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phillipvjohnsonj · 4 years ago

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Should You Try Influencer Marketing?

Hint: It can solve more than your marketing needs.

By Sandi Leyva and Jason Holmes

Influencer marketing has been around forever in retail marketing, but does it have a place in the accounting and tax profession? Absolutely! Here’s what most firms are missing out on when it comes to leveraging this profitable channel.

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First, let’s get everyone on the same page and define influencer marketing. It’s simply getting help from someone with a large following – an influencer – to market your offerings in exchange for value or a fee. In a way, it’s like an endorsement or sponsorship. But unlike a sponsorship, which is somewhat passive, an influencer is more actively participating in the promotion of your items. You might think of influencers as paid referrals on steroids. Influencers are paid based on the number of followers they have, and they are often paid by the post. A similar model is to recruit affiliates, who typically get paid only if their posts result in sales. Affiliates use a special tracking link and software that calculates their commissions.

You can see influencers on almost every social media platform, especially Instagram and YouTube. Influencers can be celebrities, the most famous being the Kardashians, but they don’t have to be. “Regular people” with large followings earn their living being influencers. Thought leaders can be influencers, too. The key is to have a large fan base.

You can see how it works for retail: all an actress has to do is wear something, and that something will get visibility and sales. But how would it work for services? And specifically accounting? Here are some examples and opportunities:

One midsized CPA firm had a bookkeeping and tax client who was a New York Times best-selling author and speaker on customer service. The speaker created a testimonial video for the accounting firm and mentioned them in his speeches.

At conferences, you can find B-list celebrities (who are amazingly affordable to hire) given a speaking slot and an autograph-signing hour to draw more attendance. Jason Alexander was at a conference Sandi attended a few years back.

At accounting conferences, you can find accounting thought leaders who have been hired by software vendors to speak or conduct demos, or even just hang out at their booths.

Influencers with specific characteristics can shore up branding weaknesses of a typical accounting firm. For example, you can hire a comedian or someone colorful if you want your brand to go from boring to memorable.

While influencers are typically hired to boost sales, they are also the perfect solution to the staffing shortages we have right now. For example, you can make a statement on diversity and inclusion by hiring a leader who is vocal about their pro-LGBTQ stance or who has a strong minority fan base. This influencer can help you spread the word about your job openings to help you have more choice in candidates. (If we all did this, we’d shave years off of closing some of the diversity gaps we’re behind on.)

There are databases of influencers available and specialized software to find and match influencers with companies that want to hire them. And there are marketing agencies like ours that can help firms build campaigns around influencers. Done well, the ROI from influencer marketing is at or above the top five marketing channels typically used in our profession for lead generation.

Be careful to hire influencers who know how to follow the disclosure rules, not only to meet our profession’s ethics, but also the FTC’s social media disclosure requirements.

As you’re planning your marketing for 2022, keep in mind the power of influencer marketing, and feel free to reach out to the authors for any questions you might have.

Go PRO for members-only access to more Sandi Smith Leyva.

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phillipvjohnsonj · 4 years ago

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A Holiday Tradition: Tax Extenders Slated to Expire at End of 2021

It’s that time of year when we review which items of the tax code are scheduled to expire or otherwise change in just a few days. An eclectic group of temporary tax policies approach their expiration dates, but at the last minute typically hitchhike onto must-pass legislation for another temporary extension. Not so this year, as the must-pass bills (the Defense Authorization Act and a continuing resolution) have been enacted, and the Build Back Better Act abandoned for 2021.

At the end of last year, lawmakers addressed six extenders permanently and provided a five-year extension to another 11 provisions. They also extended another 19 for shorter terms and created several new temporary tax policies in the same year-end package and the March 2021 American Rescue Plan. That leaves us with 30 temporary provisions expiring at the end of 2021.

Even so, some of the 30 tax extenders could make a comeback early next year. Congress often retroactively revives these expired tax breaks, most recently in 2019, but ought to resolve the status of tax extenders once and for all and provide taxpayers with a stable, certain tax code. Permanent solutions for each expiring provision would ensure taxpayers no longer have to predict what tax code they will face.

Extenders can be split into three rough groups: expiring parts of the Tax Cuts and Jobs Act (TCJA), expiring parts of various COVID-19 economic relief packages, and the Island of Misfit Extenders.

Tax Cuts and Jobs Act (TCJA) Tax Extenders

1. Full Expensing of Research & Development (R&D) Expenditures

Under current law, companies can deduct the cost of spending on research and development (R&D) immediately. But starting in 2022, they will need to spread those deductions over five years, a delay that essentially raises the cost of R&D investment, especially when inflation is high. If allowed to take effect, the U.S. treatment of R&D would be among the least generous in the OECD.

2. Interest Deduction Limitation Changes from EBITDA to EBIT

Before the TCJA, companies could deduct net interest expense, subject to comparatively small restrictions. The TCJA introduced a new limit, preventing companies from deducting interest in excess of 30 percent of EBITDA (earnings before interest, taxes, depreciation, and amortization). Starting in 2022, the limit will further narrow to 30 percent of EBIT (earnings before interest and taxes), which is more restrictive than the typical “thin-capitalization” rules found in other countries.

COVID-19 Relief Tax Extenders

3. Expansion of the Child Tax Credit

The American Rescue Plan Act of March 2021 (ARPA) raised the Child Tax Credit (CTC) for low- and middle-income households to $3,600 per child under 6 years old and $3,000 for children between 6 and 17, while making the credit fully refundable so that low-income earners receive the full credit regardless of income or tax liability. The expanded credit, which was also partially sent out in advance monthly payments, is scheduled to expire at the end of the year. The CTC will revert to a $2,000 maximum payment, with up to $1,400 refundable depending on earned income.

There is a simmering debate about the job impacts of the CTC expansion. By making this year’s CTC more generous and fully refundable, it increased marginal tax rates on earned income, reducing incentives to work and reducing employment by as much as 1.5 million, according to estimates from a group of economists at the University of Chicago. The magnitude of the effect is debated but researchers agree the expansion is a disincentive to work. As such, reverting to the old CTC in the new year should increase employment.

4. Expansion of the Earned Income Tax Credit

ARPA also temporarily expanded the Earned Income Tax Credit (EITC). The law raised the maximum EITC available to workers without qualifying children to $1,500 from $540, and expanded eligibility based on income level and age, including more younger workers. The changes will expire at the end of the year.

5. Expansion of the Child and Dependent Care Tax Credit (CDCTC)

The CDCTC allows taxpayers to reduce their tax liabilities by a certain amount of their childcare expenses. Originally, the credit capped the benefits at $600 for a single dependent or $1,200 for two or more, based on taxpayers being able to claim expenses of up to $3,000 in the first case and $6,000 in the second. ARPA raised the expense limits to $8,000 and $16,000, and made the credit refundable, while expanding eligibility. The rules would revert at the end of the year.

6. Above-the-line Charitable Contribution Deduction

The traditional charitable deduction is an itemized deduction, meaning that it is not available to taxpayers who take the standard deduction. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, however, created an above-the-line deduction for some charitable contributions ($300 for single filers, $600 for joint filers) for 2020, and it was extended for 2021 in the December 2020 relief bill.

7. Modified Limitations for Charitable Contributions

The CARES Act suspended the limitation on individual deductions for cash contributions to charitable organizations (typically 60 percent of taxable income) and increased the corporate deduction limit from 10 percent to 25 percent of taxable income and business food inventory donations from 15 percent to 25 percent of taxable income for 2020. The provisions were extended in the December 2020 relief bill and are scheduled to expire at the end of the year.

8. Employee Retention and Rehiring Tax Credit

This program provided a 50 percent credit for up to $10,000 in wages for certain businesses impacted by the COVID-19 pandemic. Businesses (or nonprofits) could qualify if they were forced to close all or part of their operations, or if they saw a 50 percent or more decline in gross receipts relative to the equivalent quarter the previous year. The provision was scheduled to expire at the end of 2021, but the Infrastructure Investment and Jobs Act passed in November 2021 retroactively ended it on September 30, with the exceptions of some benefits for startup businesses still expiring at the end of the year.

There are also a handful of smaller COVID-19-era extenders scheduled to expire.

Table 1: Minor COVID-19 Relief Tax Provisions Expiring at the End of 2021 9. Prevention of Partial Plan Termination (sec. 209 of Division EE of Pub. L. No. 116-260) 10. Special Rule for Health and Dependent Care Flexible Spending Arrangements (sec. 214 of Division EE of Pub. L. No. 116-260) 11. Providing a Safe Harbor for HSA Beneficiaries Who Receive Telehealth Services before Their Deductible (sec. 223(c)(2)(E))

Source: Andrew Lautz and Will Yepez, “Not All Tax Extenders Are Created Equal,” National Taxpayers Union, Dec. 1, 2021, https://www.ntu.org/publications/detail/not-all-tax-extenders-are-created-equal-2021.

The Island of Misfit Tax Extenders

Outside of the TCJA and COVID-19-relief extenders, many of the remaining ones are remnants of past temporary tax policies, such as the stimulus package passed in response to the Great Recession. Some fall into clear categories: green energy, traditional energy, and cost recovery. Then there’s a grab bag of others, often related to state- or territory-level policy issues.

The largest group of extenders is aimed at energy production. The Joint Committee on Taxation (JCT) explains the two primary motivations for energy-related tax provisions are promoting energy independence and addressing externalities related to pollution. The current mix of energy-related tax provisions is suboptimal for addressing either concern, as the provisions were not developed in a coordinated way and are not permanent parts of the tax code. Energy production goals could be better accomplished if Congress avoided a piecemeal approach and instead worked toward a cogent solution for energy-related tax policy.

Many of the cost recovery extenders are redundant given 100 percent bonus depreciation under current law, which allows a full and immediate write-off for short-lived assets. Bonus depreciation, however, could become a new extender itself as it is scheduled to begin phasing down after 2022. Cost recovery provisions are less ideal when they are constrained to one specific type of asset, such as the expiring provision for a three-year recovery period for racehorses. Congress should instead prioritize permanent, full, and immediate cost recovery for all investment.

Table 2: Other Tax Extenders Expiring This Year Green Energy Tax Provisions 12. Credit for Nonbusiness Energy Property 13. Credit for Qualified Fuel Cell Motor Vehicles (sec. 30B(k)(1)) 14. Credit for Alternative Fuel Refueling Property (sec. 30C(g)) 15. Credit for 2-wheeled Plug-in Electric Vehicles (sec. 30D(g)(3)(E)(ii)) 16. Beginning-of-construction Date for Renewable Power Facilities Eligible to Claim the Electricity Production Credit or Investment Credit in lieu of the Production Credit (secs. 45(d) and 48(a)(5)) 17. Second Generation Biofuel Producer Credit (sec. 40(b)(6)(J)) 18. Credit for Construction of New Energy-Efficient Homes (sec. 45L(g)) Incentives for Alternative Fuel and Alternative Fuel Mixtures: 19. Excise Tax Credits and Outlay Payments for Alternative Fuel (secs. 6426(d)(5) and 6427(e)(6)(C)) 20. Excise Tax Credits for Alternative Fuel Mixtures (sec. 6426(e)(3)) Conventional Energy Tax Provisions 21. Mine Rescue Team Training Credit (sec. 45N(e)) 22. Credit for Production of Indian Coal (sec. 45(e)(10)(A)) 23. Black Lung Disability Trust Fund: Increase in Amount of Excise Tax on Coal (sec. 4121(e)(2)) Cost Recovery Tax Provisions 24. Accelerated Depreciation for Business Property on an Indian Reservation (sec. 168(j)(9)) 25. Three-year Recovery Period for Racehorses Two Years Old or Younger (sec. 168(e)(3)(A)) Miscellaneous Individual and Corporate Tax Provisions 26. American Samoa Economic Development Credit (sec. 119 of Pub. L. No. 109-432, as amended) 27. Indian Employment Credit (sec. 45A(f)) 28. Increase in State Low-Income Housing Tax Credit Ceiling (sec. 42(h)(3)(I)) 29. Temporary Increase in Limit on Cover over of Rum Excise Tax Revenues (from $10.50 to $13.25 per proof gallon) to Puerto Rico and the Virgin Islands (sec. 7652(f)) 30. Credit for Health Insurance Costs of Eligible Individuals (sec. 35(b)(1)(B)) 31. Treatment of Premiums for Certain Qualified Mortgage Insurance as Qualified Residence Interest (sec. 163(h)(3)(E)(iv))

Source: Joint Committee on Taxation.

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phillipvjohnsonj · 4 years ago

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Communication Isn’t About You

BONUS: Three outlooks from our exclusive expert council: Pipe, Dobek, Grundy.

By Martin Bissett Passport to Partnership

What does communication mean at the partner level?

MORE: 4 Top Communication Habits | The Seven Levels of Communication Management | Make Firm Culture Work for You | Sailing the Seven C’s to Partner | You Can’t Land Your Next Client without This | If You’re Selling, You’re Doing It Wrong Exclusively for PRO Members. Log in here or upgrade to PRO today.

Ask yourself and answer these questions when considering the current and future communication tactics that you’ll employ.

If I were my client, boss, peer or subordinate, how would I want to be communicated with by me?

What areas of my firm’s communication can I improve quickly?

I need to understand that it does not matter how I think I’m coming across. I need to understand how the person I’m communicating with thinks I’m coming across.

The expert council

Here’s what a number of experts exclusively interviewed for this project had to say about communication in CPA firms.

What would be your advice to senior managers wanting to develop their communication abilities?

Pipe

“Technology will change the picture as it has been doing for some time. For example, many believe that in the future we will be able to run our businesses from our mobile devices.

“Remember, much of what used to feature in the role of an accountant doesn’t now. For example, I spent most of my early career reading over between two sets of Wordperfect accounts and carrying the comptometer machines around – all of which is anathema to today’s profession.

“So we need to make sure that we spend our time providing what computers will never be able to provide – the trusted relationship to clients and colleagues alike. We need to keep the promises we make and keep them brilliantly.” – Steve Pipe, founder of The Added Value Network

Dobek

“Your people are your biggest asset in an accounting firm. Firms that are investing in their people and spending the time to train and develop them in non-technical areas, like marketing and sales, management and leadership, are going to far surpass firms that can’t address this. They will not only grow, but be able to remain independent.” – Sarah Johnson Dobek, Inovautus Consulting

Grundy

“Although most firms won’t admit it, communication can be an issue internally because partners consciously and actively keep what it takes to join their ranks as a bit of a secret. This can be from a sense of self-preservation (some partners feel challenged, or even threatened, by up-and-coming managers) but mainly because the enthusiasm and drive that you need to find out what is needed to become a partner is much the same as what you need to be successful as a partner, so it’s a self-proving ‘test.’” – David Grundy, Fundingstore.com

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phillipvjohnsonj · 4 years ago

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The Case for Video Marketing

Why your firm should explore these strategies.

By Kelly Schuknecht

Many of us walked away from 2020 with a laundry list of new experiences, among those: how to appear on video for dozens of hours each week without doing anything (too) embarrassing. Video was already becoming a standard tool for businesses to communicate before 2020, but it’s undoubtedly proven its staying power. Despite the amount of time you might spend on video, your business should be using the form for more than just Zoom calls and conferences.

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How you market your business with videos is not always intuitive and getting it right may require a copious amount of practice. As a fully remote accounting firm since 2013, we came into video marketing almost naturally, but not without a plan. Here are some ideas on how an accounting firm can jumpstart its video marketing strategy to help develop authentic relationships with potential clients and generate solid leads.

Create a Plan for How to Use Video

Treat video marketing the same way you treat any other type of marketing. Sketch out a basic marketing plan that includes answers to these questions:

Why do you want to use video marketing versus other content marketing formats?

Who is your intended audience, and what value can you bring to them?

Where do you plan to market or publish your videos?

When will you post content, and at what frequency?

Consider Why Video Is Important

Let’s get the obvious out of the way first. Good marketing should ultimately help guide your prospects through the marketing funnel until they eventually convert into buyers or clients. That shouldn’t be your “why” for using video. Instead, your “why” should be something with a more robust foundation for development.

Regardless of where you decide to post your videos, the best content marketing is focused on educational material. We recommend this also be one of your reasons for using video marketing.

Of course, you could (and possibly do) create educational content through blog posts. And you should. We don’t recommend you drop your blogging strategy. But it’s pretty difficult to differentiate your business through blog posts alone. Everyone has a website and a blog writing strategy these days. Video marketing, however, can help you stand out and give your content marketing an edge by bringing your personality to the forefront of the content.

Meanwhile, because video content isn’t tracked by Google the same way blog posts are, you can repurpose video content to help support the written content you use for the SEO side of your marketing strategy. And once that video is active, it gives you strong material to send to prospects you’re already in communication with, especially if it helps provide some convincingly strong answers to questions you’ve already answered in a video explainer.

To summarize this one, we recommend video as an excellent medium for creating informative, educational content and building deeper relationships with your audience.

Determine Your Ideal Audience and Your Value Proposition

Now that you’ve established why you want to use video marketing, begin developing a marketing plan for what that content will look like. Let’s assume you’ve dedicated yourself to creating educational content for your audience. What should that look like? We can’t tell you exactly, and that’s a good thing.

The value you bring could cover three areas:

Your company’s expertise (your niche area)

The pain points that exist for customers utilizing services within your market

The pain points for other businesses operating in your market

The first of these should be obvious enough. You want to establish yourself and your business as a leader within your industry. But there’s more to it than that. You also want to put a face and voice to your content in a way that builds your brand recognition. Video is a great way to do that because people can connect the earnestness in the way you speak with your knowledge of the subject matter. Additionally, while the research is mixed, there’s a good reason to believe that people remember faces better than names. Getting your face (and voice!) out there can create better and more positive familiarity with your business.

The question, then, is how do you use that knowledge to impact your audience? There are two ways, both of which we operate. One is to create content that helps to demystify aspects of your business that can cause frustrations for potential customers or clients. For example, 401(k) audits are a large part of our business but can also be confusing for businesses. We offer an extensive library of content focused solely on educating businesses on how 401(k) audits work because we understand just how stressful the process can be.

But what about educating businesses within your industry? Isn’t that counterintuitive? We don’t think so. Indeed, business is a competitive environment. And while you aren’t going to give away all of your trade secrets, creating informational and educational content for others working in your industry can help establish your business as a leader while also sparking more confidence from potential customers or clients that you are an expert in your field.

Choose the Right Network for Sharing Your Content

We know you love your website, but you should look beyond your website for posting your content. This is not to say that you shouldn’t post your video content to your website at all. But your website traffic is likely primarily driven by SEO, and videos aren’t a great SEO driver for website content.

Instead, we recommend you utilize LinkedIn and YouTube.

At present, LinkedIn is the largest business-focused network in the world. And it also has a well established user who emphasizes and rewards well-developed informational and educational content. What’s more, unlike Facebook or Twitter, it’s overwhelmingly free of the controversies that plague the other social media networks. It truly is the best option for sharing professional video content and building a brand around that. Assuming you create videos that fit those criteria, your videos will likely be well received there.

LinkedIn is a much more influential network than you might think it is. According to Stephen Pope, founder and CEO of SGP Labs, video content gives you a chance to stand out within your network. “They’re going to see you differently too because you’re going to be one of the only people that’s doing this kind of innovative work,” he explained.

Outside of LinkedIn, consider creating and publishing your videos on YouTube. It’s a bit less “social” than other social networks like LinkedIn, Twitter or Facebook. But YouTube is an excellent search engine for video content and can help connect you to people outside of your network who might be searching for the topics you’re covering in your videos.

Create a Publication Schedule

Consistency is crucial with marketing of any kind, especially video. Before you start sweating bullets, don’t worry. We’re not suggesting you record and publish videos every day or even every week (although weekly is a good cadence). However, regularly creating and posting content has a few benefits.

It creates a reason for your audience to keep coming back: If your audience knows they can expect a new video from you on a specific date, they’ll pay attention to your channel or profile on that date or add you to their watch list.

It helps you improve the quality of your videos over time: Pope has some wise words on this topic. “When you start going on video, there’s much personal growth you go through. You get better at articulating your points. You become more confident.” Recording video content is a skill, just like any other. And even if LinkedIn falls out of fashion, you’ll still have that skill at confidently delivering expert and informative ideas to audiences.

You build relationships with your audience: Once you have a well established video marketing strategy, don’t be surprised if prospective clients contact you expressing how they feel they know you on a personal level. Video marketing can do that far better than most other marketing formats. We like to think of video marketing not as a lead generation but as relationship generation. Your video content could impact many people in your audience, even if they never like, comment or share that material.

Time to get started

Feeling overwhelmed? Don’t panic. There is a lot to think about. Let this outline be your first step toward a profitable and effective video marketing strategy that’ll change the way your firm looks at video.

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phillipvjohnsonj · 4 years ago

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Latest Accounting Overachiever Comes From PwC

From CyprusMail:

Demos Ioannou, a trainee accountant of PwC Cyprus, achieved the highest world score in the ICAEW [Institute of Chartered Accountants in England and Wales] exams that took place in November 2021. More specifically, Ioannou achieved first place worldwide in the subject of “Strategic Business Management” and was awarded the Walton Prize.

PwC trainee accountant achieves significant worldwide distinction – Demos Ioannou achieved the ICAEW First Place in the subject "Strategic Business Management" – Read more here – https://t.co/tuk4hOm1om pic.twitter.com/MNbJBAWQmS

— PwC Cyprus (@PwC_Cy_Press) December 20, 2021

Ioannou, who graduated from the University of Reading with a bachelor’s degree in accounting and finance, is currently a senior associate at PwC Cyprus, according to his LinkedIn profile.

PwC trainee achieves highest ICAEW exam score worldwide [CyprusMail]

The post Latest Accounting Overachiever Comes From PwC appeared first on Going Concern.

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phillipvjohnsonj · 4 years ago

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We Did it Guys, We Found the World’s Most Insufferable Accountant

Once again, r/linkedinlunatics comes through with the gold:

Either this guy is really, really serious about his job OR — and more likely — just really bad at figuring out how to get 16 hours of work done in 10.

If Reddit existed 20 years ago, the comment section on that post would likely be filled with similarly-minded weirdos who consider abandoning any hope of a personal life some kind of twisted badge of honor. Thankfully we live in current day where this kind of behavior is called out for what it is: lunacy.

This is not the flex you think it is, my guy. Go touch grass. Quick, before climate change turns it all to dust and sadness.

The post We Did it Guys, We Found the World’s Most Insufferable Accountant appeared first on Going Concern.

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phillipvjohnsonj · 4 years ago

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Tax Change Hits Payment Apps

If you use PayPal, Venmo or others, this might affect you.

By Rick Richardson

If you’re among the millions of people who use payment apps like PayPal, Venmo, Square and other third-party electronic payment networks, you could be affected by a tax reporting change that goes into effect in January.

MORE TECH THIS WEEK: Amazon Launching Its First Internet Satellites | How to Fit 500TB on a CD-Sized Glass Disc | New State Cyber Bureau to Combat Hack Attacks | Russian SolarWinds Hackers At It Again | Hunker Down: The Chip Shortage Is Here for a While Exclusively for PRO Members. Log in here or upgrade to PRO today.

Payment app providers will have to start reporting to the IRS a user’s business transactions if, in aggregate, they total $600 or more for the year. A business transaction is defined as payment for a good or service. Prior to this change, app providers only had to send the IRS a Form 1099-K if an individual account had at least 200 business transactions in a year and if those transactions combined resulted in gross payments of at least $20,000.

The expansion of the reporting rule results from a provision in the American Rescue Plan, which was signed into law earlier this year. The aim of the provision is to clamp down on unreported, taxable income.

Keep in mind, the new reporting threshold does not change your basic tax responsibilities. Income you receive for a good or service – including tips – has always been reportable and, most times, taxable.

And you’ve always been responsible for reporting it on your tax return, regardless of whether a third party sends the information to the IRS.

The rule change also does not make other transactions suddenly taxable. For instance, your friend sending you money on Venmo to reimburse you for their half of last night’s dinner tab will not become taxable.

The biggest change is the increased visibility the IRS will have into business income transactions, both those that have always been reported by the income recipient and those that haven’t been.

In theory, the only people who should be worried about the rule change are those who weren’t reporting all their business income. “Those who are tax evaders, who violated the self-reporting rules and used the old thresholds to avoid paying taxes,” said Scott Talbott, spokesperson for the Electronic Transaction Association.

But, tax experts say, the threshold change could mean some administrative hassles for many tax filers who use payment apps, whether or not they’re engaged in business transactions.

“These third-party settlement entities may not know for sure if they are dealing with a business or an individual or if they are dealing with a payment for goods or services, or a non-taxable transaction. It is going to be up to the taxpayer, if they receive a 1099 in any form for a nontaxable event, such as splitting rent among roommates, splitting a dinner bill or even selling something on eBay for less than you paid for it, to explain to the IRS that the 1099 was received for a non-taxable transaction,” said Mark Luscombe, principal analyst for tax publisher Wolters Kluwer Tax & Accounting.

Also, Luscombe noted, there’s a fair chance your business transactions may be reported in duplicate – for instance, if you’re a freelancer or independent contractor, you might get a 1099-K from your payment app provider, as well as a 1099-NEC or 1099-MISC from your client for the same transaction.

“Again, the taxpayer will have to explain to the IRS that the two 1099s are for the same transaction,” he said.

Each app provider must decide which procedures it will use to accommodate the rule change and will need to alert their customers about what will be required of them to better identify the nature of their transactions.

For instance, PayPal, which now owns Venmo, recently put out an initial Q&A for users of both apps. It noted that “In the coming months, we may ask you to provide tax information like your Employer Identification Number (EIN), Individual Tax ID Number (ITIN) or Social Security Number (SSN), if you haven’t provided it to us already.”

The net effect of the new reporting requirements for users of payment apps may be that some will ask customers to pay them in cash – at least for smaller amounts, like tips. Or, as Luscombe noted, they may decide to only use an app for taxable business transactions and keep their other, non-taxable transactions separate.

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phillipvjohnsonj · 4 years ago

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Compensation Watch ’21: Crowe Is Full of Christmas Cheer

Three years ago this week, Crowe made the news for being fined $1.5 million by the SEC for its audits of Corporate Resource Services Inc., which can best be described in three words that are as follows, and I quote: “Stink, stank, stunk.”

But this week, nothing but good news coming out of the Crowe camp: bonuses and mid-year comp adjustments. While we don’t know how good the raises were, we were told yesterday by a source who works at Crowe that employees also received a $2,000 bonus.

So how big of a raise did you guys get? Was it a decent reward for all the hard work you put in this year? Let us know in the comments section or get in touch with us using the contact info below.

SEC Got All Grinchy on Crowe, Four Partners for Bad Banana of an Audit

The post Compensation Watch ’21: Crowe Is Full of Christmas Cheer appeared first on Going Concern.

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phillipvjohnsonj · 4 years ago

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Stop Complaining and Start Innovating

Step #1: The staffing shortage begins at home. By Tamera Loerzel

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phillipvjohnsonj · 4 years ago

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Four Issues with ‘Quick’ Tax Questions

Sometimes things aren’t so simple.

By Ed Mendlowitz Tax Season Opportunity Guide

I keep a few of the one-volume tax guides in my office so I could look up a quick answer when I need to. Recently a golf buddy emailed me a question that I thought I could answer quickly. He wanted to know that if he was in the “zero” percent capital gains tax bracket, did that apply to an unlimited amount of capital gains? Sounds like a simple question.

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Well I looked it up online and then in three one-volume tax guides. Only one source had thorough coverage of the issue. I ended up spending an hour on this “simple” question including my emailed response. Nothing is simple anymore.

Research techniques: Needing an answer to a question you don’t know will slow you up and insert a bottleneck in your production line.

There are three types of research – light, heavy and just want to make sure. Every preparer should be equipped with a one-volume tax guide (either paper or a digital version) to look up questions.

My rule is simple. If a preparer doesn’t know something they should spend a half hour, but not any more time than that and if they don’t have an answer, they should go to someone above them for assistance. Show them what you found or did not find and ask how you should proceed. Sometimes they will point them in the right direction, and sometimes it would be something above their level and they will get the answer.

The first person trying to find the answer is what I call light research. Heavy research is where the higher level person says they will find the answer. This requires additional work, skills and resources that they are more competent to do or have. Many times you know something, but just want to make sure – that is a minute or two project and should be done by anyone feeling that way.

Don’t let not having an immediate answer slow up the return.

Not having an immediate answer to a question does not mean work should stop. Work around it, getting everything else completed so when that response is received, the return can be easily completed.

Every return should have an open item listing. The issue needing heavy research should be the only entry on that list. Stopping work leaves a larger volume of work undone and it will make it harder for someone else to pick up on the return should the original preparer not be available to complete the return

Stopping slows up the momentum.

Each client’s return is treated special but the work load requires a method similar to an assembly line, and any slow up reduces the momentum. Because of this, it is important to have a minimum number of stoppages. This can be accomplished by as much as possible being done each time there is a “touch” while at the same time reducing the number of touches. As much as possible needs to be done each time the return is worked on with nothing left for later.

When a question needs research, it should be done immediately within the half hour rule expressed above. Anything not resolved creates delay and increases the time to complete the return

Putting something aside creates a “mortgage” of work that will still need to be done – it won’t go away.

All returns will need to be completed and at some point, there is no tomorrow. A no-tomorrow attitude will reduce delays and time needed to work on a return. Anything pushed forward will become a mortgage on that return, increasing the time to get it completed and pushing forward the completion date.

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phillipvjohnsonj · 4 years ago

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What Do Global Minimum Tax Rules Mean for Corporate Tax Policies?

Today, the Organisation for Economic Co-operation and Development (OECD) released model rules for the global minimum tax (also known as Pillar 2). These rules are designed to apply to multinational companies with more than €750 million in total global revenues and place a minimum effective tax rate of 15 percent on those company’s profits.

In the coming days, countries will be considering how to incorporate these rules into their national tax codes. The rules are complex, and some countries may opt to put them in place on top of preexisting rules for taxing multinational companies. However, countries should also consider ways to reform their existing rules in response to the minimum tax.

The global minimum tax rules do not require any changes in domestic tax law. The approach is voluntary, but if enough countries do enact the rules, then even countries that do not adopt them should evaluate their tax policies with an eye toward simplification, revenue-neutral reforms, and policies that support investment which would not be eroded by the minimum tax.

Many jurisdictions around the world offer tax preferences or structure their tax rules in such a way that allow companies to be taxed at rates below the 15 percent rate envisioned by the minimum tax.

The global minimum tax can create problems for those policies, however. For example, let’s say a large multinational company headquartered in Country A makes an investment in Country B which is eligible for a 10-year corporate tax holiday. Even though the profits from the investment will not be taxed by Country B, the global minimum tax would allow Country A to apply the minimum rate of 15 percent to those profits.

Country B may choose to change its tax holiday policy to tax those profits locally rather than allowing the tax revenue to go to Country A. If Country B applies a high corporate tax rate to companies that are not eligible for a tax holiday, the additional revenue from shutting down the preferential policy could support a more general tax reform (broadening the base and lowering the rates, as the mantra goes).

Not all tax policies will follow such a straightforward analysis, however, and the model rules are only helpful in assessing policies to the extent that they result in effective tax rates below 15 percent for large multinational companies.

With the risk of oversimplifying, I have developed a rough categorization of the policies that countries will most likely choose to change in the context of the minimum tax rules. Policies facing a Red Light are primarily those that provide a zero effective tax rate. Yellow Light policies provide reduced effective tax rates below 15 percent but not zero. Green Light policies are those that reduce the cost of investment while not triggering the minimum tax unless the general corporate tax rate is very low.

Though the list below is not comprehensive, policymakers can use this framework to prioritize the type of evaluations which will be necessary to determine the direction tax policy should take when the minimum tax rules are in place. Once that evaluation is complete, policies that generally promote investment in fixed assets and local hiring should be prioritized because they will align with the areas where the minimum tax provides meaningful carveouts.

Even in the context of the global minimum tax, countries can and should pursue principled, competitive, and pro-growth policies that provide sufficient revenue while minimizing economic distortions.

Red Light

Tax holidays

Zero-tax free trade zones

Zero-rate corporate tax systems

Countries that have rules that provide a zero tax rate on business profits either through tax holidays, free trade zones, or because there is no corporate tax face a clear choice in the context of the global minimum tax.

As the example above described, countries can choose to change their policies and collect revenue themselves (potentially in the context of a broader reform) or they can allow a foreign jurisdiction to collect the revenue associated with the 15 percent minimum effective rate.

The choices may be easier for jurisdictions that have a general corporate tax that applies outside of tax holidays or certain zones than for countries that do not operate a corporate tax at all.

The latter will need to assess whether the additional revenue will be worth the administrative costs of establishing new rules and systems for collecting a tax that they had previously chosen to not have as part of their laws. In our recent report, we noted that 15 jurisdictions around the world do not have a corporate income tax.

Yellow Light

Reduced-rate incentives (e.g., patent boxes)

Business tax credits (particularly refundable credits)

Direct funding programs

Corporate tax rates below 15 percent

This category of policies will likely prove more challenging for governments to assess in view of the global minimum tax.

If a country has a patent box rate of 10 percent (and the patent box complies with OECD guidelines), it might be assumed that the country should just raise the patent box rate to 15 percent or repeal it altogether. However, if the country has a general corporate tax rate of 25 percent, a company could have some of its profits subject to the 10 percent patent box rate and the rest subject to the general 25 percent rate. Even in that case, one option which should be considered is to repeal the patent box and reduce the corporate tax rate for an overall revenue-neutral reform.

Nineteen OECD countries have a policy that provides either an exemption or lower rate for income from certain patented technology, and in each case the applicable rate is lower than 15 percent. However, Italy has already opted to remove its patent box in favor of new deductions for research and development costs.

Under the global minimum tax model rules, refundable tax credits and direct funding will increase the income of a company and lower the measured effective tax rate. If a company benefiting from these policies is in a jurisdiction with a low enough corporate tax rate, the size of the credits and funding have the potential to push a company below the overall 15 percent effective tax rate threshold.

There will also be a need to assess general business tax credits since a country providing tax credits for certain activities may find that the companies receiving those credits are simply paying additional tax elsewhere.

Countries that have tax rates below 15 percent should consider whether to put the new rules in place just for the large companies targeted by the minimum tax or raise the general corporate tax rate. In a recent study, we highlighted 20 jurisdictions that operate a corporate tax rate below 15 percent (but greater than zero).

Ireland is expected to adopt the minimum tax rules for large multinationals while leaving its 12.5 percent rate in place for all other businesses.

The Yellow Light policies will be tricky to evaluate because they will depend on many factors, including the overall corporate tax rate, the number of companies benefiting from the preferences, and the ambition of lawmakers to undertake a general reform that could eliminate or trim multiple preferential policies with a goal of improving the tax system overall.

Green Light

Accelerated depreciation (full expensing)

Last-In-First-Out (LIFO) inventory treatment

Unlimited loss carryforwards

The global minimum tax rules do not mean that all business tax policies need to be rethought. In fact, the way the rules calculate the minimum tax rate matters a great deal. The rules use the concepts of deferred tax assets and loss carryforwards that allow some important features of good tax systems to be outside the zone of policies that might need to be reconsidered.

These policies include accelerated depreciation (or full expensing) of assets like the rules that are currently in place in the U.S. and Canada. Super-deductions for business investment as in the UK would also be spared. Many countries use capital cost allowances to spur investment during economic downturns. The policy response to the pandemic has seen eight OECD countries adopt accelerated depreciation in certain circumstances.

Last-In-First-Out (LIFO) inventory deductions allow companies to deduct the cost of inventory at the price of the most recently acquired items and therefore help mitigate the impacts of volatile prices or inflation. This lowers the tax cost of acquiring inventory. Fourteen OECD countries allow businesses to use LIFO for tax purposes.

Finally, policies that allow companies to carry their losses forward for an unlimited time would not need to be reevaluated. The model rules specifically allow loss carryforwards. This allows the tax rules to minimize the likelihood that a business will get caught by the minimum tax rules simply because it is in the start-up phase with significant up-front costs. As with capital allowances, many countries loosened their loss deduction policies in response to the pandemic.

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phillipvjohnsonj · 4 years ago

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Is It Time to Outsource?

Twelve signs to watch for. By Hitendra Patil Client Accounting Services: The Definitive Success Guide

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phillipvjohnsonj · 4 years ago

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Friday Footnotes: KPMG Discipline Looms; Whistleblower Gets 2nd Chance; Firing Auditors | 12.17.21

Deloitte U.S. CEO on the past year’s business challenges and what’s ahead in 2022 [Fortune] “Many came into the year thinking that 2020 was the unprecedented year and things would calm down,” Ucuzoglu said. “Yet you could argue there have actually been more twists and turns [in 2021]. The pandemic is by no means behind us, yet, in spite of all of that, we’ve got a reasonably strong economic recovery underway. We have remarkable tools at our disposal to manage the ongoing pandemic. All of that leaves me relatively bullish.”

KPMG disciplinary date set over misconduct complaint involving Carillion, Regenersis audits [Financial News] A disciplinary hearing has been set for KPMG and some of its former and current staff over allegations they provided false or misleading information to the accounting watchdog for inspections of Carillion and Regenersis. The Financial Reporting Council said it will hold the hearing on 10 January to consider the complaint against the Big Four firm.

Accounting firm pays Jackson County millions over failed Singing River pension plan [SunHerald] KPMG accounting firm will pay a $20 million settlement to Jackson County over the failed pension plan at county-owned Singing River Health System, a news release says. The county netted $16 million after attorney’s fees from the settlement. The money has been placed in an interest-bearing account, Chancery Clerk Josh Eldridge said. The Jackson County Board of Supervisors has not yet decided what the funds will be used for, he said.

KPMG withdraws from bidding for UK government contracts after scandals [Financial Times] The Big Four firm, the third-biggest winner of public sector consulting contracts by value in the financial year to March 2021, has halted bidding for new assignments pending the outcome of a Cabinet Office review. It caps a chaotic year for KPMG UK, in which its chair quit after telling staff to “stop moaning” about their work conditions during the pandemic and the accounting regulator branded the quality of the firm’s banking audits “unacceptable”.

Great news for whistleblower Mauro Botta [The Dig] RSM US LLP has given Botta a second chance as a Senior Director in its National Office after he went through hell for blowing the whistle on PwC to the SEC, after getting no satisfaction making internal complaints.

When Companies Fire Their Auditors, Timing Is Clue to Future Trouble [Wall Street Journal] When a company and its auditor split up, it can be a sign of trouble in the books. But the two sides typically don’t give a reason for the breakup. Two accounting professors instead looked at the timing of the split. They found that the later in the year it occurs, the more worried investors should be.

PCAOB Says It Can’t Inspect Audits of Chinese Firms Listed in U.S. [New York Times] An American accounting board has started what could prove to be a three-year clock for the delisting of many Chinese companies traded on American stock exchanges, in a move involving audit standards that are at the center of a squabble between Beijing and Washington. The Public Company Accounting Oversight Board said late Thursday that it had been unable to fully inspect the audit papers and other documents of accounting firms in mainland China and Hong Kong. The Securities and Exchange Commission has the power to delist companies that lack fully approved overseas audits for three years.

Deloitte wins big auditor work from rival firms [Australian Financial Review] Deloitte will become the corporate auditor for listed companies Booktopia and concrete and quarries group Boral after winning the work from its big four rivals. The shift follows other listed companies changing their auditor as the year draws to a close, including KPMG winning the audit work for electronic design software company Altium and PwC winning the Bank of Queensland audit.

AICPA Legacy Scholarship application period is open [This Way to CPA] Become an AICPA Legacy Scholar by applying for an AICPA Legacy Scholarship. If chosen, you’ll be given funds to help pay for college and be offered exclusive professional development opportunities.

Attributes of top-performing firms revealed [Journal of Accountancy] Double the revenue per partner. Double the profit per partner. Double the compensation per partner. Those are three of the revelations about how top-performing accounting firms compare with their peers, as measured by the 2021 National Management of an Accounting Practice (MAP) survey from the AICPA Private Companies Practice Section (PCPS).

Image by Photo Mix from Pixabay

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phillipvjohnsonj · 4 years ago

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Compensation Watch ’21: PwC Employees Are Getting a 5% Bump In Pay

What was rumored in posts on the usual chatter sites yesterday turned out to be true this morning: PwC is handing out 5% adjustments in pay, or a “Timmy Stimmy” as one PwCer called it on Reddit, effective in January.

Unlike Deloitte, which gave mid-year comp adjustments to Green Dotters who they deemed had salaries that weren’t competitive in their market, PwC is apparently giving 5% raises across the board.

I checked in this morning with a senior manager at PwC to confirm the mid-year raise, and he/she responded, “It is true. 5% of course is better than 0% especially given where inflation is now and will likely continue trending up.”

Most PwCers on Reddit and Fishbowl seem pretty happy with the 5% mid-year raise, even if it’s below the current inflation rate, because of how generous PwC was with raises last June.

The ball’s in your court now, EY.

Compensation Watch ’21: How ’Bout Them Raises At PwC? Compensation Watch ’21: Deloitte Puts Mid-Year Raises On the Table

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phillipvjohnsonj · 4 years ago

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Five Tough-Love Strategies for 2022

Can you follow the same advice you'd give your clients? By Art Kuesel MORE OUTLOOK 2022: Private Equity at the Gates | 20 Predictions for the Year Ahead | 12 Shifts to Ensure Firm Success | Why It’s Time for an Acquisition | How to Reinvent the Firm for the COVID Age | Accounting Will Never Be the Same | 10-Point Plan for the Year Ahead | Competing for Talent in a Private-Equity World | Your Best Advice: Get Smart, Get Tech, Get Moving | SURVEY: Worries for Small Business Clients | Exclusively for PRO Members. Log in here or upgrade to PRO today.

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phillipvjohnsonj · 4 years ago

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Why Washington State Can’t Claim Its Capital Gains Tax Is an Excise Tax

When is an income tax an excise tax? And for that matter, what exactly is an excise tax? The fate of Washington’s capital gains tax, currently in litigation, rests at least in part on the answer to these questions.

By way of background, Washington’s supreme court has repeatedly held that the state’s constitution functionally prohibits graduated income taxation. (It’s a little more complicated than that, but suffice it to say, if the new capital gains tax is determined to be an income tax, then the courts can’t uphold it without overturning almost a century of precedent regarding a clear constitutional constraint.) To get around this restriction, lawmakers passed a tax on high earners’ capital gains income that is called an excise tax on the privilege of earning capital gains, hoping that the verbiage makes a difference.

In a motion for summary judgment, plaintiffs challenging the new law argue that (1) it’s clearly an income tax and (2) even if it were an excise tax, it would be an unconstitutionally imposed one—which, if anything, further points us in the direction of calling it an income tax. The arguments are sound, but sometimes a legal brief can be short on explanations that help get lay readers from Point A to Point B. So let’s flesh those out a bit, because it’s an interesting question with implications beyond just Washington and its standalone capital gains tax.

What is an excise tax? We could just look to the dictionary, with Webster’s defining an excise tax as “a tax on certain things that are made, sold, or used within a country.” This seems roughly correct, especially when we consider the most prominent excise taxes, on things like fuel, alcohol, tobacco, and airline tickets. The definition has to stretch a little, with “used” taking an expansive enough meaning to cover real estate transfer, inspection fees, the provision of health insurance, and even mineral extraction, if you want to classify severance taxes as a class of excise tax.

And in common parlance it would also narrow in another way, putting special emphasis on “certain things” by focusing on taxes on very particular things, rather than broader-based consumption taxes like the sales tax. From a legal standpoint, however, it would be easy enough to characterize the sales tax as a “general excise tax” even if this terminology is not very useful in most circumstances, where excise taxes are more likely to be referred to as “special sales taxes” than sales taxes are to be considered “general excise taxes.” (See here for more on what constitutes an excise tax, and their traditional rationales.)

So the dictionary is basically right but perhaps not sufficient to inform our understanding of the legal distinction between an excise tax and an income tax. What prevents us from referring to an excise tax on income?

Fundamentally, excise taxes are indirect taxes while income taxes are direct taxes. That distinction is why the U.S. Supreme Court struck down early attempts to impose a federal income tax before ratification of the 16th Amendment, since, prior to that constitutional change, all direct taxes had to be apportioned among the states, which was an insuperable barrier to income taxation.

The income tax is a direct tax because it falls directly on people. The legal incidence is on particular people, and tax liability is assessed per person, not per sale or activity. While the economic incidence of excise taxes is also borne by people (what alternative is there?), the legal incidence is based on the particulars of a transaction or activity, and it is ultimately not calculated on a personal basis. In practice, this means that excise taxes will be imposed as specific taxes (based on volume, e.g., gallons of gasoline or packs of cigarettes) or as ad valorem taxes (based on price, e.g., a tax on the retail price of marijuana).

Consider the gas tax, for instance. There is no question that you “pay” the gas tax when you fuel up, even though the service station remits the tax on your behalf. But the government is not imposing a tax on you specifically, and the tax is owed based on where the fuel is purchased or used, not based on the fuel’s ultimate “owner.” You don’t file a tax return at the end of the year detailing how much fuel you purchased and paying accordingly—and even if you did (a vehicle miles traveled tax, VMT, would be somewhat more aggregated, because it’s on an activity rather than a transaction), the taxable event would be the activity, not the person. If a Washingtonian flew to California, picked up a rental car, and drove around San Diego, there’s no way that Washington could say that the driver owes the state VMT taxes simply because they’re a Washington resident, since the taxable activity has no nexus with Washington even though the person does.

This is key to one of the plaintiffs’ arguments, one I might have distinguished a bit more than they do. For states to tax someone or something, they must have nexus: sufficient connections to be allowed to impose a tax. With direct taxes, the nexus is with the person. At least as far as nexus is concerned, a state can impose an income tax on a resident’s out-of-state income, because with a direct tax, the nexus question begins with the person. (There are additional constraints related to fair apportionment and relatedness to state services; nexus is just the threshold question.) With an indirect tax, however, nexus attaches to the transaction or activity. If you buy gas in Oregon, Washington has no claim on that transaction even if you’re a Washington resident.

Washington’s capital gains tax is designed as a direct tax, not an indirect one. It taxes out-of-state earnings and out-of-state activity. If we accept the state’s argument that it’s an excise tax, then it’s probably an unconstitutional one, because it fails to meet the nexus requirements established in cases like Complete Auto Transit v. Brady. If, on the other hand, it’s a direct tax, then we have nexus—but we’ve also acknowledged that it’s an income tax, which is what Washington can’t afford to acknowledge.

Of course, it is an income tax. Let’s go back to that distinction between an indirect tax on things made, sold, or used—or, put another way, on activities and transactions—and a direct tax, which would be on an individual’s earnings or possessions. It’s possible to impose an excise tax on the activities surrounding capital gains—bad policy, but possible. If Washington had chosen to levy a tax on sales of stocks or bonds, such a stock transfer tax would be an excise tax, because it’s based on the transaction or activity. Washington’s tax, however, is not based on the number of transactions, or on any activity, but on the net capital gains income earned over the course of the year. The object of the tax is clearly the person, with a focus on their aggregate income. It is a direct tax. It is literally denominated in income. It is, in short, an income tax.

And in Washington, that should be an end to it.

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