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In trust law, a Protector is a person appointed under the trust agreement to direct or restrain the trustees in relation to their administration of the trust. Historically, the concept of a Protector developed in offshore jurisdictions where settlors were concerned about appointing a trust company in a small, distant country as sole trustee of an offshore trust which is to hold a great deal of the settlor’s wealth. However, Protectors have now moved into the mainstream of more trust agreements.
Do they have fiduciary responsibilities? And what is a fiduciary? 
A fiduciary is an individual in whom another has placed the utmost trust and confidence to manage and protect property or money. The relationship wherein one person has an obligation to act for another’s benefit. The duties of a fiduciary include loyalty and reasonable care of the assets within custody.
In Jay Adkisson‘s 2012 article “Trust Protectors — What They Are And Why Probably Every Trust Should Have One”, he states the original idea behind the Protector is to have somebody who can watch the Trustee and terminate the Trustee for any misconduct. Originally that was the only power the protector had: fire the Trustee. Then additional powers were bestowed on the Protector in trust agreements.
Adkisson cautions that if one starts giving the Protector too many powers, they become seriously at risk of being deemed a de facto “Co-Trustee”, with all the fiduciary duty baggage that carries. 
With Protector provisions, simpler is better. A Protector provision should ideally just have three sections:
In Adkisson’s recent article in Forbes.com, he raises the question as to whether the trust protector as a fiduciary is a bad idea.
Adkisson’s position is the Trust Protector should not have fiduciary duties, which means that the Trust Protector should be able to exercise wholly independent discretion to fire Trustees without worrying about whether the Trust Protector will be sued by somebody.
If a drafter of a trust agreement is going to make the Trust Protector a fiduciary, then those fiduciary duties need to be clearly and specifically set out — otherwise, the Trust Protector has the potential to be sued if anything goes wrong with the Trust even if the Trust Protector did not know about it, which is another way of saying that here the Trust Protector was implicitly charged with reviewing every slight thing that went on in the Trust.
The inclusion of a Protector in a trust can often avoid expensive and time-consuming court proceedings if their powers are properly and clearly stated. There is some confusion as to whether they in fact have any fiduciary responsibilities.
The word is caution. If you are agreeing to be a Trust Protector, know where you stand. Are you a fiduciary without any fiduciary protections under the trust?
The fastest growing segment of the labor force is workers over the age of 65, according to the U.S. Bureau of Labor Statistics.
If you plan on working past 65, there are some issues to be aware of that author Mark Miller points out in his Wealth Management.com article:
Social Security timing: It doesn’t make sense to take Social Security in your first year of eligibility (age 62) if you continue to plan on working for two main reasons: 1) you will only receive 75% of your primary insurance amount and 2) there are penalties incurred on Social Security benefits if you earn income. For example, if you have earned income of more than $15,480 in 2014, you will be hit with a penalty of $1 for every $2 over that amount. These withheld benefits are given back after you reach full retirement age, but it does not make much sense to take the reduced benefits early. Instead, if you continue to work and can wait until the age of 70, you will receive 132% of the primary insurance amount for the rest of your life, and that is nearly double the amount you would receive at age 62. After age 70 benefits stop accruing.
Medicare filing: The article notes that Medicare benefits are by the far the most important and the most complicated. If you already receive Social Security benefits, the sign-up for Medicare is automatic. 
If not, your window to sign up is the three months before turning 65 up through the three months following. Failing to do so can result in expensive premiums down the road. For example, monthly Part B premiums jump 10% for each full 12 month period that a senior could have had coverage but didn’t sign up. If you plan on working past age 70, you can delay starting Medicare without penalty if you are insured based on your active work status by an employer with more than 20 employees. However, if you are self employed, or your employer has fewer than 20 employees, you should sign up at age 65.
Required Minimum Distributions (RMDs): RMD’s are mandatory from IRA accounts and 401(k)s (unless you are working for an employer who sponsors the plan) starting the year you turn 70.5. 
If you are working, you do not have to take RMDs from the 401(k) of your current employer; it is only required from former workplaces if they were never rolled over. These distributions can affect what tax bracket you will fall into, so it’s important to plan accordingly.
Here is a common question, “when do I have to capitalize an expenditure and when can I deduct it as a repair or maintenance item?”
The difference between expensing and capitalizing can mean the difference between an immediate deduction at full value versus a deduction spread out over the useful life of the asset.
In September 2013, the IRS released final regulations governing when taxpayers must capitalize and when they can deduct their expenses for acquiring, maintaining, repairing, and replacing tangible property. The new “repair regs” are lengthy and complex. Every business with fixed assets must comply with these new rules for its first tax year beginning on or after January 1, 2014.
The IRS’s stated goal is to reduce controversies with taxpayers by moving away from a facts and circumstances determination whenever possible, as well as from the subjective nature of the existing standards in general. All well intentioned; however, with the low threshold safe harbor amounts not particularly favorable for the taxpayer.
Code Sec 263 requires the capitalization of amounts paid to acquire, produce, or improve intangible property. Code Sec 162 allows the deduction of all ordinary and necessary business expenses, including the costs of certain supplies, repairs, and maintenance.
In the regs, five main areas were addressed:
Materials and supplies are defined as a unit of property that has an economic useful life of 12 months or less with an acquisition or production costs of less than $200. Materials and supplies are generally deducted in the tax year first used or consumed.
The regs provide guidelines as to when amounts relating to acquisitions or improvements should be capitalized or deducted. These are tied to whether a taxpayer has an applicable financial statement generally defined as an audited financial statement.
A taxpayer with an applicable financial statement may deduct up to $5,000 of the cost of an item of property per invoice. The required written accounting procedures in effect as of the beginning of the tax year may specify a per item amount of less than $5,000. 
Taxpayers without an applicable financial statement may elect the de minimis safe harbor and expense up to $500 per invoice/item. Big difference. With an audited financial statement, the amount is $5,000. Without, $500.
These limits are safe harbor amounts. When accounting procedures expense items that exceed the $5,000 limit, it may still make the case with the IRS that a greater amount is reasonable under its facts and circumstances.
To take advantage of the $5,000 de minimis rule, taxpayers must have written book policies in place at the start of the tax year that specify a dollar amount (up to $5,000) that will be expensed for financial accounting purposes.
The de minimis rule is a safe harbor that is elected annually by including a statement with the taxpayer’s tax return for the year elected.
Consult with your CPA. Make sure you have a written capitalization policy in place before the end of 2013. For 2014 and beyond, make sure you are making the proper annual elections.
In an article published last week (“A Reno Neighborhood Drinks in Style”), The New York Times declared “Reno is now a city of sustenance as well as indulgence.” This declaration came after some enthusiastic and positive writing on the happenings of Midtown District businesses.
The article wandered from the Old Granite Street Eatery to Reno Public House to Hub Coffee Roasters, while also stopping over at other fine Midtown establishments along the way (Brasserie Saint James, Death and Taxes, and more). So, if an East Coast newspaper the likes of The New York Times is profiling an up and coming part of Reno, have we made it?
Yes, we have made it, but not because of The New York Times. Midtown, downtown and many parts of Reno/Sparks have made it because of the people creating the businesses and citizens of the area supporting them.
At the same time, I can’t complain about good press at the national level. It really is quite awesome.
One thing I have to say about The New York Times’ declaration: It isn’t just “now” that we have become a city of sustenance as well as indulgence. I feel Reno has been that way for some time. Reno has definitely had an explosion of restaurants and bars of late, but we’ve had restaurants that can sustain or indulge us for as long as I can remember. Bricks, La Vecchia and Rapscallion come to mind; so do Peg’s Glorified Ham n Eggs, Silver Peak and Great Basin Brewing Co. Let’s not forget the myriad sushi places we have in town (all you can eat, of course) and the multitude of Chinese, Thai and Vietnamese restaurants. 
Reno has even had an Ethiopian restaurant for some years (Zagol; it’s quite good!).
I’ve digressed a bit from talking about Midtown, but as you can see, the Reno/Sparks area is alive with great restaurants and bars. So the next time you are heading out for food, think about giving the Midtown area a try. I don’t think you’ll be disappointed.
If this week’s negotiations to raise the federal debt ceiling do not end well, there could be major consequences to the economy. 
Administration officials say that by Thursday they will have exhausted all borrowing authority and only have cash on hand. There would be enough money to make payments for a few days, but not more than two weeks.
According to an article in the Washington Post, economists on both sides agree that no matter which course the President chooses, a drop in federal spending that large would have an impact on economic growth. The administration would have to consider delaying or suspending tens of billions of dollars, as soon as Friday, to Medicare and Medicaid providers, food stamp recipients, unemployment benefits and Social security checks. This could be detrimental to seniors and low-income people. Veterans’ benefits and pay for active-duty troops could also be delayed. Nearly $60 billion is due in November to cover the aforementioned expenses.
Further, economists have estimated that if the government shutdown lasts through October, real GDP could be reduced as much as 1.5 percentage points in the fourth quarter. Hundreds of thousands of furloughed workers are expected to postpone purchases, which would be a major hit to growth through reduced consumer spending. 
Consumer sentiment hit a nine-month low in early October. Estimates for fourth-quarter GDP are being held steady or have been cut slightly in light of the shutdown. Citigroup’s chief U.S. economist Robert DiClemente stated that the longer the delay in authorized spending, the greater the incidence of negative spillovers to private activity. Though these impacts would be reversed once the furloughed workers return to work, there would still be drags on the economy that may continue into 2014.
The government shutdown has affected many federal agencies, including the Internal Revenue Service. It is estimated that only about 10% of the IRS employees are currently working. This has caused some questions among taxpayers about whether or not their tax returns need to be filed by October 15th. The government shutdown and the decrease of IRS employees will not affect the upcoming tax deadline. 
All taxpayers who requested a six month extension by April 15 will still have to file their tax returns by October 15th.
Having a decrease in employees due to the shutdown will affect other areas of tax filing. It is recommended that you file your tax return electronically because most of these will be processed automatically. If you paper file, nothing will be done with your return until the shutdown ends, but it still needs to be postmarked by the October 15th or it will be considered late. If you do paper file, it is good idea to send your return using Certified Mail to have proof that you sent your return in by October 15th.
The government shutdown has caused much frustration for taxpayers. This is mostly true for taxpayers expecting a refund. Even if your tax return is filed on time, no refunds will be issued until the government shutdown ends and operations return to normal. However, if you owe money it still needs to be paid when you file. The “IRS Where’s My Refund?” function will not be available to anyone who filed their tax return after the start of the government shutdown until the shutdown ends.
Also there is not much happening in regards to tax assistance from the IRS. 
There is no one working the telephone customer service lines and the IRS’s walk-in taxpayer assistance centers are closed. However, the automated assistance line is still open.
So get your tax return filed by October 15th, and hopefully for everyone waiting on a refund or trying to resolve an issue with the IRS, the government shutdown ends soon.
As promised, I am updating my earlier blog outlining many tax law questions left unanswered as a result of the recent Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act (DOMA). The IRS has recently announced their ruling addressing the tax law implications arising from the Court’s decision on DOMA.
The IRS took a surprisingly bold stand in their recognition of a same-sex marriage in the eyes of federal tax law. 
While it was clear early on that a same-sex couple married and residing in a state or jurisdiction recognizing same-sex marriages would be considered an married couple, there were questions as to whether other same-sex marriages with different situations would be recognized similarly. The IRS was courageous and decided to recognize all same-sex marriages regardless of circumstance as valid marriages in the eyes of the tax code.
What does this mean? As I pointed out in my earlier blog, questions remained for same-sex couples who were married in a state that obviously recognizes same-sex marriage but now reside in a state that does not recognize those marriages. Further, many same-sex couples have made the decision to marry and traveled from their state of residence to a state or jurisdiction that recognizes same-sex marriage to celebrate a legal same-sex marriage. These couples were also unsure of where they would stand in the eyes of the tax law.
On August 29, 2013, the IRS answered their questions…all of the same-sex marriages discussed above are recognized as a legal marriage for federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax or child tax credit. According IR-2013-72:
Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships (RDP’s), civil unions or similar formal relationships recognized under state law. Couples who have an RDP or similar must continue to file as they have in the past which can be complicated by those residing in states that have community property laws such as the State of Nevada.
Legally-married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status.
Individuals who were in same-sex marriages may, but are not required to, file original or 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.
Additionally, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.
Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011 and 2012. Some taxpayers may have special circumstances, such as signing an agreement with the IRS to keep the statute of limitations open, that permit them to file refund claims for tax years 2009 and earlier.
As our country moves forward in terms of equality in marriage, so too does the tax law. However, tax law has always been equal in one regard…it is, and continues to be, complicated. Please remember that we at Barnard Vogler & Co., CPA’s are always ready to help you trudge through the process of compliance and keep you on the right track.
More people are heading to their retirement plans at work for a bail out in today’s economic times. An individual will have financial options if he or she should be so lucky as to a have a retirement plan at work.
An employee may request a hardship distribution or a loan from their retirement plan at work, if available. There are strict rules that must be followed or unwanted tax consequences may occur due to non-compliance.
A retirement plan may, but is not required to, provide hardship distributions. The plan, if it provides for hardship distributions, must specify the criteria used to determine hardship. Hardship withdrawals are subject to income tax and the 10% early withdrawal penalty if the employee is under 59 ½ years of age.
Borrowing from your retirement plan is another option available if offered. The maximum amount a participant may borrow from his or her plan is 50% of his or her vested account balance or $50,000, whichever is less. A plan could include an exception to the 50% of the vested account balance limit if the balance is less than $10,000. A participant may borrow up to $10,000 if the exception is included in the plan.
Federal law mandates that participant loans must be repaid within five years and payments must be made at least quarterly. An exception to the 5-year rule is if the loan is used to purchase a primary residence. The rules for repayment for a primary home loan can vary by the individual plan.
Any outstanding participant loan balance in the event of termination of employment is treated as a fully taxable distribution at the time of separation from employment. 
The “distribution” may also be subject to the 10% early withdrawal penalty if the employee is under the age of 59 ½.
Depending on the personal situation, one option may be better than the other from a tax standpoint.
No repayment is required on a hardship distribution. Taxes must be paid on the distribution and may incur the 10% early withdrawal penalty as well.
Participant loans must be repaid but are not taxed as income unless employment terminates.
The October 15th tax extension deadline is quickly approaching, which means it’s time to finish up that tax return you have been avoiding all summer. There are many benefits to filing an extension if your tax return is not quite ready in April, but there are no additional extensions available for the upcoming October 15th deadline. When you filed your extension in April, it did not extend the amount of time to pay, it just gave you an extra 6 months to finalize and file your tax return. 
You still had to pay the amount of tax you owed or the best estimate of it by April 15th. This might have people questioning why they need to get their returns in by October 15th if they already paid in April. The reason is to avoid possible penalties.
Depending on whether you owe money or are due a refund from the IRS will determine the consequences of not filing on time.
For individuals that will receive a refund, you will not be assessed any penalties. This is because the penalties are based on a percentage of the amount owed to the government. If you owe $0, any percentage of zero is still zero. However, the sooner you file, the sooner you’ll get your tax refund so it’s not a bad idea to get your tax return filed as soon as possible.
If you are one of the unlucky individuals that do owe, you could be subject to penalties. The IRS imposes two types of penalties; the failure-to-file penalty and the failure-to-pay penalty. The failure-to-file penalty is 5% per month on any unpaid taxes and the failure-to-pay penalty is .05% per month on any unpaid taxes. If you filed an extension in April the failure-to-file penalty is deferred until October 15th. However, if you do not file by October 15th the failure-to-file penalty begins that day and will be assessed until you file your return. 
If you did not file an extension in April, the failure-to-file penalty started April 15th and will continue until your return is filed and the amount you owe is paid. In general, the maximum penalty is 25% of the amount you owe. You will also have to pay interest on the amount of tax unpaid by April 15th.
In order to avoid these penalties be sure to file your tax return by April 15th or if you filed an extension, by October 15th, and pay the total amount you owe when you file your extension in April.
How do we bring innovation into the world of Public Accounting?
The Truth About Marissa Mayer: An Unauthorized Biography by Nicholas Carlson popped up in the recommended news section of my Linked In account this weekend. Thinking I would just scan through it, I later found it was a lengthy but intriguing article which I read in two sittings. Two areas really resonated with me. 
The first was listening to Marissa speak to a Stanford class about the lessons learned at Google around Innovation .
Google’s 9 Theorems on Innovation
So how do we apply these conceptions in public accounting?
Ideas can come from other industries. What models can we change?
I want to know what you know! Engage in conversation. Contribute. There is so much information available today that we can get swept up in information overload. Share what you have found.
Surrounding yourself with smart people has always been a business axiom. I love being challenged to rethink.
Google provides the opportunity of using 20% of your time to work on anything you want. I have always thought that public accounting for me was a great forum to pursue dreams. Find your path. Find support. And then go for it.
Develop new products, methods of delivery, packaging. Throw them out in the marketplace. They don’t need to be perfect. Adjust as you go.
So we are accountants. I know. The numbers have to be right. The law has to be followed. I’m a stickler for getting it right. But there are so many other ways we can be creative and innovative.
The second area of Marissa’s bio that intrigued me was her work philosophy. She said it, “I like to work.” Now this is something I can really relate to. Marissa said she has been called a workaholic. I’ve been called the same. But it’s that I really like the work. I like being challenged and learning and relationships… it goes on and on. So here is an excerpt from the article relating to her transition into Yahoo:
“Some of the people in the room were growing frustrated with the pace, but others began contributing. Among those who contributed, Mayer learned who to trust. Those trusted people began to grow in confidence and they started to contribute even more. Once we learned how to operate on that level of intensity with her, she softened and it became more of an interaction.”
“She was pushing the pace…She was teaching…She was creating…She was using data to empathize with hundreds of millions of people all at once, as she had learned to do at Google.”
“I’ve never seen anybody like [her],” says someone from those meetings. Mayer, he says, was “somebody who could see a whole collection of possibilities and could just talk about her experiences and principles.”
One Yahoo executive said that before Mayer arrived, “what was missing was leadership from the very top, which was able to cut to the chase and get some tough decisions made, get focused in the right places, get the sense of urgency, and also somebody who could really be the chief quality control leader of the company.”
Quality control a must. What goes out is what everyone sees.
Another stickler for quality…Steve Jobs. So as if I hadn’t read enough on technology leaders, I decided to check out the new Steve Jobs movie. Similar philosophies? Yes. Surround yourself with smart people. Make quality products. Steve also had the same attention to minute detail as Marissa. Think, what does the consumer want? Steve wanted to be Different not Better.
So how do we do that in the accounting world? Be Different? Find innovative ways to engage the consumer. Make accounting their world? Make the numbers matter for them? Make them simple and understandable?
What do you think? Ideas come from everywhere.
