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Archive for the ‘CalCPA Buzz’ Category

FTB Updates Pub. 985, Releases New Forms

September 16th, 2014

The FTB updated Publication 985, Audit/Protest/Appeals (The Process). This publication provides an overview of what it does before, during and after an audit. It also outlines the steps your clients can take to protest and appeal an audit.

The FTB also will be rolling out two new forms:

  • FTB 2917, Reasonable Cause—Individual and Fiduciary Claim for Refund
  • FTB 2924, Reasonable Cause—Business Entity Claim for Refund

Coming to Your Chapter: Professional Issues Update

September 16th, 2014

The Professional Issues Update roadshow will foster a greater sense of information sharing among CPAs in your area—with a group of experts coming to your chapter, providing a customized update based on geographic, industry and professional trends.

CPA professionals, including CalCPA leadership, will cover tax issues, legislative and political activities, trends related to risks and liabilities for CPAs and a review of the Affordable Healthcare Act’s impact on employers and employees. Additional topics are also being identified.

Register for your chapter’s update.

Final Regs. Under IRC Sec. 3402(p)

September 16th, 2014

The final regulations under Sec. 3402(p) of the Internal Revenue Code (Code) relating to voluntary withholding agreements have been published. These final regulations allow the U.S. Treasury Secretary to issue guidance in the Internal Revenue Bulletin to describe payments for which the Secretary finds that income tax withholding under a voluntary withholding agreement would be appropriate. The regulations affect persons making and persons receiving payments for which the IRS issues subsequent guidance authorizing the parties to enter into voluntary withholding agreements.

Income Tax Statute of Limitations Ruling, Guidance

September 16th, 2014

A six-year statute of limitations applies for income taxes if the taxpayer omits from gross income an amount exceeding 25 percent of the gross income reported in the return.

Regs. Sec. 301.6501(e)-1(a)(1)(iii) provides that gross income generally means only the gains realized from the disposition of investment property. It further provides that, generally, an understated amount of gross income resulting from an overstatement of unrecovered cost or other basis constitutes an omission from gross income.

The Supreme Court invalidated this latter provision April 25, 2012, in Regs. Sec. 301.6501(e)-1(a)(1)(iii) (see the June 2012 California CPA, page 25.) However, on Aug. 28, 2014, the Tax Court held the remainder of this regulation to be valid (see Barkett, 143TC No. 6).

Therefore, to determine whether there is a 25 percent income omission, only gains are taken into account—not the total amounts realized from dispositions of investment properties.

—Stuart R. Josephs, CPA

FTB Guide: When the IRS Audits Your Client

September 16th, 2014

If the IRS audits your client, they have a requirement to notify the FTB of the outcome within six months of the final federal determination. You or your client are required to notify the FTB if the IRS adjusts or corrects gross income or deductions. Your notification should include any IRS assessed penalties, adjustments or corrections resulting from math errors, tax credit adjustments, other tax adjustments or supplemental income even if the IRS did not examine these adjustments. The final federal determination is the date each IRS examination adjustment or resolution is assessed as described in Internal Revenue Code Section 6203.

If the taxpayer or the IRS does not provide the FTB timely notification of the federal changes, the statute of limitations for assessment remains open, and therefore, we may issue an assessment at any time. Interest accrues from the original tax year due date until the tax liabilities and penalties are paid in full.

Get a more thorough explanation of what to do if the IRS audits your client from the FTB’s website.

Upcoming Foundation Events: San Luis Obispo CE Week

September 16th, 2014

Guidance to Improve Financial Reporting of Going Concern Uncertainties

August 28th, 2014

The Financial Accounting Standards Board issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.

The update is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. It provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes.

The amendments apply to all companies and nonprofit organizations and are effective in the annual period ending after Dec. 15, 2016, with early application permitted.

CAMICO Tip of the Month: Helping Clients with Legal Services

August 28th, 2014

Some clients will ask their CPA to assist them with the preparation of documents pertaining to the formation or liquidation of corporations, partnerships, estates, trusts or other entities that require organizational documents. At other times clients will ask for help with documents pertaining to mergers, acquisitions, dissolutions, employment, severance, compensation or stock option plans.

Accounting and law professionals have long debated how much assistance a CPA should provide a client in this area. The pertinent laws differ by state and are constantly changing. From a risk management perspective, CPAs who help clients with legal forms and documents can inadvertently expand their liability exposures when they should be trying to limit exposures. Further, the CPA helping a client with activity outside the typical CPA functions may hamper an effective legal defense. On top of that concern is the issue of not being qualified or trained to spot potential legal problems.

CPAs should consult an attorney when a tax issue involves legal principles that extend beyond tax law, or when any other type of issue or engagement involves legal principles that need to be interpreted for clients. Avoid yielding to pressure from clients who are looking to cut legal expenses. The fee received by the CPA for some services is just not worth the exposure to potential litigation.

For more information about CPA firm insurance issues, call CAMICO at (800) 652-1772 or go online.

Professional Issues Updates: Free, Local CPE

August 28th, 2014

Join us for an overview on topics impacting the CPA profession and CPAs in your local community. CPA professionals, including CalCPA leadership, will discuss the latest tax issues, legislative and political activities, risk and liability trends impacting CPAs, as well as the Affordable Healthcare Act and the new provisions going into effect. Full breakfast will be included. Attendees will earn 3 hours of free CPE. This event is FREE for members and guests. Invite your colleagues to use discount code “PIUGuest” at checkout.

Learn more and register today.

Report on the IRS External Leads Program

August 28th, 2014

Participation in the IRS External Leads Program is growing, resulting in the receipt of a significantly larger volume of leads about questionable tax refunds, but the IRS is not always verifying the leads timely, according to a new report by the Treasury Inspector General for Tax Administration (TIGTA).

The program has grown from 10 partner financial institutions returning $233 million in 2010 to 258 partner financial institutions and partner organizations returning more than $576 million in 2013. TIGTA recommended that the IRS establish more consistent time frames to verify leads; communicate these verification time frames to external partners; develop a process to ensure that leads are verified timely; consolidate the current lead inventory tracking systems into a single tracking system; and ensure that key information is captured as to how each lead is resolved.

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