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Capitol Building
Topic: Tax Reform Impact: What It Means to Business Owners

Join us at the PDX Live Studio on Wednesday, February 7, 2018, from 3:30pm – 6:30pm to hear presenters from Perkins & Co and Davis Wright Tremaine explain the consequences of tax reform for corporations, pass-through entities and their owners.

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2018 Winter - RE Connection Banner
Topic: Tax Cuts? What They Mean for the Real Estate Industry

Join us at the PDX Live Studio on Thursday, February 8, 2018, from 3:30pm – 6:30pm to hear a distinguished panel from Perkins & Co and Schwabe, Williamson & Wyatt dispel tax cut myths from the facts.

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Capitol Building

You may have heard that both the House and Senate recently approved the final compromise tax reform bill. While most of the corporate changes included in this bill are permanent, many of the individual tax changes will expire by 12/31/2025 absent new legislation (see our Federal and Individual bulletins for more specific phase out date information).

Provided here is a summary of some of the key elements of the legislation:

  • The highest rate applicable to C corporations is reduced from 35% to 21% effective for 2018. This obviously suggests to the extent possible, any legitimate method of accelerating deductions into 2017 or deferring income into 2018 should be considered.
  • The U.S. will convert its corporate tax regime from a system that taxes companies on their worldwide income to what is commonly referred to as a territorial based system where companies are only taxed on their US sourced income. This regime is more commonly used throughout the developed world by our competitor economies, and is intended to make the US more competitive in the worldwide economy. There are significant transition issues and many related provisions in the law. 10% or greater owners of foreign entities will need to plan for the transition during 2018.
  • Full expensing of new and used qualifying property placed in service after September 27, 2017 for a period of 5 years followed by a phase down will be adopted in lieu of the current 50% bonus depreciation on new property additions.
  • The maximum individual rate will be reduced to 37% from 39.6% (exclusive of certain surcharge rates still in effect) effective for 2018, but expiring at the end of 2025. State and local tax deductions will be capped at $10,000 in 2018 forward (this includes real and personal property taxes and state/local income taxes). Taxpayers who are not in AMT may benefit by fully paying 2017 state (e.g. Oregon income tax) and local taxes by December 31, 2017. The new law includes a provision intended to prohibit obtaining a benefit from prepaying 2018 taxes in 2017.
  • Qualifying business income of up to 20% can be excluded from taxable income beginning in 2018. There are complex limitations relating to this provision for pass-through income from S corporations and partnerships/LLCs, such limitations being based on W-2 wages and assets employed by the business (which also present significant planning opportunities). Service businesses are severely limited in the ability to use this exclusion, though joint filers with less than $315,000 in taxable income may be eligible for the exclusion despite these limitations. This provision was in part intended to reduce the rate difference between C corporations and pass-through businesses, but it doesn’t eliminate the difference, and so reconsideration of entity type will need to take place.
  • The estate and gift tax lifetime exemption will be nearly doubled to $11 million per individual, but will return to roughly current levels after 2025.
  • Section 1031 like kind exchanges will be limited to real property not primarily held for sale, generally for exchanges completed after December 31, 2017, with certain transition rules.

The new law certainly does not simplify taxation for most businesses and individuals with significant income/net worth, but we’re are here to help you understand it and to optimize the outcome for you, your family and your business.

Please contact your Perkins tax advisor to assist you with any questions or concerns.

Author: Chris Loughran, Shareholder, Director of Tax

30th anniversary, anniversary post, anniversary image

“Go west, young man” a friend advised a teenaged Roy back in his native South Africa. With a stellar swimming talent and top notch academic record, west he did go, landing in the Garden State at the tender age of 17 to attend Princeton University.

A Classics Major Turns to Business

Influenced by a high school teacher, Roy developed a love for language and history, especially Latin. So it’s no surprise he majored in Classics while at Princeton. He fondly recalls studying the history of Roman and Greek cultures; his thesis focused on pre-Roman Empire days. But upon graduation, Roy pondered, “Now what am I going to do with this?” His then-wife suggested, “Why not go into business?” Up to that point, Roy, who was also good at math, had little exposure to the business world. Encouraged by his wife, Roy applied to a few Masters of Business Administration programs and accepted an offer from UCLA. In the summer of 1977, he and his wife packed up their New Jersey life and made their way to the City of Angels. While earning his MBA, Roy interned at Coopers & Lybrand (currently known as PwC) and credits that internship for guiding him into the accounting profession.

The Road to Portland

After obtaining his MBA, Roy puzzled over where to start his career; L.A. wasn’t a good fit for the young couple. With contacts in Eugene, Oregon, they drove north to see what Track Town, USA was all about. They were impressed by the natural beauty of the place, but having grown up in an urban and vibrant setting, they couldn’t see themselves settling there, so they continued their search north to see what Portland was all about; they immediately took a fancy to the Rose City. “It just clicked for both of us,” he reminisces. “It had a similar vibe to our hometown of Johannesburg.”

Roy interviewed with several accounting firms, but because of his internship with Coopers he accepted the offer from their Portland office, thereby marking Roy’s official start into the world of accounting.

The Beginning of an Illustrious Career

In 1979 Roy joined the audit staff at Coopers, but after three years discovered audit wasn’t for him. “I really didn’t like lengthy checklists” he protests. So he joined a smaller firm where he was exposed to the world of tax and bookkeeping and was able to work with small businesses for the first time. After six months at his new firm, the company was acquired by a regional accounting firm where he gained additional tax experience.

A few months later Roy decided to return to Coopers—this time in their tax department—and soon thereafter was promoted to manager. While at Coopers Roy did tax work for large corporations and got involved with the Oregon Society of CPAs (OSCPA) including serving on the Board of Directors.

Then along came the Tax Reform Act of 1986 (TRA) which introduced a significant overhaul of the U.S. income tax code. Much of the impact was felt by individuals and smaller businesses, which meant Roy’s clients at Coopers were relatively unaffected. In light of the TRA, Roy felt he could have a greater impact on and be a better advisor to smaller businesses and their owners. He reconnected with a former “Big 8” firm partner and OSCPA colleague, Jim Gaffney, who had recently joined a new upstart local accounting firm called Sander, Perkins & Company (now known as Perkins & Co). Jim was doing exactly what Roy sought to do, so at Jim’s urging he interviewed with the firm. 1987 marks the year Roy was invited to join the Perkins family as a tax manager and the rest is history. Thirty years later, he says it was the best business decision he’s ever made.

While Jim Gaffney may have helped launch Roy’s career at Perkins & Co, he states that working with Cheryl Perkins — one of the original co-founders and the firm’s namesake — was pivotal in laying the essential groundwork for his career growth and professional development. He started working with Cheryl on estates and trusts taxation and honed his interest in advising individuals and their families by getting involved with the Austen Family Business Program being offered by Oregon State University that to this day helps prepare family businesses and their owners address the challenges and opportunities which may arise during succession planning.

When Cheryl announced her retirement plans in the early 2000s, Roy took over running the firm’s Legacy Planning Practice Group’s meetings and became its director. Roy happily accepted the firm’s offer of shareholder in 2004 — an offer he had declined ten years earlier because he felt he wasn’t ready for the commitment at the time — and enrolled in BDO’s Sales Training Program for new partners, something the firm still offers to all of its new shareholders.

Going Above and Beyond – Creating a Philanthropic Legacy

Outside of Roy’s 38-year career in public accounting, we’d be remiss if we didn’t touch upon his philanthropic endeavors. Roy is a celebrated community service leader and has volunteered countless hours for many nonprofit organizations and foundations ranging from Oregon Health and Science University’s Planned Giving Council to the Portland Baroque Orchestra where he served as Treasurer for several years to past Board Chair of the Randall Children’s Hospital Foundation. Currently, he serves on the board for the Oregon Jewish Community Foundation.

With an illustrious career under his belt and retirement close on the horizon, we asked Roy what he’ll miss most. “Working with smart people at a firm that nurtures its employees and provides them opportunities for advancement,” he commented. “Also working at a firm that provides a wide variety of opportunities — both in interesting industries to work with and services we can provide our clients.” He notes sentimentally, “I’ll also miss being an advocate and trusted advisor for my clients; they’ve become good friends of mine over the years.”

We’ll certainly miss Roy’s wisdom, passion and calm demeanor around our office when he retires next month. Whether it’s reconnecting with the Classics, learning French or playing a good game of bridge, we wish him the best of luck in the next chapter of his life.

Author: Erika Kirkland, Senior Marketing Specialist

Portland Oregon Downtown Cityscape in the Fall

With autumn upon us in the Pacific Northwest, the accounting community is busy closing the third quarter’s books, updating forecasts and fine-tuning fiscal 2018 budgets. While on the home front, kids are settling into their school routines, homeowners are completing those forgotten outdoor projects and everyone will soon be searching for the perfect pumpkin to carve. With demands of your time and energy coming from all angles, do you know if your accounting team has appropriately allocated resources to tackle the new revenue recognition standard, one of the most comprehensive standard overhauls in recent years? Hopefully yes, but for those nonpublic entities hesitant to take the first steps, the time is NOW.

Topic 606 – Understanding the Standard

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). This standard, which was the by-product of the FASB and International Accounting Standards Board’s (IASB) joint effort to converge US and International accounting standards, replaced nearly all pre-existing revenue recognition guidance currently employed under US generally accepted accounting principles (US GAAP). The result was a framework on how an entity should account for its revenue producing transactions.

Public entities are required to implement this standard during the first interim period within annual reporting periods beginning after December 15, 2017; which would be the first quarter of fiscal 2018 for a calendar year-end public entity. Nonpublic entities are allowed an additional year as implementation is to take place during annual reporting periods beginning after December 15, 2018, or fiscal 2019 for a calendar year entity.

In conjunction with this implementation, entities will adopt one of two methods for applying the standard within its financial statements. The first approach, known as the retrospective method, will require application of the standard to each period reported in the financial statements. This will require a full restatement of any comparative figures from prior years presented in the financial statements and disclosures. The second approach, known as the modified retrospective method, will allow for a cumulative effect adjustment to be recorded at the adoption date (i.e. January 1, 2019 for a calendar year-end nonpublic entity). While this may seem like a more simplistic adoption method, please note that entities utilizing the modified retrospective method will still be required to disclose the effect of applying the new standard to allow readers the ability to evaluate comparable results.

With the issuance of Topic 606, the FASB introduced the ‘Five Step’ model for entities to follow in order to recognize revenue from contracts with customers. Those five steps are outlined as follows:

  • Step 1 – Identify the Contract
  • Step 2 – Identify the Performance Obligation(s)
  • Step 3 – Determine the Transaction Price
  • Step 4 – Allocate the Transaction Price to Each Performance Obligation
  • Step 5 – Recognize Revenue as Each Performance Obligation is Satisfied

As evaluating the intricacies of this standard goes beyond the scope of this article, the “ASC Topic 606 – Revenue from Contracts with Customers” Practice Aid prepared by BDO’s National Assurance Practice provides a useful summary of the five step model for public and nonpublic entities and introduces key terms and concepts adopted within this standard.

Assessment and Implementation of the Standard

Before discussing the steps entities should take today to begin the assessment process, it should be noted that nonpublic entities have the welcoming advantage of learning from the work done by those public entities nearing their formal effective date. In June 2017, KPMG completed a survey[1] of 245 entities, 76% public and 24% nonpublic, which identified certain findings that nonpublic entities should be mindful of:

  • “…nearly a quarter of private company respondents have not begun their assessment (compared to 8 percent of public companies who had not begun as of Summer 2016).”
  • “The process has a tendency to be more complex, time-consuming and costly than anticipated…”
  • “Only 6 percent of respondents believed they were faced with minimum impact requiring “little to no action” on their part.”
  • “Internal communications need to be improved; 33 percent said C-level executives had little or no involvement in the process.”
  • “Nearly 71 percent of public companies have either elected the cumulative effect transition method or are leaning towards it.”

With these findings in mind, it is in a nonpublic entities best interest to begin the assessment process today. As outlined in the “Example ASC 606 Adoption Timetable” prepared by BDO, this assessment can be broken down into five stages. While each stage should be tailored to the complexity of an entity’s revenue transactions, this tool provides a comprehensive list of steps to be considered as part of the adoption of this standard.

Stage 1: Understanding, Scoping, and Planning

It should be noted that Stage 1 is the most important step in the implementation process as it provides the guidelines for all future work performed in stages 2 through 5. An entity’s accounting team should take time to read and comprehend the standard. It should then identify who internally or externally can provide the knowledge and expertise needed to interpret and apply the standard to the entities revenue streams.

Stage 2: Technical Analysis and Assessment

Once the revenue streams and transaction types have been identified, the entity will need to allocate resources to evaluate the impact of the standard. This will include evaluating industry specific guidance, determining a transition method to be applied at adoption, identifying systems and internal control considerations, and, hopefully sooner than later, involving external auditors to review the scoping and implementation action plan.

Stage 3: Testing and Implementation

With an implementation action plan approved both internally by the entity’s management team and externally by auditors and/or other services providers (i.e. banks, lending institutions, leasing companies, insurance companies, etc.) involved in the process, an entity will move into the testing and implementation stage. As outlined in the timetable, this stage includes a number of heavy-lifting steps whereby resources will need to ensure tracking of revenue transactions is being captured in a useful manner that can produce financial information under both current GAAP and Topic 606. For nonpublic entities, it will be important to consider the adoption method to be utilized as it will impact the financial information that will need to be produced. It will also be crucial to have external auditors begin their testing of the completeness and accuracy of this financial information to ensure all parties agree with the data being produced.

Stage 4: Financial Reporting and Disclosure

With useful financial information available, an entity is now in the home stretch. In stage 4 the entity will begin to identify the impact the adoption has on its financial statement disclosures. This is an important point to note, as many nonpublic entities may rely on their external auditors to prepare the financial statements and disclosures. Without the assistance of the entity, it would be very difficult for an external auditor to produce the footnote disclosures required under the new standard. These expanded disclosures include, but are not limited to, the evaluation of the adoption impact on financial statement figures, disaggregation of revenue, disclosure of performance obligations, and other qualitative factors. Proactive evaluation of the disclosures with external auditors will make the process more efficient and cost effective.

Stage 5: Post Adoption

Regardless of the impact of the adoption of the standard, an entity should ensure it establishes appropriate controls to maintain accounting policies, evaluate new revenue contracts and ensure personnel stay on top of this standard. After making an investment of time, energy and money, it is in an entity’s best interest to maintain a high standard of financial reporting.

And You’re Off…

While it is always easy to find a more pressing project, nonpublic entities should start to develop their implementation plan today for this important standard. With the resources made available in this article, those in financial reporting positions should feel empowered to begin the process of identifying resources, both internal and external, that are available to assist. Taking time today to comprehend the standard, evaluate its impact, and proactively communicate with external auditors will vastly improve the efficiency and cost-effectiveness of implementing this standard.

If you have any questions surrounding the adoption of this standard, please contact your (Perkins & Co) advisor.

Author: Drew Stevenson, Audit Senior Manager

Through its alliance with BDO, Perkins & Co has access to the Practice Aids seen in this article. Further resources are publicly available by BDO through their Revenue Recognition Resource Center.

[1] KPMG’s 2017 Accounting Change Survey, The Deadline is Approaching for Accounting Change

pdxskylinegraphic
Topic: An Economic Outlook for the Construction Industry in 2018

Join us at Ruth’s Chris Steakhouse on Wednesday, November 1, 2017, from 4:00pm – 6:00pm. Special keynote speaker Dr. Tom Potiowsky will examine the question, “What lies ahead for the construction industry?” by discussing upcoming prospects, and the current economic outlook for 2018 for the major sectors of this industry.

Registration is now closed.

Vancouver Waterfront Development Project
Topic: The Evolution of Vancouver’s Waterfront Development

Join us at the Hilton Vancouver Washington on Thursday, October 26, 2017, from 3:30pm – 6:30pm to hear a distinguished panel from both the public and private sectors discuss the vision that is unfolding.

Registration for this event is now closed.

how to write a killer resume blog image

There are many things I love about my job: meeting new people; being a warm and friendly voice in a world of grumpy recruiters and impersonal recruitment processes; playing matchmaker (it’s fun when you match the right person to the right job!); serving as coach/big sister/pseudo-mom to college students who are going through fall recruiting.

Then there are the things I don’t love so much – like reviewing resumes. LinkedIn is rife with accusations of applicant tracking system (ATS) nightmares and tricks to get through the application black hole. This might be true for large companies, but in the 10 years I’ve been recruiting, I’ve read resumes and cover letters myself. My eyes scan hundreds of resumes each year.

Unfortunately, hundreds of these resumes are mostly mediocre. Rather than lamenting the state of affairs, I’d like to counter headache-inducing resumes with practical advice on writing interview-snagging resumes.

Many professionals have eloquently written about the modern approach to resume writing. Natalie Severt’s blog post “How to Make a Resume: A Step-by-Step Guide” at Uptowork is one of my favorites. Her advice makes me want to scream, “Amen! Ditto! You tell ‘em, girl!” There’s no need for me to rehash what she’s already written. Please read and heed her advice.

Please also consider my additional thoughts on writing that killer resume:

Your resume is a marketing document

Remember this always. Your resume is NOT:

  • a legal or historical document
  • a biography
  • a list of job descriptions
  • a retelling of every duty you’ve had in your life

Your resume is an advertisement

You’re advertising you to employers. Let that sink in a little. In just one or two pages, you must communicate to the reader how you can bring value to their organization.

Get to the point (you can talk more later)

You have just a few seconds to capture the reader’s attention and inspire him or her to keep reading. Your goal is to get a follow up phone call with a request for more information. That’s all. Once you’re in touch, you can have meaningful conversations and share your full story. But you may never get that chance if your resume isn’t written with a marketer’s mindset.

Here are my top tips for creating a resume that grabs a reader’s attention:

  1. Be specific. Tailor your resume to the job for which you are applying. Scan the job ad to learn what the employer wants – and be sure your resume addresses those needs.
  1. Add some personality. Include a summary/branding statement at the top of your resume. Make it professional and give the reader some insight into who you are. Write it in first person. TALK TO ME (the recruiter). If you have room to fill on your resume, add hobbies and interests, but be careful: avoid things that could be controversial.
  1. Make the resume easy to read. Remember that recruiters usually quickly review many resumes at a time (fall recruiting candidates: I easily read over 200 resumes in a weekend). My eyeballs are over 40 years old, folks. I need some help. Here’s what I’m looking for:
  • Size 11 or 12 font (10 works, but it’s pushing it)
  • Simple font – no italics, no underlining
  • White space (it’s your friend)
  • No physical/mailing address – it’s unnecessary and it takes up space
  • Jobs listed in reverse chronological order (most recent job first)
  • Dates of employment in month/year format (e.g., October 2014 – October 2016)
  • One page if you’re a student or it’s early in your career; two pages if you have more experience; and if you bleed into three pages, you are dead to me
  1. Proofread, proofread, proofread. Read your resume out loud to yourself—it’s amazing how many more errors you’ll catch when your mouth and ears are engaged. Ask several other people proofread it, too. Don’t enlist just your friends; ask people who routinely look at resumes and other professional writing for feedback.
  1. Save your resume as a PDF. Double-check the final document before you submit it. A PDF is supposed to protect your formatting, but it can mess with line spacing, etc.
  1. For accounting student applicants only: Put your education section near the top of your resume. Include your GPA and CPA eligibility date. Is your cumulative GPA borderline and accounting GPA high? List both.
  1. Keep in mind that resume standards are subjective. You’re marketing yourself, remember? Know your audience. If you’re applying to a traditional employer, you might want to throw out my earlier advice about using the first person voice and stick to the traditional third-person voice, for example. How will you know which voice to use? Peruse the company’s social media and web presence for indications of their style. Adjust your resume accordingly.

I hope these thoughts are helpful. Remember to link over to Natalie Severt’s advice. Consider checking out Resume Genius (not an endorsement of their services, but I liked most of their general advice). Keep my tips in mind. If you follow our advice, you will end up with a killer resume that starts a conversation with employers. Good luck out there in the crazy job hunting jungle!

Author: Areena McLaughlin, Talent Acquisition Manager

Golfing is fun; accounting is boring, or so young Trent Baeckl believed. Now a CPA and tax senior manager, Trent reflects on his ten years with the firm and the path that brought him to Perkins & Co.

When Trent’s college professor suggested accounting as a career path, he thought ‘No way!’ Though he’d always had a good head for figures, he also had a great golf game and planned to be a professional golfer and instructor. However, being a golf instructor while living in Michigan meant working 70 plus hours in nice weather and being rather bored during the long, cold winters. What’s fun about that?

So, instead of a career on the green, after graduating college Trent found himself working in a three-person accounting department of a small local company. To his own surprise, he really enjoyed the work. So much so that he went back to school to study accounting. Not only did accounting fascinate him, but the schedule suited him perfectly. Though he was slammed during spring and fall with tax deadlines, summer was mellow and allowed time for golf and tennis (another favorite hobby of his). After working two busy seasons in a small accounting firm, Trent was certain he’d found the right profession. He also knew he was ready to leave Michigan to pursue work at a bigger firm.

Finding His Niche

Trent set his sights on Portland and interviewed at a handful of firms in the area. He was especially interested in Perkins because of its client profile. Trent wanted to focus on tax work, not audit, but he wanted complex tax work, more than just a seasonal rush of 1040s. Once at Perkins Trent was assigned to the real estate niche, and right away he felt he was in his element.

A cool and reserved guy, Trent gets visibly excited talking about multi-partner LLCs and tax planning for the real estate industry. Real estate development is notoriously complicated. The landscape is always changing, and there are a multitude of beneficial tax provisions to consider and often many parties involved.  The nature of multi-partner LLCs means a single engagement can produce upwards of 30 different tax returns. “The key,” says Trent, “to keeping a project on track that involves so many different entities and tax returns is communication.”

Accounting as a Team Sport

Trent is not the first leader of our real estate niche to extoll the importance of communication. Kimberly Woodside, a co-leader of our real estate practice group, shared similar sentiments when she was interviewed her for her anniversary post earlier this year. Among all the real estate niche leaders, clearly communication is highly valued; managers meet every week; planning for tax season starts in the fall, and everyone knows what everyone else is doing—when and where each domino needs to fall. “The stereotype of an accountant being boring, solitary, just one socially awkward person formulating spreadsheet equations and banging out numbers on a 10-key is totally wrong,” says Trent. “Accounting is collaborative. It’s a team sport.”

Working on a team with really smart people is what Trent enjoys most about Perkins & Co. He never feels like he’s on an island. There are always other people to discuss issues and problem solve with. In particular, Trent looks to Tim Kalberg, shareholder and a co-leader of our real estate niche, as a mentor. “Tim,” Trent says, “has an incredible gift of recall. He sees parallels between cases and can remember exactly which section of the tax code or specific client return to turn to for reference. His memory is encyclopedic and he is a great teacher. Tim has been instrumental in shaping the real estate niche at Perkins and everyone on the team benefits from his expertise.”

We all benefit from Trent’s expertise too. Whether he’s in the office or on the golf course we’re happy to have him on our team. Congratulations on 10 years with Perkins!

Author: Taylor Valdes, Administrative Assistant

Welcome-to-Oregon-Sign

On July 6th, 2017 the Oregon legislature passed the $5.3 billion transportation package (Oregon House Bill 2017) which is expected to be signed into law by Gov. Kate Brown. The bill, in part, raises revenue through a 0.5% excise (privilege) tax on dealers for the “privilege of engaging in the business of selling” new cars in Oregon.

Download our latest bulletin for further information.

If you have any questions or concerns about the bill, please contact your advisor.

Author: Blake Seabaugh, CPA, Tax Manager

Last year we addressed the question, “Do I Need an Identity Protection PIN to File My Return?”, as the IRS received an increase in fraudulently filed tax returns. Thieves used stolen identities to claim false refunds, and to combat this, the IRS issued Identity Protection PINs (IP PINs) to certain taxpayers who were at risk for identity theft.

The six-digit IP PIN is included on the taxpayer’s federal tax return to authenticate that they are the rightful filer of the return. The IRS has increased the usage of IP PINs to improve their efforts against identity-related theft. So, most taxpayers affected by past identity-related theft issues should have received an IP PIN for the tax year 2015.

However, on January 5th, the IRS announced that the IP PIN correspondence dated January 4th, 2016 incorrectly stated the tax year to which the PIN applied. The IRS announcement advised taxpayers that IP PINs issued on CP01A Notices are intended for use on the 2015 tax return as opposed to the tax year listed on the notice—2014. Here’s the IRS’s explanation regarding the Notice CP01A error.

Taxpayers who file their 2015 federal tax returns without the IP PIN will encounter IRS processing delays of their returns as the IRS will need to take additional steps to verify their identity.

For additional questions on using the IP PIN, see the IRS’s IP PIN page or call Identity Protection Specialized Unit at 1-800-908-4490.

Author: Meredith Miller, Tax Senior

This blog post is a summary and is not intended as tax or legal advice. You should consult with your tax advisor to obtain specific advice with respect to your fact pattern. 

January again! The busiest time of year for many accountants and bookkeepers. There’s the general ledger to reconcile and close out, financial statements to produce, 1099 forms and payroll filings to complete, and personal property tax returns to file. But wait! There’s another task to consider…the income tax return.

Fortunately, the CPA prepares the income tax return for you, but they need your help. There are several strategies you can employ to make your working relationship a successful and productive one.

First Steps

For starters, double-check your accounting software to ensure you’ve posted your CPA’s journal entries for last year (2012). Your CPA may have included these entries in the same packet with the 2012 tax return. If the person who signed the 2012 tax return didn’t pass on any journal entries, check in with your CPA to find out if there were any. If so, be sure to post them to your general ledger as of December 31, 2012 (for calendar year entities).

If the business experienced changes in ownership, or any other type of significant transaction during the past year, gather the relevant legal documents (buy-sell agreements, promissory notes, etc.) and forward copies to you CPA. These documents will provide specific information about the transaction that will help your CPA report it properly on the tax return.

The “PBC List”

Many CPAs send out a document that includes a list of the information they typically need each year to prepare your company’s income tax return.  These documents are commonly called Prepared by Client Lists, or “PBC Lists”. If you have questions about some of the items on the PBC List, don’t hesitate to contact your CPA and ask them what they’re expecting. If some of the items on the PBC List won’t be available for a while, ask your CPA if they’d like you to send the information you’ve gathered so far. You can forward outstanding items once they become available.

Standard items accountants almost always need

If you don’t have a PBC list, feel free to request one. Even without a PBC list you can accomplish a lot by addressing these common items:

  1. 1) Ensure that your books are complete for the tax year: complete the December reconciliations for all cash, credit card and loan accounts; make sure all reimbursable expenses have been submitted by employees and recorded in the company’s books; review the year-end balance sheet and profit & loss statement for erroneous amounts or unusual items.
  2. 2) Once you’re comfortable with the balance sheet and profit & loss statements, export a copy of the company’s trial balance from your general ledger software. We recommend that the file be exported in excel.  Many CPAs prefer to receive the trial balance in this format for ease of import into their firm’s trial balance software. Or, if your business uses Quickbooks, create a “portable file” which backs up the data in a condensed format that can make transferring the file to your CPA simpler.
  3. 3) Collect copies of the company’s year-end bank statements and bank reconciliations for each checking and savings account.
  4. 4) Gather copies of the company’s year-end bank line or credit, bank loan and credit card statements. Since some loan and credit card statement periods cross over month ends, be sure to collect the statements with coverage periods that include the last day of the business’s tax year.
  5. 5) If the business has fixed assets, prepare a list of asset additions that includes a description of each asset, its in-service date and cost. If any assets were retired or sold during the year, prepare a list of each disposed asset that includes the same elements as the asset additions list and also includes the amount of proceeds received from sale of the asset, if any. You could also request a copy of the fixed asset list from your accountant; use that listing to identify disposed assets and the related sales proceeds.
  6. 6) If the business has a retirement plan, contact your plan administrator and ask what information they’ll need from you in order to calculate the required amount of the employer contribution to the plan in accordance with management’s intent and plan requirements.
  7. 7) Prepare a schedule of officers’ compensation showing each officer’s Medicare wages. If the business has a calendar year-end, you can take the amount from box 5 of the W-2 (or simply provide copies of the officers’ W-2s).
  8. 8) If the entity is an S corporation or a partnership, prepare a schedule listing the medical and dental insurance premiums paid on behalf of each owner.
  9. 9) Review any account where you have recorded meals and entertainment expenses. Be sure that these accounts don’t include the expense of any company parties, or meals served on-site to permit employees to meet or work beyond their normal workday.  (Those types of expenses may not be subject to the same tax limitations as business lunches at restaurants, or golf or sporting events with a client.) If you have any questions about the tax treatment of any items in your meals or entertainment accounts, ask first – it will save time in tax preparation, and may save tax dollars, too.
  10. 10) Sign the tax engagement letter, or locate the letter and have the business owner sign it. This agreement describes the terms of the arrangement between the business entity and the accounting firm for the preparation of the return. These letters are often mailed in January, so check with your employer to find out whether they have already signed and returned the letter; if they haven’t returned it yet, you can remind them to do so.

Why do they keep asking me questions?

After you’ve provided this information and whatever else was requested on the PBC List, your CPA will probably contact you with some follow-up questions and requests. This is normal! Your CPA wants to understand your business thoroughly, and help you take advantage of all allowable deductions and tax accounting methods. (Also, we like to talk to you!)

Happily, once you’ve submitted everything to your accountant, you’re likely nearly done – until next year!

Have a question about our post? Don’t be shy! We welcome you to contact us at any time.

Author: Chalayane Woodke, CPA 

This blog post is a summary and is not intended as tax or legal advice. You should consult with your tax advisor to obtain specific advice with respect to your fact pattern. Based on the most recent “best practice” standards for tax advisors issued by the Treasury Department, commonly referred to as Circular 230, we wish to advise you that this blog post has not been prepared to be used, and cannot be used, to provide assurance that penalties which may be assessed by the IRS or other taxing authority (including specifically section 6662 understatement penalties) will not be upheld.