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Dear Colleague:

In a U.S. economic recovery still trying to find its legs, properly managing net operating losses and adeptly carrying forward or backward NOLs is a vital, and complex, activity for federal and state income
tax professionals at multi-state companies.

When it comes to federal NOLs, tax specialists must stay current on rules for calculating NOLs, general limits on carry forwards and special limits on carry forwards after an ownership change under Sect.
382. In the state tax arena, matches of federal NOL policy constantly change and take myriad directions.

Corporate tax professionals can benefit greatly from a current awareness briefing on treatment of NOLs in federal and individual state laws and regs. Our panel will also present a practical discussion on navigating associated complications that arise with state combined reporting, nexus and other policies.

Our panelists, including Caleb Gauen, Director at  PricewaterhouseCoopers, will provide a review of current federal policy for NOL computations and carryforwards, examine trends in state  variations from the federal approach with specific examples, and explore special situations that can make carryforwards and carrybacks
problematic at the federal or state levels.

The panel will explore these and other relevant topics:

* Federal guidelines for computing NOLs and carrying them forward and backward, limitations on their usage, and latest rulings and guidance.

* General trends in state modifications to the federal NOL computation, with specific state examples.

* Dealing with special situations arising from a state’s mandate of combined reporting, nexus standards, and application of NOLs pre- or post-apportionment.

Following the speaker presentations, you’ll have an opportunity to get answers to your specific questions during the interactive Q&A.

I hope you’ll join us.

For more information or to register >

or call 1-800-926-7926 ext. 10 (mention code: ZVETS)

Sincerely,

Jon McKenna
Executive Editor

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By August Aquila

Firm success today requires that partners and staff focus their energies on achieving the firm’s goals. It’s like a military campaign. Everyone on the battlefield is accountable for their role in the overall battle plan. Ask yourself how well would your people would carry out your battle plan.  Chances are, there is room for improvement.

While it is critically important to clearly define your goals and outline the actions needed to achieve them, accountability can only be achieved one employee at a time. So here’s the secret to a creating culture of accountability: change behavior of each individual in the firm.

There Are No Excuses

When we think about accountability, we often think about someone holding a large club over our heads. Or we think about having to explain why we did not do such and such a task. Or we have to defend our actions.  If none of that works, then we can blame someone or something else.

You know when you have a culture of accountability when individuals take personal responsibility for their actions or lack thereof. In the Oz Principle: Getting Results Through Individual and Organizational Accountability (Prentise Hall, 1994), Roger Connors, Tom Smith and Craig Hickman note that rather covering one’s tail, finger pointing, claiming “it’s not my job,” etc., individuals need to see the problem/task, own it, solve it and then do it.

Different Readiness Levels ? Different Approaches

I’ve noticed that many firms make the same mistakes in trying to implement a culture of accountability. They don’t realize the amount of time and commitment it takes and they assume that their people know what to do. One managing partner recently said to me, “We sent out the memo and we held a meeting.  What else am I suppose to do?”

He just assumed that his people would know what to do and what was expected of them. When we send out memos or hold group meetings, we put everyone in the same readiness level. We mistakenly assume that we can lead all of our people in the same way. We forget that each person in the firm has a unique personal readiness level.

In Compensation as a Strategic Asset (AICPA 2007) , Coral Rice and I identified four personal readiness levels which are based on an understanding of what to do, how to do it and the motivation to do it:

Level I: Low skill, low will . The individual has not yet developed the competencies needed to complete the task and you have limited motivation. These people need a lot of clear and specific directions and rules to follow.

Level 2: Low skill, high will. The individual has not yet developed the competencies needed to complete the task, but you have high motivation.  Skill training is needed here so that the person’s motivation does not get ahead of their skills.

Level 3: High skill, low will. The individual has the competencies needed, but lack the motivation.  This person needs to be supported and listened to. They can do the job from a skills perspective, but are lacking in desire to get it done.

Level 4: High skill, high will. The individual has both the competencies needed and the motivation. It’s best to just delegate the tasks at hand to people at this level. They won’t need a lot of guidance or oversight.

Implementing an Accountability Program

There are no out of pocket expenses to implement accountability.  The real cost is your time and commitment to make it part of your firm’s culture.

Here is a simple process to follow:

1. What is expected of me? In order to answer that question, firm leadership needs to set out individual goals. Goals will usually fall in one or more of the following areas ? production goals, marketing goals, client service goals, internal systems goals and training goals. Don’t assume that your people know what to do just because you sent out the memo or held a meeting. For some people you have to outline the what, when and how. For others, it might just be to tell them the “what.” (See the four readiness levels above.)
2. Why am I doing this? You have told your people what to do, but we all know from first-hand experience that does not mean that they will do it. You need to explain to them why they should be doing it, how it fits into the firm’s overall strategic plan and what’s in it for them personally. This step provides them with the opportunity to ask questions and actually buy into the firm’s goals and their specific action steps.
3. Is the goal measurable? Every goal that you set, whether for the firm or an individual, needs to be measurable and tractable. If you have a goal that you can’t measure or track the measure, then change the goal.  Ideally, goal progress should be tracked on a monthly basis. If you find that too time consuming, then do it on a quarterly basis. If you wait longer than that, you miss the opportunity identify and remedy gaps in performance that could affect your outcome.
4. Am I given feedback? It’s not possible to have true accountability without having effective feedback. Feedback provides the employee or partner with positive information as well as information that can help them improve. Feedback is not about using a performance evaluation to tell someone how poorly they did; it’s about problem solving on how they can meet their goals. Employees and partners need to feel that you want them to succeed and you are there to help them.
5. How are my results evaluated? There are varying degrees of results. Firms need to decide what will be acceptable to them. For example, some firms I have worked with look for a minimum 90% of goal attainment as acceptable, others are happy with a minimum of 80%.  Everyone should be aware of the parameters. There should be no surprises during the evaluation.
6. What are the consequences? If there are no consequences for failing to achieve one’s goals, then there is no culture of accountability. There can be various types and degrees of consequences. Tying compensation to goal performance is one way to encourage a culture of accountability. Non-monetary consequences may include holding off a promotion or requiring an individual to take a training course. Ultimately, someone who consistently fails to achieve his or her goals may be terminated.  It is important that everyone at the firm understands the consequences of their actions.

The Bottom Line

A culture of accountability must come from the top down. In small firms, it will be the managing partner who champions it. In larger firm, it may be the executive committee. Too many firm leaders merely give accountability lip service. In reality, they don’t hold anyone truly accountable.

Remember, if you plan to hold someone accountable for a result that must be communicated to them.  They need to be aware of the defined, measurable results you expect them to achieve, they need to know the consequences they will be subject to if they don’t meet their goals, and they need to take personal responsibility for their actions.

The acid test for accountability lies within your business results. Each individual in the firm must be personally accountable for the business results, even those who believe that they have no impact on them.

About the author:

August Aquila is a well-known consultant, author and keynote speaker to the accounting profession. In 2010 he was again named one of the “Top 100 Most Influential People” in the accounting profession by Accounting Today. August helps firms implement accountability and compensation programs as well as developing strategic and succession plans. Reach him at 952.930.1295 or aaquila@aquilaadvisors.com.

.

/li

Firm Develops Global Strength through Unique Strategy

The secret is finding and filling a ‘market hole’

By Gale Crosley, CPA

For many mid-market accounting firms, the status and activities of the Big Four (B4) are of passing interest, but not much more. But EOS Accountants LLP has charted an innovative and successful growth strategy by linking with the Big Four and other firms.

According to founder and managing partner Michio Ishii, collaborating with B4 and other Japanese-based accounting firms helped his firm grow with Japanese companies doing business in the U.S. He graciously shared his experience and perspectives.

Strategic steps

Ishii spent several formative years with Tohmatsu Awoki, the predecessor firm of Deloitte Tohmatsu. An original member of the firm’s U.S. operation, he eventually left to start his own firm. The practice he built in the New York City area included a number of Japanese-headquartered clients who used Ernst & Whinney (the predecessor to E&Y) in Japan and relied on Ishii for their U.S. subsidiaries.

Ishii was growing so fast that he decided to merge his practice with Ernst & Whinney in the U.S., accessing more staff to meet the demand. His mission was to develop their Japanese practice, and he remained there for 11 years before founding EOS in 1996.

A primary motivation to launch his own venture was Ishii’s growing recognition that U.S. subsidiaries of Japanese firms needed different solutions, often not part of the B4′s evolving strategy.

Ishii observed that while a B4 was a good choice for the large established U.S. operations of a large Japanese parent company, the smaller U.S. subsidiaries increasingly were dissatisfied. As smaller entities they often needed more hands-on, intimate service including business, management, and technology consulting.

The B4 had difficulty servicing these smaller subs, whose needs didn’t easily fit in their business model. As a result, services were more expensive and often did not meet the need. These were, however, the specialty of mid-market CPA firms.

We can help

Ishii and his partners identified their market hole (a need without an existing solution) and energetically went about filling it. The rest, as they say is history. He and his partners amicably left the B4 to start EOS.

The B4 firm acknowledged Ishii’s premise – that certain U.S. subs of their corporate clients were unhappy and could use EOS to fulfill needs that the B4 couldn’t. And ensuring good service for them was a priority.

Ishii and his partners were tightly focused and attracted U.S. subsidiaries of Japanese parent companies. Their prospects were companies that lacked adequate accounting professionals and infrastructure. This was a timely development as Japanese businesses were actively in pursuit of U.S. acquisitions.

Powered by relationships

The approach worked and over time EOS was sought out by other B4 players to serve their U.S. clients as well. The strategy became even more valuable when Sarbanes-Oxley established regulations that precluded audit firms from providing many of the services these clients needed.

Ishii and his partners nurtured close ties with other large Japanese accounting firms, and became known in Japan as the go-to firm for U.S. subs of Japanese parents. EOS grew as a result of close and trusting associations with individual partners in these large Japanese firms.

Expert navigation

Today EOS Accountants LLP has become a solid mid-market international provider. The firm has expanded well beyond its Teaneck headquarters with offices in San Jose, Los Angeles, Honolulu, San Mateo, Detroit and Chicago. More than half the staff is bilingual in Japanese and English.

Successfully navigating the relationships with B4 and other accounting firms remains the key to the firm’s success. As the large global players became less interested in serving smaller U.S. subsidiaries, and as they were regulated out of a number of service lines, Michio Ishii and EOS was prepared to meet the need.

Ishii says his firm continues to grow its formal and informal links with practitioners in Japan. As younger partners are developed, the next generation continues to focus on the relationships that have been central to the firm’s success.

As we concluded the interview, I was struck by the elegance and sophistication of the EOS strategy: finding a market hole, developing a unique distribution channel, having a focused niche discipline and navigating the complexities in relationships with other firms.

It beautifully illustrates the application of key growth concepts implemented in a creative way. As a result EOS has achieved an enviable position – going where the competition is not and staking its rightful claim in the international world!

Copyright ® 2012 by Crosley+Company

Gale Crosley, CPA, was selected one of the Most Recommended Consultants in the Inside Public Accounting BEST OF THE BEST Annual Survey of Firms for eight consecutive years, and one of the Top 100 Most Influential People in Accounting by AccountingToday for six consecutive years.

She is an honors accounting graduate from the University of Akron, Ohio, winner of the Simonetti Distinguished Business Alumni Award, and an Editorial Advisor for the Journal of Accountancy. Gale is founder and principal of Crosley+Company, providing revenue growth consulting and coaching to CPA firms. She brings more than 30 years of experience, featuring a unique combination as a practicing CPA in two national accounting firms, along with significant experience in business development in the cutting edge technology environment with such firms as IBM and MCI.

For more information, visit the website at www.crosleycompany.com or contact her at gcrosley@crosleycompany.com.

Reprinted with permission from Accounting Today

Smart Time Tracking can be a CPA Firm’s Strategic Weapon

By Debra Andrews

For many CPA firms, tracking time is a way of life.  There are two major time buckets – billable and non-billable.  Billable time is client work and there are usually specific client codes and sub-codes for active client projects.  There is always a great deal of attention placed on tracking billable time and rightly so – that is what pays the bills!

From Marketing Junkyard…

From my experience as a client services professional, in-house professional services marketer and now marketing consultant to professional services firms, non-billable marketing time codes area lot like junk yards.  Marketing, business development, non-chargeable client work such as travel and even administrative tasks are dumped in the non-billable marketing pile.  Some may argue that this time is non-revenue producing, and why should coding matter?  Trash is trash, after all.

…To Marketing Treasure

Well, some firm’s trash can be another’s treasure – savvy CPA firms can transform their non-billable marketing junkyards into plush fields blooming with valuable business intelligence. As an example, instead of having one code for all marketing time, try dividing the time up into sub-codes by your firm’s target markets.  This structure would enable the COO, CMO and/or Managing Partner to see your firm’s time investment in a particular sector and compare it against the return such as new clients and increased revenue.

I’ve worked with many clients to restructure their marketing time tracking systems.  We often discover that there is a measurable opportunity cost involved with investing too much professional time marketing to one segment at the expense of another that produces a higher ROI.

For hard-core time trackers looking to gain even further knowledge from their non-billable marketing time, I recommend additional sub-coding as follows:

• Marketing Admin: This sub-code might include time spent in internal marketing meetings and discussions.
• Marketing Business Development: This sub-code would represent networking activities, face-to-face meetings with referrals sources and prospective clients.
• Marketing Activities: This sub-code might include writing articles or blogs, speaking, and posting on social media platforms such as LinkedIn.

What management will glean through analyzing non-billable marketing time sub-codes like the ones noted above is how much time is spent “behind the desk” versus “shaking hands.”  Successful CPA firm marketing programs typically strike a balance between the two.  Ultimately, people do business with people they know, like and trust and so nothing replaces “face time.”  If most of a firm’s professional marketing time is spent on “Marketing Admin”or “Marketing Activities” at the expense of “Marketing /Business Development,” it may experience high brand awareness but maintain a relatively empty sales funnel.

There is a fine balance between smart time tracking and creating an unnecessary headache for busy billable professionals.  But for CPA firms that truly invest time and hard dollars into proactive marketing, creating some level of specificity in coding non-billable marketing time just makes good business sense.  The information gained could truly transform your time into treasure.

By Debra Andrews, Managing Director of Marketri LLC

http://www.marketri.com/

Contact: Debra Andrews
Day: (215) 489-5563
Cell: (215) 534-5085
e-mail: dandrews@marketri.com

By Don McDougall

We all travel for business, and I had one boss who was robbed once a year.  He used to say he had bad luck.  But since he is an ex-boss, I can share that he caused most of his own luck (or rather caused his own bad luck) and that you can learn from his mistakes.

Lesson 1.            Valet your car if you cannot find a well-lit and public parking spot. This sounds so obvious, but at night you don’t want to be walking the streets looking for your car.  If you do have to park on the street, park your car in a well-lighted public area, or find somewhere else to eat.

Lesson 2. Don’t look like a business person on an expense account. Leave the $8,000 Rolex in the room, don’t wear a suit to a local joint, and do try to blend in.  Business travelers don’t come back to help the police with line-ups and rarely will even show up for a trail.  Guess what – the criminals know this.  The criminal knows that robbing a traveling business person has a low rate of prosecution.

Lesson 3. Don’t flash cash If you carrying a pocket of cash (I use to travel with $500 in cash) don’t flash a big role of dollars.  Leave most of it in your room, or divide it up between two pockets.  Try NOT to look like a good target to be robbed.

Lesson 4. If you’re going drinking, take a cab or better yet, do so in your hotel. I suppose this one should go without saying.  If you do go out, bring ONE credit card and minimal ID and cash.  Don’t make yourself a tempting target.

Lesson 5. Don’t wonder off on foot in a city you don’t know, late at night.

Remember that boss I mentioned above, one night around 2am he could not sleep, so he went for a walk, off Bourbon St. in New Orleans … to get some air.  He put on his suit, and the $8,000 Rolex, put a couple hundred in his pockets and wondered off.

Cost him the watch, his wallet with the credit cards and all his spare cash.    –  Yeah we never quite bought that “went for a walk excuse” either.  But it was still an expensive walk around the block.

The “book” on self-protection suggests you keep looking around, assess your danger zones and keep an exit strategy in mind.  All good ideas, but you will never learn them in a 1000 word article. Don’t be stupid or flashy, avoid placing yourself at risk.  Take a cab when you can.  They pick you up in a well-lit doorway and drop you off in one, when you are done.

Ladies – That $900 coach purse is $100 at a pawnshop to anyone who can steal it, not counting what is in side. If you can spend $900 on a purse you probably have something in the purse worth stealing. Carry a small clutch, or something less obtrusive is you are going to be in a vulnerable spot.

Here is yet another story for traveler beware… This last story has so many lessons, but the key one is “she is probably not a college girl down on her luck.”

We had a new employee coming in to get started, his 1st day of work. Picks up his new Dell super-duper PC, corporate Amex-Card; and has the 1st night on his own, we will all meet for training and orientation on Tuesday.

That night, he meets a girl in the bar, she is a “college girl” he father told her that her boyfriend was no good. She moved in anyway, and ….. well the BF was caught sleeping with her best friend. She feel embarrassed, stupid, HOW could she be so gullible. She cannot face her father, he is Miami on business till Friday. She is alone and trapped and has no friends and no place to spend the night or stay until her family is back in town.

Well… Our boy has an idea, she can stay with him. At first she says no, but then after a while suggest that IF they were to go on a date that night, and IF they liked each other.. well.. she would stay with him for the week and then MAYBE see each other when he is in town since his corporate office is there anyway. They get back to his hotel at 2am, after dinner and a night on the town. He wanted to … well guess.. she is just too tired, but she will be “his” in the morning and every time he wants, until he has to leave her. She PROMISES… She was lost and he saved her, he was her hero.

He called the office about 10am that morning, turns out his PC has been stolen, he thinks when he checked in, SOMEONE must have reached in and taken it. Turns out he was also missing, all his cash, his credit cards, his briefcase and his suite case.. and.. ALL of his cloth. He was buck ass naked in a hotel room 1,100 miles from home on his 2nd day at work.

We found out when we got a fraud report from American Express that morning, he had put the dinner and his date with the girl on his corporate card. She has added $400 in jewelry. (Would have been more but we had a spending limit on all new employees.)

I’m not sure where to start on the mistakes he made, and we advanced him a month’s salary and a quick trip to Target to get some cloth. He turned out to be a great employee, and a VERY cautious man after that when he traveled.

In addition to being an expert on EPAct, Don McDougall teaches Personal Protection in the Home and the Refuse, on don’t be a victim course, for the NRA.  From experience, Don has provided us this article on personal protection.

Don McDougall can be contacted at dmcdougall@engineeredtaxservices.com or on 213.280.2266. Don is a Director with Engineered Tax Services, seasoned traveler and based in California.

By Patrick Temple-West and Ernest Scheyder

WASHINGTON/NEW YORK (Reuters) – Dow Chemical Co is challenging the U.S. Internal Revenue Service in a rare court case over expanding the research and development tax credit to cover the costs of supplies used to improve the ways existing products are made.

Oral arguments are set for Thursday at the 2nd U.S. Circuit Court of Appeals in New York in a case that pits Union Carbide, a wholly owned subsidiary of Dow (DOW.N), against the IRS.

A win for Dow would widen the scope of the R&D credit – a mainstay of the corporate tax code that costs U.S. taxpayers roughly $7 billion a year – at a time when corporate tax breaks, in general, are under scrutiny in Washington.

As lawmakers grapple with the enormous U.S. budget deficit and a tax code riddled with loopholes, the R&D credit continues to enjoy broad political support, but it has critics.

Far from being just about lab coats and microscopes, the credit today is part of the economic mainstream. It can be claimed by all sorts of companies, from chicken farmers and fast-food packagers to brewers and wineries, according to the many tax consulting shops that promote it to the private sector.

Since its creation in 1981, the credit has helped support basic research. But detractors say it has become a costly corporate hand-out, too broadly claimed, that does little to further the goal of driving more U.S. R&D hiring and investment.

Dow is arguing that traditional manufacturers with older but popular products – it produces ethylene, a basic chemical used to make plastics – deserve the credit just as much as high-tech companies creating the next big cellphone or cancer drug.

The IRS is arguing, according to court documents, that to allow the R&D credit to be claimed as Dow wants “would transform the research credit into a manufacturing subsidy.”

Dow disputes this, arguing that availability of the R&D credit “should not hinge on whether a product or process improvement is the desired outcome,” Dow spokesman Greg Baldwin said. “This distinction is not supported by the Internal Revenue Code, applicable Treasury regulations or legislative history.”


STRETCHING THE CREDIT

Under current law, the R&D credit is typically claimed to cover research labor costs. Widening it to manufacturing process improvements would lift profits, but raise taxpayers’ costs.

The IRS, which won an earlier round in the case at the Tax Court level, argues that Dow should not get the credit simply for streamlining the way it makes an existing product.

The case involves process improvements that were researched in 1994 and 1995. Dow wants to apply the credit retroactively to the cost of the work. One improvement was an experimental, cost-cutting method to make polyethylene resin for dry cleaning bags with fewer materials. Using the new process, Dow sold enough resin to customers to make 125 million dry cleaning bags.

With less than $8 million in R&D claims in dispute, Dow’s lawsuit is about setting a precedent, tax professionals said, adding Dow has a strong argument as the R&D law is so broad.

“The government ought to lose because they’ve got a real problem with the statutory language,” said Roseann Cutrone, a counsel with law firm Skadden Arps Slate Meagher & Flom LLP.

Dow, like many manufacturers, says the government needs to offer stronger tax incentives to businesses to keep research centers and manufacturing plants from moving offshore.

Dow is “looking for some of these process improvements in an effort to save money,” said Jeffrey Stafford, a chemical industry analyst with Morningstar. “To be getting a tax credit on top of that would seem to me like gravy.”

The U.S. Chamber of Commerce, the country’s largest lobbying group for businesses and other industry groups, backs Dow.

The IRS has tagged the R&D tax credit a high risk audit concern due to frequent abuses.

“The credit is a big waste of money,” said Calvin Johnson, a law professor at the University of Texas, who favors dumping the present credit for one that defines research more specifically.

PERMANENTLY TEMPORARY?

In some ways, the Dow case illustrates the controversy around the R&D credit, which has become maddeningly complex.

Never enacted as a permanent provision of the tax code, the credit has always been “temporary,” requiring Congress to extend it 14 times in its 31-year lifespan.

This is frustrating to businesses that need to plan for the future. The credit expired again at the end of 2011, but Congress is expected to renew it again retroactively after the November elections for the presidency and Congress.

Dow Chief Executive Andrew Liveris has said the United States should mimic countries with higher R&D credits, including his native Australia, which reimburses R&D costs at 125 percent.

Michigan-based Dow recently opened a research center for light-emitting diode display technologies in South Korea, where the government reimburses 100 percent of R&D costs.

Many companies – Dow included – favor putting manufacturing plants near research centers and actively shop the globe for countries willing to subsidize operations.

In a theme echoed in Dow’s lawsuit against the IRS, Liveris has argued that R&D is integrally linked to production.

“Engineers on the factory floor are more likely to notice potential areas where a product can be improved,” he wrote.

EDGING TOWARD TAX REFORM

Tax breaks of all sorts are being questioned in Washington as Congress – despite its present paralysis – edges closer to overhauling the tax code for the first time in 25 years.

The R&D credit enjoys bipartisan support and President Barack Obama has repeatedly called for making it stronger.

Senator Orrin Hatch, the top Republican on the Senate Finance Committee, told Reuters he had no doubts the credit is “beneficial for innovative companies.”

At the same time, Hatch said: “We need to work on the language of the research and development tax credit.”

The R&D credit is a big-ticket lobbying cause on Capitol Hill. Mentions of a U.S. House of Representatives bill to expand and make permanent the R&D credit showed up in more lobbying reports than any other legislation, according to public records.

Microsoft Corp (MSFT.O) is the top U.S. research spender, with a $9 billion R&D budget in fiscal 2011. The software company spent $7.3 million on congressional lobbying in 2011. Its top goal, unrealized, was making the R&D credit permanent.

Congress waited until the last days of 2010 to extend the credit last time and likely will do the same this year.

About two-thirds of the manufacturing sector’s R&D credit claims are made to cover wage expenses. Dow’s case involves the supplies portion of the credit, or 20 percent of claims. Computer and contracting costs make up the rest.

“It was abusive on the part of Union Carbide to take the credit on everything that they delivered to customers,” said Michael Solomon, a tax lawyer at Fenwick & West LLP, who has argued R&D claims on behalf of General Electric Co (GE.N) and General Motors Co (GM.N). “A supply is something that is consumed in research, not delivered to a customer.”

The cost to taxpayers of the R&D credit will likely continue to rise if Dow wins its suit against the IRS, said Annette Nellen, a tax professor at San Jose State University.

“Maybe more people will go back and file amended returns to see if there are supplies they overlooked,” she added.

(Reporting By Patrick Temple-West and Ernest Scheyder; editing by Kevin Drawbaugh and Andre Grenon)

http://mobile.reuters.com/article/idUSBRE82Q0BK20120327?irpc=932

Why you may be overpaying your federal taxes every year.

By Brent Ross

Countless numbers of commercial property owners overpay federal taxes every year and are missing out on allowable depreciation expense deductions. Under existing IRS tax law, accelerated depreciation expense deductions are available to all federal taxpayers; however, without an engineering-based cost segregation analysis, the taxpayer is unable to take full advantage of the tax law and, therefore, surrenders significant cash flow to the IRS.

What is cost segregation?

A typical cost segregation study maximizes the tax benefit of real estate ownership by identifying, segregating and classifying a building’s components to asset categories with the shortest possible life creating significant tax deductions sooner for federal and state income tax purposes.

This is determined though an analysis that reclassifies components of a building from 27.5, 31.5 and 39 year depreciable lives to five, seven and 15 year depreciable lives. The benefit comes from accelerating the depreciation tax deductions, which are more valuable today than 39 years from now.

Nonstructural items like carpet, accent lighting and signage, or exterior items such as paving, sidewalks and landscaping are examples of building components eligible for accelerated depreciation, and are items that can be “broken out” from structural costs and depreciated over a shorter period.

Many property owners can identify nonstructural items that qualify for accelerated depreciation, but the greatest savings come from identifying assets in three broad areas: electrical, mechanical and plumbing.

Let’s say a standard office has three electrical outlets. To effectively operate your computers, printers, projectors, etc. in your office, however, you require six electrical outlets; those “extra” three outlets may qualify as five-year property and accelerated depreciation. The same can be said for specific air conditioners when a certain temperature must be maintained for the safety of the product, such as in grocery/food stores or maintenance facilities so equipment won’t overheat.

Depreciation can increase your ROI

An often overlooked tax-saving opportunity is accelerated depreciation of cost associated with the construction, renovation or purchase of a new building or real estate. Taking advantage of certain techniques can boost your return on investment (ROI), and a cost segregation study can help you improve profitability and increase ROI by maximizing tax benefits on certain projects.

Property owners can substantially reduce taxable income and maximize current depreciation by accelerating deductions, thereby increasing after-tax cash flow. In addition to recently purchased or constructed properties, a cost segregation study can produce substantial tax benefits for properties that have already been depreciated for as many as 10 years or more by catching up on missed depreciation.

Most business owners who own a building understand that they recover their investment through depreciation. What they may not understand is how to look at an entire facility and allocate as much cost as possible to things with the shortest depreciable life thereby recovering the cost of their investment for tax purposes much sooner.

Business owners often overlook the opportunity to allocate costs to land improvements and things that qualify as furnishings that depreciate in five to 15 years as opposed to the building itself, which depreciates over 39 years for commercial property and 27.5 years for residential rental property.
A proven and allowable tax strategy

Cost segregation is by no means an aggressive or risky strategy. For decades, court rulings have supported the practice of segregating costs for tax depreciation on commercial buildings. In 1997, the U.S. Tax Court ruled that segregating costs for tax purposes was allowable. Subsequently, cost segregation has become an accepted—if somewhat underutilized—tax planning strategy.

Using sources such as revenue rulings, court cases, IRS publications, senate and congressional finance committee reports and IRS regulations, cost segregation experts are able to help companies apply deductions that create tax savings starting in the first year.
Is a cost segregation study for you?

Office, manufacturing, retail, professional, residential rental—it doesn’t really matter which type of real estate you are building or acquiring. If the property can be depreciated, a cost segregation study would be a valuable strategy. The study can help you find hidden deductions and help you realize substantial tax savings. Even if your real estate project has been completed for several years, the IRS allows for a look back of the benefits from previous years through a change in accounting method.

A cost segregation study requires detective work. It might start with an invoice, but it goes into extensive analysis involving the examination of construction documents, blueprints and an inspection of property. This approach analyzes both actual cost records and cost estimates and may take up to a month to complete. Trained engineering and tax specialists will work closely with you and your contractor to identify more assets that qualify for shorter depreciable lives and accelerated depreciation, including all assets that are imbedded in your building’s construction or acquisition costs.

The business owner receives a detailed report including background, the methodology, asset classification summary and support, and the complete allocation of costs—everything they would ever need to know about the process and results.

Reinvest in your company

It’s important for the property owner to have a detailed report from a CPA so they understand exactly what they did. The engagement will pay for itself many times over through the first year’s tax savings. Earning these tax savings now, as opposed to many years from now is valuable. The property owner can take that money and invest it back into their business.

It’s important however, for property owners to work with engineers and tax advisors that are intimately familiar with cost segregation rules and requirements in order to make sure the study is in compliance with the constantly changing regulations regarding how assets may be classified. Any building put into service after 1987 qualifies. Even now, years later, the benefits can be realized.

The money you save from a cost segregation study can help your company in many ways. It could for example be used as additional working capital for operations, or be used toward new investments and ventures or used to pay down debt and reduce interest costs.

Brent Ross, CPA, is president of Brent Ross & Associates, CPAs, LLC. He has worked in the area of federal and state taxation since 1972. Having worked as a practicing CPA since the early 1970s, he has extensive experience dealing with issues related to investment tax credits (ITC) and property qualifying for ITC and component depreciation. This body of experience is the backbone of knowledge necessary to complete quality cost segregation analysis and reports to owners. He can be reached at 904-448-6408, bross@brjaxcpa.com, or through http://brjaxcpa.com/default.aspx.

Who qualifies?

Although any non-residential commercial property may qualify for tax deferral and increased cash flow, here is a sampling of the types of properties with a high probability of benefiting from a cost segregation study:

Corporate office buildings

Warehouses and distribution centers

Hospitals

Medical/dental offices

Nursing homes

Apartment buildings

Restaurants

Hotels and motels

Strip malls and retail stores

Car dealerships

Golf courses and country clubs

Grocery stores

Airport hangers

By L. Gary Boomer

The CPA is the most trusted business advisor, yet many CPAs continue to focus on transactional rather than advisory services. Why? Old habits are often hard to break and change is difficult. Transactional services have become commoditized and the hours required to produce them have been reduced or eliminated by technology. This is bad for the accountant that is focused on transaction work and good for the trusted advisor who is able to provide value at a higher level while leveraging the technology to complete the transaction at a low cost to the client. Contrary to popular believe, manufacturing is still strong in the US from a revenue perspective, but jobs have been eliminated or reduced due to technology and lower labor costs in other countries. The same is happening in accounting, but it is providing tremendous opportunities to those who know how to package, price and name advisory services.

History can be a great teacher, but often the students don’t listen or pay attention. Let’s look at traditional transaction type work such as write-up and payroll. Many firms abandoned these services with the advent of the personal computer and programs such as Intuit’s QuickBooks. Little did they realize the struggles that would ensue with clients utilizing technology they did not have the accounting skills to operate. Accountants also lost control over the technology platform as individual clients purchased software and technology from multiple vendors. Thus the start of problems associated with versions, licensing, file transfers and reconciliations. Vendors told the clients/consumers they didn’t need accountants if they utilized their software and often competed directly for this transactional work.

There is good news on the horizon for accountants who wish to package and price advisory services for value rather than by the hour. Cloud computing is the enabler that allows accountants to eliminate redundancy, improve efficiency and take over the platform while offering their clients a uniform and standardized system accessible by both the client and the accountant. The software vendors can’t offer the accounting expertise or the efficiency of a firm that can provide both the transactional services inexpensively and the advisory services the clients value and are seeking in today’s market. The economics behind this evolution date back to Adam Smith and the division of labor. Is the client better off sourcing transactional and advisory services to the accountant who has developed an efficient system accessible from anywhere at any time or should they try to do it themselves? Most entrepreneurs and good business people will opt for focusing on what makes their business successful and sourcing both the transactional and advisory services to the accounting professional. Until now, the accounting firm had to rely upon vendors who did not operate as partners, but acted as competitors. What is the difference between cloud computing and the client server model?

There are several:

• The client and the firm do not need to invest in as much technology and can share resources through virtualization.

• The firm can standardize and private label the platform used by many clients while maintaining the current version on hosted virtual servers.

• The technology allows the accountant and client to share transactional data as well as advisory reports 24/7 in a secure environment.

• The accountant does not need to waste valuable time traveling to and from the client’s offices.

• The accountant’s market is expanded from local to global with access to the Internet.

Most accountants I know would gladly change to a platform that allows them to provide both transactional and advisory services. The challenge is how do we make this a viable business model by packaging, naming and pricing these services other than by the hour? My advice is to first think like the entrepreneur rather than like an accountant. The value to the entrepreneur comes from the elimination of a danger or the ability to focus on an opportunity. One of the dangers to an entrepreneur when it comes to accounting is the ability to attract and retain quality bookkeeping and accounting skills at a reasonable rate whether it is part-time or full-time. A competent bookkeeper will cost the client in excess of $50,000, plus the investment in an in-house system can be significant as well as the maintenance. What is the value to the client of eliminating these dangers and sourcing with a trusted advisor? I can assure you it is more than most advisors will charge billing by the hour.

Next, what is the value of the client’s time to focus on revenue rather than payroll, accounts payable, general ledger, receivables and financial reporting? Again the value to the entrepreneur is generally greater than the value in the eyes of the accountant. The value only grows to several $1,000s of dollars per month as the size of the business grows. The new jobs in the US are being created by small companies of 25 employees or less and government. The government sector is going to change as they are forced into employing technology and reducing their size due to the current inefficiency and related labor costs. This leaves entrepreneurial companies to provide the economic stimulus the country is looking for.

CPAs can capture this opportunity that will provide increased margins and monthly cash flow plus act as a pipeline for advisory services. The first step is to survey some of your entrepreneurial clients and propose the cloud computing solution. Get their reaction. Sell tickets and then produce the show rather than build something that doesn’t meet the client’s needs or wants. Second bundle and price these services on a monthly basis. Utilize a fixed price agreement that narrowly defines the scope of services and responsibilities of both the client and the accounting firm. Be sure to include a change order clause because it protects the client and the firm.

While naming may not seem important, it is very important to the market and potential clients. He who names the process owns the process. Clients will always buy from the supplier who can name and graphically demonstrate a process. Naming is tricky and should utilize the talents of a professional marketer (division of labor). I suggest you follow Dan Sullivan’s naming process and start with “The” as it connotes exclusivity. Next use a technological word that describes your process and finally protect the name by trademarking it e.g. The Cloud SolutionTM or The Entrepreneurial SystemTM. Graphically define your process. A picture is worth a thousand words.

Now for the tough part, pricing. Again value the advisory services from the client’s perspective. Define your target client in terms of an ideal monthly fee and a minimum monthly fee you are willing to accept. Define the criteria for accepting and retaining a client. Go beyond the monthly fee and use criteria such as:

• Does the client take our advice – are they coachable?

• Will they refer us to other clients that meet our ideal profile?

• Will the client increase our capabilities?

• Respect – do we respect the client and do they respect our people?

• Does the client appreciate our services and promptly pay our bills?

Your pricing will change over a period of time, but your criteria for client acceptance and retention may remain static. This requires time to think and a plan while assigning responsibilities internally and to the client.

I suggest you consider a pricing matrix, as it is generally more acceptable and easier to close with than quoting hourly rates where the client feels they are assuming all of the risk of the engagement. Clients like to know the monthly amount in advance and it should provide the firm both with improved cash flow and margins, especially with experience and focusing on process improvement.

Change orders are an important concept and should be addressed in the fixed price agreement. Ironically many firms have change order clauses in their agreements, but few firms capture significant revenue due to the fact they fail to execute change orders prior to completing additional work that is beyond the scope of the fixed price agreement. This is a function of awareness and training. Often it is the staff accountant or manager who recognizes the opportunity in the field rather than the partner. Don’t be afraid to offer an incentive to your staff for recognizing opportunities and executing a signed change order.

Some of the services beyond traditional accounting (including payroll) and tax work (income, sales, payroll, and property) for small business are bill payment (back office), document management, records retention, budgeting and other CFO services, strategic planning, HR management, training, compensation planning. This menu of services can start in a limited format and expand based upon client requirements. Many of these services can be provided through the cloud or elements of the cloud can be used to gather (aggregate) information as well as deliver information.

Think of a client portal as not only a place to deliver documents, but also to aggregate client information before starting the engagement. Leverage the fact that much of the information you need for the project is already in digital format from other systems. Many firms are experiencing the fact clients will provide more timely information through the use of a secure portal. In fact, many clients are requiring the use of a portal in order to insure they do not violate state and federal privacy laws by sending sensitive data via email. Portals can reduces the inefficiency of starting and stopping on projects.

Innovation comes from combining what you already know with new capabilities (knowledge and technology). You should think about your client’s dangers, opportunities and strengths as you develop new services. Value is created when you reduce or eliminate client dangers, leverage their strengths and help them focus on their greatest opportunities. This requires leadership (direction), relationships (confidence), and creativity (new capabilities). Don’t get caught in the trap of trying to focus on too much. Focus on no more than their three top dangers, three top opportunities and their top three strengths.

The following action plan should enable you to start quickly, test the market, and grow your revenue stream quickly.

1. Think – Brainstorm using a mind map to identify client dangers, opportunities and strengths. Identify the obstacles and develop strategies to overcome the obstacles.
2. Plan – Develop a written one-page plan listing your strategic objectives, initiatives, dues dates and responsible parties.
3. Grow – Test the market with your best clients – check writers; they are the only opinions that matter.

In addition to these three steps I would recommend avoiding committees, unless you want to design a camel. Seek input from clients. There are entrepreneurs who make it happen, people who watch it happen and those that wonder what happened. The upfront investment and risks are relatively low, especially compared to commoditized services where the risks of litigation are often high and the competition fierce. Be an industry transformer.

L. Gary Boomer

L. Gary Boomer is CEO of Boomer Consulting, Inc., an organization that provides consulting services to leading accounting firms in the areas of  Leadership & Management, Client Development, Talent Development, Technology and Compensation.  Gary is also an ETS Board Advisor.

Gary is recognized in the accounting profession as the leading authority on technology and firm management. For over a decade, he has been named by Accounting Today as one of the 100 most influential people in accounting. He is also a member of IPA’s 10 most recommended consultants.

Get To Know What You Know

By Kristin Wing

One of the best strategies to attract new business is to get known for what you know. When you are able to achieve this, you will get the right kind of business and won’t have to work nearly as hard to get it.

THE REAL BENEFITS OF POSITIONING YOURSELF AS AN EXPERT Clients are attracted to successful professionals. As a leader, you’ve built credibility and a level of trust within your industry by creating an attraction factor. Wouldn’t it be great to have potential clients calling you? The increased visibility also helps you to be more selective and targeted about the business opportunities that come your way. And better yet, experts charge more. Being an expert allows you to charge a premium for what you do. This indirect method of promoting your expertise makes it easy for you to continually market yourself in order to keep your pipeline full. As you share your knowledge with clients, you’re also positioning your solution as the best solution.

What is an expert? What makes an expert? How do you know that you’re an expert in someone else’s eyes? According to the Dreyfus Model of Skill Acquisition, experts go beyond reciting the rules to understanding how to apply them intuitively to solve problems. They just know how to get it done. They have an innate ability to go from A-Z almost effortlessly by tapping into their knowledge bank and past history. Additionally, you will find that true experts are thirsty for more knowledge. They are continual learners and are always refi ning and evolving their approach. If you want to learn more about “How to Become and Expert: A Roadmap”, check out this great article by Litemind. http://litemind.com/expert-roadmap/

It’s never been easier to move forward. Let’s go. As a professional, you have spent many years learning the technical aspect of your field. You understand the issues that your clients are facing, and instinctively know the right solution. You have expertise; now you need to be recognized for it. Many professionals think that marketing themselves is a complex, difficult or confusing thing to do. Quite the contrary! It does take dedication, a little elbow grease and time.

True experts go beyond reciting the rules to understanding how to apply then intuitively.

The best news is that you have the skill sets to do it. You didn’t build a successful practice just by accident. The same skills you use to build your practice are the same ones you use to market yourself: Organization, communication, focus, relationship building and execution (or getting it done!). After years of working with professionals, we’ve identified a few ‘tried and true’ tactics that work. We find people are most comfortable choosing marketing tactics that they enjoy. For example if you fear speaking in front of people, writing maybe a better option for you.

Content Chances are good that you have at least a half dozen ideas rolling around in your head that can be used to position yourself as an ex­pert. And, if you’re really smart, you will ask your clients what legal/accounting or business issue they would like to know more about. These ideas are really your ‘content’ that can be easily used for articles, whitepapers, website copy, news releases… the ideas are endless. We encourage you to write them down, with a few sentences of description for each one. Start building a list of content or topics that you feel comfortable writing or speaking about.

Writing Many professionals find it intimidating to write (we all have flashbacks to grammar school English teachers admonishing us for writing mistakes!). The good news is that you know what you are writing about, are passionate about the subject and have experience with it. Figure out what works for you. If free flow writing (just start writing without an outline), works for you, great. Other profes­sionals like to build an outline first. There are a few tips to keep your writing fluid and interesting:

• Write it tight. After you’ve written a draft, look at what you can delete without cutting out major themes or technical information.
• Think like the reader. People are scanners, they read headlines, not pages of copy. How can you get the important themes up front quickly?
• Cut the jargon. Nothing turns off a reader faster than having to weed through big words or industry jargon. Keep it simple.
• Tell stories. Nothing hooks a reader faster than to do a deep dive into a story that vividly describes a problem and how you solved it for client.

Get Published You’ve come up with several ideas for content, written a few articles, now you’re wondering…. “How do I get published? Fortunately, in today’s environment, you don’t have to solely rely on someone else to publish your writing. You can self-publish through your company newsletter, or perhaps a blog. This is often a great way to start your publishing career. Getting published in local, industry or trade publica­tions can be a bit trickier. First you need to determine what publications best reach your target market, then you need to sell your article idea to the editor. You do this this by giving them enough information so that they can get a clear idea about the content but you don’t want to go so far as to send them a written article. If this seems to overwhelming to you, you may want to reach out to a public relations professional who has experience in pitching stories to the press.

Speaking The purpose of speaking is to start a relationship with the audience to build your credibility. It’s the perfect opportunity to showcase your knowledge while connect­ing with people. How do you get started? The key is to choose your audience wisely. Find speaking opportuni­ties with industry or trade organizations – they always want speakers. Try to find opportunities where your competitors are not sitting in the audience. Other ideas:

• Speak on a topic that you are passionate about. If you are not passionate about a topic, you will appear stiff and not interesting.
• Invite the audience to join in. Set ground rules at the top (“I welcome questions” or “Let’s take questions at the end”). Little sneaky tip: If you know someone who is coming to your presentation, give the person a question to ask to start the conversation flowing!
• Try to make your presentation a call to action. Think about how you can energize your audience to do SOMETHING.
• Oh REHEARSE. Nothing takes the edge off the speaker anxiety than practicing your speech a few times. Listen for how you deliver key sentences. Are there sentences in your speech that are hard to ver­balize? Are you tripping over your tongue? If you’re  like most of us, you’ll also start speaking quickly once you get in front of an audience. Try to slow down your delivery.

Which marketing tactics are right for you? Typically professionals are most successful when they choose the tactics that they enjoy the most

Awards Identifying and applying for business or industry awards is a great way to get your firm noticed. And go­ing through the process helps bring positive news about your fi rm, creates instantaneous buzz, media exposure, improves your employee morale and can create a bump in business development. Many communities have award opportunities through a local chamber, organizations or publications. The key is to understand exactly what the criteria is for the award. Is it firm growth? Innovative ideas to provide to clients? Community service? If either you or your firm don’t match up in the relevant award criteria, you may want to think about not applying or reworking your firm so you can apply next year. Associations (Professional, Business and Trade) We’ve all been there. The rubber chicken lunch folowed by a boring speakerand cold, tasteless coffee. How do you avoid ‘random acts of meetings?”

Before you pay your dues to join an association, do your due diligence.

Associations are great vehicles for connecting face to face with prospects. The key is to find the right association that isn’t full of lawyers/ accountants/consultants/whoever is in your industry at the meeting. Better news yet – Many have robust virtual discussion boards, social media tools that you can par­ticipate in without making a meeting. Before you starting writing a check for dues, we suggest that you do a little due diligence of your own. Check out the association’s website

• Ask others if they have attended the meetings – were they helpful? Interesting?
• Call the membership chair and ask how you can participate once you join.
• Get a list of current members (or at least the names of the member companies)
• Are there committees you can participate in?
• DO YOU HAVE THE TIME! (big one…..no sense in joining and then never participating)
• Finally, to make sure that the association is right for you, we recommend that you attend the association at least twice before you join.

Third Party Endorsements In her 1985 Oscar acceptance speech, actress Sally Field exclaimed “You like me! You really like me!” If you are doing your job, chances are good you have a few raving fans too. So why not ask them to speak on your behalf? Third party endorsements are the equivalent of a big old slap-on-the-back-you-done-good moment. Ask clients if they would endorse you to others. This can be in the form of a written letter that details how you solved a big problem or simply having a client write an endorse­ment on your LinkedIn page. One easy way to get the ball rolling is to write it for the client, have them edit/make it sparkle and send it back to you.

Social Media You can easily turn your talent and experience into expert status with the click of a mouse. If you are social media phobic, now is the time to build the foundation, especially for LinkedIn, the fastest growing social network. Your foundation needs to include analyzing your expertise – what industry or service areas do you have the most expertise? Once you have that down, write a quick positioning statement, such as “I work with (insert type of clients) to help them (insert types of problems you them with) by providing them with (insert services you perform). Then create a killer profile that includes your credentials, articles published, presentations and links to your website, don’t forget to include important key words as they will help you increase your online search rankings.

Expertise to Call to Action Make a prospect want you. In every one of the tools we’ve mentioned, think about how you can provide a ‘call to action’…….the one thing that is going to make a prospect reach out to you. Is it a whitepaper offer on your website? Is it an email campaign with a complimentary review of a prospect’s tax returns from last year? Or is it simply offering to make a special introduction for a client to a resource that you know will help them? What can you do to engage, educate and have them coming back for more?

Don’t Procrastinate… Start today As a service professional, you are balancing current client needs, firm commitments, and your networks, and you’re probably thinking that there is absolutely NO WAY that you can get anything else into your already jammed packed schedule today. Unfortunately, time does not fall into your lap, you must create it. Think about those deleting the time wasters on your calendar, or perhaps an item or two that you can delegate to others. Block time on your calendar once a week. Then close your door and focus completely. You would be amazed what you can accomplish in one hour a week or 52 hours a year.

Kristin Wing, Principal Kristin helps professionals build social capital with reporters, writers, bloggers and organizations to help them tell their stories by finding the right audiences and crafting the right messages.

About Acceleraction.com. AccelerAction is dedicated solely to helping professional service firms fuel their marketing, branding and lead development efforts. We work with accounting and law firms as well as consultants, private invest-ment firms, banks, financial advisors, human resources firms – any business-to-business service organiza-tion that needs to accelerate growth through personal relationships. Contact: www.acceleraction.com,  info@acceleraction.com or  6240 W 135th St, Overland Park, KS  66223

By Steve Erickson

I’m going to keep this short as I know how hard all of you are working. Here are a few ideas to keep you operating at a pace for peak performance.

1. Set short term productivity goals and then challenge yourself to meet them. There is a law called Parkinson’s Law that basically states that all work will expand to the time available. If you don’t have quite so much time available watch how your productivity soars. Make one of your goals to have dinner with your family or an appointment at the gym. You will work more efficiently and feel that you are doing a few things for yourself.
2. Eliminate as many negatives as possible in your life. Negative exchanges and relationships take up valuable productive and positive time. There will always be a few negatives in everyone’s life and what I recommend you do is get resolution as quickly as possible to remove the negative exchange/event from your current thoughts. It is very difficult to be creative and productive when you are upset.
3. Keep your clients abreast of your progress on their work. This will minimize misunderstandings and result in better billings. Nothing ever made me more upset than a disappointed client. It didn’t make me feel successful.
4. Watch your language. We think as we speak so speak kindly to yourself and others. Clients are the life blood of your practice so speak nicely about them. In many practices I have visited and in my own firm when I practiced I heard staff and partners make negative comments about clients. Stop it! The only person being hurt by the discussion is you.

Steve can be contacted as follows;

Steve Erickson
National Consultant to CPA Firms
505-331-9100
Albuquerque, NM 87120
Steve@SteveEricksonLLC.com
www.SteveEricksonLLC.com