Practice management

For some, going global means eating a hamburger one night, sushi the next, a gyro sandwich the third, followed by curried chicken, and then Chilean sea bass. “Going global” or “going international” means something entirely different for firms. It might mean hiring a more diverse staff to appeal to a more diverse potential client base. For others, it might mean foreign outsourcing, or joining an international firm association to develop working relationships with firms in foreign countries. To some, it might mean hiring accountants from overseas to fill staff vacancies. And let’s not forget the need to understand international accounting standards as the move to convergence gains strength. There are, especially in regional firms, exchanges of staff where staff from one firm work in the offices of a firm in another country for a number of months. One firm association rotates its annual international meeting among its seven international regions to ensure a continuing diverse international flavor. I just read an online article in USA Today about the fact that more MBA candidates are going abroad for their degree. The reasons given were that it normally takes one year rather than two, the future MBAers like international travel, it helps their career if they might want to eventually work in that country, and there is contact with MBA candidates from many other countries. What is interesting to watch in many firms is that there is an increased comfort level with going international, similar to what you experience when you eat unfamiliar food from different cultures. Think also about the fact that the youngest generation is growing up in the “Age of Globalization,” and using the Internet to easily plan foreign travel and interact, communicate, and maintain contact with those in other countries. Ultimately, they are forming and building at a very early age an international network that will serve them very well in their future personal, employment, and professional endeavors.

Notice 2007-54, which provides guidance and transitional relief for the return preparer penalty provisions amended by the Small Business and Work Opportunity Act of 2007, has been issued by the Internal Revenue Service. The new amendments are effective for returns prepared after May 25, 2007. The new law amended several provisions of the Tax Code to extend the return preparer penalties under Section 6694 to preparers of all tax returns, including estate and gift tax returns, employment tax returns, and excise tax returns. Prior to the new law, these penalties applied only to the preparers of income tax returns. The new law also increased the amount of the penalties and changed the standards of conduct that must be met by return preparers in order to avoid penalties under Section 6694. The transitional relief provided by Notice 2007-54 will apply to all returns, amended returns and refund claims due on or before Dec. 31, 2007, including those returns, amended returns and refund claims filed pursuant to extensions to file due on or before Dec. 31, 2007; to 2007 estimated tax returns due on or before Jan. 15, 2008; and to 2007 employment and excise tax returns due on or before Jan. 31, 2008.

While conceding that the Internal Revenue Service has made significant progress in improving internal controls and financial management since its initial financial audit in 1992, it still needs to close some 75 recommendations from prior audits according to the Government Accountability Office. The auditor general said the IRS has resolved myriad internal controls weaknesses by closing over 200 of the GAO's recommendations over the past seven years, but since its 2006 audit, the GAO has identified 28 more, bringing the total to 75. The categories cited by the GAO for recommendations include: Safeguarding of assets and security activities; proper recording and documenting of transactions; and effective management review and oversight. The report can be accessed at www.gao.gov.

Veteran accounting marketer Sally Glick, currently chief marketing officer and director of marketing consulting services at Livingston, N.J.-based Sobel & Co. LLC, was inducted into the Association for Accounting Marketing Hall of Fame. Her induction came at the group's 18th annual AAM Summit, here. The award honors the recipient's dedication to and promotion of the accounting marketing profession. After working several years at a local firm in the Chicago area, she became marketing director at Pencor LLC, a company providing professional service firms with niche marketing materials and programs. She then went on to become director of marketing services at firm association Polaris International. She also served as marketing director at regional CPA firm, J.H. Cohn. In 2003, she was honored as Accounting Marketer of the Year.

Yep, it's that time of the year again! CPA Wealth Provider is calling for nominations for its Fifth Annual Financial Planning Awards in any of the following categories: CPA/Financial Planning Firms, Broker/Dealers, and Financial Planning Software Vendors.Winners are those firms or companies that have taken the lead through innovation, efficiency, initiative, or growth in the financial planning area.

On the heels of strong tax revenue gains, state spending during the past fiscal year rose 8.6 percent over the year-ago period, but concerns over tighter budgets and more modest spending levels may be in the near future, according to the National Governors Association and the National Association of State Budget Officers. According to the 2006 Sales Tax Rate Report from tax technology products provider Vertex Inc., the average U.S. sales tax rate hit an historical high in 2006 at 8.579 percent -- up from 8.549 percent in 2005. Vertex also said that the number of tax rate changes in the U.S. grew by 28 percent since the late 1990s. "As the economy was flush with money in the late 90s, there is a recognized decrease in the number of tax rate changes from 1995-2000," said John Minassian, Vertex vice president of Tax Content Development. "However, ever since predictions of an economic bubble burst came to fruition in 2000, we have seen a severe increase in the number of rate changes, likely the result of local, city, county and state needs to increase revenue and balance budgets."

Payroll and benefits outsourcing provider Paychex, Inc. has unveiled Tax Credit Services, a product that provides small and mid-sized businesses with help in identifying and applying for eligible wage-based tax credits they may be eligible to receive. Wage-based tax credits were designed to stimulate economic development and create job growth in targeted areas throughout the country by reducing income tax liability at the state and federal levels. They can be used in the current year or can be carried forward to reduce future tax bills. The Paychex Tax Credit Services target two types of business tax credits: location-based and job-creation tax credits. Paychex veteran executive Cliff Gibson has been tapped to head the company's new Tax Credit Services sales division. For more information go to www.paychex.com

The Internal Revenue Service revealed plans to launch a new National Research Program reporting compliance study for individual taxpayers that would provide updated and more accurate audit selection tools and support efforts to reduce the nation's $300 billion-plus tax gap. The latest NRP study will be the first of an ongoing series of annual individual studies using an innovative multi-year rolling methodology. The study is scheduled to start in October 2007 and examine about 13,000 randomly selected 2006 individual returns. Similar sample sizes will be used in subsequent tax years. The IRS said that the advantage of combining results over rolling three-year periods is that it would be able to make annual updates to compliance estimates and develop more efficient workload plans on an annual basis. Previous studies started from scratch, drew tax returns from a single tax year and involved examinations of more than 45,000 taxpayers. The initial group of taxpayers whose returns are selected for audit under the new NRP study will start receiving official letters in October informing them that they are part of the research study.

The multi-billion-dollar-gap between what publicly traded companies book as expenses for executive stock options and what they report cost the U.S. Treasury roughly $43 billion between 2004 and 2005, charged Sen. Carl Levin, D-Mich. Levin, who chairs the Homeland Security and Governmental Affairs Committee said at a hearing earlier this week that companies are reporting higher deductions for stock options to the Internal Revenue Service than what they are reporting to their shareholders. Levin said when company directors who approve executive compensation learn that the options, while an expense, also produce a huge tax break, it "becomes a tempting proposition for them to pay their executives with stock options instead of cash." Levin proposed that the massive gap be closed via legislation that requires a uniform reporting standards for options.

After resurrecting its Professor in Residence program earlier this year, the Internal Revenue Service has selected Gregg D. Polsky as its 2007-2008 PIR. Polsky recently joined the faculty at Florida State University's College of Law as the Sheila M. McDevitt Professor of Law. He also spent six years on the faculty at the University of Minnesota Law School. Polsky was also in private practice with the firm of White & Case LLP. He succeeds Calvin Johnson, whose term ended May 31. Polsky's term begins in September. Dormant since the late 1980s, the Professor in Residence program provides a forum for legal academicians to contribute and develop legal tax policy and administration. The professor in residence reports to IRS chief counsel Donald Korb.

Republican presidential candidates Rudy Giuliani and Sen. John McCain, R-Ariz., have each refused to sign a pledge not to raise taxes if either is elected as the nation’s chief executive.

Small businesses, those companies with less than 50 employees, increased their payrolls by 58,000 in May, according to the Small Business Report from payroll provider ADP. Highlights from the May report show that the service-providing sector added 61,000 jobs in May, while there was a loss of 3,000 in the goods-producing sector for a net gain of 58,000. Additional charts on monthly job growth and job levels, along with historical data, are available at http://www.smallbusinessreport.adp.com. ADP said its June report would be released July 5.

A business valuation standard that has been incubating for the past five years within the American Institute of CPAs is ready to hatch early next year, and when it does, it could force those who perform business valuations to pay attention to yet another set of guidelines.

Former Internal Revenue Service district director Jesse Ayala Cota pleaded guilty to conspiring to defraud the United States through his involvement in a tax fraud scheme promoted by the Topeka, Kansas-based organization Renaissance, The Tax People Inc.Cota admitted in his plea agreement that from 1997 through April 2002, the conspirators, through Renaissance, operated a scheme to defraud the government by marketing a program designed to sell illegal tax deductions through false and misleading representations.

After learning that more than 450,000 federal workers and retirees owe a whopping $3 billion in back taxes to the Internal Revenue Service, the Senate Finance Committee is urging the president to step up efforts to collect from those delinquent employees.Senate Finance Committee chair Max Baucus, D-Mont., and ranking Republican member Sen. Charles Grassley, R-Iowa, sent a letter to President Bush requesting that he remind the delinquent federal employees and warn them of the consequences of non-compliance.

Tax practitioners looking to Congress, the Treasury or the Patent Office for a solution to the perceived problem of tax strategy patents may instead have found some assistance from an expected source - the Supreme Court.A unanimous Supreme Court, in the case of KSR v. Teleflex, decided on April 30, 2007, overturned a decision of the U.S. Court of Appeals for the Federal Circuit and found a patent claim invalid. In doing so, the high court also criticized the Federal Circuit for applying the wrong standard on patent claims and being too liberal in upholding patent claims for obvious improvements.

Sen. Chuck Grassley, R-Iowa, ranking member of the Senate Finance Committee, has sent a letter to his chamber colleagues in an attempt to blunt what he termed "inaccurate claims" about the private collectors employed by the Internal Revenue Service.In a "Dear Colleague" letter, Grassley pointed out that the agency's own collection infrastructure is better set up for placing liens and garnishing wages than it is for making initial phone calls to delinquent taxpayers to set up a payment plan.

"Segmenting" is nothing new in the accounting profession. It's another term for dividing a marketplace into well-defined groups of likely buyers. It's the foundational step in developing a firm's industry niches and service lines.Although segmenting and then developing niches is a commonly recommended strategy, many CPA firms remain relatively unsophisticated regarding this technique. The result is that potentially remunerative service lines and industries die on the vine. Niches get stuck in ditches and potential opportunities become road kill!

With Friday marking the official start of the hurricane season, the Internal Revenue Service is encouraging taxpayers to safeguard their records. Taking simple steps now can ensure that both individuals and businesses have protected financial and tax records in case of a hurricane, or other disaster.

Nexus - the amount of contact between a taxpayer and the state that subjects the taxpayer to taxation - continues to vary widely from state to state. In addition, the nexus for sales and use tax differs from the nexus for income tax.The nexus requirement is derived from the language in two different places in the Constitution - the commerce clause, which prohibits states from unduly burdening interstate commerce, and the due process clause, which requires a minimum connection between a state and an entity it seeks to tax.