bekaert LLP in Virginia Beach.

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Crystal Stewart, CPA, and Lisa Timbrook, CPA, were promoted to partner at CST Group CPAs, PC, in Reston.

APPOINTMENTS & AWARDS Nancy Bagranoff, CPA, accounting professor at the University of Richmond, received the 2021 Distinguished Achievement in Accounting Education Award from the American Institute of CPAs. Steven Caseres, CPA, of Graham, Poirot & Caseres CPAs in Leesburg, was named favorite accountant by readers of Loudoun Now. Kara Santmyer, CPA, of Mitchell & Co. In Leesburg, was named runner-up.

Kendall Coleman, CPA, partner at CST Group CPAs, PC, and Joey Musmar, CPA, partner at Millermusmar CPAs, both in Reston, were named to the 2021–2022 Greater Reston Chamber of Commerce Board of Directors.

Hope Cupit, CPA, president & CEO at the Southeast Rural Community Assistance Project, won the Robert Steward Leadership Award at the 2021 National Rural Community Assistance Project awards.

Jeff Ewing, CPA, a sole proprietor in Irvington, was elected to the board of directors of the Steamboat Era Museum.

Connie Hammell, CPA, principal at KWC CPAs, and Andrew Young, CPA, shareholder at Renner & Company, CPAs, PC, both in Alexandria, were named to the Top 40 Under 40 list from the Alexandria Chamber of Commerce.

Genevieve Hancock, CPA, from Port Orange, Fla., and interim vice president of technical Accounting for LPL Financial, received the Women to Watch Experienced Leader Award winner from the Florida Institute of CPAs. Two young professionals were selected for the American Institute of CPAs’ 2021 Leadership Academy: Jennifer Korbely, CPA, controller at BurgerBusters Inc. in Virginia Beach, and Carey Miller, CPA, director at Veris Consulting in Reston.

FIRM NEWS Aiken & Company, PC, CPAs, in Fairfax, was named best accounting services company in the 2021 Best of Loudoun awards from the Loudoun Times-Mirror.

VSCPA

Remembering Ellis Dunkum, CPA Ellis Dunkum, CPA, a champion of the accounting profession from Richmond, died July 29, 2021. His accomplished career began at Leach, Calkins & Scott and then Coopers & Lybrand, where he became partner in 1969. He moved to the firm’s national office in New York as consulting partner in the audit directorate and remained until retirement from PricewaterhouseCoopers, LLP, in 1999. He subsequently started Ellis M. Dunkum, CPA, LLC.

VSCPA Board of Directors in 1986 and served in dozens of capacities at the Society beginning in 1970. He chaired the Virginia Board of Accountancy, was a delegate to the National Association of State Boards of Accountancy, and chaired the University of Richmond School of Business Alumni Association. He was active in the All Saints Episcopal Church as vestryman and senior warden, and was a member of the Foundation Board of the Richmond Symphony.

As a long-time servant to the CPA profession, he was president of the

“Ellis and I were classmates at the University of Richmond, and we followed

each other’s careers,” said Walter Stosch, CPA, retired Virginia state senator. “He became of the most successful and prominent CPAs in Virginia, not only serving his clients and his profession with his firm, but also within the community.

He served as a chair of the Board of Accountancy when I was in the state Senate, and we worked closely together to revise the public accountancy statute.

Ellis was one of my best friends and best professional colleagues, and we will all miss him dearly.”

“Ellis made such a significant impact to the CPA profession in Virginia over the past several decades. He was instrumental in revising the accounting statutes and also helped the VSCPA with its advocacy efforts to move the Board of Accountancy out from under the Virginia Department of Professional and Occupational Regulation. The entire profession has lost a legendary Virginia CPA.” — Stephanie Peters, CAE, VSCPA president & CEO

IN MEMORIAM Robert Neeley, CPA, a Life member from Abingdon. In his career, he served as chief financial officer and senior vice president of administration for KVAT Food Stores. He served on several VSCPA committees in the 1960s, including the Board of Directors.

James Oakes, CPA, a Life member from South Boston. He was a former member of the Virginia Tech accounting board, South Boston Jaycees and Southfax Sertoma Club. He was also a trustee and past treasurer of the Main Street United Methodist Church.

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VSCPA

New Virginia CPA licensee members Sarah Annie Butteweg, CPA, Alexandria

Demi Paulino, CPA, Falls Church

Julio Velasco III, CPA, The Plains

William Dagli, CPA, Charlottesville

Amber Payne, CPA, Chester

Benjamin Watts, CPA, Roanoke

Kailey Gale, CPA, Tysons

Megan Prevette, CPA, Elkton

Shannon Williams, CPA, Virginia Beach

Tyra Green, CPA, Virginia Beach

Natalie Rees, CPA, Petersburg

Justyna Zuchmanska, CPA, Alexandria

Assel Ibrayeva, CPA, Dumfries

Deborah Robison, CPA, Lorton

Michelle Keith, CPA, Fairfax

Nicolas Saglimbeni, CPA, Arlington

Robert Lego, CPA, Englewood, Co.

Kellie Seaman, CPA, Tysons

Xiaowei Li, CPA, McLean

Stephen Snyder Jr., CPA, McLean

Roderic Morgan, CPA, Mechanicsville

Taylor Teixeira, CPA, Henrico

Theresa Murray, MD, MPH, CPA, Richmond

Kirsten Tice, CPA, Richmond

List from May 1, 2021, through July 31, 2021.

Brag, please!

Send your member news to disclosures@vscpa.com.

MEMBERS RECOGNIZED BY VIRGINIA BUSINESS VSCPA members continue to make their mark as trusted business advisors by winning recognition.

Two members were named to the inaugural Virginia Business magazine Women in Leadership Awards. Honorees had to hold a C-suite or equivalent position at a for-profit entity. Congratulations to Mary Aldrich, COO at PBMares LLP in Newport News, and Tracy Lewis, CPA, partner at BDO in Richmond.

The Virginia CFO Awards honored Kim D’Errico, CPA, CFO of Special Olympics Virginia in Richmond in the small nonprofit category, and John Zeheb, CPA, CFO of Ukrop’s Homestyle Foods in Richmond in the large business category.

The following members were named to the 2021 Virginia 500 list of the most powerful people in the Commonwealth: • Timothy Gillis, CPA, managing partner at KPMG LLP, McLean • Jason Hartman, CPA, managing partner at Brown, Edwards & Company, LLP, Roanoke • Dan Hudgens, CPA, managing partner at Deloitte, Richmond • Harvey Johnson, CPA, partner & CEO, PBMares LLP, Newport News • Susan Moser, CPA, managing partner at Cherry Bekaert LLP, Tysons • Scott Moulden, CPA, principal at Yount, Hyde & Barbour, PC, Winchester • Paul Thompson, CPA, managing partner at DHG LLP, Richmond • Kevin Virostek, CPA, managing partner at Ernst & Young, McLean • Gary Wallace, CPA, managing partner at Keiter, Glen Allen • Greg Wallig, principal, Grant Thornton, Arlington

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VSCPA

You can start your VSCPA volunteer journey anywhere!

Anne Hagen, CPA, CGMA, was inducted as the 2021–2022 VSCPA chair in May, but her involvement with the VSCPA began years ago.

If you’d like to hold leadership positions in your state society but don’t know where to begin, here are just a few of the stepping stones Anne used before becoming chair.

You can start your own volunteer path anytime by joining our volunteering pool! Find more at vscpa.com/volunteer.

These are just a few of the ways you too could become involved! Others include visiting classrooms as part of our CPAs in the Classroom program, writing articles, and much more. Questions for Anne about her volunteer positions or career?

She’s happy to help! Contact her at ahagen@mahova.com.

After joining the VSCPA Board of Directors in 2016, she was named to the Executive Committee in 2018 before becoming chair.

Here, she poses with the other members of the VSCPA Board.

For several years, the VSCPA held a formal CPA Day of Service. Firms and companies around the state chose how and where to give back. As CFO of the Mason Home of Virginia (she’s now the CEO), Anne volunteered with her employer at the food bank.

Anne served on the Business & Industry Conference Committee for four years, helping to develop content relevant to CPAs working in various finance functions and outside of public accounting.

Staff news ANNIVERSARIES

HONORS

Oct. 11: Ben Munford, finance assistant & facilities coordinator, five years

Congratulations to VSCPA President & CEO Stephanie Peters, CAE, for being named to the Virginia 500 2021–2022 Power List by Virginia Business magazine.

Oct. 29: Julia Henderson, membership & marketing director, eight years Nov. 13: Linda Newsom-McCurdy, CAE, senior director, learning, 14 years Celebrating 5 years

Dec. 1: Stephanie Peters, CAE, president & CEO, 24 years

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CLASSIFIEDS

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FALL 2021

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FALL 2021

39

Virginia Society of CPAs 4309 Cox Road Glen Allen, VA 23060

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