On Balance Magazine - Sept/Oct 2020

September | October 2020 | Vol. 16 No. 4 A publication of the Wisconsin Institute of CPAs | wicpa.org

Making It Work in Wausau The Grant Smart Co. | 6

Plus: The post-pandemic IRS | 10 Bankruptcy and forgiveness | 20 Filing protective claims | 24 Washington CARES | 36

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A publication of the Wisconsin Institute of CPAs | wicpa.org

September | October 2020 Vol. 16 No. 4

6 Features

Columns

6 Making it work in Wausau Grant and Melanie Smart are a father-daughter team who share similar interests beyond their CPA credentials. One of these is a partnership in Grant Smart Co.

By Marcia Tillett-Zinzow

30 TECHNOLOGY

Tools change with the times Addressing security needs, learning new features and upgrading equipment can no longer be a once-a-year process.

By Randy Johnston

10 How will practice before the IRS change?

Now that the IRS has started to reopen, how will they handle the backlog created by the pandemic, and what will the agency look like in the future?

By Michael G. Goller, JD, and Karla M. Nettleton, JD

34 PRACTICE MANAGEMENT

Ethics: A line in the sand 2020 Ethical behavior in accounting is a function of actions, beliefs and perceptions from all areas of our world.

Awareness can prevent crossing the line.

By Jim Lindell, CPA, CSP, CGMA, MBA

16 Accounting for the new normal From large public firms to businesses to higher education, the COVID-19 pandemic is reshaping the accounting world. Find out how some firms are handling it.

By Ken Wysocky 20 Bankruptcy and debt forgiveness The U.S. government has been addressing the pandemic with financial assistance for many months, but uncertainty remains. Some businesses must weigh their options.

By Robert A. Mathers, JD, CPA, ABV, PFS and William D. Gardner, JD 24 Filing protective claims This Q&A from the AICPA and WICPA can help your firm decide whether to file protective claims before the Supreme Court rules on the ACA.

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36 FEDERAL TAXATION

Washington CARES In most tax legislation, there are changes that help save some taxpayers money and cause others to pay higher taxes. But things were different in the CARES Act.

By Jim Brandenburg, CPA, MST

Departments

38 HUMAN RESOURCES

Leading people in the “next normal” The coronavirus pandemic has been stressful for everyone. Workforce emotional well-being must be a factor in your business strategy as we move ahead.

By Kelly M. Renz, MHRM, SHRM-SCP

32 Memorials | departed members

3 Outlook | chair’s letter 4

In Touch | president & CEO’s message

15 Welcome | new members 28 Kudos | members in the news

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2020-2021 WICPA OFFICERS/BOARD MEMBERS Chair Wendi M. Unger, CPA

On Balance is published five 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; Fax: 262-785-0838; email: amanda@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 2020 On Balance.

Join us online!

Chair-elect Angela C. Thomas, CPA Past Chair Neil R. Keller, CPA/ABV, CVA Secretary/Treasurer Lucien A. Beaudry, CPA, JD Directors Jeff Dewane, CPA, CGMA, CMA, MBA John R. Heindel, CPA Daniel Holzhauer, CPA Ruth A. Kallio-Mielke, CPA Wendy A. Peters, CPA Steven A. Pullara, CPA Matthew J. Schaefer, CPA, CGMA Kyle R. Stephens, CPA

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President & CEO Tammy J. Hofstede Design & Layout Brett Stallman Advertising Sue Daniels Editor Marcia Tillett-Zinzow Printing Delzer

AICPA Council Ryan J. Hanson, CPA, CGMA Neil R. Keller, CPA/ABV, CVA

CPA firms are invited to submit proposals for WICPA’s annual audit The WICPA invites licensed CPA firms to submit a proposal for its annual audit of the WICPA and the WICPA Educational Foundation for a five-year period, beginning with the fiscal year ending April 30, 2021. All interested parties must send a written letter of interest to Tammy Hofstede, President & CEO, WICPA, W233N2080 Ridgeview Parkway, Suite #201, Waukesha, WI 53188 or email tammy@wicpa.org.

Written letters of interest must be received no later than September 21, 2020.

Firms that send a written letter of interest will receive a request for proposal along with additional information by September 28, 2020.

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OUTLOOK | CHAIR’S LETTER “At the end of the day, we all want what is right for ourselves and the profession we have dedicated a lot of time and effort to.”

Getting back to the business at hand

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s I sit down to write this column, I reflect on how all of our lives have changed over the last few months. We have gone from traveling from client to client and meeting with clients and colleagues in person to conference calls, Zoom calls, Microsoft Teams calls and the like. The days of getting up and leaving for the office have been replaced with stumbling to our new “offices” located somewhere in our homes. The number of hours we work seems to be growing — but, boy, do the days go by fast. Will the world that we knew before COVID-19 ever return? Do we really want it to? As I look at our profession, things have definitely changed. The way we work, with whom we work and where we work — all different.

Our ability to work remotely and do it effectively and efficiently is amazing. The challenge that I see is how to handle that new hire who just started in June and did so remotely. How do we bring them into our culture and give them the experience they were hoping to have when they decided to pursue a career in accounting? There is also the harsh reality that we are all attempting to do more with less. Workforce limitations have been put into place, and measures have been taken to protect a company’s profitability and viability. How will this affect our staffing needs and our ability to recruit the best and the brightest at some point? The profession already struggles with having a sufficient pipeline of available talent. My concern is that the current environment and economy will cause this struggle to grow.

In looking at where we work, we’re seeing that a physical office presence is not really necessary to do what most of us do. Who would have thought that we could get by without a copier, scanner and fax? Technology needs have replaced the brick-and-mortar needs of the past. The questions now are “How many monitors do I really need to operate effectively?” and “Should I sit all day or should I stand for a portion of the day?” One thing I have noticed

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is that I have many more meetings by videoconference than I ever had by phone or in person in the past — but a sense of loneliness exists that I never noticed before.

Perhaps that is all right. It may allow for more time to reflect, analyze and “think.” Maybe life is now at the right pace — or at least at a better pace.

So whether your area of expertise involves extended tax deadlines, extension of time to implement new GASB standards, FASB ASUs or new services related to CARES funding or PPP loans, we are all dealing with scenarios that we would have welcomed under what used to be normal circumstances. Now they represent things that we will have to address at some point and one more thing that makes our lives “different.”

As we move into fall and look for some return to normalcy — which is most likely going to look and feel very different — let’s embrace the changes we have experienced. Let’s not dwell on the past but look to the future and determine what we can do to make it even bigger and brighter than we had hoped it could be prepandemic. The sky is the limit! Stay safe. Stay healthy.

Wendi Unger, CPA, is a partner with Baker Tilly in Milwaukee and the chair of the WICPA board of directors. Contact her at 414-777-5423 or wendi.unger@bakertilly.com.

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IN TOUCH | PRESIDENT & CEO’s MESSAGE “While the COVID-19 pandemic has forced many changes, it has not eliminated opportunities to continue to serve you: our members.”

Membership update

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or today and the foreseeable future, COVID-19 is the new acronym we’ve learned and wish we’d never heard of. I am very proud of our profession and of the WICPA staff ’s resilience during this challenging time. I also appreciate everyone’s understanding of this everchanging situation as we continue to take steps to protect our staff, our members and our communities.

To assure safety of our members, staff and communities, the WICPA has canceled all in-person gatherings, meetings and events and (when possible) transitioned them to digital and livestream. We have completed planning for virtual meetings, livestream conferences, webcasts and online trainings through April 30, 2021.

While the COVID–19 pandemic has forced many changes, it has not eliminated opportunities to continue to serve you: our members.

In the coming months Although the pandemic has forced many large venues to either close their doors or limit the number of people allowed inside and change how service is provided (preventing in-person training and conferences), it has not eliminated opportunities to expand your professional knowledge and ensure your lifelong employability. Instead, we’ve moved these opportunities online for you.

As changes continue to occur in the profession — whether relating to regulatory, technology, security, law or employment and diversity — the WICPA is here to make sure you stay current in your profession. Online learning offers flexibility to gain relevant skills tailored to your needs. Livestream conferences and select seminars and breakfast programs will also be recorded for on-demand viewing and will qualify for formal CPE credit.

Our season lineup has been scheduled and announced in The Bottom Line and on the website. The programs we selected were based on feedback I received from member visits last fall. Registration fees have been discounted for all livestream programs. We also have a four-part diversity series that will be

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free to members as well as a one-hour program on unconscious bias to provide education on diversity and inclusion.

Rescheduled events and activities • The 2020 Annual Golf Outing has been canceled and rescheduled to next year. Save the date for Friday, Sept. 17, 2021, at Ironwood Golf Course.

• Our 2020 Membership Banquet & Annual Business Meeting, rescheduled to Oct. 16, will be held virtually in the morning with a condensed format. In addition to organization updates from me, you will hear from our past and current board chairs; elect our board of directors; and recognize our 5-, 10-, 25-, 40- and 50-year longevity members. You can register now at wicpa.org/ banquet. Recognizing and honoring our Excellence Award recipients will be postponed to next year’s banquet, which is scheduled for Friday, May 7, 2021.

• The 2020 New CPA Banquet that was rescheduled to Oct. 29 was canceled, and we will honor two years of newly licensed CPAs (2019 and 2020) at next year’s banquet, which is scheduled for Friday, June 4, 2021.

Last fall I started member visits across the state. These have provided valuable feedback and the opportunity to share state and national updates. I plan to continue such visits in the coming months via virtual meetings.

Taking the additional opportunity to utilize this technology, we will be holding virtual new member orientation meetings on a monthly basis this fall. Further, we have held virtual meetings with high school and college educators to develop innovative ways to provide resources and continue to keep the WICPA and accounting profession at the forefront of their classes.

Advocacy successes and continued efforts Advocacy has been an important and continuous activity as we support the profession, and despite the coronavirus interruptions, the WICPA has remained active and involved. During the recent months, our advocacy efforts have included the following:

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• We were successful in implementing continuous testing of the CPA Exam, which went into effect July 1. Continuous testing allows candidates to sit for the CPA Exam yearround. The only restriction is that candidates must wait to receive scores from prior attempts of a section before they can sit for that section again.

• We collaborated with the Accounting Examining Board to successfully pass an emergency rule that extends the 18-month expiration of exam sections passed to Dec. 31, 2020.

• A task force of WICPA members was formed to work with the Wisconsin Department of Revenue (DOR) on legislation related to partnership audits and taxation of nonresident income derived in Wisconsin. We anticipate agreed-upon legislation by the end of September.

• We have developed quarterly meetings with the DOR and the WICPA Wisconsin Taxation Committee to discuss topics impacting CPAs in depth with DOR technical staff.

WICPA members will have an opportunity to provide input and questions on topics prior to the meetings through Connect on the WICPA website. DOR responses will then be posted to the Connect discussion after the meetings.

Once the legislature comes back into session, we will push to pass our legislation (AB753) regarding modifications to the tax treatment of tax-option corporations that elect to pay tax at the entity level. Additionally, we will collaborate with the Accounting Examining Board to introduce legislation allowing technical

college credit that does not transfer to four-year colleges to count toward the 150-hour requirement.

On the federal level, I joined CEOs from 27 other state CPA societies and sent a letter to Congressional leadership urging them to pass legislation that would close a projected gap of $555 billion that states and local governments face this fiscal year and the two years following. This response stems from the impact COVID–19 has had on legislators and local officials in states and municipalities across the United States, all of whom are dealing with crippling budget shortfalls to close this fiscal year and limited resources to craft 2021 budgets. State society leaders came together to support this effort and work to find a solution so legislators won’t have to resort to tax increases and cuts to important state programs.

Together, the group represents nearly 280,000 CPAs from across the country.

I hope that you — our WICPA members, who are on the front lines supporting clients, customers, individuals and businesses in great need — are feeling supported by your WICPA team. We are here for you. Our staff has been safely working, and we are operating at 100% to meet your needs, support the profession and keep you updated on the most recent news impacting your profession and industries.

Tammy J. Hofstede is president & CEO of the WICPA. Contact her at 262-785-0445 ext. 4518 or tammy@wicpa.org.

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Photography by Rick Swearingen

Making It Work in Wausau Father and daughter CPAs team up for success

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By Marcia Tillett-Zinzow

G

rant and Melanie Smart are a father-daughter team who share similar interests beyond their CPA credentials. One of these is a partnership in Grant Smart Co. — where it’s their differences that make the business work.

Melanie and her dad both love the outdoors. She loves gardening and works outside in her yard whenever she can — spring, summer and fall. Grant loves outdoor sports. For years, he’s had season tickets to Badger football games and occasionally enjoys a Packer game at Lambeau Field.

They also both love animals. Grant has two dogs and a cat; Melanie has two dogs and three cats. She started college as a pre-med student, in fact, thinking she was going to be a veterinarian. Then she discovered she fainted at the sight of blood. So she earned a bachelor’s degree in science and then went to Plan B: accounting.

The office is where father and daughter go their separate ways. “I like the corporate world, and she likes the tax part,” said Grant. “I don’t like tax very much, and I never did.”

The company man Grant graduated from UW–Madison in 1956 and went to work for what was then Wipfli Ullrich & Co. in Wausau.

He was licensed as a CPA in 1960. Born and raised in Marathon County, where Wausau is the county seat, it made perfect sense for Grant to go with Wipfli Ullrich, and he’s never been sorry. He retired from Wipfli LLP in 1997 after being with the firm for more than 40 years.

“I was in the right place at the right time,” he said. “I didn’t make any moves, got married, had kids — and our families were from Marathon County, so we never moved away. It turned out to be a good decision.”

In its most positive definition, a “company man” is one who has built a relationship with their employer based on loyalty and trust. Such was Grant, who worked for Wipfli until he reached the firm’s mandatory retirement age of 60.

He has pleasant memories of working there — lots of them.

“When I started there, Wipfli was a firm of about 15 people, and John Ullrich was managing partner. It was a one-office firm, and we started growing by first setting up offices in the region — Marshfield, Wisconsin Rapids, Rhinelander and so forth,” Grant said.

According to Wipfli’s website, the firm now has 45 offices in the U.S., two offices in India and nearly 2,200

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Grant is a huge fan of Wisconsin Badgers football and the Green Bay Packers.

employees. The website also states, “The firm’s expansion across the Midwest was propelled by its founders’ determination to recruit top talent and provide ongoing training for its employees.”

Grant helped recruit some of that top talent. For 25 years, he was the main recruiter, regularly visiting the largest Wisconsin university campuses to talk to students about coming to work for Wipfli.

“We were the top firm in the area, so we had a leg up,” he said. “We were able to get the smartest kids, the ones in that 4.0 GPA range. Then we had smart people to help build the firm, and that was part of our growth strategy.”

Grant worked with numerous manufacturing and trucking companies as well as auto dealerships during his career with Wipfli. He also helped some of Wisconsin’s best-known companies when they were startups. One of these was Tombstone Pizza.

“They had about $100,000 in sales at the time,” he recalled, “and in about 20 years, they sold the company to Kraft Foods for $150 million.”

The professional student Melanie got hooked on tax partly because it involves research. She attributes her love of research to her degree in science. But she also is a perfectionist, and that’s a valuable trait to have in tax practice.

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Melanie works with a staff member to ensure mailings get out to clients in a timely manner.

After graduating from UW–Whitewater in 1991, Melanie went to work for a Wausau firm that did mostly tax, and she got her feet wet there. She then worked for a large corporation in Wausau and found the accounting work to be too routine for her liking. She left that job in 1998 and went to work for her dad.

The corporate job “wasn’t very challenging, whereas tax gives you that challenge,” she said. “You have to do a lot more research, so to me it’s just a little more exciting. I’m not sure too many people would explain it that way, but that’s how I see it.”

In addition to her bachelor’s degrees in science and accounting, Melanie also has minors in math and English as well as credits toward an information technology degree, which she plans to finish in the future. “I’m a professional student,” she joked.

When asked about her English minor, she explained that when she was in college at UW–Whitewater, all accounting majors were required to take a certain number of credits in English so that accountants would be able to write better letters. “So I decided to use those credits for an English minor,” she explained.

Her writing skills came in handy during the governor’s COVID-19 Safer At Home order. Tax practitioners pivoted, sometimes daily, to understand numerous tax changes brought about by stay-at-home orders throughout the country that took people out of the workplace and closed many a business door.

Melanie took numerous tax seminars — sometimes daily — and participated in many webinars on the Paycheck Protection Program and other loans and grants designed to help small businesses weather the lockdown. Much of the information had to be communicated to clients.

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Melanie stands outside the Grant Smart Co. office in Dudley Tower.

“A lot of our clients still like to get things in the mail, so we were sending out a lot of letters — often one or two a day,” she said. “While everyone else was sitting at home, we were actually very busy.”

A Smart future In addition to Grant and Melanie, the Grant Smart Co. also has two administrative staff, rounding out the office to four members of the organization. There had been five on the team

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“

“It’s been kind of a fascinating life, to be honest. In fact, it’s been very exciting. And the best part of all is that I’m still doing it!”

— Grant Smart

until Grant’s wife (Melanie’s mother) passed away in 2017, leaving a vacancy in the office and a hole in their hearts. They will add another accountant to the staff in the near future.

If you ask Melanie what the future holds, she will tell you without hesitation that the plan is to shape the firm into a tax and virtual CFO business. They’ve dabbled in virtual CFO already, with Grant supplementing his client base as CFO of Bauer Trucking, based in Medford.

“We do all of the heavy lifting here in our office, including their financial statements and such,” he said, “and then I spend one day a week out there. It’s about 50 miles away.”

Melanie said they will hire another CPA and develop the virtual CFO service as soon as they can. The basic framework is already in place, but they’ve had to put off the launch a couple of times. The first time they tried, her mother was diagnosed with cancer. Supporting her during her illness and working through the grief of losing her threw them off track for a couple of years. They shifted their launch plan to 2020.

“We were going to do it this year after tax season, but then COVID-19 hit, and tax season was extended. So our plans to advertise and hire another CPA were pushed out to September,” Melanie said.

If you ask Grant what the firm’s future looks like, he will tell you that whatever happens, he’s not going anywhere. “I’m one of those guys who will probably work until the end,” he said. As he reflects on his career— which began with 41 years at Wipfli and has progressed to owning his own firm and teaming up with daughter Melanie — he is satisfied.

“It’s been kind of a fascinating life, to be honest,” he said.

“In fact, it’s been very exciting. And the best part of all is that I’m still doing it!”

Marcia Tillett-Zinzow is a Wisconsin freelance writer and editor.

Contact her at mtzinzow@icloud.com.

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Safe at the Office While many were furloughed during March and April, Grant and Melanie Smart remained very busy due to the nature of their business and the COVID-19 tax and law changes. The building that houses their office — Dudley Tower in downtown Wausau — was practically vacant during the lockdown, but the Smarts carried on. They easily complied with social distancing by communicating with clients only through email, phone calls and letters.

But it got a little lonely.

“We could literally go weeks without seeing another person in the office,” Melanie said, adding that they also saw no clients in person. “That was hard,” she said.

“I really did miss seeing them during tax season, as I normally would.”

Concerns about being exposed to the virus in the office were eased by a conscientious maintenance staff and a state-of-the-art building. “All high-touch areas are disinfected twice a day, and hand sanitizers are located at all elevator and stairway entry points,” said Melanie. “In our office, we switched out the natural cleaner we had been using for more of a bleach solution to wipe down door handles and light switches and such.”

But one of the best ways the 10-story Dudley Tower protects its occupants is by purifying their air. “The building has a special air-filter system that disinfects the air with ultraviolet light,” said Melanie.

“It was installed when the building was constructed because the owner wanted something that would accommodate allergies and respiratory conditions.”

That feature alone made staying in the office just as safe — or possibly safer — than staying at home.

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How Will Practice Before the IRS Change? and other practitioner concerns raised by COVID-19

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By Michael G. Goller, JD and

ractitioners and taxpayers alike are wondering how COVID-19 will change tax practice before the Internal Revenue Service (IRS). As the IRS has started to reopen with some additional funding, practitioners and clients question how the agency will handle the backlog created by the pandemic and what the IRS will look like postpandemic. Practitioners should prepare for delays, stay up to date on changes and keep in mind their ethical duties.

The IRS began reopening summer 2020

Karla M. Nettleton, JD

In March the IRS, in response to the COVID-19 pandemic, shut down all Taxpayer Assistance centers, IRS call centers and return-processing centers. During this shutdown, the IRS focused only on “mission-critical” essential functions.

In late April, the IRS began the first phase of reopening by asking for volunteers to return to work with incentive pay. That incentive pay ended on June 6, as the IRS began its reopening plan. The IRS reopened facilities in Kentucky, Texas and Utah on June 1, followed by Georgia, Tennessee, Michigan and Missouri on June 15. The IRS also began reopening operations in Ohio, Indiana, California and Oregon on June 29. All remaining facilities opened by July 13 for workers whose jobs could not be performed remotely. The IRS’s initial goal was to get facilities — including processing centers, notice-printing facilities and call center operations — online.

As of June, the Taxpayer Assistance centers were still closed, but the IRS had opened extremely limited phone assistance.

On its website, the IRS encouraged practitioners and taxpayers

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“to use electronic options to support social distancing and speed the processing of tax returns, refunds and payments.”

The People First Initiative, which was launched in April, continued to provide relief to taxpayers until July 15. The changes included relief such as postponing payments, limiting enforcement actions and extending deadlines.

As IRS employees returned, it was not entirely clear what functions those employees would be assigned to perform.

Things are still far from clear. What is clear, however, is that the agency will still need significant time to return to normal and handle the backlog of work that has amassed throughout the pandemic. The IRS estimated that the Kentucky, Texas and Utah facilities alone had nearly 5 million unopened tax returns as of mid-May and some 5 million unopened pieces of mail, ranging from general correspondence to tax payments.

IRS Commissioner Charles Rettig testified before the U.S. Senate Committee on Finance on June 30 that the total backlog stood at about 12.3 million unopened pieces of mail.

The commissioner indicated that return processing, refunds and customer service have been ranked as the top priorities to address the backlog.

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The ability to process the backlog was and may continue to be slowed by the requirements put in place to prevent the spread of COVID-19. The IRS’s initial requirements included prior approval for many of the employees to enter the office, for employees to have their temperature taken upon entering, and for adjustments to working spaces to accommodate CDC social distancing guidelines. In addition, the age of IRS employees is on the older side due to a lack of hiring, and as such, there are increased concerns about the health of those workers. In the event a worker contracts COVID-19, IRS protocols require that the affected areas be closed and thoroughly cleaned before operations can resume.

The IRS’s new COVID-19 duties and guidance In addition to handling the massive backlog, the IRS also has new duties. The agency was at the center of COVID-19 relief legislation, such as the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES Act). Both laws contain several tax-relief provisions for businesses and individuals. As a result of these laws, the IRS was tasked with issuing new guidance, processing individual stimulus payments and processing refund claims. And as of the end of June, these duties were far from over. In his June 30 testimony, Commissioner Rettig indicated the IRS is still working to resolve issues and provide guidance surrounding the COVID-19 legislation.

The majority of the guidance issued by the IRS for COVID-19-related tax law changes has been in the form of press releases on its website’s Newsroom and Frequently Asked Questions (FAQs) pages. Press releases and FAQs not published in the Internal Revenue Bulletin do not constitute authority for the purposes of the accuracy-related penalty under Internal Revenue Code (IRC) § 6662 or the preparer penalty under IRC § 6694. What constitutes authority is specifically addressed in Treasury Regulation § 1.6662-4(d) (3)(iii).

While it seems unlikely the IRS would argue that a taxpayer cannot rely on the agency’s own FAQs and other informal guidance, this possibility has raised anxiety among some practitioners. IRS Circular 230 imposes a duty on practitioners to inform clients of law or guidance changes.

Because FAQs and other informal guidance can change at any time, practitioners must be aware of any changes that may arise in this guidance.

Ethical concerns Attorney and CPA malpractice insurance carriers, along with the American Bar Association, indicate that far more malpractice claims arise during times of economic recession.

For example, these claims doubled from 2005 to 2009 during the Great Recession. Because it takes time to discover

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“

Attorney and CPA malpractice insurance carriers, along with the American Bar Association, indicate that far more malpractice claims arise during times of economic recession. negligence, there is often a delay in claims. Economic downturns also have a way of revealing fraudulent schemes and substandard work product. Further, when liquidity dries up because of an economic slowdown, tax shelters and tax avoidance schemes often come to light. The IRS Criminal Investigations Division has already reported an increase in fraudulent activity as a result of some of the CARES Act provisions.

When the economy slows, taxpayers may engage in behavior designed to avoid paying tax. Further, the COVID-19 world is changing at a rapid pace and impacting deadlines, responsiveness and services. As such, practitioners must be vigilant, and to avoid malpractice and ethical issues, practitioners should consider the following guidelines: • Frequently check the IRS website for updates and guidance. The IRS has used its website as a primary means of providing guidance.

• Track, check and double-check all deadlines. The IRS and most states changed many key tax deadlines, and practitioners need to be aware of these changes.

• Consider using reminders to check on the status of filings and update deadlines if necessary.

• Protect firm data. Both the IRS and the American Institute of Certified Public Accountants have issued guidance indicating that a practitioner has a duty to keep client data secure. In times of crisis, data theft is likely to increase. Further, with more communications being electronic and not face to face, the likelihood of a data breach increases.

• Communicate frequently with clients. This should include updating them about the status of filings or cases. Also, talk to clients about changes in the law and business activities they are engaging in to ensure they are receiving the correct services and support.

• Document! Practitioners should document all client communications and any significant actions taken on behalf of a client.

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• Pay special attention to conflict-of-interest issues.

Conflicts are a primary source of malpractice and ethical claims.

• Watch out for overly aggressive tax positions. When times are tough, there is a temptation to take more aggressive tax positions.

• Make sure you can properly address the needs of new clients.

• The Central Authorization File offices are reopening, but practitioners may experience delays in processing Form 2848 and Form 8821.

• Document all tax losses. No one plans to lose money, but when a loss occurs, make sure it can be claimed and supported. The new Net Operating Loss Carryback Rules create opportunities, but know that many of those carrybacks may be audited.

Finally, the COVID-19 pandemic crosses not only national borders but also practice areas. It is unlikely that any one person is an expert on tax issues, insurance coverage matters, loan and borrowing questions, and the myriad of other issues and concerns raised by the pandemic.

Practitioners need to communicate, pool resources and ideas, and watch for the many “traps for the unwary.”

Possible changes to the IRS Many clients and practitioners have raised concerns about the IRS’s ability to juggle COVID-19-related matters with its regular duties. Over the last decade, the agency’s funding has been cut by 25%, and its staff has been reduced by a third. As a result, from 2010 to 2017 the number of individual audits decreased by 42%. The funding cuts forced the IRS to close or consolidate tax-processing centers.

The IRS’s five-year plan — started in 2019 — closed the Covington, Kentucky, facility and is scheduled to close the Fresno, California, facility in 2021, followed by the Austin, Texas, facility in 2024. The virus has, however, interrupted ongoing plans to close the Fresno facility, including slowing the progress of moving jobs and issuing buyouts and early retirements for employees.

Changes, however, may be forthcoming. For the first time in a decade, the president has proposed significantly increasing the IRS’s funding, partly because of the Taxpayers First Act. The proposed increase in funding for fiscal year 2020 also includes $362 million for enforcement purposes.

In addition, the CARES Act provided the IRS with $500 million to implement the stimulus payments through fiscal year 2021. This included an additional $37.2 million in enforcement funding. The House Appropriations subcommittee has also indicated it would be tracking the budget to determine whether additional funding would be necessary for virus-related responsibilities. Commissioner

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Charles Rettig has been consistently vocal about the need for additional funding in order to improve the IRS. Moreover, rumors surrounding the next pandemic response bill indicate that the IRS will receive additional funding if a second wave of economic impact payments are sent out. The Senate Committee on Finance, during its June 30 hearing, continually expressed its desire to help the IRS with resources and funding.

Additional funding will allow the IRS to increase staff and, in turn, the number of audits. It will also aid the IRS in reorganizing and launching new initiatives under the Taxpayers First Act, which was signed into law in July 2019.

This law seeks to modernize the IRS and requires the agency to create a comprehensive customer service plan and to reorganize to improve efficiency, enhance cybersecurity and better meet taxpayer needs. The IRS was to submit its plans for reorganization and improved customer service during fiscal year 2020. However, the virus seems to have temporarily derailed this plan. While it is due to the Senate Committee on Finance on Sept. 30, Commissioner Rettig indicated that the Restructuring Report will not be completed until November or December of 2020. Members of the committee have urged the committee to require briefings on the progress of this report.

As a result of COVID-19, the IRS has engaged in what could be called a temporary restructuring. The agency is examining and realigning resources to meet its COVID-19 duties and to determine how to best utilize its staff. In order to meet its needs, the IRS is considering reassignments. The chief of the Criminal Investigation Division (CID) recently noted that agents from CID can expect to be reassigned to investigate

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on these taxpayers through its new Fraud Enforcement Office.

This office was created in early 2020 and is headed by a former IRS criminal investigator.

The IRS Tax Exempt and Government Entities Division also announced increased audits of private foundations, which are linked to global high-wealth enterprises. Audit topics will also be expanded to include COVID-19-related provisions and any fraud associated with those provisions.

“

The COVID-19 pandemic has resulted in changes to tax laws, the IRS and the way practitioners will practice. fraud associated with stimulus payments and small business loans (such as Paycheck Protection Program loans). These changes will create new concerns for practitioners.

What will the IRS look like post-COVID-19?

A post-COVID-19 IRS will certainly be different. The extended hiatus from processing returns coupled with law changes prompted by the pandemic have created a significant backlog for the IRS. Some predict it will take several months for the agency to recover from the backlog and return to normal.

Any increased funding for the IRS will mean additional hiring and increased audits. It is expected that a significant number of these audits will be focused on low-hanging fruit such as mismatches between self-reported income and the information forms reporting income (Form W-2 and Form 1099).

The IRS has also publicly indicated that its examination function is gearing up to audit hundreds of high-income individuals. These high-income audits were launched in a phased approach between July 15 and Sept. 30 and will be worked through the IRS Large Business and International Division (LB&I). The audits will include not only highincome individuals but also related entities. These audits were triggered by the Treasury Inspector General’s report (No. 2020-10-015) released on May 29, which found that during tax years 2014, 2015 and 2016, nearly 900,000 high-earning individuals did not file taxes and went without audit, owing the government some $46 billion. The Senate Committee on Finance has called for decisive action to end this practice. The Commissioner noted that the IRS plans to increase scrutiny

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Finally, as the IRS Commissioner announced during his June 30 testimony to the Senate Committee on Finance, after July a new round of audits focusing on conservation easements would begin.

This comes after several wins for the IRS before the U.S. Tax Court and new legislation proposed by U.S. Sen. Steve Daines, R-Mont., to end the alleged abuse of conservation easements.

The form of tax audits will also likely change. We expect to see more audits conducted by mail or office/correspondence audits. In its 2020 budget, the IRS set a goal of 162,000 office/ correspondence audits, while in-person audits were estimated at around 38,000.

A post-COVID-19 IRS will likely also be more tech savvy. The pandemic forced the IRS to move employees to telework where possible. As part of this, IRS employees were authorized to use secure email as a form of communicating with practitioners. In the past, email was used very sparingly, and most written communication with the IRS was by regular mail or facsimile. The IRS has also increased its use of data analytics and information sharing between departments. In addition, a significant portion of IRS funding increases are earmarked to upgrade the agency’s antiquated technological infrastructure. We have already seen a sample of the enhanced technology the IRS will begin to utilize with the stimulus payment tracking tool, Get My Payment. We have also seen the IRS increase utilization of its website to transmit information and to use email as a more common means of communicating with practitioners. During the June 30 hearing, Commissioner Rettig testified at length about the technological improvements anticipated for the IRS, including repurposing existing tools, increasing teleworking functions and considering options for fax filings. He stated that the future of the IRS is technology.

Summary The COVID-19 pandemic has resulted in changes to tax laws, the IRS and the way practitioners will practice. As 2020 wraps up, practitioners should continue to stay up to date on COVID19-related changes — and be prepared for an evolving IRS. Michael G. Goller, JD, is a shareholder and chair of the tax practice at Reinhart, Boerner and Van Deuren s.c. in Milwaukee. Contact him at 414-298-8336 or mgoller@reinhartlaw.com. Karla M. Nettleton, JD, is a tax attorney with the firm. Contact her at 414-298-8310 or knettleton@reinhartlaw.com.

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Investment advice offered through Spectrum Investment Advisors, a registered investment advisor. Registration with the SEC does not imply a certain level of skill or training. Spectrum has been named to the 2019 Future 50 list presented by the Metropolitan Milwaukee Association of Commerce (MMAC) and its Council of Small Business Executives (COSBE). The Future 50 program recognizes 50 companies in the seven-county Milwaukee Region that have been experiencing strong growth in both revenue and employment. To qualify for the award a company must be headquartered in the seven-county Milwaukee Region, independently owned and in business for at least three years. Spectrum was named a 2019 Top DC Advisor Team by the National Association of Plan Advisors (NAPA), which is a compilation of leading individual advisor teams, ranked by self-reported defined contribution assets under advisement. The 2019 list is made up of 235 teams and the 2017 list is made up of 275 teams, both with more than $100 million in DC assets under advisement. NAPA was created by and for retirement plan advisors and is the only advocacy group exclusively focused on the issues that matter to retirement plan advisors.

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wicpa.org

Welcome new members!

Get to know the newest members of the WICPA. April 1, 2020 – July 31, 2020

Sarah E. Abramson Grant Thornton LLP

Kayla Gomski Grant Thornton LLP

Bryan J. Kronberger Northland CPAs, S.C.

Isaac D. Pooler Hawkins Ash CPAs, LLP

Nick Stieve Deloitte & Touche LLP

Megan Aprahamian PwC

Kandyce Graber Deloitte & Touche LLP

Kaitlin R. Kubiak Hawkins Ash CPAs, LLP

Daniel Potter Grant Thornton LLP

William Strigel Wipfli LLP

Benjamin J. Badger

Julie Graceffa

Jessica J. Balogh Cohen & Company

Philip L. Greenwood University of WisconsinMadison

Kasandra Kulpa Shady Lane Inc.

Claryce Prasser Chortek LLP

Lucas Swerdlow PwC

Danielle L. LaCount CLA

Carson J. Radl University of WisconsinLa Crosse Department of Accountancy

Devon Thomas Deloitte & Touche LLP

Kevin A. Bartos Deloitte & Touche LLP Jodi S. Baus Deloitte Tax LLP Andrea Bertram Medical College of Wisconsin Jill S. Bier Kollath & Associates, CPA, LLC Nathan J. Boeckers PwC Aaron Brockman PwC Anna Brown KPMG LLP Katelyn Bujunoori BDO USA LLP Axel F. Candelaria Rivera Deloitte & Touche LLP Drew J. Casperson Grant Thornton LLP Kristen P. Chapman Grant Thornton LLP Brittny L. Cloutier Foley Kalseim & Company LTD Stephanie Compton SVA Certified Public Accountants, S.C. Michael J. Conard Jr. Millhouse Accounting, LLC Stephanie Contrucci Deloitte & Touche LLP Erik Cooper Grant Thornton LLP Sam J. Dallman Chortek LLP Jordan M. Dean KPMG LLP Joshua Drews Grant Thornton LLP Steven J. Egan Deloitte & Touche LLP Russel Erickson Lisa U. Fernandez Deloitte & Touche LLP Megan B. Fitzpatrick PwC Alexander J. Gassner Gassner Company, S.C. Tyler J. Gold Baker Tilly

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Jacob Gross Wisconsin Lutheran College

Mark W. Leeder Berkley Iselin & Lotz, S.C.

James R. Hampel KPMG LLP

Olivia Lesar Deloitte & Touche LLP

Kevin Heiden Grant Thornton LLP

Joseph Liethen

Laura Herrell Eagle Point Mutual Insurance Company Sarah G. Hoehnke University of WisconsinMilwaukee Holly Hoffman Sales & Income Tax Advisory Network Linda M. Hucko Deloitte & Touche LLP Kyle Hundt Hawkins Ash CPAs, LLP Mary K. Huybers Grant Thornton LLP Tami James Grant Thornton LLP Paige M. Janquart Capitol Bank Bradley J. Jansen PwC Gary M. Joers PwC Matthew Johnson Grant Thornton LLP Cassandra Johnson Grant Thornton LLP LeeAnn Kaye Deloitte & Touche LLP Thomas G. Kieffer Prairie Trust, a division of Waukesha State Bank Elizabeth Kirchenwitz Kohls Corporation Matthew R. Kleinow BDO USA, LLP Hannah Kluball University of WisconsinWhitewater Emily Koeller KPMG LLP Elizabeth M. Krahn Gassner Company, S.C. Lawrence E. Kreuscher

Ling Liu University of WisconsinEau Claire Heather M. Loger UW Hospitals and Clinics Lukasz M. Los Chortek LLP Shannon N. Lyons PwC Joseph M. Mardirosian U.S. Bank Phillip L. Martin Mansur Trucking, Inc. Patrick J. McClellan BDO USA LLP Jordan T. Miller Grant Thornton LLP Matthew Miller David C. Minch Huberty & Associates, S.C. Amanda Morris SVA Certified Public Accountants, S.C.

Dallas J. Ramsden Grant Thornton LLP Carl C. Rappelt City of Milwaukee DPW Infrastructure Beth Reed Grant Thornton LLP Andrew L. Richter Deloitte & Touche LLP Ramona L. Rogers-Windsor and Zach Ruedinger Deloitte & Touche LLP Donna R. Scaffidi Baker Tilly Eric Schleicher Deloitte & Touche LLP David Schmidt Deloitte & Touche LLP Emily M. Schmitz University of WisconsinMadison

Rebecca J. Sepnafski Deloitte & Touche LLP

Chase O’Brien City of Madison Finance Department

Nathan A. Sharpe Siepert & Co., LLP

Jeffrey C. Peterson Cardiac Science Corporation

Sara N. VanRossum Grant Thornton LLP Robert J. Von Rueden PwC Emily J. Vondrum Deloitte & Touche LLP Daniel M. Weber Grant Thornton LLP Kala Wedell Enerpac Tool Group Timothy Wells De Forest High School Christine Wilcox Concordia University

Rosalind T. Williams Monona Plumbing & Fire Protection, Inc.

Scott I. Shaffer Grant Thornton LLP

Stacey L. Parke Orion Family Services

Brian A. Van Eperen Grant Thornton LLP

Amelia M. Schumacher Grant Thornton LLP

Zane D. Navratil Deloitte & Touche LLP

Eric Pachowitz Grant Thornton LLP

Kayla A. Van Asten KerberRose S.C.

Bradley Wilhelmson KPMG LLP

Ricardo A. Sevilla Focus CPA

Philip Overmoyer Grant Thornton LLP

Kimberly P. Tomala Wipfli LLP

Michael R. Schoos Grant Thornton LLP

Jeffrey D. Mueller Grant Thornton LLP

Travis F. Olson Hawkins Ash CPAs, LLP

Stephen Thompson Grant Thornton LLP

Kristine N. Wing The Equitable Bank, SSB Morgan K. Wirkus Gassner Company, S.C. Franklin C. Wistl Deloitte & Touche LLP

Mathew Sheahan Grant Thornton LLP

Zachary Witt Grant Thornton LLP

Amy L. Simon Grant Thornton LLP

Brandon Wolf KPMG LLP

Richard C. Sippl Grant Thornton LLP

Susan M. Woods

Brian P. Smith KPMG LLP Leslie Smith Hawkins Ash CPAs, LLP

Amanda A. Petzold Deloitte & Touche LLP

Michael C. Sorenson University of WisconsinMilwaukee

Simon Phillips BouMatic

Daniel T. Sotiros PwC

On Balance

Lisa A. Winer State of Wisconsin Investment Board

Melanie A. Wyland KerberRose S.C. Amie J. Yerukhimovich KPMG LLP Camilla S. Young Arrow Carton Company Cal Zimborski Deloitte & Touche LLP

September | October 2020

15

Accounting for the New Normal From large public firms to businesses to higher education, the COVID-19 pandemic is reshaping the accounting world.

By Ken Wysocky

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rom video- and teleconferencing with clients to working remotely to adopting workplace social distancing practices, accounting officials statewide are grappling with the “new normal” imposed by the COVID-19 pandemic.

At the same time, whether they’re working in private accounting firms, industry or academia, CPAs also find themselves resigned to one of the few certainties posed by the virus going forward: uncertainty.

“We’re going to have to remain fluid about whatever we do,” said Ben Hauser, CPA, the president of Northland CPAs in Rhinelander.

The company also operates offices in Woodruff and Tomahawk and has about 14 employees. “It’s anything but definitive what the rest of the year will look like, much less tax season 2021.

We’re watching things like a hawk.”

Ben Hauser

Matt Schaefer

Working the phones Take Northland, for example: Like many other businesses nationwide, the firm initially closed its offices to clients in midMarch. Then it shifted to virtual tax consulting, using phone conferencing. Disruption was minimal, Hauser said.

“Quite honestly, teleconferencing has worked out just fine,” he said. “Our clients totally respected what we were doing to keep them and our employees safe.”

By mid-June, the firm had reopened to the public. Staff and visitors aren’t required to wear masks, but visitors are advised to not enter if they have any of the symptoms listed on a sign by the front door. Bottles of hand sanitizer also are available by the door. And because eight of the nine employees in the Rhinelander office have their own offices, social distancing already was in force, Hauser said.

“It’s different up here in Oneida County,” he explained.

“We haven’t had that many cases, which made us feel more comfortable about reopening.

“But all staff members have the option to work from home if they don’t feel comfortable at work. I think it’s important to

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To replace on-site work with clients, Northland started using a software program called LogMeIn. The software enables Northland employees to remotely access clients’ computers in much the same way that IT technicians can take control of computers and fix problems from far away.

“The pandemic forced us to get creative, and thankfully we have the technology to provide services remotely in an effective manner,” Hauser said. “LogMeIn allows us to help clients do things such as adjust payroll entries and provide QuickBooks support. Our clients have been very pleased with it.”

Stark contrast

“You can’t be married to one particular protocol,” said Matt Schaefer, CPA, CGMA, vice president of the Bank of Wisconsin Dells. “You have to keep looking at the risk factors and adapt as needed.”

Interviews with nearly a half-dozen CPAs showed that approaches to workplace protocols vary by location, size and type of business.

keep that option out there,” he added. “We already had a few people who self-quarantined because they had family members who took spring-break vacations.”

Things are very different at the much larger Milwaukee office of KPMG, where roughly 115 employees still are working from home, while a handful of essential employees might go to the office a day or so a week, said Joe Rock, CPA, the office managing partner.

Joe Rock

“We’re still planning a phased reopening of our offices,” he said. “But historically speaking, we’re comfortable working outside our offices — and we have the technology to keep doing that. So it hasn’t been massively disruptive because we’re already used to working like this.”

Depending on the size of virtual meetings, the firm has been using technology such as Skype, Microsoft Teams and Webex. “It’s all pretty amazing technology and very easy to use,” he said.

The firm’s 80-page return-to-office “playbook” calls for a measured reappearance of employees, Rock said.

“We’re not blasting the offices open,” he explained. “We’ll start with the 10% of employees who need to come in and see how that goes, and as we learn from that, we’ll gradually open it up to another 25%. But it’s all determined by facts on the ground and is very fluid.”

Company officials are still working out how to reconfigure workspaces to accommodate social distancing.

The first option calls for using all offices and then limiting seats in cubicle clusters and “team rooms” to create proper distancing, he said.

As for wearing masks, taking employees’ temperatures upon coming to work and staggered work shifts, everything is under discussion. And no one will be forced to go back to the office if they feel uncomfortable, he noted.

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Will KPMG ever have an office filled with employees again?

“I’d hate to say no – I think we will,” Rock said. “But I’m not sure if that’ll be pre-vaccine or anytime soon. Our main concern is opening things cautiously and safely.

“But I think it’ll be a bit of time before we’re back to normal, and then the question is whether we get back to normal or to a new normal,” he continued. “And I certainly can’t answer that today.”

Banking on best practices At the Bank of Wisconsin Dells, almost all of the roughly 81 employees in three locations — the headquarters in Wisconsin Dells and two other branch offices in Lake Delton and Portage — returned to work on June 29, having shut down in midMarch, Schaefer said.

On the other hand, the bank’s branches are complying with best practices provided by public health officials in Sauk and Columbia Counties. That includes social distancing (seating for visitors was reduced by 75%), minimizing touchpoints (a second set of entry doors in the vestibules are kept open at all times so customers don’t need to touch them) and eliminating free coffee and refreshments, he said. In addition, the banks offer a disinfectant station and erected Plexiglass barriers at tellers’ windows.

As for wearing masks, there’s no requirement. “We have to be very wary about people wearing masks — and sunglasses — in banks,” Schaefer said.

Educators, students also affected

But in early July, the banks closed again as COVID-19 cases rose. The situation underscores how fluid the situation is and the importance of flexibility.

When employees returned to work in June, things weren’t that different compared to pre-COVID-19. Foot traffic in banks was already declining due to online banking, so there was no need to limit the number of customers allowed in the bank simultaneously, he said.

Moreover, on an average day, only three of the five teller windows in the Wisconsin Dells branch were open simultaneously before the pandemic. So with a teller sitting at every other window, they already were social distancing, Schaefer explained.

D’Arcy Becker

The world of accounting academia also is facing unprecedented challenges.

At the University of Wisconsin– Whitewater, about 780 students are enrolled in the accounting program.

That’s down slightly compared to last year, said D’Arcy Becker, CPA, MBA, PhD, chairperson of the accounting department and an accounting professor.

“It’s very hard to predict whether enrollment will go up or down [by the time school starts],” she said. “Ultimately, most classes would transfer if a student decided to attend school elsewhere, but it’s not seamless. There are significant barriers for students who decide at the last moment to go to a different college.”

Becker expected that by Aug. 1, officials would know which courses would be taught remotely, in person or in a hybrid manner (a combination of both). But she said one thing is for sure: The class schedule would be the same for both remote and in-person classes.

“We want them to feel like it’s a regular school day — to get into that academic rhythm,” Becker explained. “One of the biggest lessons we learned last spring is that students feel less connected to classes and teachers with asynchronous classes … and that students need some regimentation to their school day.”

Distancing is a classroom challenge Social distancing requirements will make in-person instruction more challenging because seating capacities will decrease significantly. The UW system requires six-foot social distancing; at UW–Whitewater, for example, that means a tiered classroom with a capacity of 66 students will be capped at 16.

So what happens if the class has more than 16 students?

That’s where the hybrid classes come in. If, for example, 32 students are enrolled in a class with a limit of 16 and that class meets on Tuesdays and Thursdays, half would attend in person on Tuesday and remotely on Thursday and vice-versa for the other half, Becker explained.

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“Dealing with all of this will require a lot of flexibility,” she noted. “We’ve been spending a lot of time this summer trying to figure out the best and most appropriate way to use the campus because everyone coming to every class on campus just isn’t an option.”

Furthermore, students may not visit professors’ offices, and faculty will be required to wear cloth masks in class. The university is expected to provide each student with two or three reusable masks, she said.

“Masks are difficult in two ways,” Becker pointed out. “One, it’s become a political issue; and two, availability can be an income issue. Not everyone has access to a sewing machine to make their own masks, and because the rooms get hot, a student might need to wear three masks during one class, so it can get expensive.”

Amid all the disruption and challenges, there’s one small silver lining: Accounting is not as complicated to teach remotely as many other subjects. “It’s quantitative … there’s a process, an order to it that makes it easier to teach remotely,” Becker said.

“Another saving grace is that accounting students tend to be excellent students,” she continued. “They’re very diligent and pursue information, especially upper-division students.

Accounting students are among the best students at the university.”

Technology to the forefront Looking ahead, there’s little doubt that COVID-19 has changed the accounting profession and accounting education.

But Hauser believes that even if things are never quite the same again, that’s not all bad.

“I’m convinced that the events of this year will really change the way small and medium-sized accounting firms will do business going forward — maybe even for larger firms, too,” he said. “The pandemic has almost forced some technological advances onto our clients — and some of them find virtual meetings are quite nice.

“I think that during the 2021 tax season, we’ll also have fewer face-to-face tax appointments in our office and fewer on-site services as a result of COVID.”

Ken Wysocky is a freelance writer based in Whitefish Bay. Contact him at 414-962-6202 or kenwysocky@gmail.com.

Audited financial statements approved for fiscal year ended April 30, 2020 The Finance Committee of the WICPA Board has reviewed and approved the WICPA audited financial statements for the fiscal year ended April 30, 2020.

The WICPA Educational Foundation Board has reviewed and approved the audited WICPA Educational Foundation financial statements for the fiscal year ended April 30, 2020.

Members may request a copy of the audited financial statements by contacting WICPA President & CEO Tammy Hofstede at 262-785-0445 ext. 4518 or tammy@wicpa.org.

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Bankruptcy and Debt Forgiveness for businesses adversely impacted by the COVID-19 pandemic

T

By Robert A. Mathers, JD, CPA, ABV, PFS and

he COVID-19 pandemic is unlike anything this country has experienced in more than 100 years.

Although the United States has been addressing the pandemic since early 2020, there remains substantial business uncertainty. It is difficult to predict how a state may respond to an increase in COVID-19 cases or fatalities. States have imposed varied restrictions, in some cases reflecting local political priorities. In addition, the COVID-19 pandemic accelerated certain existing trends. Big-box retail continues to deteriorate, and working remotely has become increasingly accepted for service industry professionals.

The federal government responded to the COVID-19 pandemic with unparalleled financial assistance, including making available to small William D. businesses hundreds of billions of Gardner, JD dollars of potentially forgivable loans pursuant to the Paycheck Protection Program. Notwithstanding unprecedented federal financial assistance, as of June 30, there was a total of 3,604 chapter 11 commercial business bankruptcy filings — the highest number of such filings for the Jan. 1 – June 30 period since the same period in 2012, when there were 4,122 chapter 11 filings.1 The unemployment rate peaked in April at 14.7%, the highest unemployment rate since World War II. By the end of June, the unemployment rate fell to 11.1%, but there were still nearly 15 million fewer jobs in June than there were in February.

There are many lower middle-market companies with a viable business, but — as a consequence of the COVID-19 pandemic — they require restructuring. For many of these lower middle-market companies, there is a new restructuring tool. In February, the Small Business Reorganization Act (SBRA) became effective. SBRA makes the chapter 11 process for small business debtors shorter, less expensive and more likely to result in a confirmed plan of reorganization.

Small business debtors Only a small business debtor may elect application of SBRA to its Chapter 11 bankruptcy case. A small business debtor may be an entity or an individual provided it meets the following qualifications: a. It engages in commercial or other business (excluding single-asset real estate debtors). b. It holds noncontingent liquidated debts of not more than $7.5 million (reduced to approximately $2.8 million after March 27, 2021). c. At least 50% of the non-contingent liquidated debt is derived from commercial or other business activities.

1

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Statistics from Epiq and posted on the website of the American Bankruptcy Institute.

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It is estimated that with the approximately $2.8 million threshold, about 40% of chapter 11 cases filed after Oct. 1, 2007, would have qualified for treatment under SBRA. With the higher $7.5 million threshold, it is estimated that more than 50% of chapter 11 cases from 2013 to 2017 would have qualified for treatment under SBRA.

Shorter and less expensive bankruptcy SBRA makes the chapter 11 process shorter and less expensive. Within 60 days of a bankruptcy filing, the bankruptcy court must hold a status conference (with certain exceptions), and prior to the status conference, the debtor must file a report with the court regarding its efforts to achieve a consensual reorganization plan. Absent a court order otherwise, the debtor must file a reorganization plan within 90 days of the order for relief. Unlike a typical chapter 11 case, the debtor in a SBRA case does not need to file and seek approval of a separate disclosure statement. To further reduce costs, absent court order, there is no unsecured creditor committee, and the debtor is not required to pay U.S. Trustee fees.

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Lower threshold to confirm reorganization plan SBRA substantially improves the debtor’s ability to confirm a plan of reorganization. A SBRA case differs from a typical chapter 11 case in the following ways: a. The U.S. Trustee appoints a trustee to, among other things, facilitate the development of a consensual reorganization plan. b. Only the debtor may propose a plan of reorganization (there are no competing plans). c. The debtor may confirm a reorganization plan even if every class votes against the plan (no impaired accepting class required).

In addition, SBRA eliminates the “absolute priority rule.”

Notwithstanding a class of unsecured creditors voting against a reorganization plan, that reorganization plan may provide to business owners equity of the reorganized post-bankruptcy entity.

The cost of these more relaxed plan confirmation requirements is that, for a three- to five-year period post-bankruptcy, the debtor

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of debt” (COD) income. This is reported separately from the capital gain or loss.

Numerous Tax Court cases deal with the determination of what constitutes abandonment. Generally speaking, a debtor wanting to claim abandonment must prove three basic elements: 1. ownership of the property prior to abandonment, 2. an intent to abandon the property, and 3. affirmative action to abandon the property.

For intangible assets, this may be a difficult burden of proof.

Nonrecourse debt

“

As states permit more businesses to reopen, many will need to evaluate whether they can survive in a post-pandemic environment. must pay an amount equal to “projected disposable income” to classes that reject the reorganization plan.

In some cases, restructuring is not an option, and a business will be required to liquidate. Yet even in liquidation, there are legal traps for the unwary — including tax consequences.

Abandonment Replaying the movie from the Great Recession of 2008, many clients will simply abandon property securing a debt.

In these cases, the tax result is dependent on the debtor’s relationship to the debt: Were they personally liable or not?

For business or personal use property, personal liability makes that debt “recourse debt.” Here, there are no tax consequences until the property is repossessed. Gain from the sale of abandoned property is included in gross income, whether the property was business or personal property. However, as with any capital loss, if it is attributable to a personal-use asset, it is nondeductible. Business-use assets, however, will trigger gain or loss on the disposition (again, at foreclosure). Depending on the character of the underlying property, it may be treated as either capital gain or ordinary income. On top of the capital gain or loss, if any portion of the unpaid debt is forgiven, it may be included in the debtor’s gross income as “cancellation

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Normally, a debtor not personally liable for a debt is not responsible for COD income. However, there are exceptions. If a debtor abandons property securing the nonrecourse debt (such as a home secured by a mortgage), such abandonment is treated as a sale as of the date of the abandonment. For abandoned property, the amount of the gain (or loss) is determined by comparing the debtor’s adjusted basis in the property to the outstanding loan balances — and losses may be deductible. The character of the property determines the character of the loss.

Forgiveness Generally, any forgiveness of personally guaranteed debt constitutes COD income. However, there are a number of exceptions, including the following: • gifts • some forms of government programs and certain types of agriculture indebtedness • price reductions of the underlying property • insolvency (immediately before the debt cancellation) • qualified property — including some forms of business and residential indebtedness As states permit more businesses to reopen, many will need to evaluate whether they can survive in a post-pandemic environment and, if so, whether they must restructure to remain viable. There are various liquidation and restructuring options, including bankruptcy, receivership, foreclosure and property abandonment. Understanding which option is best suited to your business needs requires an analysis of many factors, including the tax consequences.

Robert A. Mathers, JD, CPA, ABV, PFS, is a shareholder and chair of the tax section at von Briesen & Roper s.c. Contact him at 414-287-1239 or rmathers@vonbriesen.com. William D. Gardner, JD, is a shareholder with the firm’s banking and commercial finance section. Contact him at 414-287-1283 or wgardner@vonbriesen.com.

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YOUR TRUSTED TAX SOLUTION The Tax Section of von Briesen & Roper, s.c. is your resource for tax situations ranging from the traditional to the most complex including: State and Federal Voluntary Disclosures, FBAR/Foreign Issues and State Tax Nexus Studies. Our knowledge and experience have positioned us to be your trusted solution on unique tax matters. The bottom line? We get results.

To learn more about our Tax Section, please contact Robert Mathers at rmathers@vonbriesen.com

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Milwaukee • Madison • Neenah • Waukesha • Green BaySeptember | October 2020 On Balance

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SPECIAL FEATURE

Filing Protective Claims Before the Supreme Court’s Decision on ACA 24

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This Q&A from the AICPA and WICPA can help your firm decide whether to file protective claims for clients prior to the Supreme Court making a decision about the Affordable Care Act.

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n March of this year, the U.S. Supreme Court announced that it will hear a case that challenges the constitutionality of the individual mandate under the Patient Protection and Affordable Care Act (ACA).

(The original case, Texas v. U.S., is now docketed in the Supreme Court as California v. Texas.) It is possible that if the individual mandate is held to be unconstitutional, income taxes established under the ACA, such as the Net Investment Income Tax (NIIT), may effectively be repealed.

Accordingly, any ACA-related income taxes paid in prior years, including the individual shared responsibility penalty, may be refundable if a claim for refund is filed in a timely manner. The Supreme Court did not accept the case for an expedited review, so it will be some time until the case is heard.

Some practitioners were wondering if their clients should file protective claims for any years about to expire, especially since claims for the 2016 tax year were due July 15, 2020.

The AICPA did not take a formal position on filing a protective claim by July 15. The AICPA’s conversations with Tax Executive Committee, Employee Benefits TRP and Tax Practice and Procedures Committee members who deal with the ACA helped to inform the conclusion that there is little chance of the tax being declared unconstitutional for tax years before 2019.

Most national and regional CPA firms did not recommend that their clients file a protective claim. Protective claims must be filed on a reasonable basis; if the Supreme Court declares the ACA unconstitutional, it is unlikely that it would be retroactive, and therefore, protective claims filed now could be considered baseless claims.

Following are some questions and answers to help determine whether filing a protective claim is the right decision for you and your clients. You can also watch this free AICPA Tax Section Odyssey Series video at tiny.cc/regmsz to learn more.

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It is possible that if the individual mandate is held to be unconstitutional, income taxes established under the ACA may effectively be repealed.

1. Why is Texas v. United States important?

The case of Texas v. United States has brought forward a discussion of protective claims that we have not had since Quality Stores. In Quality Stores, the issue was whether severance payments were subject to employment taxes. Texas v. U.S. involves a case brought by several state governors who are challenging the constitutionality of the Affordable Care Act (ACA). The Supreme Court will hear arguments that address the constitutionality of the ACA, with a decision likely to come out next spring.

2. Is there a reasonable possibility that the Supreme Court would find the ACA unconstitutional retroactively, back to at least 2016?

Firms are grappling with whether they should file protective claims regarding the case. If a protective claim is filed, it must be on a reasonable basis; some firms don’t think it is reasonable that even if the Supreme Court deems the ACA unconstitutional, it will do so retroactively to 2016. These firms believe if a claim is filed, it will likely be thrown out as baseless. Many firms are not filing claims, but there is a risk with that as well. Other firms are telling their clients to consult their attorneys.

The AICPA concluded that there is little chance of the tax being declared unconstitutional for tax years before 2019

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(2019 is different, as that is the year the 2017 Tax Cuts and Jobs Act effectively eliminated the individual health insurance penalty). Almost all national and regional CPA firms have reached the same conclusion, and as such, they are not recommending that their clients go through the expense of filing a protective claim. The AICPA is making the same recommendation and does not advise action.

3. If deemed unconstitutional, can we expect the Supreme Court to make it retroactive to 2016?

Some firms think it’s a stretch that, if deemed unconstitutional, the Supreme Court would look back retroactively to 2016. But if it’s found unconstitutional and retroactive to 2016, then there could be a problem: The statute ran out on the 2016 tax year on July 15. Taxpayers who paid these taxes with their 2016 federal tax returns lost any opportunity to claim a 2016 tax refund if they didn’t file a protective claim for refund. For extended returns, the claim would be due three years from the date of filing.

While we can’t be certain, it would be a stretch for the Supreme Court to make it retroactive back to 2016. That’s why firms are saying that even if they filed protective claims, they could be considered baseless claims because the chances are slim.

5. A protective claim frequently shows a dollar amount of $1. Why?

Because an amended return extends the assessment statute of limitations (SOL) — but only to the extent of the dollar amount of the allowed claim — if a taxpayer indicates a dollar amount of $1 but then perfects the amended return to $10,000, the SOL will be extended, but it will be limited to $10,000 instead of $1.

With the potential refund of NII tax, the theory is that if you identify the dollar amount of the tax and the Supreme Court rules that the applicable law is unconstitutional, because there will be so many protective claims filed, the IRS will simply refund the dollar amount identified in the protective claim, and the taxpayer will not have to file a second amended return to perfect the protective claim. However, the usual procedure is that once the uncertainty is removed, the taxpayer must perfect the protective claim.

4. If I decide to file a protective claim for my client, how do I do it? a. Include name, address, TIN, year of refund claim, dollar amount of claim and explanation to alert the IRS of the basis of the claim. b. The entire copy of the originally filed return does not need to be attached; attach the first two pages, but even these aren’t required. c. You will almost always have to file a perfecting claim for refund once the uncertainty is resolved.

While sometimes taxpayers know the dollar amount of the claim, generally they do not. Because of the uncertainty, the IRS almost never processes, nor will they ever process, these claims. However, sometimes they do when the claim amount is clearly identified, and the protective claim can be easily processed.

Generally, taxpayers must file a perfecting claim once the uncertainty is resolved. d. Like any amended return, enough information must be provided so that the IRS can identify the taxpayer and understand the basis and dollar amount of the claim.

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WHAT’S BETTER THAN CALLING ANY TIME YOU NEED ADVICE ABOUT PRACTICE SUPPORT AND RISK MANAGEMENT?

REACHING KNOWLEDGEABLE EXPERTS. CAMICO® policyholders know that when they call us, they’ll speak directly with in-house CPAs, JDs and other experts.

We have dedicated hotlines for loss prevention, tax, and accounting and auditing issues. You can call as often as you need and consult with experienced specialists — all at no additional cost. No one knows more about the profession, because we provide Professional Liability insurance and risk management for CPAs only — it’s all we’ve done for 34 years and why more than 8,000 CPA firms insure with CAMICO. To learn about CAMICO or to receive a coverage quote, please contact Harris Hauptman.

See what other CPAs say about CAMICO. Visit www.camico.com/testimonials Accountants Professional Liability Insurance may be underwritten by CAMICO Mutual Insurance Company or through CAMICO Insurance Services by one or more insurance company subsidiaries of W. R. Berkley Corporation. Not all products and services are available in every jurisdiction, and the precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued. ©CAMICO Services, Inc., dba CAMICO Insurance Services. All Rights Reserved. wicpa.org

Harris Hauptman CAMICO Senior Account Executive T: 800.652.1772 Ext. 6727 E: hhauptman@camico.com W: www.camico.com On Balance

September | October 2020

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kudos

Britley Diermeier

Kayla Frank

Lydia Glatzel

Nicole Best, CPA, CFO and chief administrative officer of Heartland Advisors, Milwaukee, has been added to the Milwaukee County Pension Board.

Britley Diermeier has joined Vrakas S.C., Brookfield, as an audit associate.

Steve Dittman, CPA, recently joined Hawkins Ash CPAs as audit manager. He previously was an audit manager with a Milwaukee-based accounting firm.

Kayla Frank, tax associate with Baker Tilly Virchow Krause LLP in Madison, has been named a 2019 Elijah Watt Sells Award winner. She graduated in May 2019 with a bachelor’s degree in accounting from UW–Oshkosh.

Lydia Glatzel has been hired by Vrakas S.C., Brookfield, as an audit associate.

Todd W. Gray, CPA, has joined von Briesen & Roper s.c. as a senior consultant, expanding their school law practice. Gray most recently was superintendent of the Waukesha School District. He holds several advanced education degrees and a Master of Science in accounting.

Ryan Hanson, CPA, financial accounting manager for Mortgage Guaranty Insurance Corp., has been named Volunteer of the Year by the Insurance Accounting & Systems Association Inc. (IASA). He serves as vice president of education on the IASA management team.

Nicholas Hinz, CPA, was promoted to partner in the Madison office of Baker Tilly Virchow Krause LLP. His service/industry area is assurance/manufacturing and distribution.

Mark Johannsen, CPA, a retired WICPA member, has joined the Eagle River Historical Society advisory board.

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Todd Gray

Ryan Hanson

Nicholas Hinz

Thomas Kieffer, CPA, CFP, CTFA, has been promoted to vice president–senior trust administrator for Prairie Trust, a division of Waukesha State Bank. He has more than 30 years’ experience.

Ryan Lay, CPA, was promoted to partner in the Milwaukee office of Baker Tilly Virchow Krause LLP. His service/ industry area is assurance/not-for-profit.

James Lindell, CPA, CSP, CGMA, MBA, president of Thorsten Consulting Group, received a 2019 Outstanding Discussion Leader Award from the AICPA. He is a ninetime recipient of the award.

Kyle Mair, CPA, was promoted to partner in tax in the Janesville office of Baker Tilly Advantage.

Scott Marr, CPA, MST, has been promoted to partner at Kerber, Eck & Braeckel LLP. He has been with the Milwaukee firm for 15 years.

Bill Merrick, CPA, has been appointed to the board of directors of the Wisconsin Center for Investigative Journalism. The Center collaborates with (but is independent of ) the UW–Madison School of Journalism and Mass Communication and news organizations across the nation. Its investigations focus on government integrity and quality of life issues important to the people of Wisconsin.

Sydney Nelson, a senior internal auditor for Aurora Health Care, was named a Distinguished Alumna of the University of Wisconsin–Whitewater.

Matt Nitka, CPA, was promoted to partner in the Milwaukee office of Baker Tilly Virchow Krause LLP. His service/industry area is assurance/financial services.

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Ryan Lay

Kyle Mair

Matt Nitka

Joseph J. Placek, CPA, has joined Sitzberger & Co. S.C., Brookfield, as an audit manager.

Isaac Pooler, CPA, an audit associate with Hawkins Ash CPAs, has received his CPA designation from the Department of Safety and Professional Services. He joined the firm in 2017.

Brian Rozek, CPA, was promoted to partner in the Milwaukee office of Baker Tilly Virchow Krause LLP. His service/industry area is assurance/financial services.

Jerod Steigenberger, CPA, has been named chief operating officer of Bassett Mechanical, Kaukauna. He was previously CFO of the company.

Joshua TeBeest, CPA, is one of only 30 CPAs across the nation to be honored as a member of the AICPA Leadership Academy’s 12th graduating class. He was selected based on his exceptional leadership skills and professional experience.

TeBeest is manager and tax service line leader at Huberty & Associates S.C., Sheboygan.

Michael Thornton, CPA, has joined Vrakas S.C., Brookfield, as a tax manager.

Glen Weyenberg, CPA, has been named president of SVA Certified Public Accountants S.C. He began his career at SVA in 1987 and previously served as the principal-in-charge of SVA’s Madison CPA Group.

Isaac Pooler

Brian Rozek

Joshua TeBeest

Laurie Winger, CPA, was promoted to chief financial officer

by CUNA Mutual, Madison. (It was incorrectly reported in our May/June issue of On Balance that she had been promoted to CEO. We apologize for this error.)

Christopher Zwygart, CPA, JD, chief legal officer for West Bend Mutual Insurance, was elected to the West Bend School District board of education in April.

ORGANIZATION NEWS The following CPA firms were recipients of Best of the [Fox] Valley Awards in the Services category: Best of the Valley • Endries Otto CPAs (Principals: Randall R. Endries, CPA; Mark W. Otto, CPA) Finalists • John D. Helgeson, CPA • V V H & Associates (Principals: Scott R. Vanden Heuvel, CPA; Todd J. Hietpas, CPA; and Todd D. Vanevenhoven, CPA) The annual awards program is coordinated by the USA TODAY NETWORK | LocalIQ Wisconsin Conceptual Marketing Department.

Want your new job, promotion or award mentioned in Kudos?

H Email your announcement and photo in JPG format to mtzinzow@icloud.com. H

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{ Technology | Tool transitions }

TECHNOLOGY TOOLS CHANGE WITH THE TIMES

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re you doing things the same old way? Do you wish there were an easier way? Have you noticed how rapidly our technology tools are changing? Continuous updates via the internet have become the standard for technology on our mobile phones, for Software as a

By Randy Service (SaaS) and for applications Johnston like Microsoft Office. Addressing security needs, learning new features and evolving the product can’t be a once-a-year process, releasing all the changes at one time using the waterfall approach. Developers are using short sprints spanning just a few weeks to add features and repair

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bugs while following the “scrum” approach — a structured framework for product development that is frequently used by agile software development teams.

How do you accommodate rapid change?

First, you need to have your own vision. What are your business strategy and tactics, and what are your information technology (IT) strategy and tactics? How do you build your business case for the use of any technology, and how do you justify your expenditures? How do you manage change?

What do you have in place for governance of the changes?

Or do you simply “decide”?

Second, you need to pick tools from the software creator that work together or that have an automated way to connect with software tools we call digital plumbing, or you have to have available IT expertise in-house or

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contracted to keep the tools running. In the CPA firm world, we attempted to work around most of these problems by picking all our applications from a single vendor like CCH Wolters Kluwer or Thomson Reuters. This approach is commonly referred to as the “one-suite” method. Our expectation was that these vendors would make all their modules work together or “talk” to each other, so a client set up in practice management would flow into the tax software.

We had a similar expectation when we purchased software from a major vendor like Sage Software, which had lots of modules that they owned and sold. However, by the time we reached the early part of this century, it was clear that integrations to third-party vendors were going to become more common. Today, most vendors don’t build a complete solution. They expect you to acquire all the thirdparty applications you need to solve your business issues.

This approach is commonly referred to as the “best-ofbreed” method.

As a business manager, you must assume that your applications will change regularly, probably even monthly.

This is quite different from the past, when applications had major revisions once or twice a year with the waterfall method of releases. You will need to have training for your team to accommodate the rapid change. Most users do not have the desire, time or insight to recognize new software features and optimize the way they use them. Worse, many do not even notice that a new feature has arrived.

For best results, we believe your business should map all the processes used. When software is updated, these processes can change for better or worse. You need to make sure your team understands the changes and what the firm believes is the best method to use the software to run the business smoothly.

Further, vendors will try to sell additional applications and features that you may or may not need. Consider how you will evaluate the opportunities presented continuously by new software and features. Not all problems should be solved with technology, but not using features that you are already paying for seems like a waste of human capital. As examples, consider the use of Excel Tables; the Excel Data Model along with the Extract, Transform and Load features of Get Data; or the use of certification in Adobe Acrobat.

All these features have been available for years, and we suspect many of you do not know they exist.

How can I help my team?

Education and training! When choosing your continuing professional development courses, remember that learning

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new time-saving techniques is important. Education shows the big picture and helps you understand strategy, while training instructs on how to complete a simple task. While just-in-time learning is convenient to help solve a pressing problem, the technique learned may not be the optimal way or even the way you want the problem solved. On the other hand, the user may have spotted a new, easier way to complete critical tasks. You should learn from the user (or the user from you), your processes should be updated, and the new method should be taught to everyone.

As a business manager or owner, one of your jobs is to help people be as effective as possible and do their work in the most optimal way. Human nature tells us to do things in the easiest way possible, and technology can help us do that. However, that desire to do things in an easy way is often offset by resistance to change. You can achieve the best of all worlds if you can help people change by optimizing their processes and making things easier. However, this is not a “one and done.” While we used to recommend process revisions twice a year, the software updates that are changing almost monthly tell us that processes need to be revised more often — perhaps monthly.

As you learn the optimal way to revise your processes, we’d love to hear about it.

Randy Johnston is executive vice president of K2 Enterprises, where he develops and delivers technology-focused learning opportunities for accounting, financial and other business professionals. Contact him at randy@k2e.com.

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memorials Victor E. Bethke, CPA (1950 – 2020)

Victor E. Bethke, CPA, 70, of Augusta, passed away Friday, Feb. 21. Bethke was born in Eau Claire and raised on the family farm south of Augusta in Bridge Creek Township.

He graduated from Augusta High School in 1968 and subsequently earned a bachelor’s degree in accounting from UW–Eau Claire. As a new CPA, he worked for an accounting firm in Stevens Point for five years before starting his own firm, Bethke & Associates, in Plover, where he worked for 25 years before retiring in 2005.

Bethke is survived by his wife of 49 years, Jennifer; two brothers and five sisters; and several nieces and nephews.

Gail A. Daugherty, CPA (1957 – 2019)

Gail Daugherty, CPA, died suddenly on Thursday, Feb. 27, at her Menomonee Falls home. The 1975 graduate of New Berlin West High School earned a degree in accounting from UW–Madison in 1979 and became a CPA in 1983.

She began her years in business with the national firm of Coopers & Lybrand and then worked with Strong Capital Management in Menomonee Falls. Daugherty’s last years were spent with Crabel Capital Management in Milwaukee; she retired in 2017. She is survived by her mother, a brother and sister-in-law, one nephew and many other friends and relatives.

David B. Gerstner, CPA (1954 – 2020)

David B. Gerstner, CPA, passed away Sunday, July 19. He was 65. A Green Bay native, Gerstner was a graduate of Preble High School and attended UW–Whitewater, where he earned a degree in accounting. He ultimately became a licensed CPA and was a partner at a public accounting firm until January 2008, when he became president and CEO of De Pere Cabinet Inc., where he remained until his health would not allow him to continue. Gerstner was a longstanding member of the National Railroad Museum board of directors, serving as their treasurer, and also participated with the Humane Society and Family Services, among other organizations. He is survived by his wife, Maryanne; two daughters; four grandchildren; one brother and two sisters; and numerous other relatives and friends.

Lisa E. Kuenn, CPA (1971 – 2020)

Lisa Kuenn, CPA, passed away Wednesday, March 11, at age 48. Kuenn was a successful accountant who several years ago became a partner with Andoloro, Smith & Krueger LLP in Waukesha. She is survived by her husband of 20 years, Rob; a daughter, Cassie; both parents; a sister and nephew; and many other relatives and friends.

Thomas J. Milliken, CPA (1956 – 2020)

Thomas J. Milliken, CPA, 63, passed away from natural causes on Friday, March 20. He was a longtime resident of Madison but was currently residing in Rio Verde, Arizona. He is survived by his wife, Patricia; one son and one daughter; and four siblings. A celebration of life will be held at a later date, at which time a full obituary will be published online.

Thomas P. Moore, CPA (1936 – 2020)

Tom Moore, CPA, of Monona, passed away Saturday, May 30, at age 83. Moore graduated from UW–Madison in 1958 and became a CPA. He spent his entire career with Smith & Gesteland CPAs and was promoted to partner in 1967.

After he retired, Moore returned to UW–Madison and earned a degree in Community and Environmental Sociology; he then volunteered at the Monona Grove High School Student Services Center, Dane County 4H and the Wisconsin headquarters of the USDA’s Natural Resources Conservation Service. Moore is survived by his wife, DeAnn; six children; and many grandchildren and great-grandchildren.

Edward H. “Tadd” Trier III, CPA, CGMA (1959 – 2020)

Tadd Trier, CPA, CGMA, of River Hills, passed away Thursday, April 9, at the age of 60. Trier graduated from Homestead High School in 1977 and earned a Bachelor of Science degree in accounting from Upper Iowa University. He started his career with Ernst & Young and worked as a CPA in both the private and public sectors of accounting before becoming a partner and president of the firm of Milkus, Trier & Company in West Bend. Trier attended Fox Point Lutheran Church and was a dedicated board member of Faith Walkers Men’s Group in Brown Deer. He is survived by his wife, Brenda; his mother, Toni; four siblings; aunts, uncles, nieces and nephews; and many colleagues and friends.

Donald S. Wagner, CPA (1931 – 2020)

Don Wagner, CPA, a longtime WICPA member, died Monday, May 4, at age 88. Wagner served in the U.S. Army from 1952 to 1954, stationed in Germany. After discharge, he earned a degree from Badger Business College and became a CPA, gaining employment with the firm of Schuldes, Burns, Alk and Denis in Green Bay. Eventually, he joined Wipfli LLP and retired from that firm in 1992. Wagner was very active with the WICPA and the AICPA and served as president of the WICPA board of directors in 1992–1993. In 1995, he received the WICPA’s Distinguished Career Award. Wagner served his community as a member and officer of the Thursday Breakfast Optimist Club, the Cerebral Palsy Foundation, and Boys and Girls Clubs of Greater Green Bay. He is survived by his son and daughter, four grandchildren, three great-grandchildren and many other relatives and friends.

If you are aware of a member obituary and believe it should be included in Memorials, please send a copy of the obituary or contact Marcia Tillett-Zinzow at mtzinzow@icloud.com.

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{ Practice Management | Ethics }

Ethical behavior in accounting is a function of actions, beliefs and perceptions from all areas of our world

T

he plethora of unethical behaviors continues to astound.

What will be the impact on our country if unethical behavior continues? The loss of civility has also contributed to and affected unethical behavior.

Consider some current ethical

By Jim Lindell, lapses: conflicts of interest; the CPA, CSP, loss of privacy; religious leader, CGMA, MBA political party and COVID-19 behavior; the college admissions scandal and more. This author firmly believes that the root cause of ethical lapses comes down to selfishness.

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If you consider the above list of unethical behaviors, you already know the specific examples that fall under each of those categories and that wrong behavior occurs when one person believes that their needs, wants and desires are more relevant and take precedence over the rights — and possibly the safety — of another person. The reason selfishness is so critical to understand is that it drives inappropriate behavior beyond what we would consider reasonable bounds.

Here is where it gets confusing. The vast majority of people have implicit boundaries that everyone within their group (or “tribe”) understands. For the most part, people will play by the same rules. At some point, one of the members of the group or tribe decides that they need an advantage; they want possession of something they don’t have and can’t get within the standard rules of behavior for their group.

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“

As a result, they cross over the implicit boundary lines and act explicitly with unacceptable behavior.

What does this mean for companies?

These situations occur frequently in business and must be confronted. Organizations must do the following: • Demand ethical conduct from everyone. Ethical behavior should be emphasized at the initial contact with the company, especially at interviews.

• Challenge prospective employees to define ethical behavior. Interviews should include candidate testing.

Determine consistency in their responses and value observations. The evaluations should provide useful insight into the candidate’s ethical stance.

• Be led by a chief executive officer who is adamant and passionate about an ethical company. The CEO must “walk the talk.” Employees at all levels view upper management with a jaded eye. The company suffers a damaging effect the moment senior executives begin to act contrary to company policy. Not only does this endorse unethical behavior; it also creates significant confusion for other employees as to appropriate boundaries.

• Realize that there are different degrees of unethical or inappropriate behavior in an organization, and each should be dealt with accordingly. However, there is “a line in the sand” that — once crossed — must result in termination, regardless of the individual. That which is tolerated will become the norm if an organization is not careful.

• Create a whistleblower policy and a vehicle to transmit potentially harmful information to the appropriate company authority.

• Create policies that address all forms of inappropriate behavior, including sexual harassment, bullying, physical harassment, discrimination (gender, race, creed), conflicts of interest and self-interest business dealings.

• Empower someone at the board level to ensure that senior management honors corporate ethical responsibilities. This individual must be willing to follow up on any significant ethical complaint.

• Be concerned with ethical financial reporting practices.

When we endorse or use questionable accounting practices, we must understand why we’ve taken those actions. If putting an organization in the best light is the goal for confusing accounting practices, this could quickly fall into a gray area or put us beyond our usual boundaries.

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The challenge is to recognize the norms and boundaries of the groups we work with and belong to. We must be aware when we cross over that line in the sand.

In speaking to CEO groups over the last couple of years, I have made a significant realization: Of more than 200 CEOs addressed, only two were able to correctly describe working capital. If CEOs can’t describe working capital, how well do you think the general public understands the financial statements we publish? When you consider that the financial statements may be the basis for people investing pension money or making personal investments, are we acting appropriately?

Privacy matters We’ve gotten this far in the article and have not even discussed information technology. What happens when there is a violation of an individual’s privacy? Is it the result of the analysis of data we might have? What happens when privacy is violated because we did not keep data secure? What is the appropriate ethical action when we can identify individuals with facial recognition? What happens when we can trace locations of people through this software and — with that knowledge — ascertain confidential information? It really is scary. The technology is moving so fast we don’t even recognize where we can end up.

The challenge is to recognize the norms and boundaries of the groups we work with and belong to. We must be aware when we cross over that line in the sand. Keep in mind that groups and tribes can have different rules and boundaries.

Awareness is essential.

Jim Lindell, CPA, CSP, CGMA, MBA, is president of Thorsten Consulting Group, providing strategic and financial consulting, professional speaking, training and executive coaching. Contact him at jim@thorstenconsulting.com.

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{ Federal Taxation | CARES Act }

Washington CARES Tax relief provided for businesses impacted by coronavirus pandemic

C

By Jim Brandenburg, CPA, MST

ongress and the administration have been busy this year providing economic assistance to businesses, individuals and others impacted by the ongoing coronavirus pandemic. The largest legislation (to date) was the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27.

This historic legislation provided over $2 trillion in relief: the largest rescue package in U.S. history.

In most tax legislation, there are some changes that provide savings for taxpayers but other provisions that cause higher taxes for certain businesses and individuals. In the CARES Act, things were different, as the tax provisions in the bill were designed to provide liquidity and savings to businesses impacted by the pandemic. There were also several significant loan provisions in the CARES Act, most notably the Paycheck Protection Program (PPP). This article focuses on the tax measures, not the loan provisions. Here are several selected business tax incentives in the CARES Act:

Employee retention credit The CARES Act offers a refundable payroll tax credit of 50% of wages paid to employees during the coronavirus crisis.

This tax credit is available to employers that (1) had their operations partially or fully suspended by the COVID-19 shutdown order or (2) experienced a drop of 50% or more in gross receipts compared with the prior year. The credit is based on wages paid to an organization’s employees and covers the first $10,000 of compensation, including health benefits, paid to an eligible employee. There are separate rules based on the size of the employer: • For employers with more than 100 full-time employees, qualified wages are wages paid to employees when the employer is impacted as described above by the coronavirus pandemic.

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• For eligible employers with fewer than 100 full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shutdown order.

Tax-exempt organizations may also qualify for this employee retention credit. The credit is provided for wages paid or incurred from March 13, 2020, through Dec. 31, 2020. This credit presents opportunities for employers to recover part of their payroll costs if they meet the retention rules. The IRS provided detailed FAQ guidance of nearly 100 questions covering many aspects of this new credit on its website at this link: https:// www.irs.gov/newsroom/faqs-employee-retention-credit-underthe-cares-act.

Deferred payroll taxes The CARES Act also permits employers and self-employed individuals to defer payment of the employer’s share of the FICA tax of their employees (employers are responsible for paying a 6.2% FICA tax on employee wages). This deferral applies for the period March 27, 2020, through Dec. 31, 2020. The provision allows the deferred payroll tax in this period to be paid over the following two years. One half of the deferred tax would be paid by Dec. 31, 2021, and the other half by Dec. 31, 2022. Further, companies with a PPP loan that is forgiven are also able to use this payroll tax deferral provision. Here is the link to the IRS website for its FAQ on this payroll tax deferral: https://www.irs.gov/newsroom/deferral-of-employment-taxdeposits-and-payments-through-december-31-2020.

New limitation on excess individual losses changed You may recall that the Tax Cuts and Jobs Act (TCJA) of 2017 ushered in a new limitation on deducting losses for passthrough businesses and sole proprietors. This new provision started in 2018 and specified that taxpayers were limited to an overall $500,000 loss deduction per year. Any loss above this amount was carried over. CARES removes this new loss limitation, and thus the $500,000 cap does not apply for tax years 2018 through 2020. Several other modifications were made

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Next, under CARES any NOLs incurred in 2018, 2019 or 2020 can be carried back five years to obtain a refund of a taxpayer’s prior years’ tax liabilities. This could be a boost to a business struggling this year. This is a complicated measure, so the IRS has offered the following guidance to assist taxpayers incurring NOLs: • Rev Proc 2020-24 (https://www.irs.gov/pub/irs-drop/rp20-24.pdf ) • Notice 2020-26 (https://www.irs.gov/pub/irsdrop/n-20-26.pdf ) • FAQ on NOLs and AMT (https://www.irs.gov/newsroom/ questions-and-answers-about-nol-carrybacks-of-ccorporations-to-taxable-years-in-which-the-alternativeminimum-tax-applies)

Fix for TCJA glitch with qualified improvement property

to this loss limitation beginning in 2021. This tax relief for 2018–2020 allows impacted individuals to use these business losses and should generate cash flow by deducting them. Some taxpayers might be able to amend their 2018 and/or 2019 tax returns to obtain this deduction.

Enhanced deductibility of business interest expense Another TCJA change limited the deductibility of interest expense. This was a complicated provision with many limitations and exceptions, which started in 2018. Generally, the TCJA change limited the interest expense deduction for a business to 30% of its adjusted taxable income (ATI).

CARES, however, increased the 30% threshold to 50% of ATI but only for 2019 and 2020. Additional provisions were added for partnerships. This higher deduction level could help businesses deduct more of their interest expense in these challenging times. The IRS offered guidance on the CARES Act changes with interest expense in Rev Proc 2020-22 (https://www.irs. gov/pub/irs-drop/rp-20-22.pdf ).

Changes with net operating losses The TCJA made several significant changes to the deduction for net operating losses (NOLs). First, the TCJA removed the ability of carrying back NOLs to recover prior years’ tax paid.

Next, TCJA limited the amount of income that could be offset

by NOLs. The CARES Act softens the new TCJA limitations by first removing the taxable income limitation for NOLs.

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The TCJA established 100% bonus depreciation for many fixed asset additions. This provides a significant incentive for businesses. Congress, however, made a drafting error in the legislation with “qualified improvement property” (QIP) costs related to improving facilities. The QIP was supposed to be treated as 15-year property and thus entitled to the 100% bonus depreciation. This TCJA glitch, however, relegated the QIP to 39-year straight-line depreciation with no bonus depreciation.

Congress had been unable to remedy the QIP glitch over the past several years. A special CARES provision fixes the glitch and thus now allows businesses to use 100% bonus depreciation for QIP. This CARES change could provide a large tax savings for any recent QIP items. Thus, QIP costs can now be written off in one year rather than over a 39-year depreciable life. This change is retroactive for QIP items in 2018 and 2019. The IRS issued Rev Proc 2020-25 to assist taxpayers in adopting this QIP change (https://www.irs.gov/pub/irs-drop/rp-20-25.pdf ).

Businesses are confronted with change on a regular basis.

Usually, this entails dealing with customers, vendors, workforce and staffing issues, competition in their industry, technology advances, government regulations and more. This year, however, businesses have been pushed to their limits through the many challenges unleashed by the COVID-19 pandemic. Congress continues to do what it can by offering relief to businesses via several tax incentives designed to keep organizations afloat and their staffs employed during these difficult times.

James D. Brandenburg, CPA, MST, is a tax partner with Sikich LLP, Brookfield. Contact him at 262-754-9400 or jim.brandenburg@sikich.com.

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September | October 2020

37

{ Human Resources | Workforce well-being }

Leading People in the

“Next Normal”

Ensuring current workforce emotional well-being

W

By Kelly M. Renz, MHRM, SHRMSCP

hen we hear the terms “next normal” or “new normal,” we all have different reactions and feelings about them. So do our employees.

Most just want to go back to “the old normal.” However, a lot has changed over the past several months, and we won’t simply return to business as usual, even as business makes strides to recover.

Organizations are already doing more with less when it comes to people, due to reductions and reorganizations, as we move into the COVID-19 recovery phase (and this is expected to last for months or years to come). You need to ensure you are providing the environment, tools and communications to keep your talent safe and focused. That said, workforce emotional well-being must be a factor in your current business strategy, and understanding the impacts for sustaining a mentally safe place for people to work will positively affect business results.

What is important to know about workforce emotional well-being right now?

When it comes to understanding the emotional wellbeing of employees, as leaders we must be in tune with meeting our organization where it is, not where we assume it to be. During a state of crisis, cultures morph and environments change quickly. We also know that, generally, as goes the leadership team, so goes the rest of the organization.

Even if you think you know your organization well, the world has changed drastically around your people. That has

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On Balance

September | October 2020

had significant effects on each one as a whole person, and it is time to check in with them again. Understanding what we call your “organizational DNA” is your competitive advantage of knowing your talent’s overall wiring. Knowing what makes your talent tick — and how to ultimately motivate your people to their highest performance — unlocks the real potential of your workforce, especially in tough times.

For example, workforce research shows that nearly 60% of job performance is attributed to a person’s emotional intelligence (EQ), which is the degree to which they are able to accurately recognize, appropriately manage and socially apply their emotions to situations for the best possible outcomes. For some this comes easily, and for others it is far more difficult. Measuring the EQ of your organization provides keen insights into how well equipped employees will be and where you might need to augment.

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How can you obtain current organizational DNA insights?

Employee data is powerful. Mapping the blueprint of your organization’s DNA — the pre-existing and innate organic characteristics, style, culture and competencies that are part of employee psychology — lays the groundwork for your road map. Without understanding the natural organizational DNA, initiatives and programs have a difficult time relating to the people and ultimately don’t stick. Assessment tools measuring motivation and EQ would be incredibly insightful, as would short pulse engagement surveys and small focus groups, all of which are ideal vehicles to get insights into your organization through data. Don’t wait for an annual process — it’s time to check in with them now without overcomplicating it.

What else should you consider about your workforce environment right now?

This is an opportune time for organizations to also objectively reflect on what they learned through this global health crisis and apply the best lessons to the new operating environment. Not all was bad — so what can you take away that was valuable?

What have we learned?

• Do you need to update your organizational structure?

How did leaders lead during this time? Who emerged to step up and lead?

• What is really the essential work to be performed? Did you find any processes and procedures to be cumbersome or outdated? Can you make improvements?

• What investments are necessary? What can you do without?

• Consider the schedule impacts: How have flexible work schedules affected productivity and teamwork?

• Do remote work options benefit your talent pool? How can you better leverage this way of working to attract and retain employees? How does this fit into recruiting and talent selection?

• What was the overall effectiveness of different groups?

How was their responsiveness to the needs of each other, customers and vendors?

How and what should we communicate?

• Consider an employee survey about return-to-work or workplace concerns to get a sense of what is on their minds. It is not the same for everyone, and this will give

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“

This is an opportune time for organizations to also objectively reflect on what they learned through this global health crisis and apply the best lessons to the new operating environment. you a pulse check to ensure concerns are being adequately addressed.

• Publish clear workplace rules and guidance for health, safety and conduct, including how to solve issues that arise. You cannot possibly anticipate every situation, so go for the majority. Establish emergency procedures as well.

• As a leadership team, review key employee connections: o What needs to change about communication and cadences of meetings and information sharing? o Hold a town hall and communicate the plans to return to a physical office environment to reset expectations as they are developed. Everyone will be adjusting again, and change is hard. o Forecast your talent needs early. Everyone will be ramping back up at the same time, and talent will evaluate new opportunities. o If you plan to hire employees who were laid off, are you keeping in touch with them? How will you know if they are still available to you? o How were clients or customers served during this time? You may wish to ask them as things settle. o Consider employee feedback sessions upon returning to “business as usual,” asking employees about what they experienced. Stop/start/continue discussions are excellent opportunities to explore positive changes.

Perhaps do these every month — as this is a very dynamic environment, and situations change quickly.

Kelly M. Renz, MHRM, SHRM-SCP, is CEO and professional EOS implementer at Novo Group. Contact her at 414-758-0269 or kellyrenz@thenovogroup.com.

On Balance

September | October 2020

39

Everything you care about is in this house.

Things your family just can’t afford to lose.

We can help you protect it with a Home and HighwayÂŽ policy from West Bend.

One policy, one bill, one deductible, one agency ... and a discount for members of the WICPA. To find out what else the Home and Highway has to offer, contact this Official Supplier of the Silver Lining.

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On Balance

September | October 2020

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Streaming Live Friday, Oct. 16 at 9 a.m.

Join us for this year’s special event to: • Hear updates from WICPA President & CEO Tammy Hofstede, past WICPA Board Chair Neil Keller, and current WICPA Board Chair Wendi Unger.

• Elect the WICPA Board of Directors.

• Recognize longevity members for their 5, 10, 25, 40 and 50 years of membership.

Attendance is complimentary for WICPA members.

As an online-only membership event, guest tickets are not available this year.

For more information, visit wicpa.org/banquet.

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