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.

The 2014-2015 Federal Tax Updates Are Here!

The holidays are not the only thing quickly approaching! Tax season will be here before you know it; ensure you are prepared for those tricky tax changes with the 2014-2015 Federal Tax Updates! Offered in both Live Webcast and Self-Study versions, receive detailed and informative information you need-to-know from expert Vern Hoven.

Register for the Live Webcasts offered in November, December, and January and receive 16 hours of CPE test free, as well as gain access to Instructor Vern Hoven LIVE to ask questions.

2014-2015 Federal Tax Update: Part 1 (4 CPE hours)

  • Part 1 of this series focuses on changes to Individual Income Tax.

2014-2015 Federal Tax Update: Part 2 (4 CPE hours)

  • Part 2 takes a look at Real Estate Tax, Passive Loss, Individual Retirement Plan and Estate/Gift Taxation.

2014-2015 Federal Tax Update: Part 3 (4 CPE hours)

  • Part 3 of the series covers business tax changes and business retirement plans.

2014-2015 Federal Tax Update: Part 4 (4 CPE hours)

  • Part 4 takes a look at Federal Payroll changes, Corporate Tax changes, Partnership changes,and IRS Audit issues.


The 2014-2015 Federal Tax Updates are also available in Self-Study format, allowing you the ease of completing these courses on your own time and now on your iPad or Android Tablet. Gain instant access to video courses and bonus manuals and materials provided by Vern Hoven.

2014-2015 IRA & Individual Retirement Federal Tax Update (3 CPE hours)

  • In this course, Vern discusses the current Tax Codes, cases and rulings affecting IRA and individual retirement plans.

2014-2015 Real Estate & Investment Federal Tax Update (5 CPE hours)

  • In this course, Vern discusses the current Tax Codes, cases and rules affecting real estate taxation.

2014-2015 Estates, Trusts & Beneficiaries Federal Tax Update (2 CPE hours)

  • In this course, Vern discusses the current Tax Codes, cases and rules affecting gift, estate and trust taxation.

2014-2015 Schedule C/F & General Business Federal Tax Update (9 CPE hours)

  • In this course, Vern discusses the current Tax Codes, cases and rules affecting business taxation.

2014-2015 Business Pension Plan & Issues Federal Tax Update (2 CPE hours)

  • In this course, Vern discusses the current Tax Codes, cases and rules affecting pension and IRA contributions and distributions.

2014-2015 Payroll & Self-Employment Tax Federal Tax Update (2 CPE hours)

  • In this course, Vern discusses the current Tax Codes, cases and rules affecting payroll and self-employment taxation.

2014-2015 C & S Corporate Federal Tax Update (3 CPE hours)

  • In this course, Vern discusses the current Tax Codes, cases and rules affecting corporate taxation.

2014-2015 Limited Liability Company (LLC) & Partnership Federal Tax Update (2 CPE hours)

  • In this course, Vern discusses the current Tax Codes, cases and rules affecting partnership and LLC taxation.

2014-2015 IRS Practice & Procedures Federal Tax Update (2 CPE hours)

  • In this course, Vern discusses the current cases and rules affecting the tax preparer’s relationship with the IRS.

2014-2015 Individual & Employee Federal Tax Update (9 CPE hours)

  • In this course, Vern discusses the current Tax Codes, cases and rulings affecting individual taxation.

Find all the information you need to register at cpelink.com or contact Customer Service and one of our knowledgeable Customer Service Representatives will be happy to assist you.

Goodbye 2013 Returns, Hello 2014 Returns!

As the filing time for 2013 returns enters its final phase, the reality of the 2015 filing season hits! A few developments from the IRS and the courts bring new compliance measures and due diligence reminders. The fall quarterly update (offered both September 17 and October 24) will include the following:

  • When payee statements can use a truncated TIN.
  • How the Individual Shared Responsibility Payment (§5000A) and Premium Tax Credit (§36B), will factor in on the 2014 Form 1040.
  • Knowing when payments between ex-spouses or soon to be ex-spouses counts as alimony.
  • Elections and accounting method changes in store per the final regulations on dispositions of tangible depreciable property.
  • A recent IRS ruling on LLC members and self-employment tax.
  • Reminders on business deductions.

This post was written by CPE Link Instructor Annette Nellen for her upcoming Live Webcasts on September 17 and October 24, Fall Quarterly Tax Update.

Best for Spouses to Have a Meeting of the Minds Before Filing

Keeping up to date with the tax law is more than waiting for actual law changes. The numerous court cases issued each week often include reminders about due diligence, reminders for clients, and planning considerations. Of course, some of the court cases, such as regular Tax Court decisions, have new interpretations of the law. One recent case includes a reminder about the need for spouses to coordinate filing to optimize the combined tax result.

In Bruce, TC Summary Opinion 2014-46 (5/12/14), husband (H) and wife (W) were married in 2008. They had two children (including a child of W from a prior relationship). H worked for the Navy and sometimes worked away from home. In 2009, the couple mostly lived in Navy housing. W moved out in 2010, as did H and they sometimes lived with one of their parents. Divorce proceedings began in early 2010 and were complete in February 2011. H moved out of home where he lived with W in December 2010. H e-filed their MFJ 2010 return in February 2011 and told W he’d split the $4,581 refund with her. W provided H with her bank account information. W also told H she would talk to a friend of hers who did tax work. Before 4/15/11, W filed a return as head-of-household, claiming the children as dependents. H did not know.

The IRS sent a deficiency notice to H changing his filing status to MFS and denying him the child credit, dependency exemption and EITC. The Tax Court agreed with IRS. Per §1.6013-1(a)(1), it is permissible to change from joint to separate filing status if done before the due date of the return. W filed her HH return in March 2011.

The court held that W was entitled to the dependency exemptions because the children lived longer with her because H moved out in December 2010. The court also noted that the time H was away for military service does not affect this residency test. Once it was determined that W was entitled to claim the children, H did not qualify for the child credit, dependency exemption or EITC. The court did not uphold accuracy-related penalties against him though because it seemed reasonable for H to assume W was fine with the MFJ return and W even gave H her bank account information so he could give half of the refund to her.

Lesson learned – Most likely, the couple would have had a combined benefit from joint filing status… Joint income was low enough to qualify for the EITC. Also, since it does not appear that H lived out of the home for the last six months of 2010, W should have filed as MFS, not as HH (see IRC 7703(b)). With both H and W using MFS, no one can claim the EITC. Of course, divorcing spouses have additional factors to consider and to avoid joint liability, separate filing is sometimes warranted.

This and other updates of summer will be covered in the Quarterly Tax Update scheduled for August 26.

This post was written by CPE Link Instructor Annette Nellen for her upcoming Live Webcast on August 26, 2014 , Summer Quarterly Tax Update.

Supporting eCommerce Clients in Your Practice

As most companies at least have some sort of eCommerce presence now, it is imperative that accountants and consultants be able to support their clients and understand all of the components of eCommerce including:

  • Hosting
  • Web Site Design
  • Shopping Carts
  • Accounting System Integration
  • Marketplaces
  • Payment Gateways
  • Merchant Processors
  • Sales Tax Implications
  • Shipping Providers/Software
  • Supply Chain/Logistics Providers
  • EDI

While you don’t need to be an expert in each of these subjects, we will try to give you a framework to put together the pieces for your client so that you can assist them or at least know where to turn to for assistance. Learn who the vendors are in each of the categories, find out what the best practices are and be able to put together requirements for an eCommerce project.

Join us on June 30 and come away with the tools you’ll need to support your customers more effectively.

This post was written by CPE Link Instructor Jim Savage for his upcoming Live Webcast on June 30, Supporting eCommerce Clients in your Practice


The Excel Automation Feature You’re Likely Not Using

By David Ringstrom, CPA

Although Excel 2007 brought us the new ribbon interface, which replaced the traditional drop-down menus, it also gave us a great automation tool known as the Table feature. I find that most Excel users either aren’t aware of this feature, or aren’t fully aware of its capability. Read on to get a high level overview of what’s possible with the Table feature.
The Table feature is actually an update to the List feature that was buried on the Data menu in Excel 2003 and earlier. This feature appears both on the Home tab and Insert tabs of Excel 2007 and later, and is designed to simplify working with lists of data in Excel. Once you make a list into a table in Excel, the dataset takes on special characteristics:

  • Every other row will be shaded.
  • Filtering arrows appear at the top of each column.
  • If your list is too long to appear on a single screen, the headings in the first row replace the column letters in the worksheet frame when you scroll down.
  • A Design tab appears when you click any cell within a table, and from there you can toggle a total row on or off. Click any cell within the Total row to reveal a drop-down list from which you can choose to sum, count, or display other statistics that update automatically as you filter the table.
  • Tables expand automatically when you add columns to the right, or rows below (assuming that the total row is turned off). Further, when you type a formula in cell within a table, Excel automatically copies the formula down the entire column, saving you from having to drag or copy and paste the formula.

To add all of these characteristics to a data set in Excel, carry out any of these steps in Excel 2007 and later:

  1. Select any cell within a list of data.
  2. Carry out one of these steps:
    • Press Ctrl-T.
    • Choose Insert, and then Table.
    • Choose Home, Format as Table, and then choose a style.
  3. At this point you’ll be presented with a dialog box from which you can confirm the cell coordinates for data. Make sure that My Table has Headers is clicked, and then click OK.
  4. All of the above features will now be added to your data.

If you don’t like the automatic formatting that gets applied to a table, click any cell within the table to make the Design tab appear. Click the arrow in the Table Styles section, and then choose another style or click Clear. This will preserve the other functionality but remove the formatting. At any point you can return a table back to a “normal” range of cells by choosing Convert to Range on the Design tab.

Making data into a table improves data integrity in your spreadsheets:

  • Charts based on a table expand automatically as you add new months of data.
  • Pivot tables based on a table automatically “see” new rows and columns of data when you refresh the pivot table.
  • Other features, such as Sparklines in Excel 2010 and later, will automatically display additional data added to a table.

This is only a sampling of the automation features available with Excel’s Table feature.

This post was written by CPE Link Instructor David Ringstrom for his upcoming Live Webcast on June 11, Tackling Excel’s Table Feature.

About the author:
David H. Ringstrom, CPA, heads up Accounting Advisors, Inc., an Atlanta-based software and database consulting firm providing training and consulting services nationwide. Contact David at david@acctadv.com or follow him on Twitter. David speaks at conferences about Microsoft Excel, teaches webcasts for CPE Link, and writes freelance articles on Excel for AccountingWEB, Going Concern, et.al.

Important IRA and 401(k) Developments

In the past few months there have been a few interesting and important tax developments involving IRA and 401(k) distributions.

A regular Tax Court decision at the end of 2013 involved a wife forging her husband’s signature to withdraw about $37,000 from his IRA account. She used the funds for her personal benefit. Husband did not learn about it until the next year when he received the 1099-R – too late to roll it over. The court found that he was not the distributee as he received no direct or indirect benefit from the withdrawal. The court also excused him from the early distribution penalty. [Roberts, 141 TC No. 19 (12/30/13)]

Another IRA distribution case exposed an error in IRS Publication 590. The Tax Court held that an individual may have only one nontaxable rollover per year regardless of how many IRAs they have. [Bobrow, TC Memo 2014-21] The IRS subsequently issued Announcement 2014-15 providing relief, but only through 2014. The case also presents reminders of the value of an IRS publication in answering tax questions (not much) and whether status as a tax attorney is enough to waive a penalty for reasonable cause (no).

And a decision in late April involving a 401(k) distribution and divorce serves as a reminder that source of funds often matter for tax purposes. As part of a Qualified Domestic Relations Order (QDRO), wife was named an alternative payee of her husband’s 401(k) plan. Husband owed money to the wife and the 401(k) was used to repay her. Wife did not report the distribution on her return (for which she did receive a 1099-R) because it was money husband owed her. No surprise with the court’s conclusion – it’s taxable. Even with application of §1041, husband had no basis in the 401(k) funds and the debt owed to wife did not create any. [Weaver-Adams, TC Memo 2014-73]

Lesson learned – source of funds does matter. Husband should have taken the distribution and used the funds to repay his wife. Wife tried to get the understatement penalty waived saying she relied on her tax professional, that did not work. That also leaves a lesson for tax professionals. Remind clients that 1099s are also reported to the IRS and when they show them to you, you may want to make a copy for your file if you don’t already do so.

These and other tax updates of the past few months will be covered in the spring quarterly update on May 13 (repeated on June 4).

This post was written by CPE Link Instructor Annette Nellen for her upcoming Live Webcast on May 13, Spring Quarterly Tax Update.


The Tax Reform Act of 2014?

As tax season started this year and individuals and tax practitioners had to address the complexity that exists in many parts of the income tax liability formula, House Ways and Means Committee Chairman introduced the Tax Reform Act of 2014. He believes his plan would make the system fairer and simpler. Is that possible?

He also says his plan “spurs stronger economic growth, greater job creation and puts more money in the pockets of hardworking taxpayers.” He will close “loopholes,” make the law more accountable and lower double taxation. Is that possible?

Congressman Camp has gone beyond just making these statements.. His proposal consists of 979 pages of legislative language. So, you can see exactly what his plan is.

Tax reform could happen this year before one of its most avid proponents – Congressman Camp, retires. Reform could also happen in smaller pieces. In addition to Congressman Camp’s plan, the Senate Finance Committee and President Obama also have ideas and goals.

A tax reform update webinar on April 29 will provide details on the Camp proposal and those from other elected officials and others. Information will also be provided on how to analyze the proposals and help explain them to your clients. The relevance to other tax legislation this year, including actions on expired provisions, will be covered as well.

This article is written by CPE Link instructor Annette Nellen as a follow up to her Live Webcast Tax Reform Update.

Real Estate Professionals – Section 469(c)(7) – Getting it right

This article is written by CPE Link instructor Annette Nellen as a follow up to her Live Webcast Passive Loss Rules and Real Estate Professionals.

We continue to see cases involving Code §469(c)(7) on real estate professionals.  One commonality is that the taxpayers lose because they clearly do not meet the definition of a real estate professional, often because they have full-time employment outside of the real estate industry and have few rental properties.  A recent case involved a couple with three rental properties located out of state. This case has lessons both for taxpayers and their preparers.

Ballesteros, TC Summary Opinion 2013-108, involved a working couple. The wife (W) was a full-time nurse and the husband (H) was a full-time employee of an aerospace company. The couple lived in California and owned three rental properties in Georgia and Florida. They deducted approximately $12,000 loss per year for these grouped properties. They had logs showing time spent for phone calls, paying bills, going to the Post Office, and social events. Most tasks were reported in block of 2 or 4 hours.  The hours reported were as follows:













W indicated that both she and her husband were real estate professionals. The IRS and court questioned the logs and time spent. Per the court:

“We need not accept petitioner’s testimony and may and do reject it because of the many indicia of unreliability. … Petitioner’s logs are unreliable because the hours she recorded for specific tasks, such as telephone calls and writing and mailing checks, were improbable in that they were excessive, apparently duplicative (charging the same hours to each rental property), and always the same. The total hours recorded are unrealistic in view of petitioners’ full-time employment.”

The court upheld a substantial understatement of tax penalty. Per the court, “exaggerated logs negate the good faith” of H and W. W stated that their return preparer provided a checklist of questions which confirmed that she was a real estate professional. The preparer did not testify, but the court noted that the preparer likely only had erroneous information from the couple.

Tax Season Relevance:

If an individual has a full-time job outside of real property trades or businesses, they are unlikely to be a real estate professional.  A full-time job is likely 2,080 hours per year (perhaps more). So, to be a real estate professional, the person would have to work more than 2,080 hours in real property trades or businesses.  If the person only has rental properties (not a real estate broker or developer, for example), they would need many rental properties to possibly be spending over 40 hours per week on all of them.

If a person’s answer to the question – what is your profession, is something outside of real property trade or businesses, they likely are not a real estate profession. One of the actions IRS examiners are to take in auditing a §469(c)(7) issue is to look at the occupation noted on the signature line of the taxpayer’s return to see if it indicates a real estate profession (IRS audit guide page 2.5).

Ask questions of clients with rental properties who tell you they are real estate professionals – what is there profession, how many rental properties do they have, do they have legitimate logs noting realistic time spent on the rentals?  Share the Ballesteros case (or other similar cases) with them, highlighting the penalty imposed upon the taxpayer.


Offer-in-Compromise – Fundamental Concepts

Our U.S. tax system is built on the premise that all taxpayers are expected to report their tax liabilities accurately and pay them on time. However, the Internal Revenue Code (§7122) gives the IRS the authority to “compromise” (i.e., settle based on a taxpayer’s adverse economic circumstances) a tax liability for less than its stated amount at certain times when 1) Doubt exists as to the liability; 2) Doubt exists as to the liability’s collectibility; or 3) It would advance effective tax administration to settle the liability.

Defining the 3 OIC Fundamental Concepts

  1.  “Doubt as to liability”—Doubt as to liability exists when there is a real dispute about the existence or amount of the correct tax liability of a taxpayer.

    Such doubt doesn’t exist, though, if the liability has been settled by a final court decision or judgment concerning the genuineness or amount of the liability. But an offer under the “doubt as to liability” category can’t be rejected just because the IRS can’t locate the taxpayer’s return or information to verify the liability (IRC 7122(c)(3)(B)). The IRS indicates it will consider an offer based on doubt as to liability if it reasonably reflects the amount the IRS could expect to get by going to court. Since trying to predict the outcome of a court case is far from an exact science, the IRS relies on “discretion” in determining what it will consider as a reasonable offer (Rev. Proc. 2003-71, 2003-2 C.B. 517).

  2. “Doubt as to Collectibility”—Doubt as to Collectibility may be present in any case when a taxpayer’s assets and income are less than the full amount of the assessed liability. To determine doubt as to Collectibility, the IRS considers the taxpayer’s ability to pay. In settling such a case, the taxpayer must be allowed to preserve sufficient funds to pay for his/her basic living expenses. To determine settlement, IRS considers expenses only to the extent they are necessary for health and welfare of the taxpayer and family or are needed to produce income (Rev. Proc. 2003-71).

    In general, the IRS won’t consider an offer based on doubt as to Collectibility if the ability of the government to collect the tax is not in doubt. This kind of offer is considered appropriate when liquidation of assets or maximum levy of income isn’t enough to pay the tax. The assets of a non-liable spouse generally aren’t considered to determine a taxpayer’s ability to pay unless those assets have been conveyed to the spouse in order to defraud creditors (or unless state law makes the spouse’s assets available to creditors, such as in community property states). However, action against the spouse’s assets must be weighed against how such action will affect the standard of living of the taxpayer and family.

    The IRS publishes schedules of national and local living expense standards to help evaluate family needs (Publication 1854, How to Prepare a Collection Information Statement (Form 433-A)). They use these standards based on the individual facts and circumstances of each individual case. The standards aren’t used if the amounts they prescribe would deprive a taxpayer of adequate support for basic living needs.

  3.  “To promote effective tax administration”—If the IRS finds no grounds to compromise based on the two previously described categories, they may enter into a compromise to promote effective tax administration. This could happen when collection of a full tax liability creates economic hardship. Alternatively, it could result where detrimental public policy or unfairness to the taxpayer provide basis for a compromise. Although acceptance of a compromise under this standard may occur where full collection would undermine public confidence in the tax law, a compromise would not be accepted if it would undermine compliance with the tax laws by taxpayers.

    Congressional intent with this provision was that the IRS would take into account factors like equity, hardship, and public policy in the tax administration process. Factors that may be considered in determining hardship might include serious illness that depletes a family’s financial resources (Reg. Section 301.7122-1(c)(3)(i)(A)). On the other hand, a compromise of a tax shelter liability would be one that could undermine rather than promote compliance within the tax system.

Excerpt from 2013 Taxes: Affordable Care Act and Other Special Circumstances by Lee T. Reams, Sr.