Estate and Succession Planning: More Important Than Ever

After enactment of the American Taxpayer Relief Act of 2012, many clients and their advisors quickly concluded that “estate planning” was no longer important. This was primarily due to the effectively permanent large Federal estate and gift tax exemption level of $5 million-plus per person. This exemption, which is adjusted for inflation annually, this year is at $5.43 million – effectively eliminating Federal estate tax concern for over 99% of U.S. families! Yet estate and succession planning is more important than ever – for both tax and non-tax reasons.

First of all, 19 States still have an estate or inheritance tax of some type, and some of these jurisdictions have much lower exemption levels than does the Federal estate tax. So tax practitioners must know their State law for clients before eliminating estate tax from the planning agenda. In addition, many Wills and trusts are quite out-of-date, especially if not updated the past few years, and the changes in family situations, increase or decrease in net worth and other factors call for updating of the estate and succession plan.

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Top Three Accounting & Auditing Issues: Peeling the Onion

Recent surveys have shown that the top three issues for professional CPAs are:

1. Keeping Up with the Effects of new Federal and State Regulations

  • Keeping up with new accounting and auditing pronouncements
  • Information technologies
  • Health Care and Related Issues
  • Consumer Issues

2. Keeping Up with the Complexities of Tax Laws

3. Finding Qualified Staff/Employees

These issues all have sub issues that are important. When we drill down into the issues we come across the top three accounting and auditing issues just below the surface. This is similar to “peeling an onion” to get to the heart of the issues. Other issues also arise such as:

  • Succession Planning
  • Seasonal workload compression

Nevertheless, the top three A & A issues always come back to changes in generally accepted accounting standards (GAAP), changes to generally accepted auditing standards (GAAS), and changes to compilation and review standards (SSARS). Some have said the overarching theme to all this is “standards overload.” Whether one is employed in public practice, industry, government, or education, the same “standards overload” concerns always seem to surface. “Standards overload” is said to be one of the primary reasons for the rise of the concept of “other comprehensive basis of accounting” (OCBOA).

There is growing appeal in the accounting profession to find an alternative for small businesses to some of the measurement and disclosure requirements of GAAP. We see this in the Private Company Council (PCC) with the FASB. Mr. Russell G. Golden’s, Chairman of the FASB, goals include simplicity and clarification of GAAP.

One solution often mentioned is the use of OCBOA financial statements. In 1981, the AICPA’s Special Committee on Accounting Standards Overload was formed to consider alternative means of providing relief from accounting standards that are not cost-effective, particularly for small, closely held businesses.

So the nature of the problem in finding the top three issues seems to be in finding which of the exact standards of GAAP, GAAS, or SSARS are the top three issues.

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Fundamentals of Construction Accounting

While most believe the construction process begins on the left at the Estimating stage, the process truly begins at the Accounting stage. Accountants must provide estimators with the right internal information before the estimator can begin. The estimator is then able to draft blueprints and enter information for job costs. Once construction begins, information is delivered to Accounting and completes the circle as the job finishes.

Since the construction process begins with the Accounting stage, common issues will naturally occur. One main issue is the accumulation of contract costs. This error is a result of the cash method used to accumulate costs resulting in unrecorded liabilities that affect cost records for contracts in progress. The correct accounting fix to this issue is to use accrual accounting as costs should be allocated to the appropriate individual contract records.

Why is being aware of your costs the most important aspect of construction accounting? It helps you:

  • In the bidding process
  • To determine problem jobs and people
  • In the claims process
  • To make better business decisions
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Lost Revenue from Corporate Fraud

ACFE 2014 Report to the Nations states that organizations typically lose 5% of their revenue to fraud each year.

Most of the time, fraud takes place below the radar, and upon discovering it, companies tend to want to move forward as quickly as possible without notifying the public of the fraudulent activity.

The smallest organizations tend to suffer the largest median loss as these organizations typically employ fewer anti-fraud controls than their larger counterparts. It is not unusual for small business to lose a significant amount to fraud and end up closing their doors for good.

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Marijuana’s Tax Paradox

These days, over half the country (32 states + DC) has some level of pot legalization, whether for medical or recreational use or both. Despite the way our founding fathers established states’ rights, when the federal government’s laws conflict with state laws – the Internal Revenue Code will follow federal law for U.S. income tax purposes.

The good news is, buried in the spending bill last December (Public Law No: 113-235), Congress included a provision to end federal drug enforcement raids on medical marijuana establishments. In effect, it legalized medical marijuana on a federal level.

This is an interesting opportunity for accountants and tax professionals to cater to a readily-identifiable niche market that can afford our fees…

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Maximize the Social Security Income Election for your Clients

The clients of Accountants, Tax Professionals, and Financial Advisors increasingly ask for guidance on how to best take their Social Security income election. This issue has become very important to baby boomers for many reasons. Pre-retirees and early retirees are now living longer than previous generations. Also, there has been a shift away from defined benefit plans (i.e. pension plans) to self-retirement funding. Financial market forces, such as low interest bearing accounts, real estate devaluation, and a flat stock market for the past 10 years, also make the Social Security income election much more important.

The Social Security income election decision may be one of the most important financial decisions your clients make in their lifetime. Singles, and especially couples, can miss opportunities to collect hundreds of thousands of dollars of additional income over their lifetimes when they make poor Social Security income election decisions. By applying little-known, yet creative claiming strategies, your clients may be rewarded with significant additional lifetime retirement income.

Read more for three important strategies

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The Long Winding Road of Professional A & A Standards

Are you current on the fast developing standards and issues from new FASB Pronouncements for 2014 and 2015?  According to CPE Link instructor Pat Patterson more changes will come from from the FASB and the Private Companies Council as well. Revenue Recognition (ASU 2014-9) is currently being considered for a delayed effective date; however, early implementation may be allowed. Are you ready? Leases and Financial Instruments are on the verge of being issued which will have an instant impact. Revenue Recognition, Leases, and Financial Instruments will change the way every professional has to handle the related issues.

The AICPA’s Clarity Project is essentially complete and has totally revised all AICPA Auditing Standards. Some have very little change, but there are many new requirements that include:

  • A new audit report
  • Issues with legal and regulatory agencies
  • Communicating Internal Control Related Matters Identified in an Audit
  • Forming an Opinion and Reporting on Financial Statements
  • Modifications to the Opinion in the Independent Auditor’s Report
  • Emphasis of Matter Paragraphs and Other matter Paragraphs in the Independent Auditor’s Report
  • Special Considerations-Audits of Group Financial Statements
  • Special Considerations-Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks
  • Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Generally Accepted Auditing Standards
  • Terms of Engagement
  • Quality Control for an Engagement Conducted
  • Opening Balances-Initial Audit Engagements, Including Re-audit Engagements
  • Written Representations
  • Special Considerations-Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement

But whether there is some, little, or even no change, you still need to go through all of the new clarified AU-C sections because with clarity . . .You may find that you need to change or tweak how you do things!

For Compilation and Review Engagements, professionals are entering into new territory with Section 70 of SSARS 21, Preparation of Financial Statements. This new standard will change the way many professionals look at a set of financials. There are new standards for the engagement letters and signatures, the reporting (or no reporting), legends on financial statements, and the new Compilation report. Additionally, there are some changes to the documentation issues with Compilation and Review engagements.

Are you familiar with the “RED Zone” for Comp and Review? In this case, RED stands for Reporting, Engagement Letters, and Documentation. While standards in SSARS 19 are still in play until periods ending after December 15, 2015, the provisions of SSARS 21 may be early implemented; and even both standards may be used until December 15, 2015.

Other matters that involve professional standards also are affected by the new FASB, Clarified Auditing Standards, and revisions to Preparation, Compilation, and Review engagements. These include:

  • Personal Financial Statements
  • Special Purpose Formats
  • Disclosures like “going concern”
  • Quality Control
  • International Standards from the IASB

Want to know more? Check out a live webcast or on-demand self-study course from award-winning, nationally recognized author and discussion leader, Pat Patterson.

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Roth IRA Contribution

This information is an excerpt from the 2014-2015 IRA and Individual Retirement Federal Tax Update course by Vern Hoven:


Roth IRAs

Contribution amount is $5,500. Individuals with AGI below certain levels may make nondeductible contributions to a Roth IRA. The maximum annual contribution that may be made to a Roth IRA is the lesser of $5,500 or the individual’s compensation for the year. The contribution limit is reduced to the extent an individual makes contributions to any other IRA for the same taxable year. As under the rules relating to IRAs generally, a contribution of up to $5,500 for each spouse may be made to a Roth IRA provided the
combined compensation of the spouses is at least equal to the contributed amount.

Income limitation for annual contributions (2014 Pension Plan Limitation, IR 2013-86). The maximum annual Roth IRA contribution is phased out as an individual’s AGI exceeds certain limits:






$112,000 – $127,000

$114,000 – $129,000

$116,000 – $131,000

Married filing joint

$178,000 – $188,000

$181,000 – $191,000

$183,000 – $193,000

Married filing separate

$0 – $10,000

$0 – $10,000

$0 – $10,000

Distributions (§408A(d)). “Qualified distributions” of designated Roth contributions are excludable from gross income. A qualified distribution is one that occurs at least five years after the year of the participant’s first designated Roth contribution (counting such first year as part of the five) and is:

1. made on or after attainment of age 59½,
2. made on account of the participant’s disability,
3. made to a beneficiary or estate on or after the participant’s death, or
4. made for qualified first-time homebuyer expenses up to $10,000.

This information and more can be found in the 2014-2015 IRA and Individual Retirement Federal Tax Update.

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Same Sex Marriage Tax Law Changes

In the 2014-2015 Individual and Employee Federal Tax Update, Vern Hoven discusses the changes in same-sex marriage laws for the year 2013 and forward. Changes include legally married same sex couples in both a same sex marriage recognized state and those living outside of a marriage recognition state.

Legal Same-Sex Marriages Are Recognized for Federal Tax Purposes 

(Rev. Rul. 2013-17)

Joint or married separate filing required for years beginning in 2013. Legally married same sex couples are treated as married for all Federal tax purposes, including income, gift and estate taxes. Starting in 2013, legally-married same-sex couples generally must file their Federal income tax returns using either the “married filing jointly” or “married filing separately” filing status. For legally married couples living outside of a marriage recognition state, generally, the couple will use a married filing status for Federal purposes but their state may require that they continue to file as “single” or “head of household.”

Prior years. Under the terms of Rev. Rul. 2013-17 individuals who were in same-sex marriages may, but are not required to, file amended returns choosing to be treated as married for Federal tax purposes for one or more prior tax years still open under the statute of limitations.

Receive this information and more tax law updates in the 2014-2015 Individual and Employee Federal Tax Update.

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101 Financial Solutions: Diagnosis and Remedy

A manager’s success depends largely on his or her ability to manage a company’s assets. This mission is complicated by the interdependent nature of a company’s finances. One short-term financial problem, such as a cash flow shortage, can cause a longer-term credit problem, such as denials for bank loans. The successful manager must be able to quickly identify and resolve such short-term problems in order to prevent their long-term deleterious effects.

Intended for effective business managers and entrepreneurs, 101 Financial Solutions covers every facet of the daily management of a business’s finances. It is designed to help managers pinpoint, remedy, and prevent business and financial problems. In each case, it also points out potential ripple effects—the ways in which a problem in one sector can disrupt operations in other areas.

A recent review praises the ease of this course:

“…The material was relevant and well written.  I liked how it was broken into sections similar to a text book but much more interesting.  The sections are set up [to] work through pretty quickly. The book thoroughly defines each problem and gives relevant and real solutions…Very complex topics like inventory and production are broken down in a way that makes them easier to understand…”

Register for 101 Financial Solutions: Diagosis and Remedy and receive instant access to the PDF document course.

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