CPA Cafe: March 2013

Friday, March 29, 2013

The Top 10 Indirect Tax Audit Triggers

Thompson Reuters' Tax & Accounting service has released its top 10 issues likely to prompt an audit of indirect taxes. The issues are as follows:

Nexus, but no registration: Nexus, a confluence of factors that make a business liable for sales and use taxes, is very likely if you are paying payroll or other taxes in the state. This issue comes into play for companies that are not registered for sales tax in a state, but pay other kinds of taxes there.
Lack of registration in the state system: If auditors can find you online, but not in the state system, they're more likely to call you to inquire about your registration status.
Issued resale certificates: Issuing a resale certificate despite not being registered for sales and use tax is a red flag for auditors.
Use tax audits: Current audits often provide leads for future audits. If one of a company's vendors has not charged proper use tax and is audited, it's likely that company will be audited as well.
Visual inspections: Auditors sometimes visit major construction projects and take note of contractors on site, often leading to an audit.
Whistleblowers: Disgruntled employees, angry customers and competitors can call in to hotlines and give auditors information that could lead to an audit.
Personal observation: Auditors still notice red flags when leading their day-to-day lives.
Non-remission of use tax: Companies that file sales tax, but not use tax, are often selected for audits.
High net sales: Growing businesses often make more errors in reporting.
Exempt items: Exempt status is easy to misinterpret, with confusion around what is and is not exempt. Companies that deal with a lot of exempt items are ripe for audit.

Friday, March 22, 2013

The Money Behind the Madness

Chris Smith of Forbes recently posted about the financial rewards schools and conferences get for playing in the NCAA tournament.

Payouts are based on how many tournament games a conference member has played in over the past six years. Under the "unit system," the total six-year value of playing just one tournament game in 2013 is more than $1.5 million for a team's conference. A Final Four run this year will earn the team's conference $7.7 million over the next six years.

A question not addressed in the article, but relevant in this day and age: What happens to these payments when a team changes conferences? I'm guessing there are provisions in conference agreements for this, and I assume that the Colonial Athletic Association (CAA) will continue to reap the benefits of Virginia Commonwealth University's (VCU) 2011 Final Four run even though the Rams are now in the Atlantic 10 (A-10), but I haven't found anything that confirms or refutes this.

So a berth in the Big Dance is a big deal to smaller schools and mid- and low-major conferences, although the Big South isn't getting any extra money from Liberty's one-and-done appearance since they were guaranteed at least one game due to the conference's automatic bid. But if James Madison* pulls off the unthinkable and shocks top-seeded Indiana this afternoon**, that win will be worth millions to the depleted CAA, which is in its first year without VCU and is losing Old Dominion and Georgia State next year. Meanwhile, VCU and conference foes Saint Louis, Butler, La Salle and Temple could provide a big windfall for the A-10 by going deep into the tournament. (For this blogger's money, the Rams and Billikens have the best shot at reaching the Sweet Sixteen and beyond.)

* Shoutout to our student bloggers from JMU's Beta Alpha Psi chapter!

** This is where I say a bittersweet goodbye to Southern University, which nearly became the first No. 16 seed to beat a No. 1 before losing narrowly to top-seeded Gonzaga on the tournament's opening day. There's a Virginia connection there: Southern coach Ryan Price graduated from William Fleming High School in Roanoke. That leaves VCU guard Troy Daniels (William Fleming) and Louisville forward Luke Hancock (Hidden Valley High School) as the only players left in the bracket representing your blogger's hometown, although North Carolina assistant coach Steve Robinson is also a Fleming graduate.

Thursday, March 21, 2013

Are You Connected?

Are You Connected?
By Brenda Fogg, Member Relations Director
March 21, 2013

Get Connected with our interactive members-only online community, Connect! Connect allows you to network across the state and use members’ experience and knowledge to help you grow and learn. Use Connect to search for answers and resources or post questions to more than 11,000 active VSCPA members. It’s one of the many exciting benefits for members during our 2013–2014 membership year. Are you ready to become Connected?

Congressman: IRS Parody Videos Should Boldly Go to Me

(Apologies all around for the awful pun.)

U.S. House Ways and Means Oversight Subcommittee Chairman Charles Boustany (R-La.) sent a letter (PDF) Wednesday to U.S. Internal Revenue Service (IRS) Acting Commissioner Steven Miller demanding copies of video parodies of Star Trek and Gilligan's Island the agency shot.

Boustany argued that the IRS's television studio in New Carrollton, Md., may have cost taxpayers more than $4 million in 2012. He requested the videos so that taxpayers can be assured that resources were used efficiently and in a manner keeping with the IRS's core mission and asked the agency for a complete accounting of production expenses at the studio.

“In your letter you state that the IRS’s goal of ‘mak[ing] voluntary compliance with the country’s tax laws as easy as possible,’ requires effective employee training,” Boustany wrote. “And further that the IRS’s production studio ‘allows the IRS to provide education and training to large audiences, both within the IRS and to the public, often while reducing travel and other costs associated with such programs.’ This explanation sounds both plausible and reasonable. However, your agency’s refusal to timely produce copies of the IRS parody videos to the committee is unacceptable.”

In his response (PDF), Miller acknowledged the videos' existence and said that the IRS spent $60,000 in taxpayer money in producing them. The IRS refused to comply with Boustany's request to turn over the videos, but offered to "make both videos available for viewing," which Boustany said was not responsive to his request.

Miller said that one of the videos in question "trained IRS employees on a wide variety of topics, including tax law updates, strategic issues, and employee management and safety issues," while the other "discussed, among other topics, IRS tools to deliver quality taxpayer service."

He also pointed out that the IRS uses its studio for many purposes, including a virtual town hall for IRS managers and YouTube videos that provide taxpayer information.

Tuesday, March 19, 2013

Unintended Consequences for FASB Proposal?

Rating agency Fitch Ratings said last week that the Financial Accounting Standards Board's (FASB) proposal on the treatment of credit losses for loans and other financial assets could have a detrimental effect on U.S. bank reserve levels.

The FASB proposal, currently in the public comment stage, would change the way banks account for expected loses on loans and other financial assets, requiring a more timely recognition of future losses as expected cash flows change. Currently, institutions are allowed to wait until losses are incurred.

Fitch said the loss model from the proposal could lead U.S. banks to report asset values more conservatively than their international counterparts. Specifically, the agency said that the use of the FASB model could lead to quarterly adjustments in expected loss provisions, whcih could lead to increased volatility in reported earnings.

What do you think? Would this proposal have unintended consequences?

Monday, March 11, 2013

Tuesday, March 5, 2013

The Student's Perspective: Firm Campus Visits

What Do Students Expect When Firms Visit College Campuses?

By Michael Thiele
President, Beta Alpha Psi, James Madison University

Editor's note: This is the first in a series of guest posts from members of the James Madison University (JMU) chapter of Beta Alpha Psi, an honors fraternity for accounting students. These posts will cover topics of interest to accounting students.

The first and foremost item I look for when firms visit campus is a solid presentation. When a firm comes and gives a well-planned, well-rehearsed, engaging presentation it shows that they are serious about hiring and are really aiming to impress. At some point during the presentation I am also looking for the firm to provide a cultural overview of their company. This may be the most important area that the firm can cover. If we as students are going to be spending the next chapter of our lives at this company, we want to know that the culture there will coagulate with our own. Immediately following that should be what sets their firm apart from other similar firms. It is no mystery that many public accounting firms do very similar work, but what we really want to know is, “what makes your firm so special?” Many of the firms that visit highlight their financial success and awards they have won which is nice, but what we are really looking for is that special trait that sets their firm apart from the rest. Whether it be jean Fridays or paid time for community service, certain attributes attract different people and highlighting them is critical to picking the right future employees. Another area where firms can set themselves apart from the others is highlighting their work-life balance initiatives. We have all heard by now that public accounting may not be the most stress free profession at times so hearing what firms do to balance out the work can be a deciding factor.

Aside from the general overview of the firm, students also like hearing certain specific key details such as the types of clients the firm deals with. While none of us have experienced firsthand what it is like to deal with different types of clients, some people may be particularly interested in working with federal or non-profit clients as opposed to huge public companies and vice versa. Thus, it is important to showcase what industries the firm is associated with.

Other key details that must be conveyed to student include credentials needed for hiring as well as the general interview process. Firms need to let students know what criteria they must meet for employment for the student’s sake as well as their own. This can save a tremendous amount of time on both ends as students won’t apply for a position where they clearly don’t meet the requirements. An overview of the interview process is also important so that students have time to rearrange their class schedules and such. This is especially important if the firm conducts office visits at locations far away from campus. Giving the students a heads up about the process can also take some of the anxiety away which allows the interviewer to get a better assessment of the interviewee.

Finally, in my opinion, the most critical question that a recruiter can answer is, “why did you choose to work there?” The answer to this question reveals more than you can imagine because it puts the recruiter on the spot and often forces them to give a genuine, sincere answer. Many recruiters will say they chose their firm because of the people. While this is a good answer, a better answer would be to go into detail as to why the people at your firm are different from others.

All in all, it is important to be thorough while still keeping the audience engaged. The recruiters should act in a professional manner but be approachable at the same time. Putting all these elements together fits the description of a perfect visit to campus.

Michael Thiele is a senior accounting major at James Madison University and president of the Eta Delta chapter of Beta Alpha Psi. He is a student member of the VSCPA and the New Jersey Society of CPAs (NJSCPA). He has interned at Fannie Mae and KPMG.