Got issues? A virtual roundtable has the answers.
by Rick Telberg
At Large
It's hard to know where to begin when trying to list and address the biggest issues and opportunities facing the CPA profession.
Is it the changing competitive landscape? Unpredictable career paths? Technology? Regulation?
It's overwhelming. So I've assembled a virtual roundtable of advisors for you. By e-mail, four of the profession's leading lights shared with me some of their biggest concerns, greatest passions and essential success strategies for CPAs today.
The panelists are:
* James C. Metzler, CPA, vice president in charge of small-firm interests at the AICPA. Based in East Amherst, N.Y., near Buffalo, Metzler has led his own CPA and technology consulting firms.
* Charles C. Larson, CPA, based in Saint Joseph, Mo., a driving force behind the Missouri MAP conference and one of the most experienced practice consultants in the profession.
* Bob Wilson, director, firmwide human resources, RSM McGladrey Inc. Based in Charlotte, N.C., he's head of staff recruiting.
* Donald P. Danner, chair of the Missouri society MAP committee and chief financial officer of Aspen Marketing Services, the largest privately held marketing services company in the U.S., based in Chicago.
All are involved in the 32nd Annual Management of an Accounting Practice Conference, produced by the Missouri Society of CPAs, next week, Nov. 8-9, in Kansas City, Mo. It may be the oldest continuously running MAP conference in the profession.
The conference also features some of the biggest names on the circuit today, including: David G. McIntee, a Kinnelon, N.J., CPA, who has long been involved with the AICPA in practice issues; L. Gary Boomer, the renowned technology guru from Manhattan, Kan.; Gale Crosley, the marketing advisor from Atlanta. And I'm honored to be keynoting the event on opening day.
Here are some of the highlights of our virtual roundtable:
WHAT'S THE SINGLE MOST IMPORTANT ISSUE IN BUSINESS TODAY AFFECTING CPAs?
* METZLER: It's business ethics and corporate responsibility.
* LARSON: Change... in every aspect of our practice, including: technology, personnel, new sources of competition, and new rules and laws.
* WILSON: The supply of new people entering and remaining in the profession.
* DANNER: How to restore trust and balance to the financial markets at all levels.
WHAT EFFECTS ARE SCANDALS, REFORMS AND CONSOLIDATION HAVING?
* METZLER: Re-focusing and elevating longstanding standards such as independence, client acceptance, client retention, code of ethics and code of conduct.
* DANNER: Over-legislation and the ongoing series of unintended consequences.
* LARSON: None, for smaller firms. In local firms, CPAs continue to be America's most trusted advisor. New rules have imposed new costs and often unnecessary requirements on these local firms that were not involved in the scandals and incidents occasioning the new requirements.
WHAT'S THE BIG LESSON IN MARKETING?
* METZLER: A new market has opened up for smaller firms as a result of SOX and the inability for auditors of public companies to do nonattest services. There are now opportunities for the smallest of firms to do business with public companies by performing nonattest services such as tax, reconciliation, accounting, internal audit, inventory work, even write-up for small divisions and branch locations.
* LARSON: You better know what is available in the market. And, you better know your competition from outside the profession.
* DANNER: Expertise and relationships remain the key to provide "full-service" to our clients.
HOW IMPORTANT IS TECHNOLOGY TODAY? CAN YOU GET ALONG ANYMORE WITHOUT A CRM SYSTEM? A WEB SITE? OR E-MAIL?
* METZLER: No. Utilizing the best in technology is a given.
* DANNER: Technology is a key facilitator. But some mindsets create a "slavery" to technology, losing track of the reason for it.
* LARSON: It's as important as you are willing to make it. If you spend the time and money it will pay off.
WHAT'S THE SINGLE BIGGEST MISTAKE CPAs ALWAYS SEEM TO MAKE?
* WILSON: Short-term focus in regard to staffing and people issues.
* METZLER: Firms drive on individual measurements/success rather than firm/group success, thus very many firms have unaligned leadership and fail to get to the next level because of it.
* LARSON: Analysis paralysis.
* DANNER: Being slow adaptors. We must learn to manage our practices from a variety of sources including colleagues in industry.
CAN RAINMAKERS BE "MADE," OR ARE THEY JUST "BORN" THAT WAY?
* METZLER: They can be made. Those who are born that way are naturally extroverted and are great at bringing in new name clients. But they still need the training and the discipline. Those who are more introverted are great at selling expanded services to current clients once they are trained appropriately. Anyone who follows -- and adheres to -- a simple sales process methodology can become a rainmaker.
* LARSON: Easy to make... But it takes a long time to describe how.
* DANNER: With some pre-attitude, they can be made.
NAME A BUSINESS BOOK OR CONSULTANT THAT SHOULD BE CRITICAL TO EVERY CPA'S THINKING.
* METZLER: Zig Ziglar and all of his books and tapes.
* DANNER: "Good to Great." It traces a measured, reasoned approach to success. Jim Collins identifies a number of issues confronting all business entities.
* LARSON: Besides his own "Billing & Collection Methods that Work," he recommends Ron Baker on value billing.
Sunday, October 31, 2004
Saturday, October 30, 2004
Can You Close a Million-Dollar Deal in Two Sales Calls?
Maybe. If you follow this partnering strategy.
1. Establish a relationship with a partner. Gardner calls the partner a code breaker. "A partner is someone who already is writing millions of dollars’ worth of business annually with one of your potential clients. He or she usually is a sales rep with another company that is not a competitor," says Gardner. "This is your strategic alliance – the person who can get you in to see the decision maker."
So how do you find the right partner? Gardner suggests researching companies and finding sales reps who are connected to some of the major corporations you are interested in approaching. Contact them with your idea about working together. Once you both agree the foundation of a mutually beneficial relationship exists, research the new account and meet with your partner before the sales call to talk specifically about the strategy you will use with the client.
2. Make the first sales call. "You are already prequalified in the decision maker's mind because of the code breaker," says Gardner. "Ease your way into the meeting by taking a back seat and letting your partner follow up on old business. Then have the him or her introduce you." Remember, says Gardner, you need to be armed with case studies and metrics. "Know your RIO, your differentiators and value-adds before you enter the room," she says.
3.Make the second (and last) sales call. Keep in mind you may be meeting with someone other than the CEO. "If this is the case, try to introduce yourself to the person before your presentation," she says. "You can do this via a conference call or, after your meeting with the C-level person, walk down the hall and introduce yourself. Find out in advance who your allies are. You don't want to go in cold."
The second sales call is a traditional sales meeting where you pitch your product, answer questions and discuss the details. You don’t need the code breaker for this meeting, but you do need to be prepared. "Because you have entered at an exceptional level on the solid reputation of your partner, you will get the commitment and close the deal in this sales call," says Gardner.
4. Keep the code breaker in the loop. If you want to continue to build the relationship with your partner – and you do – you need to keep that person in the loop about everything that is happening with the account. "You build rapport and trust by communicating," says Gardner. "Keep C-level people in the loop, too, but pick and choose what you tell them."
5. Move on. After you close the deal, create a technical team to handle the pricing, proposal and smaller details while you move on to close other deals with your partner.
Source: Patricia Gardner, president of the consulting firm, Maximum Sales Inc., and author of The Million Dollar Sales Call (McGraw Hill, October 2004), via sellingpower.com
1. Establish a relationship with a partner. Gardner calls the partner a code breaker. "A partner is someone who already is writing millions of dollars’ worth of business annually with one of your potential clients. He or she usually is a sales rep with another company that is not a competitor," says Gardner. "This is your strategic alliance – the person who can get you in to see the decision maker."
So how do you find the right partner? Gardner suggests researching companies and finding sales reps who are connected to some of the major corporations you are interested in approaching. Contact them with your idea about working together. Once you both agree the foundation of a mutually beneficial relationship exists, research the new account and meet with your partner before the sales call to talk specifically about the strategy you will use with the client.
2. Make the first sales call. "You are already prequalified in the decision maker's mind because of the code breaker," says Gardner. "Ease your way into the meeting by taking a back seat and letting your partner follow up on old business. Then have the him or her introduce you." Remember, says Gardner, you need to be armed with case studies and metrics. "Know your RIO, your differentiators and value-adds before you enter the room," she says.
3.Make the second (and last) sales call. Keep in mind you may be meeting with someone other than the CEO. "If this is the case, try to introduce yourself to the person before your presentation," she says. "You can do this via a conference call or, after your meeting with the C-level person, walk down the hall and introduce yourself. Find out in advance who your allies are. You don't want to go in cold."
The second sales call is a traditional sales meeting where you pitch your product, answer questions and discuss the details. You don’t need the code breaker for this meeting, but you do need to be prepared. "Because you have entered at an exceptional level on the solid reputation of your partner, you will get the commitment and close the deal in this sales call," says Gardner.
4. Keep the code breaker in the loop. If you want to continue to build the relationship with your partner – and you do – you need to keep that person in the loop about everything that is happening with the account. "You build rapport and trust by communicating," says Gardner. "Keep C-level people in the loop, too, but pick and choose what you tell them."
5. Move on. After you close the deal, create a technical team to handle the pricing, proposal and smaller details while you move on to close other deals with your partner.
Source: Patricia Gardner, president of the consulting firm, Maximum Sales Inc., and author of The Million Dollar Sales Call (McGraw Hill, October 2004), via sellingpower.com
Wednesday, October 27, 2004
CPA MARKETING:
Does Advertising Work?
YES! GOOD B2B advertising works great, especially with innovators.
CPAs and small business owners are the Influentials of our communities... The social leaders who influence our opinions about what to buy and who to believe are more likely than any other influence group to also own their own company.
The elite among these influential business owners are the Innovators. Innovators are those business owners who seek out and try the newest products or services. These active learners search for new information. Market scanning is an innate habit. In addition to being voracious absorbers of information, they also experiment and tolerantly try new products and services, often before development is entirely complete. They are a dream customer for most product marketers and every marketers’ ideal target.
Given their sophistication, these Innovator business owners are surprisingly influenced by good B2B advertising. In fact, more than half acknowledge that good SMB ads make them feel good. More importantly, more than 75% of all Innovators claim that good B2B advertising affects their purchase decisions. Spending by Innovators is vastly more affected by good B2b advertising than Early Adopters, the next group most likely to try new things.
Source: Warrillow & Co.
CPAs and small business owners are the Influentials of our communities... The social leaders who influence our opinions about what to buy and who to believe are more likely than any other influence group to also own their own company.
The elite among these influential business owners are the Innovators. Innovators are those business owners who seek out and try the newest products or services. These active learners search for new information. Market scanning is an innate habit. In addition to being voracious absorbers of information, they also experiment and tolerantly try new products and services, often before development is entirely complete. They are a dream customer for most product marketers and every marketers’ ideal target.
Given their sophistication, these Innovator business owners are surprisingly influenced by good B2B advertising. In fact, more than half acknowledge that good SMB ads make them feel good. More importantly, more than 75% of all Innovators claim that good B2B advertising affects their purchase decisions. Spending by Innovators is vastly more affected by good B2b advertising than Early Adopters, the next group most likely to try new things.
Source: Warrillow & Co.
Sunday, October 24, 2004
Do Accountants Have The Skills to Help Save The Planet?
Can it happen here (in the U.S)?
From London, comes this report: Chartered accountants may have the potential to be major players in the sustainability arena, according to a new report published last Wednesday by the Institute of Chartered Accountants in England & Wales. By assuring corporate performance in areas such as human rights and greenhouse gas emissions, accountants in practice can make businesses more accountable to investors and regulators. Through collecting, reviewing and interpreting information relating to environmental and social impacts, those in business can make sustainability benchmarking more reliable.
While entering this field of work presents many challenges for accountants, not least because of the paucity of suitable reporting criteria, the Institute of Chartered Accountants says the opportunities are considerable. ICAEW President Paul Druckman commented: "Chartered accountants have a long history of responding to new market opportunities and shifts in public expectations. I personally think the profession should take a lead on sustainability because it is in the public interest. But even from a hard-headed business perspective, this is an area of work into which accountants can and should diversify because governments and consumers will increasingly demand sustainable corporate behaviour."
But don't hold your beath. The Institute's own survey of the managing partners of 143 accountancy firms found only 10% had so far received any demand from clients for guidance on environmental or social regulations and taxes. However, this is the main area in which demand for practitioner services is expected to increase in the next three to five years, with 52% of respondents predicting at least some demand for advice.
Accountants may indeed "have the skills to help the planet." But does the planet really want to be saved by accountants? Just wondering.
From London, comes this report: Chartered accountants may have the potential to be major players in the sustainability arena, according to a new report published last Wednesday by the Institute of Chartered Accountants in England & Wales. By assuring corporate performance in areas such as human rights and greenhouse gas emissions, accountants in practice can make businesses more accountable to investors and regulators. Through collecting, reviewing and interpreting information relating to environmental and social impacts, those in business can make sustainability benchmarking more reliable.
While entering this field of work presents many challenges for accountants, not least because of the paucity of suitable reporting criteria, the Institute of Chartered Accountants says the opportunities are considerable. ICAEW President Paul Druckman commented: "Chartered accountants have a long history of responding to new market opportunities and shifts in public expectations. I personally think the profession should take a lead on sustainability because it is in the public interest. But even from a hard-headed business perspective, this is an area of work into which accountants can and should diversify because governments and consumers will increasingly demand sustainable corporate behaviour."
But don't hold your beath. The Institute's own survey of the managing partners of 143 accountancy firms found only 10% had so far received any demand from clients for guidance on environmental or social regulations and taxes. However, this is the main area in which demand for practitioner services is expected to increase in the next three to five years, with 52% of respondents predicting at least some demand for advice.
Accountants may indeed "have the skills to help the planet." But does the planet really want to be saved by accountants? Just wondering.
Friday, October 22, 2004
Tax Pros: Get Ready for 2005
'Bring it on!' says one CPA. 'It comes too fast,' gripes another.
by Rick Telberg
At Large
With the last of the extension dates passed and gone a couple of weeks ago, tax professionals are gearing up for a 2005 filing season that figures to be one of the best, if not smoothest, of their careers.
A flurry of tax bills in recent weeks, plus the uncertainty of the implications of the quadrennial voting next week, is spicing up an otherwise smooth-running start-up phase. Lessons from last year are being recalled, new tax software is under review, new office procedures are getting a try, and temporary staff is being lined up.
In fact, about 41 percent of the CPAs I've surveyed say they are "about on schedule to be ready" for the new tax season. Another 4 percent are "totally ready to rock-n-roll!"
"Bring it on!" said the owner of one small firm.
Of course, there are always the procrastinators: 19 percent said, "I don't even want to think about it yet."
Overall, nevertheless, CPAs are eager and optimistic.
Check the stats:
-- 75% expect gains in revenue over last year.
-- 72% expect gains in profits to match.
-- 65% expect no change in the number of clients on extension.
-- 64% expect more revenue per client.
-- 61% expect more profit per client.
"People will be more confused than ever," conceded one CPA, apologetically. "Of course, that's good for our business. But it's bad for the citizen's understanding of the government's financial operations."
Still, the usual challenges loom:
-- 63% worry that clients will be late or unprepared.
-- 41% are concerned about last-minute changes by the government.
-- 36% fret about finding enough staff.
-- 29% expect technology problems.
-- 28% say learning all the new rules, regs and forms will be an issue.
-- 28%, again, worry about the overall economy's impact on their business.
-- 13% wonder how the IRS will be operating this year.
-- 8% are warily eying new competitors.
One problem that many preparers hope won't reappear this year is the late 1099's from financial institutions, which were jammed up last year by some late changes in the law.
"As tax law changes are enacted and complexities become greater, our service is much more valuable and goes much further beyond the standard tax return completion, 'see-you-in-8-months' mentality, according to one respondent. "Clients are demanding more attention during the year and we find it a profitable niche. For a small firm, we can offer that kind of attention to the clients that demand it, plus it allows us to know more and more about our client base since we spend so much time together."
Now there's a CPA who seems to know how to run a tax practice.
by Rick Telberg
At Large
With the last of the extension dates passed and gone a couple of weeks ago, tax professionals are gearing up for a 2005 filing season that figures to be one of the best, if not smoothest, of their careers.
A flurry of tax bills in recent weeks, plus the uncertainty of the implications of the quadrennial voting next week, is spicing up an otherwise smooth-running start-up phase. Lessons from last year are being recalled, new tax software is under review, new office procedures are getting a try, and temporary staff is being lined up.
In fact, about 41 percent of the CPAs I've surveyed say they are "about on schedule to be ready" for the new tax season. Another 4 percent are "totally ready to rock-n-roll!"
"Bring it on!" said the owner of one small firm.
Of course, there are always the procrastinators: 19 percent said, "I don't even want to think about it yet."
Overall, nevertheless, CPAs are eager and optimistic.
Check the stats:
-- 75% expect gains in revenue over last year.
-- 72% expect gains in profits to match.
-- 65% expect no change in the number of clients on extension.
-- 64% expect more revenue per client.
-- 61% expect more profit per client.
"People will be more confused than ever," conceded one CPA, apologetically. "Of course, that's good for our business. But it's bad for the citizen's understanding of the government's financial operations."
Still, the usual challenges loom:
-- 63% worry that clients will be late or unprepared.
-- 41% are concerned about last-minute changes by the government.
-- 36% fret about finding enough staff.
-- 29% expect technology problems.
-- 28% say learning all the new rules, regs and forms will be an issue.
-- 28%, again, worry about the overall economy's impact on their business.
-- 13% wonder how the IRS will be operating this year.
-- 8% are warily eying new competitors.
One problem that many preparers hope won't reappear this year is the late 1099's from financial institutions, which were jammed up last year by some late changes in the law.
"As tax law changes are enacted and complexities become greater, our service is much more valuable and goes much further beyond the standard tax return completion, 'see-you-in-8-months' mentality, according to one respondent. "Clients are demanding more attention during the year and we find it a profitable niche. For a small firm, we can offer that kind of attention to the clients that demand it, plus it allows us to know more and more about our client base since we spend so much time together."
Now there's a CPA who seems to know how to run a tax practice.
Wednesday, October 20, 2004
CPA FIRM MARKETING MINUTE:
Now's the Time to Think Ahead for the Holidays
Yesterday, one marketing advisor was reading her local business newspaper, and was surprised toi find the first Christmas-related article of the season. It was an attorney's perspective on employers' liability for drinking at holiday parties. But it could just as well have been a CPA's views on year-end planning.
Marketers must always be thinking ahead. It's not too late for deadlines at local newspapers, weekly magazines, radio, TV and the web.
Here are three strategies:
1. A news release. Journalists and producers search online
for holiday content ideas, so this can inspire them to use you as a source.
2. An advice, personal experience or opinion piece related to the holidays.
3. Pitching yourself to the media as a resource on an issue
that often comes up during the holidays: plum pudding, the etiquette of mistletoe, family stress, car travel with kids, electrical safety, interfaith conflicts, or, obviously, end-of-year tax planning and business strategies, charitable gifts, etc. Approach media folks by calling, emailing or enclosing a business card or Rolodex card with a postal letter.
Marketers must always be thinking ahead. It's not too late for deadlines at local newspapers, weekly magazines, radio, TV and the web.
Here are three strategies:
1. A news release. Journalists and producers search online
for holiday content ideas, so this can inspire them to use you as a source.
2. An advice, personal experience or opinion piece related to the holidays.
3. Pitching yourself to the media as a resource on an issue
that often comes up during the holidays: plum pudding, the etiquette of mistletoe, family stress, car travel with kids, electrical safety, interfaith conflicts, or, obviously, end-of-year tax planning and business strategies, charitable gifts, etc. Approach media folks by calling, emailing or enclosing a business card or Rolodex card with a postal letter.
Monday, October 18, 2004
Something for Everyone in New Corporate Tax Bill
A supposedly simple technical corrections bill to fix problems in trade subsidies becomes a Christmas tree.
by Rick Telberg
At Large
The American Jobs Creation Act of 2004, passed by Congress and headed for the President's desk for signing, began more than two years ago as an effort at ending illegal U.S. trade subsidies. It may have done that; but it has done so much more. In fact, the bill turned into a 633-page Christmas tree of corporate tax breaks (Watch Out for Election-Year Tax Issues).
Some items, of course, are needed and commendable. Bob Scharin, editor of the Thomson RIA Practical Tax Strategies, for instance, points out that the bill closes an oft-abused tax break for individuals donating used vehicles to charity. "Because the crackdown on donations of automobiles to charity will take effect in 2005," he advises, "taxpayers intending to make such donations should consider doing so before year end."
Sen. John McCain called the bill "a classic example of the special interests prevailing over the public's interests," and Sen. Ted Kennedy agreed: "Elite corporate interests are the winners at the expense of average Americans."
Mainly, the new corporate tax bill grants about $136 billion in supposedly revenue-neutral tax breaks over the next decade. The $10-billion buyout of tobacco farmers and tax breaks for big companies like GE, Caterpillar, Boeing and Microsoft have gotten the most news coverage, but true tax mavens looking at the bill page-by-page are finding all sorts of little gems.
"The basic plan to replace the exemption was simple, but the bill became more expansive, and pretty complex and convoluted in the legislative process," noted Mark Luscombe, JD, CPA, principal federal tax analyst for CCH. "To gain support for the bill, all sorts of things were tacked on to appeal to specific groups, such as farmers, the film industry, residents of states that don't have an income tax and so on."
For instance:
-- Ceiling Fans: Suspends a 4.7 percent duty on ceiling fans, which Home Depot is one of the main beneficiaries. This is for any ceiling fans purchased before December 31, 2006. Cost: $44 million.
-- Shopping Malls: $231 million in taxpayer funds to finance $2 billion in bonds for mall developments in Syracuse, NY; Shreveport, LA; Lakewood, CO and Atlanta, GA.
-- Dog and Horse Race Tracks: A $27 million provision included to lure more foreigners to gamble at U.S. horse and dog racing establishments.
-- Cruise Ships: A $28 million provision allows the cruise industry a delay in paying taxes on the airplane tickets, hotels, and other excursions it sells in the United States. The tax delay would save Carnival Corp $15 million and Royal Caribbean would save $8 million to $10 million.
-- Fishing Tackle Boxes: Reduces the excise tax on fishing tackle boxes to 3 percent from 10 percent. One of the biggest beneficiaries will be Plano Molding Co. of Illinois. The company has been making plastic fishing-tackle boxes for more than 55 years. Cost: $11 million.
-- NASCAR: A $101 million provision which allows track owners to write off the cost of grandstand facilities over seven years - the only such tax break for owners of a sports facility.
-- Trial Lawyers: This $327 million tax break establishes costs incurred as a result of attorney and court costs paid to prosecute a claim of unlawful discrimination as a tax deduction.
-- Hollywood: A $336 million break that allows studios to expense up to $15 million in the first year of production of small and independent films in the United States. Studios could expense an additional $5 million if a significant amount of production expenditures are incurred in low-income communities or in the Delta Regional Authority. The Delta Regional Authority includes counties in Alabama, Arkansas, Illinois, Kentucky, Louisiana, Mississippi, Missouri and Tennessee. Hollywood also benefits from the new manufacturing tax break.
The list goes on: $247 million break for manufacturers of corporate and private jets on top of a $995 million break for companies that lease planes; $501 million break for railroads and even a $9 million break for archery companies.
But, most troublesome for tax professionals may be the new, separate rates on manufacturing and service companies.
For the first time in memory, if not history, according to AICPA taxation vice president Tom Ochsenchlager (The New Tax Bill: Washington at Work), they will be taxed at different rates -- 35 percent for services and lowered to 32 percent for manufacturers.
Last week, I wrote wistfully wishing for real tax simplicity. This, of course, isn't it.
"Major tax overhaul may indeed be a pipe dream, depending on what you put in the pipe and whether or not you inhale," quipped reader Richard W. Blalock, a St. Charles, MO, CPA, in an e-mail. "But it's clear that the ever-growing volumes of tax legislation, tax code, tax regulations, letter rulings and on, and on, and on, are growing tiresome to even the most studious of the tax specialists in this country. I cringe every time I hear someone jump on his or her soapbox and preach tax simplification. But if by simplification they are talking about abolishment of the income, estate and payroll taxes in favor of let's say a national sales tax, well, you've got my attention and could well gain my support."
CPA Margaret E. McConn in Houston might agree. "The federal income tax is supposed to be a self-assessed tax," she said. "It is now so complicated that even the intelligent are best-served hiring a professional tax preparer. This will only get worse. I am one tax preparer who would love to see a tax law change to put me out of business, in the interest of fairness."
Some have suggested a VAT, CPA William Seth suggests instead a "FAT tax."
"Fat is killing the country. A slow agonizing death just as insidious as cigarettes and just as sure as the Red Sox not winning the series," he writes on his blog. "Here's a thought: Taxation based upon fat. The ultimate consumption tax, eh?"
Follow his thinking: The Federal budget is roughly $2 trillion. Divide that by a population of 350 million, and that equals about a $6,000 tax burden for every citizen. So, if you're 10% overweight, you owe an additional 10 percent or $600; 10 percent under, pay less.
Who knows? Seth's solution sounds about as reasonable as some of the items in the new tax bill.
by Rick Telberg
At Large
The American Jobs Creation Act of 2004, passed by Congress and headed for the President's desk for signing, began more than two years ago as an effort at ending illegal U.S. trade subsidies. It may have done that; but it has done so much more. In fact, the bill turned into a 633-page Christmas tree of corporate tax breaks (Watch Out for Election-Year Tax Issues).
Some items, of course, are needed and commendable. Bob Scharin, editor of the Thomson RIA Practical Tax Strategies, for instance, points out that the bill closes an oft-abused tax break for individuals donating used vehicles to charity. "Because the crackdown on donations of automobiles to charity will take effect in 2005," he advises, "taxpayers intending to make such donations should consider doing so before year end."
Sen. John McCain called the bill "a classic example of the special interests prevailing over the public's interests," and Sen. Ted Kennedy agreed: "Elite corporate interests are the winners at the expense of average Americans."
Mainly, the new corporate tax bill grants about $136 billion in supposedly revenue-neutral tax breaks over the next decade. The $10-billion buyout of tobacco farmers and tax breaks for big companies like GE, Caterpillar, Boeing and Microsoft have gotten the most news coverage, but true tax mavens looking at the bill page-by-page are finding all sorts of little gems.
"The basic plan to replace the exemption was simple, but the bill became more expansive, and pretty complex and convoluted in the legislative process," noted Mark Luscombe, JD, CPA, principal federal tax analyst for CCH. "To gain support for the bill, all sorts of things were tacked on to appeal to specific groups, such as farmers, the film industry, residents of states that don't have an income tax and so on."
For instance:
-- Ceiling Fans: Suspends a 4.7 percent duty on ceiling fans, which Home Depot is one of the main beneficiaries. This is for any ceiling fans purchased before December 31, 2006. Cost: $44 million.
-- Shopping Malls: $231 million in taxpayer funds to finance $2 billion in bonds for mall developments in Syracuse, NY; Shreveport, LA; Lakewood, CO and Atlanta, GA.
-- Dog and Horse Race Tracks: A $27 million provision included to lure more foreigners to gamble at U.S. horse and dog racing establishments.
-- Cruise Ships: A $28 million provision allows the cruise industry a delay in paying taxes on the airplane tickets, hotels, and other excursions it sells in the United States. The tax delay would save Carnival Corp $15 million and Royal Caribbean would save $8 million to $10 million.
-- Fishing Tackle Boxes: Reduces the excise tax on fishing tackle boxes to 3 percent from 10 percent. One of the biggest beneficiaries will be Plano Molding Co. of Illinois. The company has been making plastic fishing-tackle boxes for more than 55 years. Cost: $11 million.
-- NASCAR: A $101 million provision which allows track owners to write off the cost of grandstand facilities over seven years - the only such tax break for owners of a sports facility.
-- Trial Lawyers: This $327 million tax break establishes costs incurred as a result of attorney and court costs paid to prosecute a claim of unlawful discrimination as a tax deduction.
-- Hollywood: A $336 million break that allows studios to expense up to $15 million in the first year of production of small and independent films in the United States. Studios could expense an additional $5 million if a significant amount of production expenditures are incurred in low-income communities or in the Delta Regional Authority. The Delta Regional Authority includes counties in Alabama, Arkansas, Illinois, Kentucky, Louisiana, Mississippi, Missouri and Tennessee. Hollywood also benefits from the new manufacturing tax break.
The list goes on: $247 million break for manufacturers of corporate and private jets on top of a $995 million break for companies that lease planes; $501 million break for railroads and even a $9 million break for archery companies.
But, most troublesome for tax professionals may be the new, separate rates on manufacturing and service companies.
For the first time in memory, if not history, according to AICPA taxation vice president Tom Ochsenchlager (The New Tax Bill: Washington at Work), they will be taxed at different rates -- 35 percent for services and lowered to 32 percent for manufacturers.
Last week, I wrote wistfully wishing for real tax simplicity. This, of course, isn't it.
"Major tax overhaul may indeed be a pipe dream, depending on what you put in the pipe and whether or not you inhale," quipped reader Richard W. Blalock, a St. Charles, MO, CPA, in an e-mail. "But it's clear that the ever-growing volumes of tax legislation, tax code, tax regulations, letter rulings and on, and on, and on, are growing tiresome to even the most studious of the tax specialists in this country. I cringe every time I hear someone jump on his or her soapbox and preach tax simplification. But if by simplification they are talking about abolishment of the income, estate and payroll taxes in favor of let's say a national sales tax, well, you've got my attention and could well gain my support."
CPA Margaret E. McConn in Houston might agree. "The federal income tax is supposed to be a self-assessed tax," she said. "It is now so complicated that even the intelligent are best-served hiring a professional tax preparer. This will only get worse. I am one tax preparer who would love to see a tax law change to put me out of business, in the interest of fairness."
Some have suggested a VAT, CPA William Seth suggests instead a "FAT tax."
"Fat is killing the country. A slow agonizing death just as insidious as cigarettes and just as sure as the Red Sox not winning the series," he writes on his blog. "Here's a thought: Taxation based upon fat. The ultimate consumption tax, eh?"
Follow his thinking: The Federal budget is roughly $2 trillion. Divide that by a population of 350 million, and that equals about a $6,000 tax burden for every citizen. So, if you're 10% overweight, you owe an additional 10 percent or $600; 10 percent under, pay less.
Who knows? Seth's solution sounds about as reasonable as some of the items in the new tax bill.
Monday, October 11, 2004
Watch Out for Election Year Tax Issues
Candidate positions could have a huge and lasting impact on how practitioners work and plan.
by Rick Telberg/At Large
Just as President Bush was preparing last week to sign the tax extenders bill, officially known as The Working Families Tax Relief Act of 2004, I was sitting down with four of the best tax insiders in the business in their lower Manhattan offices. What they told me is essential information for every tax professional -- maybe even every taxpayer.
Seated around the conference table at tax and legal publisher, Thomson/RIA headquarters were:
-- Bob Scharin, who focuses on individuals and small business,
-- Bob Fuerst, for international and corporate issues,
-- Bill Massey, estate and gift tax planning, and
-- Dick O'Donnell, the pensions specialist.
Their attention was already shifting from the new tax bill to the next tax bill and the long-term ramifications of the upcoming election. Remember, they warned, Americans will be voting for more than just a President. One-third of the Senate is up for re-election and every seat in the House is open. With an election season as unpredictable and volatile as this, anything could happen. And it might. CPAs will need to maintain constant vigilance going into tax season.
For one thing, as soon as the election is over, no matter who wins or loses, there was still a chance late last week that there would be a lame-duck session of Congress to pass the ETI-FSC bill, which could be a 630-page whale of new, and perhaps retroactive, changes affecting almost every business, not just corporations, and adding a brand new wrinkle to tax accounting: differentiating between "service" and "manufacturing" incomes.
"They're going to do something, sooner rather than later," Massey said confidently.
But if the lame-duck session ends empty-handed on Nov. 20, it all starts over again in January. And that could cause real problems as CPAs get rolling into the 2005 filing season.
"Practitioners will have to look at the bill just to see how it affects their companies and clients before doing anything else," said Fuerst. "They'll need to be thinking, 'If we're not affected this year, what should we be doing to set up and qualify for the benefits next year?'"
And then it could all change again with a new Congress and new Bush or Kerry Administration. The presidential candidates' fundamental views of the tax system represent a major difference, hardly surfaced yet in the campaign.
Kerry, for instance, would roll back the Bush cuts and seek new revenues from those earning over $200,000 a year.
"There'd be more means-testing" under a Kerry presidency, according to Scharin. But the details remain murky and unpredictable, dictated by what Kerry could find on his desk when, if, he takes office.
Bush, on the other hand, has laid a strong vision of an "ownership society" that could radically change retirement planning, by replacing 401(k)s, SEPs, and SIMPLEs with LSAs, RSAs and ERSAs ("Lifetime," "Retirement" and "Employer Retirement" savings accounts).
"It's good for the small business owner, but not so good for the employee," according to O'Donnell's analysis, because it would eliminate the requirement that employers who set up plans for themselves must also offer coverage to their workers.
Plus, O'Donnell is quick to add that the defined-benefit Pension Benefit Guaranty Corp., already underfunded by maybe as much as $11 billion and under pressure by possible bailouts at struggling airlines, faces potential insolvency. It might need its own bailout, he said, reminiscent of the Resolution Trust Corp. after the savings-and-loan catastrophe of the 1980s.
During the campaign, Bush has briefly raised the issue of eliminating the income tax, without suggesting whether he'd replace it with a flat tax, a VAT, or a national sales or consumption tax. The one thing that the Group of Four agreed on was that a dramatic overhaul of the tax system, however desirable, remains a pipe dream.
But at least we can dream, can't we?
by Rick Telberg/At Large
Just as President Bush was preparing last week to sign the tax extenders bill, officially known as The Working Families Tax Relief Act of 2004, I was sitting down with four of the best tax insiders in the business in their lower Manhattan offices. What they told me is essential information for every tax professional -- maybe even every taxpayer.
Seated around the conference table at tax and legal publisher, Thomson/RIA headquarters were:
-- Bob Scharin, who focuses on individuals and small business,
-- Bob Fuerst, for international and corporate issues,
-- Bill Massey, estate and gift tax planning, and
-- Dick O'Donnell, the pensions specialist.
Their attention was already shifting from the new tax bill to the next tax bill and the long-term ramifications of the upcoming election. Remember, they warned, Americans will be voting for more than just a President. One-third of the Senate is up for re-election and every seat in the House is open. With an election season as unpredictable and volatile as this, anything could happen. And it might. CPAs will need to maintain constant vigilance going into tax season.
For one thing, as soon as the election is over, no matter who wins or loses, there was still a chance late last week that there would be a lame-duck session of Congress to pass the ETI-FSC bill, which could be a 630-page whale of new, and perhaps retroactive, changes affecting almost every business, not just corporations, and adding a brand new wrinkle to tax accounting: differentiating between "service" and "manufacturing" incomes.
"They're going to do something, sooner rather than later," Massey said confidently.
But if the lame-duck session ends empty-handed on Nov. 20, it all starts over again in January. And that could cause real problems as CPAs get rolling into the 2005 filing season.
"Practitioners will have to look at the bill just to see how it affects their companies and clients before doing anything else," said Fuerst. "They'll need to be thinking, 'If we're not affected this year, what should we be doing to set up and qualify for the benefits next year?'"
And then it could all change again with a new Congress and new Bush or Kerry Administration. The presidential candidates' fundamental views of the tax system represent a major difference, hardly surfaced yet in the campaign.
Kerry, for instance, would roll back the Bush cuts and seek new revenues from those earning over $200,000 a year.
"There'd be more means-testing" under a Kerry presidency, according to Scharin. But the details remain murky and unpredictable, dictated by what Kerry could find on his desk when, if, he takes office.
Bush, on the other hand, has laid a strong vision of an "ownership society" that could radically change retirement planning, by replacing 401(k)s, SEPs, and SIMPLEs with LSAs, RSAs and ERSAs ("Lifetime," "Retirement" and "Employer Retirement" savings accounts).
"It's good for the small business owner, but not so good for the employee," according to O'Donnell's analysis, because it would eliminate the requirement that employers who set up plans for themselves must also offer coverage to their workers.
Plus, O'Donnell is quick to add that the defined-benefit Pension Benefit Guaranty Corp., already underfunded by maybe as much as $11 billion and under pressure by possible bailouts at struggling airlines, faces potential insolvency. It might need its own bailout, he said, reminiscent of the Resolution Trust Corp. after the savings-and-loan catastrophe of the 1980s.
During the campaign, Bush has briefly raised the issue of eliminating the income tax, without suggesting whether he'd replace it with a flat tax, a VAT, or a national sales or consumption tax. The one thing that the Group of Four agreed on was that a dramatic overhaul of the tax system, however desirable, remains a pipe dream.
But at least we can dream, can't we?
Monday, October 04, 2004
The New Tax Bill: Washington at Work
But score at least one 'win' for simplification.
by Rick Telberg/At Large
The Working Families Tax Relief Act of 2004, more commonly known as "the extenders" bill, flew through Congress last month. Democrats and Republicans alike approved the bill despite the fact it would add $146 million to the federal deficit, and despite the senate rules requiring offsetting expenses with revenues.
The new tax law's key provisions extend four tax cuts from the 2001 and 2003 tax acts scheduled to expire this year, and a package of regularly expiring tax provisions that would otherwise expire at the end of this year.
But in the true sprit of election-year politics, Congress added a variety of unrelated tax breaks. Among the winners: soldiers in combat, businesses with research and development costs, Caribbean distillers and teachers who spend their own money on classroom supplies."
"Who would contest these types of things?" said Rep. Charles B. Rangel (D-N.Y.), the ranking Democrat on the House Ways and Means Committee (who was, in fact, one of only two on the conference committee to vote against the bill).
So it's with not a little irony that the new bill it may actually be good news for tax professionals, if only to the extent that it keeps many things unchanged.
"In effect, the Act smoothes out ups and downs in these tax benefits to keep them in effect at basically their current level through 2010," said CCH Principal Federal Tax Analyst Mark Luscombe.
And the profession did gain a significant advance in the battle for simplification. Tom Ochsenschlager, the AICPA vice president-taxation in the Washington office, notes that 30 pages of the bill are dedicated to creating a uniform definition of "child" under IRS rules.
But the big battle over tax law may be yet to come. Congress is working on a 900-page bill known variously as the "J.O.B.S." bill (for "jumpstart our business strength") or the "ETI-FSC repeal" bill (for "extraterritorial income exclusion-foreign sales corporation"). It's supposed to mollify United States trade partners who have slapped heavy and still-escalating tariffs on U.S. farm goods in retaliation for U.S. moves to subsidize manufacturers.
It could come out before the election, but more likely will surface next year. Hopefully it won't complicate the tax season with a raft on new complexities.
But it could have a longer-lasting effect. Ochsenschlager points out that the ETI-FSC bill could set up a new regime in which corporate income would need to be categorized between "manufacturing" and "services." Under this concept, McDonald's is already lobbying to be classified as a manufacturer.
Stay tuned. The election isn't over and tax season is just around the corner.
by Rick Telberg/At Large
The Working Families Tax Relief Act of 2004, more commonly known as "the extenders" bill, flew through Congress last month. Democrats and Republicans alike approved the bill despite the fact it would add $146 million to the federal deficit, and despite the senate rules requiring offsetting expenses with revenues.
The new tax law's key provisions extend four tax cuts from the 2001 and 2003 tax acts scheduled to expire this year, and a package of regularly expiring tax provisions that would otherwise expire at the end of this year.
But in the true sprit of election-year politics, Congress added a variety of unrelated tax breaks. Among the winners: soldiers in combat, businesses with research and development costs, Caribbean distillers and teachers who spend their own money on classroom supplies."
"Who would contest these types of things?" said Rep. Charles B. Rangel (D-N.Y.), the ranking Democrat on the House Ways and Means Committee (who was, in fact, one of only two on the conference committee to vote against the bill).
So it's with not a little irony that the new bill it may actually be good news for tax professionals, if only to the extent that it keeps many things unchanged.
"In effect, the Act smoothes out ups and downs in these tax benefits to keep them in effect at basically their current level through 2010," said CCH Principal Federal Tax Analyst Mark Luscombe.
And the profession did gain a significant advance in the battle for simplification. Tom Ochsenschlager, the AICPA vice president-taxation in the Washington office, notes that 30 pages of the bill are dedicated to creating a uniform definition of "child" under IRS rules.
But the big battle over tax law may be yet to come. Congress is working on a 900-page bill known variously as the "J.O.B.S." bill (for "jumpstart our business strength") or the "ETI-FSC repeal" bill (for "extraterritorial income exclusion-foreign sales corporation"). It's supposed to mollify United States trade partners who have slapped heavy and still-escalating tariffs on U.S. farm goods in retaliation for U.S. moves to subsidize manufacturers.
It could come out before the election, but more likely will surface next year. Hopefully it won't complicate the tax season with a raft on new complexities.
But it could have a longer-lasting effect. Ochsenschlager points out that the ETI-FSC bill could set up a new regime in which corporate income would need to be categorized between "manufacturing" and "services." Under this concept, McDonald's is already lobbying to be classified as a manufacturer.
Stay tuned. The election isn't over and tax season is just around the corner.
Sunday, October 03, 2004
The 'Next Big Thing' in Software?
Well, that depends on what kind of CPA you are. But some answers are already clear.
by Rick Telberg/At Large
CPAs in public practice and in business and industry are struggling to make the leap beyond basic accounting software, but their needs and expectations are by no means monolithic.
That is to say, each firm, each business, each individual client seems to have different objectives and requirements. CPAs are clearly working hard to stay on top of the trends and deliver real value to all their constituencies.
But it's not easy, as the first glimmers of one of my ongoing studies suggests. I launched the subject with the question "What's Next for CPA Software?" And the survey is still open as we further analyze the data. Please join the professional panel here.
Meanwhile, the jury is still out on whether so-called "basic" accounting software is reaching maturity.
"Yes," says a senior executive at an Ohio hospital. "Debits and credits are readily recorded and linked throughout the various financial reporting packages -- eliminating past practices of many accounting departments."
On the other hand, the same CPA wonders, too, about "the next big thing" in business and accounting software. For starters, this finance professional would like to see "more focus on timely and quick implementation."
But to many others, there's still a lot of life left in the business of "basic" accounting software.
Is it a mature industry? "No," says a controller at a small business. That "would imply the evolution has stopped."
"By no means has this 'art' been perfected," adds a research analyst at one large company.
Furthermore, CPAs are finding fertile ground in the theoretically "basic" QuickBooks and Peachtree market. "You still need trained personnel to operate the software," according to a senior partner at a local CPA firm. "We find that QuickBooks Pro is not for the untrained."
And one managing partner of a small local CPA firm suggests, "There is a dearth of software in the mid-range, between $1,000 and $10,000 in installation costs."
Separately, my new study is also helping to pinpoint the software solutions sought most by CPAs in public practice and CPAs in controllership. Importantly, there are vast differences.
For instance, CPAs in public accounting say they want and need solutions mostly for:
1. Construction accounting,
2. Estate and financial planning,
3. Networking and communications,
4. Not-for-profits, and
5. A mobile workforce.
The top five for members in business and industry is strikingly different. To wit:
1. Help desk and call center,
2. Sales management,
3. Business intelligence and customization,
4. Logistics, and
5. Supply-chain management.
The savvy CPAs -- in either public or private practice -- who can bridge the gap of demand in the marketplace will be the winners of the future.
September 27, 2004
by Rick Telberg/At Large
CPAs in public practice and in business and industry are struggling to make the leap beyond basic accounting software, but their needs and expectations are by no means monolithic.
That is to say, each firm, each business, each individual client seems to have different objectives and requirements. CPAs are clearly working hard to stay on top of the trends and deliver real value to all their constituencies.
But it's not easy, as the first glimmers of one of my ongoing studies suggests. I launched the subject with the question "What's Next for CPA Software?" And the survey is still open as we further analyze the data. Please join the professional panel here.
Meanwhile, the jury is still out on whether so-called "basic" accounting software is reaching maturity.
"Yes," says a senior executive at an Ohio hospital. "Debits and credits are readily recorded and linked throughout the various financial reporting packages -- eliminating past practices of many accounting departments."
On the other hand, the same CPA wonders, too, about "the next big thing" in business and accounting software. For starters, this finance professional would like to see "more focus on timely and quick implementation."
But to many others, there's still a lot of life left in the business of "basic" accounting software.
Is it a mature industry? "No," says a controller at a small business. That "would imply the evolution has stopped."
"By no means has this 'art' been perfected," adds a research analyst at one large company.
Furthermore, CPAs are finding fertile ground in the theoretically "basic" QuickBooks and Peachtree market. "You still need trained personnel to operate the software," according to a senior partner at a local CPA firm. "We find that QuickBooks Pro is not for the untrained."
And one managing partner of a small local CPA firm suggests, "There is a dearth of software in the mid-range, between $1,000 and $10,000 in installation costs."
Separately, my new study is also helping to pinpoint the software solutions sought most by CPAs in public practice and CPAs in controllership. Importantly, there are vast differences.
For instance, CPAs in public accounting say they want and need solutions mostly for:
1. Construction accounting,
2. Estate and financial planning,
3. Networking and communications,
4. Not-for-profits, and
5. A mobile workforce.
The top five for members in business and industry is strikingly different. To wit:
1. Help desk and call center,
2. Sales management,
3. Business intelligence and customization,
4. Logistics, and
5. Supply-chain management.
The savvy CPAs -- in either public or private practice -- who can bridge the gap of demand in the marketplace will be the winners of the future.
September 27, 2004
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