On Balance November | December 2015

November | December 2015 | Vol. 11 No. 6 A publication of the Wisconsin Institute of CPAs | wicpa.org

Plus: Grow your IRA assets with proper planning ROI technology questions for every business Successful year-round tax planning tips you can use

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FIDUCIARY EXPERIENCE

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INVESTMENT EXPERIENCE

● Sel ect i on of ap p rop r iat e in d e p e n d e n t in ve st m e n t solu t i o n s .

PLAN ADMINISTRATION & OPERATIONS ● Pl an d e sign assist an c e t o h e lp m e e t e m p loye r ob j e c ti v e s .

● Lead in g t h e p roc e ss t o id e n t if y n e w re c or d k e e p in g p a r tn e r s .

EMPLOYEE IMPACT

● In d e p e n d e n t e d u c at ion A N D ad vic e . ● On e on on e e m p loye e e d u c at ion /gu id an c e t o p e r s o n a l i z e t h e c on ve r sat ion an d im p rove re t ire m e n t re a d i n e s s . ● A ssist an c e im p le m e n t in g re c om m e n d at ion s .

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Spectrum Investment Advisors, Wisconsin Institute of CPAs, NAPA, PLANSPONSOR and Retirement Advisor Council are not affiliated. PLANSPONSOR finalists are selected based on services the advisor offers, how they benchmark plans, the education they offer plan participants, whether they consider retirement readiness and income replacement ratios, if they provide 3(21) or 3(28) fiduciary services, how often they review investments and service providers and whether they offer guidance to plan participants or sit on plan investment retirement committees. NAPA finalists are selected based on the following factors: acknowledgment of peers and customers, demonstrated expertise in plan design innovations or products, results in terms of plan growth or participant retirement readiness, participation and leadership in industry events and committees, expertise sought by peers, and regulators and policy makers. The National Association of Plan Advisors (NAPA) 401(k) Advisor Leadership Award recognizes leadership, innovation and contributions to the retirement plan industry with sales, marketing and establishment of 401(k) plans. PLANSPONSOR eligible advisers must have a majority of business revenue derived from employer-sponsored retirement plans, serve as a fiduciary, be committed to fee-based compensation and use outcome-based metrics of plan success with clients. The rating is not indicative of the advisors’ future performance. The Retirement Advisor Council advocates for successful qualified plan and participant retirement outcomes through collaborative efforts of experienced, qualified retirement plan advisors, investment firms and asset managers, and defined contribution plan service providers.

A publication of Wisconsin Institute of CPAs | wicpa.org

November/December 2015 Vol. 11 No. 6

6 Features

Columns

6 Getting a piece of the pie David N. Hegg, CPA serves up his accounting skills as a pizzeria owner.

By Donna Pinsoneault

22 TAX

Successful tax planning: It’s not just for year-end anymore Thriving companies must bridge the gap between their current capabilities and the future reality by redesigning, redefining and redeploying tax functions.

By Jennifer Fahey, CPA

10 Buying and selling multimember interests in an entity taxed as a partnership Become familiar with tax rules to avoid the traps of selling a partnership interest.

By Daniel B. Geraghty, CPA, J.D. 14 Engagement letters: Your first line of defense against malpractice claims Using engagement letters demonstrates your professionalism and protects your firm against potential litigation.

By Alvin Fennell

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24 FINANCIAL PLANNING

Should you roll your 401(k) into an IRA? With proper planning, your IRA assets can continue to grow tax-deferred to benefit children and succeeding generations.

By Peter F. Schumacher, CPA 26 TECHNOLOGY

Four key technology questions every organization should address Maximize your organization’s ROI in technology by considering four key technology-related questions by year-end.

Thomas G. Stephens Jr., CPA, CITP, CGMA

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24 Departments 2

Odds & Ends | news briefs

3 Outlook | chair’s letter 5

Membership Matters | member benefits

13 In Touch | president & CEO’s message 20 Kudos | members in the news 20 Memorials | departed members

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Odds & Ends Baraboo CPA firm buys consulting firm Moy, Borchert & Erbs Associates LLP of Baraboo recently purchased Business Tax Services LLC, a consulting firm in Colby, according to

2013 Apex Award for Publication Excellence

2015–2016 WICPA OFFICERS/BOARD MEMBERS Chair Jean M. Hansen, CPA, MBA, CGMA Chair-elect Steven G. Handrick, CPA, CGMA Secretary-treasurer Joy L. Hertlein, CPA, CGMA Directors Lucien Beaudry, CPA, J.D. Kyle J. Beld, CPA Ryan Hanson, CPA, CGMA Katherine L. Hauser, CPA, MBA, CGMA William L. Komisar, CPA, J.D. Matthew A. Los, CPA Scott Miller, CPA, ABV, PFS, CVA Gregory L. Ryan, CPA Wendi M. Unger, CPA AICPA Council Neil R. Keller, CPA, ABV, CVA Nicholas S. Lascari, CPA, CEA, CGMA President & CEO Dennis F. Tomorsky, CPA, J.D., CGMA Chief Financial & Operating Officer Tammy Hofstede Vice President of Communications Amy E. Gaeth Editor Cynthia M. Hodnett Copy Editor Joan Bahr Design & Layout Rachel Moore Advertising Manager Ellen Engel Printing The Printery, An RR Donnelley Company

Baraboo News Republic.

Schenck publishes manufacturing survey on reshoring The manufacturing team at CPA and consulting firm Schenck SC recently published the results of a survey, “Reshoring: Is your manufacturing business bringing operations back to the U.S.?” (schencksc.com/guides). The report highlights Schenck’s views on reshoring, including its impact on how it manages its business. More than 80 Wisconsin-based companies responded.

The report is a summary of responses, comments and suggestions, including: Factors driving decisions to reshore, how tax incentives influence the decision and obstacles to reshoring.

SVA offers new financial planning website SVA Plumb Financial LLC recently launched its fully-featured website (svaplumb.com). SVA Plumb Financial’s objective is to simplify its presentation of financial planning resources and information by highlighting its clients’ life events. This includes retirement planning for individuals and businesses, family status changes, education savings, health-related planning, inheritance and high-income earners. This is accomplished by highlighting client case studies and a short video feature for each life event.

Wipfli becomes first U.S. partner to offer BPO by Microsoft Wipfli LLP recently became the first U.S. partner to provide business process outsourcing (BPO) powered by Microsoft in the United States. The Microsoft BPO Platform is currently offered in Europe. The firm has provided outsourced accounting services to small businesses for nearly a decade.

This includes financial statement preparation, tax compliance, payroll and accounts payable processing. Wipfli can now offer these services and more to its midsize clients utilizing the Dynamics platform.

WANT YOUR BUSINESS MENTIONED IN ODDS & ENDS?

Email your announcement to cynthia@wicpa.org.

Join us online!

On Balance is published six times a year by the Wisconsin Institute of Certified Public Accountants (WICPA). Change of address should be sent to: Membership, W233N2080 Ridgeview Pkwy, Suite 201, Waukesha WI 53188; Phone: 262-785-0445 or 800-772-6939 (WI/MN); Fax: 262-785-0838; email: jessica@wicpa.org. Statements and opinions expressed are those of the authors and not necessarily those of the WICPA. Publication of an advertisement does not constitute an endorsement of the product or service by On Balance or the WICPA. Articles may be reproduced with permission. © Copyright 2015 On Balance.

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WICPA offices will be closed on the following dates: Thanksgiving: Thursday and Friday, Nov. 26 and 27 Christmas Eve: Thursday, Dec. 24 Christmas Day: Friday, Dec. 25 New Year’s Eve: Thursday, Dec. 31, (beginning at noon) New Year’s Day: Friday, Jan. 1

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{ Outlook | chair’s letter } “Remember, there are ‘three C’s’ in life: Choice, Chance and Change. You must make the choice to take the chance, if you want anything in life to change.”

Workplace change: A necessary evil?

Workplace change can be difficult for the most loyal of employees. It’s clear that both our workplaces and our mindsets operate from different perspectives. This can make for uncomfortable employee situations, such as a change of office structure or business ownership or the introduction of new technologies and work practices. The key challenge for those managing workplace changes is how to engage and motivate a workforce who may already be apprehensive.

Communication is paramount Successful change is not necessarily about employees getting what they want, rather persuading them to want what the organization requires. Helping employees understand the rationale on how changes impact and benefit them, secures their acceptance. There will be a spectrum of concerns among the workforce, as well as preferences around how information is provided.

The best way to tackle resistance to change is to simply talk to people about it. In addition, introduce change in measured receptive doses. Understand the context of change and mood of the workforce. Use this as an opportunity to determine if the desired change and time frame are realistic.

Resistance can be good While people might not like what they hear and react in a negative manner, it’s positive that they are not ignoring change or in denial. This is a critical step on the change journey. A considered response to resistance can convert negative emotion into positive energy and new thinking.

Resistance also provides important feedback to help validate you’re changing the right things.

Know that resistance is not always obvious; it can be passive, as well as active. Passive resistance is harder to identify, as people sometimes hide their true feelings.

Whichever situation you are in, don’t be surprised; anticipate and plan for it.

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Embrace acceptance to change Ensure your preparation and support activities that recognize employees’ change journey. Create content that engages and involves them in ways that allow them to help shape the future of their workplace.

This will increase their buy-in and transformation. Be prepared to listen and adapt the change program as you go.

This may mean doing more with less or different actions. The last thing you want is for people to feel patronized or ignored.

The most important change period is immediately after implementation, when behaviors can easily slip backward.

The key takeaway is to view workforce change as a journey, not a final destination. The new norm that change is constant has become an everyday fact of life. In conclusion, workplace change is a necessary evil. Remember, there are “three C’s” in life: Choice, Chance and Change. You must make the choice to take the chance, if you want anything in life to change.

Jean M. Hansen, CPA, MBA, CGMA is CFO/ vice president-finance at Manitowoc Tool & On Balance | December 2015 Machining LLC. ContactNovember her at 920-682-8825 ext. 114 or jhansen@mantool.com.

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THURSDAY, NOV. 6 & FRIDAY, NOV. 7

Annual tax conference to feature even more sessions

CPAS IN INDUSTRY FALL CONFERENCE TUESDAY, SEPTEMBER 23, 2014 COUNTRY SPRINGS HOTEL & CONFERENCE CENTER Estate Planning

Domestic Partnership Law and same-sex clients. 5

IT Security Issues

Data breaches, the cloud and apps. 6

What past attendees are saying…

New and returning tax pros expected to draw crowds at annual WICPA Tax Conference as they address important developments, latest issues and biggest questions.

KEYNOTE SPEAKER

CLOSING SPEAKER

IRS Reaches the “Tipping Point”

Minimizing the 3.8% Surtax

Robert S. Keebler, CPA, MST, AEP addresses complex issues and answers your biggest questions revolving around the 3.8% Net Investment Income Tax. 7

Rick J. Taylor, CPA, MST reviews the most important judicial, legislative and regulatory developments for late 2013 and 2014 from the practitioner’s perspective and tackles the latest hot-button issues. 4

Ways to Register: ONLINE: WWW.WICPA.ORG/CONFERENCES PHONE: 262-785-0445 FAX: 262-785-0838 MAIL: W233N2080 RIDGEVIEW PARKWAY, SUITE 201, WAUKESHA, WI 53188

Wisconsin Tax and DOR Updates

“From the speakers to the topics to the food and beverages, it’s always a great experience.”

CPAs in Industry Fall Conference

Important changes affecting tax practitioners. 6

Register to Save

“Great forum. I enjoy attending both the Spring and Fall conferences every year.”

Monday, Sept. 23, 2013 Country Springs Hotel & Conference Center

Save $30 when you register by Friday, Oct. 24!

“I can use information from each of the sessions – all pertinent to my business.”

“The speakers were great, the topics were highly relevant, and a perfect mix between technical and soft skills.”

“Excellent conference as always! Worth every penny!”

DETAILS & REGISTRATION WWW.WICPA.ORG/CONFERENCES

FINANCIAL INSTITUTIONS C O N F E R E N C E Tuesday, May 12, 2015

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Sharpen your skills at the

School District Audit Conference Thursday, June 4

Holiday Inn Hotel & Convention Center Stevens Point, WI

Friday, June 5

Country Springs Hotel & Conference Center Pewaukee, WI

WHERE ACCOUNTING AND TECHNOLOGY COLLIDE!

Quality CPE is like a four leaf clover: HARD TO FIND & LUCKY TO HAVE

CPAs in Industry

TUESDAY, MARCH 17, 2015 Spring Conference

WICPA & K2 TECHNOLOGY CONFERENCE THURSDAY, DEC. 4 & FRIDAY, DEC. 5, 2014 Country Springs Hotel & Conference Center, Pewaukee

ACCOUNTING, AUDITING &

Country Springs Hotel & Conference Center From early on, nothing has proven to be more important to a business’s success than accounting, and nothing has had a bigger impact on a business’s success than technology. As both continue to

TUESDAY, MARCH 17, 2015 Country Springs Hotel & Conference Center

evolve at tremendous rates, it is difficult to keep up with the changes, and even harder to anticipate and respond to them when they occur.

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FINANCIAL MANAGEMENT C O N F E R E N C E WEDNESDAY, NOV. 19, 2014 COUNTRY SPRINGS HOTEL & CONFERENCE CENTER

THESE CONFERENCES?

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Technology Conference Thursday, Dec. 1 – Friday, Dec. 2, 2016

Tax Conference Thursday, Nov. 3 – Friday, Nov. 4, 2016

Accounting, Auditing & Financial Management Conference Thursday, Nov. 10, 2016

Nonprofit & Health Care Financial Conference Thursday, Sept. 29, 2016

CPAs in Industry Fall Conference Thursday, Sept. 15, 2016

November | December 2015

School District Audit Conference Thursday, May 26, 2016

On Balance

School District Audit Conference Wednesday, May 25, 2016

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Financial Institutions Conference Tuesday, May 10, 2016

CPAs in Industry Spring Conference Wednesday, March 16, 2016

If you are looking for top-quality CPE and networking events, look no further than WICPA conferences. Thousands of your peers attend each year, as every conference is an unrivalled opportunity to hear from the most highly regarded experts and thought leaders about the biggest changes and hottest issues, so save these dates for 2016!

{ Membership Matters | Professional Insurance Programs } “You’ll find a strong commitment to community involvement among West Bend associates. At the WICPA, West Bend has been a long-time advertiser and sponsor.”

The Silver Lining® and The Standard Above® Most people would agree that having insurance is an important part of a sound financial plan, protecting themselves and their families from risk.

Today’s property and casualty insurance coverage is evolving as market conditions change. Advances in technology challenge the scalability and agility of insurance carriers to meet the needs of consumers interested in wearable devices, micro-sensors, drones and driverless cars.

Extreme weather events, including changes in precipitation patterns, flooding and wildfires affect both rates and claims.

So just how much do consumers know about purchasing property-casualty insurance?

A recent Insure.com survey found some of the most common sources of misinformation extended from insurance for houses. For example, 52 percent of respondents were confused about how to properly insure a house. Many of them believed a house should be insured for its market value when in fact it should be insured on the basis of reconstruction costs.

The Silver Lining

That’s where affinity partner West Bend Mutual Insurance Company can help. Since 1894, West Bend has been assisting its customers, making sure that positives come from negative situations. West Bend’s tagline, The Silver Lining, was born out of its mission to step up when needed, to do the right thing. That includes a history of exceeding expectations through outstanding customer service and support.

West Bend’s property and casualty insurance for homes, autos, personal property and businesses includes: • Home and Highway®.

• Personal Umbrella.

• Business Owners Program.

• Metalworkers Program.

• Workers’ Compensation Insurance.

Cash in on savings. No, really!

As the Standard Above®, the WICPA has joined with businesses to bring unique products and services to our members. Affinity partner West Bend offers WICPA members a 10 percent discount on annual Home and Highway premiums while simultaneously supporting the

wicpa.org

efforts of the association. Take advantage of West Bend’s cash back with the Claim Free Award, a unique feature of the Home and Highway policy.

Each year there are no claims on your policy, you’ll receive a Claim Free Award check equal to a portion of your annual policy premium.

And, if you’re a West Bend Home and Highway customer, its “refer a friend or family member program” could get you a $50 Silver Lining® Prepaid MasterCard®.

Stepping up

You’ll find a strong commitment to community involvement among West Bend associates. At the WICPA, West Bend has been a long-time advertiser and sponsor. You’ve seen them at our annual banquet, Brewers Bash, New CPA Welcome Dinner, golf outing and conferences and we’re grateful for their continued support.

Sign up to receive West Bend Cares Safety Blog at http://www. thesilverlining.com/westbendcares/blog. Covering topics that range from renter’s insurance for your college student to winter driving tips, you’ll be surprised what you’ll learn. Check out the full line of West Bend offerings at thesilverlining.com.

To make the most of your membership, take advantage of WICPA member benefits. Read a full list at wicpa.org/marketplace.

Ellen Engel is the advertising manager at the WICPA. Contact her at 262-785-0445 Balance November | December 2015 ext. 4513 orOn ellen@wicpa.org.

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By Donna Pinsoneault Warning: Reading this article may trigger a sudden craving for something crusty, spicy, meaty, saucy and bubbling with melted cheese, or an equally sudden desire to spice up your career.

David N. Hegg, CPA has relished his work in the accounting profession since 1979, but has never settled for a single-item career menu. Currently practicing with Grobe & Associates CPAs, LLC, a full-service accounting firm in Madison, Hegg delivers accounting, auditing and tax services with the same commitment to quality, personal attention and high standards that marked his entire career. But that’s not all Hegg delivers these days.

Last year, he opened a Falbo Bros. Pizzeria. People in and around Sun Prairie can enjoy the pizzeria’s fresh, old-fashioned style pizzas topped with an extensive range of goodies that includes Hawaiian pineapple, Greek feta, Cajun chicken, and a robust mix of meats known as the Slaughterhouse Five. There are healthy salads, hot sandwiches, classic bombers, cheese breads and well, maybe we should get back to the business side of the story.

Hegg’s 30-plus years of serving small business clients gave him a deep understanding of the financial challenges of ownership. He also had some business ownership experience, becoming licensed as a private investigator in the late 1980s and launching Dossier, Inc. That business provided employers with background checks for potential hires, a service that was 6

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Hegg watches as his son, Nathan, tosses pizza crust. The younger Hegg manages the pizzeria and recently became part-owner.

just beginning to become a common component of the hiring process.

“At the time, I just wanted to do something more,” Hegg said. “I learned a lot from that venture.”

PLANNING MATTERS So late in 2013, hungering again for something more, Hegg decided to work with a franchise, one that was as committed to quality as he was. He then contacted Jason Schleip, a longtime client, co-founder and president of Falbo Bros. Pizzeria Inc., and coincidentally, the originator of Hegg’s favorite pizza. Schleip started Falbo Bros. in 1992 while a student at the University of Wisconsin-Madison. To date, Schleip has franchised 12 pizzerias in Wisconsin, Iowa and Texas.

With Schleip, Hegg combined solid accounting experience with proven franchising expertise. He spent several months thoroughly researching the market, creating a start-up budget and preparing multiple cash flow analyses. The Sun Prairie Falbo Bros. Pizzeria opened in April 2014.

“We took our time and looked for potential trouble spots,” Schleip said. “David is smart, analytical. Beyond that, he does a good job of listening, considering ideas, and acknowledging that we know what we are doing.”

In addition to extensive financial planning, the building needed considerable attention. “It had been a restaurant before, but now it was just a shell,” Hegg said. “Some expensive things like venting were in place, but it needed pretty much everything else. It was actually kind of fun, but getting it in shape took a tremendous amount of hours.”

“We even put the walk-in cooler together ourselves,” said Hegg’s son, Nathan, who began selling hot dogs at age 13 and continued working in food service in college.

After graduation, the younger Hegg cooked up some business experience by forming his own graphic design service LLC. Now he manages the piz-

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zeria and recently became part-owner of the business. Although it came about sooner than expected, the younger Hegg wasn’t completely surprised when his father offered him part-ownership.

“He’s an old-school guy, big on family values,” Nathan Hegg said. “Having a small family business is part of that.”

LEARNING CURVES Hegg said transitioning his son from employee to part-owner allowed them to learn from each other, collaborate effectively and benefit from the other’s professional experiences.

“Making good pizza is the easy part, especially when you start as we do with quality ingredients,” Nathan Hegg said. “For me the challenges are about making calculations on a daily basis, recruiting and managing staff.”

Both men invested increasing time, energy and cash reserves into the business during the planning and start-up phases. David Hegg’s wife, Jill, was indispensable in sustaining the household cash flow.

“Dealing with the ups and downs can leave you feeling swamped,” he said. “You really need a large reserve fund.”

Now, with the pizzeria breaking even, David Hegg keeps a close eye on the numbers. If he were to do it over again, he would have given more attention to the start-up year when he talked with other franchise owners.

“I knew we had a great product,” he said. “When I talked with the other owners though, I should have taken a closer look at their first-year numbers. You have to be ready for lower-than-expected returns at first and constantly watch costs.”

A TASTE OF SUCCESS As a CPA, Hegg understood that accounting was about people. It’s not only focusing on business and estate plans, audits and tax strategies, but also giving

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clients personal attention and developing relationships and friendships. That commitment continues at the pizzeria.

“The interaction with customers works a little differently here because we haven’t been in business for a long time yet,” he said. “We are meeting repeat customers and new people every day though, and we’ve found some really good employees.”

In both professions, Hegg finds carrying out that commitment to quality, personal attention and high standards extremely satisfying. He’s also establishing an interesting post retirement career.

So is there a downside to ownership?

“It’s not like accounting where you can take time to complete the task,” Schleip said. “There’s a lot more speed involved. You’re on your feet and have to make decisions now.”

For Hegg, the minus to ownership equals the most challenging time for many CPAs. “It’s a lot like the last two months of tax season,” he said. “Only April 16 never comes.”

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TH I N K I N G O F STA RTI N G A B USI N ESS? “Don’t look for shortcuts,” Hegg said.

“Do what you know you should do.”

• Research the product.

• Research the market.

• Know your startup costs; do sales projections and cash flow analysis at different levels of sales.

• Line up some reserves and expect surprises.

Donna Pinsoneault is a freelance writer in Brookfield.

Contact her at dpinsoneault@gmail.com.

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BUYING AND SELLING multimember interests in an entity taxed

AS A PARTNERSHIP

By Daniel B. Geraghty, CPA, J.D.

SOME THINGS IN LIFE ARE MEANT TO BE SIMPLE. PARTNERSHIP TAXATION IS NOT ONE OF THEM. When selling or purchasing an interest in a multimember partnership (or limited liability company taxed as a partnership), the issues are more complicated than a sale of stock. The rules are full of traps for the unwary. This article highlights a few of the issues that arise in these transactions.

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CHARACTER OF GAIN

Generally, when selling shares of stock of either a C corporation or an S corporation, the seller’s gain is taxed as a capital gain. For example, assume an S corporation has inventory of $100, unrealized receivables of $300, and goodwill of $1,600. The owners sell the shares for $2,000. Assuming a combined basis of $100 in the shares, the shareholders have a capital gain of $1,900. The result is the same for an S corporation and a C corporation.

The result is quite different in a partnership1 context. Instead of all the gain being capital, the selling partners look through to the partnership to see whether the partnership holds so-called “hot assets.” These assets are generally: 1) unrealized receivables; 2) substantially appreciated inventory (20 percent appreciation is considered substantial); and 3) ordinary income recapture.

Because these assets would generate ordinary income if sold in the ordinary course of business, the rules require the partnership and the selling partners to look through to the sale of a partnership interest to cause the partner to recognize the ordinary income on the sales price allocable to the hot assets. In the above example, the partners would still have $1,900 of gain; however, it would be split between ordinary and capital.

Assuming the inside basis of the assets equaled the outside basis and the basis was attributable to the inventory, the seller would recognize ordinary income of $300 for the gain on the sale of the unrealized receivables and capital gain of $1,600. The highest rate applicable to the ordinary income items is 39.6 percent and the highest capital gain rate is 23.8 percent. In addition, to the extent the sale price is financed by the seller, the installment method would not be available for the profit attributable to the inventory. This accelerated the gain that would otherwise be deferred under the installment method.

For most partnership sales, these look-through rules equate the sale of a partnership interest with the sale of partnership interests followed by liquidation.

AMOUNT REALIZED

Another potential difference in a partnership sale is the amount a partner realizes on a sale. A partner’s basis in the partnership includes both his capital in the partnership as well as his allocable share in the partnership debt. When the partner sells his interest, the proceeds are increased by the relief from the debt that was previously allocable to the partner. While this increase in proceeds will many times be offset by the basis in the debt and have no net effect on the net gain recognized on the sale, to the extent the partner has used some of the debt basis (to perhaps claim losses) the partner will recognize a higher gain.

This article will refer to partnership and partners, but the discussion likewise applies to limited liability companies and members where the limited liability company is taxed as a partnership.

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MULTIPLE PARTNERS SELLING: ONE PARTNER BUYING

Where partners in a multimember partnership sell all of their interests to a single new partner, they will be treated as selling their partnership interests. If the new partner is the sole owner, the partnership is disregarded after the sale and the new partner owns the assets for tax purposes.

To account for this fiction, the partnership is deemed to liquidate and distribute the assets to the old partners who in turn are deemed to sell them to the new partner (See Rev. Rul. 99-6.). This gives the new partner a stepped-up basis in the assets with no further action.

This dichotomy in the treatment of different participants for the same transaction can sometimes cause other consequences. For example, if one of the assets being held by the partnership is stock in a related entity, and the purchaser is also related, does this trigger the application of Section 304 (which applies to related party purchases of stock) to the transaction? The answers to questions such as this are beyond the scope of this article. However, practitioners should be aware of collateral issues that might arise where such dual treatment applies.

EFFECT ON BUYER

Similar to the purchaser of stock, a new partner will have a basis in the partnership interest equal to the purchase price (plus the partner’s allocable share of partnership debt). However, unlike a corporation, a partnership can elect to adjust the “inside” basis of its assets to equal the new basis attributable to the purchased interest. This is done on an allocable portion of the assets as related to the interests that are purchased.

Using the previous example, if the partnership had two new partners and they paid $2,000 for the interests, then the inside basis of the assets would likewise be stepped up to the $2,000. This allows the buyers the benefit of increased write-offs from the business operations. This election, commonly known as a Section 754 election, is a partnership election, not a partner election. Once made, the election is generally irrevocable. It is also noteworthy that if the purchase of the partnership interest is at a discount, the inside basis of the assets would have to be written down as well.

CONCLUSION

As noted at the beginning of this article, a sale of a partnership interest can be complicated and there are many traps for the unwary.

It many times involves greater risk and planning than the sale of stock.

That said, familiarity with the rules will help an informed tax adviser to plan around the traps and turn them into opportunities.

Daniel B. Geraghty, CPA, J.D. is a shareholder of Whyte Hirschboeck Dudek S.C. in Milwaukee. Contact him at 414-978-5518 or dgeraghty@whdlaw.com.

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2015 Past Chairs Dinner Past Chairs of the WICPA Board of Directors and the WICPA Educational Foundation, Inc. Board gathered for an annual photo at the WICPA Past Chairs Dinner on Sept. 24 at the Osthoff Resort in Elkhart Lake.

WICPA Board of Directors Past Chairs

Front row L-R: Bart Adams (‘95-’96), Karin Gale (‘03’04), LeRoy Schmidt (retired executive director), Linda Dicks (‘06-’07), William Heinrich (‘10-’11) and Donald Wagner (‘92-’93). Back row L-R: David Benner (‘83-’84), David Christianson (‘05-’06), Robert Albrecht (‘80-’81), Theodore Hart (‘08-’09), Nicholas Lascari (‘11-’12), Ray Petkovsek (‘09-’10), William Goodman (‘99-’00), Douglas Haag (‘00-’01) and Lucretia Mattson (‘98-’99).

WICPA Educational Foundation, Inc. Board Past Presidents

L-R: Ray Petkovsek (‘98-’01), Robert Albrecht (’90-’91), William Komisar (‘12-’14), James Miller (‘08-’10).

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wicpa.org

{ In Touch | president & CEO’s message } “Look for additional information to help navigate new WICPA CPE membership requirements in resources, including the WICPA website, print and online publications, as well as WICPA events.”

CPE: Past, present and future When the WICPA established mandatory CPE for membership around 1990, the Internet and mobile devices did not exist. Personal computers and cell phones were still a novelty, and those starting their CPA careers in 2015 had not yet been born. Fifty-minute live lectures were the only acceptable knowledge transfer method in 1990, and unavailable at that time was the neuroscience research from recent decades establishing that the most effective and deepest learning results from: 1) Learning activities far shorter than 50 minutes.

2) A variety of competency-enhancing activities that extend far beyond lectures.

The historical obsession with rigid compliancedriven CPE has created many inefficiencies during recent decades. These have included taking courses that are unrelated to job responsibilities and sitting through expensive full-day lectures (while perhaps checking emails, news, and work tasks) in order to receive perhaps only one hour of relevant job-related content. It also included an extensive focus on technical skills at the expense of developing critical CPA skills in communication, leadership and business acumen that accelerate solutions and career development.

Recognizing the importance of re-examining conceptual frameworks every quarter-century or so, your visionary WICPA Board of Directors recently approved CPE in five-minute increments (effective in 2015) and expanded creditable CPE activities (effective 2016). These changes recognize neuroscience research establishing that the deepest learning results from shorter and more diverse types of learning activities than provided by 50-minute lectures. These innovations also reflect the latest (and continually evolving) learning delivery technologies that will benefit WICPA members with more economical, convenient, timely and effective learning.

wicpa.org

Other 2016 changes in CPE requirements for WICPA membership include: 1) A two-year rather than three-year CPE reporting period (to align with Wisconsin’s CPA license renewal period).

2) A three-credit ethics CPE requirement every two years.

3) Elimination of a lower CPE standard for CPAs outside public accounting (since the new rules will significantly increase the convenience and cost-effectiveness of CPE, and since CPAs outside public accounting face levels of complexity and need for continuous competency enhancement no less rigorous than required for public accountants).

The democratization and commoditization of the emerging sharing economy (Uber, AirBnB, CPAcademy) has forever changed the landscape of CPE to the benefit of WICPA members. Look for additional information to help navigate new WICPA CPE membership requirements in resources, including the WICPA website, print and online publications, as well as WICPA events.

Dennis F. Tomorsky, CPA, J.D., CGMA is president & CEO of the WICPA. Contact himOn atBalance 262-785-0445 ext. 4519| December or November 2015 dennis@wicpa.org.

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ENGAGEMENT LETTERS: Your first line of defense against malpractice claims

By Alvin Fennell

A

n engagement letter helps protect the CPA from allegations, including negligence, by providing a record of the contract between your firm and the client. The client, by signing, dating and returning a copy of this letter, demonstrates their acceptance of the contract. While there is no standard engagement letter, they can vary according to the type of services offered and the type of client. Here are the basic components: • Scope of services: A description of the nature of the services to be performed and the deliverables.

• Responsibilities of the firm: The specific professional standards and responsibilities of the CPA. • Responsibilities of the client: Since conducting certain work requires the client’s assistance, such as providing records, to comply with regulatory deadlines, the letter should identify time frames in which such documents will be provided.

• Limitations of the service: To help avoid client misunderstandings, this section explains any limitation of the services, including that they are not designed to detect fraud or illegal activities.

• Fees and payment terms: This section addresses payment terms, late charges, additional fees and stop-work provisions for nonpayment.

• Dispute resolution: By establishing how disputes will be resolved, such as using arbitration or mediation, this section can help keep a potential dispute from escalating into an insurance claim.

• Termination provision: A good engagement letter will also define the steps necessary to terminate the engagement.

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To craft your engagement letter, contact the AICPA or your professional liability insurance carrier. They may provide templates you can use as the foundation for your letter.

HOW OFTEN SHOULD I REVIEW THE ENGAGEMENT LETTER WITH MY CLIENT? At minimum, the engagement letter should be reviewed annually and even sooner, if the scope of services changes significantly during the course of the engagement. As new services are added, to avoid any misunderstandings, updating the engagement letter should be a routine part of the discussion.

“As the scope of the engagement changes, be sure to have the client sign an updated engagement letter,” said Debbie Tomlinson, a professional liability specialist at Aon Insurance Services. “Otherwise you can fall prey to something known as ‘engagement creep.’ For example, if you’re now providing investment advice in addition to your other services, be sure to add it during your annual client discussion.”

WHEN SHOULD I BE USING AN ENGAGEMENT LETTER? Ideally, you should be using engagement letters in 100 percent of your engagements. While use over time has increased, not all CPAs have made engagement letters a routine part of their practice.

“CNA has been tracking engagement letter use in malpractice claims reported to the AICPA Program since 1995,” said Jeffrey Day, vice president and accountants global practice leader at CNA, the underwriter of the AICPA Program. “During that time, engagement letter use in claims arising from tax practice improved from 20 percent to more than 65 percent. In our experience, there is no question that engagement letters wicpa.org

have proven to be a key factor in defending claims when the scope of services is in dispute.”

The engagement letter should be an important part of a firm’s internal controls. Ensuring this document is signed by the client before services begin should be a part of the firm’s quality control process.

Once you have the engagement letter on record, as you’re communicating with your client, it should become an integral part of your documentation procedures. If you step outside the scope of services defined in the engagement letter or are asked to perform additional services, adjust the engagement letter accordingly.

ARE THERE ANY ADDITIONAL REASONS TO USE ENGAGEMENT LETTERS? Because engagement letters help defend against malpractice claims, many carriers in the insurance industry may offer incentives that reward CPAs for the use of engagement letters: • Premium credit: Many insurance companies will provide a discount on your professional liability insurance premium. The percentage of the discount depends on the percentage of your practice that is using engagement letters. The higher the use, the higher the credit typically.

Conversely, underwriters may surcharge your premium if you’re not using them at all.

• Mediation deductible credit: In the event of a claim, if there is a signed engagement letter in place that stipulates the dispute must go through mediation first, in many cases the insurance company will offer a sizeable credit on the claim deductible. This credit may be as high as $5,000, which can go a long way toward cutting the firm’s expenses during a claim. wicpa.org

• Deductible credit: Several insurance carriers offer a deductible credit on claims reported from non-attest services, in which the CPA had a signed engagement letter in place. This credit may be as high as 50 percent, and can also help reduce a firm’s expenses through the claim process.

WHAT DOES USING ENGAGEMENT LETTERS SAY ABOUT MY FIRM? As a CPA, you’re held to a high standard. Using engagement letters demonstrates your professionalism. It says you’re not going to leave your firm exposed to potential litigation. It illustrates you’re using the tools at your disposal to protect your staff, your finances and your reputation. Moreover, the establishment of a written understanding with a client regarding the services to be performed is required by AICPA Professional Standards for most services. What better way to establish this understanding than through an engagement letter.

When you consider the advantages of using engagement letters, it’s a bit mystifying that CPAs are not using them in 100 percent of their engagements.

This article is provided for general informational purposes only and is not intended to provide individualized business, insurance or legal advice. You should discuss your individual circumstances thoroughly with your legal and other advisors before taking any action with regard to the subject matter of this article. Only the relevant insurance policy provides actual terms, coverages, amounts, conditions, and exclusions for an insured.

Alvin Fennell is a vice president at Aon Insurance Services, a division of Affinity Insurance Services, the consumer, association and program business of Aon plc (NYSE: AON), the world’s leading insurance brokerage.

Contact him at 215-773-4713 or alvin.fennell@aon.com.

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T O G E T H E R, we can make a difference.

WICPA members participate in Advocacy Day 2015

Your contribution to the WICPA CPAC/LIF campaign for Political Awareness allows the WICPA to: Strengthen the voice and visibility of the WICPA. Educate lawmakers about the issues impacting Wisconsin CPAs.

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Support the election campaigns of candidates who support our issues.

Ensure a healthy business climate for CPAs and the clients you serve.

VisitOnwicpa.org/cpaclif to learn more and make a contribution today.

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What’s new with you?

wicpa.org

www.wicpa.org

Update your membership profile and stay connected >

Share

your knowledge over breakfast!

Are YOU a subject-matter expert?

Help us and your fellow members get to know you better for greater networking opportunities and greater control of the communications you want to receive from us. Update your member profile today by logging in to www.wicpa.org/memberprofile with your WICPA username and password.

Be a volunteer speaker for a WICPA breakfast meeting.

Speakers needed in Appleton, Eau Claire, Green Bay, LaCrosse, Madison, Waukesha, Wausau and Wauwatosa.

Plus

Speak at a breakfast meeting and receive:

CPE credit Speaking & leadership experience Recognition for you and your company

Contact Tammy Hofstede at tammy@wicpa.org with your presentation topics.

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wicpa.org

The WICPA celebrates and congratulates The Milwaukee Business Journal’s

CFO of the Year – Professional Services

Tammy J. Hofstede

WICPA Chief Financial & Operating Officer

This award recognizes Tammy’s dedication to our members and her hard work and exceptional executive and leadership skills in accounting, finance, human resources, technology, professional wicpa.org On Balance November | December 2015 19 development, advocacy, membership, marketing and many other areas!

kudos

Andrea M. Draize, CPA

Rachel L. Buck, CPA was recently promoted to tax manager at PricewaterhouseCoopers LLP in Milwaukee.

Elizabeth Hazi, CPA, manager at Brookdale Senior Living, Inc. in Milwaukee, was recently accepted to the AICPA Leadership Academy for 2015.

Blake J. Derr, CPA was recently promoted to assurance senior manager at PricewaterhouseCoopers LLP in Milwaukee.

Kyle R. Kaestner, CPA was recently promoted to assurance senior associate at PricewaterhouseCoopers LLP in Milwaukee.

Andrea M. Draize, CPA was recently hired as a tax associate at KMA Bodilly, CPAs and Consultants, S.C. in Madison.

Andrew D. Faust, CPA was recently promoted to supervisor at RitzHolman CPAs in Milwaukee.

Caitlin E. Fentzlaff, CPA was promoted to assurance senior associate at PricewaterhouseCoopers LLP in Milwaukee.

Andrew D. Faust, CPA

Susan E. Frey, CPA was recently promoted to tax director at PricewaterhouseCoopers in Milwaukee.

Lauren A. Grebe, CPA was recently promoted to assurance senior manager at PricewaterhouseCoopers LLP in Milwaukee.

Want your

promotion or

award mentioned in Kudos?

Email your announcement and photo in JPG format to cynthia@wicpa.org.

Robert A. Gruber, Ph.D., CPA, CGMA, CMA (1955–2015)

Robert A. Gruber, Ph.D., CPA, CGMA, CMA, a professor and Master of Professional Accountancy program coordinator at the University of Wisconsin-Whitewater, died Sept. 13. He was 60.

Gruber earned a degree in business education in 1977 and a Master of Business Administration in 1978 from UW-Eau Claire.

He later earned a master’s degree in accounting in 1986 and a doctorate degree in accounting in 1990 from UW-Madison. While earning his advanced degrees, he taught accounting for one year at UW-Eau Claire. He began teaching at UW-Whitewater in 1983.

The Mukwonago resident earned his certified public accounting license and joined the WICPA in 1983.

Gruber’s contributions and accomplishments include serving several terms on the WICPA Board of Directors and Educational Foundation, including as board chair and president, respectively.

He was also a member of the Office Lease Task Force, Nominations Committee, Finance Committee, Accounting Careers Committee, Competency Enhancement Task Force, Foundation Fundraising and Investment Committees, 100th Anniversary Committee, and

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Ethics Committee. Most recently, he served on the AICPA Future of Learning Task Force.

Gruber was a tireless champion of the accounting profession.

An educator for more than 30 years, he shaped hundreds of current and future CPAs and business professionals.

In a letter nominating Gruber for the 2015 AICPA Distinguished Achievement in Accounting Education Award, a former student, Kenesha A. Crafton, MPA, shared how Gruber encouraged her through several challenging accounting courses and adjusting to campus as a first-generation college student.

“Dr. Gruber has something that all great educators possess: The ability to build a student’s confidence through his encouragement and support,” wrote Crafton, now a revenue agent within the Large Business and International Division of the Internal Revenue Service.

“He was very open and approachable, allowing me to visit him in his office at any time and for any duration to explain accounting concepts to me one-on-one.”

www.wicpa.org wicpa.org

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West Bend. Insurance you buy when you can’t afford anything less.

To find out more, contact the official supplier of the Silver Lining®.

Professional Insurance Programs at 414-277-0154 or info@profinsprog.com. wicpa.org

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{ Tax: Tax planning }

SUCCESSFUL TAX PLANNING: It’s not just for year-end anymore Tax departments that devote resources and attention on continuous transformation, rather than merely year-end tax planning,

By Jennifer Fahey, CPA

will enjoy the benefit of those improvements for years to come. These departments may also be viewed more as a strategic asset for the company.

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wicpa.org

“Tax departments that devote resources and attention on continuous transformation, rather than merely year-end tax planning, will enjoy the benefit of those improvements for years to come.”

THE CURRENT STATE OF THE TAX FUNCTION Tax professionals are aware the current landscape is changing when it comes to the function of the corporate tax department.

A business cannot rely solely on value provided by year-end tax planning strategies. Increased global compliance requirements combined with inefficient processes and over-reliance on spreadsheets will increase risk and drain the already strained resources of corporate tax departments. Reputational damage can also occur due to unforeseen or misunderstood data emerging from the global regulatory transparency initiatives.

Utilize data flow to make tax function more efficient. The linchpin for tax department transformation is data. How data issues are solved will shape process change, which in turn will drive the resource model and the opportunities for value-added activities that contribute more strategically to the business. Tax is one of the largest consumers of data in an organization, with virtually every transaction having a potential tax impact. Therefore, tax will need to take a leading role in defining data requirements and potential solutions that is on par with the requirements of other parts of the organization.

There are several key trends impacting a company’s tax function today:

• Big data and analytics are becoming of equal importance to tax.

Automatic tax function analytics through technology. The ability to analyze data in real time has a significant impact on a company’s business performance and is quickly becoming a necessity for tax. Imagine having detailed transaction level data at your fingertips, already aligned to legal entity and tax sensitized.

Next, imagine having the ability to easily identify (and then correct) a data entry problem, e.g., calculating the incorrect tax on an invoice or at the point of sale, avoid the unexpected significant over/underpayments of taxes and reduce the cost of filings. Tools and analysis methods exist today that leverage historical data, pattern matching, relationship algorithms and other techniques to make this possible, and they are already being used in other parts of your organization like supply chain, marketing and finance.

Tax will need to continue to manage the growing external pressures and operational challenges to ensure that tax compliance, financial statement and other obligations are fully satisfied. Increased capabilities in forecasting, analysis and scenario planning will be necessary to better manage and respond to increasing multiple stakeholder interest in how tax affects the overall business. Historic practices and processes will need to be redesigned to manage risk by leveraging new technology resources.

Rethink the tax function roles and processes. Many companies are constantly exploring cost management and resources. The successful tax professional of tomorrow will need to focus more on the utilization of data and technology. The data skills needed by tax professionals will be less about gathering and managing data and more about analyzing the data from a broader vantage point to make valuable decisions. Tax functions will be transforming their operations with technology to automate and accelerate tax-planning opportunities and trends.

REDESIGN, REDEFINE AND REDEPLOY TAX TO BE A STRATEGIC ASSET For a tax department to move from the current state, successful strategies will need to be implemented. Successful companies must find ways to bridge the gap between their current capabilities and the future reality by redesigning, redefining and redeploying tax functions. Fresh, innovative approaches utilizing technological know-how will be crucial.

THE FUTURE STATE OF THE TAX FUNCTION The need for change is certain given the challenges tax functions are currently facing, as well as those on the horizon.

While a tax function may have been a passive participant in transformational and enterprise efforts in the past, it must now be a strong advocate for change. Tax functions should take ownership of their business case and pursue actions to ensure it is ready for the future. As you can see, merely implementing year-end tax planning ideas is no longer enough to make tax a strategic business asset. With a thoughtful roadmap, a positive impact may be achieved for years to come.

• Compliance requirements are increasing.

• Tax authority approaches are changing.

• Tax risk tolerance is aligning with the wider company.

• Robust tax control frameworks are becoming increasingly important.

• Increasing options are being provided by the technology revolution.

• Automation is becoming a necessity.

• Greater reliance on financial reporting software by tax.

Strengthen the tax function’s role in risk management and governance. In the future, apart from the accurate reporting of tax results, tax will need to provide assurances to authorities and other stakeholders on the adequacy of the controls and process framework it uses to manage tax risks. How tax delivers is becoming just as important as what tax delivers. wicpa.org

Jennifer Fahey, CPA is a tax partner with PricewaterhouseCoopers in Milwaukee. Contact her at 414-212-1755 or jennifer.fahey@us.pwc.com.

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Should you

{ Financial planning: 401(k) and IRA }

roll YOUR 401(K)

INTO AN IRA?

By Peter F. Schumacher, CPA

ESTATE PLANNING BENEFITS CAN BE SIGNIFICANT Among the decisions you must make if you change employers or leave your job is how to handle your 401(k) account.

Oftentimes, employees face decisions about their 401(k) plans through no action of their own. When companies are bought, sold or merged, existing 401(k) plans may be terminated and replaced by new ones.

Under either scenario — if your company’s plan is terminated or you separate from your employer — the simplest choices might appear to be to roll your assets into the 401(k) plan at your next employer or to take a lump sum. But rolling the money into an IRA can be a much more advantageous strategy, especially when considered as part of your estate planning.

BACKGROUND

Although some 401(k) plans offer a good number of diverse investment choices, others are more limited. With a self-directed IRA, you can put your money into a much wider universe of investment options. And, if you change jobs multiple times throughout your career, rolling your 401(k) assets into your IRA is a simple resolution to consolidate those investments when your employment changes.

When done properly, a rollover will not incur income tax or penalty and your account will remain tax-deferred. Some of the 24

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advantages of rolling over into an IRA include: • A broader array of investment options.

• Consolidating investments with your advisor.

• Exceptions allowing penalty-free early withdrawals.

• The ability to stretch the tax deferral beyond your lifetime.

• Maintenance of creditor protection.

ESTATE PLANNING ISSUES

Self-directed IRAs can act as estate planning tools that may be useful compared to 401(k) plans. Proper beneficiary planning on an IRA will allow for both spousal and non-spousal beneficiaries to continue the tax deferral of your account even after your death.

This is often referred to as the “stretch” strategy and it can be used with both traditional and Roth IRAs. Visit http://tinyurl.com/cg401kira for more information.

Most investors name a spouse as primary beneficiary on their IRAs, but with proper planning, the IRA assets can continue to grow tax-deferred to benefit children and succeeding generations. This stretch or multigenerational strategy works best if you don’t think you will need all of your IRA assets during your retirement.

Under this strategy, after the investor’s death, the IRA assets become the spouse’s assets. The spouse can perform a tax-free wicpa.org

{ Financial planning: 401(k) and IRA }

rollover into his or her own IRA and then name children as beneficiaries. The IRA’s required minimum distribution (RMD) calculation switches from the original investor’s life expectancy to the spouse’s.

After the spouse’s death, the assets can be inherited by the children, who might be able to take lesser RMDs, using their own life expectancies. That allows the IRA assets to continue to grow tax-deferred, and the children, in turn, can designate their own children as beneficiaries. Beneficiaries also would have the option of taking a lump sum distribution instead of continuing the IRA account, but that would be subject to income tax.

It’s important to note that a spouse is the only beneficiary who can commingle inherited IRA assets with an existing IRA and can continue to contribute to it. Non-spousal beneficiaries can’t co-mingle inherited IRA assets and they can’t add money to an inherited account. Here are some key steps we encourage our clients to take to establish a multi-generational IRA: • Ensure proper beneficiary designations on your IRA account, appropriately naming your spouse, then children and/or grandchildren as beneficiaries (trusts can be beneficiaries, too, with careful planning).

• Prepare and execute estate planning documents

(wills, trusts) to support your multigenerational IRA. All documents need to be in proper order to support the approach.

• Ensure IRA plan documents permits multigenerational planning. Most IRAs now have language that permit the use of a multigenerational approach, but be sure to verify the language in advance.

• Make sure you have adequate cash on hand to pay any estate taxes and other settlement expenses. You don’t want the beneficiaries to have to tap into IRA assets in order to pay these costs.

• Retain an advisor to help you plan. An expert can make sure you will follow all the appropriate steps.

Visit http://tinyurl.com/cgtaxrollover to read more about after-tax rollover rules.

Peter F. Schumacher, CPA is vice president, relationship manager at Cleary Gull in Milwaukee. Contact him at 414-291-4500 or pschumacher@clearygull.com.

You have the opportunity to impact Students today. CPAs tomorrow.

thousands of accounting students and educators in Wisconsin.

Through your contribution to the WICPA Educational Foundation, Inc., you can help us reach students and teachers in high school and college to create awareness about the accounting profession. You’ll also make an important difference by supporting students on their way to becoming CPAs. As the end of 2015 draws near and you may be doing some tax planning, consider contributing to the WICPA Educational Foundation. Visit wicpa.org/EF to contribute online. Contact WICPA Chief Financial and Operating Officer, Tammy J. Hofstede, at 800-772-6939 ext. 4518 or tammy@wicpa.org with questions.

Join us in thanking our Foundation contributors!

View a PDF at: wicpa.org/EFContributors

wicpa.org

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{ Technology: ROI technology }

FOUR

key technology questions every organization should address

By Thomas G. Stephens Jr., CPA, CITP, CGMA

Technology permeates virtually everything we do in our jobs. As such, when we utilize technology as a strategic asset, it can provide a substantial return on investment (ROI). On the other hand, when we fail to update our technology or to train our team members on how to utilize it effectively, results suffer. To help ensure that your organization is maximizing its ROI in technology, consider addressing each of the following four questions before the end of the year:

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wicpa.org

1) HOW CAN YOU USE EXCEL MORE EFFICIENTLY, WHILE SIMULTANEOUSLY REDUCING THE THREAT OF SPREADSHEET ERRORS? 2) DO YOU WANT TO MINIMIZE INTERNAL AND EXTERNAL THREATS TO SENSITIVE INFORMATION? 3) SHOULD YOU MIGRATE TO WINDOWS 10?

4) WHAT ARE THE BEST COLLABORATION TOOLS FOR YOUR ORGANIZATION? USING EXCEL EFFICIENTLY AND EFFECTIVELY For most accounting and financial professionals, Microsoft Office Excel is one of the most-used applications on their desktop.

Yet, most Excel users receive little, if any, formal training on how to take full advantage of this ubiquitous tool. Consequently, productivity suffers because these users remain unaware of new and improved features and advancements available with the more recent versions of the application.

To obtain a greater ROI from Excel, consider to what extent you use features such as Tables, PivotTables, and Data Queries.

Each of these three tools can help you to automate many of your reporting processes, leading to spending less time on mundane tasks such as creating formulas.

Also, do not overlook opportunities to extend the functionality of tried-and-true features such as “layering” multiple levels of calculations with Excel’s Subtotal feature and using array formulas to solve simple rounding issues, along with generating advanced summaries of data. Additionally, explore how the new Power BI features can help you create meaningful business intelligence applications by building on your existing knowledge of Excel.

One often-overlooked issue with spreadsheets is the error rate associated with them. Many estimates peg the error rate at approximately 90 percent of all spreadsheets in use! Of course, this is simply unacceptable and we must find ways to reduce spreadsheet errors, without compromising functionality. To that end, consider taking advantage of features such as Excel’s Inquire tools, IFERROR function, and the Analysis Toolpak to help you prevent and detect spreadsheet errors.

Of course, with the imminent release of Microsoft Office 2016, Microsoft will introduce new features in Excel and the rest of the applications in the Office suite. As you upgrade to Office 2016, carefully review and consider how you and your team can benefit from using each of these tools.

MINIMIZING THREATS TO SENSITIVE INFORMATION Just as we must address the error rate in Excel spreadsheets, we must also minimize threats to sensitive information stored by our organizations. Doing so requires a well-planned strategy that encompasses protecting data stored on PCs, laptops, servers,

wicpa.org

tablets, smartphones, and in the ever-growing “cloud.” Key internal controls that you should consider implementing to minimize the threat of compromising sensitive data include the following five items:

1) Control access with strong user authentication measures. This includes user IDs and passwords, but for a growing number of organizations, it should include password management tools, biometrics, and multi-factor authentication.

2) Restrict the assignment of administrative rights on end-user computers so users cannot implement changes that potentially compromise data.

3) Block USB ports from transferring data. Sensitive data stored on uncontrolled and unencrypted USB drives represents a tremendous risk to organizations when those devices become lost or stolen.

4) Encrypt all disks so if a device is lost or stolen, the likelihood of compromising data is minimal. For many, simply using Windows’ BitLocker encryption tool will suffice here.

5) Implement a “whitelist” approach to managing applications.

Instead of trying to block all of the “bad” things on a computer — an endless list of malware that grows on a daily basis — use a whitelist approach that blocks everything on a computer except the applications to which you grant specific rights allowing them to run.

6) Implementing these five common sense steps to data security will go a long way toward minimizing threats to sensitive information.

MIGRATING TO WINDOWS 10 With the July 29 release of Windows 10, Microsoft has once again altered how the majority of the world’s computers will operate. Windows 10 will be a major consideration for organizations and individuals alike for various reasons, including the fact that a large number of organizations continue to run the outdated and unsupported Windows XP operating system. Another driving factor behind the expected high adoption rate of Windows 10 is the fact that it is a free upgrade for current Windows 7 and Windows 8 users.

From a feature perspective, Windows 10 offers a great deal of improved functionality to users of Windows 7, Vista and XP. Most will find Windows 10 to be substantially faster than prior versions of Windows. Further, Microsoft improved security in Windows 10, adding increased protection of sensitive data. For all users, including existing Windows 8 users, Windows 10 offers an improved Start menu that allows those who want to work in a more “traditional” environment to do so. Additionally, Windows 10 includes Cortana, a voice-activated personal assistant similar to Apple’s Siri, and Continuum, a feature that adjusts your operating environment on the fly as you change from tablet mode to desktop mode on a convertible device such as a Surface Pro 3.

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27

{ Technology: ROI technology } As you consider upgrading, particularly from Windows XP, carefully research and confirm that your existing applications will run on Windows 10 and that peripheral devices such as printers will work with Windows 10. The general rule-of-thumb here is that if your applications and devices work with Windows 7, they will also work with Windows 10. However, just in case, be sure to confirm.

COLLABORATION TOOLS FOR YOUR ORGANIZATION The emergence of collaboration tools is one of the more significant trends in technology today. As the lines blur between departments, and even companies, more information workers find the need to collaborate in real-time with colleagues, both inside and outside the organization, to be critical in getting their jobs done. More than just simple file sharing, real collaboration means voice communication, instant messaging, whiteboards, video chats, and potentially even social media interaction.

Microsoft Office 365, Zoho, and Google Apps for Work are among the more widely known collaboration tools available to businesses today. Each of these tools provides exceptional functionality and affordability to their target markets.

Additionally, niche players such as Citrix, Colligo, and Basecamp offer solutions such as secure file transfer, synchronizing SharePoint data, and project management tools

that you can use to address specific needs within your organization. Regardless of the size of your organization, do not overlook the need for collaboration tools when considering how to ramp up productivity.

SUMMARY Technology is always evolving and to ensure that we maximize our return on our investment in technology, we must stay abreast of relevant changes that impact us as individuals and as information workers. Four key issues — using Excel (and the rest of the Microsoft Office suite) efficiently and effectively; minimizing threats to sensitive information; migrating to Windows 10; and collaboration tools for your organization — are sure to affect virtually every organization.

During the coming months, invest the time necessary to address the questions and issues outlined in this article so you and your team will be well on your way to maximizing your technology ROI. Thomas G. Stephens Jr., CPA, CITP, CGMA is a shareholder in K2 Enterprises in Hammond, La. Contact him at tommy@k2e.com.

Learn more from Stephens at this year’s WICPA Technology Conference Dec. 3-4. Visit wicpa.org/content/ContinuingEducation/Conferences for more information.

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Serving all of Wisconsin with offices in Milwaukee and Delafield.

Solving Wisconsin tax problems for almost 60 years.

We handle IRS and state tax audits, appeals and collections.

A team of Attorneys skilled in accounting (CPAs), business and real estate to ensure all tax issues are properly addressed and resolved.

IRS and Wisconsin Tax Audits Tax Collection Problems Property Tax Challenges Foreign Account Disclosure Corporations and Individuals

Tax Appeals Offers in Compromise Non-filers Tax Planning

Attorney Robert Teuber AVVO Top Rated Attorney Super Lawyer Rising Star 414-276-5800

www.wbb-law.com

C h e c k o u t H o t Ta x To p i c s a t o u r b l o g ! w w w . t a x l a w f o r u m . c o m 28

On Balance

November | December 2015

wicpa.org

usbank.com/smallbusiness

Solutions for every stage of your business

Start

Run

Expand

Transition

Our commitment to business success is inspired by yours.

Whether your client is starting or expanding their business, U.S. Bank provides financial solutions that may help manage cash flow, payments and loans for future growth opportunities. We are dedicated to providing tailored business solutions that may help support business success.

Mike Ward Business Banking 414.765.6061

Call us today to learn more about how U.S. Bank can become a resource for both you and your clients.

EQUAL HOUSING

Credit products are subject to normal credit approval and program guidelines. Some restrictions and fees may apply. Please see a banker for details. Deposit products offered by U.S. Bank National Association. Member FDIC 141627

PRSRT STD U.S. POSTAGE

The Magazine for Wisconsin CPAs A publication of the

Wisconsin Institute of Certified Public Accountants

W233N2080 Ridgeview Parkway Suite 201 Waukesha, WI 53188 wicpa.org

PAID

Milwaukee, WI Permit No. 5845