CPA Cafe: February 2012

Wednesday, February 29, 2012

Increasing Diversity in the CPA Ranks

I listened to a great webinar today led by American Institute of CPAs (AICPA) Senior Manager Heidi Brundage, CPA, on diversity and inclusiveness in the CPA profession. The profession has been working for decades on increasing diversity in its ranks, but recent studies show we haven’t seen much progress. I know the AICPA and state CPA societies are planning a new, integrated approach to tackling the issue moving forward. It’s not just the right thing to do — it’s a business imperative.

“The bottom-line objective of diversity is to create a high-performing organization by leveraging the capacity of the total workforce.” — William A. Guillory, Ph.D., Innovations International

Your business will need to take a serious look at diversity and inclusiveness, especially in our current economic environment and as we move into a more culturally diverse society. Valuing diversity will be important in attracting and keeping clients and staff and provides a greater utilization of your workforce.

Stay tuned for new initiatives this year, and check out these current AICPA resources: http://www.aicpa.org/Career/DiversityInitiatives/Pages/DiversityInitiatives.aspx

Monday, February 27, 2012

Buffett Hints That Berkshire Hathaway Tax Return Could Be Historic

Berkshire Hathaway Chairman Warren Buffett praised his employees and hinted that his company’s tax return might be big enough to warrant inclusion in the Guinness Book of World Records.

In his annual letter (PDF) to shareholders, Buffett singled out the 23 employees at Berkshire Hathaway’s corporate office, who he said deal with “a multitude of SEC [U.S. Securities and Exchange Commission] and other regulatory requirements and files a 17,839-page Federal income tax return — hello, Guinness! — as well as state and foreign returns.”
(To be fair, Buffett could be saying that dealing with such a massive return could drive a CPA to drink.)

While that is a hefty document, the return pales in comparison to the 57,000-page return filed by General Electric in 2011. That return — which, printed out and stacked, would have been 19 feet high — came under fire when it was revealed that the company didn’t pay taxes on $14 billion in profits.
Buffett, for his part, has also generated controversy for his New York Times editorial calling for taxpayers making over $1 million and $10 million per year should be taxed at higher rates. Proposed higher taxes for millionaires have become known as the "Buffett Rule," and Sen. Sheldon Whitehouse (D-R.I.) proposed a law earlier this month that would institute a minimum 30 percent federal tax rate for taxpayers with income over $2 million, including capital gains and dividends.
Without compromising client confidentiality, have you dealt with or heard about any other mind-boggling tax returns?

Friday, February 24, 2012

Thursday, February 23, 2012

The Done Manifesto

Do you ever have trouble working on tight deadlines? Everyone deals with deadline pressure differently. A sense of urgency can be a double-edged sword — the deadline crunch can inspire you to new heights of productivity or wear you down mentally.

Bloggers Bre Pettis, co-founder of a robotics company, and Kio Stark developed the Done Manifesto to set guidelines for working on deadline. Naturally, they developed the rules on a 20-minute deadline. Here are the 13 guidelines of the Done Manifesto:

There are three states of being. Not knowing, action and completion.
Accept that everything is a draft. It helps to get it done.
There is no editing stage.
Pretending you know what you're doing is almost the same as knowing what you are doing, so just accept that you know what you're doing even if you don't and do it.
Banish procrastination. If you wait more than a week to get an idea done, abandon it.
The point of being done is not to finish but to get other things done.
Once you're done you can throw it away.
Laugh at perfection. It's boring and keeps you from being done.
People without dirty hands are wrong. Doing something makes you right.
Failure counts as done. So do mistakes.
Destruction is a variant of done.
If you have an idea and publish it on the internet, that counts as a ghost of done.
Done is the engine of more.

Note that this advice doesn’t apply to a lot of tasks CPAs must do. If you’re doing a tax return or an audit, it doesn’t make sense to “laugh at perfection” or to count failure as done. It doesn’t do much good to finish a project in a haphazard way to get it off your plate for the time being — that strategy will come back to haunt you. But if you’re struggling with procrastination on projects outside of your comfort zone, the Done Manifesto can get you back in the working groove.

Friday, February 17, 2012

Wednesday, February 15, 2012

Brainstorming and Following Through

A recent article in The New Yorker traces the history of brainstorming from its genesis as an idea from an advertising executive in the 1940s. Jonah Lehrer’s story discusses brainstorming’s popularity before dropping this bombshell:
“But there is a problem with brainstorming. It doesn’t work.”

Lehrer, citing University of California-Berkeley psychology professor Charlan Nemeth, says that the standard “no criticism” brainstorming is ineffective because debate and criticism stimulate ideas, rather than inhibiting them. He goes on to discuss different theories on how employee interaction leads to better ideas.
While it’s true that bad ideas can lead to good ones, it’s important to look at those ideas with a critical eye. How does your firm’s brainstorming process work? What techniques have proven fruitful for you?

Friday, February 10, 2012

Wednesday, February 8, 2012

Tax Conformity Becomes Law Early in Legislative Session

We are about one month into the 2012 General Assembly 60-day, or “long,” legislative session, and the VSCPA has been working hard tracking hundreds of bills introduced in the House of Delegates and Senate this year. We already have an early victory with the quick passage of tax conformity — Gov. Bob McDonnell signed the bill into law yesterday, which is one of the earliest dates the bill has passed in the past decade or so that Virginia has had fixed-date tax conformity.

There still is a conformity bill related to Section 199 of the Internal Revenue Code that has not yet passed the legislature as of today, although it affects tax year 2012, not 2011. HB 1153 and SB 462 allow the entire amount of the deduction allowed for domestic production activities pursuant to §199 to be deducted for Virginia income tax beginning on and after Jan. 1, 2012. This provision has been an item of contention for the past few years, which is why we agreed to have it addressed in a separate bill. We will watch that bill and report on its outcome.

We are also monitoring closely several other bills affecting CPAs. You can see all of the legislation we are tracking at our 2012 Session Watch page. You can also read Emily Walker’s blog post about two hot items we are working on — one deals with the penalties associated with tax due returns on extension that are electronically filed, and the second requires the Auditor of Public Accounts (APA) to outsource all audit work to CPA firms.

HB 1264, HB 341 and the VSCPA's Legislative Process

We've gotten quite a bit of feedback from members in response to the last two issues of our Session Watch e-newsletter. Since most of it has been in relation to two specific bills, I thought it might be helpful to provide some additional information regarding how the VSCPA arrived at its positions and our involvement in the outcomes for these bills.

HB 1264, introduced by Del. David Toscano (D-Charlottesville), dealt with the penalties associated with tax due returns on extension that are electronically filed. The bill summary indicated that it would ensure that no late payment penalty would be imposed if the full amount of tax due was paid by the extended due date of the return, regardless of whether the return was filed prior to the extended due date. On the surface, this appeared to be a good bill, intended to fix an unforeseen consequence of the e-file mandate. There were a lot of comments on the VSCPA tax listserve about this issue over the course of the past year.

Del. Toscano contacted the VSCPA and asked us to take a look at the bill and make sure that it truly accomplished his intended goal as stated in the bill summary. Upon closer review, it was determined that the bill had been drafted incorrectly and referenced the wrong section of the statute, so it would not have achieved the patron’s goal. Additionally, the Virginia Department of Taxation (TAX) determined that if amended to reference the correct section of the statute, the bill would result in a $100 million, one-time, negative impact to the Commonwealth. Furthermore, TAX indicated that the problem could be handled with an administrative process change.

We were invited to participate in a meeting with Del. Toscano and TAX last week to discuss the bill and whether it should proceed. In preparation for the meeting, I consulted with members of the VSCPA Tax Advisory Committee for input on how best to proceed. During the meeting, it was determined that an administrative fix was preferable to legislation as long as TAX could provide assurance that they could make the necessary changes.

The plan at this point is for TAX to come up with a way to "warehouse" e-filed returns, similar to what is already done for returns filed by May 1. The VSCPA has offered assistance in achieving this goal. TAX has also assured us that they will allow for a reasonable amount of time for taxpayers to submit payments on e-filed returns and in the event that does not occur they have committed to abating any late payment penalties assessed in error. TAX acknowledged that this has been an ongoing issue over the past several years and has assured us of its commitment to fixing it now.

Unfortunately, due to the lead time needed for such programming changes to occur to support the warehousing solution, a fix will not be in place until the next filing season. This outcome would be the same even if legislation were to pass. The VSCPA plans to provide information to members on how to avoid the additional penalties and guidance on how to pursue having penalties abated if they are assessed in error.

The bottom line in all of this is that this is just one piece of the puzzle in terms of how TAX handles penalties. The VSCPA takes the feedback we've received from our members about this very seriously and plans to look at the penalty structure overall. That will better enable us to better collaborate with TAX to come up with fix that everyone can agree on.

The other bill we've gotten a lot of feedback from members about is HB 341, introduced by Del. Tony Wilt (R-Harrisonburg). This bill would have required the Auditor of Public Accounts (APA) to outsource all audit work to CPA firms. This bill was a complete surprise to the VSCPA and immediately caught our attention.

Again, on the surface, this looks like a bill that would benefit many VSCPA members. However, we were concerned at the outset because there was not sufficient information available to demonstrate that making such a change would result in a more cost-effective and efficient audit process than what is currently done by the APA staff, several of whom are CPAs and VSCPA members. While we agree that this is a topic that deserves some attention and research, it represents a huge step that would result in the APA laying off two-thirds of its staff, a move which has a significant cost associated with it. This is also a change which, once made, could not be easily reversed. Lastly, from the VSCPA's experience in administering the AICPA Peer Review Program, we have concerns about the number of new audits subject to Generally Accepted Government Auditing Standards (GAGAS) and whether or not there are enough firms qualified to perform these audits.

Ultimately, we determined that it was best to encourage Del. Wilt to take a step back and allow this issue to be studied before proceeding, and he agreed. This resulted in a joint letter from Wilt, who issued a joint letter with Del. John O’Bannon (R-Richmond), chair of the subcommittee that considered the bill, directing the APA to study the issue. The VSCPA was named in the letter and has offered assistance in compiling and evaluating the proposal.

I think it's also important to note that both pieces of legislation were the direct result of VSCPA members contacting legislators and getting engaged in the process. This is fantastic, and I'm so excited to know that members are getting engaged! Unfortunately, the VSCPA was unable to support the bills for the reasons discussed above. I strongly encourage members to contact us whenever they have an issue they feel needs to be addressed. While we can’t guarantee that we’ll be able to take up every issue brought to our attention, we will certainly give consideration to anything brought forth by a member.

Tuesday, February 7, 2012

Barnard Puts Her Stamp on Leaders' Institute

Donors take different paths to the VSCPA Educational Foundation. Dawn Barnard, CPA, went through her employer to get involved.

Barnard is a manager at Baker Tilly Virchow Krause, LLP, in Vienna. If that name sounds familiar to you, you might have passed through one of the firm’s most enduring contributions to the VSCPA and Virginia Accounting Students — the Leaders’ Institute.

The Leaders’ Institute is a summer weekend program held at a Virginia college or university that puts Virginia’s top college accounting students (nominated by their professors) in contact with potential employers. In addition to the recognition that comes with being the program’s sponsor, Baker Tilly reaps the same benefits as other firms that attend and has even hired students based on their performance in the program.

“The Leaders’ Institute enhances our recruiting strategy by demonstrating our commitment as a firm to develop future leaders both in our firm and in Virginia,” Barnard said. “Our people have participated as team leads, speakers and mock interviewers. This provides them with opportunities to build their presentation, coaching and interviewing skills.”

Barnard has held several leadership positions with the VSCPA, culminating with her term as vice chair of the Board of Directors in 2009–2010. She’s also been heavily involved with the CPA PAC Board of Trustees and chaired the VSCPA’s Young Professionals Advisory Council (YPAC) in 2005–2006.

Barnard graduated from South Carolina’s Converse College in 1994 and has been at Baker Tilly since 2003. During that time, she’s become quite familiar with the students and accountants who make up the future of the CPA profession, whether from her work at Baker Tilly, her time at the Leaders’ Institute or her work with the YPAC. She’s made it a point to share her career experiences with the students she meets.

“I have enjoyed organizing fundraising efforts for the Ed Foundation at Baker Tilly and meeting the recipients of scholarships at VSCPA events,” she said.

Friday, February 3, 2012

Session Video Update With Emily Walker

VSCPA Government Affairs Director Emily Walker checks in from Richmond to discuss amendments to two bills dealing with professional licenses. She also talks about penalties related to electronic tax filing. Click here to see more of Emily's session videos.