Women, women, everywhere. But are we in the right places? Yes and No. It is interesting that when we focus on something we find it everywhere we look.
Last week I was off to a conference In Portland. I always end up picking up reading material in the airport so I bought the October 2014 issue of the Harvard Business Review. In it I found an interesting article on Hacking Tech’s Diversity Problem. Diversity meaning “looking for more women.” It is widely known that the technology sector has a diversity problem.
Prove-it-again – Women often have to provide more evidence of competence than men do to be seen as equally capable.
Tightrope – High status jobs are seen as requiring stereotypically masculine qualities, while women are expected to be modest and self-effacing, so women must walk a tightrope between being seen as too feminine to be effective and too masculine to be likable.
Maternal Wall – Researchers found that mothers were 79% less likely to be hired and were held to higher performance and punctuality standards. Mothers considered competent and committed were seen as bad mothers.
Tug-of-war – Gender bias against women fuels conflict among women. Research shows that women who encounter discrimination early in their careers tend to distance themselves from other women, refuse to help them, or even align themselves with men at other women’s expense.
“Housework” vs. “Glamour Work” In many companies, women are expected to do disproportionate amounts of “housework,” which includes both domestic tasks, like planning parties, and undervalued tasks. “Glamour work” consists of bringing in new business, managing key client relationships, and strategic planning.
So where was I heading? To a Leading Partners Retreat in Portland comprised of 75 accounting firms from around the country.
The emphasis of the conference was on attracting and developing your people. This year also included sessions directed at keeping women in public accounting. One speaker at the conference was Krista McMasters from McMasters Consulting.
Krista became CEO of Clifton Gunderson LLP in 2009 becoming the firm’s fourth CEO and the first female CEO in the history of the accounting profession among the top 50 firms, retiring from the firm in 2013. She ended her session discussing women leaders.
Although the number of women entering the profession from college is greater than the men, the number of equity partners in accounting firms is significantly lower: 86% Male to 14% Female. Why? Similar to Sheryl Sandberg’s Lean In, Krista believes women opt out early and that moving more women into leadership takes commitment and investment. Understand that women are “wired” differently. They may be less confident, may be more emotional, are more collaborative in nature, and have different communication styles. Krista pointed out that women should be mentoring other women.
I had a brief discussion with Krista at the end of her session. Similar to myself, she had been mentored by a man that saw the potential in her and pushed her outside of her comfort zone causing her to take on stretch assignments t providing tremendous growth for her and increased confidence. So my suggestion – men should be mentoring women as well. Deal with the differences. We want to keep women rising in the profession.
So women – Be there to mentor other women. But men….we what and need you as well to be there to mentor us. We want “Glamour Work!” We may need a little push…but remember we are all in this together.
There was a major change to the threshold percentage regarding the medical expense deduction in 2013.
Starting in tax year 2013, your medical expenses now must exceed 10 percent of your adjusted gross income (AGI) for you to receive any tax benefit from those expenses. The rate prior to the change in 2013 was 7.5 percent.
The old rule of 7.5 percent still applies if the taxpayer or his spouse attains age 65 by the end of the tax year in question. Older taxpayers will receive the preferred 7.5 percent rate until 2016.
So, for tax year 2014, if one spouse of a married couple is at least 65, the couple still is subject to the former rate of 7.5 percent.
The types of medical expenses that are allowed to be deducted are the same as they were in the past. Expenses for the diagnosis and treatment of physical disorders, travel and lodging costs related to such expenses, qualified long-term care expenses and medical insurance premiums are still deductible. The limit on lodging costs of $50 per day, per individual, is the same.
The general rule is that medical expenses are deductible in the year paid. Deductible medical expenses must be substantiated. It is always a good idea to keep a copy of all medical invoices and receipts.
Your local pharmacy can give you a printout of all of your prescription activity for the entire year. This is a nice, convenient summary instead of having a bunch of individual receipts that you accumulated during the year.
The invoices, receipts and prescription summary serve as your backup. Just a canceled check without any documentation supporting it would not be considered adequate substantiation by the IRS. The IRS can disallow any unsubstantiated deduction.
The amount that you pay in medical expenses during the year is reduced by any reimbursements that you receive from your insurance company. If the insurance company covered the whole cost of a procedure, you do not have an eligible medical expense deduction. Only out-of-pocket expenses paid by the taxpayer qualify.
The medical expense deduction is not limited to qualified expenses of the taxpayer but includes the taxpayer’s spouse and dependents. The cost of providing medical insurance coverage for your family, such as employee co-pays (if your employer provides you with medical insurance coverage), is an example. And qualified out-of-pocket expenses for the spouse and dependents qualify as well.
As an example, if you have an AGI of $50,000 and are under the age of 65, you will need more than $5,000 in qualified medical expense deductions to receive any tax benefit. If you have $7,000 of qualified medical expenses, $2,000 will qualify as a potential itemized deduction. If you do not itemize on your return, you receive no benefit from these expenses.
With insurance costs rising, companies increasing the size of employee co-pays, insurance companies limiting various types of coverage and many people out of work, it becomes more important to keep accurate records of your medical expenses to see whether you qualify for this type of itemized deduction despite the threshold being increased from 7.5 percent to 10 percent.
©2014 CPAmerica International
File your tax returns in a timely manner, or your filing status may be determined for you – by the IRS.
That’s the lesson Donald Thomas Salzer and his wife learned the hard way. They failed to file income tax returns for 2008 and 2009. Mrs. Salzer had refused to sign the 2008 and 2009 tax returns for political reasons.
Salzer and his wife had filed under the married filing jointly status from 1985 through 2007. However, when the IRS prepared returns for Salzer and his wife for 2008 and 2009, it selected the filing status of married filing separately for the taxpayers.
The difference in tax rates between the two filing statuses caused the taxpayers to have a deficiency on the returns for both years in question. Under normal circumstances, with the taxpayers filing jointly, they would have received a refund as they did in 2007. The amount of the 2007 refund was $1,375.
The taxpayers’ situation in 2008 and 2009 was almost identical to that of 2007. Salzer was still married, still had two dependents, had the same job, and was withholding in a similar manner. The taxpayers would have received a refund for 2008 and 2009 had the returns been prepared with the filing status of married filing jointly.
The Tax Court ruled recently that an individual was not entitled to claim joint filing status for a return prepared by the IRS after the individual and his wife failed to file a return for two years. The court further stated that joint return rates apply only if a married individual files a return jointly with his or her spouse. Joint filing status cannot be imputed. (Donald Thomas Salzer v. Commissioner, T.C. Summary Opinion 2014-59, June 24, 2014)
The court imposed penalties for failure to timely file and pay tax since the husband failed to address the penalties at trial. The amounts of the penalties are still in dispute and will be settled by the U.S. Tax Court Rules of Practice and Procedure.
Take seriously your responsibility to file your tax returns in a timely manner. If the IRS has to prepare your returns for you, under certain circumstances, they can change your filing status.
This case was tried in the U.S. Tax Court Small Case Division. The decisions do not serve as precedent for other taxpayers but are indicative of how the Tax Court may rule in a similar situation.
©2014 CPAmerica International
The date of an irrevocable letter of authorization sent to a financial services company by an individual should be considered the date of the contribution to his retirement account, the IRS determined in a recent private letter ruling.
This situation involved a taxpayer who sent his financial services company a letter of authorization (LOA) instructing the company to transfer funds from one of the taxpayer’s nonretirement accounts to an IRA. The date of the letter – April 15 – was treated as the day of the contribution.
Thus, if the LOA was postmarked by April 15, or if the individual made a verbal request to the company by April 15, the taxpayer is deemed to have made the contribution by the end of the preceding tax year. The verbal request must be summarized in a document and signed and dated by the financial services company.
The letter of authorization must specify the amount of the cash contribution, the account from which the funds are being transferred and the tax year for which the contribution is made.
The rules regarding an IRA account allow taxpayers to make contributions to their accounts by the due date of their returns without taking into account any extensions.
If a taxpayer made a contribution to his account by April 15, 2014, it would count as a 2013 IRA contribution because that is the due date for the 2013 return.
The issue here is that, although the actual transfer of funds occurred after April 15, the contribution authorized by the LOA was considered made in the preceding year. The IRS treated the date of the authorizing letter as the contribution date.
This private letter ruling (Letter Ruling 201437023, June 18, 2014) is consistent with a 1985 IRS private letter ruling in which the IRS stated that the postmark date of a contribution would be treated as the contribution date.
Please keep in mind that private letter rulings are not binding on the IRS. These rulings are based on a particular taxpayer’s facts and circumstances. There is no guarantee that the IRS would take the same position in another situation.
With tax season 2014 fast approaching, a few tips regarding donating property seem in order.
Specifically, clothing, household items and cars are the most common items donated to qualified organizations.
To receive a tax deduction, you need to donate the property to a qualified organization. A qualified organization includes nonprofit groups that are religious, charitable, educational, scientific or literary in purpose, or that work to prevent cruelty to children or animals.
If you ask organizations whether they are qualified, most will be able to tell you.
The IRS has an online resource at IRS.gov. Click “Tools” and then “Exempt Organizations Select Check.” This online tool will allow you to search for qualified organizations.
The general rule regarding contributed property is that the amount of the charitable contribution is the fair market value of the property at the time of the contribution.
There are some special rules regarding clothing and household items. You cannot take a deduction for clothing or household items you donate unless the items are in good used condition or better.
The IRS is trying to stop people from donating items that are basically worn out and of no use to anyone. So, unless your donated items are in good condition, you will not be allowed to take a charitable contribution deduction.
Now let’s define the term “household items.” Household items are considered to be furniture, electronics, appliances, linens and other items. Some examples of items that are not considered household items include food, paintings, jewelry and collectibles.
Used clothing and household items are usually worth far less than what you originally paid for them. These items are difficult to value because they do not lend themselves to fixed formulas or methods.
A good habit to follow is to prepare a detailed list of the items you plan to donate. You should put a value on every item donated. Located next to the item should be its thrift shop value.
What thrift shops are selling the various used clothing and household goods items for is a good indication of the fair market value. Some of these thrift shops and charities actually have price lists that you can use as a guide.
Determining the fair market value of a car you donated is no problem if the value of the donation you are claiming is $500 or less. You can use a used car guide or a blue book to determine the fair market value of the donated car.
When using one of these guides, you should be honest about the condition of the vehicle. Very few people have cars in excellent condition. Most cars would probably fall into the average category. In addition, use the private sale price, not the higher dealer retail value.
If you are claiming a deduction of more than $500 for the car, the rules are a little more complicated. You will be able to deduct the smaller of the actual sales price of the vehicle received by the donee organization or its fair market value on the date of the contribution.
The donee organization will provide you with a Form 1098-C, which shows the gross proceeds from the vehicle sale. This 1098-C form must be attached to your return if you are mailing it in or transmitted as a PDF file if your software program allows you to attach it.
If you do not attach your Form 1098-C in some fashion, the deduction for the car will be disallowed by the IRS. This form serves as a type of control mechanism against taxpayers claiming inflated values for the used cars that they have donated – a problem with this type of donation in the past.
The key to donating clothing, household items and cars successfully is to know the rules for determining fair market value. Be reasonable when you are applying those rules. And always request some type of documentation from the charity when you donate.
©2014 CPAmerica International
On August 21, 2014, the National Oceanic and Atmospheric Administration (NOAA) released its U.S. Seasonal Drought Outlook for the period of August 21 through November 30, 2014. Unfortunately, for residents in California, Nevada, and southern Oregon, the predictions are not encouraging. According to the NOAA, the drought in these areas is expected to “persist or intensify” throughout this time period. For residents living in these areas, it is very troubling to imagine that it could become even worse. Here in Northern Nevada, it only takes one quick glance at Lake Tahoe or the Truckee River to see that we are suffering from a severe lack of snowfall during the past few winters. Lake Tahoe’s water level has noticeably decreased this year, causing difficulties for boat owners, while the Truckee River is so low in certain parts that the water no longer covers the entire riverbed. So what can we expect this winter? Is there hope?
According to the Farmer’s Almanac, this year’s winter will bring below-normal temperatures for seventy-five percent of the country. The coldest temperatures will occur during late January/early February. For us on the west coast, however, temperatures will be closer to average. No region in the country will experience an extended period of above-normal temperatures. In terms of precipitation, it is anticipated that the eastern third of the country will see many storms with much snow or rainfall. The Midwest and the Great Lakes are expected to receive below-average snowfall. The Central and Southern Plains will face above-average precipitation, while the Pacific Northwest and Northern Plains will experience average precipitation. Finally, the Southwest States are projected to see below-normal snow or rainfall.
So what does this mean for residents located in drought-stricken areas? Based on these predictions, this upcoming winter is not looking too promising. It does not appear that California, Nevada, and southern Oregon will receive the precipitation they so desperately need this winter. There still is some hope, however. The NOAA has issued an official El Niño watch. An El Niño is characterized by a warming of the central Pacific due to a combination of wind and waves. It happens at irregular intervals of two to seven years and can last from nine months to two years. It is generally most severe between December and April and results in changing weather patterns around the world. For areas currently suffering from severe drought, an El Niño could be beneficial by bringing more precipitation to these areas this winter. It could also result in a milder wilder winter for the northern part of the country. Although the NOAA has released a watch, is not guaranteed that an El Niño will occur this winter. We will just have to wait and see what happens this winter and hope for the best!
September 15, 2014:
October 15, 2014:
An opinion piece by CPAmerica member R. Milton Howell, III, CPA, CSEP, Partner, Davenport, Marvin, Joyce & Co., LLP
Several years ago, the IRS issued its “Taxpayer Bill of Rights.” These spell out the minimum standard of service that you should expect from your dealings with the IRS (after all, the S in IRS is for, well, Service.)
To quickly summarize, the “Taxpayer Bill of Rights,” as published by the IRS,
is as follows:
1. The right to be informed. You are entitled to clear explanations of laws and to be informed about IRS decisions on your tax matters.
2. The right to quality service. You should expect prompt, courteous and professional service.
3. The right to pay no more than the correct amount of tax. You should pay only the amount you owe and all payments should be applied properly.
4. The right to challenge the IRS’ position and be heard. The IRS will consider your timely objections and documentation promptly and fairly.
5. The right to appeal an IRS decision in an independent forum. Administrative appeals and court actions are available as remedies.
6. The right to finality. You have the right to know when an audit has concluded, as well as the maximum amount of time for the government to audit or collect tax on a particular tax year.
7. The right to privacy. IRS inquiries, examinations and enforcement actions should be no more intrusive than necessary.
8. The right to confidentiality. Information provided to the IRS will not be disclosed unless authorized by the taxpayer or required under law.
9. The right to retain representation. You have the right to have a professional of your choice to deal with the IRS for you.
10. The right to a fair and just tax system. The government should consider other facts and circumstances that affect your tax liability, ability to pay or ability to provide information.
I would suggest that these “official” rights are a great idea, but they are really too conceptual and aspirational. They mean well, but these times require more specific rights that attempt to address the problems that taxpayers are having with our tax system.
Milton Howell’s suggestions for the “Taxpayer Bill of Rights,” written by a taxpayer for taxpayers:
1. The right to a prompt response to your inquiries. You should not have to wait 90 days or more for the IRS to acknowledge and respond to your letter, particularly when the agency may proceed with audit or collection actions that do not take your response into consideration.
2. The right to know what the rules are for that year before the year begins. Too many tax rules are decided at the end of the year, retroactive to the beginning of the year. A few times, it has been retroactive to the beginning of the prior year! This election year of 2014 is likely to be no different, with legislators wanting to wait until after the November elections to push needed tax bills through. You would not play a new board game without knowing the rules first – why should paying taxes be different?
3. The right to a simpler tax code with fewer rules and still fewer exceptions. The rules are just too darn complex, and fewer taxpayers should require a CPA’s assistance for basic tax issues.
4. The right to hold our tax agencies to the same standards of behavior and accountability to which they hold us. If I tell IRS auditors that I cannot get the information because the computer crashed and it could not be saved, do you think they would accept my explanation and drop the matter?
5. The right to greater year-to-year consistency in tax rules. Some tax law changes are quite significant from year to year, and taxpayers should not need to consult a scorecard from their accountant on every financial decision.
6. The right to be able to rely on IRS guidance and responses, whether verbal, in publications or on its website. If the IRS tells us that something is so, we should be able to count on that guidance – even if it is wrong.
7. The right for consistent application of laws, regulations and rulings. Whether an item is “income” should be a uniform answer, and it should not matter whether you are a corporation, partnership, LLC, trust or individual taxpayer.
8. The right to speak to a real person on the phone in less than 30 minutes. No one wants to, and should not have to, spend all afternoon on hold.
9. The right to a business fiscal year-end if it makes economic sense for my business. I realize this is already technically available, but the test hurdles are just too high to be practical. Right now, only the most bizarre fact patterns can make it work.
10. Here’s a technical but important one – the right to a conclusive determination of whether a working arrangement is that of an employee or an independent contractor. Perhaps publish an IRS form that both parties sign, agreeing to the form of the arrangement, and file the form with the IRS. This would provide protection against retroactive government changes to the arrangement. The government could change the arrangement if it is clearly wrong, but not for past years if the form was properly filed.
How about a set of tax rights that actually works for us? After all, it is our government.
©2014 CPAmerica International
Giant Eagle took a nose dive in a recent case before the Tax Court.
The huge supermarket and gas station chain wanted to claim a tax deduction for unredeemed discounts issued through its “Fuelperks!”campaign.
Fuelperks! offered customers discounted gas and diesel fuel from its GetGo gas stations when they presented a card while buying goods and services from Giant Eagle. All the fuel discounts were aggregated and used to reduce the price of fuel at the time of redemption. Any excess discounts could be held over on a loyalty card until they expired, which was three months from the last day of the month in which they were earned.
The chain store deducted the estimated costs of redeeming a portion of the issued Fuelperks! that were unexpired and unredeemed at the end of each tax year.
The Tax Court found against Giant Eagle because the unredeemed discounts did not satisfy the “all events” test since the liability for the discounts became fixed when the discounts were redeemed, not when they were earned.
The court said that an accrual basis taxpayer may receive a deduction in the year the expense is incurred under the all-events test when all three of the following requirements are satisfied:
1. All events have occurred that establish the fact of the liability.
2. The amount of the liability can be determined with reasonable accuracy.
3. Economic performance has occurred with respect to the liability.
In its Memoranda decision, the court said Giant Eagle failed the first requirement because all events had not occurred to establish the supermarket’s liability for unredeemed discounts (T.C. Memo, 2014-146, 108 T.C.M. 67).
©2014 CPAmerica International
Social Security has two funds: one for “old age and survivors” and the other for disability insurance.
The retirement fund is going strong and is funded through 2033, according to the recently released annual report of the U.S. Treasury.
But the disability insurance fund is depleting quickly. By 2016, there are projected to be enough funds to cover only 80 percent of scheduled payments. Legislation will be needed to address the imbalance, the report said.
The disability insurance fund provides income support for workers who have become disabled and cannot work to support themselves and their families. Nearly 9 million Americans receive disability insurance. The average monthly benefit is $1,129.
When the disability insurance program began in 1966, about 1 percent of the population received disability insurance benefits.
Today, nearly 5 percent of the working-age population receives benefits, in part due to such demographic factors as the aging of the Baby Boom generation, the increase in women’s long-term employment, which qualifies more of them for disability, and the declining job opportunities for older workers during recent years.
The fund has also become the target of widespread abuse as some workers are suspected of exaggerating the extent and length of their injuries to collect disability payments.
Social Security is funded through payroll taxes collected by the Federal Insurance Contributions Act (FICA) and the Self Employment Contributions Act (SECA).
The money is placed into two trust funds:
1. The Old-Age and Survivors Insurance (OASI) Trust Fund
2. The Disability Insurance (DI) Trust Fund
These funds hold the accumulated assets and disburse benefit checks. The trust funds hold securities issued by the federal government, including marketable Treasury bonds and special issues.
The 2033 projection for depletion of the old-age and survivors fund is the same this year as it was last year.
After 2033, the dedicated payroll tax will be sufficient to fund three-quarters of scheduled payments until 2088 with annual income coming into the fund. Legislation would need to be enacted by that time to restore long-term solvency.
In 1982, the OASI trust fund was nearly depleted. Congress enacted emergency legislation that allowed borrowing from other federal trust funds, and no beneficiary was shortchanged. Legislation was later enacted to strengthen the OASI fund.
The borrowed amounts were repaid with interest within four years, the Social Security Administration reported.
Medicare also has enough funds through 2030, the report said.
The Medicare Insurance Trust Fund will have sufficient funds to cover its obligations until 2030, 13 years later than was projected prior to the Affordable Care Act. After 2030, 85 percent will be covered, declining slowly to about 75 percent by 2050, the report said.
Part B of Supplementary Medical Insurance, which pays doctors’ bills and other outpatient expenses, and Part D, which covers prescription drug coverage, are both projected to be financed into the indefinite future because current law automatically provides financing each year to meet the next year’s expected costs, according to the Treasury.
But as the population ages and healthcare costs rise, costs are projected to grow steadily from 1.9 percent of GDP in 2013 to 3.3 percent in 2035 to 4.5 percent by 2088. Roughly three-fourths of these costs will be financed from general revenues, and about one-quarter from premiums paid by beneficiaries, the Treasury report said.
©2014 CPAmerica International