Agility is for CPA Firms, Not Just Sports Teams or Dog Shows

Agile CPAs

Rebecca Ryan, proprietrix of Next Generation Consulting and motivational speaker, describes "the agile CPA firm" as the CPA firm most likely to thrive in the future. She points out that agile CPA firms go beyond social media such as Facebook, Twitter and LinkedIn to empower junior employees, to look beyond traditional answers for struggling clients (one example: an Ohio firm which found non-traditional financing for cash-strapped manufacturing clients), to reduce office rent by finding inexpensive properties to rent and replace physical client contact with e-mail and other electronic communication and to save costs by avoiding traditional perks for top management. Additional features of agile CPA firms include an emphasis on innovation and continuous improvement, searching for market niches, transparency in business relationships, an emphasis on value added rather than time spent and some level of ruthlessness with underperforming or vexing clients and employees. The end result: MIT research indicate on average that agile firms increase revenue and profit by 30-40% more per year than non-agile firms.

The fact that Ms. Ryan points out issues probably also raised by Michelle Golden's Golden Practices or Rick Telberg's CPA Trendlines does NOT mean that they should be ignored. Certainly, the expansion of technology in accounting practice is an issue that can seem overwhelming by itself to practitioners my age (55) or older, but the empowerment of younger staff, transparency and value added emphasis and greater use of electronic communication to save rental fees (and possibly commute time) are also well worthy of consideration.

Tax Traps to Traverse

New Tax Minefields

Yahoo's Market Watch reports on a number of changes in the tax law that could lead to heartburn, unexpected tax costs or worse for unwary preparers. Probably the biggest lurking headache comes for taxpayers with sizable overseas investments; a new Form 8938 must be filed--if not, the MINIMUM penalty is $10,000. Among past tax moves that could come back to bite this year are use in 2008 of the first-time homebuyer tax incentive (a loan rather than grant that year) and conversion of traditional IRA to Roth IRA in 2010 (remember that there was a TWO-year spread of tax on the conversion). Additional dangerous changes include confusing W-2s from employers regarding the FICA 2% credit (in part because its extension was short-lived and occurred very late in 2011), more detail from brokers on basis of financial assets sold for potential capital gains or losses, a new provision in gift and estate tax law to allow carryover basis instead of the traditional step-up basis (this could lead to higher than expected taxable gains on property received by beneficiaries of decedants) and reduction of the available credit for installing energy-efficient home improvements.

Seriously consider using a professional preparer such as a CPA, tax attorney, enrolled agent or an experienced registered tax preparer (ask the registered preparer for proof that they have passed the new competency exam if you have not had them previously prepare a return for you) if you have one or more of the tax events listed above, particularly the homebuyer provision from a 2008 home purchase or sizable foreign investments. Also, particularly if President Obama is re-elected, be ready for new tax complications related to 2010's Affordable Health Care Act in 2013.

Romney Releases Two Years of Tax Returns

Romney Tax Return Analysis

Major Republican Presidential contender Mitt Romney, under considerable pressure, released two years of tax returns this morning. Important features include income of about $20 million per year, annual taxes of about $3 million or 15% and giving to his Mormon church of about 10%, consistent with Christian teaching about tithing (the issue of whether Mormonism is or is not part of Christianity will be left for other bloggers to address). Romney, whose wealth approaches one quarter BILLION dollars, explained his hesistancy in releasing the records as an accomodation to the manager (trustee) of family trust funds.

There is no obvious evidence that Mr. and Mrs. Romney and their tax preparers were anything other than upright on preparation of their tax return. Regarding their wealth and income, a lot of people are uncomfortable with Wall Street these days (and probably with at least some cause), but nothing to date has come to light that indicates that Romney has done anything illegal or even clearly unethical while working for Bain. None of this means that Romney automatically deserves support--there are still reasons such as disagreeing with his political positions, concern about depth of commitment to present positions on social issues, concern about his ability to connect with everyday voters or belief that Romney, like John McCain, will not hold up well in the street fighting of a general election campaign to support other Republican candidates and certainly plenty of political issue reasons for Democratic-leaning voters to support President Obama.

The Santorum Slash: Rick Does NOT Tell Taxes to Take a Hike

Scoring Santorum's Tax Proposals

Rick Santorum, whose campaign has had highs and lows in January (but comparatively speaking, much better highs than bad lows) has made a variety of statements in regard to the federal income tax while speechmaking and debating. The Tax Policy Center, associated with the presumably left-leaning Urban Center and Brookings Institute, estimated that if all Santorum's proposal were to be enacted; tax revenue losses would be $1.3 trillion or 40% of present tax revenue. Among former Senator Santorum's tax proposals are continuation of the "Bush" tax cuts early in the prior decade; collapsing tax brackets to two (10% and 28%), eliminating the alternative minimum tax, cutting capital gains and dividend taxes to 12%; the elimination of the estate tax and elimination of new taxes associated with "Obamacare."

A 40% drop in tax revenues would be a major shock to the U. S. Treasury; but two things to consider: [1] there is almost no chance that Santorum would everything he proposes through Congress; especially controversial provisions like the capital gains/dividend rate cut; [2] there probably would be some offsetting revenue from greater economic activity (though who knows if such an offset would reach Lafferian levels). Republican base voters should be excited about Santorum's tax proposals; moderates probably not so much.

Like Currency, Like Professional Designation: "CPA" Going Canadian?

Canadian Accountant Bodies Plan to Merge

CPA Canada website

Three major professional organizations in Canada: the Canadian Institute of Chartered Accountants, the Certified Management Accountants of Canada and the Certified General Accountants of Canada are in talks to merge the organizations into a single body for Canadian accountants. The designation of choice for the proposed new organization is Chartered Public Accountant (does the acronym look familiar?). The four goals of the new professional organization are to insure public confidence through a single certification program and high ethical standards; to insure that the new CPA designation is respected both within Canada and internationally; to make that Canadian accountants continue on a prosperous path and to govern accounting matters effectively. Accountants in Quebec have already agreed to merge; giving "la belle province" accountants a chance to demonstrate to the rest of Canada the potential benefits of combining.

It is worth watching Canada to see whether this new merger is beneficial to Canadian accountants. Certainly, the AICPA and IMA could stand to be on better terms (national bodies, not necessarily problematic at local chapter levels).

Key Topics of 2011

Rick Telberg's CPA Trendlines reviews its 20 stories with greatest reader interest and summarizes by saying that competitiveness has become the emphasis of the day. The top five topics plus a sampling of the rest: Its Offical: The War for Clients Has Begun, Top Tech Strategies of High-Performing Firms, Widening Gap Among Solo Practitioners, Five New Realities for Accountants and Lawyers, Super-Sized: Meet the new "CliftonLarsonAllen," Marketing Efforts Surge as Accountants Battle for New Clients, Cloud Computing for CPAs? Client Portals? Be Afraid, Be Very Afraid, Bookkeeping Rates Show Broad Advances, The New Practice Management Discipline, New IRS Requirements Could Force Shakedown in Tax Prep Industry.

While some, perhaps many of these topics may have limited utility to some readers, especially tax preparers, Telberg's blog, between its stories and one of the best updated blogrolls around, is a must read for many accountants, especially those who deal with practice management issues.

Tax Update to Start 2012

2011 Tax Update

Carnival of Taxes 94

Welcome after three weeks away. For a summary of some important posts by other bloggers in the interim, link to the Carnival of Taxes above.

Bonnie Lee of Fox Business provides alerts about a number of 2011 filing season changes and issues to look for in 2012. Base filing date this year is April 17 instead of the (more or less) usual April 15. For those with quarterly payments to make, January 17 (moved back for Sunday and Martin Luther King Jr. holiday) is the due date for the fourth quarter. A new Form 8949 spells out basis in shares sold (for Schedule D purposes). The business rate for mileage went from 51 to 55.5 cents at July 1, 2011; other rates are $0.23 per mile for medical and moving and 14 cents for charity. The maximum earnings subject to FICA is now $110,100, up $3300 from last year. While the payroll tax cut handled so clumsily by Republicans last fall continues for at least two months; the Making Work Pay credit is gone and the first-time homebuyers credit is now restricted primarily to military families. Finally, self-employed taxpayers will find that the health insurance adjustment returns as a "toward AGI" deduction instead of enjoying last year's status as an offset against self-employment tax.

Ms. Lee has provided a useful and concise summary of significant tax law changes. For an election, 2012 may have more adjustments in tax law than typical for a presidential election year, since many thorny decisions were effectively punted last year.

Wrapping up 2011

With the possible exception of a religiously-oriented post about Christmas Day, this will be my final post of 2011. As I have often done in the past, I thank most of my commenters (spammers excluded), every one who read my posts and a special thanks to those who cited posts in their blogs or carnivals or who link to this blog in their blogroll.

Hints for the Competency Exam by the IRS

IRS Candidate Information Bulletin

Accounting Today Headline

The IRS recently published a 12 page "Candidate Information Bulletin" (link above) to assist tax preparers planning to take the Taxpayer Competency Exam to become a Registered Tax Preparer. Included in the bulletin are study resources, pre-test study materials, an overview of the test and information on the testing fee and test center locations and procedures. A notable item from the Bulletin is that the exam is blacked out (cannot be taken) during the April 1-April 15 period. I also recommend studying the Master Tax Guide (available from CCH and RIA) either to complement or as a substitute for their recommended study materials which are a series of IRS publications.

This is a continuation of the tax preparer registration process. Whether or not you agree with the concept of taxpayer registration (and I do not as chronicled in earlier posts), the IRS is to be commended for putting together this helpful guide.

Avoiding an Internet Cloak of Invisibilty

While a "cloak of invisibility" may have appeal for a comic book superhero or a desperate boy in any number of teen sex romps, being invisible on the Internet is NOT a good place to be for a CPA firm. Nevertheless, Online Marketing Group found that nearly 40% of small CPA firms use no keywords suitable for Internet searches and over 80% received a poor or fair rating for their keyword strategy (or lack thereof). Larger CPA firms barely do better; over 40% have no keyword and five out of eight do fair at best in keyword use. Larger firms are better at social media (Facebook, Twitter, etc.) profiling with almost three of four referencing a social media site on their webpage versus one out of SIX for small firms. Mike Murray of Online Marketing Coach asserts that many CPA firms are not paying enough attention to social media and search engines and that both can be powerful generators of potential new business.

The marketers have a legitimate point here: CPAs cannot waste opportunities to generate potential business. Two counterpoints: [1] in the busy world of the CPA, any number of client issues probably seem more urgent that updating the website to setup a Facebook or Twitter page or digging through their website to generate keywords; [2] social media business generation, while clearly having significant potential, is somewhat of a "scattershot" proposition at the moment and CPAs may prefer a more focused approach to client development. One suggestion--during the lighter months of activity (certainly NOT the next four months for most CPA firms), have a local consultant (perhaps even a grad student in marketing for smaller CPA firms) look through your website and suggest ways to make your website more visible to those with real client potential.

Easy to Miss Tax Deductions

Note: Thanks to Kay Bell for running the TPIN Competency Article in "Merry Taxmas" in the December Carnival of Taxes at Don't Mess with Taxes this past Monday.


Kiplinger recently gave a list of ten commonly missed tax deductions, which should actually be eight because one (child care) is a credit (similar to but not a deduction) and one is an increase in basis (only deductible when an item is sold). The eight mentioned include state sales taxes (keep a special eye out here if you made a large consumer purchase like a car or boat. However, also remember that you get EITHER sales or income tax and that the annual renewal may not have passed by Congress yet); out-of-pocket charitable (remember charitable mileage and make sure you have receipts (cancelled checks no longer work in an audit) if claiming over $250 for a given charity); interest on student loans paid by parents; job-hunting costs (primarily by first-time job hunters--the 2% of AGI limit will make it hard for present job holders to qualify); cost of moving to a new job (remember the 50 mile rule and the 39 weeks in first year rule--this ususally means a move from one city to another. It IS possible if you lost a job through no fault of your own and moved twice in the same year to take two rounds of this deduction--I did so in 1978); reservist costs of training (similar to business travel if you travel over 100 miles and are away from home at least overnight); deductions of Medicare premiums paid (primarily available to the self-employed; avoids the dreaded 7.5% rule) and estate tax paid related to income earned by decedant (a small giveback from the government for adding insult to injury by double taxing (income and estate) money earned by someone that you probably were grieving).

Kiplinger also provides a slide show of other potential tax deductions. Throughout this month, bloggers listed in the blogroll at right will be mentioning other tax deductions to remember; it may be well worth your time to check these blogs throughout the month to make sure that you do not miss any important deductions.