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Magazine of the

New Jersey Society of Certified Public Accountants

Logistics Accountants Help Get NJ’s Infrastructure Moving Helping Clients Make the Leap to Exporting Building Your Personal Infrastructure CPAs and Employee Expatriation

March • April 2013


March • April 2013

features

Ralph Albert Thomas, CGMA Chief Executive Officer & Executive Director rthomas@njscpa.org

Ellen C. McSherry, CGMA Chief Operating Officer emcsherry@njscpa.org

Don Meyer Director, Communications & Marketing dmeyer@njscpa.org

David Plaskow Managing Editor dplaskow@njscpa.org

Jeanette L. Miller Editorial Assistant jmiller@njscpa.org

Editorial Advisory Board Neil B. Becourtney, CPA Timothy A. Burley, CPA Salvatore A. Collemi, CPA Rebecca B. Fitzhugh, CPA Catherine Z. Horn, CPA Bernard M. Kiely, CPA Marcella LoCastro, CPA Anthony F. Marone, CPA William C. McNamara, CPA Marc D. Mintz, CPA John F. Raspante, CPA Margaret Van Brunt, CPA

The New Jersey Society of Certified Public Accountants 425 Eagle Rock Avenue Roseland, NJ 07068-1723 973-226-4494 njscpa.org #njcpamag Read New Jersey CPA digital at njscpa.org/newjerseycpa.

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Accountants Help Get NJ’s Infrastructure Moving Find out the business intricacies of New Jersey’s infrastructure and the opportunities for accounting professionals. Helping Clients Make the Leap to Exporting Learn how you as a CPA can play a vital role in a client’s decision to enter the export market. Building Your Personal Infrastructure Discover the steps you can take to assess, accumulate, document and deploy your personal and professional assets to advance your career. CPAs and Employee Expatriation Global business is more accessible than ever. See how CPAs can effectively expedite the process for both the employee and the company.

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4 Close Up One-Stop Shopping at the NJSCPA Member Benefits Marketplace 6 News Briefs 20 A&A Buzz AICPA Clarifies U.S. Auditing Standards 22 Best Practices The CPA’s Role in Formulating PTO Policy 23 Financial Planning Commodities in Clients’ Portfolios 24 Forensic File For the Forensic Accountant, Reputation Is Everything 25 Industry Insights Check Under the Hood of Auto Dealership Upgrades 26 Small/Sole Practitioner Is Your Independent Contractor Really Independent?

28 Tax Talk An Overview of New York City Taxes 29 Tech Center A New Way to See Eye-to-Eye 36

Student Outlook Starting Your Career as a FASB Postgraduate Technical Assistant

37 Legislative Views Society Supports Tax Relief for Hurricane Sandy Victims 38

Member Profile She Gets a Kick Out of Accounting

Society Pages CPE Offerings and Events, 30 Member Benefits, 31 Get Involved, 32 NJ State Board of Accountancy Report, 34 Classifieds, 35

New Jersey CPA (ISSN 1534-6692) is published six times per year by the New Jersey Society of Certified Public Accountants, 425 Eagle Rock Avenue-Suite 100, Roseland, NJ 07068. Issue No. 38 Copyright © 2013 New Jersey Society of Certified Public Accountants. Annual membership dues includes $9 for a one-year subscription to New Jersey CPA magazine. Members may not deduct subscription price from dues. Periodicals postage paid at Roseland, NJ, and at additional mailing office. POSTMASTER: Send address changes to New Jersey CPA, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068-1723. The materials and information contained within New Jersey CPA are offered as information only and not as practice, financial, accounting, legal or other professional advice. The opinions expressed herein are those of the authors and not necessarily those of the New Jersey Society of CPAs. Publication of an advertisement in New Jersey CPA does not constitute an endorsement of the product or service by the New Jersey Society of CPAs.


CLOSE

up

One-Stop Shopping at the NJSCPA Member Benefits Marketplace V

isit njscpa.org/marketplace and take advantage of these money-saving New Jersey Society of CPAs member benefit programs:

ADP – Members and clients receive a discount on payroll services; free for firms with a staff of 49 or fewer.

Affinity Federal Credit Union – NJSCPA members, their immediate families and their employees receive credit union benefits.

Air Brook Limousine – Save 10 percent on limousine, car and van services.

Askin, Weber & Reed – Special insurance rates on disability, life, accidental death and dismemberment, hospital indemnity, business overhead and long-term care. Avis – Car rental discounts.

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Becker – Recent graduates receive a $300 discount on CPA Exam review courses.

Brooklyn Nets – Save on select home basketball games.

Buyer’s Edge – Save on cars, travel, furniture, technology, jewelry, real estate services and more.

FedEx – Save up to 29 percent on shipping services.

Integrated Executive Search LLC – Executive placement services for members in industry and clients of members in public practice.

CAMICO/Bollinger Professional Liability – The Society’s preferred provider carrier and agent of accountants’ malpractice insurance.

Morey’s Piers & Beachfront Waterparks – Enjoy great savings at this Wildwood attraction.

Capital One, N.A. – Earn credit card rewards, get a low introductory APR or build credit.

New Jersey Devils – Special discounts on select home hockey games.

CCH – Save 30 percent on 175-plus tax and accounting publications. New Jersey Jets – Discounted tickets for select Jets home football games. CPASuccessionMatch. Com – Online mergers and acquisitions portal.

NJSCPA Education Center – Receive a 10-percent rental discount.

Energy Plus – Save on your residential and business energy bill and earn cash back.

NJSCPA Job Bank – Post jobs and view resumes at discounted prices, and post your resume for free.

Family Trusted Child ID – Prepare your family for an emergency.

Plymouth Rock Assurance – Save 15 percent on car insurance.

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PRCounts, LLC – Save 20 percent on public relations, communications, marketing and branding services.

Roger CPA Review – Save up to $400 on CPA Exam review courses.

Yaeger CPA Review – Save on CPA Exam review courses.

2012/13 Board of Trustees EXECUTIVE COMMITTEE President Thomas F. Roche III, CPA President-Elect Gerard Abbattista, CPA Secretary Brad E. Muniz, CPA Treasurer Walter J. Brasch, CPA Immediate Past President Carole A. Hedinger, CPA CEO & Executive Director Ralph Albert Thomas, CGMA TRUSTEES Jose E. Bombino, CPA Susan Burke-Leichner, CPA William A. Cadmus, CPA Edward I. Guttenplan, CPA Michael W. Gutwetter, CPA Karl A. Halteman, CPA Robert P. Herman, CPA Maryann Holloway, CPA Kenneth Pogrob, CPA Jody Rorick, CPA Mary E. Zago, CPA Joseph A. Zielinski, CPA


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NEWS

briefs

A Noteworthy Conference

There were approximately 100 attendees at the second annual New Jersey Society of CPAs Women’s Conference in Iselin in January. Education sessions included “Negotiation Skills for Women” and “Shattering the Glass Ceiling.” “Female Society attendees really appreciate sharing the unique needs, concerns and experiences of women,” says Pat Marrese, associate director, NJSCPA Education Foundation and Business Development. One highlight was an acknowledgement of the 2012 NJSCPA Women of Note. During the networking session, those winners in attendance received a special certificate highlighting their well-deserved awards. To hear from a few of the NJSCPA Women of Note, visit this video link: njscpa.org/won.

Deadline for NJ CPE Minimum Extended

Due to Hurricane Sandy, the New Jersey State Board of Accountancy has extended the 2012 CPE deadline. New Jersey CPAs now have until March 31, 2013, to complete 2012’s 20-hour CPE minimum.

SEC Approves PCAOB Auditing Standard No. 16

The Securities and Exchange Commission (SEC) has approved the Public Company Accounting Oversight Board’s (PCAOB’s) Auditing Standard No. 16, Communications with Audit Committees, and amendments to other standards. The new standard and related amendments are effective for public company audits of fiscal periods beginning on

or after December 15, 2012. The standard establishes requirements that enhance the relevance and timeliness of the communications between the auditor and the audit committee and is intended to foster constructive dialogue between the two on significant audit and financial statement matters. The standard supersedes the board's interim auditing standards AU Sec. 310, Appointment of the Independent Auditor, and AU Sec. 380, Communication with Audit Committees, and amends other PCAOB standards.

deficiencies in registered public accounting firms' audits of the internal control over financial reporting at public companies. The report, Observations from 2010 Inspections of Domestic Annually Inspected Firms Regarding Deficiencies in Audits of Internal Control Over Financial Reporting, provides information about the nature and frequency of deficiencies in firms’ audits of internal control over financial reporting detected during the 2010 PCAOB inspections of eight domestic registered firms that have been inspected every year since the PCAOB inspection program began. The report is based on inspections that examined portions of approximately 300 such audits. It describes the most pervasive deficiencies identified in those audits and includes information on the potential causes of the deficiencies.

PCAOB Issues Report on Inspection Observations The PCAOB released a report summarizing inspection observations related to

Rutgers/UMDNJ Merger by the Numbers 3,000,000,000

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PCAOB Addresses Maintaining and Applying Audit Skepticism

456,000,000 UMDNJ debt that Rutgers will assume 45,000,000 Cost to combine the two schools 60,000 Total students at both schools

The PCAOB published a Staff Audit Practice Alert to remind

NEW JERSEY CPA • March • April 2013

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auditors of their requirement to exercise professional skepticism throughout their audits. Staff Audit Practice Alert No. 10, Maintaining and Applying Professional Skepticism in Audits, focuses on the importance of professional skepticism, the appropriate application of professional skepticism in audits and certain important considerations for audit firms’ quality control systems. PCAOB standards define professional skepticism as an attitude that includes a questioning mind and a critical assessment of audit evidence, and it is essential to the performance of effective audits under board standards. The board is also continuing to explore whether additional actions might meaningfully enhance auditors' professional skepticism. Visit pcaobus.org to learn more.

FASB Proposal on Accounting for Credit Losses on Financial Assets

The Financial Accounting Standards Board (FASB) issued for public comment its proposal


to improve financial reporting about expected credit losses on loans and other financial assets held by banks, financial institutions and other public and private organizations. Proposed Accounting Standards Update, Financial Instruments – Credit Losses (Subtopic 825-15), proposes a new accounting model intended to require more timely recognition of credit losses, while also providing additional transparency about credit risk. Stakeholders should comment by April 30. Learn more at fasb.org.

NJ State Board to Accept Society CPE Tracker Reports

The New Jersey State Board of Accountancy approved a proposal from the NJSCPA regarding the state board using the Society’s CPE Tracker report for auditing purposes. Use will be for live CPE courses provided by the NJSCPA. Learn more about the NJSCPA

documents. Some categories of applicants are not impacted by these documentation changes, including spouses and dependents of U.S. military personnel who need ITINs and nonresident aliens applying for ITINs for claiming tax treaty benefits. Visit irs.gov for full details.

Tracker program at njscpa.org/ education/cpe-tracker.

IRS Strengthens, Revises ITIN Program

The Internal Revenue Service (IRS) has announced updated procedures to strengthen the Individual Taxpayer Identification Number (ITIN) program requirements. ITIN applications will continue to require original documentation or copies certified by the issuing agency. In addition, the IRS will no longer accept notarized copies of documents for ITINs. A key change is that new ITINs will expire after five years. While original documents or copies certified by the issuing agency are still required for most applicants, there will be more options and flexibility for people applying for an ITIN. These options provide alternatives to mailing in passports and other original

SEC Approves New Rules Regarding Lost Holders of Securities The SEC approved new rules requiring broker-dealers to conduct searches for holders of securities with whom they have lost contact. A similar rule already applied to recordkeeping transfer agents who are the intermediaries between the clearing house and the broker-dealer. The Dodd-Frank Wall Street Reform and Consumer Protection Act tasked the SEC with extending the application of this rule to broker dealers so that

njscpa.org Spotlight

Let’s Get Personalized The New Jersey Society of CPAs recently added a new “My Events” feature to njscpa.org. Located at njscpa.org/ myevents, the section includes a listing of all of the NJSCPA events and meetings you are registered to attend, as well as those you’ve attended in the past year. When you click on an event title for an upcoming event, you’ll have access to: • The event time and location. • Directions to the event. • A list of sessions/options you selected (if applicable). • The number of CPE credits you’ll earn if you attend the event in its entirety.

• Any special notes or instructions. • Downloadable handout materials. An increasing number of NJSCPA events will be offering downloadable handout materials. We encourage you to help us go green. Simply download the handouts to your laptop or tablet and bring the device with you to the event. Once the event has taken place, you can access the handout materials for one year. Once the event roster has been reconciled, you’ll also be able to access your CPE Tracker so that you can retrieve your credit letter.

NEW JERSEY CPA • March • April 2013

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broker-dealers have the same obligation. The new rules also require broker-dealers and other securities market participants to provide notifications to persons who have not processed checks that they have received in connection with their securities holdings. The compliance date will be one year after the date of publication of the release in the Federal Register.

Save the Date for the Annual Accountants Bowl-A-Thon

This industry-wide fundraiser, taking place on May 22, will engage employees, company leaders and industry members to come together for a common cause – empowering NJ youth to own their economic success. Statewide bowling alley locations will be announced soon. For information on how to register, reserve lanes or become a sponsor, contact squick@ja.org.


Accountants Help Get NJ’s Infrastructure Moving From her office high above Port Elizabeth, with its unobstructed view, Josephine Viera, CPA, executive vice president and CFO of Maher Terminals, can see four major New Jersey transportation networks in action: Port Elizabeth, the NJ Turnpike, various railroad lines and Newark Liberty International Airport. Viera has a unique perspective on the importance of an efficiently functioning infrastructure.

By Stephen F. McCarthy, CPA The Presidents Forum

New Jersey residents have their own perspectives of the state’s infrastructure after they experienced two recent events: the release of toxic chemicals from a train that derailed over a swing bridge in Paulsboro that was originally built in 1873, and the far-more-damaging Hurricane Sandy. While the Federal Emergency Management Agency (FEMA) and Governor Chris Christie quickly took the lead responding to the incredible damage from Sandy, the public and private sectors began the enormous task of addressing the local and state needs of rebuilding our infrastructure. These public-private partnerships, often called the P3s and already active at New Jersey universities, bring together public and private sources to leverage the funds needed NEW JERSEY CPA • March • April 2013

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for infrastructure improvement and expansion efforts, essential in these times of budgetary challenges. As Viera points out, we need a well-maintained infrastructure for the efficient movement of goods and services. All pieces of our current infrastructure are mutually dependent on each other. After Hurricane Sandy, the port was closed, refineries were shut down and the barrier islands were blocked for months due to delivery problems of fuel, natural gas, electricity and other basic utilities. Our infrastructure has evolved over the last century to become a vast agglomeration of a publicprivate mishmash that sometimes has integration issues. So, who is ultimately responsible for maintaining and improving this massive infrastructure? The government and its agencies essentially own and are responsible for maintaining the highways, bridges, tunnels, harbors and airports. Land under rail lines and most waste water treatment facilities are also government owned. Much of what is owned may be leased to quasigovernment entities and private companies. Normally, drinking water, electricity and natural gas are provided by investor-owned entities, along with telephone and Internet systems. So, in this complex system with different priorities, how are basic


infrastructure projects evaluated, approved, constructed, funded and monitored? One example is the New Jersey Transportation Trust Fund Authority, an independent agency of New Jersey state government whose stated mission is to finance the cost of “planning, acquisition, engineering, construction, reconstruction, repair, resurfacing and rehabilitation of the state’s transportation system.” Similar to the frequently discussed and proposed national infrastructure banks, a funding source is created and projects are selected based on vigorous selection criteria.

Over time, though, public-private partnerships have assumed an increasingly important role to define essential projects; deal with regulatory requirements; attract capital; and design, build and control costs. This is where accountants can play a pivotal role in New Jersey’s infrastructure spending. “Accountants don’t drive projects, but they help get them right,” says Laurie Mahon, senior expert, infrastructure, McKinsey & Company. She suggests that the presence of sophisticated investors demands sophisticated analysis. In examining

the details of these huge infrastructure projects, Mahon believes that accountants may be the best prepared to value cash flow, confirm returns on investments and reconcile the inevitable trade-offs. Furthermore, accountants generally help bring efficiency to the project. With the ever-changing regulatory environment, accountants and policy makers need to work together to study these trade-offs closely and help identify opportunities and hazards, while providing a framework that can be used to make better decisions in infrastructure spending.

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Since all of these projects require large amounts of capital, accountants play a very active role. Large international accounting firms already have successful practice groups dedicated to these capital projects, encompassing planning, analysis, fund structuring, execution, governance, and regulatory and compliance activities. But there is a role for smaller firms, especially with local government projects and the private sector. Viera notes that the Port Authority owns the port and is responsible for infrastructure improvements, such as dredging and raising the height of the Bayonne Bridge. However, it leases the land to terminal operators. These operators, like Maher Terminals, invest substantial capital in equipment, such as cranes and container moving equipment, all to increase productivity for moving cargo. From her vantage point, Viera can also see her competitors, reminding her of the importance of costs. She believes accountants need a mixture

of problem solving, critical thinking and a thorough understanding of costs both on the front end and in ongoing operations. At Maher Terminals, Viera has financial accountants preparing monthly financial statements, as well as a team of management accountants working closely with operations to help develop key performance indicators to manage its business at Port Elizabeth. Even though no costs are purely fixed or purely variable, the big cost drivers for Maher are container moves. This operation requires a need for in-depth analysis to determine return on invested capital for equipment. Viera reiterates that while industryspecific knowledge is helpful, a thorough understanding of factors that influence revenue and costs is essential. And since risk management and financing are important functions for CFOs in industries or agencies with large capital expenditures, experience in these areas is vital. Mahon projects that accountants will play an essential role in infrastructure

spending over the next five years, working with government agencies and the private sector. There is already an outcry at many levels to minimize waste and spend money more efficiently and effectively. Governor Christie appointed Marc Ferzan, most recently with PricewaterhouseCoopers, to oversee the state’s rebuilding from Hurricane Sandy and also hired the project management firm, Witt Associates, to take a lead role in identifying critical needs and ensure that FEMA funds produce the greatest returns. Clearly, proper fiscal management and capital investment oversight in aging infrastructure systems and disasterrelated repairs are necessary. Fortunately, accountants’ unique skill sets will result in a wealth of opportunities in both the private and public sectors. Stephen F. McCarthy, CPA, is a lecturer at Kean University and the principal of The Presidents Forum. He is a member of the New Jersey Society of CPAs. Contact him at stepmcca@kean.edu or 732-977-7233.

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GET CONNECTED

It’s easy to connect with members of the NJSCPA. ANDROID

Download our new mobile app to link to and talk with members, view Society events and read the latest professional news.

Learn more at njscpa.org/mobile NEW JERSEY CPA • March • April 2013

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IPHONE, IPAD, IPOD TOUCH


Helping Clients Make the Leap to Exporting There are many important reasons for a business to export, among those are increasing and diversifying sales, expanding markets, spreading risk, taking on foreign competition on their turf, ensuring global adaptability of products and services, and extending product life cycles by entering less-developed markets.

By Timothy A. Burley, CPA WeiserMazars LLP

Today’s technologies allow a company of virtually any size to export products or services to all corners of the globe. This is particularly the case regarding business-to-consumer retail sales, which may or may not involve more complexity than domestic sales. To be successful exporters, many companies must develop new skills and resources. As a trusted business advisor, it falls on you to help clients assess their preparedness and identify some of those resources needed to develop an effective and efficient export strategy.

Export Readiness Assessment First, help the client make an assessment of its product/service and organization in terms of export readiness. The client may already have some success exporting products or services. Even so, it will still want to undergo some kind of assessment to understand that success and how to potentially increase it. Start by asking the client some basic questions: NEW JERSEY CPA • March • April 2013

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• What drives your success in the markets you serve? • Do similar demands exist in different foreign markets? • What are the unique features of your product/service offering? • What differentiates your offering from competitors in target markets? • Where is your product life cycle in each of your target markets? • Will you have to and can you modify your product/service to make it fit for foreign markets? For example, can you change electric cords to fit foreign outlets or substitute ingredients to conform to foreign regulations and tastes? Have your client assess the cost of making its product or service exportready. Once the client is familiar with the possible costs of these changes, it will then have an idea of what sales level will need to be reached to justify any changes. Organizing for export and assessing organizational readiness are driven by the added complexity of dealing with new jurisdictions, trade regulations and taxation. Talk to your client about designating someone who is capable to handle export sales. This leads to the development of specialized skills needed for export. For example, the client may need to learn about shipping documents, servicing and/or training those associated with the product, payment terms, freight costs and a host of other details. What is the resource commitment your client is ready to


make to support export sales, and how will it organize these resources? Will it use employees, agents, outside service providers? The answers probably involve a combination of these, but it is important to help the client recognize what it will take and then develop a plan that best aligns its resources. The client will then want to do some market research to better understand the market segments that have the highest potential for sales and return on export resources. The client needs a clear definition of the markets to serve by geography (countries/regions), customer (commercial/government/ private/component/resale/end user), and distribution channels (wholesale/retail/ own sales force/commissioned agents/ representatives). Your client also needs to do some competitor analysis to understand what it is up against and what differentiates the company in the marketplace. The client may have already developed some export business organically. It’s okay to go with momentum, but some basic market research can pay big dividends. These websites can help you get started with your client: • export.gov/cs • buyusa.gov • strategis.ic.gc.ca • exportcompass.com • distributormatch.com

Develop a Marketing Plan Take some time to work with your client to develop a strategic marketing plan. Some of the key areas you will want to consider include product/service pricing and payment terms – trade finance and banking service providers will be key here; sales generation and promotional programs, including advertising, trade shows, and technical and training seminars; and logistics and distribution. Will your client use its own employees or dependent/ independent agents? Freight forwarders and common carriers will be able to provide the insight and expertise needed to understand and manage elements, such as documentation requirements and import/export regulations. This link provides a comprehensive sample export

plan: http://export.gov/exportbasics/ eg_main_017456.asp. A well-thoughtout and documented plan enhances your client’s likelihood of success and provides a useful map to keep it on track.

A Helping Hand A word about incentives and support for export businesses. Federal tax law has certain incentives that enable U.S. companies to compete in the global market. The Interest Charge Domestic International Sales Corporation (IC/ DISC), a creature of U.S. tax law, allows an exporting company to pay a taxdeductible commission to an IC/DISC, a related domestic entity. The IC/DISC does not pay tax on the commission income and distributes its income as a qualified dividend to shareholders who are taxed at capital gains rates. If your client is ready to establish a presence in a foreign jurisdiction, it is possible to defer or avoid certain U.S. federal and state income taxes with proper transaction and legal entity structuring. The planning is complex and requires NEW JERSEY CPA • March • April 2013

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U.S. and foreign jurisdiction tax expertise. Both the U.S. and state governments provide support services, including U.S. Commercial Service (trade.gov/cs), which is a branch of the U.S. Department of Commerce. In New Jersey, support can be found at export.gov/newjersey and districtexportcouncil.com. Going from being a domestic product/ service provider to an exporter can not only take your client’s company to the next level, in today’s increasingly global economy it can prevent it from being left behind. As a CPA, your role is severalfold as it encompasses awareness, understanding, resourcefulness, economic efficiencies and strategic planning. Timothy A. Burley, CPA, is a partner at WeiserMazars LLP. He is a member of the New Jersey Society of CPAs and the Editorial Advisory Board of New Jersey CPA magazine. Contact him at timothy.burley@weisermazars.com or 212-375-6508.


Building Your Personal Infrastructure

To enjoy a rewarding career, today’s professional has to create and sustain a personal infrastructure that incorporates a collection of assets that keeps him/her current, relevant, informed and connected – particularly in an era of rapid technological innovation, globalization and economic uncertainty. Having a personal infrastructure is far more than keeping an updated résumé in your desk drawer. It’s how the sum of your career parts fit into the whole, what you are doing to enhance your personal and professional assets in the short- and long-terms, and how you deploy those assets when needed.

By Angela S. Calzone Change & Response Strategies, LLC

Creating Your Personal Infrastructure When examining the totality of what makes a professional successful, it’s generally a combination of formal education, experience, the ability to manage and leverage relationships, technological aptitude and a lifelong commitment to self-improvement. To create a personal infrastructure, begin by developing a strategic plan that defines your goals, strengths versus weaknesses, what the market needs from you today and what you anticipate tomorrow’s needs will be.

Education Beyond an undergraduate education, NEW JERSEY CPA • March • April 2013

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examine the potential impact of a graduate degree on your career. While there’s a significant investment of both time and money in pursuing an M.B.A., M.S.T, J.D. or Ph.D., the long-term gains may outweigh initial sacrifices. Such gains may include career opportunities that might otherwise be inaccessible without a graduate degree, the ability to teach at the university level, an entrée to public speaking or having your work published. Speak to others within your profession who have earned graduate degrees, and weigh the gains they’ve realized as a result. Take note of what schools they’ve attended, disciplines and degrees they pursued and why, and how robust their alumni activity is for networking and career advancement assistance. Many CPAs also pursue careerenhancing designations such as Certified Financial Planner or Accredited in Business Valuation. Designations such as these offer you the potential to expand your client base by being able to work in a niche requiring specific expertise and training. Before deciding which designation may be right for you, reflect on what you have an interest in, speak to professionals who already have the designation and find out how ripe the area is for advancement today and in the future.

Experience You should really think about your next job the day you start your


current job. An up-to-date copy of a résumé is not a sufficient summary of work experience, except when applying for a new position. Once you’ve secured your first position, think about planning for your career path. Consider those professional options that best match your goals, personality, abilities and interests. Supplement your career aspirations with volunteering. Volunteering often provides ample experience that leverages your abilities and interests, typically is more accessible and can often lead to future full-time employment. As you gain experience, keep a journal or portfolio of your key

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accomplishments, professional wins, case studies, achievements, recognitions, awards, work samples and recommendations. These assets can be used not only as a platform from which you can speak to your successes, but as you gather the elements of your portfolio, you’ll more likely be compelled to request challenging, nontraditional assignments to gain exposure and experience and add to your body of work.

Relationships

well-informed. Sustained relationships also offer a sanity check and support system when needed. Despite how technology has reshaped the ways we can manage relationships, in-person networking is still a highly effective method of cultivating and sustaining strong relationships. Attending industry events, grabbing lunch with consultants or enjoying a round of golf with vendors can be invaluable. Catching up with colleagues can segue into introductions or opportunities to be a keynote speaker, write articles or blog, teach a college course or become a member of a committee or board.

Whether you’re networking face-toface or staying in touch electronically via LinkedIn, managing relationships today means more than doing Technology business. It’s essential to stay You must be able to navigate and connected with other professionals in maintain a positive presence in the order to share ideas and best practices. digital environments relevant to Relationship management also affords your work and related relationships. you the opportunity to stay abreast Consider a technology self-assessment of what’s current in your industry, and determine what technology specialty and region. Remaining in training you may need; online the know keeps you relevant and technology training no longer requires 17224 Online MAcc NJSCPA v3_Layout 1 1/30/13 5:56 PM Page 1

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Lawrenceville, NJ NEW JERSEY CPA • March • April 2013

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you to go to a classroom, you can learn from the comfort of your living room. There are several online assessments you can take to gauge technological aptitude and determine what training you’ll need to close your skills gap and bring your ability to the next level. Continue to examine which devices, such as tablets, smartphones and VPN systems for remote access, will allow you to work and communicate more efficiently and effectively. Identify your remote priorities so that once you’ve invested in a device or access method, you don’t outgrow its usefulness too quickly. Even the smallest details can have a big impact. Make sure your LinkedIn profile has a current, professional headshot. Be proactive and ask for recommendations and endorsements from those with whom you’ve worked closely and productively. Technology can greatly assist your personal infrastructure development. You should have one venue to document education, experience, contacts, recommendations and awards, work samples, selfassessments and more. You should equate a personal infrastructure to your investment portfolio. You probably have different investments; use various professional(s) for assistance; coordinate with other providers, such as insurance agents and attorneys; and you periodically review and update your portfolio. Why not take the same approach with your career? Remember, your professional development extends far beyond you; it has a ripple effect on coworkers, clients, allied members of your profession and ultimately your friends and family. Chances are, they are all building their personal infrastructures. So, don’t get left on the side of the road! Angela S. Calzone is comanaging member of Change & Response Strategies, LLC, a management consulting, customized training and outsource support services firm. Contact her at acalzone@changeandresponse.com.


#njscpa13

2013 NJSCPA CONVENTION & EXPO June 12-14, 2013

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Bally’s

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Registration Open njscpa.org/convention

What’s Next? Ideas and strategies for navigating the uncertain business landscape.

What’s Next?

06.13.13

ALL-ACCESS ROCKFEST Featuring artists from

BOSTON FOREIGNER THE DOOBIE BROTHERS JOAN JETT AND THE BLACKHEARTS

NEW JERSEY CPA • March • April 2013

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CPAs and

Employee Expatriation Along with exporting goods and services, expatriating employees is a key element of success in developing a business abroad, and CPAs can help clients of all sizes handle such transactions. Whether it is to enhance a presence in foreign markets by moving employees knowledgeable about products, services and business culture abroad, or for the development of a workforce by exposing them to doing business in other parts of the world, companies can drive significant value by having a mobile workforce.

By Anne-Mélaine Daly-Schveitzer WeiserMazars LLP

A typical expatriate package is composed of salary, monetary benefits and nonmonetary incentives. Frequently, an expatriate package is structured with two main elements: nonrecurring benefits, such as an expatriate bonus paid in a lump sum or over a period of time, visa and moving expenses; and recurring incentives which will be paid throughout the term of expatriation, such as home and education allowances, housing and cost of living allowances, health insurance premiums, retirement contributions, tax equalization and professional fees for accounting/attorney services required in connection with the foreign NEW JERSEY CPA • March • April 2013

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assignment. While each expatriate assignment is unique and may require certain unique elements, it is important to start with this framework as you work through the details of an expatriate package.

Tax Law In evaluating expatriation tax implications, the first issue is to determine the employee’s country of residence. This requires knowledge of the local tax rules of both the origin country and destination country, as well as a command of the international tax treaties between the two countries. The U.S. has signed 68 income tax treaties for avoiding double taxation and preventing tax evasion. Even though most of these treaties are based on the Organization for Economic Cooperation and Development model, each treaty has its own specific provisions and needs to be thoroughly understood and applied. Once the country of residency is established, the local tax rules determine whether or not each element of the expatriate package is taxable for local individual income tax purposes. Even at this stage, it’s important to ensure that there is no double taxation. Indeed, one of the two countries at stake could consider that all or part of the expatriate package is taxable even if the employee is a nonresident. To avoid double taxation, the tax treaty, if any, prevails over the local tax rules to determine which country


is entitled to tax the various elements of income earned by an expatriate. The U.S. expatriate will then avoid double taxation by taking a credit for taxes paid in the foreign jurisdiction. The question becomes whether or not the employer will equalize the tax discrepancy between the two countries, (i.e., determining if the expatriate package will include a gross tax equalization adjustment is an essential part of the package). The objective of tax equalization is to compensate or eliminate any additional tax burden or benefit that arises due to the elements of compensation and taxation introduced by the expatriate assignment, (e.g., allowance paid while on assignment, tax rate differentials). Preparation of U.S. and local country tax returns and equalization calculations are services CPAs can provide to these clients. Beyond tax considerations, there are a number of other issues to consider. Expatriation tax aspects are too often disassociated from legal issues which could, to a great extent, affect the tax situation for both the company and the expatriate.

Labor Law Expatriation is often mistakenly used to describe several different legal situations: secondment, expatriation or transfer. Generally, a secondment implies that the employment contract signed between the former employer and the employee remains. The employee is sent abroad by the former employer, in general, for a temporary period of time – from a few days to several years. In most cases, expatriation involves the situation where the employment contract is only suspended and a new employment contract is signed between the employee and the foreign entity. Lastly, a transfer applies when there is a total breach of the employment contract between the former employer and the employee, and a new employment contract is signed between the employee and the foreign entity. Depending on the factual circumstances of the move, the

employee’s country of residency could be different (e.g., an employee seconded could remain a resident of his/her former country while permanently living in a foreign country). The type of visa granted to the employee is also an obvious element in determining the employee’s country of residence.

the local plan. Few income tax treaties contain provisions about the tax treatment of retirement contributions made in the former country and allow the employee to benefit from deductions based on the payment of a foreign pension plan if certain conditions are met.

Social Security

Dealing with expatriate issues involves having a good overview of both the company goals and employee’s expectations. The CPA professional must demonstrate his/her ability to provide advice in a more complex international context involving foreign jurisdiction tax law and international tax treaties. Beyond the payroll and individual income tax questions, sending employees to a foreign country could raise corporate tax issues, such as transfer pricing and permanent establishment for the business enterprise.

The legal framework could also have an impact on the employee’s Social Security contribution requirements. The U.S. has signed 24 Social Security agreements. Usually, Social Security agreement provisions exempt seconded employees from participating in the local security system, as they are normally not on the foreign entity payroll. However, an expatriate or transferred employee may have to be registered on the local payroll and, thus, must pay local Social Security. Expatriate packages frequently include health insurance in the country of origin. Those premiums cannot, in principle, replace local Social Security contribution requirements which remain due. Tax treatment of these premiums needs to be addressed to determine if they are deemed fringe benefits under local tax rules.

Retirement Retirement plans are also a relevant issue and it begs the question of whether the employee should continue to contribute to his/her former retirement plan or to NEW JERSEY CPA • March • April 2013

19

Anne-Mélaine Daly-Schveitzer is a senior manager for international tax at WeiserMazars LLP. Contact her at annemelaine.dalyschveitzer@weisermazars.com.

Member Benefit International Taxation: To and from the United States Thursday, April 25, Roseland Visit njscpa.org/catalog Express Code: E1209383


A&A

buzz

AICPA Clarifies U.S. Auditing Standards B y Salvatore A. Collemi , C PA, Rothstein K ass

applied in the current period’s financial statements, and changes in accounting policies have been properly accounted for and adequately presented and disclosed in accordance with the applicable financial reporting framework. Auditors have to obtain evidence about opening balances. Some of this evidence may come from reviewing the predecessor auditor’s workpapers. The auditor has to obtain direct evidence, which might come from testing the opening balances or by other means. Auditors may want to perform a rollback of current year-end balances to the opening balances and perform analytics for reasonableness to identify significant anomalies that may require further testing.

Group Audits

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uch attention has been given in the last few years to the convergence of U.S. accounting standards with International Financial Reporting Standards (IFRS). However, there has been a silent insurgence taking place within our profession due to the need to converge U.S. auditing standards with its international counterpart. The auditing convergence movement has created changes ranging from simple formatting to substantive requirements that are applicable to all audits of annual financial statements for periods ending on or after December 15, 2012 (calendar year-end 2012) of privately held entities.

The Clarity Project With Statements on Auditing Standards (SASs) Nos. 122-126 (Super SASs), the American Institute of CPAs Auditing Standards Board completed its massive overhaul – Clarity Project – to redraft and recodify U.S. generally

accepted auditing standards (GAAS) to make them easier to understand and implement. One project objective was to align GAAS with International Standards on Auditing (ISAs) as issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The Super SASs are principles-based. Some changes, however, will be significant from existing standards and require auditors to carefully perform engagements this season. Significant revisions due to the Clarity Project are as follows:

Testing of Opening Balances The Super SASs require auditors to obtain sufficient appropriate audit evidence about whether opening balances contain misstatements that materially affect the current period’s financial statements, accounting policies reflected in the opening balances have been consistently NEW JERSEY CPA • March • April 2013

20

The Super SASs change the focus in audits that involve the work of another auditor from the coverage by each auditor to the extent of the involvement of the engagement partnerin-charge of the entire group. The auditor’s scope has been significantly expanded and is far broader than dealing with classic consolidation scenarios. Group audit guidance applies whenever there are significant components that are aggregated into a single set of financial statements and not the presence of more than one auditor or engagement team. A component is an entity/business activity for which management prepares financial information that must be consolidated, combined or aggregated from a separate financial reporting system into the group financial statements. Components can be subsidiaries, geographic locales, divisions, investments, products/ services, functions or processes.


They can be a single set of financial statements with varied business lines, equity investees, joint ventures and variable interest entities. The group’s structure and financial information flow used by management help the group auditor define components. The group audit requirements of the Super SASs address: • Client acceptance and continuance. • Group engagement team’s process to assess risk. • Calculation of materiality for group financial statements and components. • Test significant components and account balances. • Communications between the group engagement team and component auditors. • Assessing adequacy and appropriateness of audit evidence by the group engagement team.

Auditor’s Report The Super SASs introduce a new format and content into the auditor’s report. The most pervasive changes are a description of management’s responsibility in more detail than what is currently required, as well as the auditor’s responsibility to obtain sufficient and appropriate evidence to provide a basis for issuing an opinion. Headings are used throughout the auditor’s report to clearly distinguish each section. Auditors can now reference in the report that the audit was also conducted in accordance with ISA, since GAAS has been substantially converged.

auditors and management of privately held entities to work together and coordinate their efforts to ensure a smooth and effective 2012 annual audit engagement. Salvatore A. Collemi, CPA, is a quality control senior manager at Rothstein Kass. He is a member of the New Jersey Society of CPAs and the Editorial Advisory Board of New Jersey CPA magazine. Contact him at scollemi@rkco.com or 973-577-2266.

Member Benefit International Versus U.S. Accounting: What in the World Is the Difference? Thursday, March 28, Roseland Visit njscpa.org/catalog Express Code: E1303133

The aforementioned only highlights the most significant changes and is not a complete listing. It will be critical in the inaugural year for both

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BEST

practices

The CPA’s Role in Formulating PTO Policy By James Celentano, Extensis Group

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s a CPA, you probably don’t want to be out of the office the day the firm’s vacation policy is written. While vacation policies seem like something human resource directors and employment attorneys should write, your understanding of the financial impacts are essential to the process. Various features of paid time off (PTO) policies have direct financial implications in how the liability of PTO is carried on the company’s books: • Is the PTO time a grant or an accrual? • At year end, is unused time lost or carried over to the next year? • Is there a cap set on the amount of time an employee can accrue? • Does the policy allow for unpaid days after an employee exhausts his/her PTO, or is the company stuck paying exempt employees in full-week increments? • If your New Jersey company also has employees in other states, are there requirements in those states that impact your financials, such as requirements to pay out the full unused PTO balances?

that PTO is used in the year it is accrued, then it is also common to allow employees to use anticipated earned PTO time in advance of its accrual. This ensures that employees will actually get to use the time that is being offered.

Requesting PTO While the PTO bank is not specific about how employees use their time off, the requirements of requesting time off can be different for planned versus unplanned absences. For example, employees may be required to request planned PTO at least two weeks in advance. The policy might allow for a same-day request for unplanned PTO and provide a definition for allowable unplanned PTO, such as illness or injury of employee or immediate family member. If the policy is straightforward and clearly outlined, employees will appreciate this freedom.

Planning the Details of the Policy It is important to consider other details that might intersect with your new PTO policy: • Types of absences covered. • Number of days per employee, based on job level, seniority or another factors. • Whether to maintain other time off policies, like bereavement or jury duty. • Stating whether PTO days are “use it or lose it,” or if unused PTO will carry over into the next year and, if so, whether it is capped. • Payment for unused PTO if the employee leaves the company. • How the program will be administered and coordinated with payroll.

Policy Types Unlike traditional vacation or sick time policies, a PTO policy is a bank of time that employees may be able to draw from for a number of reasons, including vacation, taking care of a sick child, going to a doctor’s appointment or simply a “mental health” day off from work. For example, instead of offering an employee two weeks of vacation, two personal days and eight sick leave days, for a total of 20 possible days in a traditional vacation policy, the employer might offer 18 days total in a PTO policy. Instead of these days being itemized by the employer for a specific purpose, the employee uses the days at his/her discretion. The employer reduces the overall liability it carries in total number of potential days off, and the employees enjoy greater trust and flexibility in how they choose to use their PTO days.

Grant Versus Accrual

PTO is a viable option that should be considered, as it works well for many companies and can be a beneficial alternative to traditional vacation and sick days. The most effective policies are drafted by a cross-functional team that includes human resources, employment counsel and a CPA.

There are two ways to distribute PTO days. Some employers credit the full annual number of days to the employee’s account on January 1. Others prefer the days to accrue throughout the year and deposit days each pay period. Obviously, this results in a different accounting treatment, with the accrual generally being advantageous to the company. If a company uses the accrual method and requires

James Celentano is the human resources vice president for the Extensis Group, a professional employer organization that provides clients outsourced human resource and risk management services, payroll and tax administration, insurance, benefits and regulatory compliance. Contact him at 888-473-6398.

NEW JERSEY CPA • March • April 2013

22


FINANCIAL

planning

Commodities in Clients’ Portfolios B y K enneth B . S hapiro, C PA, Shapiro F inancial S ecu rity G rou p, I nc .

Direct trading of these contracts requires specialized investment knowledge. For investors who lack this knowledge, firms do exist that can offer a managed futures account to acquire commodity contracts for speculation purposes. High investment minimums, suitability issues and traditional heavy use of margin previously restricted access and availability to these accounts.

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commodity is often defined as a tangible resource used to create other products for consumer or industrial use that may also possess investment benefits. As we meet with our clients during this tax season, we, as financial professionals entrusted with guiding them to financial security, should take a few minutes to address the potential risks and rewards of having commodities in their investment portfolios. These commodities, or raw materials that can be bought or sold on regulated exchanges, are often packaged into risky and volatile investment products that are used by Wall Street as it seeks to find another means of profiting at the expense of investors. Commodity-linked investments are also highly sensitive to sudden changes in weather and geopolitical events. But, these investments have usually been found to have a low or negative correlation with more traditional long-term investments and can be a good hedge against inflation. When prudently used, commodities can stabilize the investment returns of a diversified portfolio.

Investment Alternatives Starting with a Rydex Fund created in 2007, managed futures investments have been launched with increasing frequency and lower investment minimums, but the lack of transparency regarding fees, structural investment restrictions and weak performances raised questions about their appropriateness in a client’s portfolio. One can buy the physical commodity outright, but most investors do not want the related responsibilities and costs to store, feed or maintain. While some clients may find it easier to purchase shares of stock in select companies like Nestlé (cocoa), BHP Billiton (mining) or Weyerhaeuser (timber), the investment vehicle of choice for the average investor has become commodity-indexed mutual funds or exchange traded funds (ETFs). Some precious metals ETFs will take actual possession of the commodity on behalf of the investor, but most of the indexed investments use derivatives to serve as a proxy for the price movement of the underlying targeted diversified basket or single commodity. The most widely referenced indices are the Standard & Poor’s GSCI Index that tracks the relative price performance of 24 commodities, currently placing a heavier emphasis on energy-related holdings; and the Reuter Jefferies CRB Index that tracks the performance of 19 equally weighted commodities.

Types The physical commodity is not one specific product, but rather a diverse selection of natural resources or agricultural units that add even more complexity or confusion to investment decisions. A partial list of commodity subcategories includes: • Agriculture – lumber, corn, soybeans, wheat, coffee, cotton, sugar. • Energy – oil, natural gas. • Industrial Metals – copper, aluminum, zinc, nickel. • Livestock – cattle, hogs. • Precious Metals – gold, silver, platinum.

The new commodity-related investment choices available, when used in moderation and as part of an overall plan, can and should be part of a client’s portfolio. The choices should be researched to find those targeted to improve the overall risk-adjusted return of a diversified portfolio. Depending on the investor’s risk tolerance, an allocation to commodities ranging from 2 to 10 percent of a portfolio could be reasonable and prudent, with higher percentages considered for more aggressive portfolios.

Evolution of the Buying and Selling Process Commodities were originally sold to buyers at the spot price for cash on the day the seller brought the product to market. However, this price fluctuated regularly due to multiple factors, making it difficult for buyers and sellers to plan for the cost or proceeds of a pending transaction. Over time, commodity futures contracts were developed to better address these uncertainties, and organized exchanges were then created to facilitate the buying and selling of the contracts without the parties having to deal directly with each other or take actual delivery of the products.

Kenneth B. Shapiro, CPA, PFS, CFP, is the president of Shapiro Financial Security Group, Inc. He is a member of the New Jersey Society of CPAs Investment Committee, Financial Literacy Interest Group and chairs the Monmouth/ Ocean Chapter’s Personal Financial Planning Committee. Contact him at kshapiro@shapirofsg.com or 732-739-8991.

NEW JERSEY CPA • March • April 2013

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Forensic

file

For the Forensic Accountant, Reputation Is Everything B y K eith S . B alla, CPA, Fazio, M ann uzza, Roche , Tankel, L a P il u sa , L L C

F

orensic accounting opportunities are opening every day in family law, valuations, fraud prevention and detection, economic damage claims, financial statement misrepresentation, bankruptcy and reorganization, and computer forensics. But practitioners should proceed with caution. Forensic accountants should expect every case to wind up in litigation and go to trial. Prior to accepting any engagement, the professional should be certain to have the proper skills, training and expertise, as well as the time to perform the work and render the report. There should also be a client evaluation to make certain that his/her information will be submitted timely and the fees can be paid. There should never be a compromise in the extent of time needed and the fees to complete the service. The forensic accounting expert has two major hurdles to clear in rendering client services. First, he/ she must be accepted by the court. To do so, the practitioner should possess the training, education, professional certifications, knowledge, skill, expertise and experience. Second, the expert report must be prepared based upon tested and accepted methods, theory and techniques and contain sufficient relevant data to form an opinion and derive a conclusion. The report will be used to assist the judge or jury in the case. Consequently, the acceptance by the court as an expert and the rendering of the appropriate report are keys to credibility and reliability. To withstand a challenge and avoid being discredited, the expert is expected to be a member in good standing in his respective profession and the résumé should be complete and accurate. There is an opportunity for the opposition to discredit the expert when the

expert presents puffed or misleading information about background, history or experience. The expert should hold a valid license to practice in the state and have evidence satisfying all of the continuing education requirements. If the expert was sanctioned by a regulatory board, a simple and concise explanation should be disclosed to the client prior to accepting the engagement. The opposition will likely perform a detailed background check on the expert. If the background check reveals questionable or contradictory information, a strong challenge should be expected. The opposition will frequently obtain copies of prior reports issued by the expert to ascertain if the opinion in the current case conflicts with conclusions in prior cases. Attorneys will review statements and articles issued by the expert in media sources to establish inconsistency to discredit the expert. Preparedness and truthfulness are the keys to sustaining cross-examination and scrutiny. Key factors for the admissibility of the expert’s report and testimony are: • Whether the theory and techniques have been or can be tested. • Whether the theory and techniques have been peer reviewed or published. • The acceptability of the methods utilized by the professional community. • The known or potential error rate of the methods. • Existence of the theory before the litigation began. By using accepted theories and techniques that are tested and peer reviewed in the professional community, the expert will bolster credibility and the report positions. The expert is an expert as to the facts of the case and NEW JERSEY CPA • March • April 2013

24

not a client advocate. Maintaining a professional demeanor and composure at all times during depositions and at trial is critical to giving successful testimony. Opposing attorneys may try to discredit and destroy the expert’s selfconfidence. Explaining the methodology, facts and conclusions in simple terms with visual aids serves to relax the expert. A relaxed expert demonstrates to the judge and jury a level of confidence and competency. However, the expert must guard against overreliance on an attorney and allowing the attorney to mold conclusions. Your reputation is your most important asset. Do not accept a case which you are not equipped to handle. You never get a second chance to make a first impression. And, like most professions, the legal profession is a small community; lawyers talk, and bad reputations can make engagements dry up quickly. Keith S. Balla, CPA, CFF, PSA, FCPA, is a principal at Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC. He is a member of the New Jersey Society of CPAs. Contact him at kballa@fmrtl.com.


INDUSTRY

insights

Check Under the Hood of Auto Dealership Upgrades B y Elliot J. DeS anto, C PA, T he M ironov Gro u p, L L C

M

any automobile dealerships these days are replacing or upgrading their current facilities. Some of the renovations are initiated by the dealer, but most are due to strong support or forceful persuasion that includes automobile manufacturer payments. While some dealers feel they don’t have a choice about upgrading, it’s important for them to understand the tax implications and potential return on investment (ROI) when considering a dealership facelift. Has the dealership recently undergone a cost segregation study and modified its depreciation lives and methods? Has it addressed whether Internal Revenue Code (IRC) Section 118 might be available to exclude some payments from ordinary income? Various and often-complex factors must be considered.

Manufacturer Programs There are several manufacturersponsored facility enhancement programs, including Toyota’s Image II, Mercedes Benz’s Autohaus, Nissan’s NREDI, Infiniti’s NREDI, GM’s Essential Brands Element and Kia’s Gallery program, to name a few. Some manufacturers are encouraging dealers to develop exclusive showrooms, while others support combining brands into one dealership location. Although manufacturers pay a portion of the specified expenditures, the total cost of facility renovations can be significant. Manufacturers’ programs have their own uniqueness, and some even incorporate exclusivity agreements. However, programs have several common characteristics: • The auto manufacturer sets the facility appearance and construction standards. • The manufacturer requires upgrade

completion by a specified date or percentage of completion over specified intervals. • Manufacturer payments are based on meeting standards defined by the program requirements. • Payment amounts are based upon the number of new vehicles purchased or sold by the dealership. • Participation is not mandatory, though negative repercussions or adverse consequences are a concern. • Payments may be based on cumulative performance.

IRC Sections 179 and 168 When contemplating a dealership upgrade, determine depreciation deductions based on IRC Sections 179 and 168. Sec. 179 benefits can vary depending upon what tax year the asset is placed in service. Clearly, having up-to-date information from your tax professional is imperative.

C2R Regulations and IRC Section 118 Capitalization to repair (C2R) regulations also have significant implications. There are many factual considerations in determining whether the facility expenditure should be capitalized to the cost of the asset or deducted as a repair expense. The tax courts have adopted methodologies to distinguish deductible repairs and nondeductible capital improvements utilizing added value, prolonged life, new or different use, and putting the property in a better operating condition versus keeping it in efficient operating condition. Manufacturer payments not treated as taxable income may come under Internal Revenue Service scrutiny. Certain cases to treat the funds as NEW JERSEY CPA • March • April 2013

25

capital contribution and/or basis reduction exist. Interestingly, the majority of new entities formed today are LLCs and, as such, cannot benefit from Section 118. Treating the monies as taxable income, either currently or deferred, must be carefully documented.

ROI Since the dealership’s financial outlay in a facility upgrade can be substantial, it is important to estimate ROI, but this can be difficult to quantify due to many variables. Once the renovations are completed, will more consumers likely purchase a vehicle from the dealer? Will they pay more for a vehicle at the updated dealership facility? Are there increased sales and wider profit margins? It’s not likely. Consumers were asked in a recent study, “What matters most to you when selecting a new vehicle and a dealer?” The dealership’s facility mattered least in the consumer’s buying process. It’s puzzling that many dealers are upgrading their facilities, even when it might not improve their top or bottom lines. Ultimately, if a dealer upgrades, it’s essential to understand the uniqueness of the manufacturer’s program. A good working knowledge of it is imperative, along with a thorough understanding of current tax laws and regulations and how they relate to the program. Since there is no one-size-fits-all answer for every auto dealership, it’s always best to “check under the hood” and seek guidance from experienced CPAs with in-depth auto industry knowledge. Elliot J. DeSanto, CPA, is a partner at The Mironov Group, LLC. He is a member of the New Jersey Society of CPAs. Contact him at edesanto@ mironovgroup.com or 732-572-3900.


Small/Sole

practitioner

Is Your Independent Contractor Really Independent? B y F rank J. Centrella , C PA, Gramkow, C arnevale , S eifert & C ompany, L L C

• Pay their own business expenses. • Receive a flat fee that is not based on an hourly or similar rate. • Are not prohibited from doing work for other companies. • Can pay subcontractors to do the job. • Are not performing services as an integral part of a regular business. • Have a contract with an enforceable liquidated damages provision. • Can make a profit or suffer a loss.

C

onsultants often desire contractor status so they can create generous retirement vehicles, deduct expenses and avoid withholding of income taxes. Employers also desire this treatment to avoid their share of federal and state employment taxes, workers’ compensation and other benefits. In 1978, Congress passed Section 530, which precluded the Internal Revenue Service (IRS) from reclassifying certain contractors as employees. This Section 530 relief does not apply to “skilled workers” hired to provide technical services. The IRS later issued Revenue Ruling 87-41, which sets forth a 20-factor test to determine employee or independent contractor status. It is not a bright-line test. There is no definite number of factors that determine the contractor’s employee status. Rather, this test should

be considered when evaluating an employer’s right to direct and control the contractor. Clients who use independent contractors should review the key factors that IRS agents use to determine whether a worker is really a contractor. Agent inquiries generally fall into three categories: (1) Who has financial control of the job? (2) Who can exercise control over how the worker performs the specific task? (3) How do the parties view the relationship? When reviewing the checklist, as noted in Revenue Ruling 87-41 and as stated above, the IRS will make its decision based on the whole picture, not any single factor. Generally, workers are more likely to be classified as independent contractors if they: • Make a significant investment in business property. NEW JERSEY CPA • March • April 2013

26

Workers are more likely to be classified as employees if they: • Are given specific instructions and ongoing training. • Cannot work for others. • Have expenses paid by the company. • Are paid with a salary or hourly wage. • Do not have a significant investment in their trade or business. • Are an integral part of a regular business. • Receive direct reimbursement for all or most expenses. Less important factors are whether the: • Work is performed on the business’ premises. • Worker has flexibility in setting hours. • Relationship is temporary or shortterm. • Work is full- or part-time. • Worker performs services for one or more businesses. In September 2011, the IRS issued a new voluntary classification service program (VCSP) that provides partial relief from retroactive employment tax assessments for eligible taxpayers who agree to treat their workers as employees in the future. To qualify for the VCSP, the taxpayer must have


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treated the workers in question as nonemployees and filed 1099 forms in at least three prior years. Taxpayers admitted into this program agree to pay a portion of the employment tax liability that might have been due on the compensation paid to the workers reclassified as employees. Participants who qualify will not be assessed interest or penalties. New Jersey has its own standards when testing for independent contractor status. It is possible to be a contractor for federal tax purposes and an employee for NJ tax purposes. To be a contractor for state purposes, the worker needs to satisfy a three-part test: (1) The individual has been free from control and direction; (2) The services are outside the usual course of business; and (3) The individual is engaged in an independent trade and performs this work for others. Businesses should review their contractor relationships to protect themselves from exposure. Each contractor should have a written consulting agreement that includes the nature of the work, terms and conditions of the arrangement, and contractor responsibilities. Periodic invoicing is also critical in such arrangements. Certain industry practices may offer safe harbor where the contractor treatment is consistent as a recognized practice within the industry. Alternatively, taxpayers can file Form SS-8 with the IRS and it will determine the employment status.

The PMAc program is designed for accounting professionals who wish to earn a Master of Accountancy degree without disrupting their full-time career. The PMAc curriculum develops participants’ critical thinking, communication, and analytical skills while meeting the 150-hour requirement for the CPA examination. Information Session Dates: Thursday, March 21 6:30-8:00 PM Tuesday, April 23 6:30-8:00 PM Location: The Enterprise Center at Burlington County College (BCC) 3331 Route 38 Mt. Laurel, NJ 08054 To Register: Visit pmac.rutgers.edu/infosessions or call 856-225-2700

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Frank J. Centrella, CPA, M.S.T., is a tax director with Gramkow, Carnevale, Seifert & Company, LLC. He is a member of the New Jersey Society of CPAs. Contact him at fcentrella@ gcs-cpa.com or 201-599-0008.

NEW JERSEY CPA • March • April 2013

27


TAX

talk

An Overview of New York City Taxes By Jo Anna M. Fellon, Friedman LLP

N

ew York City is the 24th largest city in the U.S., based on square mileage, but with a population of more than eight million people it would rank as the 12th largest state – right behind New Jersey. Not surprisingly, the tax laws and regulations are as complicated as any state and wind intricately through the city’s commerce. Advanced planning is often necessary to understand and appropriately apply tax obligations imposed upon city taxpayers. These liabilities are commonly derived from, but not limited to, the general corporation tax, unincorporated business tax and commercial rent tax.

fiduciaries, associations, estates or trusts. Both active businesses and businesses in the process of liquidation are subject to this tax. Additionally, individuals who carry on two or more unincorporated businesses are viewed as a single entity when calculating the UBT. Individuals who actively purchase, hold or sell property for their own account are not considered to be conducting business in the city and are, therefore, exempt from the UBT. In addition, individuals who perform services as an employee as well as landlords residing within a two-family rental property are also not subject to the UBT. Furthermore, associations and publicly traded partnerships treated as corporations for federal income tax purposes are subject to New York City’s GCT, not the UBT. New York City residents and pass-through entities that make UBT payments are allowed to claim a credit on their respective income tax returns. The credit, though limited, can be applied in the year the payments are made. Part-year resident taxpayers are also eligible, but only for a partial credit.

General Corporation Tax Domestic and foreign corporations conducting business activities in New York City are subject to an 8.85-percent general corporation tax (GCT) under certain criteria. This tax is levied on corporations that employ capital, own or lease property, or maintain an office within the city’s five boroughs. In addition, the city does not currently recognize federal or New York State S corporation elections. Therefore, all S corporations are subject to the GCT. Consequently, publicly traded partnerships taxed federally as corporations are also viewed as corporations by New York City and subject to the tax. While GCT exemptions are rare, they do exist. For instance, relief from the tax can be obtained if a corporation remained dormant throughout a taxable year. New York City defines a dormant corporation as one otherwise subject to the GCT that at no time during the taxable period was engaged in any activity or held title to real property located within the city. New York City’s GCT is calculated using four different methods: entire net income base, total capital base, alternative tax base and minimum tax base. The method producing the largest tax liability is applied, and the tax calculated is imposed. It is common for the method to vary from year to year.

Commercial Rent Tax All tenants who occupy or use a specific location to carry on a trade, business, profession or commercial activity within the borough of Manhattan (south of the center line of 96th Street) and have annual or annualized gross rent of at least $250,000 are subject to the commercial rent tax (CRT). Tenants with short rental periods, residential subtenants, theatrical production tenants and tenants with not-for-profit status are all exempt from the CRT. Taxpayers often overlook the CRT because the tax is not paid by the landlord receiving the rent, but by the tenant paying the rent. Likewise, the tax is calculated at a 6-percent statutory rate, using gross rent paid by the tenant not net rental income received by the landlord. Subtenants are excluded from paying the CRT on rent paid or due during the period on the same premises.

Unincorporated Business Tax Every individual or unincorporated entity that is carrying on a trade, business, profession or occupation in New York City is charged a 4-percent tax on income sourced to the city. Unincorporated businesses that are subject to the unincorporated business tax (UBT) include trades, professions and certain occupations of an individual (e.g., sole proprietors), partnerships, limited liability companies,

Jo Anna M. Fellon is a tax manager at Friedman LLP. Contact her at jfellon@friedmanllp.com.

NEW JERSEY CPA • March • April 2013

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TECH

center

A New Way to See Eye-to-Eye B y A nthony Mongelu zo, Pro C ompu ter Service

R

emember the science-fiction television shows years ago where spaceship captains would talk to alien commanders through a screen? It was a technology that we only dreamed of at the time. Then, 10 years or so ago, video conferencing arrived on the scene. It was a technology reserved for large companies with large data connections, thousands of dollars in equipment and a small army of information technology professionals. Today, however, video conferencing with someone a town away or halfway around the world is available to any small business that has a basic Internet connection, a computer and a webcam. For that matter, some devices even allow you to video conference from your telephone or tablet. Perhaps best of all, many software applications let you do it all for free. Here are a few of the more popular video conference products currently in use:

conference with multiple users on almost any device, regardless of the operating system. Your capabilities really only depend on the device you are using. If you have an iPad without a camera, for instance, you’re restricted to voice capabilities. Skype can also replace your phone service by allowing you to make voice over Internet (VoIP) calls. You can pay a monthly subscription or an as-you-go fee. You can even purchase a VoIP phone to make calls without your computer (skype.com/intl/en-us/features).

FaceTime FaceTime is a video conferencing application for the Mac, iPhone, iPad (if it has a camera) and iPod Touch. FaceTime is free and a solid choice for video conferencing. However, you and your video counterpart need to both be Mac users, which can be limiting (apple.com/ios/facetime).

A Few Words of Caution

OoVoo

As much as I like to dispense technology advice to clients, I also give them this piece of tested wisdom: When you have a deal that’s of the utmost importance, where millions of dollars might be hanging in the balance, leave the video screen and have an in-person meeting. You want to assess the handshake and see all of the body language, as well as avoid the glitches that any technology is capable of. When you’re on a video conference, especially if it’s free, doing so on a wireless or shared Internet video leaves you open to someone observing and hearing the conversation. Also consider that every video conference is immortalized. You don’t know who's taping the video conference or audio portion, something I believe is happening more often. If you should never tell a reporter anything you wouldn’t want to read in the newspaper the next day, the same holds true for video conferences.

OoVoo is a lesser-known application that offers a lot of power – at no cost. It lets you video conference with up to 12 people, as well as send instant messages, video messages and voicemail. So, for that belt-and-suspenders approach, you can leave someone a video mail and a voicemail. OoVoo also touts high-definition video that will impress your tech-savvy clients (oovoo.com).

Video conferencing is a great tool for quickly and costeffectively bringing people together from disparate locations. But remember, you can’t hug your mom via a video conference. So when some physical connection and emotion matter – and it matters in business more than most people want to accept – make an effort to get together in person.

Google+ Hangouts Google+ Hangouts is a free, easy-to-use Google application that lets you video conference on a computer or a smart phone – as long as your smart phone has a camera and offers the Google+ mobile app. You can conference up to 10 people at a time. One of Hangouts’ really useful tools is that you can also share news links, YouTube videos and other web links while talking. This allows for a more effective presentation with visuals. To use the application, you must be part of Google+, which is Google’s social network (google.com/+/learnmore/ hangouts).

Skype

Anthony Mongeluzo is president of Pro Computer Service. Contact him at 877-596-4446 or anthony@helpmepcs.com, or visit procomputerservice.com.

Skype lets you do many things. You can video conference or make voice calls with other Skype users. You can also video

NEW JERSEY CPA • March • April 2013

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SOCIETY

pages

CPE Offerings and Events Upcoming Education Foundation Events Date

Event/Code

Location

CPE Credit

3/18-19

IFRS Essentials with GAAP Comparison: Building a Solid Foundation (E1303073)

Roseland

16/AA

3/20

Cooperation with Bankers Breakfast (E1303020)

Iselin

1/TBD

3/22

Internal Control Essentials for Financial Managers, Accountants and Auditors (E1303083)

Iselin

8/AA

3/25

Advanced Controller and CFO Skills (E1303093)

Iselin

8/MT

3/26

AICPA's Controllership: 25 Critical Lessons from the Trenches (E1303103)

Iselin

8/AA

3/26

Bank Financing and Financial Statement Analysis (E1303033)

Roseland

8/MT

3/27

Financial Statement and Cash-Flow Forecasting and Modeling (E1303043)

Roseland

8/MT

3/27

FASB Review for Industry: Targeting Recent GAAP Issues (E1303123)

Roseland

8/AA

3/28

International Versus U.S. Accounting: What in the World Is the Difference? (E1303133)

Roseland

8/AA

3/28

Valuation, Acquisitions, Capital Projects and Leveraged Buyouts (E1303053)

Roseland

8/MT

4/16

Auditing for Internal Fraud (E1304093)

Roseland

8/AA

4/17

Financial Fraud, Forensics and the CPA/New Jersey Law and Ethics (2012-14) (E1304103)

Roseland

4/AA, 4/PE

4/18

Mastering the Applications of Budgeting While Side-Stepping the Pitfalls (E1304113)

Roseland

8/MT

4/19

Financial Forecasting and Management Decisions (E1304123)

Roseland

8/MT

4/24

Introduction to Multi-State Income and Sales and Use Taxes (E1304133)

Roseland

8/TX

4/24

New Jersey Law and Ethics Webinar (E1304154)

N/A

4/PE

4/25

International Taxation: To and from the United States (E1304143)

Roseland

8/TX

4/25

Scholarship Awards Ceremony (E1304165)

Iselin

N/A

5/7

Cooperation with Bankers Breakfast (E1305240)

Iselin

1/TBD

5/15-16

2013 New Jersey Accounting, Business and Technology Show (E1305230)

Secaucus

12/MC

Upcoming Chapter Events Date

Chapter

Event/Code

Location

CPE Credit

4/18

Passaic County

Wills, Trusts, Gifts and Generational-Skipping Transfers (E1304089)

Paterson

2/TX

4/23

Mercer

CFO/Controllership Update (E1304039)

West Windsor

4/CS

4/24

Morris/Sussex

New Jersey Law and Ethics (E1304079)

Mount Olive

4/PE

4/24

Atlantic/Cape May

Accounting and Auditing Update (E1304019)

Somers Point

2/AA

4/24

Middlesex/Somerset

Social Security, Medicare and Pension Optimization Considerations (E1304059)

Somerset

4/CS

4/25

Hudson

QuickBooks (E1304069)

Jersey City

2/CS

4/26

Southwest Jersey

Health Care Act and Fiduciary Responsibility in Retirement Plans (E1304029)

Berlin

4/TX

4/26

Essex

Information Technology Audit and Compliance (E1304049)

East Hanover

4/AA

5/1

Middlesex/Somerset

Estate Planning – What's New and What Now (E1305149)

Somerset

2/CS

5/2

Bergen

Professional Development (E1305049)

Paramus

4/PD

5/3

Southwest Jersey

New Jersey Law and Ethics (E1305019)

Voorhees

4/PE

5/7

Bergen

Accounting and Auditing (E1305059)

Paramus

4/AA

5/9

Middlesex/Somerset

New Jersey Tax Update (E1305159)

Somerset

2/TX

5/9

Passaic County

State Tax, Cross-Border Issues/Planning (E1305229)

Paterson

2/TX

NEW JERSEY CPA • March • April 2013

30


Date

Chapter

Event/Code

Location

CPE Credit

5/9

Monmouth/Ocean

Personal Financial Planning (E1305199)

Neptune

3/CS

5/10

Hudson

New Jersey Law and Ethics (E1305079)

Secaucus

4/PE

5/10

Essex

New Jersey Law and Ethics (E1305089)

East Hanover

4/PE

5/14

Middlesex/Somerset

Employee Benefit Plans (Internal Control Issues and A&A Updates) (E1305169)

Somerset

4/AA

5/15

Southwest Jersey

Accounting and Auditing Update (E1305039)

Berlin

4/AA

5/15

Atlantic/Cape May

Financial Planning (E1305029)

Northfield

2/CS

5/16

Monmouth/Ocean

Lease Accounting (E1305209)

Neptune

2/AA

5/16

Bergen

Awards Night (E1305069)

Ramsey

1/PD

5/17

Mercer

Accounting and Auditing Update (E1305099)

West Windsor

8/AA

5/17

Essex

Pension Update (E1305109)

East Hanover

4/CS

5/18

Hudson

Semiannual Tax and Accounting Seminar (E1305179)

Secaucus

4/TX, 4/AA

KEY AA – Accounting & Auditing MT – Management

CS – Consulting Services PD – Personal Development SK – Specialized Knowledge

EC – Economics PE – Professional Ethics TX – Taxation

MC – Multiple Categories PM – Practice Management

njscpa.org/catalog

Commitment to 100% Member Champion Status Reaps Rewards The 100% Member Champion status is yours if all of your firm’s New Jersey-based CPAs are members of the New Jersey Society of CPAs. Stand out and experience the rewards listed below by making this commitment and becoming a 100% Member Champion. CPA Candidate Coaching – The NJSCPA facilitates in-person instruction with your firm’s CPA candidates to help them navigate the CPA Exam application. Education Center Rental Discount – 100% Member Champion firms receive a 20-percent discount on an NJSCPA education center rental in Roseland. For details, visit njscpa.org/rental. Media Opportunities – 100% Member Champion firms are the NJSCPA’s primary resource for press interviews and editorial opportunities. Personal Service – 100% Member Champion firms have a key contact at the Society to call or email with questions or concerns. Professional Development – Each CPA staff member can receive two free CPE credits when the firm hosts the Society’s free business

communications, social media or professional issues seminars. Recognition – 100% Member Champion firm names are listed on the Society’s website and at NJSCPA events throughout the year. They also receive a certificate for display and electronic and print-ready versions of the 100% Member Champion icon for their websites and firm publications. Recruitment Resources – NJSCPA membership materials are available for your firm’s recruitment and new-hire packets. Tax-Time Treats – 100% Member Champion firms receive treats to keep staff members’ energy levels up during tax time. To see a current listing of 100% Member Champion firms, visit njscpa.org/100percent. Become a 100% Member Champion firm today by contacting Susan Dyer at 973-226-4494 x266 or sdyer@ njscpa.org.

NEW JERSEY CPA • March • April 2013

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SOCIETY

pages

Get Involved Financial Literacy Committee Offers Stability By Jean I. Abbott, CPA, Richard Stockton College of New Jersey The New Jersey Society of CPAs and the NJSCPA Financial Literacy Committee are educating consumers about making smart financial decisions in support of both individual security and societal stability. According to the Federal Reserve Bulletin, “Market operations and competitive forces are compromised when consumers do not have the skills to manage their finances effectively. Informed participants help create a more competitive, more efficient market.” The Society is trying to do its part to educate Garden State residents. NJSCPA volunteers hold seminars for women, students and seniors; the Society’s consumer website, moneymattersnj.com, provides a wealth of information, including articles, podcasts and webinars. The Monmouth/Ocean Chapter’s Financial Literacy Committee, cochaired by Adriano DePina Jr., CPA, and Kenneth B. Shapiro, CPA, established relationships with local libraries and the Senior Citizen’s Activity Network (SCAN), a local senior citizen service. Over the past year, the committee has conducted 20 programs, including seminars on financial basics for women, teaching children about money and tax-time preparation. The Bergen Chapter’s Financial Literacy Committee, chaired by Hope Player, CPA, provides basic financial literacy education to the community. Presentations include “How to Start a Conversation with Your Teen About Finances,” “Seniors Scams and Identity Theft” and “The Fiscal Cliff and Planning in 2013.” The committee is also working with Habitat for Humanity to offer training to new homeowners. Experienced presenters team up with novice members to show them the ropes, so that they don’t have to know all the answers. As committee chair, I presented to a group

of SCAN members and was asked about annuities – a topic about which I know little. Luckily, Adriano and Ken were with me and answered the question. Adriano sees the committee as a great way to be involved with the NJSCPA, “The ultimate satisfaction I find is when attendees tell me they will put at least one thing they learned into practice.” For more information about the NJSCPA Financial Literacy Committee, visit njscpa. org/getinvolved or email me at abbott@ stockton.edu.

PDF – A CPA’s Preferred Delivery File By Danielle Dvorak, Traphagen Financial Group Just as Google went from being a noun to a verb, portable document format (PDF) has reached the same vernacular. “Can you PDF that for me?” is regularly heard as businesses transition to a paperless environment. PDFs have become one of the most useful and trusted tools for accountants and professionals alike. Any document, form, graphic or webpage can be converted to a PDF, which can include clickable links, buttons, form fields, video, audio and electronic signatures. Here are some of the PDF’s most helpful features: Combining Multiple PDFs – In order to combine numerous PDFs into one PDF file, select multiple files in a folder using either Shift or Ctrl. You won’t need to convert them all to a PDF first; the combining process includes conversion. Right click and choose “Combine Supported Files in Acrobat.” A dialog box will appear and allow you to change the order of the documents and add or remove any files. You can adjust the file size so it is easier to send through email. Keep in mind that this will lower the quality of graphics within the file. You can merge the files into one document with continuous pages or into a portfolio where each PDF is separate. Once all options are selected, click “Combine Files” and save the new NEW JERSEY CPA • March • April 2013

32

consolidated PDF. Your originals remain intact. Searching a PDF – A forensic accounting firm contacted our firm with a need to analyze more than 2,000 documents in PDF form. Here’s how. By using the find feature (edit, find or Ctrl+F), you can search for specific text; however, this will not work with a scanned document. Since Acrobat views scanned documents as an image, optical character recognition (OCR) must be activated. From the menu, click “Document,” then “OCR Text Recognition” followed by “Recognize Text Using OCR.” Select the page(s) on which you want to perform the OCR recognition. You can also perform OCR on more than one file at a time. Depending on the number of pages or documents, this can take some time to complete, but the results will be worth it. For example, a 16-page loan document took approximately 30 seconds. If the quality of scanned documents is poor, Adobe may not be able to identify renderable text and the “Recognize Text Feature” will fail. While most people will use the find feature, the search tool offers more options, including finding object data and image XIF (extended image file format) metadata. The search tool also features a sidebar that will show how many instances your phrase or word is used and its context. To search for text, click “Edit” and then select “Search” or Ctrl+Shift+F and enter the text you’re looking for. Creating Comments and Markups – From the menu bar, select “Tools” followed by “Comments and Markups,” which is where you will find features enabling you to add sticky notes, highlight, underline and add text boxes, to name a few. The comment and markup features are great for client workpapers, particularly in the audit field. Creating Watermarks – To include a watermark, such as “draft” or “confidential” on each page, click “Document>Watermark>Add.” This will enable you to have any word or phrase underneath the page content. I suggest


Administered by

reducing the opacity from 100 percent to 25 percent so that the contents of the PDF remain legible. Danielle Dvorak, CPA Candidate, Traphagen Financial Group, was selected as an NJSCPA “30 Under 30.” She is a speaker for Scholars Institute, Pay It Forward and the CPA Exam study sessions. Contact her at danielle@tfgllc.com.

Get Involved Now Volunteer opportunities are available throughout the year. Let us know how you’d like to be involved at njscpa.org/getinvolved. Here is an activity that needs your support now. Scholars Institute 2013 – Scholars Institute provides high-achieving accounting and finance students with interactive programming that helps them identify their career goals and supplies essential tools to reach them. Members are needed to be speakers and firm representatives who can explain accounting specialty areas and more. Contact Janice Amatucci at jamatucci@ njscpa.org or 973-226-4494 x209.

Working together with some of the most trusted names in insurance, Askin, Weber & Reed has been providing quality insurance programs to the New Jersey Society of CPAs (NJSCPA) and its members for more than 60 years. NJSCPA members and their families are able to easily and conveniently access a large variety of insurance coverages at special group rates.

From helping protect your family and assets, to helping protect your business, we have a solution that’s right for you, including these group products:

• Accidental Death & Dismemberment Insurance

• Business Overhead Expense Insurance

• Disability Income Insurance

• Hospital Indemnity Insurance

• Term Life Insurance

To customize a plan to meet your needs, call us toll-free at 1-973-783-7505, or connect with us online at www.awrins.com. Magazine of the

New Jersey Society of Certified Public Accountants

May • June 2013

May/June Coming Attractions

Technology

Underwritten by:

The United States Life Insurance Company in the City of New York New York, NY

American General Assurance Company Schaumburg, IL

n To Excel or Not to Excel

The underwriting risks, financial and contractual obligations and support functions associated with products issued by American General Assurance Company (AGAC) and The United States Life Insurance Company in the City of New York (USL) are each company’s responsibility.

n Managing Scanned Documents

Plans may vary or may not be available in all states.

n Windows 8 n Search Engine Optimization

NEW JERSEY CPA • March • April 2013

33

AG9538 (09/12)


SOCIETY

pages

NJ State Board of Accountancy Report Board to Accept Society CPE Tracker Reports

Committees

CPE – The committee reviewed a proposal from New Jersey Society of CPAs CEO & Executive Director Ralph Albert Thomas, CGMA, about the state board using the Society’s CPE Tracker report for auditing purposes. The board voted to accept the use of this report. Use will be for live CPE courses provided by the NJSCPA.

RMA – The Registered Municipal Accountants Exam was held on December 7. Of the 18 people who took the test, one had passed. Statutes/Rules/Regulations – The proposed changes are still working their way through the regulatory process. There was also a discussion regarding certain instances where a licensee passes away and the related safeguards in protecting the public. The board is obtaining similar information from other state boards.

Public

NJSCPA President Thomas F. Roche III, CPA, thanked the board for its approved use of the Society’s CPE Tracker program. He also mentioned the NJSCPA Scholarship awards presentation on April 25 and the 2013 NJSCPA Convention & Expo June 12-14.

GR WTH It’s what CGMA stands for. Officially, of course, it’s Chartered Global Management Accountant. A new designation representing accomplished professionals that drive and deliver business success, worldwide. Find out more at cgma.org

CGMA_HalfPage_ADS.indd 1

NEW JERSEY CPA • March • April 2013

34

Copyright © 2012 American Institute of CPAs. All rights reserved.

Newark (January 17)

1/30/12 11:16 AM


CLASSIFIEDS Mergers/Acquisitions

Pro Bono

Mergers and acquisitions are not the only paths to financial security and less aggravation. Our structured client transfer program is an ideal solution for practitioners to lighten their loads without an obligation to merge or sell their firms. We represent highly motivated CPA firms looking to recalibrate their practices by pursuing mutually beneficial transfer arrangements where individual clients are acquired on specific terms set by you. Contact ira@optimumstrategies.com for details.

Gallery Aferro – a young, growing nonprofit community arts organization in Newark, NJ – seeks an auditor. Contact Emma Wilcox at ewilcox@aferro.org or 646-220-3772.

Want to sell or merge your accounting practice? Accounting Practice Sales has qualified buyers waiting and financing available to sell your practice quickly and get you the best deal possible. For information regarding our risk-free and confidential services, call Bradley Holmes at 800-397-0249. Buyers see listings and register for free email notifications at accountingpracticesales.com.

Peer Review Do you need a practical system or engagement reviewer? Obtain a free quotation at bbertscha@yahoo.com. Audits – Does your client need an audit, but you don’t provide audit services? You do the tax work, and I'll do the financials; contact bbertscha@ yahoo.com.

Goldstein Lieberman & Company LLC, one of the region's fastest growing CPA firms, wants to expand its practice and is seeking merger/acquisition opportunities in northern NJ and the entire Hudson Valley region, including Westchester. We are looking for firms ranging in size from $300,000 to $5,000,000. To confidentially discuss how our firms may benefit from one another, please contact Phillip Goldstein, CPA, at philg@glcpas.com or 800-839-5767. The Curchin Group, LLC, a central NJ, Monmouth County firm is seeking to merge-in near-retirement sole practitioners and small firms needing succession planning. Other individuals seeking growth and expansion are welcome to inquire. Initial practice continuation also an option. Reply in confidence to Peter Pfister, CPA, at 732-747-0500 or ppfister@curchin.com. New Jersey – CPA firm wishes to acquire or merge with progressive, small to mid-sized firms. File 0701

Professional Services Financial statements – If your client needs an audit, review or compilation and you don't do them, we can. You still do the taxes and other work for your client. Free estimate: diane@slcpa.net.

Real Estate Summit – Monthly office space available within prestigious building. Spacious cubicles at $500/month. Price includes kitchen, conference room, copier/scanner and use of receptionist services. Call Pam: 908-273-6500 x6016. Real estate appraising – Tax assessment appeals, eminent domain (condemnation), unique properties; consulting; business valuations. Contact Charles A. McCullough, CPA, M.B.A., State Certified General Real Estate Appraiser, American Society of Appraisers member: cmccullough@camcpavalue.com, renwickandassociates.com, 856-779-7050, 609-923-5879.

Classified Advertising Replies to ads with file numbers should be sent to: File________________________ New Jersey CPA Classifieds 425 Eagle Rock Avenue, Suite 100 Roseland, NJ 07068-1723 To see additional classified listings or to place an ad, visit njscpa.org/ classifieds. NEW JERSEY CPA • March • April 2013

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ENTERPRISE a quarterly focus on the people and the issues that drive New Jersey business

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Advertisers Index New Jersey CPA is the only way to reach each of the 15,500 members of the New Jersey Society of CPAs, and 55 percent of readers take action after seeing an advertisement in the magazine – by either purchasing the product, contacting the advertiser, visiting a website or recommending the product or service to a client. For advertising opportunities, contact Advertising Manager George Chateauneuf at custompubs@thewarrengroup.com.

Accounting Practice Sales accountingpracticesales.com

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Askin, Weber & Reed, Inc. awrins.com

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Bloomfield College bloomfield.edu

2

CPE Link cpelink.com/value-pass

21

Fulton Bank of New Jersey 10 fultonbanknj.com Kolinsky Wealth Management, LLC kolinskywealth.com People's United Business Capital peoples.com

40 5

PNC Bank pnc.com/cfo/cfo

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Rider University rider.edu/macc

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Rutgers 27 pmac.rutgers.edu Sterling National Bank snb.com

9


STUDENT

outlook

Starting Your Career as a FASB Postgraduate Technical Assistant B y Daniel R. Arc uri, C PA, L’ O real

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s future business leaders begin their accounting careers, many decide to take different paths. Some may start at large or small public accounting firms, while others may begin in private industry, government or academia. For those wanting to gain even more experience before starting their careers, especially at a Big Four accounting firm, some are nominated and selected by the Financial Accounting Standards Board (FASB) to serve as postgraduate technical assistants (PTAs) for a one-year term. I spoke with the FASB’s Senior Manager of Media Relations Christine Klimek about this unique program. How does someone apply for the PTA program, and what skills and qualifications should candidates possess? Unlike the normal application and recruiting process when applying for a job, a PTA candidate must be nominated to the FASB program by his or her school’s accounting department and then approved by the school’s dean or department chair. Not only must the candidate be currently enrolled in or recently graduated from an undergraduate or graduate accounting program, he/she must have a superior academic record. Additionally, the FASB looks for candidates with strong written and oral communication skills who’ve completed courses that will provide them with a strong background in accounting theory and practice. FASB PTAs are asked to write project memos and make presentations before the board. What are some of the projects that participants get to work on, and are some of them related to convergence? A PTA is assigned to just about every project on the FASB’s active agenda. They participate in critical research and outreach with constituents on our four major convergence projects: revenue recognition, leases, insurance contracts and accounting for financial instruments. Participants also get involved in improving the financial reporting practices of private and not-for-profit organizations, as well as working on the postimplementation review project, which reviews and evaluates the effectiveness of existing accounting standards. How can the experiences from this program benefit someone in a career path, and what connections or contacts can participants build during the program? The FASB is known throughout the accounting industry, and the PTA program is highly regarded as a great way to launch one’s career. Participants are given the opportunity to develop strong connections in the profession through project outreach activities. They are also able to work alongside FASB practice fellows, who are sent by Big Four firms to work at the FASB for two years, as well as with permanent FASB employees. Participants are sometimes even given the opportunity to

FASB postgraduate technical assistants meet with a FASB project research associate regarding the FASB’s joint project on leases. present and answer questions at board meetings in order to increase their visibility. Since the program is for a one-year term, where do most graduates go afterward? Most PTAs move on to one of the Big Four firms. Some of our recent participants have received offers but decided to defer them until the following year in order to work at the FASB and gain additional experience. For those participants who’ve deferred their offers, this program is a great way to give them a head start in their careers and gain exposure to many technical accounting areas that they are likely to come across in the future. But by no means are participants limited to public accounting. Some go on to industry, government, academia or elsewhere in the accounting profession. Does the program allow time for and encourage studying for the Uniform CPA Exam? Some PTAs have already completed all or part of the exam. If a participant has not already completed the CPA Exam, the FASB allows PTAs to take up to three days off to take and/or study for the exam. The FASB understands that the CPA license will be essential to many participants’ careers, especially in public accounting, and encourages that pursuit as it seeks driven students who have already excelled academically. To learn more about the PTA program, visit fasb.org. Daniel R. Arcuri, CPA, CGMA, M.B.A., works for L’Oreal. He is a member of the New Jersey Society of CPAs Tomorrow’s CPA Editorial Advisory Board. Contact him at daniel.arcuri1@ gmail.com.

NEW JERSEY CPA • March • April 2013

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LEGISLATIVE

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Society Supports Tax Relief for Hurricane Sandy Victims B y Jeffrey T. Kaszerman , NJ SC PA Government R elations D irector

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Hurricane Sandy-related hazardous substance abatement, debris removal and repairs of business-related property, rather than charging such expenses to a capital account. Net Operating Loss Carryback – Provides a five-year carryback of net operating losses attributable to Hurricane Sandy that occur in the disaster area. Increased Expensing for Hurricane Sandy Qualified Disaster Assistance Property – Increases the expensing limits under Section 179 for certain business property that rehabilitates or replaces property damaged or destroyed by Hurricane Sandy in the disaster area. Expensing of Environmental Remediation Costs – Allows taxpayers in the disaster area to elect to expense qualified environmental remediation expenditures where the contamination that is being remediated is in the disaster area and was caused by the hurricane. New Markets Tax Credit – Provides an allocation of $250 million of new markets tax credits for the purpose of making qualified low-income community investments within the disaster area. Public Utilities Casualty Loss – Allows public utilities to treat casualty losses as specified liability losses, which are eligible for a 10-year carryback. Work Opportunity Tax Credit – Provides businesses in the disaster area a tax credit for hiring workers who lost their jobs as a result of the hurricane.

he New Jersey Society of CPAs is advocating passage of H.R.6683, The Hurricane Sandy Tax Relief Act of 2012, which was introduced by New Jersey Congressman Bill Pascrell on December 19, 2012. The American Institute of CPAs is also supporting the bill. The legislation, modeled after a similar bill passed into law in the wake of Hurricane Katrina, would provide tax relief for victims of Hurricane Sandy in locations designated as federal disaster areas by the president. You can view a copy of the legislation at http://thomas.loc.gov/cgi-bin/ query/d?c112:1:./temp/~c1121olcof. The bill’s provisions include:

Individuals Remove Casualty Loss Deduction Limits – Waives the requirement that net casualty losses exceed 10 percent of adjusted gross income before they are deductible for federal income tax purposes for personal casualty losses suffered as a result of Hurricane Sandy by taxpayers residing in the disaster area. Increase Charitable Contribution Limits – Increases charitable deduction limits of taxpayers with respect to cash contributions to certain tax-exempt organizations made for the purpose of relief efforts related to Hurricane Sandy. If the donations exceed the increased contribution limits, taxpayers can carry forward the deduction for the succeeding five years. To be eligible for the increased limits, contributions must be made prior to April 15, 2013. Taxpayers may also elect to treat contributions to eligible organizations made prior to April 15, 2013, as having been made in 2012. Include a Look-Back Provision for the Child Tax Credit and Earned Income Tax Credit – Allows families that reside or are substantially employed in the disaster area to elect to use their previous year's income to calculate the child tax credit and the earned income tax credit. Allow Loans from Retirement Plans – Allows taxpayers whose principal place of residence is in the disaster area and who suffered a loss because of Hurricane Sandy to take distributions of up to $100,000 from an IRA or 401(k) account with no tax penalty, provided such amount is repaid within three years.

Bonds Sandy Recovery Bonds – Creates a new state-by-state private activity bond allocation for Sandy-affected areas. The bonds are for financing the rebuilding of docks and wharfs, commuting facilities, certain housing, water, sewage, solid waste infrastructure and facilities used to provide electric energy or gas.

Housing Low-Income Housing Tax Credit – Increases the allocation of the low-income housing tax credits to $8 per individual states that contain counties covered by the natural disaster declaration as a result of Hurricane Sandy. Waiver of Certain Mortgage Revenue Bond Limitations – Waives the first-time homebuyer rule and the purchase and income rules for targeted area residences financed with qualified mortgage bonds. The proposal also increases the amount of a qualified home improvement loan with respect to residences located in the specified disaster areas.

Businesses Expensing of Qualified Disaster Expenses – Allows businesses in the disaster area to elect to expense costs of

NEW JERSEY CPA • March • April 2013

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MEMBER

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She Gets a Kick Out of Accounting By David Plaskow, NJSCPA Publications Editor

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lena Sanchez, CPA, has a knack for finding things, and things have a knack for finding her. After her parents passed away when she was just 10 years old, Sanchez was raised along with her brother and sister by an aunt and an uncle. Thanks to the Internet – how many stories in the past 15 years have started that way? – a cousin in Argentina was able to find her about a decade ago. “It was purely by chance,” says Sanchez. “I’ve since been to Argentina three or four times.” For Sanchez, however, accounting wasn’t a chance encounter. “I took a business course in high school and found accounting fascinating. I’ve always loved solving puzzles and been keen on math,” she recalls. She began with Kean University’s accounting program, but took a sabbatical when her daughter was born. A few years later, after working in the accounting department for a chemical company, she entered Rutgers in New Brunswick and graduated with a B.S. in accounting in 1999. “I did an internship at KPMG, but realized a large firm wasn’t for me. I wanted more control and involvement,” admits Sanchez. A fellow Rutgers graduate offered her a position at Frazer, Evangelista & Company in New Brunswick, and she hasn’t looked back since. “Being at a smaller firm fits my personality and lifestyle, and I enjoy getting to do a little of everything: tax, audit, reviews and so on,” adds Sanchez. Sanchez is also in charge of her firm’s quality control. She prepares the firm for peer review, stays up to date on standards for audits, comps and reviews, and examines all financials before they go out the door. “It’s important to keep up with the many

ever-changing standards out there,” comments Sanchez. Sanchez obtained her CPA credential in 1999 right after graduating from Rutgers. “I passed on the first try with a score in the top 10 percent of the country,” she notes proudly. “I knew I wanted to go into public practice or work for myself, so the CPA designation was always a goal. It carries a certain prestige.” The following year, Sanchez joined the New Jersey Society of CPAs. “The Society was quite involved at Rutgers, and I’d received an NJSCPA Scholarship,” says the Piscataway resident. “I appreciate what the Society does, take the chapter CPE seminars and enjoy reading this column to see the personal side of practitioners.” In her downtime, Sanchez likes to spend time with her kids, read, cook, salsa dance with her husband of 17 years and work out daily. It was at her son’s mixed martial arts competition that she found an information table of a group called “Moms Who Kick.” The group is into fitness and nutrition, which appealed to Sanchez. But what also caught her attention was a 2013 calendar the group was putting together for breast cancer awareness and research. Sanchez decided to apply to be a “Model Mom” in the calendar. “I sent some photos along with an essay discussing how I was a model Mom and how I set a healthy example for my family,” recalls Sanchez. Much to her delight, Sanchez was chosen NEW JERSEY CPA • March • April 2013

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from among a large pool of applicants to be in the calendar. “It was very exciting,” says Sanchez. “The winners attended a makeup session and photo shoot on Long Island. The calendar included fitness shots, but it also had a Hollywood theme and we were each made up to look like a celebrity. I got to be Liza Minnelli from the movie Cabaret.” The latter part of 2012 was really a whirlwind for Sanchez. There were the photo shoots, an announcement ceremony, autograph sessions and then a fashion show in October where the completed calendar was unveiled. The calendar is available on momswhokick. com, and while the proceeds are earmarked for breast cancer awareness and research, a certain part is going to victims of Hurricane Sandy. “The response has been amazing,” exclaims Sanchez. “I’ve even sent copies to my relatives in Argentina and Puerto Rico. I decided to dedicate the calendar to my sister-in-law who has been taking care of my brother who was diagnosed with multiple sclerosis. She’s really a Mom who kicks!”


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NJ CPA Mar/Apr 2013