New Jersey CPA - September/October 2013

Magazine of the

New Jersey Society of Certified Public Accountants

Sept • Oct 2013

What Does the Future Hold?

Firm Relationships Go Back to the Future The Challenges and Opportunities of an Expanding Regulatory Environment Accounting in an Era of "Templosion" A Look into the Technology Crystal Ball

Q&A with PCAOB Chair Doty p. 20

September • October 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

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Firm Relationships Go Back to the Future Envision how CPAs will work with clients, employees, vendors and the government during the next generation.

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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 Gregory Levine, CPA Marcella LoCastro, CPA Anthony F. Marone, CPA Marc D. Mintz, 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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The Challenges and Opportunities of an Expanding Regulatory Environment In an ever-increasing regulatory environment, see what CPAs need to stay ahead of the curve on and what they can leverage.

2 Close Up The Future of Continuing Education Is Now

Accounting in an Era of “Templosion” Discover how the workforce of the future will be impacted by the implosion of all business activities into compressed time.

22 Best Practices Building a Diversity Plan at Your Organization

A Look into the Technology Crystal Ball What will technology look like in 20 years, what will the modern office look like and how will technology impact the next generation of CPAs?

26 Forensic File Partial Win for Golfer in Treaty Case

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28 Industry Insights Is the U.S. Making Plans for an International Corporate Tax Holiday?

Society Pages 2013/14 Chapter Presidents, 36 CPE Offerings and Events, 38 Get Involved, 40 Member Benefits, 41 NJ State Board of Accountancy Report, 42 Classifieds, 44

4 News Briefs

20 A&A Buzz Q&A with PCAOB Chair James R. Doty

24 Financial Planning The Causes of and Solutions to Economic Bubbles

30 Small/Sole Practitioner Big Changes in NJ LLC Law

32 Tax Talk Medicare Tax Planning for High-Income Clients

34 Tech Center The Impact of Technology Company Consolidation on CPA Firms 45 Student Outlook Sometimes It Pays to Get Way Ahead of Yourself 46 Legislative Views NJSCPA Talks Tax Reform with Congressional Delegation Member Profile It’s a Life of Crime for This Society Member

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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. 41 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.

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The Future of Continuing Education Is Now B Y SHARON DRUCKER , NJ SC PA B USI NE SS D E VE LO PM E N T S P E C I A L I S T

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he learning experience of young people today is remarkably different from the experience most of the Baby Boomers, Gen Xers and even Gen Yers had during their formative years. Now, children utilize tablets, laptops and smart phones to study and take part in dynamic, often virtual, learning environments. Unlike the conventional classroom model of the past, where a teacher gave a lecture to 20 or so students, students today are enthusiastically participating in, researching and challenging key concepts introduced to them in a digital format. All of this is possible due to rapid advancements in technology that have led to changing patterns of how we as a society consume information.

Forward thinkers are challenging our traditional education systems and calling for change, as is evidenced by the TED Prize. Initiated in 2005, the TED Prize (Technology, Entertainment, Design) is awarded to an extraordinary individual with a creative and bold vision to spark global change. By investing $1 million in a powerful idea, the TED Prize supports one wish to inspire the world.

The 2013 TED Prize winner, Sugatra Mitra, believes our current education system is antiquated and calls on educators and parents to challenge children’s curiosity. Mitra is best known for his “Hole in the Wall” experiment where he placed a computer with Internet access in a slum in India. Left to their own devices and without any instruction, the children of the community taught themselves on the computer and then taught each other. The results of his experiment directly support his call to design an education system that reaches beyond the classroom to develop innate curiosity and push students to find answers for themselves. Mitra is using his TED Prize winnings to build The School in the Cloud, a learning lab in India where children can embark on intellectual adventures by engaging and connecting with information and mentoring online. A global network of educators and retired teachers will support and engage the children through the Web. Innovative learning ideas such as Mitra’s might one day be the rule rather

than the exception. Technology has provided the vehicle for us to foster this culture and provide collaborative learning on previously impossible levels. With more than 90 percent of colleges and universities offering online instruction, future learning trends will include greater flexibility and increased education customization. Students can choose the best content delivery method for their own maximum retention, whether it is video, webcasting, eBooks or engaging in a completely online project to interact with other students.

The choice is theirs, and the experience is unique.

So, with an ever-increasing number of options available, what is the best way to provide continuing education for the members of our profession?

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2013/14 Board of Trustees EXECUTIVE COMMITTEE President – Gerard Abbattista, CPA President-Elect – Brad E. Muniz, CPA Secretary – Walter J. Brasch, CPA Treasurer – John M. Szczomak, CPA Immediate Past President – Thomas F. Roche III, CPA CEO & Executive Director – Ralph Albert Thomas, CGMA TRUSTEES Sharon J. Bishop, CPA Leonard N. Brooks, CPA William A. Cadmus, CPA Joseph C. DiFalco, CPA Edward I. Guttenplan, CPA Michael W. Gutwetter, CPA Karl A. Halteman, CPA Robert P. Herman, CPA Edward G. O’Connell, CPA Jody Rorick, CPA Mary E. Zago, CPA Joseph A. Zielinski, CPA

The answer really is all of the above.

An integrated approach to learning can potentially deliver the best results. Blended learning is defined as “a form of education that combines face-to-face classroom methods with computer-mediated activities.” Online learners benefit from the speed, variety and convenience that e-learning provides. Self-study offers unlimited flexibility, and live instruction provides the dynamic, interactive environment of face-to-face group learning.

All are effective ways to gain education.

However you choose to learn, sample all of the foods of the educational buffet and make them your own. The commitment to lifelong learning is undeniably one we must all make, not only for professional compliance, but for the commitment to self-improvement and ongoing development in a multifaceted world full of increasing complexity and competitiveness.

For more information on New Jersey Society of CPAs live courses, self-study, webinars and more, visit njscpa.org/ education.

U.S. Government Spending on Education as a Percentage of Gross Domestic Product

5.9%

6.2%

4%

1.3%

1% 1900

1930

1944

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NEWS

briefs

AICPA Introduces New Financial Reporting Framework

FASB Clarifies Investment Company Status and Accounting

The American Institute of CPAs has introduced the Financial Reporting Framework (FRF) for Small and Medium-Sized Entities (SMEs) to help them with financial reporting needs.

The FRF for SMEs accounting framework is a new accounting option for preparing streamlined, relevant financial statements for privately held owner-managed businesses that are not required to use U.S. generally accepted accounting principles (GAAP).

The FRF for SMEs framework offers small business owners an alternative to the non-GAAP options currently available. The FRF for SMEs is not GAAP, but complements efforts by the Financial Accounting Foundation’s (FAF's) Private Company Council to modify GAAP for private companies.

Small businesses will use the FRF for SMEs to prepare financial statements that report what a business owns, what it owes and its cash flow. Lenders, insurers and other financial statement users will find this new accounting framework helps them understand key measures of a business and its creditworthiness, including business profitability, cash available, assets to cover expenses and concise disclosures.

The FRF for SMEs uses historical cost, steering away from fair value measurements; offers a degree of optionality because businesses can tailor statement presentations to their users; includes targeted disclosure requirements; reduces book-to-tax differences; and produces reliable financial statements that can be compiled, reviewed or audited.

The Financial Accounting Standards Board (FASB) has issued an Accounting Standards Update (ASU) that sets forth a new approach for determining whether a public or private company is an investment company. The update also clarifies the characteristics and sets measurement and disclosure requirements for an investment company.

ASU No. 2013-08, Financial Services – Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements, is effective for fiscal years beginning after December 15, 2013, and earlier application is prohibited. Learn more at fasb.org.

NJ Compensation Study Attention managing partners, firm administrators and human resource professionals! If you haven’t already received one, in the coming days you will be receiving the NJSCPA Compensation & Benefits Survey of Public Accounting Firms in New Jersey.

Not limited to strictly salary but overall compensation, this unique New Jersey-specific survey will break down results by northern, central and southern parts of

New Jersey Special Election by the Numbers 24,000,000 Dollar cost for the special election 174,000 Annual salary for a U.S. Senator 40 Years since a Republican won a Senate race in NJ 3 Weeks held before the general election

the state for both accountants and support personnel.

We ask that you please take some time to complete this survey and return in the enclosed pre-paid envelope. All responses will remain strictly confidential. While you may not need this information at the present, you may find you will want the data at a later date, and completing this survey will help strengthen the accounting profession in New Jersey.

Results of this survey will be available in February 2014. Questions? Contact David Plaskow, NJSCPA Communications Manager, at 973-226-4494 x228 or dplaskow@njscpa.org.

FASB Responds to PostImplementation Review of Statement 141R on Business Combinations The FASB released its response to the post-implementation review (PIR) of its business combinations reporting standard.

The review, conducted by the FAF, examined FASB Statement No. 141, Business Combinations. The standard requires an acquiring organization to recognize the assets acquired, liabilities assumed and any noncontrolling interest in the acquired organization at the acquisition date, measured at their fair values as of that date, with limited exceptions.

The FASB acknowledged in the PIR findings that some participants expressed difficulty in (1) applying the definition of a business; (2) accounting for purchased loans; and (3) separately reporting some intangibles and goodwill. The board said it will consider the PIR report’s findings in relation to other projects that are currently underway. Visit fasb.org to learn more.

AICPA Survey Finds Growth and Firm Development Planning Key With economic conditions improving, CPAs are taking a longer-term, more strategic view of goals to ensure their firms thrive, according to the AICPA’s 2013 CPA Firm Top Issues Survey.

Two priorities have assumed new importance in most firms’ lists: bringing in new business and finding top-notch staffers to handle anticipated growth.

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The Top Issues Survey is conducted biennially with results segmented by firm size, since the needs of a sole practitioner are dramatically different than those of a Top 100 firm. While each size grouping has a unique list of top five issues, common elements give insight into trends. Visit aicpa.org to learn more.

NJSCPA Tops 5,000 “Likes” on Facebook In June, the New Jersey Society of CPAs received its 5,000th “like” on Facebook, courtesy of James Fylstra, an accounting student at Seton Hall University. The Society’s Facebook site went live in April of 2008, mainly as a means to communicate with college students. Today, it provides up-to-the-minute information to all of the organization’s members, as well as nonmembers. The NJSCPA’s Facebook site has received likes from five continents, including such countries as Brazil, Iran and Thailand.

SEC Announces Enforcement Initiatives The Securities and Exchange Commission (SEC) announced three new initiatives that will build on its Division of Enforcement's ongoing efforts to concentrate resources on high-risk areas of the market and bring cutting-edge technology and analytical capacity to bear in its investigations.

The initiatives are (1) the Financial Reporting and Audit Task Force; (2) the Microcap Fraud Task Force; and (3) the Center for Risk and Quantitative Analytics. Learn more at sec.gov.

RIP

August 2013

Our Condolences IRS Disclosure Authorization and Electronic Account Resolution e-services.

The deaths were due largely to low usage.

njscpa.org Spotlight

NJSCPA Offers Social Media Webinars Gain practical knowledge on how to best develop and deploy social media tools to accomplish your business goals by attending one or more of these webinars.

Register at njscpa.org/catalog.

Report Outlines Changes for IRS Review of Tax-Exempt Applications The Internal Revenue Service (IRS) issued a report outlining new actions and next steps to fix problems uncovered with the IRS’ review of tax-exempt applications and improve the wider processes and operations in place at the IRS. The report, Charting a Path Forward at the IRS: Initial Assessment and Plan of Action, covers three primary areas: accountability, fixing the problems with the review of applications for tax-exempt status, and review of IRS operations and risks.

The report cites actions to hold management accountable and identifies immediate steps to help put the process for approving tax-exempt applications back on track. The report also outlines actions needed to protect and improve wider IRS operations, ranging from compliance areas to taxpayer service. Learn more at irs.gov.

Connect: Leveraging NJSCPA’s Online Community for Business Thursday, October 10, 12:00-1:15pm • Login and complete your profile.

• View the communities you belong to and join others.

• Participate in discussions.

• Share documents.

• Download the mobile app to access Connect via a smartphone or tablet.

Twitter for Business Tuesday, October 29, 12:00-1:15pm • Set up and maximize a Twitter account.

• Find and follow people who matter to your business.

• Engage people for networking and business development opportunities.

• Use third-party applications to plan and schedule your tweets and learn what the

business community is talking about in real time.

• Integrate Twitter into your overall business plan.

Facebook, Pinterest and Instagram for Business Tuesday, December 3, 9:00-10:15am • Increase your business presence and engage with clients and prospects on Facebook.

• Set up a Pinterest profile and make the most of it for your business.

• Put a face to your name using Instagram.

• Integrate these sites into your overall business plan.

LinkedIn for Business Thursday, January 9, 2:00-3:15pm • Setup and maximize a LinkedIn profile.

• Build a network on LinkedIn without spamming people.

• Use LinkedIn Groups to extend a network.

• Enhance a profile with timely and valuable updates.

• Integrate LinkedIn into an overall business plan.

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Firm Relationships Go Back to the Future Our business lives are always filled with client and firm projects, deadlines, emails and phone calls, and often we’re not thinking about tomorrow, much less 20 years from now. How will our businesses look? What will our clients look like? How will we get new clients and replenish staff?

By Thomas M. Angelo, CPA Spire Group, PC

The world is changing daily as we adapt to a combination of rapid technology advances, a changing demographic workforce and new ways to interact. We’re pretty confident that the business relationships we have today are probably going to be very different in the future, whether it affects us or our children. Let's take a drive in the Delorean and step into the future to see what those relationships will look like.

Clients We can already see changes in client relationships. For example, we often communicate with clients by email versus phone, and we have less face time with them than we did 10 years ago. But what about 25 years from now? Can you imagine your client needing to talk with you about something important, so he or she takes out a phone and can instantly see

your availability, schedule a meeting and you video conference with each other on your smartphones. While this technology is available now, it’s not the norm. Our role as CPAs will evolve and we’ll be more than just tax preparers and auditors. We’ll come full circle to become clients’ chief business advisors, including tax, financial, technology, investments, retirement and overall strategy. Our relationship with clients will be strengthened by technology and more so by the additional services we’ll manage for them.

Competition Our competition often is in our own states, as most small business clients tend to use local firms. However, we can already see those walls falling. In the future, there will be no boundaries.

Clients and CPAs will be completely comfortable working with each other from across town or around the world.

Clients will select advisors based on their talents and what services they offer. They will not be limited by geographic boundaries. Your best client may be in Italy or Japan. In 25 years, working virtually will be as common as the iPhone. What does that mean to us and how we define our competition? Clearly, our competition will be unlimited, and it will be more important to perfect your value

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statement and what your firm brings to the table. You’ll have to spend far more time creating and executing your marketing strategies to attract new clients; however, you’ll also have a far greater pool of prospects to work with.

Employees We’ve already seen the changes in firm culture when Baby Boomers, Gen Xers and Millennials get together.

All three clearly have different work characteristics and career expectations.

What about in 25 years when Gen Xers dominate the executive ranks and a new generation comes behind the Millennials? We’ve already seen how the Millennials like working with

teams and a diverse workforce. There’s a good chance that our firms will run much less like silos of individual partners and more like strong practice teams with top industry strength and a multicultural workforce to serve our diversified new client bases.

Your audit team may have a combination of people working in different states or countries, all collaborating together and with clients.

Will we have the knowledge and creativity to attract such talent? Schools of higher education will begin working on developing student leadership, team building and communication skills even more. In the past, schools have perhaps left soft skills to employers to worry about. It will become more important

to make sure every student is equipped with these vital skills, and not just technical knowledge, to succeed.

Government As CPAs, our relationship with government agencies is generally lacking, and it’s frustrating that they don’t keep up with the times when working with us. Only now has the Internal Revenue Service allowed some email communications in certain situations. But will the government agencies still be so rigid and behind 25 years from now? Probably not. As younger generations migrate through higher ranks, they’ll adopt new technologies at government agencies to be more efficient. And society will

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demand that our government adapt to these new ways of conducting business. In addition, silos of data in separate databases will begin to merge and interact as we’ve seen with cloud computing. Federal and state data will be able to interact with our own tax software, and our ability to resolve client issues will improve. Can you imagine preparing your clients’ tax returns and the federal and state estimate payments populate your own tax software? How about a client placing his or her electronic audit report out there for banks across the U.S. to bid on business? These scenarios are not only possible in the future, but they’re probable.

Suppliers We certainly can't forget about our vendors who help us with our businesses. We’ll see a continued consolidation of major vendors that can rapidly develop new technologies and bring to market better and faster tools at a rapid pace. I also foresee a growing niche of smaller companies and consultants to help CPA firms adapt and develop their businesses.

Our firms are and will be dominated by technology. Clients won’t generate paper, thus no scanning. Everything will be electronic. Smaller firms will need to purchase their software from these major vendors; however, many of them will benefit from smaller companies and

consultants who are implementation experts.

It’s always scary to look into the future when we’re having a hard time keeping up in the present. The accounting profession has nothing but exciting and creative plans ahead. As CPAs, we’ll continue to work on and evolve our relationships with clients, employees, vendors and, yes, even the government.

Thomas M. Angelo, CPA, CITP, is a shareholder at the Spire Group, PC. He is a member of the New Jersey Society of CPAs Nonprofit and Technology interest groups.

Contact him at tangelo@spirecpa.com.

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The Challenges and Opportunities of an Expanding Regulatory Environment Students of history and philosophy are probably familiar with the pendulum theory, popularized in George Hegel’s dialectic, among other references. It states that macro tendencies in human society tend to move from one extreme end of the spectrum to the opposite extreme and slowly approach stability in the middle.

By Anthony F. Marone Jr., CPA The Blackstone Group L.P.

This general theory can be applied to the economy (bull and bear market cycles), politics (national trends toward liberalism and conservatism) and other facets of life. Recently, there has been a global movement that could be considered to be a swing of the pendulum away from recent trends in deregulation and toward increased regulation. Regardless of your political or personal views, you need only follow the news each day to see a multitude

of examples of the growing regulatory environment.

The accounting profession is no stranger to regulations in general, with the alphabet soup of the Internal Revenue Service, Securities and Exchange Commission, Public Company Accounting Oversight Board, Financial Accounting Standards Board and state boards of accountancy all part of a CPA’s daily life. The recent trend toward an increase in the regulatory environment, however, is a source of both challenges and opportunities for CPAs. Recent examples of laws and regulations that may significantly impact CPAs and their clients include the Dodd–Frank Wall Street Reform and Consumer Protection Act, the Patient Protection and Affordable Care Act and the Foreign Account Tax Compliance Act. In addition, conversations have evolved to varying degrees around

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large-scale accounting paradigm shifts, including the pending adoption of International Financial Reporting Standards in the U.S., the evolution of the FASB Private Company Council and various proposed implementations of a national value-added tax and/or flat income tax regime. As the pace and scale of these regulatory shifts continue to increase, CPAs should be aware of the challenges and opportunities presented by the various regulatory frameworks to their firms and their clients.

Future Challenges Noncompliance Risks – Perhaps this is stating the obvious but, with few exceptions, not knowing or understanding the various regulatory requirements does not absolve CPAs or their clients from compliance. To the contrary, the various penalties for noncompliance have only increased with recent laws and regulations.

Additional Overhead Expenses – As most CPAs have experienced, the

implementation of new regulations can be very expensive. Businesses may need to upgrade software, hire additional personnel or alter existing business practices. For CPAs in public practice, these additional costs incurred by clients can translate into an all-toocommon challenge: fee pressure.

Distraction from Core Businesses – One less-tangible – or at least lessquantifiable – challenge posed by the expanding regulatory environment, particularly for smaller businesses, is the time spent on compliance. Each hour spent by business professionals analyzing how new regulations will apply to or impact their businesses is an hour not spent providing products and services to customers and clients or completing other core business functions.

Future Opportunities New Client Services – As trusted business advisors, CPAs are often a source of information on business

matters outside of accounting and tax.

Being informed about new regulations can provide additional avenues to provide value to clients and strengthen existing relationships, in addition to combatting fee pressure as a result of rising overhead. CPAs working in industry also have “clients” in the other business units they serve. Other than larger businesses with dedicated compliance departments, companies often rely on their finance and accounting professionals to navigate the regulatory framework. By becoming well-versed on the evolving regulatory regimes, CPAs in industry can prevent their businesses from needing to hire outside consultants and expand their roles within organizations.

Niche Businesses – Many CPAs specialize in one or more of a few traditional accounting areas, such as audit, tax and forensics, which are all function-based specialties. Another option is to develop an industry-specific niche business that is more full-service

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and includes consulting services centered on regulatory compliance and business processes. For example, a CPA specializing in health care could provide tax and accounting services to medical practices, as well as help them navigate compliance with the Patient Protection and Affordable Care Act. Although legal expertise will likely be required to assist with certain aspects of compliance with this law, other components revolve around billing practices and other financial matters that CPAs understand well. CPAs also have expertise in developing internal controls and business flows that could be leveraged to help a health care client implement new software and determine appropriate staff policies.

Strategic Partnerships – For CPAs who do not have the capacity to add

additional services to their existing client offerings or who are not interested in focusing on niche industries, another alternative is to develop strategic partnerships with other firms. An advantage of this approach is that less upfront costs, in both time and money, are necessary to meet client needs. A disadvantage is that while CPAs can meet client needs through referrals to strategic partners, they will not develop their own in-house expertise and face the general risk associated with referrals, meaning poor performance will reflect badly on them.

Although there is no crystal ball for specific types of accounting regulations, Hegel’s pendulum seems to be swinging toward an increase in the overall quantity of regulations for

the foreseeable future. While most CPAs won’t be excited by that, they should focus on the opportunities afforded them to add value to clients and stay abreast of evolving issues to plan ahead. By proactively researching and understanding new regulations as they evolve, CPAs will be well-placed to offer advice to their clients, which is the cornerstone of a healthy client relationship.

Anthony F. Marone Jr., CPA, CGMA, is a vice president of Blackstone Real Estate Debt Strategies at The Blackstone Group L.P. He is a member of the New Jersey CPA magazine Editorial Advisory Board.

Contact him at tony.marone@blackstone. com. The views expressed in this article are those of the author and are not those of The Blackstone Group L.P.

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Accounting in an Era of “Templosion” If I were to ask what in your life is in short supply but high demand, what would you say? For many, time is probably the number one answer. This is because time is something we all value, seek to maximize and wish to extend. But it’s also something we’re learning how to leverage.

By Erica Orange Weiner, Edrich, Brown, Inc.

Time is going from something that was once linear and sequential to something that is now multilayered and simultaneous. For instance, the idea that there are definitive beginning, middle and end stages to an individual’s life is shifting. Today, people are more likely to quit work and go back to school, or retire and then start a new career. There are no longer career paths in one place or one industry, and there is no longer any guarantee that a job will even be there as soon as a year later.

Leveraging time-related value propositions will dramatically alter the future landscape of the workplace in the 21st century. This not only implies multitasking of products and services, but also the overlaying of careers and ability to have many competing demographics and life cycles in the course of one’s life. Growing impatience with wasted or prolonged time will also reshape many products and services.

As we look to the future, we see that time is capable of not only speeding up, but sweeping us up along with it at a breathtaking pace. Anything and everything is beginning to quicken.

Things are happening faster and faster.

This is a world of “templosion,” the implosion of everything into compressed time.

Technological Templosion Technological change is speeding up exponentially, as each technology builds on others to create new ways of collecting and mining information, accumulating financial data, changing the nature of work, connecting various constituents with each other, establishing global interconnectedness and making instantaneous decisions. Security, privacy, integrity, reliability, storage capacity and responsiveness will be increasingly tested as all professions grapple with the many ways fast, mobile, decentralized and smart systems change the work they do, where they do it, how they do it and for whom they do it.

VirFlex The concept of VirFlex refers to virtual work mixed with flexible schedules, and it’s describing more and more of the employee pool. Whether mandated by companies looking to get leaner or leveraged by self-employed or

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home-based workers, VirFlex work arrangements may become less the exception and more the norm. Virtual office buildings are beginning to take hold where employees don’t have their own offices, but share space when they do show up at a building. All of these novel configurations, which move toward the managing of work output as opposed to traditional time and place measures of input, make new systems of goal setting, expectations, reporting and accountability more urgent.

Shifts in Strategic Planning Cycles Strategic planning is usually consolidated under one unit/person. It is sometimes broken up into short- and long-term planning. Neither practice is relevant as we head further along into templosion.

The time periods make more sense when arrayed along a continuum of six months, one year, three years, five years, 10 years and 20-plus years. The skills needed are different for six-month planning and 10-year planning for everything from finance to talent to creative. And no organization is wellserved by trying to assign the longer-term planning a lower priority, because that timeframe may be upon us in a much shorter time than originally thought.

Smart Versus Intelligent In the next 15 years, people demonstrating intelligence (the ability to solve challenges never before encountered) will be valued far more than those who are smart (the ability to

U.S. Population Projections

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420 million

learn and retain things). At a time when everything is speeding up at an unprecedented rate, adaptable, critical and strategic thinking will be valued like never before. Where once the mark of a profession was the accumulation and application of years of study, the future will reward those who are better able to grasp a project, account for related external circumstances, read the client’s culture, gather the relevant resources, unearth the relevant information in a sea of sources and anticipate outcomes. Reliance on sophisticated software and algorithms, rather than diminishing or replacing the need for human critical thinking, will make it even more necessary.

Importance of Lifelong Learning Because of templosion, knowledge is becoming outdated at an advancing pace. With the exception of the basics – reading, writing and arithmetic – each year casts doubt on that which we learned the year before. As these powerful changes occur, and they occur constantly, it becomes more important that the accounting profession and its practitioners embrace continuing education and lifelong learning as core values. Part of lifelong learning will be the need to “unlearn” knowledge and processes that are no longer useful. This is especially important as the average lifespan expands.

Long-Term Thinking: Vision Versus Strategy In all of this, it will be important to create and hold to a timeless vision and be willing to quickly adopt, and then scrap, even the biggest of strategies. The life cycle of strategies will be constantly shortened, while the bigness of the vision can keep the organization from succumbing to templosion. The future, too, will be less about fixing old or broken systems and institutions, and more about completely reimagining new systems.

It’s difficult for us to conceive of time as malleable, rather than linear and constant. But as the 21st century progresses, we’ll be faced with alterations in this dimension that challenge our business practices as well as our personal behaviors and expectations. Time, like energy, is becoming a precious resource. Just as no entity or profession has the luxury anymore of frivolously wasting energy, no entity will have the luxury in the future of failing to value time.

Erica Orange is a vice president at Weiner, Edrich, Brown, Inc., a firm that tracks social, economic, political and technological trends, and serves client organizations by enhancing their capacity to anticipate change and take action.

Contact her at erica@weineredrichbrown. com or 212-889-7007.

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A Look into the Technology Crystal Ball Just what will technology look like 20 years from now? What will the modern office look like, and how will technology impact the next generation of CPAs? These are just a few of the questions that give us an opportunity to let our minds wonder and have some fun with predictions.

Computers: A Thing of the Past

By Mario Nowogrodzki, CPA Mendelson Consulting

In 2033, there will be no personal computers. Work and play will be based solely on cloud computing – distributed computing over the Internet. Utility computing will be the norm, as a payper-use or subscription-based use of virtual servers and computers. It’s not only going to be software as a service (SaaS), but computing as a service (CaaS). While still young today, cloud computing already offers the flexibility to increase or decrease capacity, or add or remove capabilities on the fly without investing in new infrastructure, training new personnel or licensing

new software. Twenty years from now, all applications will be served via the Internet, including today’s desktop standards like Microsoft Office. Look for others to become the SaaS desktop standards; there are already great innovations made by Google and others. And business applications, such as accounting, payroll processing and tax software, will be no exception.

Faster Internet One of the advances that will make CaaS a reality is that Internet speed and bandwidth will equal or surpass current local area network speed and bandwidth. This is already a reality, but only in very few metropolitan areas.

In essence, this is the deal maker for cloud computing becoming the standard computing platform. Until then, claims of speed and performance issues with cloud-based applications are fairly valid.

Improved Software, More Consistent Applications Thanks to the immense vastness of software development opportunity that

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is the Internet, business applications – accounting and tax, for example – will be made better sooner. The desktop installation form of delivery for software updates and upgrades is a thing of the past. Every time an application has an upgrade, it will automatically be incorporated into the cloud-based software – there will be no need to install updates or patches. Best of all, everyone using the same software model will be on the same version. No more inconsistencies caused by different releases or builds.

Better Environmental Responsibility Cloud computing maximizes the use of computer resources across the globe.

Not only are we able to reallocate resources for our own on-demand needs, but this concept will work for allocating resources to users in different time zones, where the same computing powers will be used by different users during different business hours on different continents. This reduces environmental damage: Less power, cooling systems and idle equipment wasting energy will be required for the same functions. E-waste systems and options will also expand.

Mobile Devices The personal computer will be replaced by the mobile device: a smartphone, tablet or some future gadget. Are we saying that our comfortable multi-monitor desktop view of the computer world will be downsized to a smartphone or tablet only inches in diagonal size? No. You’ll be able to plug in or dock your mobile device and use a standard keyboard, a mouse and desktop displays, basically giving you the best of all worlds. Voice recognition technology will finally evolve to the complete understanding of normal talk (and not having to erase and repeat commands). This will virtually eliminate input devices and make our interface with the computer faster and easier.

Mobile devices will become easier to store and carry, either rolling up

to fit in your pocket or being worn as a wristwatch. It’s hard to say today which will be the de facto computing platform/operating system for mobile devices in 20 years. It’s likely to be none of the ones in existence today; rather, it will probably be one that provides for the quickest, most seamless access to Internet applications and data. Ultimately, mobile devices will be the intelligent gate to get to your computer in the cloud.

Security If a mobile device is lost or stolen, you’ll be able to easily erase all information and deactivate it. (This technology exists today, in some instances for free). Most importantly, mobile devices won’t contain your personal or financial information, but they will just be a conduit to it. All information will be in the cloud.

Passwords will be gone, with only biometrics for authentication. Physical keys will be gone as mobile devices

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Global IT Spending in 2013

areas to more employers than they can today.

Accounting Profession Predictions

Telecom Services

45%

In 25 years, the Uniform CPA Exam will include a section for Information Technology. In 2063, the last CPAprepared computer tax return is filed.

All returns are handled automatically by artificial intelligence without human interaction, while CPAs shift completely into consultative services. A century from now, artificial consciousness will usher in the new era of robotic cyber accounting. But who really knows what will be next?

IT Services

24%

Devices

19%

Enterprise Software

8%

Data Center Systems

4%

will serve as IDs for unlocking your house and your car; even hotel rooms and rental cars will be programmed for access by your mobile device.

as easy as tapping on your device to electronically transact debit card activity.

No More Cash

The Modern Office Will Be No Office at All

In the future, there will be no more cash or credit cards. You’ll be able to conduct banking and retail transactions at the point of sale from a mobile device. Paying at the store will be

In 2033, there will be few on-site employees. Most people will work remotely and likely be contractors to various businesses worldwide, offering specific expertise in their particular

Mario Nowogrodzki, CPA, CITP, is founder and principal of Mendelson Consulting, an accounting technology consulting firm that assists entities with planning, selecting and implementing accounting information systems.

Nowogrodzki is a member of the Florida Institute of CPAs Business Technology Section, a contributing author and speaker for Intuit, The Sleeter Group and the National Advisor Network and cofounder of the South Florida QuickBooks Meetup Group. Contact him at mario@mendelsonconsulting.com.

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A&A

buzz

Q&A with PCAOB Chair James R. Doty B Y DAVID PL AS KOW, N J SC PA C OM M U NI C AT I O NS M A N AG E R

Will the Public Company Accounting Oversight Board (PCAOB) have the quality and quantity of inspection staff to fully understand International Financial Reporting Standards (IFRS) and effectively review work papers?

The PCAOB has devoted resources to IFRS training for staff. If the Securities and Exchange Commission decides to require U.S. companies to use IFRS, or if it gives them the choice between IFRS and U.S. generally accepted accounting principles, the PCAOB would devote further resources to IFRS training as well as recruitment of highly experienced IFRS auditors. In addition, the board would evaluate whether any additional adjustments to its programs or new initiatives are needed.

Will the PCAOB consider alternatives to address the presumed lack of independence and objectivity of registered public accounting firms?

This is not a new issue: Concerns over independence and the role of anticipated or established auditor tenure predate the Sarbanes-Oxley (SOX) Act. There is now, however, a broad international debate. People disagree on what the best reforms will be, how to implement them and indeed whether reform is necessary.

Costs and any potential unintended consequences will have to be considered.

Through responses to our 2011 concept release and the substance of our public meetings, we have elucidated many of the questions asked by the concept release. Through

research and public meetings with experienced investors, financial statement preparers, academics, audit firm professionals and regulators, the PCAOB has amassed a great amount of public opinion, insight and evidence on auditor independence, objectivity and professional skepticism. Expert views have differed as they are apt to do on any major public policy issue.

The PCAOB continues to focus on independence through inspections and standards setting.

When examining specific accounting and audit issues on an engagement, would the PCAOB examine the rest of the other engagements selected for inspection to see if the same issue is pervasive, instead of just examining deficiencies on an engagement-level basis?

The board uses a risk-based approach to select which audits will be reviewed during a firm’s inspection. For small firms with only a handful of clients, PCAOB inspectors may review portions of all of their audits. For larger firms, inspectors will choose a larger sampling. In general, PCAOB inspection methodology is consistent across the firms and audits that are inspected.

After completion of the inspections field work, PCAOB inspectors discuss the findings with the firms. The PCAOB then issues a report that focuses on areas where inspectors found audit deficiencies. When audit deficiencies have been found, inspectors

consider whether those deficiencies suggest the existence of a defect or potential defect in the firm’s system of quality control. In considering that question, inspectors do in fact consider, among other things, the extent to which the particular type of deficiency did or did not appear in other inspected audits that involved the need for similar audit work.

Has SOX had a positive impact on the public accounting profession and U.S. capital markets?

The achievement of the goals of the Sarbanes-Oxley Act remains essential to the health of our financial system.

The PCAOB will continue to serve these objectives by protecting the interests of investors and furthering the public interest in the preparation of informative, accurate and independent audit reports.

Industry leaders, business executives, investor advocates, regulators and academics routinely cite SOX as having a positive impact on audit quality and effectiveness as well as investor confidence in the marketplace.

Prior to the passage of SOX, very few countries had regulatory bodies similar

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to the PCAOB. Today, more than 40 countries have emulated the U.S. and established some form of formal auditor oversight.

Has there been a trend of enforcement actions against individuals versus firms?

The PCAOB Enforcement Division focuses its efforts on high-priority investigations involving significant investor protection considerations.

Its matters arise from a number of sources, including board inspections of registered firms, analysis conducted by the PCAOB Office of Research and Analysis, other regulators, public disclosures of restatements and auditor changes, news reports and confidential tips.

To date, the board has issued 56 publicly announced disciplinary orders and has imposed sanctions on 42 firms (including 27 revocations of registration) and 59 individuals (including 50 bars or suspensions). The enforcement division currently has more than 90 open informal inquiries, formal investigations and nonpublic litigated proceedings in process.

How about various violations/ enforcement actions committed since the start of the Great Recession?

We bring cases as we find violations against a person or entity that committed an alleged violation. To date, most of the board's disciplinary proceedings have involved violations of professional auditing standards.

But the board has also used its enforcement power to address other auditor misconduct, including failures to cooperate with board inspections and

investigations; to respond as required to illegal acts by an audit client; to maintain independence; to maintain appropriate quality control; to comply with the terms of board disciplinary orders; and to provide required filings and pay required fees.

Under SOX, the PCAOB's disciplinary proceedings are nonpublic, unless the board finds there is good cause for a hearing to be public and each party consents to public hearings. Auditors and audit firms charged with violating applicable laws, rules or standards have little incentive to consent to opening the cases against them to public view and, in fact, none have ever done so. This secrecy has a variety of unfortunate consequences.

The public cannot properly evaluate the board's enforcement program.

During the course of a PCAOB disciplinary proceeding, no investor, no other auditor, no audit committee and no member of the media is entitled to know what conduct the board considers to merit discipline, who the board has charged and what issues are being litigated.

Have PCAOB inspectors focused on whether registered public accounting firms have adequately audited uncertain tax positions or income tax provisions of issuers?

We conduct risk-based inspections, and that means sometimes we look at tax issues. PCAOB inspectors have identified instances where auditors appeared not to have complied with PCAOB auditing standards related to the audits of tax positions.

Regarding the PCAOB’s new oversight of registered public accounting firms that audit broker-dealers per Dodd-Frank, when do you foresee the permanent inspection program commencing? Has the PCAOB considered whether it will be scoping out “introducing” or “noncarrying” brokers?

The purpose of the interim program is to gather information to determine the scope and methodology for a permanent program. In 2013, the PCAOB plans to inspect 60 firms that audit broker-dealers and portions of 90 of those firms' broker-dealer audits. The PCAOB Division of Registration and Inspections will continue to dedicate resources to program-building activities, including development of an inspection methodology for the permanent broker-dealer program and related inspection tools. The board has not made any determinations regarding the scope of the permanent inspection program.

The views expressed by Chairman Doty are his own and shouldn’t be attributed to the PCAOB as a whole or to any other board members or staff.

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BEST

practices

Building a Diversity Plan at Your Organization

BY C ATHERINE Z. HORN, CPA, ALC ATEL-LUCENT

T

here’s no doubt that the human tapestry of the U.S. is changing. In 1995, 74 percent of the U.S. population was classified as “white.” By 2050, that percentage will fall dramatically to 52 percent.

This seismic shift has increased the need for diversity and inclusion plans in the workplace. A diversity plan is a set of actions designed to enhance the diversity of a workforce in a specific way in order to drive business success. A diversity plan helps ensure that everyone feels included – that the differences each one of us brings to

the table are understood, valued and embraced so that everyone is committed to the philosophy that the whole is greater than the sum of its parts.

People tend to think of diversity in terms of ethnicity, race, gender, age, disability and sexual orientation.

Diversity plans can be created and implemented for any size organization – from just a few to thousands of employees.

Where to Begin First, perform a gap analysis, which is the comparison of actual performance

with potential performance. Examine your organization’s mission, vision and business objectives and determine where you are falling short. The answers may be broad, but it will come down to how well your workforce is able to support and deliver on your goals. Consider the following scenarios: Is revenue or market share decreasing? Perhaps the ethnic, gender and/or generational profile of your workforce does not reflect your customer base. Clients often feel more comfortable doing business with someone more like themselves. Look

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at your staff profile and decide if you should recruit differently to expand your diversity mix. Perhaps the profile of your entry-level staff is diverse, but you have difficulty retaining this talent.

So, why are you losing strong, diverse performers? To develop a diversity plan addressing this scenario, try holding focus groups, performing exit interviews and surveying existing employees. Or, you can simply have heartfelt, one-onone conversations, particularly with key employees. Determine what you can do to recruit, develop, retain and promote employees to create your desired workforce profile.

Within your existing organization, is each employee performing to his or her potential? Could employee productivity be negatively impacted because of frustration with managers, peers or subordinates due to prejudices, misunderstandings or fears related to differences in gender, race, ethnicity, disability or sexual orientation? Here, a diversity plan might resemble a team-building plan where employees learn more about each other on a more personal level so that perceived walls can be broken down and camaraderie nurtured.

A diversity plan could also include something as simple as attending cultural events as an organization, bringing in guest speakers or having ethnic potluck lunches.

The American Institute of CPAs has created a National Commission on Diversity & Inclusion. Learn more at aicpa.org/career/diversityinitiatives/pages/ aicpanationalcommissionondiversity.aspx.

Keys to Success To help ensure the success of your diversity plan, there are several key points to remember:

U.S. Population Distribution in 2050 American Indian

1% Asian Latin American

25%

8%

White

52%

African American

14%

• Commitment must come from the top of the organization.

• Messaging must clearly articulate the linkage to the organization’s vision, mission and business objectives.

• The plan needs to be clear, attainable and regularly measured.

• The commitment should not be just to a diversity plan, but to a cultural shift in the organization. The plan cannot be viewed as the “project of the month” that management eventually loses interest in.

• Recruitment should continue to focus on obtaining the best and brightest staff for your organization.

• The plan needs to have someone who is qualified to be the day-today information source, negotiator, sounding board and overall champion.

The benefits of a successfully implemented diversity plan are far reaching. It will define your organization’s culture, enhance your revenue potential and lead to a highperforming workforce. This will result in higher employee morale that improves the way workers interact with each other and with clients.

Catherine Z. Horn, CPA, CGMA, SPHR, is a human resources director at Alcatel-Lucent. She is a member of the New Jersey Society of CPAs Volunteer Relations Committee and the Editorial Advisory Board of New Jersey CPA magazine. Contact her at cathy.horn@ alcatel-lucent.com.

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FINANCIAL

planning

The Causes of and Solutions to Economic Bubbles B Y M IT CH EL L A. FRANK LI N, C PA, SY R AC U SE U NI VE RS I T Y

F

or the past decade, our economy has been impacted by a period of market bubbles, the dot-com and housing bubbles being the most notable. Other bubbles impacting our economy are student loans, credit cards and even municipal bond markets. When bubbles burst, related financial markets fall and taxpayers, through bailouts, become responsible to maintain market stability through the infusion of resources that our

nation simply doesn’t have. To get our economy on track, it’s important to understand what causes a bubble and how to act fiscally to make sound decisions to prevent these bubbles from forming.

Typically, markets operate under the efficient market hypothesis, which states that investors make sound investment decisions based on quality information that is equally available to all market participants. If someone

is reviewing a stock, all investors have equal access to accurate financial fundamentals, and this information drives pricing. When markets are not efficient, this important information is not appropriately used in investment decisions by all parties. An inefficient market can be the result of having access to information that should be used as part of a decision but is simply ignored, either intentionally or accidentally.

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Causes The housing bubble, for example, was caused largely by mortgage lenders. Lenders became very flexible in lending and approval practices, literally ignoring potential borrowers’ financial conditions and ability to repay. Increased access to loans increased demand for homes and increased home prices. This bubble continued to increase until loans defaulted in large numbers, bank reserves vanished and the supply of foreclosed homes on the market significantly increased compared to demand. Prices tumbled and banks failed as the bubble burst. This same situation can easily be applied to student loans today based on the open and lax lending practices utilized by banks and current government policy. As investors leave equity markets, many find themselves investing in municipal bonds due to the tax attractiveness, as well as the perception of a secure investment.

But how many of these investors are carefully viewing the financials and feasibility of the municipalities’ future objectives to actually repay these bonds upon maturity?

Solutions

If we’re going to get our markets back on track, investors at all levels need to be educated on basic financial literacy to invest smartly, not emotionally. While this might be easier said than done, it will lead to significant social debate and the need for lawmakers to look at social policy to make difficult decisions, which may not sit well with many voters.

Current U.S. BUBBLES

$13.8 trillion

$1 trillion

$650 billion

mortgage debt

student loan debt

credit card debt

Student loans need to be granted based on probability of graduation and actual potential to repay relative to the amount borrowed, not a desire and right to attend a certain college.

Mortgages cannot be granted based on the social right to own a home – they can only be granted to those who have the current and documented expected future financial means to repay loans within a reasonable time frame. The Dodd-Frank ability-topay regulation is a start, but there still is a long way to go. Investors cannot invest in an initial public offering (IPO) strictly because the company sounds “cool” – they should only invest in an IPO that has solid financial numbers to prove a reasonable probability of success.

And investors cannot just blindly move from equities into municipal bonds – they need to focus on the few municipalities left in our country that actually have the ability to pay off this accrued debt within the time frame of the maturities being sold.

We have a long way to go, and our system is doing a terrible job of educating our population on these issues. As CPAs, we have the experience and knowledge to understand the importance of making investments based on facts and business sense, not emotion. The accounting profession needs to communicate these important financial literacy lessons early and often to change the way many do business – before it is too late. The time for change is now, and the future of our country depends on it.

Mitchell A. Franklin, CPA, Ph.D., is a professor at the Joseph I. Lubin School of Accounting, Martin J. Whitman School of Management, at Syracuse University. He is a member of the New Jersey Society of CPAs. Contact him at 315-443-9641 or mifrankl@syr.edu.

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FORENSIC

file

Partial Win for Golfer in Treaty Case B Y CHARL ES D. RUBIN, GUT T E R, C HAVE S, J O SE PHE R , R U B I N , FO R M A N , FL E I S H E R , M I L L E R , P. A .

allocation. The court did not believe that TaylorMade was adverse to Garcia simply because it did not want to suffer the bad publicity of the IRS disputing its tax allocation.

The tax court determined that 65 percent of the income was royalty income, thus reducing Garcia's claimed percentage but still allowing him a major allocation to royalties. This was a factual analysis, but the court borrowed from other cases (including Goosen v.

Commissioner) that dealt with similar contracts. The case is instructive for others as to the factors the court will review in testing such allocations.

What Portion of Payment Qualifies as a Royalty?

The key test employed was what portion of the payments was “for the right to use a person's name and likeness ... because the person has an ownership interest in the right.”

A

recent U.S. Tax Court case (Sergio Garcia v. Comm., 140 TC No. 6) addressed some interesting athlete and treaty issues. The court ended up siding with Garcia on some, but not all, of his positions.

Sergio Garcia is a professional golfer.

In the tax years at issue, he was a party to an endorsement agreement with TaylorMade Golf Co. Garcia was obligated to use certain TaylorMade products, both on and off the golf course (the “personal services” income).

TaylorMade also had the right to use Garcia's name and image in advertising and other promotions (the “royalties” income). The distinction between personal services income and royalties income was important because under the applicable Switzerland-U.S. income

tax treaty, royalties income is taxable only in Switzerland. Personal services income could be taxed by the U.S. as to personal services performed in the U.S.

Allocation of Payments Between Royalties Income and Personal Services Income The endorsement agreement allocated 85 percent of the TaylorMade payments to Garcia as royalties income and the rest as personal services income. The Internal Revenue Service (IRS) claimed, at least initially, that all of the payments were for personal services.

The tax court rejected that the contract allocation was binding based on a claim that the parties were adverse to each other in making this

Supremacy of Royalties Article Over Artistes and Sportsmen Article of Treaty The royalties article of the treaty gives exclusive taxing jurisdiction of royalties to Switzerland: “Royalties derived and beneficially owned by a resident of a contracting state shall be taxable only in that state.” To be able to tax the royalties payment, the IRS argued that, as an athlete, the artistes and sportsmen article overrides the royalties article and applied to Garcia, thus allowing the U.S. to tax those payments: “Income derived by a resident of a contracting state as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician or a sportsman, from his personal activities as such exercised in the other contracting state may be taxed in that other state.”

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In resolving disputes between the articles, the Treasury technical explanation provides that, “The controlling factor will be whether the income in question is predominantly attributable to the performance itself or other activities or property rights.”

Applying this test, the court found that: “We believe that even though petitioner's golf play and personal services performed in the United States have some connection to his U.S. image rights, income from the sale of such image rights is not predominantly attributable to his

performance in the U.S. Rather, the image rights are a separate intangible that generated royalties (as defined by article 12(2)) for petitioner when TaylorMade paid him for its use.” Thus, the court concluded the royalties article prevailed and that the U.S. had no jurisdiction over the royalty portion of the payments.

Charles D. Rubin, J.D., LL.M., is a tax attorney with the firm of Gutter, Chaves, Josepher, Rubin, Forman, Fleisher, Miller, P.A. Contact him at 800-288-2925.

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Golf''s top earners in 2012 Tiger Woods Phil Mickelson Arnold Palmer Jack Nicklaus Rory McIlroy

$86 million $45 million $36 million $28 million $23 million

INDUSTRY

insights

Is the U.S. Making Plans for an International Corporate Tax Holiday?

B Y DA NIEL R. ARCURI, C PA, L’ O R E AL

600,000 jobs were cut between 2004 and 2005.

Tax holiday discussions came up again in 2009, but the loss of tax revenue for the U.S. government was estimated at $30 billion over a 10-year period. Thus, no holiday was granted.

What to Do with That Mountain of Cash

C

urrently, there is approximately $1.7 trillion (with a “t”) in U.S. corporate funds sitting idly overseas.

Recently, companies such as Apple, PepsiCo, Pfizer and others have been requesting that Congress grant a corporate tax holiday so they can bring that cash held abroad back to the U.S.

Tax Holiday Case Study There was such a tax holiday in 2004 when approximately $362 billion was repatriated to the U.S. from corporate firms abroad. However, since the benefits were contrary to what the government expected, there was concern over granting another holiday.

Furthermore, the top beneficiaries of the 2004 tax holiday – technology and pharmaceutical companies – slashed approximately 20,000 jobs instead of creating jobs (as promised), and at least

When companies repatriate money from overseas, there are many things that can be done with those funds.

For example, corporations can invest in research and development, reduce debt, create jobs, repurchase stock, issue dividends, increase executive compensation, and undertake mergers and acquisitions.

Unfortunately, when the U.S. government grants a tax holiday, it does not dictate what the multinational corporations can do with the tax savings, and this is one of the biggest issues for both sides of the argument. The government can make recommendations, but they are not requirements, and the government could lose billions in tax revenue.

One option is to not offer a taxfree holiday, but rather a temporary nominal tax rate of perhaps as low as 5 percent or slightly higher – the 2004 holiday also offered a similar low tax rate. The argument is that some tax revenue is better than no tax revenue. There are also discussions about whether or not the government should dictate what the money should be used for, such as infrastructure projects. Again, this would only work if the restrictions were enforced as requirements as opposed to recommendations.

Leveling the Playing Field At 35 percent, the U.S. corporate tax rate is one of the highest in the world. And although corporations receive a foreign tax credit to avoid double taxation, they end up paying the higher of the two tax rates.

Therefore, if a U.S. corporation is doing business in Ireland, it would end up paying the 35-percent tax rate instead of Ireland’s 12.5-percent tax rate. This has been one of the many arguments for a tax holiday, as echoed by the Organization for Economic Cooperation and Development, which would like the U.S. tax rule to be aligned with the rest of the world and not tax companies on their worldwide profits.

Multinational corporations are also supposed to create accounts to cover the deferred tax liabilities, but many companies instead permanently declare that the funds are invested overseas.

Congress can either grant a tax holiday or revise the U.S. tax policy on foreignearned income, but many will argue that something needs to be done so corporations can bring back funds from overseas and invest them locally.

What Are the Odds of Another Tax Holiday?

There may not be a direct correlation between the amount of profits brought back into the U.S. and layoffs, but the concern is that these large multinational corporations are promising job growth and increased headcount but are actually reducing their headcount and increasing executive compensation while receiving a tax break from the government. In the end, a corporate tax holiday is a touchy subject, and many companies

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would like to repatriate their profits instead of permanently keeping them overseas. Unfortunately, unless Congress can impose restrictions, it is unlikely that it will grant another tax holiday in the near future.

Selected U.S. Corporate Cash Abroad

Microsoft $58 billion Pfizer $73 billion

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.

Apple $82 billion GE $102 billion

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SMALL/SOLE

practitioner

Big Changes in NJ LLC Law B Y GIANFRANCO A. P I E T R AF E SA, ARC HE R & GR E I NE R

interest rate higher than one available from a bank. Unless owners B and C agree, owner A has breached his or her duty of loyalty since the terms of the loan are not fair to the LLC. Under the old law, there was no fiduciary duty of loyalty specified in the statute and nothing definitive in the case law.

Oppression

owners B and C can outvote owner A, 2-1, although they own only 18 percent of the LLC. Also, any major decisions, such as a merger of the LLC or sale of the LLC’s assets, require a unanimous vote.

Assume owner A mistreats owners B and C by, for example, reducing their compensation or withholding information. They can file a lawsuit and, depending on the nature and extent of the oppressive conduct, the court may appoint a custodian to run the business or force owner A to purchase the equity interests of owners B and C, among other things.

Minority owners did not have such rights or remedies under the old law, since oppression was not addressed in the statute and the case law was inconsistent.

Resignation

Operating Agreement

Assume owner A contributes $90,000 and owner B contributes $10,000 to an LLC. They may expect to share profits on a 90/10 basis, which was the case under the old law. However, under the new law, they share profits on a 50/50 basis.

Assume owner A is disillusioned and resigns from the LLC. By resigning, he or she loses the right to vote and manage the LLC, but continues to own an economic interest entitling him or her to receive any distributions from the LLC. By contrast, under the old law, owner A would have his or her equity interest purchased by the LLC for fair value.

Voting

Fiduciary Duty of Loyalty

Assume owner C joins the LLC by contributing $10,000. Owner A, contributing nearly 82 percent of the capital, may think that he or she makes all of the decisions for the LLC, which was true under the old law. However, under the new law each owner has an equal vote, and decisions are made by the majority of the owners. As a result,

Assume owner A forms another LLC to engage in the same business – for example, an LLC to acquire and hold real estate. Owner A would be surprised to learn that he or she has breached his or her fiduciary duty of loyalty to owners B and C by starting a competing business. Further assume owner A lends money to the LLC at an

There were legitimate reasons for the changes in the law. Among them, the statute protects minority owners of an LLC by, for example, treating all owners equally. Fortunately, the first four changes are default statutory provisions that will apply only if the LLC does not have an operating agreement. In fact, in drafting the statute, it was assumed that where owners make different capital contributions or have unique economic arrangements, the LLC would have an attorney prepare an operating agreement to change these default provisions.

N

ew Jersey’s new LLC law – the New Jersey Revised Uniform Limited Liability Company Act (RULLCA) – already applies to any LLC formed on or after March 18, 2013, and will apply to all LLCs, both new and old, on March 1, 2014. The following are some key changes to this law:

Distributions

These changes in the law can lead to surprising results if CPAs and their clients do not prepare for them. As such, it pays to have a written operating agreement so that the owners do not

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have to go to court to prove the terms of an oral or implied agreement. Every LLC should have a written agreement, and existing agreements should be reviewed in light of changes in the law.

LLCs vs. Corporations Formed in NJ in 2012

Gianfranco A. Pietrafesa, Esq., is a partner in the law firm of Archer & Greiner. He is the immediate past chair of the Business Law Section of the NJ State Bar Association and a member of the committee that drafted RULLCA for NJ adoption. Contact him at gpietrafesa@archerlaw.com. To read more on this and other legal issues, visit archerlaw.com.

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TAX

talk

Medicare Tax Planning for High-Income Clients

BY GUY MCPHAIL, CPA, THE GM CPA GROUP P.C.

A

s we head into the home stretch of 2013, this could be an especially important year for your higher-income tax clients. There could be a big surprise waiting for them if you haven’t done your homework to inform them about the new Medicare Tax Act. And, if your clients are like mine, they don’t like costly surprises.

The Medicare tax provisions of the Affordable Care Act have already taken effect. This means an additional 0.9-percent tax on earned income above $200,000 ($250,000 for joint filers) and a 3.8-percent tax on investment income for taxpayers earning more than $200,000 ($250,000 for joint filers).

The unearned income Medicare contribution tax is an additional tax

of 3.8 percent. This tax is in addition to any regular income taxes. The tax is calculated by multiplying the 3.8-percent tax rate by the lower of net investment income for the year, or modified adjusted gross income over a certain threshold amount.

Net investment income for the purposes of calculating the unearned income Medicare contribution tax includes interest, dividends, capital gains, annuities, royalties, rents and pass-through income from a passive business such as an S corporation or partnership.

The following types of income will not be subject to this additional Medicare tax: tax-exempt municipal bond interest; nontaxable veterans benefits; capital gains excluded from

the sale of a principal residence; and distributions from IRAs, 403(b) plans, 401(k) plans, 457 plans, pensions, profit-sharing plans, stock bonus plans or qualified annuity plans.

Perform tax projections for your higher-income clients this fall. This is a perfect opportunity to distinguish yourself by giving your clients the extra value that a CPA provides. If you don’t normally do this with your client base, it is a great way to increase revenue and help save your clients money. Here are possible strategies to assist your clients: • Increase payroll withholding or estimated taxes to cover the additional Medicare tax.

• Shift income-producing investments into tax-deferred plans such as IRAs, 401(k)s or defined benefit accounts.

• Consider tax-exempt municipal bonds instead of taxable bonds.

• Harvest capital gains with capital losses so that net capital gains are as low as possible.

• Defer selling investments with capital gains to a year when the additional Medicare tax would not apply.

• Give income-producing investments to children or other family members who are not subject to the additional Medicare tax.

• Manage clients’ modified adjusted gross income (MODI) around the thresholds for the Unearned Income Medicare tax.

• Convert IRAs to Roth IRAs to avoid future required minimum distributions that will put highincome taxpayers over the MODI limits.

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• Meet the material participation test for S corporations or partnerships.

If these investments are passive, the income will be subject to the Medicare surtax. If, however, the owner actively participates in business activities, this income will not be subject to the Medicare surtax.

• Consider meeting the real estate professional test for income generated by rental properties. Similar in concept to the aforementioned material participation test, rental income that is passive is subject to the Medicare tax, while rental income for which the property owner meets the real estate professional test will be nonpassive and, thus, not subject to the Medicare surtax.

Medicare Cost Projections As a Percentage of U.S. Gross Domestic ProducT

8% 6% 4% 2020

CPAs should provide the clarity and financial education to help prepare highly compensated individuals or families for the Medicare tax-related changes. The goal is to try to get their MODI beneath the thresholds for this Medicare surtax. It isn’t too late to get educated on all the provisions of this new surtax and pass the benefits on to your clients, but time is running out.

Guy McPhail, CPA, PFS, CFP, is the principal of The GM CPA Group P.C. He is a member of the New Jersey Society of CPAs Personal Financial Planning Interest Group. Contact him at gmcphail@njbizcpa.com or 609-7376600.

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2035

2060

TECH

center

The Impact of Technology Company Consolidation on CPA Firms B Y PAUL PETERS ON, C PA, W I SS & C OM PANY, LLP

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hether you’re a larger CPA firm or sole practitioner, technology plays a pivotal role in running a successful practice. The past decade has seen considerable consolidation within the accounting technology industry, with the giants absorbing smaller companies to add to their product suites. While this should continue in the short run, over the long haul the rise of new transformative technologies, such as cloud/software as a service and mobility, may fundamentally change the way these technology companies, large and small, interact and compete. This change could have a profound impact on how CPA firms select and benefit from technology solutions.

Recent consolidation has left a small group of technology behemoths

jockeying for position as the central accounting ecosystem. Larger accounting and tax technology companies continue to make acquisitions as they try to be a onestop shop for all firm needs, from tax preparation to compliance to practice management.

The systems offered by these large tech companies, such as CCH and Thomson Reuters, have traditionally been closed systems, making integration difficult. You must either use their products or face a difficult, uphill battle to try to integrate third-party offerings.

For anybody to figure out how to hook into their systems, reverse engineering was considerable.

CPAs must choose to either go with the suite from one of the large vendors and use all of its products, even

though it may not be ideal for their needs, or choose best-of-breed from multiple vendors and be prepared to spend much time and money to attempt to get them to work together.

CCH’s recent introduction of its Axcess platform, which is built on an open architecture, may signal a sea change in how large tech companies will do business going forward. Best-ofbreed companies and innovative startups are always going to be acquisition targets. But this move toward an open architecture may indicate that the focus of these large conglomerates has shifted from obtaining the best-of-breed companies to partnering with them.

The industry majors’ appetites for building brand new applications or purchasing external ones and getting them to work within their platforms may be waning. The large companies’ systems would certainly remain the central part of the overall ecosystem, but they would let the start-up companies do the market research, develop the niche applications and build market share. They would then simply “join worlds” with third-party providers by allowing them to hook into their ecosystems – based on some sort of fee structure.

So what does all this mean for CPA firms going forward? Consolidation is often viewed as a negative by those buying the services. It leads to fewer provider choices, can potentially inhibit innovation and may limit the ability to access solutions that best fit firms’ needs if they won’t easily integrate into their main systems. But the introduction of the new open architecture environment and the potential move away from the traditional acquisition mentality could mean the exact opposite for CPA firms.

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TAX PREP MARKET SHARE CCH 32% Intuit 31% Thomson Reuters 22% Drake Software 6% Other 9%

Firms would now be free to choose the solution that best fits their needs and solves their problems, rather than being forced to put all of their eggs in one basket and simply select everything from a single provider. If they decide that a solution outside of the CCH or Thomson Reuters suite does something better, they could go that route without worrying about the higher costs and headaches of system integration.

In the long run, this helps firms from an internal operations perspective and helps their clients as well. Being able to have things run more smoothly when collaborating with clients and delivering a better work product would be pluses for both firms and their clients.

Consolidation within the technology industry will always exist. But this move toward an open architecture environment may indicate a shift in the overall dynamics of the industry, from an acquisition mentality to a partnership model. In the end, that could be good news for CPA firms.

Paul Peterson, CPA, M.B.A., is the managing partner at Wiss & Company, LLP. He is a member of the New Jersey Society of CPAs. Contact him at 973994-9400.

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2013/14 Chapter Presidents Hudson

Atlantic/Cape May

Jennifer R. Peoples, CPA, Senior Accountant, Fazio, Mannuzza, Roche, Tankel, LaPilusa LLC, Cranford, joined the New Jersey Society of CPAs in 1999. In the Hudson Chapter, she has served as secretary and treasurer. She is currently a member of the NJSCPA Strategic Planning Committee, has served as a member of the Financial Literacy Committee and served on the NJSCPA Board of Trustees as a trustee. This is People’s fourth term as president.

Peoples earned her B.S. in accounting from New Jersey City University and M.B.A. in management from Fairleigh Dickinson University. She and her husband, Daryl, reside in North Plainfield and have two daughters.

Teresa L. Zipf, CPA, Financial Consultant, Benjamin F. Edwards & Co., Northfield, joined the New Jersey Society of CPAs in 1997. In the Atlantic/Cape May Chapter, she has served as vice president, secretary, treasurer and director.

Zipf is a member of the American Institute of CPAs. Zipf earned her A.S. in business administration from Atlantic Cape Community College and B.A. in accounting from Richard Stockton College of New Jersey. She resides in Egg Harbor Township.

Bergen

John M. Lisa, CPA, Sole Practitioner, Fairfield, joined the New Jersey Society of CPAs in 1978.

In the Bergen Chapter, he has served as vice president, secretary, treasurer and director.

Lisa is a member of the American Institute of CPAs and served as a member of the Tax Society of New York University.

In his community, Lisa has served as a coach for the North Caldwell Baseball Association, president of the North Arlington Rotary Club and currently serves on the board of the North Caldwell Board of Adjustment. He has also served as an adjunct professor of accounting at Saint Peter’s University and has lectured before business and professional associations. He is a recipient of the Paul Harris Fellow from Rotary International.

Lisa earned his B.S. in accounting from St. Peter’s University and M.B.A. in taxation and finance from New York University. He and his wife, Zena, reside in North Caldwell and have two sons.

Mercer

Michael J. Kirchner, CPA, Audit Manager, EisnerAmper LLP, Edison, joined the New Jersey Society of CPAs in 2008. In the Mercer Chapter, he has served as vice president, secretary, treasurer and director.

Kirchner is a member of the American Institute of CPAs. In his community, Kirchner is a fundraiser for Junior Achievement’s bowling events.

Kirchner earned his B.B.A. in accounting from Monmouth University and M.B.A. in finance from Rider University. He and his wife, Kristen, reside in Howell and have a son and a daughter.

Middlesex/Somerset

Melanie Cobb, CPA, Tax Controversy Specialist, E. Martin Davidoff & Associates, Dayton, joined the New Jersey Society of CPAs in 2006. In the Middlesex/Somerset Chapter, she has served as vice president, secretary and director. She is a member of the NJSCPA State Taxation Interest Group and has served as a member of the Young CPAs Resource Group and the Federal Taxation; Personal Financial Planning; and Estate, Trust & Gift Taxation interest groups.

Cobb is a member of the American Institute of CPAs. In her community, Cobb is a board member of South County Day Care and Donations Coordinator for the EveryDay Angels Foundation.

Cobb graduated with an A.S. from Berkeley College and a B.S. in accounting and criminal justice from Rutgers University. She and her husband, Michael, reside in Spotswood.

Essex

William J. Ryan, CPA, Manager, Smolin, Lupin & Co., P.A., Fairfield, joined the New Jersey Society of CPAs in 2002. In the Essex Chapter, he has served as vice president and director.

Ryan serves as a director of the Builders and Remodelers Association of Northern New Jersey.

Ryan earned a B.B.A. in accounting from Montclair State University. He and his wife, Kathleen, reside in West Orange and have a son.

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Monmouth/Ocean

Garcia has served as vice grand chancellor of Tau Kappa Phi Fraternity, FEU Law, Manila and president of the International Student Club of St. Thomas Aquinas College.

Garcia earned his LL.B. in law from Far Eastern University, Manila; B.S.A. in accounting from St. Thomas Aquinas College; and LL.M. in law from Hofstra University. He and his wife, Lorelei, reside in Clifton and have a son.

Robert J. Brown, CPA, Senior Manager, Cowan, Gunteski & Co., P.A., Tinton Falls, joined the New Jersey Society of CPAs in 2003. In the Monmouth/ Ocean Chapter, he served as vice president, secretary, treasurer and director. He has also served as a member of the NJSCPA Business Valuation Forensic Litigation Services and Valuation Services interest groups as well as leader of the Matrimonial Accounting Interest Group.

Brown is a member of the American Institute CPAs, Association of Certified Fraud Examiners and the National Association of Certified Valuation Analysts.

In his community, Brown served as treasurer of the Education Foundation of Little Silver.

Brown earned his B.S. in business administration from Muhlenberg College and M.B.A. in accounting and finance from Fordham University. He and his wife, Kathleen, reside in Little Silver and have a daughter and a son.

Southwest Jersey

Margaret Van Brunt, CPA, Assistant Dean, Rowan University, William G. Rohrer College of Business, Glassboro, joined the New Jersey Society of CPAs in 1978. In the Southwest Jersey Chapter, she has served as vice president, secretary, treasurer and director. She is currently a member of the New Jersey CPA magazine Editorial Advisory Board and has also served as a member of the NJSCPA Educators Committee and Tax Resource Group.

In her community, Van Brunt serves as the advisor to the Bureau of Business Associations at the Rohrer College of Business and coordinates its Business Supervised Internship program. She is a recipient of the Volunteer Income Tax Assistance Program Award from the Internal Revenue Service for her 10 years of service.

Van Brunt earned her B.A. in accounting from Rutgers University-Camden. She and her husband, Robert, reside in Cherry Hill and have a son and a daughter.

Morris/Sussex

Robert P. Sokoloff, CPA, President, Robert P. Sokoloff, CPA, P.C., Lincoln Park, joined the New Jersey Society of CPAs in 1998. In the Morris/ Sussex Chapter he has served as vice president, secretary and director. He has also served as a member of the NJSCPA Federal Taxation and State Taxation interest groups. This is Sokoloff’s second term as president.

Sokoloff is a Quickbooks Pro Advisor and a member of the Tri-County Chamber of Commerce. In his community, Sokoloff is a Eucharistic Minister at Our Lady of Good Counsel Church.

Sokoloff earned his B.S. in accounting from Seton Hall University.

He and his wife, Mary, reside in Pompton Plains and have four sons, a daughter and two grandsons.

Union County

Jerome M. Newler, CPA, Principal, J. M. Newler CPA & Co., Springfield, joined the New Jersey Society of CPAs in 1980. In the Union County Chapter, he has served as vice president, treasurer and director. He has also served as a member of the NJSCPA Professional Conduct Committee and the Business Valuation Forensic Litigation Services Interest Group. This is Newler’s second term as president.

He is a member of the American Society of CPAs, the National Association of Certified Valuation Analysts and the Institute of Business Appraisers. A frequent lecturer for various business and legal groups, including the NJ Judicial College, New Jersey State Bar Association and the Hispanic Bar Association, he has been listed in Who’s Who and has been accepted to the NACVA’s Wall of Fame.

In his community, Newler is a member of Disabled American Veterans, B’nai Brith and Alpha Epsilon Pi. Newler earned a B.B.A. in accounting and marketing from Marquette University. He resides in Long Branch and has a son and a daughter.

Passaic County

Larry G. Garcia, CPA, Sole Practitioner, Larry Garcia CPA LLC, Clifton, joined the New Jersey Society of CPAs in 2004. In the Passaic County Chapter, he has served as vice president, secretary, treasurer and director. He has also served as a member of the NJSCPA Federal Taxation; State Taxation; Estate, Trust & Gift Taxation; and Cooperation with IRS interest groups.

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CPE Offerings and Events Upcoming Education Foundation Events Date

Event/Code

Location

CPE Credit

9/30

Excel Financial Reporting and Analysis (E1309113)

Roseland

4/AA, 4/CS

10/1

Business Valuation, Forensic Investigation and Litigation Services Conference (E1310020)

Edison

8/MC

10/1

QuickBooks Advanced Features, Tools and Techniques (E1310081)

Roseland

2/CS, 6/AA

10/2

Budgeting, Forecasting and Business Analytics (E1310093)

Roseland

4/AA, 4/MT

10/7

Internal Control (E1310223)

Roseland

8/AA

10/7

Advanced Auditing of HUD-Assisted Projects (E1310301)

Iselin

8/AA

10/7

Redefining the Close Process (E1310553)

Roseland

8/MT

10/8

Government and Not-for-Profit Frauds (E1310311)

Roseland

8/AA

10/8

Financial Managers Skills Workshop (E1310383)

Iselin

8/MT

10/8

Advanced Mergers, Acquisitions and Sales (E1310373)

Roseland

8/TX

10/8

Best Practices in Budgeting (E1310343)

Voorhees

8/MT

10/9

Business Law Essentials (E1310353)

Iselin

8/MT

10/9

Critical Controllership Tools (E1310393)

Roseland

8/AA

10/9

New Jersey Law and Ethics Webinar (E1310044)

N/A

4/PE

10/10

Connect: Leveraging NJSCPA’s Online Community for Business (E1310744)

N/A

1.5/CS

10/14

International Versus U.S. Accounting (E1310263)

Iselin

8/AA

10/15

Tax Strategies for Businesses (E1310363)

Roseland

8/TX

10/17

New Jersey Taxation Conference (E1310270)

Iselin

8/TX

10/17

Advanced Form 1041 Practice Workshop (E1310401)

Roseland

8/TX

10/18

The Best Income Tax, Estate Tax and Financial Planning Ideas of 2013 (E1310411)

Roseland

8/TX

10/21

The Complete Guide to Payroll Taxes and 1099 Issues (E1310423)

Roseland

8/TX

10/21

Fringe Benefits 2013/14 (E1310111)

Iselin

8/TX

10/22

Advanced Tax Update for Experienced Professionals (E1310101)

Iselin

8/TX

10/22

Loscalzo's Auditing Manual Utilizing the Risk-Based Audit Standards (E1310161)

Voorhees

8/AA

10/22

The Top 50 Mistakes Practitioners Make and How to Fix Them: Individual Tax and Financial Planning (E1310431)

East Hanover

8/TX

10/22

The Best S Corporation, Limited Liability and Partnership Update Course by Surgent McCoy (E1310591)

Freehold

8/TX

10/23

Shortcuts to Tax Cuts: Individual Tax, Social Security and Retirement Planning Tools and Strategies (E1310601)

Freehold

8/TX

10/23

Exploring the Updated Internal Control Framework: Critical Concepts in Design, Evaluation, Implementation and Monitoring (E1310443)

Roseland

8/AA

10/23

Loscalzo's Hands-On Guide to Understanding and Testing Internal Control (E1310171)

Voorhees

8/AA

10/23

Loscalzo's Deceptive Revenue Recognition and Other Accounting Techniques – Recognizing the Warning Signs (E1310183)

Roseland

8/AA

10/23

Social Security Benefits: Advising Clients (E1310121)

Iselin

8/TX

10/24

Loscalzo's Tax Practitioner's Guide to Accounting and Reporting Issues (E1310191)

Roseland

8/AA

10/24

Metrics Management: Choose and Use Key Performance Indicators (E1310023)

Roseland

4/AA, 4/MT

10/24

Surgent McCoy's Federal Tax Camp (E1310010)

Edison

8/TX

10/24

AICPA's Guide to Business Combinations, Goodwill and Other Consolidation Issues (E1310203)

Iselin

8/AA

10/24

Real-World Fraud: War Stories from the Front Lines (E1310453)

Voorhees

8/AA

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Date

Event/Code

Location

CPE Credit

10/24

Peer Review – Practical Guidance (E1310291)

Iselin

8/AA

10/25

Fair Value Accounting: Making the Complex Issues Understandable (E1310463)

Voorhees

8/AA

10/25

Make Money for You and Your Clients: Surgent McCoy's Top Business Tax Planning Strategies (E1310471)

Roseland

8/TX

10/25

FVA: Fair Value Accounting (E1310213)

Iselin

8/AA

10/25

Performance Analysis: Identify Profit Improvement Opportunities (E1310033)

Roseland

8/AA

10/28

Loscalzo's Using Tax Basis and Other Special Purpose Frameworks Presentations Effectively and Professional Ethics for New Jersey CPAs (E1310131)

Jamesburg

4/AA, 4/PE

10/28

Choosing the Best Entity Structure Under the New Tax Law in 2013 (E1310481)

Roseland

8/TX

10/28

Gary Zeune's Fraud 2013 Alert for Small and Midsize Firms (E1310523)

Roseland

8/AA

10/29

Sales and Use Tax Conference (E1310060)

Roseland

8/TX

10/29

College Financial Planning Conference (E1310070)

Roseland

8/MC

10/29

Loscalzo's GAAP Refresher (E1310151)

Jamesburg

8/AA

Upcoming Chapter Events Date

Chapter

Event/Code

Location

CPE Credit

9/27

Southwest Jersey

New Jersey Law and Ethics (E1309369)

Voorhees

4/PE

9/27

Hudson

New Jersey Law and Ethics (E1309419)

TBA

4/PE

10/1

Bergen

Accounting and Auditing (E1310759)

Paramus

4/AA

10/1

Passaic County

Nonprofit Accounting and Auditing (E1310719)

Paterson

4/AA

10/3

Mercer

Affordable Health Care Act Update (E1310779)

West Windsor

4/TX

10/4

Essex

New Jersey Law and Ethics (E1310639)

East Hanover

4/PE

10/10

Passaic County

Sales Tax Update (E1310729)

Paterson

2/TX

10/17

Bergen

New Jersey Law and Ethics (E1310259)

Paramus

4/PE

10/17

Passaic County

New Jersey Law and Ethics (E1310669)

Paterson

4/PE

10/18

Atlantic/Cape May

Tax Topic – Cooper Levenson (E1310679)

Somers Point

4/TX

10/18

Monmouth/Ocean

Broadway Theatre and Dinner Trip (E1310619)

New York

N/A

10/19

Middlesex/Somerset

New Jersey Law and Ethics (E1310659)

Somerset

4/PE

10/21

Monmouth/Ocean

New Jersey Law and Ethics (E1310629)

Neptune

4/PE

10/24

Hudson

New Revenue Recognition and Lease Guidance (E1310819)

TBA

4/AA

10/24

Bergen

Bankers Cocktail and Networking (E1310769)

TBA

1/EC

10/29

Mercer

Bureau of Securities Overview, Current Investment Schemes, the Sandwich Generation: Caught in the Middle (E1310789)

West Windsor

2/CS

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

Please note: Events are subject to change. For a full listing of all NJSCPA events, visit njscpa.org/catalog.

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Get Involved Being a Leader Who Rocks In June, NJSCPA Convention & Expo attendees in Atlantic City had the opportunity to connect with people, issues and possibilities to help them serve their organizations, clients and the Society.

And New Jersey Society of CPAs volunteer leaders – including the board of trustees, interest group/committee leaders and vice leaders, and chapter officers – got to explore those possibilities by transforming into rock stars.

Keynote speaker and Rock and Roll Fantasy Camp (RRFC) founder David Fishof brought a team of rockers to the convention to talk about the business of rock ’n roll, jam with Society members and have some fun. “Creativity is the key. You must not only be able to come up with ideas, but you need to execute them in order to succeed,” said Fishof. At the convention, Fishof presented his “Six Principles to Rock Your Business.”

1. Prepare yourself.

2. Keep it fresh.

3. Stay in touch with clients year-round.

4. Recommend professionals who can help your clients.

5. Look for opportunities for your clients.

6. Get to know your clients’ goals.

Fischof’s rockers helped five bands of Society leaders write and perform for the rest of the convention attendees. “The music industry in the ’60s and early ’70s was not about business,” said Kasim Sulton who’s performed with Meat Loaf, Hall & Oates, Cheap Trick, Joan Jett and others. “We were partying and having a good time. Over the years it’s become much more of a business. It takes a lot more effort to be a businessperson than it does to be a musician.”

Guitarist Gary Hoey agreed. As a musician, he’s toured with Ted Nugent, Foreigner, The Doobie Brothers and Deep Purple, among others. He’s found that any business is about relationships, not money. “Don’t go out there and try to make a lot of money. Go out and make fans and good music. Work really hard and people will notice. Keep that integrity and that will give you longevity in any business you’re in,” advised Hoey. He made a fan of

Society members jam at the NJSCPA Convention & Expo in Atlantic City.

Monmouth/Ocean Chapter President Robert J. Brown, CPA, who learned some valuable leadership lessons. “A challenge (a song) can have different solutions (music and lyrics) which can be equally effective, and leaders need to be open to such possibilities.” Brown also found that consensus building is difficult when you have a group of 20 CPAs. Yet, he learned a couple of things, like not to take himself too seriously, and why work when you can sing.

Guitarist and songwriter Johnny A. followed his dream, even when his record producer ran out of money. “I mortgaged my house, finished the record and started selling records out of my car trunk,” said Johnny. “I sold 8,500 copies in ten months and made $110,000.” He soon got picked up by a bigger label, and that record spawned his number-one single, “Oh Yeah.” “I never looked back,” he said. His dream led to a deal with Gibson guitar where he designed his own guitar, which is the second most successful signature guitar in Gibson’s history next to the Les Paul. Essex Chapter Director Jesse M. Herschbein, CPA, was on Johnny’s team. “During our sessions, some conflict among our team members was probably inevitable. Johnny looked like he’s seen that type of band drama before. So, he let us come

to the realization that we were arguing over things we didn’t need to, and that a resolution was there for the taking if, and only if, we were willing to listen and compromise.”

“The RRFC made it clear when you need to take a back seat and let others run with things,” shared Young CPAs Council Chair Sarah Krom, CPA, who was in drummer Sandy Gennaro’s band. Gennaro has played with Cyndi Lauper, Michael Bolton, Robin Gibb and The Monkees.

“Everybody has music in their lives,” Gennaro said. “To me, the drums hold the thing together.

No matter what happens, the beat has to stay as consistent as possible. Every team needs someone to be that person.”

Volunteer Relations Committee Chair Patricia Vroman-Stuart, CPA, felt that the RRFC was the right venue to tap into the creativity and hidden resources of our leaders. “All leaders need to find a way to motivate team members, but they have to listen to everyone,” Vroman-Stuart said.

“Let everyone have a voice and you might be surprised at what they may know or suggest.”

Vroman-Stuart, as part of keyboardist and guitarist Larry Oakes team, keyed into his opening comments. “It’s not so much what you bring to the table, it’s how well you work together.” Oakes should know – he has worked

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with Bad Company, The Derek Trucks Band and Foreigner.

After each Society band performed, the professionals took the stage. Leaders had an exclusive backstage pass while they set up. “I found the stage preparations each musician went through fascinating,” commented Insolvency and Reorganization Interest Group Leader Elizabeth Y. LaCorte, CPA. “There are individuals with unique talents who need to come together to complete the project. When we were working together I had to remember that this is what these artists do for a living. If they say it will or won’t work, then we needed to listen.”

Atlantic/Cape May Chapter Secretary Chandra D. Anaya, CPA, offered: “Don’t be afraid to step outside of the box. You learn a lot about yourself and how others see you.” To see pictures of the rockers and video of their performances – along with NJSCPA leaders in rock and roll garb including wigs, fake tattoos, bandanas, sunglasses, and spandex and leather pants – visit facebook.com/njscpa.

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 are a few activities that need your support now: Young CPAs Food Drive – The NJSCPA Young CPAs Council is sponsoring a food drive for the Community Food Bank of New Jersey from Monday, September 16, through Friday, November 22. Bring your nonperishable items to NJSCPA headquarters in Roseland. Additional drop-off locations are listed at njscpa.org/youngcpas. Invite your coworkers to participate. Contact Lauren Walsh at lwalsh@njscpa.org.

Pay It Forward Speakers – Revisit the hallowed halls of high school as a speaker during Pay It Forward week beginning November 11. Tell high school students about the career opportunities that come from pursuing an accounting degree. Our ready-to-go presentation, which includes speaking points, fun facts, quizzes and videos, makes it fun, easy and rewarding. Pick the school or location where you would like to speak when you register online at njscpa.org/payitforward. Contact Lauren Matullo at lmatullo@njscpa. org for more information.

NJSCPA Mentor Program – CPA members age 35 or younger are needed to be mentors for the 2014 NJSCPA high school scholarship recipients to provide guidance throughout their college careers. Apply online by December 13 at njscpa.org/mentor.

Contact Janice Amatucci at jamatucci@njscpa.org for more information.

NJSCPA Member Benefits Marketplace Welcomes New Partners New Jersey Society of CPAs members now have more ways to save money on business products and services. The NJSCPA Member Benefits Marketplace has added to its growing list of programs and discounts: Capital One Credit Card – Three great credit card options are available: a card with a low introductory APR, one for those who want to build credit through responsible use and a generous rewards card.

CPASuccessionMatch – A matchmaking website for CPAs looking to sell, grow or buy a firm. Subscribers can anonymously search for and contact a buyer, seller or merger match in a confidential environment.

PRCounts – Members save 20 percent on public relations, marketing, branding, communications, print and website design services.

The PromoTouch – Members save up to 30 percent on branded products, embroidered or screened apparel, corporate incentives, gift and awards programs, and tradeshow items.

Transition Advisors LLC – A nationally recognized consultant on succession, mergers and acquisitions, and partnership issues for small and mid-sized firms. Transition Advisors LLC specializes in advising managing partners who are actively pursuing growth and succession strategies.

Yaeger CPA Review – Members can save $200 on this CPA Exam review program.

For more information about these and other member benefits, visit njscpa.org/marketplace.

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SOCIETY

pages

NJ State Board of Accountancy Report Due Diligence for a New Disciplinary Database Newark (June 20)

Statutes/Rules/Regulations – Letters have been sent to select educators for commentary on the revised education requirements.

President’s Remarks

Public

Board President John Dailey, CPA, congratulated Gerard Abbattista, CPA, on becoming the New Jersey Society of CPAs’ 92nd president.

Dailey discussed his recent attendance at a regional meeting of the National Association of State Boards of Accountancy (NASBA). He shared with the board a database program called ALD that is designed to track if any out-of-state CPA has received any disciplinary action. Dailey indicated that ALD is currently being used in 45 states, and he asked the Monitoring Profession Committee to review ALD for possible use in New Jersey.

Committees Education – Committee Chair Ainsley Reynolds, CPA, attended the NJSCPA Scholars Institute in May at Montclair State University and gave a presentation on accounting opportunities in state government.

Magazine of the

New Jersey Society of CPAs President Gerard Abbattista, CPA, indicated that the Society was a cosponsor of the CIANJ Legislative Dinner. Society leaders and state representatives discussed the state budget, proposed legislation to increase the minimum wage and the governor’s proposal to eliminate sick payouts to retiring state employees.

The Society’s Annual Convention and Expo in Atlantic City in June drew a record 1,000-plus attendees.

The Society has penned letters seeking support from members of the NJ Congressional delegation on legislation regarding tax due dates, mobile workforce and mandatory audit firm rotation. Additionally, Society leaders conducted visits to Capitol Hill to meet with members of the NJ Congressional delegation and/or their staff to discuss and seek member cosponsorship

New Jersey Society of Certified Public Accountants

Nov • Dec 2013

November/December – Coming Attractions

Tax Matters n n n n

Annual Tax Update Misinformation About Information Reporting Managing Tax Risk NJ Division of Taxation Interview

of tax due date and workforce mobility legislation.

Newark (July 18) Committees RMA – Committee Chair John Dailey, CPA, will meet with the state contractor who prepares the annual Registered Municipal Accountant Exam to discuss content, length and grading – areas highlighted by test takers. Dailey would like to see an improved pass rate for this exam.

Education – Committee Chair Ainsley Reynolds, CPA, suggested that board members participate in the NJSCPA’s Pay It Forward program in the fall.

Statutes/Rules/Regulations – Thus far, there has been no response to the letters that were sent to accounting educators regarding changes to the education requirements.

Public New Jersey Society of CPAs President Gerard Abbattista, CPA, mentioned the Society’s Career Night scheduled for Wednesday, October 2.

The American Institute of CPAs had released the Financial Reporting Framework for Small and Medium-Sized Entities, which gave NASBA certain concerns. After working through their differences, both organizations released a joint statement reaffirming support for the Financial Accounting Foundation and the Private Company Council. One goal is to ensure there is adequate disclosure.

The U.S. House has approved a bill that prohibits the Public Company Accounting Oversight Board from requiring mandatory audit firm rotation. The bill now moves on to the Senate. Closer to home, the Society hopes to meet with New Jersey State Senator Nia Gill to discuss posting the reciprocity bill in the fall.

Finally, appeal bond cap legislation has stalled in the NJ Senate Judiciary Committee.

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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: Companies A-L Aileen Kronke 770-431-0867 x212 aileen@lionhrtpub.com Companies M-Z John Davis 770-431-0867 x226 jdavis@lionhrtpub.com

Accounting Practice Sales accountingpracticesales.com

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ADP 27 accountant.adp.com/opportunity Askin, Weber & Reed, Inc. awrins.com

35

Audimation Services, Inc. audimation.com

3

Bollinger Insurance Solutions bollingerinsurance.com

C4

Fulton Bank of New Jersey fultonbanknj.com

31

Investors Bank myinvestorsbank.com

29

People's United Business Capital peoples.com/abl

C3

PNC Bank pnc.com/cashflowinsights

19

Provident Bank providentnj.com

12

Residential Home Funding rhfbloomingdale.com Surgent McCoy, CPE, LLC cpenow.com/webinars N E W J E R S E Y C P A • s e p t e m b e r • o c to b e r 2 0 1 3

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8

C2

CLASSIFIEDS welcome to inquire. Initial practice continuation also an option. Reply in confidence to Peter Pfister, CPA, at 732-747-0500 or ppfister@ curchin.com.

Marketing Support Save 20 percent on PR, marketing, branding and coaching services with PRCounts, an NJSCPA Member Benefit Provider. Contact Eileen Monesson at 609-570-2150 or emonesson@prcounts.com; prcounts.com.

Northern NJ, medium-sized, full-service and peer reviewed CPA firm is interested in acquisition or merger of smaller firm or affiliation with retirement-minded practitioner. If interested, please send your confidential information to northernnjcpafirm@gmail.com.

Mergers/Acquisitions Morris Merker and Company, LLC, a peer-reviewed CPA firm in Passaic County is seeking to acquire/merge with small retirement-minded CPA practitioners. Reply in confidence to jpetrella@mmccpanj.com.

North NJ CPA looking toward retirement.

Practice grosses $350K. Looking for a CPA to take over practice in very near future as retiring partner works part-time. Location and staff must remain. Must be reliable, willing to move into existing location and have small existing practice. Email cpanj2010@gmail.com.

Traphagen Financial Group, a well-established firm in Bergen County with diverse client base and credentialed support staff, is seeking small firms and sole practitioners for acquisition or merger. We are looking for firms ranging in size from $300,000 to $700,000. This is an opportunity to align with a quality firm while continuing to provide your clients with exceptional service. To confidentially discuss this opportunity, please email us at iaishia@tfgllc.com.

Morris County sole practitioner seeking to purchase tax clients. Email rcorsicpa@gmail. com or call 973-479-7387.

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.

Seize a merger/acquisition opportunity with benefits for you. Tired of dealing with issues of running a firm? We are looking for firms ranging from $300,000 to $5,000,000 eager to combine forces as we continue to grow across northern NJ, Westchester and the Hudson Valley region.

Goldstein Lieberman & Company is ideally situated to service all types of industries.

Visit glcpas.com; email me, Phillip Goldstein, CPA, managing partner, philg@ glcpas.com; or call me at 800-839-5767 to have a confidential conversation.

Pro Bono

Bergen County, small peer reviewed CPA firm seeking to acquire or merge with retirement-minded practitioners. We have acquired previously and promise to make the transition seamless! If interested, please reply in confidence to bergencountycpa@gmail.com.

Renaissance Community Development Credit Union, a Somerset not-for-profit financial cooperative, seeks a volunteer accountant to serve as a board member/board treasurer.

Contact Shirley at rcdcu55@aol.com; renaissancecdu.com.

Small Union County firm looking to sell roughly 50 tax clients. Reasonable terms. Email response in confidence to unionctycpa@aol.com.

Real Estate

New Jersey – CPA firm wishes to acquire or merge with progressive, small to mid-sized firms. File 0701 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

Office space for rent, Totowa Road, Totowa, NJ. One office on second floor with windows (22’x15’) with an adjoining room (10’x10’).

Elevator building with private parking lot. Use of conference room, kitchen and rest rooms.

Includes electric, heat and air conditioning for $1,200 per month. Email aginsberg@ brunodibello.com.

Professional office suites for rent – Beautiful, renovated Victorian home located perfectly in business district, Court Street, Freehold, NJ. Conference room, reception area, $900 to $1,200/month. Contact Darren, 908-420-5299.

Office space available. $500 a month, 350 sq. ft. New building with newly renovated offices. Some of the features are state-of-the-art security system, extra parking, basement for storage, kitchen and waiting area available. Tenant will be given the option to select carpet and paint. Call 732-821-8614 or email tmarcus1040@ comcast.net.

Real estate appraising – Tax assessment appeals, eminent domain (condemnation), unique properties; commercial/residential; 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.

Newly renovated and beautifully appointed office building, 5,000 square feet in Fair Lawn, available for lease or lease/option to buy. Ideal for emerging CPA firm. Plentiful off-street parking and convenient to GWB/NYC and routes 4, 20, 80 and GSP. Call Jeff St. Thomas, McBride Corporate Real Estate, at 201-848-6119 or email stthomasj@mcbridecorpre.com.

Classified Advertising Replies to ads with file numbers should be sent to:

Office share available. Class A small law firm office in Florham Park. One to three offices, with or without secretarial stations.

Reception area, two conference rooms, kitchen. Fully furnished, includes office equipment (fax, postage meter, copier, scanner, telephone, desktop computer with Internet). Ample parking; easy highway access. Doug Ehrenworth, Esquire, dehrenworth@selawfirm.com.

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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.

STUDENT

outlook

Sometimes It Pays to Get Way Ahead of Yourself B Y M EGAN A. CICCHETT I , C PA, SAX M AC Y F RO M M & C O. , P C

I

magine you’re a 22-year-old college graduate with a degree in accounting and you have your whole life ahead of you. So, what’s next?

You may be worried about getting a job that pays well so that you can start paying off those student loans and maybe treat yourself to something nice. You join a large firm because you heard they pay the most. But you don’t think about how many hours you’re going to work or which area of accounting you’re going to focus on.

You don’t ask yourself what you want your life to look like in 25 years, both personally and professionally. However, you should be asking yourself those questions – yes, even though you’re only in your 20s.

I won’t pretend that I thought about all of those things as a recent college graduate, because I didn’t. I did know that I didn’t want to work 80 hours a week and my job had to be a place that allowed me to the live the life I wanted to live.

I have been at Sax Macy Fromm & Co., PC, for four years and I can now say that I think about the future every day. Every task I complete and every new opportunity I accept plays a conscious role in my future. This wouldn’t have been possible if I hadn’t passed the CPA Exam right after college and focused solely on advancing my career.

Even though you may (or may not) be barely old enough to have a cocktail, you really should think about areas with major implications – such as where you want to be at your firm and in the profession, how you give back and what you want personally over the long run. Here’s some of the long-range contemplation I’ve been doing lately:

Firm I became a senior at my firm at age 25, and my goal is to become a partner by age 30. Yes, it’s an aggressive goal, and there’s a good chance it may not happen, but I’m working each day to achieve this goal.

Profession Over the next 20 years, I want to be considered an expert in forensic accounting. I predict that in 25 years there won’t be general accounting degrees, but different niche accounting majors, such as construction accounting, hospitality accounting, pharmaceutical accounting and so on. Accountants will shift from doing everything (e.g., audit, taxes, wealth management) to being hyperspecialized.

Giving Back I can say that within the next 25 years I want to sit on the board of the New Jersey Society of CPAs and eventually be Society president. I also plan to be a member of the American Institute of CPAs Women’s Initiatives Executive Committee, as well as sit on the board of a nonprofit that I’m passionate about and teach forensic accounting at the university level. I know that I want to be a fully engaged, leading practitioner in the accounting profession at both the state and national levels.

Personally I do plan to get married one day and want to have children who will have as wonderful a childhood as I had. And I want to do that while still being a partner at my firm and active in my community.

I encourage all college graduates to think about what they want to accomplish in the next 25 years and where they want to be at age 50, and then strive every day to achieve those goals. While that seems like a million miles away, it’ll be here before you know it. So, if you put your future at the forefront, every step you take will be with those goals in mind – and you’ll have more success than you ever thought possible.

Megan A. Cicchetti, CPA, ABV, is a senior accountant with Sax Macy Fromm & Co., PC. She is a member of the New Jersey Society of CPAs Student Programs & Scholarships Committee and Business Valuation Forensic Litigation Services Interest Group and is an NJSCPA Woman of Note. Contact her at mcicchetti@smf-cpa.com.

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LEGISLATIVE

views

NJSCPA Talks Tax Reform with Congressional Delegation B Y JEF FREY T. KAS ZERM AN, NJ SC PA GOVE R NM E NT R E L AT I O N S D I R E C TO R

N

ew Jersey Society of CPAs leaders held meetings with members of the NJ Congressional delegation during the American Institute of CPAs Spring Council meeting in Washington in May. The leaders’ primary message was the urgent need for tax reform. Society members urged the delegation to adhere to the AICPA’s “Principles of Good Tax Policy” as they work on broad tax reform proposals being prepared by the Senate Finance and House Ways and Means Committees. The principles below reflect the goal of creating a tax system that is perceived as balanced, fair, administrable, economically efficient, transparent and neutral in its effect on economic activity: • Appropriate Government Revenues – The tax system should enable the government to determine how much tax revenue will likely be collected and when.

• Certainty – The tax rules should clearly specify when and how the tax is to be paid and how the amount is determined.

• Convenience of Payment – A tax should be due at a time or in a manner that is most likely to be convenient for the taxpayer.

• Economic Growth and Efficiency – The tax system should not impede or reduce the productive capacity of the economy.

• Economy in Collection – The costs to collect a tax should be kept to a minimum for both the government and taxpayers.

• Equity and Fairness – Similarly situated taxpayers should be taxed similarly.

• Minimum Tax Gap – A tax should be structured to minimize noncompliance.

House Ways and Means Committee member Bill Pascrell Jr. of NJ (second from left) meets with NJSCPA leaders on tax reform.

• Neutrality – The effect of the tax law on a taxpayer’s decisions as to how to carry out a particular transaction or whether to engage in a transaction should be kept to a minimum.

• Simplicity – The tax law should be simple so that taxpayers understand the rules and can comply with them correctly and cost-efficiently.

• Transparency and Visibility – Taxpayers should know that a tax exists and how and when it is imposed upon them and others.

In their meetings, NJSCPA members cited the following specific areas needing reform: • Corrected Form 1099 – Congress should permit a taxpayer to report a de minimis change in his or her

income from a corrected Form 1099 or amended K-1 in the receipt year of the amended form to streamline the tax return reporting process for both the government and taxpayer.

• Education Incentives – The tax code contains at least 14 complex incentives regarding saving for and spending on education. These incentives need to be harmonized.

• Kiddie Tax – Tax code complexity dealing with unearned income for children under the age of 18 needs to be simplified.

• Penalty Reform – Civil tax penalties need to be reformed so that they deter bad conduct without deterring good conduct or punishing the innocent.

• Retirement Plans – There are more than a dozen tax-favored

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employer-sponsored retirement planning vehicles, each subject to different rules. These plans need to be simplified to make retirement planning easier to understand, comply with and administer.

Several Congressmen agreed to cosponsor the following NJSCPAsupported legislation: • H.R. 1129 Mobile Workforce State Income Tax Simplification Act – This legislation, which relates to compliance with nonresident state income tax withholding laws, incorporates a 30-day de minimus exemption and establishes nationwide uniformity.

• H.R. 901 Tax Return Due Date Simplification and Modernization Act – This bill would alleviate the problems for taxpayers and their return preparers associated with the untimely receipt of Schedules K-1. Taxpayers and preparers have struggled with problems created when Schedules K-1 arrive late, sometimes within days of the extended due date of many returns and up to a month after the extended due date of business returns. This inefficient timeline makes it difficult, if not impossible, to file a timely, accurate tax return. H.R. 901 would establish a logical set of due dates focused on promoting a chronologically correct flow of information between passthrough entities and their owners and beneficiaries; encourage the early filing of more business and individual returns; relieve workload compression surrounding the September 15 tax return deadline; better enable K-1 recipients to submit timely, accurate returns; and reduce the need for extended and amended returns.

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MEMBER

profile

It’s a Life of Crime for This Society Member

BY DAVID PLASKOW, NJSCPA COMMUNIC ATIONS MANAGER

T

he jargon sounds like it’s from a Hollywood movie: Operation Predator, the El Dorado Task Force, the black market peso exchange, Hawala money transfers. But for New Jersey Society of CPAs Student Member, Christopher G. Costa, his work at the U.S. Department of Homeland Security is quite real.

Costa came from a “typical Italian family” in Ringwood where the grandparents lived with his mom, dad and brother. “I had a type-A personality, so I couldn’t get out of high school fast enough,” says Costa. He joined the Marines in 1994 at age 17 and trained in intelligence and as a forward observer.

After his hitch in the Marines ended in 1997, Costa worked for a veritable who’s who of law enforcement: the Passaic County Sheriff’s Office, the Veterans Affairs Federal Police, the Federal Protective Service, the U.S. Air Marshals Service and the Joint Terrorism Task Force. Much of what he did was to mitigate security risks via policies, procedures and countermeasures. He also participated in the investigation into the attacks on 9/11 and received a service award for his response and recovery efforts during and after the tragedy. “For some reason, I remember seeing a bunch of baby strollers in the rubble on Church Street that day,” recalls Costa, “and thinking ‘thank God they’re empty.’”

In 2003, Costa was part of the first class of graduates at the new U.S. Department of Homeland Security training academy in Georgia. He was assigned to the New York office and quickly got his hands dirty, so to speak, dealing with highly sophisticated criminal enterprises such as sex

trafficking, organized crime, illegal drugs and money laundering.

So, is Costa a world-class crime fighter or humble accountant?

He is, in fact, both. “Most of what I do includes undercover investigations and search warrants of bank statements and ledgers to follow the flow of illegal activity so as to seize assets of hightarget criminal enterprises leading to the sale at auction,” encapsulates Costa.

To help make himself better at catching the bad guys, Costa recently received his B.B.A. in accounting at Caldwell College and he hopes to complete his M.B.A. in 2014, all while obtaining his CPA designation somewhere in between. “When I got to one of my first assignments in the New York metropolitan area, we formed it almost like a small business. We had to deal with staffing, budgets and reports.

So, it made sense for me to become educated on proper accounting systems and procedures,” notes Costa. “But a formal accounting education also helps me do my job in the field. Criminals and the technology they use are getting more sophisticated. So I have to make sure I’m on top of my game.”

Costa’s oasis is coaching his two teenage daughters at soccer, and he releases much of the tension that goes with his profession by studying Brazilian jujitsu. You’d think he wouldn’t have much time for the Society, but he tries to remain engaged.

“This is one of the most professional groups I’ve run into; the members

are very interested in the profession,” exclaims Costa. “Personally, I appreciate the training, updates and advocacy; it’s a great support system.”

Costa hopes to one day pursue the Certified in Financial Forensics designation and perhaps open his own practice and teach.

So, how is his job different than the movies? “Fiction is a lone law enforcement person getting angry at the system because a case gets thrown out on a technicality and wanting to take justice into his or her own hands,” says the north Jersey resident. “Reality is an integrated team provides unbiased testimony and reports of the facts, and it understands that it can’t control the outcome. That’s up to a jury.”

Thankfully, Costa and his comrades have a good track record. “I think I have a knack for detecting financial anomalies that indicate a criminal activity,” says Costa. “And I get a lot of satisfaction from putting the pieces of the puzzle together to help convict someone who’s engaging in human trafficking of girls my daughters’ ages, or preventing money from going overseas to support the transnational criminal organizations responsible for spreading addiction, abuse and exploitation around the world.”

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u

To learn more about what Costa does, visit njscpa.org/ newjerseycpa/sepoct13.