Disclosures: July/August 2018

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A NEW ACCOUNTING METHOD UNIVERSE

Certain businesses will be able to use the cash basis accounting method under the Tax Cuts and Jobs Act.

20 Are Bonds Still Worth It?

Investors wonder if they should eliminate bonds from their portfolio because returns are down.

26 Estate Planning For the Rest of Us

Even if an estate doesn’t meet the $11 million exemption amount, there is still work to be done.

Advocacy

session is coming

Taxation

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president’s perspective

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

Where learning and tech collide disclosures

disclosures.vscpa.com disclosures@vscpa.com

JULY/AUGUST 2018

Volume 31, No. 4

Managing Editor

Jill Edmonds

disclosures@vscpa.com

Contributing Editor

Chip Knighton cknighton@vscpa.com

Public Affairs & Communications Director

David Bass dbass@vscpa.com

Editorial Task Force

Olaf Barthelmai, CPA

Cheri David, CPA

Mike DellaRipa, CPA Melisa Galasso, CPA Genevieve Hancock Karen Helderman, CPA Alesia Lewis, CPA

Gabriele Lingenfelter, CPA

Harold Martin Jr., CPA

David Peters, CPA

Mark Plostock, CPA Barbara Sukramani, CPA

Disclosures is published six times a year by the Virginia Society of Certified Public Accountants (VSCPA). The magazine’s mission is

I ntel cofounder Gordon Moore noted in 1965 that the number of transistors per square inch on integrated circuits had doubled every year since the technology was implemented. That observation, now known as Moore’s Law, has become a kind of shorthand for a general exponential rise in computing power and, even more generally, technological advances in total. It’s a prediction we try to take to heart at the VSCPA as we work to keep our members abreast of the trends and technology that will determine their future success.

American Institute of CPAs (AICPA) President Barry Melancon, CPA, uses the phrase “Learn, unlearn, relearn.” The skills CPAs learn at the beginning of their careers will be irrelevant by the time they approach retirement, if not long before. That’s part of what drove us to strive for a culture of learning as part of our VSCPA2025 strategic framework that we launched last year. Constant learning is necessary for CPAs to maintain their status as trusted advisors to the business community.

basic accounting work by 2020, according to a Deloitte report. The members who thrive despite that threat will be the ones who embrace technology to enhance their advisory services. We encourage our members to explore technology through our seminars and conferences, including the new Technology Showcase in October. Our Center for Innovation, coming this fall, will be an effort to help members learn about resources and other tools related to technology and talent.

of

to VSCPA

professional issues

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 © 2018 Virginia Society of CPAs.

VSCPA Preferred Providers

That means we must continuously learn in areas we didn’t know we had to. Technologies like robotics, artificial intelligence and blockchain are now a reality at today’s firms and companies. CPAs must reckon with what those technologies mean for their own jobs, but they must also lead the way to help clients, customers and coworkers embrace them.

CPAs must use technology to provide value or be left behind. Robotics and artificial intelligence are predicted to automate or eliminate up to 40 percent of

Technology is going to be a huge part of your job, and your clients’ jobs, moving forward. We want to help our members interact, talk and share ideas for how to remain vital in the face of automation. I urge you to take advantage of these opportunities and expose yourself to new technologies and processes that your VSCPA colleagues are using. It’s vital for your professional future. n

Stephanie Peters, CAE, has served as VSCPA president and CEO since 2007.

speters@vscpa.com @StephPeters connect.vscpa.com/StephaniePeters

CAMICO – Sponsored Provider of VSCPA

Stephanie Peters, CAE VSCPA, President & CEO

Why CAMICO?

• For more than 31 years, CAMICO has been protecting CPAs with insurance solutions tailored to the professional services and concerns faced by CPA firms every day.

• CAMICO’s depth of services for CPA firms is unmatched by other insurance programs.

• CAMICO policyholders have unlimited access to proactive loss prevention and claims handling.

• Policyholders can call CAMICO as often as needed – free of charge – and consult with in-house experts on loss prevention, tax, and accounting and auditing issues.

These are just some of the reasons why VSCPA selected CAMICO as the Society’s sponsored provider of Professional Liability Insurance.

Rachel Painter, AINS

Senior Account Executive

T: 800.652.1772 ext. 6773

rpainter@camico.com

www.camico.com

Accountants Professional Liability Insurance may be underwritten by CAMICO Mutual Insurance Company or through CAMICO Insurance Services by one or more insurance company subsidiaries of W. R. Berkley Corporation. Not all products and services are available in every jurisdiction, and the precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued. ©CAMICO Services, Inc., dba CAMICO Insurance Services. License #0C09618. All Rights Reserved.

“CAMICO’s expertise, stability, and commitment to CPAs provide strong reasons for the VSCPA to choose CAMICO as its sponsorship program, year after year. The company assists policyholders with a wide variety of practice and risk management issues specific to CPAs, and the society’s partnership with CAMICO supports our efforts to provide strong benefits to our members.”

line items

ATTENTION SOLE PROPRIETORS...

Health insurance relief may be on the way

Paying for health insurance in the individual market can be a huge expense for many sole practitioners, and costs are spinning out of control. To address this problem, the Virginia General Assembly passed SB 672, which was signed by Gov. Ralph Northam on April 6. The legislation revises the definition of “small employer” to include those who are self-employed, and those workers will be able to participate in the small-group health insurance market.

The new legislation defines a sole proprietor as an individual who derives a substantial portion of his or her income from a trade or business:

• Operated by the individual as a sole proprietor

• Through which the individual has attempted to earn taxable income

• For which the individual has filed the appropriate U.S. Internal Revenue Service (IRS) Form 1040, Schedule C or F, for the previous taxable year

When this issue went to press, the VSCPA and its health insurance partner, Employee Benefits of Virginia, were still waiting for more information on specific process issues, notably what information insurance carriers require to ensure that an individual is an eligible sole proprietor. We’ll send that information out to the membership as we have it!

IRS sets ambitious 5-year goals

Despite facing ongoing budget cuts, the U.S. Internal Revenue Service (IRS) wants to make the agency better to meet the changing needs of taxpayers and preparers. That’s why it’s set a five-year strategic plan to improve taxpayer service and tax administration. Its six top goals are:

1. 4.

2. 3. 5. 6.

Empower and enable all taxpayers to meet their tax obligations.

Protect the integrity of the tax system by encouraging compliance through administering and enforcing the tax code.

Collaborate with external partners proactively to improve tax administration.

Cultivate a well-equipped, diverse, flexible and engaged workforce.

Advance data access, usability and analytics to inform decision-making and improve operational outcomes.

Drive increased agility, efficiency, effectiveness and security in IRS operations.

Check out the IRS’s strategic plan for yourself at irs.gov/about-irs/irs-strategic-plan

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6

Virginia’s state ranking for technology-industry jobs.

12.8

The percentage of Virginia’s economy taken up by the tech sector ($57.3 billion).

4

The percentage of Gross Domestic Product projected to be taken up by the federal deficit in 2018 ($804 billion).

$984 billion

The projected federal deficit in 2019. 46.5 million

The number of taxpayers who itemized their tax returns in 2017.

18 million

The number of taxpayers projected to itemize their tax returns in 2018, a 61 percent decrease.

The state of risk oversight

Today’s businesses face a challenging risk environment. From cyber breaches to tax reform challenges to natural disasters, organizations never know how and when they may face risk. So, what are they doing about it? The 2018 State of Risk Oversight report, from the American Institute of CPAs (AICPA) and NC State Poole College of Management, surveyed organizational stakeholders to reveal that risk management is getting harder. Sixty percent of survey respondents said the volume and complexity of risks is increasing over time.The report contains many more takeaways and observations. Find it at tinyurl.com/2018StateofRiskOversight

EXCELLENT EXCEL

Excel slices and dices

Do you ever turn a block of data into a table by highlighting the entire block of data and clicking on the funnel icon to establish a dropdown filter for each header? It was only after I spent hours clicking and unclicking individual filters to analyze a dataset that a CPA candidate told me that I should have been using Excel’s Slicer function all along, and they were right! Also, I learned of a faster way to turn a block of data into a table.

4.05 percent

The vehicle property tax rate assessed in Virginia, the second-highest state behind Rhode Island at 4.77 percent.

24

The number of states that do not assess a vehicle property tax.

1,454

The number of VSCPA members who do not reside in Virginia, representing 11 percent of the membership.

To use Slicer you will need a table of data, which you can do by hitting “Ctrl” + “t” on the keyboard while your cursor is within any block of data. After you have your table, go to the “Design” tab and click the “Insert Slicer” button. A listing of the headers in your table will pop up. Check the headers you want to use to slice and dice your data and click OK. For each of the headers you checked, a filter box will appear that you can move around and resize as needed. Within each of these boxes will be one button for each unique item under each header. Now, just by selecting and unselecting as many buttons you like, you can filter/slice away the items you do or do not want to see in the table.

One last item to note, at the top of each filer box are icons. One icon is for selecting multiple items and the other is for clearing the filter. If you use filters to analyze datasets, I recommend trying Excel Slicers!

George D. Strudgeon, CPA, CGFM, is an audit director at the Virginia Auditor of Public Accounts in Richmond. Email him if you have Excel topics you want him to cover.

george.strudgeon@gmail.com connect.vscpa.com/GeorgeStrudgeon

advocacyTax reform on the docket for special session

The Virginia General Assembly’s regular session wrapped up in February with two major items left unresolved — the Commonwealth’s budget and tax reform. The former was being dealt with in a special session when this issue went to press. The latter is headed for a similar fate.

While the budget session is a big deal — and included movement on the much-discussed Medicaid expansion, which passed the Senate on May 30 — we’ll be focused more on the tax reform special session, which likely will convene this fall. Here’s what the General Assembly will be discussing — and where the VSCPA, and you, can make a difference.

WHERE THINGS STAND

To recap the tax reform issue, President Donald Trump signed the Tax Cuts and Jobs Act into law last

December. (We’ve got an overview of the changes at vscpa.com/TaxReformNews.) Virginia has dealt with certain aspects of the bill, as well as extenders passed with the federal budget in February, that impacted returns from 2017 and earlier, but that still leaves a host of federal changes that take effect for this year.

The VSCPA Tax Advisory Committee is currently analyzing those changes with the intent of offering comments to Secretary of Finance (and VSCPA member) Aubrey Layne, CPA, this summer. We’re also looking for any feedback from our member tax practitioners through a couple of different venues.

The VSCPA’s 2018 Professional Issues Updates were held in June across the state, and Society leadership solicited feedback from members at those events to assist the committee with its work. We’ll also be posting a survey on our tax reform resource center

(vscpa.com/TaxReform) to capture member feedback on potential changes. The questions in that survey will be:

• What was the biggest issue you experienced related to federal tax reform during this past tax season?

• What issue do you think will most affect 2018 returns?

• How can the VSCPA best help practitioners with tax reform?

MORE TAX ISSUES

Unrelated to federal tax reform, the Tax Advisory Committee also expects state and local tax reform efforts to be a focus under Gov. Ralph Northam. Several proposals are under consideration, including the expansion of sales tax on services, including professional services. That issue was the subject of two 2018 bills (HB 966 and SB 390), which were sent to the Joint Subcommittee on Tax Preferences for further study, along with HB 1444, which would have allowed taxpayers to take the standard deduction on federal returns and still itemize deductions on Virginia returns. The Tax Advisory Committee is also seeking input on those issues.

MOBILE WORKFORCE UPDATE

In federal advocacy news, the VSCPA and the rest of the CPA community continues to push Congress to move forward on the Mobile Workforce State Income Tax Simplification Act. While the bill has support in both houses of Congress, it is unlikely to be considered as a standalone bill in the Senate, meaning it may need to be attached to a larger bill.

The Mobile Workforce Act would create a uniform national standard so that employee earnings would not be subject to state income tax and withholding outside their home state unless the employee worked in another specific state for more than 30 days during the calendar year. The VSCPA sent a letter to Virginia’s congressmen and senators in support of the bill in March. n

VIRGINIA BOARD OF ACCOUNTANCY UPDATES

On the Virginia Board of Accountancy (VBOA), Gov. Ralph Northam has appointed VSCPA member Barclay Bradshaw, CPA (above left), to a second four-year term. Bradshaw, a principal at Harris, Hardy & Johnstone in Richmond, initially joined the VBOA in 2011 and served through 2015 before cycling off the board. During his first term, he worked with another VSCPA member, the late Steve Holton, CPA, to create a guide for CPAs who volunteer with nonprofit organizations and helped modernize the VBOA’s communications to licensees.

Bradshaw replaces another VSCPA member, Andrea Kilmer, CPA (above middle), who is wrapping up her second term on the board. In addition, VSCPA member Susan Ferguson, CPA (above right), an accounting professor at James Madison University in Harrisonburg, takes over as VBOA chair July 1, replacing 2017–2018 chair Matthew Bosher, the board’s public representative.

virginia taxation

Credits, incentives and business location decisions

When Amazon announced it was looking for a second headquarters location (HQ2) that would create up to 50,000 high-paying jobs, cities and states pulled out all stops to put together THE package to lure them. What began as bids from 238 cities and regions from across 54 states, provinces, districts and territories across North America is now down to 20 potential cities, including areas in Northern Virginia, Washington, Montgomery County, Md., and Raleigh, N.C., to name a few of the nearby locations. A decision is expected in 2018.

Each city/state proposed certain incentives, tax or otherwise, to attract HQ2. While most, including Virginia, have been quiet about the incentives being

offered, it has been reported that Newark and the state of New Jersey are collectively offering tax incentives of up to $7 billion.1 Maryland recently passed legislation called Promoting ext-Raordinary Innovation in Maryland’s Economy (the PRIME Act) and the Maryland Metro/Transit Funding Act. The legislation provides $3 billion in tax credits and exemptions if and when Amazon locates in Maryland and creates the requisite number of jobs and economic activity. Substantial funding is also provided for the D.C. area’s flailing Metro system.

Amazon has said the second headquarters would be equal to its Seattle campus, and estimates company investments in Seattle from 2010 through 2016

With the D.C. metro area trying to woo Amazon, it’s a good time to look at how credits and incentives can attract businesses to a locality.

Terry Barrett, CPA

virginia taxation

resulted in an extra $38 billion to the city’s economy. Assuming those estimates are correct, there is no doubt everyone is clambering for the “win.”

While the stakes rarely are not as high as with HQ2, states and localities often compete for business locations, relocations and expansion. New/expanding business generally means jobs, investment in the local economy, investment in the state economy and more tax revenue.

Incentives are viewed as investments by the jurisdictions in future economic growth and involve business decisions by both the jurisdictions and the businesses. The intent obviously is to result in a win-win situation for both businesses seeking to locate or expand and the jurisdictions involved.

Incentives generally fall into two categories: statutory incentives and discretionary incentives. Statutory credits and incentives are established by law. There are no subjective considerations or determinations. Rather, there are express expectations of a company in order to receive the benefit. If a business meets the expectations, such as the establishment of a certain number of new jobs, investments of a certain amount in new manufacturing equipment or the training of employees, and follow the specific criteria and guidelines for obtaining the credit (e.g., completing applications and submitting information by certain due dates), they receive the benefit. Examples of statutory incentives include tax credits, exemptions and reduced tax rates. Virginia and most states offer a wide variety of tax credits. Some of the income tax credits offered in Virginia are the Research and Development credit, the Major Business Facility Job Tax Credit, the Worker Retraining Tax Credit and the Green Job Tax credit.

Other statutory tax incentives may be in the form of sales and use tax exemptions. Some states, including Virginia, offer broad sales and use tax exemptions for manufacturing and a host of other industries. There may be other types of tax incentives, e.g., reduced property tax rates like one passed by Henrico County in 2017 that reduced the property tax rates on equipment used in data centers by 83 percent. Other localities seeking to attract data centers have also reduced their property tax rates.

Often incentives are not so much based upon what a company does but rather where it does it. States and localities often offer incentives in terms of lowered or waived property taxes, local

license taxes or fees, when businesses locate in enterprise or technology zones.

Discretionary incentives may be established by law but they involve a subjective analysis of the economic value and return on investment to the jurisdiction. Often, businesses compete for these discretionary incentives. Examples of discretionary incentives in Virginia are several offered through the Virginia Economic Development Partnership (VEDP). Two of the more popular incentives are the Commonwealth’s Opportunity Fund (formerly known as the Governor's Opportunity Fund) and the Virginia Jobs Investment Program. The Commonwealth’s Opportunity Fund is an incentive the governor may extend to secure business location or expansion in Virginia. With this fund, grants are awarded to localities on a matching basis with the expectation that the grants will result in location or expansion in that locality. The Virginia Jobs Investment Program is an incentive program that offers recruiting and training assistance to businesses creating new jobs or undergoing technological change. The VEDP works with Virginia-based businesses, as well as those from outside the state, that are considering Virginia as a location in determining and obtaining the assistance that is available.

From a business’s perspective, the company’s strategic plan is key in considering and making location/expansion decisions. Incentives available help to drive such decisions. For example, if the business is intent on expanding through research and developments, it certainly is looking for research and development tax credits; if it is in a “green” industry or focused on “green initiatives,” incentives promoting investment or tax credits with green intent are key. Similarly, those looking to hire employees trained in their industry or with certain technology skills are looking for jobs program tax credits and training program incentives.

When evaluating incentives, too, businesses should consider not only what is being offered but what expectations/requirements are tied to those incentives. If they commit to investing in a community and hiring a certain threshold of employees, but find they are unable to meet their commitments, what are the possible ramifications? Many incentive or grant programs have clawback or recapture provisions that allow the granting jurisdiction the authority to be paid back when the specific targets are not met. They should consider whether the goals and targets are u

Credits and incentives often result in a win-win situation for both the jurisdiction offering and the businesses on the receiving end.

realistic and obtainable given their own research regarding the jurisdiction and considering their strategic plan.

Sometimes jurisdictions have negotiable incentives that may or may not be widely known. We encourage companies considering expansion or relocation options to ask not only about the statutory and discretionary incentives but also about what else the jurisdiction may be able to offer (and what they would expect in return). Published or nonpublished incentives may be in the form of cash grants, preferred financing, utility discounts and cost offsets and cost avoidance (employee training offsets, infrastructure incentives, technology assistance, transportation cost offsets). However, unless they ask, they may never know and may miss out on incentives that could have made the difference in a location decision.

Credits and incentives promote activity and investment in a jurisdiction. As noted above, they often result in a win-win situation for both the jurisdiction offering and the businesses

on the receiving end. States and localities offer them but it is incumbent upon a business to seek and explore opportunities consistent with and in furtherance of its strategic goals. n

1. “Amazon has released a ‘short’ list of cities it’s considering for its second headquarters,” CNN, Jan. 18, 2018.

Terry Barrett, CPA, is a tax senior manager at Keiter in Glen Allen. She focuses on state and local tax consulting, with a special interest in and emphasis on sales and use tax in the multistate arena. tbarrett@keitercpa.com connect.vscpa.com/TerryBarrett (804) 273-6254 keitercpa.com

We handle serious and complex state and local tax disputes, with a track record of litigating controversies involving hundreds of millions in tax assessment dollars. Whatever your circumstances, we can help you unravel the complexities of state and local tax law. We can. And we will.

To learn how our Business Tax Group can represent you when you have a local, state or federal tax controversy, contact Johan Conrod at 757.624.3183.

Take control of your personal brand

Whether you like it or not, social media presence can affect your job search.

Social media is everywhere. Whether you are posting photos or articles, uploading your résumé or reading and commenting on news briefs and #hashtags, the trend is inescapable and can be a powerful tool for communication. All forms of social media can affect your job search — not only the ones directly related to recruiting and job searching tools. This impact can be either positive or negative, and is one that you can ultimately control. But you must be diligent.

POSITIVE IMPACT

Recent increases in efficiency can be leveraged from growing technologies, and having a social

presence can positively affect emotional intelligence. Many employers want to see a professional social media presence when researching candidates for different positions. Further, social media can be a good indicator of how a candidate behaves outside of the workplace. While potential employers want an employee who is savvy in new and updated technology, they also look for key indicators of negative behaviors. Some key ways to show that you have political and social media prowess are:

• Avoiding “taboo” topics, such as profanity, drugs or excessive violence (see below for more detail)

Genevieve Hancock

This column, from the VSCPA Young Professionals Advisory Council (YPAC), covers relevant subjects requested by young professionals in the workforce.

• Being respectful of other races and religions

• Disengaging in arguments that are disrespectful

Understanding your privacy settings is also important. Make sure that everything is not public and filter what you say that employers can see. While they may love all of your photos of that summer trip you took, there are also the photos of that college party not so long ago where you drank just a little too much. Most social media formats can be set to allow your connections to see everything, while also blocking personal data and posts from outside viewing. This may not be the best approach for professional social media sites, though, as those should be more heavily edited, rather than set for privacy, as they serve as an online footprint for your résumé.

Taking the time for both a personal and professional social media review can benefit you by showing that, as a potential employee, you care about how you present themselves to the world, and that should also translate to personal responsibility and accountability in your responsibilities for a new role. Further, it can also increase your likability when it comes to recruiters scoping out potential connections on professional social media sites.

Networking is another way you can ensure that your time on social media is put to use for your job search. Professional social media networks are great for this, but also consider your friend network. Make sure you are communicating what you are looking for, and your network may recommend you for a potential position or introduce you to someone at a company you admire.

NEGATIVE IMPACT

There are many things you can do on social media that hurt your job chances if they were to be reviewed by potential employers. Disrespect of other races and religions or genders could make an employer think twice, or involvement with illicit or illegal topics such as drugs, violence or an excessive amount of profanity.

Directly discussing your job, current or future, could also affect your role. No one wants to see how you insult others you work with, or even clients, or how you “feel you would not like the position you interviewed for but would like the money.” This shows unprofessional behavior. Vent to trusted friends, and if needed then directly address a repeated behavior or action

that is bothering you, rather than using social media to air your frustrations. Take the time to search for yourself with a few search engines to find out what organizations your name is associated with or if there are any unknown “skeletons” in your closet. Any knowledge about your name and what a potential employer could find can be helpful to head off, especially if the information is incorrect.

A hiring company wants to ensure — as most potential candidates do — that they and their organizational culture are a good fit, as well. If a company is looking for forward movement that is based in technology and most of the articles you have shared or promote on your social media sites are anti-technological growth based on health effects, then they may consider you to be a bad fit for the position. Whether the company aligns with your values and initiatives is something to consider in depth during any job search, as it could mean the difference between just another job, or devoting yourself and feeling fulfilled in your career.

CONCLUSION

Social media use can be used to your benefit in a job search, but it is good to make sure you know what is out there. Avoid posts that can damage your reputation and ensure the best side of yourself is seen publicly. Make sure to limit any damaging or controversial items and that your forward movement is aligned with the company’s initiatives. While social media can be a fun toy, it can also be a tool for the perception of your own personal brand. n

Genevieve Hancock is a technical accountant specializing in complex modeling and changes in accounting guidance as a manager of financial reporting & audit for Trader Interactive in Norfolk. She serves on the VSCPA Young Professionals Advisory Council (YPAC) and Disclosures Editorial Task Force.

T.Genevieve.Hancock@gmail.com connect.vscpa.com/GenevieveHancock linkedin.com/in/GenevieveHancock

A NEW ACCOUNTING METHOD UNIVERSE

Certain businesses will be able to use the cash basis accounting method under the Tax Cuts and Jobs Act.

Richard J. Beason, CPA

Since the beginning of mankind, we have sought the natural laws of the universe. Newton, Galileo, Einstein and Hawkins are some of the great names who developed theories of how our universe operates. Likewise, CPAs have tirelessly worked to develop complete theories to accurately measure income and net worth. Both physicists and CPAs made great strides with the invention of calculators and computers that enabled mass analysis of data. CPAs rapidly determined that the cash basis of accounting did not accurately present income or net worth, and accounting standards moved to a more realistic definition of income under the accrual method. Now we are fine-tuning the laws of income and net worth measurement with new rules for income recognition, lease versus capital expenditure reporting and determination of timing and derivatives.

While the theory of relativity reflects how time changes with the speed of an object, most people do not need these calculations to get to work on time. CPAs came to this conclusion recently with the decision to accept small Generally Accepted Accounting Principles (GAAP) for certain business entities. Congress too has accepted that the costs of information and accuracy may exceed the benefit of such. For many years, income tax law attempted to follow the accounting theories, but in recent decades, Congress realized that the practical need of collecting taxes and influencing the economy did not always coincide with Generally Accepted Accounting Standards (GAAS). The U.S. Internal Revenue Code (IRC) began deviating from natural laws to practical

laws that met the needs of government cash flow. However, these adaptations, like GAAS, placed a large amount of time, energy and costs on businesses to comply. With the Tax Cuts and Jobs Act, Congress attempted to reduce complexity in tax calculations for small businesses by allowing them to calculate taxable income on the cash basis of accounting for businesses with average gross receipts of less than $25 million per year.

The Tax Cuts and Jobs Act reflects this practicality as follows:

“The provision expands the universe of taxpayers that may use the cash method of accounting. Under the provision, the cash method of accounting may be used by taxpayers, other than tax shelters, that satisfy the average gross receipts test, regardless of whether the purchase, production, or sale of merchandise is an incomeproducing factor. The average gross receipts test allows taxpayers with annual average gross receipts that do not exceed $25 million for the threeprior-taxable-year periods (the “$25 million gross receipts test”) to use the cash method. The $25 million amount is indexed for inflation for taxable years beginning after 2018.”1

Accordingly, businesses (other than tax shelters) meeting the gross receipts test may use the cash basis of accounting with regard to income recognition and expense deductions and without regard to inventory requirements of hybrid methods or uniform capitalization rules. This reflects a substantial u

Know this...

• With the Tax Cuts and Jobs Act, Congress is attempting to reduce complexity in tax calculations for small businesses by allowing them to calculate taxable income on the cash basis of accounting.

• The cash basis will be allowable for businesses (other than tax shelters) with average gross receipts of less than $25 million per year.

• For businesses with average receipts exceeding $25 million, the Act retains the exceptions from the required use of the accrual method of accounting for qualified personal service corporations and other taxpayers other than C corporations.

taxation

FEDERAL TAX REFORM BONUS ARTICLE

Check out “U.S. Tax Reform and Its Impact on the Global Economy,” by VSCPA member Abi Joshi, CPA, at vscpa.com/TaxReformGlobalEconomy

This too can make life easier for those businesses that sell products on terms. In effect, this provision allows sales to be reported as cash is received rather than at the time of contract for personal property sales. For those selling on credit, this could be a boost to cash flow from deferral of income taxes.

change in accounting for many businesses. Other than for tax shelters, all businesses meeting the average gross receipts test of $25 million or less can now elect to use the cash basis of accounting. That means C corporations, corporate farms, partnerships with C corporation partners, qualified personal service corporations and businesses that acquire and sell real and personal property may now use the cash basis of accounting without the rule that any accounting method has to clearly reflect income if they meet the average gross receipts test.

In the past, companies acquiring and selling personal property have generally been required to use the accrual basis of accounting to account for sales and inventory. There was an exception in the law for companies with $1 million or less in average gross receipts; but, there was also a rule that required the method to clearly reflect income even for the excepted entities, which generally meant accrual basis and an inventory would still be required. The new provision removes the clearly reflect income rule and the inventory requirement for those meeting the average gross receipts test of $25 million. The new limiting rule is items previously reported as inventorial items will now be reported the same as non-incidental materials and supplies under Treasury Regulation Section 1.162-3(a)(1), or conform to the taxpayer’s financial accounting treatment of inventories. The conforming to the financial accounting method may limit the election to remove inventory measurement due to possible loss of security control of assets and financial reporting both internal and external. However, one might assume inventory control for security and protection is outside the definition of “financial accounting treatment.”

Upon the change in accounting method, businesses meeting the average gross receipts test are not subject to IRC Sec. 263A uniform capitalization rules. Businesses previously exempted from uniform capitalization for reasons other than a gross receipts test remain exempt.

The change also allows the reporting of sales on the cash basis for those meeting the $25 million requirement even though the business produces, purchases or sells real or personal property.

For businesses with average receipts exceeding $25 million, the Act retains the exceptions from the required use of the accrual method of accounting for qualified personal service corporations and other taxpayers other than C corporations. Qualified personal service corporations, partnerships, S corporations and other passthrough entities continue to be allowed to use the cash basis of accounting even if they have average gross receipts exceeding $25 million as long as such method clearly reflects income. Obviously, clearly reflecting income means a seller of personal or real property and grossing more than an average of $25 million will continue to have to account for inventory and sales on the accrual method or hybrid method and continue to follow the rules of uniform capitalization.

Under the new provisions, small real estate contractors meeting the average gross receipts test of $25 million in the year entering into a contract may use the long-term contract method of accounting rather than the percentage-of-completion method if the contract is expected, at the time of entering into the contract, to complete within two years of commencement of the contract.

The new provisions apply to years beginning after Dec. 31, 2017. For small contractors, the provision applies to contracts entered into after Dec. 31, 2017. The Act specifically states that the changes provided therein are subject to a change in accounting method for purposes of IRC Section 481 requiring businesses already in operation to request a change in accounting method using form 3115.

For small businesses, these provisions may save substantial tax dollars. Companies selling personal property on account may now report the income as received rather than the accrual basis. The cost savings from not having inventory accounting could also be substantial. However, it remains to be seen how these changes will be accepted by the state and local governments. Business licenses, inventory property taxes, and state income taxes may be affected by these changes or may require income, inventories and sales to be reported under the old provisions which could be costly and a bookkeeping nightmare. Many states, including Virginia, are currently reviewing the Act to determine their treatment of its many provisions.

The business must also consider its financial accounting method when selecting to use these new provisions, as the expensing

of sellable stock in trade may be based on the company’s financial accounting method. Such a change may have important repercussions to bankers and investors as earnings may be timed or otherwise manipulated under the cash method and not clearly reflect income and expenses without inventory accounting. As stated earlier, inventory control and protection may also suffer if the accounting method does not measure the inventory. Additional methods of control would have to be established to protect the assets for insurance, theft and finance off the general ledger.

As noted in the first paragraph, practicality has become more of a concern to Congress than accounting theory. Cash basis accounting offers tax savings and simplicity, but it also may distort business financial reporting upon which the company and third parties rely for financing and business decisions. n

1. Joint Explanatory Statement of the Committee of Conference, Business Tax Reform, Section B, Part 2. Small business accounting method reform and simplification (sec. 3202 of the House bill, secs. 13102 through 13105 of the Senate amendment, and secs. 263A, 448, 460, and 471 of the Code).

Richard J. Beason, CPA, CITP, PFS, CGMA, is a graduate of Virginia Tech and has been a member of the VSCPA for 41 years. He has offices in Roanoke and Hilton Head, S.C., specializing in taxation and financial planning beasoncpa@comcast.net connect.vscpa.com/RichardBeason (540) 966-6668

financial planning

ARE BONDS STILL WORTH IT?

Though rising rates may prevent bonds from returns similar to those seen in recent decades, the asset class still plays an indispensable role in diversified portfolios.

financial planning

Jimmy Pickert, CFA, CRPS®

This year has been difficult for bond investors. Despite the asset class’s conventional reputation as a reliable store of value, most major U.S. bond indexes were negative for the year through the end of April.

Perhaps the most well-known index, the Bloomberg Barclays U.S. Aggregate Index (the Agg) is down 2.19 percent for the first four months. Negative returns like these can almost entirely be attributed to one thing: rising interest rates. The yield on the 10-year U.S. Treasury closed above 3 percent for the first time since 2013. In fact, yields at every point on the yield curve have been rising steadily over the past few years (see Figure 1 on page 22.) With the Federal Reserve currently expected to hike the federal funds target rate thrice more this year1, and with inflation readings showing prices creeping higher2, investors have every reason to suspect that interest rates should continue to increase as well.

This poses a problem for bonds, as well as many other fixed income investments, because bond prices have an inverse relationship with interest rates. When one goes up, the other goes down. This makes intuitive sense when you consider an example. Let’s imagine that I issue a bond at par ($100) that pays an income of $4 annually. You could say that my bond yields 4 percent, because in return for paying me $100, you, the investor, can expect an annual income of $4. Then, someday soon, my brother comes along and issues a bond that pays $5 annually. Let’s assume our bonds are identical in every respect — they both mature at the same time and both my brother and I are equally creditworthy — but his bond pays $5 whereas mine

pays just $4. His bond yields 5 percent, and mine yields just 4. You, the investor, see an opportunity to get a better yield, so you decide to sell my bond and buy my brother’s. But no one wants to buy the bond I issued, because my brother’s is the better deal. So how do you make my bond more attractive? You lower the price of my bond to make it more appealing.

Investors are seeing this same thing happen in today’s bond markets. Newly issued bonds are paying higher yields, so already-issued bonds must decrease in price if their holders want to sell them. If we are indeed in a rising interest rate environment, then bond investors can expect this headwind to persist. However, while bonds might not offer the same returns seen in the past 30 years of falling interest rates, they still play a critical role in a well-constructed portfolio. This is chiefly true for those investors who have a shorter time horizon until they have liquidity needs from their portfolios, as is the case for foundations with spending commitments and private investors who are nearing, or are currently in, retirement.

DIVERSIFICATION: IN ORDER TO HAVE IT WHEN IT MATTERS, YOU NEED TO HAVE IT WHEN IT DOESN’T

Diversification has almost become a dirty word for investors during the current bull market cycle. For example, why would any rational investor desire to diversify away from the S&P 500 index and its 9.02 percent average annual return seen over the last 10 years? Over the same time period, the Agg has returned only 3.57 percent per year. With the u

Know this...

• Most major U.S. bond indexes were negative for the year through the end of April, prompting investors to ask if bonds are still a wise choice.

• The best way to protect you and your clients from an inevitable market downturn is through diversification.

• The main source of return for bonds is rarely from price increases or decreases, but rather from the income that these investments generate.

financial planning

most prominent stock index in America putting up such numbers, it’s no wonder that investors are afraid of missing out by investing in anything else.

Deep down, though, most investors realize that the party won’t go on forever. It’s true that economic and corporate fundamental conditions are supportive of continued strong equity returns (a topic for another article). But it’s important to acknowledge that this bull market, at more than nine years old, will be the longest lasting in modern history if it makes it to September 2018. Bull markets don’t die of old age, but they don’t live forever, either.

If we can acknowledge that the equity bull market must end at some point in the not-too-distant future, what is the solution? Diversification, of course. And history has shown that bonds are great for diversifying away from stocks. This is knowable because we have observed the correlation between stocks and bonds for many years. Correlation is measured on a scale of positive one (+1) to negative one (-1). A correlation of +1 indicates that two investments move in the same direction at the same time. A correlation of -1 indicates that two investments move in the opposite direction at the same time. Anything between -1 and +1 indicates that there’s less of a relationship in movement between two investments, with a correlation of 0 indicating that that there is, well, no correlation.

The correlation between the S&P 500 and the Agg is remarkably close to zero. The time period observed will affect the exact outcome, but you will generally see a correlation of between -0.10 and +0.10. While this matters little, or may even be frustrating, during bull markets, it matters tremendously when bear markets strike. Consider the total return of the Agg during the last four bear markets (the bond index did not exist during bear markets that occurred prior to that),

financial planning

where the S&P 500 has lost at least 20 percent of its value. In chronological order the Agg index returned 28.03 percent, 3.01 percent, 29.66 percent and 8.52 percent.3 When stocks were down big, bonds were up, and half of the time they were up nearly 30 percent.

There is a common criticism of using historical bond returns as a predictor for what can be expected in the future. For more than three decades, bonds have benefitted from falling interest rates. The yield on the 10-year Treasury peaked at 15.84 percent in September 1982, and it’s been in general decline ever since. And because of the inverse relationship between interest rates and bond prices, bonds enjoyed a significant tailwind that can no longer be expected. This is a fair point, but it overstates a.) the degree to which rising rates can be expected to harm bond prices, and b.) the typical movement of rates when equities fall rapidly — which is when investors rely on bonds.

BOND YIELDS EASE THE PAIN OF RISING RATES

The impact of rising interest rates is a valid consideration, but what is commonly lost in this discussion is that the main source of return for bonds is rarely from price increases or decreases, but rather from the income that these investments generate. Bonds generate regular interest payments that the issuer is contractually obligated to meet (unlike dividends, which are paid at the discretion of a company). Because of the yield generated by bonds, it’s reasonable to expect that losses caused by rising rates will be mitigated — if not completely eliminated — over the course of a given 12-month period. To get a sense of how well a bond may perform in the face of rising rates, it’s useful to consider a bond’s duration as well as its yield.

Duration, simply put, refers to the sensitivity of a bond to an increase in interest rates. It works like this: Imagine you have a bond with a duration of three. If interest rates increase by one percentage point, the price of that bond will decrease by approximately 3 percent. If interest rates increase by two percentage points, the bond will decrease by approximately 6 percent. The inverse of this is also true, with duration indicating how much a bond will rise in price given a one percentage point decline in interest rates.4 Therefore, a bond with a yield that is higher than its duration can generally be expected to have a positive return over the next 12 months unless interest rates rise by more than one percentage point.

At

Is it possible that rates may increase at a pace that causes prices to fall by more than interest income will compensate? Certainly. But consider the current state of the equity markets in comparison. In early February 2018, equity markets sold off rapidly once the 10-year U.S. Treasury surpassed 2.85 percent. In April, even with the support of overwhelming earnings growth, the S&P 500 finished barely positive for reasons that can at least partly be attributed to how fast interest rates will rise. What’s obvious is that, at this point in the U.S. bull market, equities appear to be even more sensitive to rising interest rates than do bonds. u

financial planning

CONSIDERATIONS FOR BOND INVESTING IN A RISING-RATE ERA

While bonds still play an essential role in a diversified portfolio, bond investing in a rising rate environment is new territory for most investors. Because of this, there are some important things to keep in mind.

First, pay close attention to the duration of a bond or a mutual fund that invests in bonds. You might come across a bond mutual fund that has great returns over the past 10 years, but has taken on above-average duration risk. That is not the sort of risk you want to load up on in a rising rate environment, because those bonds stand to lose the most as rates increase.

Second, don’t reach for yield. If a bond has low duration and an above-average yield, realize that the cause for that is that the bond likely carries a lower credit quality and thus a higher risk of default. Bonds like these will more closely reflect the movement of equity markets, and as a result they will not offer the downside protection that investors look to bonds for in the first place.

Third, diversify within the bond portion of your portfolio. By investing in bonds or bond funds that vary in terms of duration, geography and types of credit risk, you can construct a portfolio that offers potential for solid returns when stocks are rising but still provides protection when stocks are falling. There’s a reason that it’s prudent to spread your equity investments among large-cap stocks versus small-cap stocks, domestic versus international and so on. Companies of various sizes, geographies and sectors don’t respond to the same economic pressures in the same way. The same holds true for bonds and the bond issuer’s ability to make payments.

Finally, look outside of traditional equity and bond investments for opportunities. Non-traditional investments are becoming increasingly available to retail investors. Properly researched, such investments can be added to a portfolio of stocks and bonds to further diversify away from stock declines and rising interest rates. It’s worth noting that non-traditional investments tend to be more complicated than traditional stock and bond funds, and many are constructed around ideas that turn out to be wishful thinking. Investors should make sure that they fully understand the process and the associated risks before investing.

INVEST WITH YOUR GOALS IN MIND

Bonds are critical to building a sound portfolio. Avoiding them because the United States is in a rising interest rate environment is no different than trying to time getting in and out of the stock market based off when you think the next crash will occur. Both are flawed strategies because of the importance placed on the short-term market environment rather than the financial goals of the investor. If your portfolio has bonds or has had them in the past, it’s likely because you or your advisor thought that having 100 percent exposure to the equity market carried too much risk. Assuming your appetite for risk has not increased — in fact, it decreases for most as their time horizon shrinks — then the need for bonds is still present. n

1. CME FedWatch Tool

2. Consumer Price Index; U.S. Bureau of Labor Statistics

3. Bear market start and end dates sourced from “JPMorgan Guide to the Markets.”

4. This is a simplified description of how duration works. In practice, market interest rates do not typically move in a parallel manner along the yield curve (interest rates for two-year debt obligations will not necessarily move the same direction and degree as 10-year obligations, for example).

Jimmy Pickert is a portfolio manager with ACG, working in the firm’s ongoing investment strategy due diligence process. Pickert helps clients meet their objectives within their constraints, factoring in their tax situation, cash needs, time horizon and investment risk tolerance. He also forecasts the retirement scenario for clients to determine their retirement readiness.

jpickert@acgworldwide.com acgworldwide.com

LinkedIn.com/company/acg-inc-@/acg_live Facebook.com/ACGRichmond

While bonds still play an essential role in a diversified portfolio, bond investing in a rising rate environment is new territory for most investors.

Attention CPAs:

Whether A Decision Maker Looking To Upgrade Your Talent, Or A CPA Looking to Upgrade Yourself/Your Skills, Ask Yourself:

Who really chose who in joining your company?

Are you/your professional staff really at the right level where you should be/you need them to be?

Are you/your staff in a position that truly suits your/their personality, values, and professional and personal needs?

Why leave your future to chance?

If you’re seriously interested in making the “right” move for your next hire, I can help you. I am an actively licensed CPA in Maryland and Virginia and CGMA with over 20 years of experience including public accounting (E&Y) and consulting (KPMG), financial accounting (American Cancer Society), internal audit (Telerate, now part of Thomson Reuters), and recruiting. As a networker who truly enjoys helping others and sharing my career experiences to guide fellow professionals, including writing articles for the AICPA, here is how I can help you:

Decision Makers:

Ask you questions, and most likely ask many more questions than other recruiters about your company, duties involved, skills required, corporate culture and more

Work with you on finding the “right” professional that is the “right fit

Provide you with valuable information about the professionals I work with, the marketplace, what your competitors pay, and more

Career Seekers:

Guide you on career paths available in public accounting and industry

Enable you to capitalize on your strengths

Coach you on how to put your best foot forward to find the “right fit”

Advise you when to stay in your current position if that is the right move

If you’re interested in working with a recruiter who understands your background, skills, and is genuinely interested in helping you find the “right fit”, then I welcome meeting you!

BETH A. BERK, CPA, CGMA

Independent Recruiter

Phone: 301-767-0670

Email: BethABerk@msn.com

Specializing in CPA Firm, Accounting & Finance Positions in Metropolitan DC/MD/NoVA & Baltimore and nearby Suburbs and Richmond/Tidewater too Connecting You To Your Next Hire TM Contingency & Retained Staffing Solutions matching skills, experience & values with needs

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estate planning

ESTATE PLANNING FOR THE REST OF US

Just because you or your clients’ estates may not be worth $11 million doesn’t mean they don’t need estate planning help.

CPAs for LIFE series

This is the fifth article in our series “CPAs for Life,” which investigates how CPAs can serve their clients through many of life’s changes and challenges. Previous issues in the series are available online at disclosures.vscpa.com.

estate planning

Louise M. Clayton-Kastenholz, CPA

For those starting to feel sorry for me, please don’t; I really do enjoy my job. There is great job security, and the clients never complain. Now that the estate tax exemption amount is up to around $11 million per person, or $22 million per married couple, I have been amazed at the number of people who think I soon will be out of a job.

Nothing could be farther from the truth. I did not prepare many estate tax returns when the exemption amount was “only” $1 million, and the nature of my job was no different. I help clients navigate the unfamiliar territory of dealing with the business end of the end of life. So if the estate tax will never factor in, then what planning is really necessary, and why do our clients need us? In this article, we will take a look at the factors that affect estate planning for the rest of us.

Essentially, the goal of estate planning is to arrange the maximum transfer of the enjoyment and control of your assets (and the payment of your debts), with the minimum cost in money or trouble to the people you are leaving behind. The goal is the same whether you have $100, $100,000 or $100,000,000. Though the goal is fairly simple, there is no one-size-fits-all answer for how to meet it. Depending on a person’s family situation and the nature of their assets and liabilities, there are multitudes of different ways to meet a client’s goals.

INTESTACY — THE DEFAULT PLAN

More than half of Americans do not have a will. But they still have a plan, thanks to intestacy laws. All states have them, and Virginia’s are straightforward. Inheritance starts with the surviving spouse if there is one, divided between the surviving spouse and children if there are children not in common with the surviving spouse. If there is no surviving spouse, then just the children; if there are no children, then on to other relatives in an ever-widening, but logical, circle. With no will to name an executor, the court has to appoint an administrator, which can create extra time and expense.

If for some reason the court determines that a will is invalid, then the intestacy laws would come in to play. Most attorneys include a self-proving affidavit with the wills they draft and have those signed when the will is signed to avoid the difficulties of validating a will. Although most people have chosen intestacy, consciously or otherwise, it is extremely limiting.

LAST WILL AND TESTAMENT

Aside from a desire to depart from the state’s rules for who should inherit what, there are plenty of good reasons to make a will. A will names an executor, or co-executors, and then imparts powers to carry out the instructions given. A will can also provide guidance to the executor about how to carry out the instructions. A common example is in the distribution of tangible personal property: by a list left by the testator, by the executor’s choice or by each beneficiary having the u

Know this...

• The goal of estate planning is to arrange the maximum transfer of the enjoyment and control of your assets with the minimum cost in money or trouble to the people you are leaving behind.

• Virginia’s intestacy laws are straightforward: Inheritance starts with the surviving spouse if there is one.

• Even the simplest situation will result in at least one Form 1041 needing to be filed: For the estate to report income earned after the decedent’s death and until the assets are distributed to the beneficiaries.

I work in the world of death and taxes.

estate planning

Even if we never have to file an estate tax return, there are plenty of income tax returns to be filed for estates. And trusts. And deceased clients. And beneficiaries. Even the simplest situation will result in at least one 1041 needing to be filed.

opportunity to choose, with instruction on dealing with anything not chosen or inappropriate for distribution.

It is crucial to make a will — even with a trust already in place — to control the disposition of those assets that were not transferred into the trust. It could be as simple as a “pour-over” will leaving the residue of the estate to the trust, or it could be a mechanism to work entirely separately from the trust. Even with very diligent planning and implementation, the will inevitably governs disposition of at least one asset.

TRANSFERS OUTSIDE OF PROBATE

It is entirely possible for a reasonably wealthy person, without the use of a trust, to have such a small probate estate as to fall within the small estate statutes. Most Americans’ two largest assets are their house and their Individual Retirement Accounts (IRA). If the house is owned jointly with their spouse (either with right of survivorship or as tenants by the entirety), and the IRA account has a properly designated beneficiary, those assets will never be part of the probate estate. Even if a house is not jointly owned, real estate in Virginia transfers as of date of death and does not go through the probate process.

There are other ways that assets can be titled to avoid probate. Transfer on death, or pay on death, designations can be made on financial assets such as bank or brokerage accounts. With those designations, the bank or brokerage will transfer the asset to the designated recipient upon notification and proof of death of the original owner. The transfer of ownership through survivorship, titling or beneficiary designation takes place by operation of law, and not according to the will.

Clients who wish to avoid probate, and the expense of creating a trust, should consider some of these titling options. Likewise, joint accounts will not go through probate. Elderly clients often create a joint account with one of their children for convenience in day-today financial matters, and should be reminded that the co-owning child has no obligation to share the account with their siblings after the parent’s death.

REVOCABLE LIVING TRUST

A revocable living trust (RLT) is a popular estate planning tool,

for good reason. A will only determines the disposition of assets at death; there is no allowance for incapacity, or for voluntarily allowing another to control the assets. An RLT allows the grantor to continue to exercise control over his or her assets, even to the point of revoking the trust, while providing for those other eventualities. Trusts can be administered by the grantor, or with one or more other trustees. Trusts can also be set up with protectors, who have duties different from the trustee and can act in a non-fiduciary capacity.

Assets do not have to be transferred to the trust after death if they are already titled to the trust. This avoids probate, and also makes a much smoother transition, allowing the payment of expenses or receipt of income to continue relatively seamlessly. In order to avoid probate, the trust must be funded during life. Even a pour-over will still goes through probate. Trusts can be particularly useful in situations where there are some assets located in another state, avoiding the potential costs and inconvenience of ancillary probate in those states. The downside is the initial expense to set up the trust. Since the cost of probate in Virginia is relatively low, the cost of setting up a trust can be more than the cost of probate for a modest estate.

SELECTION OF EXECUTOR OR TRUSTEE

The selection of the executor or trustee is very important for implementing an estate plan. Often the surviving spouse, or one or more of the decedent’s children, are named as executors or successor trustees. In a happy family that gets along well, that can work, as long as the person named is emotionally and practically up to the task. In a contentious family situation, especially in the case of “blended families” where the spouses have children from previous marriages, it may be best to consider asking a professional such as the client’s attorney to act as executor. The fee for a professional administrator may be worthwhile to avoid subjecting a family member to scrutiny and potential hostility.

ACCOUNTING — TO THE COMMISSIONER OR THE BENEFICIARIES

Fiduciaries have a duty to report the income and expenditures of an estate or trust. In the case of an estate or testamentary trust, that reporting is done through a fiduciary inventory and annual

estate planning

accountings to the Commissioner of Accounts for the decedent’s city or county. The inventory and accountings are matters of public record, which is one of the reasons why many want to avoid probate.

The accounting is considered part of the fiduciary’s duties. If the fiduciary is receiving compensation, and hires a professional to prepare or assist in preparing the accounting, the allowable fiduciary fee is reduced by the amount paid to the professional. Fees paid for tax preparation do not reduce allowable fiduciary compensation.

Even the trustee of an inter-vivos trust, which is not under the supervision of the court, has a duty to report to the beneficiaries. In most cases, that reporting is only necessary upon request of the beneficiary and a copy of the trust’s tax return will often suffice. However, getting back to those contentious relatives, remainder beneficiaries may make demands for accountings from fiduciaries, particularly if the fiduciary is also the income beneficiary.

DEATH AND TAXES

Even if we never have to file an estate tax return, there are plenty of income tax returns to be filed for estates. And trusts. And deceased clients. And beneficiaries. Even the simplest situation will result in at least one Form 1041 needing to be filed, for the estate to report income earned after the decedent’s death and until the assets are distributed to the beneficiaries. For many trusts, a 1041 is needed for many years through the lives of one or more income beneficiaries, before the assets are transferred to the remainder beneficiaries. The filing threshold for a 1041 is very low — $600 gross income, or any taxable income. With an exemption amount of only $100 for any trust that is not required to distribute all income currently, it is very easy to have a filing requirement even with less than $600 of gross income.

The decedent’s final 1040 needs to be filed as well, usually by the executor or other personal representative, or jointly with the surviving spouse. The couple is still considered married if one spouse died during the year, so the filing can be either joint or separate for a decedent who was married at the time of death. Income and deductions belonging to the decedent are cut off at death, although medical expenses are deductible even if paid after death. There are some planning opportunities when filing a final 1040, but the main issue is usually the cut-off of income.

An estate or trust that makes distributions will need to issue Schedules K-1 to the beneficiaries. They need to know that the K-1 will be forthcoming, and that they are only taxed on their share of the income earned by the trust or estate’s assets. Often beneficiaries are concerned that they will be taxed on their inheritances, and understanding that this is not the case can be a great relief.

BASIS AND HOLDING PERIOD

Inherited assets have a “stepped up” (or occasionally, stepped down) basis and a long-term holding period regardless of when they were purchased or sold. Gifts, however, have “carryover basis” meaning that the donee takes on the donor’s basis and acquisition date. Generally, it is better for a client to hold on to assets and let beneficiaries inherit them than to gift the asset during life. As a planning tool, the best assets to gift are those with minimal or no appreciation, such as cash or recent purchases, while highly appreciated assets should be held.

When working on fiduciary tax returns, remember that both basis and holding period for inherited assets are affected. The broker may not have adjusted the basis or term for sales of inherited stock. Clients often provide cost for a house that sold, not realizing that there is a step up to fair market value at date of death.

LIFE INSURANCE

Life insurance can be a useful planning tool and provide needed liquidity. In a taxable estate, a life insurance policy can provide the funds to pay the estate taxes for a largely illiquid estate. Life insurance proceeds can be very helpful for paying an estate’s outstanding debt. If the client is a small business owner with only one child involved in the business, life insurance can provide funds to equalize the inheritances of the other children. Life insurance proceeds are not taxable to the beneficiary.

RUN THE NUMBERS

When your client wants to discuss estate planning — a discussion we should encourage — we owe them the kind of analysis that makes us their most trusted advisor. We know their assets and income, we know at least something about their family, and reading through their planning documents will tell us more. We also can determine the financial implications of their ideas, better than any of their other advisors; we know how the dollars will play out, and we can impart that knowledge to them. n

Louise M. Clayton-Kastenholz, CPA, is a tax manager in the Williamsburg office of PBMares, LLP. She heads the estate and trust segment of the firm’s practice. Her specialty areas include estate tax, estate and trust fiduciary tax returns and fiduciary accountings, as well assisting clients in estate and trust administration and planning.

lkastenholz@pbmares.com connect.vscpa.com/LouiseClayton-Kastenholz www.pbmares.com

Member of the Year: Harry Dickinson, CPA, Ph.D.

“About three weeks in, I changed majors,” he said. “I had found where I wanted to be in life.”

That advice — from another Outstanding Member of the Year honoree, 2012 winner Whit Broome, CPA — set Dickinson on the path to a career in academia. He got his doctorate at the University of Georgia, then spent the better part of two decades teaching at U.Va. and VCU.

Spending his entire career at large Virginia public schools meant he had ample opportunities to set students on their own accounting path. He estimates that he taught 5,000 students, which means he has a difficult time even traveling abroad without seeing a familiar face.

“Our kids used to get so frustrated. We couldn’t go anywhere without people coming up and saying ‘Mr. Dickinson,’” he said. “We had two different people come up to us at the airport in London.”

To hear Harry Dickinson, CPA, tell it, his life and career turned on a couple of recommendations and a chance encounter. Those inflection points proved to be a boon for a generation of accounting students and the profession as a whole in Virginia, and they’re what put him on the path that led to his selection as the VSCPA’s Outstanding Member of the Year.

Dickinson, 66, is a retired partner at Bishop, Farmer & Co. (formerly Bowling, Franklin & Co.) in Fredericksburg, where he had worked since 1994 after a lengthy career as an accounting professor at his alma mater, the University of Virginia (U.Va.) and Virginia Commonwealth University (VCU). But he would have gone into public accounting right out of school if he hadn’t run into a mentor at the right moment.

“I was on my way to call a CPA firm and accept a job after graduation,” Dickinson said, “and a professor stopped me and said, ‘Before you make that phone call, come talk to me.’ He talked me into staying at U.Va. an extra year and teaching at the [McIntire School of Commerce].”

Dickinson started out as an economics major and needed a class to fill out his schedule. He chose accounting on the advice that “everybody should take an accounting class,” and it took less than a month for him to switch his major and career path.

But that influence, while massive, is just a small data point when it comes to the impact Dickinson made on the profession. He’s served on the boards of directors for the VSCPA (1991–1994) and the VSCPA Political Action Committee (1994–2001). We barely have the space to list the committees and task forces he’s helped — the Professional Ethics, Strategic Planning, Membership and Insurance committees, the Accounting & Auditing Advisory and Young Professionals task forces, even the editorial task force for the magazine you’re reading right now.

Dickinson’s work with the profession at the regulatory level is even more important. He was appointed to the Virginia Board of Accountancy in 2002, working with Broome again there and helping spearhead the rewrite of the Commonwealth’s accounting regulations and the institution of the ethics CPE requirement.

“That was the time when Enron and HealthSouth and a few audit failures led to some not-so-good publicity for the profession,” he said. “It was a really interesting time to be involved in the Board of Accountancy.

“It was time-consuming, but somebody’s got to do it. I commend everyone who does.”

Time was something that was already in short supply for Dickinson. By that point, he had moved into public accounting at what’s now Bishop Farmer, a 20-person firm with offices in Fredericksburg and Stafford, with all the busy-season pressures that entailed. He has served as founding board member, president

and treasurer for his local community foundation and on the governing board of his church, Trinity Episcopal in Fredericksburg. He’s volunteered for the local Boy Scout committee and served on the advisory board for the Commonwealth Governor’s School in Fredericksburg.

Dickinson’s willingness to help has become something of a running joke among his friends and colleagues.

“I’m a professional volunteer,” he said. “Mike Gracik at Keiter and I took all of our accounting classes together, roomed together for the Exam. I run into him and he puts his finger on my forehead, and says ‘Yep, still flashing. Nice guy, can’t say no.’”

A man who’s given so much of himself and his time to his profession does well to find efficiencies, and Dickinson is no exception. His wife, Doris, is a CPA, a manager at Bishop Farmer and a VSCPA member whom he met at a meeting of the Society’s Blue Ridge Chapter. (Speaking of chapters, it says something about Dickinson’s helpful nature that we still haven’t rattled off all of his professional involvement — he’s an Ethics instructor for the Battlefield Chapter, as well as Bishop Farmer and other CPA firms.)

His daughter, Elizabeth Witt, is also in the profession as a non-CPA accountant for U.Va. His only immediate family member working outside the profession is his son, William, who is currently enrolled at Yale Divinity School.

Dickinson’s influence on the profession is as undeniable as the success of the students he’s taught.

“It’s nice to see former students who became partners in firms or chief financial officers or worked in government. The education process is really, really important.” n

2018–2019 Board of Directors

CHAIR

Richard Groover, CPA Wall, Einhorn & Chernitzer

CHAIR-ELECT

Gary Thomson, CPA

Dixon Hughes Goodman

VICE CHAIRS

Henry Davis III, CPA

Virginia Commonwealth University

Jaime Lynn Dernar, CPA, Paya, Inc.

Anne Hagen, CPA, Masonic Home of Virginia

Krystal McCants, CPA, CST Group, CPAs

VSCPA PRESIDENT & CEO

Stephanie Peters, CAE

BOARD OF DIRECTORS

David Bendahan, CPA, General Dynamics

Melinda Coley, CPA, Anthem, Inc.

Hope Cupit, CPA, SERCAP

George Forsythe, CPA, WellsColeman

Melisa Galasso, CPA, Galasso Learning Solutions

Ali Gunbeyi, CPA, Jones CPA Group

Gabriele Lingenfelter, CPA, Christopher Newport University

Aaron Peters, CPA, Peters & Associates

Stephen Theuer, CPA, Deloitte

Christine Williamson, CPA, CohnReznick

Left to right: Anne Hagen, Stephen Theuer, Henry Davis, Aaron Peters, Jaime Lynn Dernar, Richard Groover, David Bendahan, Gabriele Lingenfelter, Melisa Galasso, Stephanie Peters, George Forsythe, Krystal McCants, Gary Thomson. Not pictured: Melinda Coley, Hope Cupit, Ali Gunbeyi, Christine Williamson.

VSCPA Chair: Richard Groover, CPA

nearly moved across Virginia to continue his education instead of entering the work force.

After being accepted to a master’s program at Virginia Tech, Groover went to an ODU job fair on a whim and wound up speaking with WEC managing shareholder Marty Einhorn, CPA. Researching the firm further, he was struck by the friendliness of the WEC employees he met, and he accepted a position there instead of sticking with his plans to further his education.

Even then, he still didn’t think he would be at the firm as long as he has.

The youth movement atop the VSCPA Board of Directors continues unabated as Richard Groover, CPA, takes over the big chair from predecessor Staci Henshaw, CPA.

Henshaw, who was 46 when she took over, was one of the younger chairs in recent memory, but she’s turning over control of the Board to a full-fledged millennial.

Groover, 33, is long on accomplishments and credentials despite his relative youth. He’s a shareholder at Wall, Einhorn & Chernitzer (WEC) in Norfolk and an adjunct professor of accounting at Old Dominion University’s (ODU) Strome College of Business. And he describes himself as an “old soul” who’s been right at home with his more experienced colleagues in board meetings, including those where the VSCPA2025 strategic framework was discussed and hammered out.

“I feel like I’m in touch with the older membership, but I'm also part of the new generation that's coming up,” he said. “I feel like I have a good finger on the pulse — what they're looking for, what directions we need to move to appeal to them, to be sure we continue to grow as a profession.”

Groover is something of an anomaly among his generation through his relative longevity at WEC. It’s the only place he’s worked since graduating from ODU in 2009, although he very

“I came in with a little bit of that millennial mindset that I’m going to do this, be the best that I can be for my time here, then after six or seven years, move on and find something different,” he said. “Then six or seven years came and I looked around and thought, ‘I really love the people I work with. I really love my clients. I’m having a great time and I’m successful at it.’ So every year stretched further and further, and now I do think it's looking like I’m going to be here for the end of my career.”

One thing Groover loves about working at WEC is the empowerment to affect change, both in the firm and the profession. That willingness to question the status quo made him a great fit for the VSCPA2025 process, which took place over the past two years and resulted in the development of the Society’s new mission, vision and bold strategies.

One of his favorite parts of the VSCPA2025 process was working with a diverse group of his professional colleagues. The 2025 group ranged in age from 26 to 60 and included CPAs from public accounting, corporate finance, government and education, and while the recommendations that came from the process were huge for the VSCPA, the connections between the group members were even more important for Groover.

“Being a part of the strategic planning process helped me build a lot of connections to people at the Society, from the employee perspective and also members at large and members of the board,” he said. “That was a big reason why I accepted the appointment of chair. What a great opportunity for me to

continue to work with these people who are so dedicated and so passionate about making the profession and the VSCPA the best it can be. As long as I can continue to spend time with them, I’m going to stay in a role that lets me do that.”

Groover took a semester off from teaching this spring to indulge his passion for travel, meeting friends for a trip to Italy and the Greek Isles. He cites a trip last year to Machu Picchu in Peru as his single favorite trip — one that knocked an item off his bucket list.

He returned from that trip refreshed and ready to attack the VSCPA’s issues as chair. Fittingly, he’s particularly interested in the “Influence students to become CPAs” strategy from the VSCPA2025 plan, focusing on helping colleges and universities teach students the skills necessary for the profession of the future while helping CPAs maintain their reputation with the public as trusted, knowledgeable business experts.

“The phrase is rife throughout the history — trusted advisor. That’s what we target,” he said. “I don’t think any client we work with would say that all they rely on me for is an audit opinion and that’s all they want to talk about. When I think about all the conversations I have with clients, it’s almost never about the audit. It's about a deeper issue or I’m calling them to say, 'This doesn't make sense. We need to look at this.’Are there money-saving opportunities or efficiencies to be gained?

“We work really hard on the audit, but it’s a compliance function and a service. It’s all the things around it and all the connections you’ve built that are the trusted advisor component.” n

VSCPA Educational Foundation

Chair: Randy Spurrier, CPA

Hawaii or Hampton Roads? The new VSCPA Educational Foundation Board of Directors Chair Randy Spurrier, CPA, had a hard choice to make after leaving the U.S. Air Force.

Spurrier had a job lined up with what was then a Big Eight firm in Honolulu where he had worked during graduate school at the University of Hawaii (UH). While visiting friends in Hampton Roads, he did some research and called around for jobs in the area, where he made a fortuitous connection.

“I thought it would be a good idea to check around and see what the prevailing rate was for junior accountants, since I had no idea after being in the service for five years,” he said. “It just happened that the managing partner at Peat Marwick had been in the Air Force and had been stationed at the same base I had been. They offered me a job with the same pay and since it seemed like a nice area with a lower cost of living than Hawaii, I took the job. Not really a well-thought-out career plan, but sometimes serendipity can be better.”

After spending eight years with Peat Marwick, he went into industry as chief financial officer at local furniture retailer, and then worked as a financial consultant before joining Old Dominion University (ODU) in Norfolk as an accounting lecturer.

Spurrier joined the VSCPA in 1976 and has volunteered extensively for the Foundation and the Tidewater Chapter, where he has served as president and remains on the board. He stays involved at the chapter level to serve the local CPA community, but his work directly with students remains his greatest honor in the profession. Now he hopes to help future students afford their accounting education.

As an ODU professor of accounting, he’s steered many of his students to Foundation scholarships. In addition to his regular classroom duties, Spurrier also serves as a faculty advisor for ODU’s Beta Alpha Psi chapter. It’s his way of paying it forward after being steered into the accounting profession when attending college at UH.

“The positive effect that you can have on the students is why I’m so interested in the Educational Foundation,” he said. “I can also see that if you give the right advice and the right motivation, you can positively affect the students’ lives. I’ve had them come up to me afterwards and say ‘You said this, so that’s what I did.’ I say ‘What?’; because you never know how you touch a student’s life.”

This passion for helping students is why Randy’s main goal for his year in charge is to increase the percentage of VSCPA members who donate to the Foundation, “so we can help more students.” n

Congrats to the VSCPA’s Top 5 Under 35

The Top 5 Under 35 honorees accepted their awards at the VSCPA Leaders’ Summit in May. They are (from left) Carman Faison, CPA, Jonny Rosch, CPA, Brandon Pope, CPA, Tommy Blackburn, CPA, and Kellie Fedkenheuer, CPA.

Want to learn more about these accomplished award winners? Read full profiles of them, plus Member of tthe Year Harry Dickinson, CPA, at vscpa.com/2018LeadersSummit

TOMMY BLACKBURN, CPA, 30

Senior Financial Planner, Verus Financial Partners, Richmond

CARMAN FAISON, CPA, 35

Senior Manager, Mitchell Wiggins, Petersburg

“I think it’s important to see women with children doing things like this, that there’s time for it, that you can balance it.””

ORIGINALLY FROM: Prince George

ALMA MATER: Virginia Tech

CAREER PATH: Tommy interned at Verus Financial Planners in college and worked at PricewaterhouseCoopers out of school before returning to Verus a year later.

SERVICE-ORIENTED: Tommy has volunteered for the VSCPA’s NBC12 Tax Call-In program since 2013 and keeps going back because he enjoys helping callers so much.

ORIGINALLY FROM: Hopewell

ALMA MATER: Longwood University

CAREER FOCUS: Carman is passionate about helping family-owned, closely held businesses. It’s a subject near and dear to her heart after she grew up working in her family’s mattress manufacturing business.

SERVICE-ORIENTED: Carman focuses on student outreach, specifically in presentations to Beta Alpha Psi chapters across the Commonwealth, and CPE presentations — largely on the topic of time management.

“There’s never, ever a question that we’re going to do what’s right for the client, even if it’s counter to our own interests.”

KELLIE FEDKENHEUER, CPA, 31

Audit Manager, Cotton & Co., Alexandria

“Ethics is one of the most important CPE courses that CPAs take every year. We talk about this every year. People look up to the CPA profession. It’s very important that CPAs are acting ethically.”

ORIGINALLY FROM: Virginia Beach

ALMA MATER: James Madison University

CAREER FOCUS: Kellie began working at Cotton & Co. right out of college, where she works on the firm’s litigation support team, serving as a gatekeeper and check on the spending of taxpayer money.

SERVICE-ORIENTED: Kellie is a VSCPA Ambassador at her firm and has served as a MentorMatch mentor and on the Business Valuation, Fraud & Litigation Services Conference planning committee. She also teaches the VSCPA Ethics course.

BRANDON POPE, CPA, 25

Senior Associate, Business & Advisory Services, Keiter, Glen Allen

“I’ve met some of the most influential and overall impactful people in my life through the Society. For that, I’m eternally grateful.”

ORIGINALLY FROM: Roanoke

ALMA MATER: Virginia Tech

CAREER FOCUS: Brandon interned at Norfolk Southern and Deloitte, worked at Deloitte for a year and then began at Keiter.

SERVICE-ORIENTED: Brandon has been a MentorMatch mentor and mentee, and recently took over as chair of the VSCPA’s Young Professionals Advisory Council. He serves on the Richmond Chamber of Commerce’s Helping Young Professionals Engage (HYPE) program and on Virginia Tech’s Accounting and Information Systems Emerging Leaders Board.

JONNY ROSCH, CPA, 34

Audit & Assurance Manager, PBMares, Warrenton

“Having the opportunity to work in my hometown again and serve the local community with the resources and the diversification of services like we have at PBMares has been such a blessing.”

ORIGINALLY FROM: Warrenton

ALMA MATER: Virginia Tech

CAREER FOCUS: Jonny began his career at a national homebuilder before taking a job with a tax attorney and earning his CPA license. He worked in tax at Scheulen, Patchett & Edwards and Thompson Greenspon before moving to PBMares and the opportunity to work in his hometown.

SERVICE-ORIENTED: Jonny is the VSCPA’s Battlefield Chapter secretary and he has served on the VSCPA Young Professionals Advisory Council. He is also the board secretary for Pathway Homes, Inc., a nonprofit in Fairfax that provides housing and clinical services to individuals with mental illness.

news

Congratulations to the VSCPA’s newest Life members

We welcomed 57 new Life members into the fold at the VSCPA Honors & Awards ceremony May 10 at the Omni Hotel Richmond. In VSCPA history, only 637 members have received this honor, bestowed upon members with at least 40 years of consecutive membership. The following members earned Life member status this year:

Douglas Alcorn, CPA, Alexandria

Robert Baldassari, CPA, Fairfax

Gerard Barber, CPA, Crozier

Joanne Barnes, CPA, Arlington

Charles Bartlett Jr., CPA, Richmond

David Bowman, CPA, Chesapeake

James Brackens Jr., CPA, CGMA, Durham, N.C.

Cynthia Braun, CPA, Burgess

Thomas Burdette, CPA, Fairfax

Norman Bush, CPA, Henrico

Clayton Cameron Jr., CPA, Fairfax

Willard H. Catlett Jr., CPA, Midlothian

James Copp, CPA, Glen Allen

Richard Dail, CPA, Virginia Beach

Earle Dendtler, CPA, Richmond

Park Dodd, CPA, CGMA, Richmond

Michael Doran, CPA, Chesterfield

George Eastment III, CPA, CFP, MBA, Chantilly

William Edmonson, CPA, Winchester

Julian Facenda, CPA, Norfolk

Steven Farrar, CPA, Danville

Susie Garner, CPA, Galax

Robert Giles, CPA, CGMA, Staunton

Michael Gracik Jr., CPA, Glen Allen

Larry Greene, CPA, Montross

Thomas Hancher, CPA, Charlottesville

Roger Handy, CPA, PFS, CFP, CGMA, Virginia Beach

Leslie Hart, CPA, CPC, QKA, Virginia Beach

David Hawkins, CPA, Lexington

Paul Kositzka, CPA, Beaufort, S.C.

Walter Kucharski, CPA, CFE, CGMA, Richmond

Pamela Lawson, CPA, Hampton

Timothy Lewis, CPA, Beaumont, Tex.

Mary Ann Lloyd, CPA, Alexandria

Carl Loden, CPA, MST, Glen Allen

Lee Martin Jr., CPA, CGMA, Glen Allen

Donald Mills, CPA, Spotsylvania

Gregory Moore, Norfolk

Clive Morey, CPA, Richmond

Stephen Parham, CPA, Midlothian

James Pfeiffer, CPA, Richmond

Greg Raetz, CPA, Lexington

Charles Rannells, CPA, Harpers Ferry, W.Va.

publicationVSCPA

David Reddy, CPA, Lynchburg

Alan Stein, CPA, MBA, Norfolk

Gerald Sullivan, CPA, PFS, Virginia Beach

J.K. Timmons Jr., CPA, Richmond

J.B. Trent, CPA, Roanoke

James Vermillion Jr., CPA, Winchester

Daniel Vitez, CPA, Virginia Beach

Charles Wade, CPA, CGMA, Goodview

Jane Watkins, CPA, Midlothian

colors4-color process due dateJune

Randolph Shapiro, CPA, CGMA, Falls Church

Augustine Smith, CPA, Roanoke

Timothy Whitlock, CPA, Yorktown

Gilbert Young, CPA, Virginia Beach

Congratulations to Jon-Michael “Jonny” Rosch on being selected as a 2018 “Top Five Under 35” recipient by the VSCPA. Contact us today to experience the PBMares difference.

Jon-Michael Rosch, CPA

VSCPA bylaws proposal approved for member vote

As reported in the March/April issue of Disclosures, on Jan. 22, the VSCPA Board of Directors approved a proposal to amend the VSCPA Bylaws to allow the Society to be more nimble and future-focused to meet the rapidly changing needs of the CPA profession. As part of developing the VSCPA2025 strategic framework, the Board discussed the challenges the VSCPA currently faces with its membership model and the need for more flexibility to ensure long-term viability and relevance.

Members in attendance at the 2018 VSCPA annual meeting May 10 voted to send the proposal to a member vote, which was conducted via email and paper ballots, depending on communication preferences, in June. The final tally finished too late for inclusion in this issue, but we will communicate it electronically as soon as the results are in. Visit vscpa.com/Bylaws for a summary of the changes and the latest news on the member vote.

OPEN VOLUNTEER POSITIONS

Thanks to all the VSCPA members who have already signed up to volunteer! Visit the Volunteer Manager on Connect to see the full list of current opportunities at vscpa.com/volunteer.

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•

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FORWARD CAREER MOMENTUM

Are you ready to take the next step in your career?

Consider the VSCPA Leadership Academy.

WHAT IS IT? A leadership program that kicks off with three days of in-person training on Nov. 12–14, 2018, followed by post-event webinars, an individual coaching session and a final deep dive workshop at the 2019 Leaders’ Summit. You’ll even earn up to 28.5 CPE credits.

WHAT WILL YOU LEARN? How to take charge of your career growth, lead effectively and leverage your personal strengths. At the end of the Leadership Academy, you will have actionable next steps that you can implement and share with your team (and your boss) right away.

WHO IS IT FOR? CPAs under age 35 with an unrevoked CPA license and three or more years of experience.

FIND OUT MORE: vscpa.com/academy

Application deadline is Sept. 25, 2018.

FIND THE CPE TEST ONLINE

Visit vscpa.com/CPE. Choose “On Demand” from the side filters to find the exam and others from previous Disclosures issues.

Congratulations to the following members!

WE MOURN THE LOSS OF...

PROMOTIONS

John Jobe, CPA, a partner at Cherry Bekaert in Richmond, has been promoted to regional audit service line leader for Virginia.

Agili (formerly JoycePayne Partners) in Richmond has named a new leadership team, including President and Chief Operating Officer Cynthia Joyce, CPA, and Financial Planning Team Leader Jamie Malone, CPA.

Joe Pennington, CPA, has been named chief financial officer at Southern National Bancorp in McLean.

Kurt Taves, CPA, has been promoted to chief operating officer at Cherry Bekaert. Taves works out of the firm’s Virginia Beach office.

Cindy Vance, CPA, was promoted to associate professor and received tenure at Shepherd University in Shepherdstown, W.Va.

APPOINTMENTS & AWARDS

Carolyn Dull, CPA, mayor of the city of Staunton, was elected to another four-year term on city council.

Virginia Gov. Ralph Northam named Rick Elofson, CPA, of Newport News, to the Hampton Roads Sanitation District Commission. Elofson is a retired partner at Goodman & Co.

Virginia Secretary of Finance Aubrey Layne, CPA, was named executive of the year by the University of Richmond’s Robins School of Business.

Greg Forman, CPA, of Richmond. A former partner at Mitchell Wiggins, he was a longtime VSCPA volunteer through the NBC 12 Tax Call-In Show and the Speakers Bureau. He served as president of the Estate Planning Council of Richmond, the Private Business Study Group and the Richmond Public Library Board and as a member of the Board of Trustees of the Trust Company of Virginia, in addition to many other volunteer outlets. He was active at Christ Community Church, where he served as treasurer, and graduated from the University of North Carolina-Charlotte.

Michael Lamb, CPA, of Sanford, N.C.

Dennis Mannion, CPA, of Richmond. He had worked as an auditor at Adams, Jenkins & Cheatham in Midlothian.

Bob Reed, CPA, a VSCPA Life member from Falls Church. He was retired from Hogan & Reed, PC, CPAs, in Annandale.

Barry Saunders, CPA, a VSCPA Life member from Richmond. A longtime sole proprietor, he was a two-sport athlete at the University of Richmond, where he was captain of the school’s baseball and basketball teams.

FIRM NEWS

Richmond financial planning firm JoycePayne Partners, celebrating its 25th anniversary, has changed its name to Agili

PBMares in Newport News was honored as a Good Corporate Neighbor by VOLUNTEER Hampton Roads for the firm’s volunteer program, PBMares Cares Day.

We want to hear from you! The VSCPA prints news of members’ awards, appointments and promotions as well as new hire and job change announcements. Email disclosures@vscpa.com if you have exciting news to share.

Carolyn Dull, CPA; Aubrey Layne, CPA; Cindy Vance, CPA

news

Staff news

ANNIVERSARIES

July 7: Marketing Specialist Amanda Arnold, 3 years

July 14: Vice President, Finance & Administration Beth Bickford, CPA, 9 years

July 26: Academic Engagement Director

Molly Wash, CAE, 14 years

Aug. 6: Senior Manager, Innovation & Leadership

Laura Cobb, CAE, 6 years

Aug. 12: Technology Manager Zané Mullins, PMP, 5 years

Aug. 13: Member Services Coordinator Rocio Gibbs, 20 years

PROMOTIONS

Three VSCPA employees received promotions effective May 1: Kate Eacho to event specialist, Richard Gordon to member services & operations director and Tara Pennington to member services & event specialist.

Top row: Amanda Arnold, Beth Bickford, CPA, Laura Cobb, CAE

Middle row: Kate Eacho, Rocio Gibbs, Richard Gordon

Bottom row: Tara Pennington, Zané Mullins, PMP, Molly Wash, CAE

CONGRATS TO THE VSCPA’S NEWEST VIRGINIA CPA LICENSEES

Melissa Burke, CPA, Mechanicsville

Elizabeth Cosgrove, CPA, Washington

Dominic Esteve, CPA, McLean

Ali Farooq, CPA, Manassas

Lara Frith, CPA, Roanoke

Katelyn Gough, CPA, Dillwyn

Jiaxin Guo, CPA, Fairfax

Stephanie Homesly, CPA, Virginia Beach

Thomas Hudak, CPA, Herndon

Evelyn King, CPA, North Beach, Md.

Jinxue Li, CPA, Vienna

Monique Lubick, CPA, Bracey

Winona Morrow-Wasson, CPA, Richmond

Jason Norsen, CPA, Reston

Deric Obeldobel, CPA, Manassas

Alexandra Per, CPA, McLean

Thanh Phuong, CPA, Arlington

Julie Piche, CPA, Fairfax Station

Ali Rana, CPA, Woodbridge

Lindsey Reynolds, CPA, Woodbridge

Shannon Roberts, CPA, Reston

Evan Robertson, CPA, Harrisonburg

Christopher Roth, CPA, Reston

Taylor Schafbuch, CPA, Washington

Jonathan Sheard, CPA, Suffolk

Patrick Smerkers, CPA, Bethesda, Md.

Sheetal Sood, CPA, Annandale

Paul Szczenski, CPA, Herndon

Ricky Timms, CPA, McLean

Brendan Toner, CPA, Reston

Matt Tyler, CPA, McLean

Xi Jue Wang, CPA, Bellevue, Wash.

Shichu Yi, CPA, Greenbelt, Md.

List from March and April. Compiled May 31, 2018.

2018–2019 VSCPA Educational Foundation scholarship recipients

The VSCPA Educational Foundation recently awarded $58,500 in scholarships to 27 of Virginia’s top accounting students. These scholarships wouldn’t exist without the generous support of Foundation donors. Thanks to everyone who donated — you can too at VSCPAFoundation.com/Donate. Congratulations to this year’s recipients:

VSCPA Undergraduate Scholarship ($1,500–$2,000)

Jonathan Anglin, Radford University

Lisa Edwards, James Madison University

Elizabeth Williams, George Mason University Melissa Wright, Longwood University

VSCPA Graduate Scholarship ($2,000)

Benjamin Gardner, Virginia Commonwealth University

Stephanie Mivsek, University of Virginia Zachary Young, James Madison University

VSCPA Minority Scholarship ($1,500–$2,000)

Valentina Forero, University of Virginia

Connor Mawhinney, College of William & Mary Harold Rojas, George Mason University

CST Group Scholarship ($2,750)

Linjiang Han, University of Virginia

Dixon Hughes Goodman Scholarship ($2,250)

Manleen Bajaj, Virginia Commonwealth University Jieyao Chen, George Mason University

H. Burton Bates Jr. Scholarship ($2,000) Ameera Choudhury, University of Virginia

Kearney & Company Scholarship ($2,500)

Genevieve Coan, Virginia Tech Clark Tilson, Virginia Tech

Michael E. Mares Scholarship ($2,000)

Austin Sachs, Eastern Mennonite University

Jessica Zorumski, Christopher Newport University

MJW Scholarship ($2,000)

Sabrina Lingenfelter, University of Virginia Bethany Montrose, Roanoke College

Thomas M. Berry Jr. Scholarship ($2,750) ThuyDung Hoang, University of Virginia Kaitlyn Potter, College of William & Mary

Verus Financial Partners Scholarship ($2,750) Jacob Adams, College of William & Mary

Virginia Tech Doctoral Scholarship ($2,750) Kevin Hale, Virginia Tech

VSCPA Past Presidents/Chair Scholarship ($2,000) Steven Simon, University of Virginia

Wall, Einhorn & Chernitzer Scholarship ($2,500) Matthew Shifflett, James Madison University

Yount, Hyde & Barbour Scholarship ($2,750) Robert Kurtzman, James Madison University

2018–2019 VSCPA EDUCATIONAL FOUNDATION BOARD OF DIRECTORS

CHAIR

Randy Spurrier, CPA

Old Dominion University

CHAIR-ELECT

Heather Flanagan, CPA, KPMG

VICE CHAIRS

Dianne Guensberg, CPA, Grant Thornton

Nick Harrison, CPA, Dixon Hughes Goodman

SECRETARY/TREASURER

Beth Bickford, CPA, VSCPA

AT-LARGE DIRECTORS

O. Whitfield “Whit” Broome, CPA, University of Virginia School of Law

Michael Crichton, CPA, Burdette Smith & Bish

Scott Davis, CPA, Frank & Co.

Brian Deibler, CPA, Malvin, Riggins & Co.

Chris Enright, CPA, sole practitioner

Marshall Handy, CPA, Roger L. Handy, PC

Clare Levison, CPA, Alliant Techsystems

Kevin Matthews, CPA, Beta Solutions CPA

Melanie Randall, CPA, McKinney & Co.

Amanda Seymore, CPA

Garner, Adams & Associates

Neena Shukla, CPA PBMares

John Waters, CPA, Wall, Einhorn & Chernitzer

Elizabeth Workman, CPA Dixon Hughes Goodman

Donna Yenney, CPA, Tredegar Corporation

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DISCLOSURES • JULY/AUGUST 2018 • DISCLOSURES.VSCPA.COM 41 professional

i am the vscpa

Two minutes with Charlie Valadez, CPA

Charlie Valadez, CPA, CITP, CGMA, CISA, CIA, is the chief audit officer for TechnoServe Inc. in Washington, D.C. He chairs the VSCPA Auditing & Accounting Advisory Committee and is the academic accounting and finance chair for undergraduate business and MBA programs at a private university in Washington. He is also a recurring question writer for the CPA and Certified Internal Auditor (CIA) Exams for the American Institute of CPAs and Institute of Internal Auditors, respectively.

I AM PASSIONATE ABOUT… Leading a life of continuous learning and improvement, both professionally and personally. This has prepared me for my mission to help others who are less fortunate in the poorest areas in the world through the implementation of sustainable development.

PEOPLE DON’T KNOW THIS, BUT… I played the lead in our high school musical, HMS Pinafore.

IF I WEREN’T A CPA... I would be a political satire comedian, or a psychologist — to figure out why I want to be a comedian.

MY ADVICE TO FELLOW CPAs IS… To be resilient and adaptive. Don’t worry so much about mistakes or setbacks. Learn from them and soldier through to your next level. The best leaders are those who have developed a strong sense of humility and empathy by overcoming adversity.

I NEVER LEAVE HOME WITHOUT… Forgetting something, especially my phone, wallet or keys. Oh, and now my reading glasses. I forgot about those!

I AM A CPA BECAUSE… Quite frankly, I have no idea. n

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