May 2011 Newsletter

May 19, 2011
Marja Beltrami

Barry Melanceon, AICPA Chairman, Marja Beltrami, AKCPA President and Greg Anton, AICPA President-elect at the AICPA-CPA/SEA Leadership Conference held last October in New Orleans.

Thank you to everyone that attended the Annual Meeting held last week at Alyeska Resort.  The Alaska Ethics CPE class was well attended and Larry Stein did an excellent job presenting the material.  Larry will be back in July to teach the Ethics class in Fairbanks on 7/26 and in Anchorage on 7/28.  If you have not yet signed up, you can sign up on the society website.  We also had an excellent presentation by Bill Pirolli, Chairman of the AICPA  Private Companies Practice Section.  He spoke on "Elevating Your Trusted Advisor Status".

A special thank you to the meetings committee, Jacque Briskey, Rebecca Martin and JoLynn Blancher for all their hard work in putting the meeting together and making it a success.

The meetings committee will begin scheduling the monthly luncheon meetings for the year.  If you have a suggestion for a speaker or topic please contact the society office at akcpa@ak.net.

Divorce with Dignity

By Lisa M. Rogers, CPA and Jacque Briskey, CPA

There is a new technique spreading around the country, and the world, which provides a respectful and practical team approach to separation, divorce and custody – Collaborative Practice.  Collaborative law offers the parties the protection and guidance of their own lawyer, while creating the best possible agreement for the family as a whole.

Collaborative practice is a process of solving disputes outside of the court system using specially trained attorneys, and financial and counseling professionals.  Generally speaking, the way the process works is that the parties to the dispute each hire legal counsel to represent them.  The parties may also hire a neutral professional, such as a certified public accountant, financial planner or counselor.  At the beginning of the process the parties meet, all in the same room, where the process is explained; and a collaborative agreement is signed.  This agreement outlines how the process works.  The parties agree that the process will be conducted with civil discourse.  The parties also agree that, should the process fail, none of the professionals will agree to be a part of an adverse litigation of the same matter.  The concept is that the parties to the dispute are the best people to find a solution to their problems through collaboration rather than adverse litigation.

While no single approach is right for everyone, many couples find client-centered Collaborative Law a welcome alternative to the often unsettling, tension-filled aspects of conventional divorce.

For more information, go to the Alaska Association of Collaborative Professionals web site at http://www.alaskacollaborative.org

Report of Alaska State Board of Public Accountancy

Melody Schneider, Board Liaison

On behalf of the State society, I attend the Board of Public Accountancy meetings. The board meets four times a year (twice in Anchorage and once in both Fairbanks and Juneau).  The following list of Projects and accomplishments was compiled by members of the Board of Public Accountancy summarizing the activities from May 2010 to April 2011.

  • Legislation bill signed by the Governor consisted of mobility, firm ownership, and establishment of an executive secretary (additional legislation addressed below).  Mobility and firm ownership regulations are in process.
  • Executive secretary legislation passed in 2010 and signed by Governor.  In 2011 additional legislation had to be passed to specifically place the position salary range in statute.  2010 legislation addressed it in a fiscal note to the legislation at Range 23.  Administratively, the State concluded it should be down graded to a Range 19 in the fall of 2010.  Regulations have been drafted for this legislation.  The 2011 legislation is awaiting the Governor’s signature and hopefully the position will be filled by the end of the year.
  • Two new board members were appointed in March 2011.  New CPA member is Jeffrey Johnson from Fairbanks.  The new public member is Andre Horton  from Anchorage.
  • Three board members have joined NASBA committees.  Carla Bassler is a member of the Enforcement Practices Committee; Max Mertz is a member of the International Delivery of CPA Exam Committee; and Kathleen Thompson is a member of the Regulatory Response Committee.
  • State Division Licensing Examiner position has a new representative, Candice Windom, as of December 2010.  In February Ms. Windom went on Medical Leave.  Any licensing questions should be addressed to Sara Chamber during Ms. Windom’s leave of absence.  Her phone number is 465-2144.
  • At the April 2011 meeting, the Board was advised by the Division Director, Don Habeger, that there are no funds available for Board travel to the NASBA regional, international, and annual meetings in June, July, and October.  This limitation relates to Division budget issues not relating to the income from licensees. This is frustrating to the Board due to the importance of attendance at these meetings to keep abreast of the never ending changes to our profession, the Board’s ability to keep the Alaska CPA licensees  informed, and the State of Alaska current with evolving issues. The travel discussion with the State brought to light the State’s practice of co-mingling licensing fees between Boards in developing the Division budget. The Board has historically run a surplus despite including indirect Division costs to the mix.   Currently there is a legislative audit being conducted that is specifically looking at expense allocations relative to how they relate to the licensing fees.

 

IRS Updates and News Releases

President Signs Bill Repealing 2012 1099 Requirements

Recent legislation repeals the requirement that businesses and rental property owners file Form 1099 if they paid more than $600 per annum to any single vendor for goods and services.

First Time Homebuyer Credit

An Update on First Time Homebuyer Credit and Tax Refunds, has been posted to the IRS Newsroom.

Employee Plans News – Issue 2011-4

To read the March 23, 2011 Edition, please visit the Employee Plans News page in the Retirement Plans Community section of the IRS.gov Web site.  If you have a technical or procedural question relating to retirement plans, please visit the EP Customer Account Services page in the Retirement section of the IRS.gov Web site.  If you have a specific concern about your retirement plan, call EP CUSTOMER ACCOUNT SERVICES at 1-877-829-5500.

Winter 2011 Statistics of Income Bulletin

The Internal Revenue Service today announced the availability of the winter 2011 issue of the Statistics of Income Bulletin, which features preliminary data on 140.5 million individual income tax returns filed for tax year 2009.  Historical Tables and Appendix and Tax Statistics .

Enrolled Agent Renewal Period Reinstated

Announcement 2011-29 reinstates the renewal period for enrolled agents whose tax identification numbers end in 4, 5, or 6.

IRS “Dirty Dozen” List

The IRS recently released the 2011 "Dirty Dozen" list of the worst tax scams.

Seven Facts about Injured Spouse Relief

If you file a joint return and all or part of your refund is applied against your spouses’ past-due federal tax, state income tax, child or spousal support or federal nontax debt, such as a student loan, you may be entitled to injured spouse relief.

Here are seven facts the IRS wants you to know about claiming injured spouse relief:

  1. To be considered an injured spouse, you must have made and reported tax payments, such as federal income tax withheld from wages or estimated tax payments, or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and not be legally obligated to pay the past-due amount.
  2. If you live in a community property state, special rules apply. For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.
  3. If you filed a joint return and you're not responsible for the debt, but you are entitled to a portion of the refund you may request your portion of the refund by filing Form 8379, Injured Spouse Allocation.
  4. You may file form 8379 along with your original tax return or your may file it by itself after you are notified of an offset.
  5. You can file the Form 8379 electronically. If you file a paper tax return you can include Form 8379 with your return, write "INJURED SPOUSE" at the top left corner of the Form 1040, 1040A, or 1040EZ. IRS will process your allocation request before an offset occurs.
  6. If you are filing Form 8379 by itself, it must show both spouses' social security numbers in the same order as they appeared on your income tax return. You, the "injured" spouse, must sign the form.
  7. Do not use Form 8379 if you are claiming innocent spouse relief. Instead, file Form 8857, Request for Innocent Spouse Relief.  This relief from a joint liability applies only in certain limited circumstances. IRS Publication 971, Innocent Spouse Relief, explains who may qualify, and how to request this relief.

IRS Announces Qualified Disaster Treatment for Japan

The Internal Revenue Service has issued guidance that designates the earthquake and tsunami in Japan in March 2011 as a qualified disaster for federal tax purposes. This guidance affects recipients of disaster relief payments as well as employer-sponsored private foundations.  Notice 2011-32 designates the Japan earthquake and tsunami occurring in March 2011 as a qualified disaster for purposes of § 139 of the Internal Revenue Code.

IRS Commissioner Speech at National Press Club

IRS Commissioner Shulman delivered prepared remarks titled “On the Horizon: A Vision for the Future of Our Tax System”  on April 6, 2011.

Registration Open for 2011 Nationwide Tax Forums

The IRS has announced the locations and preregistration dates for the 2011 IRS Nationwide Tax Forums. Below are the Cities,  Dates of the Forums and the  Pre-Registration Deadlines:

Atlanta, Georgia  June 28 - 30,  June 14, 2011
Orlando, Florida  July 12 - 14,   June 28, 2011
Dallas, Texas    July 26- 28,  July 12, 2011
San Jose, California  Aug. 9 - 11,  July 26, 2011
Las Vegas, Nevada  Aug. 16 - 18,  Aug. 2, 2011
Washington DC, National Harbor,  Aug.t 30-Sept. 1 Aug. 16, 2011

The IRS Nationwide Tax Forums offer three full days of seminars with the latest word from IRS leadership and experts in the fields of tax law, compliance and ethics where attendees can earn up to 18 continuing professional education credits. Attendees can preregister on line.

Financial Crimes Enforcement Network (FinCEN) BSA Forms

There are hundreds of thousands of financial institutions currently subject to Bank Secrecy Act BSA reporting and recordkeeping requirements for which the Financial Crimes Enforcement Network is authorized responsibility. These include:

  • Depository institutions, e.g., banks, credit unions and thrifts
  • Brokers or dealers in securities and/or futures
  • Money services businesses (MSBs) [e.g., money transmitters; issuers, redeemers and sellers of money orders and travelers’ checks; check cashers and currency exchangers]
  • Casinos and card clubs
  • Insurance companies
  • Mutual funds
  • Individual(s) transporting over $10,000 in currency or other monetary instruments into/out of the US
  • Shippers/Receivers of over $10,000 in currency or other monetary instruments into/out of the US
  • Individuals or entity's that receive more than $10,000 in cash in one or more related transactions in a trade or business
  • US persons who have a financial interest in or signature or other authority over a foreign financial account if the aggregate value exceeds $10,000 at any time during the reporting year

The following are links to PDF versions of the BSA forms:  FinCEN Forms

Tax Information for Truckers

The IRS has stopped sending Form 2290, Heavy Highway Vehicle Use Tax packages in the mail.

Related links:

IRS Changes Collection Policies to Help Struggling Taxpayers

The IRS created new policies and programs to help individuals and small businesses stay current on their taxes, without adding to their financial burden. These Fresh Start policies and

programs include:

  • Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens;
  • Making it easier for people to obtain lien withdrawals after paying a tax bill;
  • Withdrawing liens in most cases where someone enters into a Direct Debit Installment Agreement;
  • Creating easier access to installment agreements for more struggling small businesses; and
  • Expanding a streamlined offer-in-compromise program to cover more taxpayers.

Estate Tax News – Form 8939 Due Date Extended

The Treasury Department and the Internal Revenue Service (IRS) have announced that Form 8939 is not due on April 18, 2011, and should not be filed with the final Form 1040 of persons who died in 2010. New guidance that announces the form due date will be issued at a later date and Form 8939 will be released soon after guidance is issued.  Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent, is an informational return used to establish basis for income tax purposes of property acquired from a person who died in 2010.

Change to International CAF Fax and Mailing Address

Effectively immediately, the International Centralized Authorization File (CAF ) Function has a new fax number and mail stop. Submit Forms 2848 or 8821, by fax, to 267-941-1017, or by mail to:

Philadelphia Campus Accounts Management

International CAF Team

2970 Market Street

Mail Stop 3-E08.123

Philadelphia, PA 19104

IRS Seeks Applications for Informational Reporting Advisory Committee (IRPAC)

The Internal Revenue Service requested nominations for the Information Reporting Program Advisory Committee (IRPAC), which advises the IRS on information reporting and administration issues of mutual concern to the private sector and the federal government.

IRS Seeks Applications for Internal Revenue Service Advisory Counsel (IRSAC)

IRS is accepting applications to IRSAC beginning May 2 through June 17, 2011.  You may view the announcement, application materials and instructions on the Open Season page.  A news release will be released on or about May 2, 2011. If you have any questions, please email *public_liaison@irs.gov.

Taxpayer Advocate

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. We help taxpayers whose problems with the IRS are causing financial difficulties; who have tried but have not been able to resolve their problems with the IRS; and those who believe an IRS system or procedure is not working as it should..

Here are ten things every taxpayer should know about TAS:

  1. The Taxpayer Advocate Service is your voice at the IRS.
  2. Our service is free and tailored to meet your needs.
  3. You may be eligible for our help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you face (or your business is facing) an immediate threat of adverse action.
  4. The worst thing you can do is nothing at all!
  5. We help taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. This includes businesses as well as individuals.
  6. If you qualify for our help, we’ll do everything we can to get your problem resolved. You will be assigned to one advocate who will be with you at every turn.
  7. We have at least one local taxpayer advocate office in every state, the District of Columbia, and Puerto Rico. You can call your local advocate, whose number is in your phone book, in Pub. 1546, Taxpayer Advocate Service – Your Voice at the IRS, and on our website at www.irs.gov/advocate. You can also call our toll-free number at 1-877-777-4778.
  8. As a taxpayer, you have rights that the IRS must abide by in its dealings with you. Our tax toolkit at www.taxtoolkit.irs.gov can help you understand these rights.
  9. TAS also handles large-scale or systemic problems that affect many taxpayers. If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www.irs.gov/advocate.
  10. You can get updates on hot tax topics by visiting our YouTube channel at www.youtube.com/TASNTA and our Facebook page at www.facebook.com/YourVoiceAtIRS, or by following our tweets at www.twitter.com/YourVoiceatIRS.

Links:

Technical Guidance

TD 9518 Final Regulations provides guidance on the requirement for “specified tax return preparers” to file individual income tax returns using magnetic media pursuant to section 6011(e)(3) of the Internal Revenue Code (Code). The publication and effective date is March 30.

Notice 2011-26 informs tax return preparers of administrative exemptions from the new electronic filing requirement under section 6011(e)(3) of the Internal Revenue Code and §§ 1.6011-7 and 301.6011-7 of the Regulations on Procedure and Administration.

Notice 2011-27 solely for calendar year 2011, provides transitional guidance relating to the new electronic filing requirement under section 6011(e)(3) of the Internal Revenue Code and corresponding regulations, specifically regarding the filing restrictions placed upon specified tax return preparers by that Code section and § 301.6011-7(a)(4)(i).  The notice allows a specified tax return preparer to mail any individual income tax returns in paper format to the IRS, at the request of a taxpayer, if the preparer obtains a signed statement containing the taxpayer’s choice to have the return filed in paper format, and the taxpayer’s request to have the preparer mail the return to the IRS.

Revenue Procedure 2011-25 provides guidance to specified tax return preparers regarding the time for filing and manner (form and content) of requests for waiver of the electronic filing requirement due to undue hardship, under section 6011(e)(3) of the Internal Revenue Code and §§ 1.6011-7 and 301.6011-7 of the Regulations on Procedure and Administration.  The revenue procedure also provides guidance regarding how to document a taxpayer’s choice to file the taxpayer’s individual income tax return in paper format when the return is prepared by the preparer but filed by the taxpayer.

Revenue Procedure 2011-26 provides guidance on the new 100 percent bonus depreciation from the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Specifically it explains the eligibility requirements for qualified property to be eligible for the 100 percent additional first year depreciation deduction. Also, Revenue Procedure 2011-26 provides the method for a taxpayer who already timely filed the 2009 tax return to amend it to include qualified property.

Notice 2011-28 provides interim guidance on informational reporting to employees of the cost of their employer-sponsored group health plan coverage.  This informational reporting is required under § 6051(a)(14) of the Code, enacted as part of the Affordable Care Act  to provide useful and comparable consumer information to employees on the cost of their health care coverage.  This reporting to employees is for their information only, to inform them of the cost of their health care coverage, and does not cause excludable employer-provided health care coverage to become taxable.  This notice provides interim guidance that generally applies beginning with 2012 Forms W-2 (that is, the forms required for the calendar year 2012 that employers generally are required to furnish to employees in January 2013 and then file with the Social Security Administration (SSA)).  Employers are not required to report the cost of health coverage on any forms required to be furnished to employees prior to January 2013.  See Notice 2010-69.  However, any employers that choose to report earlier (on the 2011 Forms W-2 generally furnished to employees in January 2012) may look to this notice for guidance regarding that voluntary earlier reporting.

Announcement 2011-22, the annual Advance Pricing Agreement report.

Notice 2011-31 provides guidance to taxpayers regarding how to answer questions related to foreign financial accounts (FFA) found on 2010 federal income tax and information returns, e.g., Schedule B of Form 1040, the "Other Information" section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120, among others.

Notice 2011-16 provides an extension of time to pay tax until October 17, 2011 to eligible civilian spouses of military servicemembers who work in American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands (each a “U.S. territory”) and claim residence or domicile for tax purposes in a State or the District of Columbia pursuant to the Military Spouses Residency Relief Act (“MSRRA”).  In addition, this notice provides that civilian spouses of military servicemembers working in a State or the District of Columbia but claiming residence or domicile for tax purposes in a U.S. territory under MSRRA should follow the procedures in Notice 2010-30 with respect to their 2010 individual income tax returns.

Notice 2011-20 addresses the application of section 501(c)(3) of the Internal Revenue Code to tax-exempt organizations participating in the Medicare Shared Savings Program (MSSP) through an accountable care organization (ACO) as described in section 3022 of the Patient Protection and Affordable Care Act.  In addition, the Notice includes a request for public comments.

Notice 2011-21 provides a more uniform method for the federal income taxation of Treasury Inflation-Protected Securities (“TIPS”), the notice provides that the IRS and the Department of the Treasury plan to issue regulations that will provide that the coupon bond method described in §1.1275-7(d) of the Income Tax Regulations applies to TIPS issued with more than a de minimis amount of premium. The regulations will be effective for TIPS issued on or after April 8, 2011.

Notice 2011-33 provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code as in effect for plan years beginning before 2008.  It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), and the 24-month average segment rates under § 430(h)(2).  In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007.

Notice 2011-34 provides further guidance and requests comments on certain priority issues regarding the implementation of chapter 4 of Subtitle A of the Code, which expands the information reporting requirements imposed on foreign financial institutions and imposes withholding, documentation, and reporting requirements with respect to certain payments made to certain foreign entities.

Notice 2011-38 announces an extension and modification of the pilot program announced in Notice 2009-93, 2009-51 I.R.B. 863, which authorized filers of certain information returns to truncate an individual payee's nine-digit identifying number on specified paper payee statements furnished for calendar years 2009-2010, if the filers met certain requirements.

Notice 2011-39 requests public comment on recommendations for items that should be included on the 2011-2012 Guidance Priority List. The Treasury Department's Office of Tax Policy and the Service use the Guidance Priority List each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance.

Rev. Rul. 2011-11 provides various prescribed rates for federal income tax purposes for May 2011 (the current month).

Hot Topics for Qualified Retirement Plans:

Increasing Tax Deferrals and Contributions with Defined Benefit and Cash Balance Plans and……

Fiduciary Solutions for Plan Sponsors

May 25th, 2011

Alaska Society of CPA’s  Training Room

Time:  12pm – 2pm

Credit Hours:  2 Hours

Cost:  Free

Reserve your seat today as space is limited.  Call Colleen at Sagemark Consulting; phone no. (907) 522-1194

Discussion Leaders:

Karen A. Jordan, CPC, QPA, QKA, ERPA

President of Alaska Pension Services, Ltd.

Thomas A. Turner, CLU, MBA

Sagemark Consulting

Overview:

Qualified Plan issues:

  • Defined Benefit Plan Characteristics
  • Comparison to Cash Balance Plans
  • Case Studies using different plan designs
  • When to Use a Defined Benefit Plan
  • Plan Designs for Multi-Partner Firms

Fiduciary Topics

  • Are your clients fiduciaries?
  • What does a plan fiduciary need to do?

PCAOB Issues First Research Note on Chinese Reverse Mergers

Washington, D.C., March 15, 2011 – The Public Company Accounting Oversight Board today issued its first public Research Note, which provides new data on the growth of reverse merger transactions involving companies from the China region.*

The Research Note, entitled, “Activity Summary and Audit Implications for Reverse Mergers Involving Companies from the China Region (January 1, 2007 through March 31, 2010),” was prepared by the PCAOB Office of Research and Analysis (ORA) to provide further context to the issues discussed in Staff Audit Practice Alert No. 6 issued on July 12, 2010.

That Alert was based on observations from the PCAOB inspection process that some U.S. registered accounting firms may not be conducting audits of companies with operations outside of the U.S. in accordance with PCAOB standards.

“Through this Research Note, and the earlier Staff Audit Practice Alert, the PCAOB is actively reaching out to investors and other users of financial statements to give them more information about the audit environment for companies from the China region that may access the U.S. markets through reverse merger transactions,” said James R. Doty, PCAOB Chairman.

In the period from January 2007 to March 31, 2010, ORA staff found that out of the 603 reported reverse merger transactions, 159 of those involved companies from the China region; the remaining 444 transactions involved primarily U.S. companies.  Overall, reported reverse merger transactions involving companies from the China region during that time represented 26 percent of all reverse merger transactions reported during that time period.

The number of reverse merger transactions in the study involving companies from the China region was almost triple the number of initial public offerings (IPOs) conducted in the U.S. by companies from the PRC during that time.  There were 56 IPOs from such companies, representing 13 percent of the IPOs completed in the United States.

Additionally, following the reverse merger transaction, two-thirds of the Chinese reverse merger companies in the study had market capitalization below $75 million as of March 31, 2010, while more than three-quarters of the companies from the PRC that conducted IPOs had market capitalization above $75 million as of March 31, 2010.

As of March 31, 2010, the market capitalization of the 159 Chinese reverse merger companies identified by ORA staff was $12.8 billion, less than half the $27.2 billion market capitalization of the 56 companies from the PRC that conducted IPOs during the same period.  As of that date, 59 percent of Chinese reverse merger companies reported less than $50 million in revenues or assets as of their most recent fiscal year.

PCAOB-registered accounting firms based in the United States audited 74 percent of the Chinese reverse merger companies, while China-based registered firms audited 24 percent.  Due to the position taken by authorities in the PRC, the PCAOB is currently prevented from conducting inspections of the U.S.-related audit work of PCAOB-registered firms in the PRC and, to the extent their audit clients have operations in the PRC, PCAOB-registered firms in Hong Kong SAR.

“We hope to add to this data later in the year, to bring to investors more of the important financial data we are collecting and analyzing at the Board,” said Joseph St. Denis, ORA Director.

http://pcaobus.org/Research/Documents/Chinese_Reverse_Merger_Research_Note.pdf

* The China region refers to the People’s Republic of China (PRC), Hong Kong Special Administrative Region (SAR), and Taiwan.

Internal & External Exposure Drafts

ASB (AICPA)

Issue date -- 3/7/11 Proposed Statement on Auditing Standards, Omnibus Statement on Auditing Standards—2011

Comment deadline -- 5/15/11

Other (AICPA)

Issue date -- 2/28/11 Omnibus Proposal AICPA Professional Ethics Division Interpretations and Rulings

Comment deadline -- 5/31/11

GASB

Issue date -- 2/14/11 Derivative Instruments: Application of Hedge Accounting Termination Provisions—an amendment of GASB Statement No. 53

Comment deadline -- 4/15/11

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