Experiencing Losses? You Aren’t the Only One.

Elizabeth Beauboeuf, Tax Associate

Due to the current state of the economy, many businesses that had always enjoyed being profitable are now finding themselves operating in the red. If you find yourself in that same spot, there may be some relief.

Individuals who have paid taxes in the last five years and are experiencing significant losses from business operations or flow-through entities may be entitled to significant tax refunds.  Current year losses may result in a net operating loss (NOL), which is available to offset income generated in prior years. 

An NOL may be carried back two years or carried forward 20 years to offset income in those tax years.  For the 2008 and 2009 tax years, the Worker, Homeownership and Business Assistance Act of 2009 allows the taxpayer to elect to carry the NOL back either three, four or five years.

In order to carryback an NOL, you can file Form 1045 before the end of the year following the loss.  The benefit of filing Form 1045 is that you will receive your refund within 90 days after filing or within 90 days of the due date of the return for the year in which the loss was incurred.  This can be very beneficial for individuals who need cash quickly following a year with limited cash flow.

Corporations may also be eligible to receive a quick refund for taxes paid in prior years.  Consult your tax advisor for more information.

Bookmark It

More than Numbers: AMD Sends Care to Afghanistan

Millicent Tutlam, CPA, Tax Senior 

Most of my friends and family think that accountants are a strange group with only numbers on our minds. Well, that assumption is far from the truth. Accountants are passionate about many things not related to numbers. At AMD, one of the causes on the top of our list is the men and women serving our country. 

Robert Minkler, Jr., our managing partner, told us a story during the June firm meeting that touched so many of us. He talked of a friend who tells his children to always remember to thank the men in uniform for their service to our country. These men and women of the armed forces made a decision to defend the red, white, and blue. The sacrifices that they made cannot be quantified in any way, shape, or form. 

After that, the AMD social committee decided to get involved by sending care packages to the soldiers serving outside the U.S. One of AMD’s employees has a son who is currently serving in the military in Afghanistan. The social committee organized a supply drive to benefit his unit. During the one month drive that ended on August 19^th, AMD employees contributed everything from toothpaste to power bars to energy drinks and movies. We made sure every man and woman in his unit had their own package, complete with items they requested.  

For me, this cause is very personal. My brother Paul just graduated from basic training and is currently in army technical school. He spent ten weeks in basic training and the most reliable form of communication we had was physical mail. My sister, niece, and I sent so many letters to him during this time. I made sure to let him know that I appreciated what he was doing for our country. 

There are very many ways to help our troops. Write a letter to thank them, send a care package or volunteer with one of the various organizations dedicated to making sure that the brave soldiers are taken care of. 

I am lucky to be part of a firm that recognizes the sacrifices that our soldiers make. Yes, we are accountants, but we also care . . . a lot.

Bookmark It

Going Green Pays Green Part 2

Nicole M. Doeschot, CPA, Tax Associate

In an effort to save both money and the environment, companies are running on a much more “green” philosophy in the way they do business.  One of the most common methods is by constructing green buildings. 

While sometimes going green can have initial additional costs, a provision in the Energy Policy Act of 2005 is intended to offset some of the costs by possibly allowing taxpayers to take an immediate expense of the cost of property that would normally be depreciated over as many as 39 years. 

The energy efficient commercial buildings deduction generally is available for energy efficient commercial building property placed in service after 2005 and before 2014. Commercial building property includes property: 

1. That depreciation is allowable;
2. Which is installed on or in a building located in the United States that is within the scope of Standard 90.1-2001;
3. Which is installed as part of the interior lighting systems; heating, cooling, ventilation’ and hot water systems; or the building envelope (everything that separates the interior of a building from its outdoor environment, including walls, windows, foundation, basement slab, ceiling, roof, and insulation); and
4. Which is certified by a qualified individual in a manner to be prescribed by the Secretary as part of a plan designed to reduce the total annual energy and power costs for the building’s lighting and heating, cooling, ventilation, and hot water systems by 50% or more in comparison to a reference building that meets the minimum requirements of Standard 90.1-2001.  
   Read more
   
   Bookmark It
   

   
   
   

Aging Clients Need Considerate Advisors

Deidra Thomas, CPA, Tax Supervisor 

Our client base is aging.  People are living longer and continue to need planning and financial services into advanced age.  This is good news for CPAs. However, there are health issues that can affect the way we should best communicate with our aging clients. 

If you have noticed an older client having trouble paying attention, becoming paranoid, or undergoing personality changes, they may be suffering from dementia.  Alzheimer’s disease is the most common type of dementia, accounting for 70% of all cases.  The 2009 Alzheimer’s Disease Facts and Figures estimates that over 5.1 million Americans aged 65 or older have Alzheimer’s.  By 2030, that number is estimated to grow to over 7.7 million. With those numbers, it is easy to see that understanding and helping aging clients will continue to become increasingly important not only for CPAs, but for all types of advisors.    

As difficult as it may be to bring up this topic, advisors need to have a discussion with the client, if they demonstrate the above mentioned symptoms.  Legal documents and engagement letters should contain the names of contact persons in case the client should lack the mental capacity to make sound decisions.  Most importantly, we should accommodate clients by taking the following steps:

• Conduct shorter meetings
• Limit the focus to one or two topics
• Be clear of deadlines and courses of action
• Hold meetings in familiar surroundings like the client’s home
• Use simple sentences and limit questions to one at a time
• Do not argue or correct
• Above all, be patient 

As our clients age, there is a strong likelihood that some, or perhaps even many, will develop a type of dementia.  Service should remain our top priority. By communicating in a way that addresses their needs, we ensure that our clients continue to see us as trusted advisors.

Bookmark It

You Got a 74 on a Section of the CPA Exam; What Now?

Sarah Holub, CPA, Audit Associate 

You took the test. You’ve sat waiting for weeks in anticipation. You go to the NASBA website, put in your birth date and section ID. And after you coax your hand off the little white box, there, staring back at you in GIANT BLACK FONT is the BIG FAT, 74.

The majority of people along their way to becoming a CPA have this happen, whether on the first or the fourth exam, at least once. No one can truly understand this sinking feeling unless it has happened to them. Others will try to sympathize, but they will never get it.

After your heartbeat has slowed to a normal pace and you’ve shed a few tears, comes the big question: What now? This is not the way things were supposed to happen. This wasn’t part of the plan.

First of all, take a deep breath. Even though it may not feel like it sometimes, the majority of people do not pass all four parts of the exam the first time through. You are in good company. The following are pass rates for 2009 by section:

            AUD - 49.79%                        BEC - 48.34%

            FAR - 48.45%                        REG - 49.81%

That is a lot of people who didn’t pass. As corny as it may sound, it can help to look to the Internet for support. Sites like www.another71.com are created and frequented by people who are in the same boat. It helps to know you aren’t alone.

Next, figure out your new plan. I say new because it was obviously never the goal to fail. It wasn’t meant to be a really expensive pretest. Some people want to continue taking tests in the same order they had intended and re-take the failed section again at the end; some want to take it again immediately so the information is still fresh. It is up to you, and you know yourself best. It feels better to have a plan and get back on track.

Finally, change something about your studying. If you are using one review program, supplement it with another program’s book from Amazon. Maybe you learn better listening than reading; record yourself and listen to notes in the car on the way to work. Everyone learns differently, so don’t think you have to do the study program exactly how they present it.

Just remember, someday soon it will all be over and you’ll have more free time than you know how to fill. I know more people who have gotten a score between 70 and 74 than have passed all parts the first time through. Lots of people who are not as smart as you managed to do it, and you can, too.

Bookmark It

More States. More Complications. More Penalties.

Katie King, CPA, Tax Associate 

The burden of simply keeping up with the reporting requirements of each individual state can cause a lot of headaches for small businesses. In fact, taxes and regulations are among the biggest challenges facing small businesses today. Operating in multiple states? The challenges multiply exponentially.  

Many small businesses are organized as passthrough entities, and the taxing and regulatory procedures of states on passthrough entities as well as their owners vary greatly.  It is very important for businesses that operate in multiple states to have clear guidance, and when necessary outside help in order to ensure that they are meeting all of the requirements. 

A few of the issues that need to be addressed include: 

• Nexus - at what point you are required to file in a state
• Entity classifications such as S corporations and LLCs and how they are treated
• At what level the state tax is imposed - at the entity level or the owner level
• Mandatory withholding or estimated tax payments
• Annual Reports - some states require these as well as a tax return
• Composite Returns - these allow the entity to file on behalf of the nonresident owners 

And the list goes on and on and on. . . . . 

As you can see there are a lot of things to think about, and the more states a business operates in, the more complicated it gets.  It is very important to ensure all of the state requirements are met because just as the challenges multiply exponentially with the amount of states you operate in, so do the penalties. For advice about your business, be sure to contact your tax advisor.

Bookmark It

Owners of Distressed Properties May Qualify For Debt Reduction or Even Cancellation

Monica L. McKillip, CPA, Tax Senior

Cancellation of debt income (CODI) from distressed property is becoming more prevalent; yet one more effect of today’s lagging economy.  As discouraging as the situation may be, there are several ways to minimize the tax impact of debt forgiveness or debt restructuring. 

The general rule is that CODI must be included in taxable income.  However, there are provisions in the tax law that allow for the exclusion of CODI to individuals and businesses. Taxpayers that may benefit from these provisions include real property owners that have:

• filed for bankruptcy
• demonstrated they are insolvent, or
• qualified real business property indebtedness

If you have distressed property, there are also other consequences that CODI may have on your specific tax situation.  If the CODI is excluded from your taxable income, your tax attributes must be reduced, which may mean a reduction of net operating losses, general business credits, and capital loss carryovers to name a few. 

Contact your tax professional early in a situation of distressed property. They can recommend an action plan and ideal timing of events to either minimize or eliminate your tax implications.  Your tax professional can also help you negotiate with lenders.  Many lenders would rather work with the taxpayer to reach an agreement than to go through the cost of a foreclosure.  There are multiple scenarios in which the lenders and taxpayers walk away relatively unscathed. But, you need to be proactive to achieve a favorable outcome.

Bookmark It