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  • 10/19/2022 6:50 AM | Anonymous member (Administrator)

    October 18, 2022 

    Jeff Stimpson

    Inflation will drive up more than 60 tax provisions for 2023, including the tax rates, according to the Internal Revenue Service.

    Revenue Procedure 2022-38 details the annual adjustments for tax year 2023, with filing in 2024, including:

    • Standard deduction. For married couples filing jointly — $27,700, up $1,800 from the prior year; for single and married filing single — $13,850, up $900; for head of houseold — $20,800, up $1,400.
    • Marginal rates. The top tax rate remains 37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for MFJ). The other rates are:
    • 35% for incomes exceeding $231,250 ($462,500 for MFJ); 32% for incomes exceeding $182,100 ($364,200 for MFJ); 24% for incomes exceeding $95,375 ($190,750 for MFJ); 22% for incomes exceeding $44,725 ($89,450 for MFJ); and 12% for incomes exceeding $11,000 ($22,000 for MFJ). The lowest rate is 10% for incomes of single individuals with incomes of $11,000 or less ($22,000 for MFJ).
    • AMT. The Alternative Minimum Tax exemption amount rises to $81,300 and begins to phase out at $578,150 ($126,500 for MFJ, with phaseout beginning at $1,156,300). 
    • The Earned Income Tax Credit. The tax year 2023 maximum amount is $7,430 for qualifying taxpayers who have three or more qualifying children, up from $6,935 for TY22. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phaseouts.

    Among other changes for TY23, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $300, up $20.

    For the taxable years beginning in 2023, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,050. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $610, an increase of $40 from taxable years beginning in 2022.

    For participants who have self-only coverage in a medical savings account, the plan must have an annual deductible not less than $2,650, up $200, but not more than $3,950, an increase of $250 from TY22. For self-only coverage, the maximum out-of-pocket expense amount is $5,300, up $350.

    For family coverage, the new annual deductible is not less than $5,300, up from $4,950 for TY22. The deductible cannot be more than $7,900, up $500. For family coverage, the out-of-pocket expense limit is $9,650, an increase of $600.

    For tax year 2023, the foreign earned income exclusion is $120,000, up from $112,000 for tax year 2022.

    Estates of decedents who die during 2023 have a basic exclusion of $12.92 million, up from a total of $12.06 million for estates of decedents who died in 2022. The annual exclusion for gifts increases to $17,000 for calendar 2023, up from $16,000 for calendar year 2021.

    The maximum credit allowed for adoptions for tax year 2023 is the amount of qualified adoption expenses up to $15,950, an increase from the maximum $14,890 for 2022.

    By statute, certain items that were indexed for inflation in the past are currently not adjusted. The personal exemption for tax year 2023 remains at 0, as it was for 2022. For 2023, as in tax years going back to 2018, there is no limitation on itemized deductions.

    Sign in front of IRS building in Washington, D.C.

    Pamela Au/wingedwolf - Fotolia

    The MAGI amount used by joint filers to determine the reduction in the Lifetime Learning Credit is not adjusted for inflation for taxable years beginning after 2020. The Lifetime Learning Credit is phased out for taxpayers with MAGI exceeding $80,000 ($160,000 for joint returns).

    The Inflation Reduction Act extended certain energy-related tax breaks and indexed for inflation the energy-efficient commercial buildings deduction beginning with tax year 2023. The applicable dollar value used to determine the maximum allowance of the deduction is $0.54 increased (but not above $1.07) two cents for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25%.

    The applicable dollar value used to determine the increased deduction amount for certain property is $2.68 increased (but not above $5.36) 11 cents for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25%.

  • 09/26/2022 7:28 AM | Anonymous member (Administrator)

    September 23, 2022

    By  Mary Anne Ehlert

    A study by the U.S. Census reveals that over 3 million children have a disability, about 4.3% of the under-18 population, and it's estimated that one in five households is caring for a child with special needs. The number is growing because of changes in diagn, the prevalence of autism is now one in every 68 children, an increase driven by greater awareness of the autism spectrum.

    More than ever, it's important for CPAs and financial planners to ask their clients about the presence of a child with special needs in the family, because many of their parents are worried about securing their child's future during their retirement and after their death. 

    At my firm, Protected Tomorrows in Lincolnshire, Illinois, we specialize in assisting such families. To me, it's a personal mission. My sister, Marcia, who was born with cerebral palsy, changed my life forever. I saw first-hand the difficulties our parents had in making sure Marcia would be cared for when they could no longer do so. Our mission is to provide each family hope and a coach who can guide them through the uncertainty they will face.

    Over the years, I've developed eight steps to future care planning, addressing all aspects of life, including legal considerations, potential government benefits, transition planning, residential options, employment opportunities, recreational choices, investment solutions and family communication. At every step, we focus on a client's abilities, not their disabilities. 

    Step 1: I've found that many families are, at first, hesitant to share their stories, so it's important to ask the right questions: Do you have a child with special needs, or a child who will need more financial support than their siblings in the future? What is the child's disability? What are their unique gifts and talents? What are your dreams for their future, and what are your fears? What is the best thing that could happen for their future?

    The answers you receive will serve as the foundation for forward-planning.

    Step 2: Identify the potential life needs of the individual with special needs, including quality of life, medical needs, education and recreation, based on their ability to support themselves. This step helps quantify medical expense deductions, identify tax returns to be filed, and clarify other expenses not yet accounted for. 

    Step 3: Guide the family toward discussions about legal considerations, including wills, powers-of-attorney, trusts and guardianships. It's common for families to delay this step because no one likes thinking about death, but the decisions made today — as daunting as they seem — can ensure greater protection for the individual with special needs. They should retain an attorney who is knowledgeable about such details as special needs trusts and guardianships. It is critical to understand how the taxation of these trusts are handled into the future.

    Step 4: Capture all the benefits the individual will be eligible for. The professional's role in helping the individual maintain their eligibility for programs such as Supplemental Security Income and Medicaid can be important to the maintenance of those valuable benefits. Questions to be asked here include whether the individual with special needs has health insurance through an employer or parent employer, whether the individual holds assets in their name, and whether there's a possibility of an inheritance.

    Step 5: Document, document, document. A family with an individual with special needs spends much of its time finding resources, building self-esteem, joining support groups and keeping life stable and safe for that person. Although parents and caregivers have much of this information in their heads, it is critical to the future quality of life of the loved one that they record important information in writing (referred to as a "letter of intent"). Parents often struggle with giving that responsibility to other family members, so building the support team is critical to confidence.

    Step 6: Help the family plan for what happens when the individual with special needs ages out of state-supported education and has to find a place to live, work and play. When the "bus stops coming," the family often realizes for the first time that the planning is now up to them. The amount of research necessary to find the right programs can be overwhelming. The key for CPAs is to have access to information through a network of professionals to share important information with families.

    Step 7: Fund the future. A CPA can help a client make wise decisions today that will be beneficial in the future. For example, if the plan dictates that a certain amount of money is needed for the lifetime of the individual, how are these funds to be obtained? Will the government provide all the necessary funding? Can the family fund the special needs trust with a large enough inheritance? Should life insurance be purchased, and who should be the policy owner? Having a defined plan to fund the future provides the family peace of mind.

    Step 8: Like all estate plans, planning for an individual with special needs is not a one-and-done. Families require regular reviews to understand the changes that may occur. New legislation may be enacted that impacts their plans, or a program may be discontinued.

    Families of individuals with special needs spend a great deal of time delivering care and finding resources to help them care for their loved one. It's often hard for them to step back and consider the future. Their CPA can and should offer the knowledge and guidance they need.

  • 09/15/2022 7:19 AM | Anonymous member (Administrator)

    September 13, 2022

    By  Michael Cohn

    Taxpayers trust professional advice and tax authorities, according to a new global survey, but are less sure about politicians and the press. 

    report released Tuesday by the Association of Chartered Certified Accountants and the International Federation of Accountants found that in relation to the tax system, people have the highest level of trust in professional tax accountants, with 67.1% saying they trust or highly trust them, and professional tax lawyers at 64.6%. Across the sample in the survey, 41.2% of respondents reported using the services of a professional accountant to manage their tax affairs.

    Respondents demonstrated a clear belief that accountants play a positive role, contributing to a more efficient (71.9%), more effective (70.2%) and fairer (67.4%) tax system.

    ACCA and IFAC surveyed 5,600 people across 14 countries and found that overall, people trust the tax authorities, but opinions are polarized and a significant minority (27.9%) either distrust or highly distrust their tax authority. Politicians were the least trusted people with respect to the tax system, with a net "trust deficit" of –25.7%. Social media reports were the only other category showing a net trust deficit  at –8.6%. Unfortunately the press isn't trusted much more than politicians and social media. While media reports show a small net positive balance (8.1%), 9.4% of the respondents indicated they highly distrust media reports, and a 22.2% distrust them. 

    "This new survey comes at a time of uncertainty as governments around the globe come to grips with the consequences of the COVID-19 pandemic and the implications of the Russian invasion of Ukraine," said ACCA chief executive Helen Brand during an online panel discussion Tuesday hosted by ACCA, IFAC and the Pan-African Federation of Accountants. "Preexisting global megatrends and challenges such as climate change and changes in population patterns have highlighted the importance of creating a more sustainable and importantly fairer world. The importance of tax systems in building resilient economies cannot be overstated."

    ACCA chief executive Helen Brand

    nataliejweddings

    She cited research from the IMF that economic growth goes hand in hand with a consistent stream of tax revenues. "The challenge for governments over the next 30 years will be to fund health and social care, infrastructure development and the needs of an aging population against the backdrop of resource and environment challenges," said Brand. "This is particularly true for developing economies, which are at the heart of our new survey, where existing resources and capacity to collect are already stretched. This puts additional pressure on governments to find responsible ways  to spend more while at the same time facing an unprecedented trust crisis. It's a vicious circle: The lack of trust threatens a key resource enabling any government across the world to meet today's challenges, in other words tax revenues, but without tax systems, governments cannot fund the initiatives to build that trust, and without that revenue governments cannot deliver on the UN's Sustainable Development Goals."

    "As professional accountants, we do our part in the development of sustainable economies and sustainable societies," said IFAC president Alan Johnson. "As we look to the future of our profession, both in the private and the public sector, and in the broader movement to sustainability, it is also important that we look more deeply and understand what is holding us back. Corruption and crime-related issues, such as money laundering, bribery, illicit financial flows and fraud are significant obstacles to economic development and economic growth as well as human development, and ultimately to the achievement of the 17 United Nations' sustainability goals. The UN estimates that you need between $5 and $7 trillion of investment annually to achieve the SDGs, but at the same time today you lose something like $3.6 trillion, or half of what we need to invest to deliver the SDGs to corruption, whether it is lost to governments or indeed to society. We could never afford to lose this amount of money before the pandemic and we certainly cannot afford to lose it today. The global profession has an important role to play here because we're uniquely placed as trusted advisors to businesses and governments, to support an ecosystem which includes all actors, both privately and in the public sector and nongovernment organizations, to ensure that public policy addresses the needs of society because that is important if we really do want to work in the public interest."

    He noted the IFAC has recently released an action plan for fighting corruption and economic crime (see story or listen to podcast). "In every country we studied, we heard that the problems in tax systems have less to do with collecting taxes and much more to do with how taxes are used," said Johnson. "We have found that attitudes toward tax are largely driven by the population's views on corruption. Trust in the tax system is lower when taxpayers perceive higher levels of corruption and the diversion of funds. There are many connections here between the tax system, sustainable development and public financial management."

    People want to see tax systems used to target specific positive outcomes, according to the survey. Nearly three-quarters of the respondents strongly support the use of tax incentives to target 'global megatrends' such as climate change (73.8%) and the aging population (72.8%). The survey found that 73.9% of respondents support the use of tax incentives to attract multinational business while 69.3% support cooperation between countries to create a more coherent international tax system. 

    The respondents generally believe that taxpayers are paying a reasonable amount of tax. Across the entire sample, respondents were more likely to agree than disagree that specific taxpayer groups were paying a reasonable amount of tax. This applied to various groups, including average- or low-income individuals, high-income individuals, local companies, and multinational companies. Nearly half the global respondents (46%) said multinational companies were most likely to be paying a reasonable amount of tax. However, in seven of the G20 countries, more respondents disagreed than agreed that multinationals are paying a reasonable amount of tax. Across the wealthier countries as a whole there was a net positive balance across the survey respondents of only 22.4%. Attitudes toward tax minimization were more relaxed than in the G20 surveys, with only minimization by low- or average-income individuals attracting a net negative score in more than one country. The attitude toward tax minimization by low-income individuals was the most deeply split category, with strongly negative scores in six countries almost equal to the aggregate positive scores in the other eight.

    Across the entire sample, online services ranked as the most commonly used service in managing tax affairs, being selected by 42.2% of respondents, compared to 36.9% of respondents among the G20 countries surveyed last year. 

  • 09/07/2022 7:52 AM | Anonymous member (Administrator)

    September 06, 2022

    By  Judie McCarthy

    Having run a firm myself and worked with many firm owners, I understand the concept of letting go can be hard. However, if you don't learn how to delegate work, your growth will be capped. In this article, I'll share how you can effectively begin to delegate. 

    Why is delegating hard for firm owners?

    Emotions play a major role in an owner's difficulty letting go and delegating tasks, but the challenges in delegating go beyond emotions. Since you've been an integral cog in your firm's operation, you may not have documented all of your processes yet.

    The tasks you handle live in your head, and often every client's tasks are a bit different.

    One of the biggest hurdles you'll likely face when you begin to delegate is documentation. However, it's possible to overcome this challenge by following the steps below:

    Capture your processes

    If you want to delegate, you need to have detailed documentation for the person to follow. With proper documentation, someone else can provide the same level of service that your clients are accustomed to already.

    You can begin capturing your processes using key tools:

    • Talk-to-text;
    • Microsoft Word or Google Docs;
    • Loom or similar screen recording; and
    • Screenshots.

    You may even want to use a combination of the tools above to capture your processes. For example, Loom is an excellent option because it allows you to record your screen and show a team member exactly how you perform a task.
    Additionally, for each task, you can attach these instructions to your project management system to reduce the risk of errors and ensure that the task gets done the same way each time.

    Break your work down into smaller pieces

    As part of capturing your work, be sure to break down your work into smaller pieces. The goal of breaking work down into smaller chunks allows you to eventually assign the work to others and make it easier to follow your instructions.

    For example, you may break down your work into entering transitions, running payroll, performing reconciliations, and so on.

    Begin delegating tasks the right way

    Once all of your processes are documented and you've broken your work down into smaller chunks, you can begin assigning work. When you first begin delegating, try assigning simple tasks first.

    If your team completes these simple tasks properly, you can assign them more complex tasks.

    When delegating, you can set your team up for success by:

    • Ensuring they have the tools they need to complete the work;
    • Granting access to files and documents they may need;
    • Providing clear expectations of the work, such as timelines, duties and so forth; and
    • Assigning work to the right person who has the experience needed to complete the job.

    You need to be confident in your staff's ability to do the jobs they're assigned. If you delegate tasks to someone who isn't qualified to complete them, you're setting your team up for failure. Don't delegate work to someone unqualified just because they need something to do.
    Additionally, just because you begin delegating doesn't mean you must delegate everything. If a task is something that you genuinely enjoy doing, do it. You can also step in from time to time to ensure you know the current processes.

    For example, if you've been delegating payroll to Suzie for months, you can ask her to let you handle payroll this week so that you remain in touch with the process.

    Monitor your team's progress

    Firm owners are so used to being hands-on that they often fear the work won't be done properly or on time without them. You should have a way to monitor results to ensure every task is moving along accordingly.

    You may want to consider using a project management application so you can track work that is getting done, view when work is getting done and monitor anything that's fallen to the back burner.

    If you find that tasks aren't being completed on time or not at all, step in quickly to discover what's causing your staff problems. Perhaps there's something you can do to remove the friction that is holding the task up from being completed on time or correctly. Just because you're delegating tasks doesn't mean that you have to step back 100%. You can still monitor things and help staff as necessary.

    Next, you need to build relationships between your staff and clients.

    Help staff build client relationships

    Being a firm owner or partner means that you've had a lot of hands-on experience with clients. You may want to maintain this relationship management, but to fully delegate work, your staff members need to also be a part of the client relationship.

    Relationships with clients will make it easier for staff to gather information, get answers to their questions, and do their job. You can facilitate these relationships by introducing team members as part of the onboarding process. Ensure your clients know which team members they should contact for various aspects of their engagement and how to contact your team members.

    It's important to tell clients that you're still available if they have any questions or concerns. You can also tell them that you're not going anywhere and will be overlooking their work still.

    Gather feedback

    Delegating needs to work for everyone, and you should gather feedback from staff you're offloading your work to because their feedback is essential. Remain open-minded and allow staff to provide honest feedback. They may have ideas on how to make processes even better.

    As you look to grow your firm, delegating work is something you must get comfortable with and  master. If you follow the steps above, not only will you find success in your delegation process, but your team and your clients will too.

  • 08/25/2022 7:16 AM | Anonymous member (Administrator)

    The Internal Revenue Service is providing penalty relief to most individual and business taxpayers who filed their 2019 or 2020 returns late due to the COVID pandemic, while refunding $1.2 billion in penalties to nearly 1.6 million taxpayers who filed late.

    As part of the effort Wednesday, the IRS issued Notice 2022-36, which offers penalty relief to most people and businesses who file certain 2019 or 2020 returns late. The IRS is going further to help the taxpayers who have already paid the penalties by refunding them with automatic payments that are expected to be completed by the end of September.

    Along with providing relief to both individuals and businesses affected by the COVID-19 pandemic, the IRS will be able to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season.

    "Throughout the pandemic, the IRS has worked hard to support the nation and provide relief to people in many different ways," said IRS Commissioner Chuck Rettig in a statement. "The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time. This penalty relief will be automatic for people or businesses who qualify; there's no need to call."

    rettig-charles-irs-budget-hearing.jpg

    IRS Commissioner Chuck Rettig

    The relief applies to the penalty imposed for failing to file, which is usually assessed at a rate of 5% per month and up to 25% of the unpaid tax when a federal income tax return is filed late. This relief applies to forms in both the Form 1040 and 1120 series, as well as others listed in Notice 2022-36, posted today on IRS.gov. 

    To qualify for the relief, any eligible income tax return must be filed on or before Sept. 30, 2022.

    The IRS is also offering penalty relief to banks, employers and other businesses required to file various information returns, such as those in the 1099 series. To qualify for relief, eligible 2019 returns must have been filed by Aug. 1, 2020, and eligible 2020 returns must have been filed by Aug. 1, 2021.

    As both deadlines fell on a weekend, a 2019 return will still be considered timely for purposes of relief provided under the notice if it was filed by Aug. 3, 2020, and a 2020 return will be considered timely for purposes of relief provided under the notice if it was filed by Aug. 2, 2021. The notice provides details on the information returns that are eligible for relief.

    The notice also provides details on relief for filers of various international information returns, such as those reporting transactions with foreign trusts, receipt of foreign gifts, and ownership interests in foreign corporations. To qualify for the relief, any eligible tax return needs to be filed on or before Sept. 30, 2022.

    The tax penalty relief applies broadly, but there are some exceptions, according to an email from Wolters Kluwer Tax & Accounting. The penalty relief is available for Form 1040 and related forms, as well as Form 1041 and related forms, Form 1120 and related forms, Form 1066, Form 990-PF and related forms. It also applies to some international information returns, including Forms 5471 and 3520. For businesses it applies to Forms 1065 and 1120-S. 

    The relief also relieves penalties for failure to timely file certain information returns that meet the following requirements: 

    • 2019 information returns filed on or before Aug. 1, 2020, with an original due date of Jan. 31, 2020, Feb. 28, 2020 (if filed on paper) or March 31, 2020 (if filed electronically), or March 15, 2020; and
    • 2020 information returns filed on or before Aug. 1, 2021, with an original due date of January 31, 2021, February 28, 2021 (if filed on paper) or March 31, 2021 (if filed electronically), or March 15, 2021.

    However, there are some exceptions. The penalty relief does not apply to any penalties not specifically listed in the notice, nor to fraud situations. It also doesn't apply to an accepted offer in compromise, a settled closing agreement or a finally determined judicial proceeding.

  • 08/15/2022 10:03 AM | Anonymous member (Administrator)
    August 12, 2022
    By Nick Spoltore, Esq.

    Congressional passage of the Inflation Reduction Act took everyone by surprise, and tax professionals all over the U.S. are fielding calls from clients and employers anxious to know what it means for them. After all, the bill’s passage marked a dramatic reversal of fortune for elements of the proposed but long-stalled Build Back Better Act. While the measure’s actual power to reduce inflation is in question, its tax implications are immediate. A bill that raises $700 billion in revenue over 10 years is certain to cause major repercussions while harboring hidden surprises.

    Corporations and other taxpayers expect their finance and accounting professionals to have the answers, making this the ideal time to apply continuing professional education credits toward learning the details of this complex act.

    Surgent’s first-to-market CPE course covers the IRA’s new tax provisions in detail, equipping participants to properly advise their individual and business clients if and how the tax changes impact their tax planning.

    The upshot of the IRA

    The Inflation Reduction Act would raise its $700 billion in revenue over 10 years through:

    • A 15% minimum tax on income reported to shareholders – so-called “book income” – by large corporations with profits higher than $1 billion. The AICPA has expressed concerns about basing tax liability on the nontax criterion ascribed to book income.
    • A 1% excise tax on companies’ stock buybacks.

    The spending side also creates tax implications:

    • About $370 billion meant to fight climate change includes incentives for energy efficiency, clean energy and clean vehicles.
    • In addition to the government’s new powers to negotiate the prices of certain prescription drugs under Medicare, beneficiaries will now have a $2,000 cap on out-of-pocket prescription costs.
    • $45.6 billion to beef up IRS enforcement.
    • Enhanced federal premium subsidies for Obamacare coverage are extended by one year, through 2025.

    IR22 covers the major topics

    Clearly, major tax changes are in order, and it’s time to become familiar with their terms. Surgent’s Summary and Analysis of the Inflation Reduction Act of 2022 (IR22) course covers the sweeping provisions of the IRA, including:

    • The 15% corporate tax
    • 1% tax on the repurchase of corporate stock
    • Enhancement of IRS services
    • Prescription drug pricing reform, including drug price negotiation
    • Maximum out-of-pocket cap for Medicare beneficiaries
    • Extension of Affordable Care Act subsidies for certain individuals whose household income exceeds 400% of the poverty line
    • Clean energy and efficiency incentives for individuals
    • Energy Efficient Home Improvement Credit
    • Energy Efficient Commercial Buildings Deduction (Section 179D)
    • Extensions, increases, and modifications of the New Energy Efficient Home Credit
    • Clean Vehicle Credit and credit for previously owned clean vehicles
    • Qualified Commercial Clean Vehicles
    • Transfers of certain credits to an unrelated transferee
    • Increase in Research Credit against payroll tax for small businesses

    A deep dive into a teeming pool
    With Summary and Analysis of the Inflation Reduction Act of 2022 (IR22), you’re the first to know and comprehend this brand-new, multi-faceted tax act. Other courses skim the surface, providing the same broad-stroke highlights you can find in any news story or online summary. With this course, your CPE investment delivers the highest ROI, as Surgent’s expert panelists detail every relevant facet applicable to planning for both you and your clients.

    Our course will help you become familiar with all aspects of the Inflation Reduction Act and help you advise clients regarding individual and business planning related to this new legislation.

    Are you ready to get up-to-date on the latest tax implications of the Inflation Reduction Act? Surgent CPE offers everything you need to know about the new legislation. Our new course will premiere on Aug. 16 with additional dates to follow. Register today for this first-to-market course on the Inflation Reduction Act.

  • 07/05/2022 3:33 PM | Anonymous member (Administrator)

    July 04, 2022

    by Helen Tupper and Sarah Ellis

    Steven Puetzer/Getty Images

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    This is a challenging time for managers. Alongside their day-to-day roles, many are facing a never-ending cycle of reskilling and recruiting on their teams. The need to reskill isn’t new, with the OECD estimating that 1.1 billion jobs are liable to be radically transformed by technology in the next decade. However, managers are now being asked to close the skills gap at the same time as they’re responding to pandemic-prompted resignations.

    According to Gartner, the pace of employee turnover is forecast to be 50–75% higher than companies have experienced previously, and the issue is compounded by it taking 18% longer to fill roles than pre-pandemic. Increasingly squeezed managers are spending time they don’t have searching for new recruits in an expensive and competitive market. Unless efforts are refocused on retention, managers will be unable to drive performance and affect change. Leaders need to take action to enable their managers to keep their talent while still being able to deliver on results.

    From Constrained Careers to Retention Reimagined

    Although managers are undoubtedly navigating dynamic market conditions, one of the primary reasons why people look to leave remains the same: a lack of career progression. That same Gartner report found that 65% of employees are now reconsidering the role of work in their lives; however, only one-third are open to internal opportunities providing part of the solution.

    Limited awareness of roles and a perceived lack of support from managers means that for many, it has become easier to leave and grow than squiggle — that is, change roles and develop in different directions — and stay.

    Even the most supportive managers face a tough choice in response to this challenge. Investing time and effort in their employees’ career development is often at odds with the metrics they’re measured against. Research from Mercer finds that eight out of 10 companies focus on individual goals whereas just five out of 10 work toward the goals of the broader business unit. Managers who optimize for individual performance are likely to become more territorial about their talent. By keeping the “best” people on their team, they achieve the best outcomes. However, this is often to the detriment of individuals’ career development and the organization’s ability to access its own talent. The unfortunate outcome is that the people managers most want to retain feel constrained and become more likely to leave, risking the performance metrics they were so keen to protect in the first place.

    The solution to the career development conflict this creates lies in taking a fresh look at how retention is managed. Managers need help with three things. First, they need help shifting the focus of career conversations from promotion to progression and developing in different directions. Second, they need help creating a culture and structure that supports career experiments. Finally, managers need to be rewarded not for retaining people on their teams but retaining people (and their potential) across the entire organization.

    The following three solutions enable managers to support people in growing beyond their teams and increase the chance that top talent will choose to stick around.

    Solution 1: Focus career conversations on progression, not promotion.

    Career conversations today are often rushed, low quality, or even skipped in favor of day-to-day responsibilities. However, career conversations are one of what Gartner refers to as the “moments that matter” if managers want to retain people. The purpose of a high-quality career conversation should be two-fold: to give employees the permission to be curious about where their career could take them and the practical support to make progress.

    Strength spotting

    Individuals often struggle to see their strengths, which makes it even more challenging to figure out how those strengths could be applied across different roles and parts of an organization. Career conversations give managers the chance to not only share strengths-based feedback (“I see you at your best when…”) but also to discuss how those strengths might be useful in other teams. They can help employees spot the value in not only what they’re delivering but how they make work happen. For example, there are few teams that wouldn’t benefit from a brilliant problem solver or creative collaborator. Helping employees go beyond being aware of their strengths to understanding how those strengths could be applied in different situations is often the first step in increasing an individual’s confidence to start exploring career possibilities within an organization.

    Creating connections

    Managers play an important role in prompting employees to have curious career conversations. These conversations are not about applying for a job but instead getting a window into someone else’s world. It can be a daunting task for individuals to approach people for informal chats, especially those senior to them. Managers typically have a wider range of relationships across an organization and are therefore in a good position to make connections and direct introductions to new people. When individuals are actively encouraged to explore internal opportunities outside their direct team, it reduces the concern that looking elsewhere for future possibilities will impact the outcome of their annual performance review.

    Solution 2: Make career experiments easy.

    Applying for new internal roles can feel like a formal and drawn-out process. An alternative approach is for managers to work together to create career experiments across an organization. These experiments encourage employees to try out new experiences and opportunities in a way that feels safe, and even fun. Though some experiments inevitably work better than others, even the commitment to experimentation signals to employees that the company is invested in finding ways to support people to “squiggle and stay.”

    Borrowed brilliance

    Moving to a new team and department creates a lot of uncertainty and unknowns for employees. Managers can reduce this risk for individuals by finding ways to share talent that involves dipping a toe in the water rather than jumping straight into the deep end. This might look like two people doing a job swap one day a week for six months. Or it could be managers identifying “borrowed brilliance” roles where people are temporarily borrowed for a set amount of time for a specific project. It might even be as simple as a two-week “squiggly safari,” where an employee has a two-week “holiday” from their day job to learn more about different parts of the organization. Everyone wins with these types of experiments: Employees find their way out of siloes and expand their networks and managers benefit from a broader range of talent.

    Skills marketplace

    Many organizations are reconsidering how they structure for skill sharing. Rather than being identified through their job titles, employees are instead profiled by their talents. These talents form part of a “skills marketplace” that allows managers to profile projects based on the expertise they require and match it with the experience available within the business. This approach also enables organizations to more accurately and proactively assess where they might have skills gaps. Beyond just projects, this approach could lead to whole roles being deconstructed into a set of skills that could be divided out between a group of people, rather than expecting one person to excel in all areas a role may require.

    Solution 3: Measure managers on people potential, not team performance.

    Where the question was once “how do I keep this person on my team?,” the question now needs to be “how do I keep this person in my organization?” A manager’s role in supporting someone’s career must expand to support people to explore opportunities beyond the boundaries of their existing team. Metrics matter in driving behavior changes, and managers need to be recognized and rewarded for enabling internal mobility.

    Mobility metrics

    Managers need to be measured against a new set of metrics that reflect their focus on the development of organization-wide people potential. These metrics could include the number of career experiments they’ve sponsored within their team and supported for people to explore outside of their team. Metrics might also cover the diversity and development of skills within the team, ideally linked back to data from the skills marketplace, and also the percentage of vacant roles filled internally. These metrics reinforce the need for talent to flow within the organization, to support people’s aspirations for career growth, and to enable the organization to benefit from a more fluid and flexible workforce.

    Empower employees

    Individuals need avenues to share whether they’re able to demonstrate and develop their transferable talents, have frequent conversations about their career, and feel they have permission to explore possibilities. Encouraging and empowering employees to share feedback on their managers’ attitudes and actions on career progression is a vital part of the process. Organizations need to provide the structure and support for this information to flow. This could take the form of feedback training for employees and developing systems that prompt employees to share their perspectives on a manager’s commitment to career growth. Providing the opportunity for employees to nominate managers for recognition and reward could also create visible signals of what success looks like. Managers that are seen to embrace the “squiggle and stay” mindset become magnets for top talent and are showcased as role models to learn from across the organization.

    . . .

    Reimagining retention is not a quick-fix solution to the challenge many organizations and managers are currently facing, but the sooner they start, the sooner their people will see the opportunities to squiggle and stay instead of looking to leave in order to grow.

  • 06/10/2022 10:02 AM | Anonymous member (Administrator)

    June 9, 2022

    By Neil Amato

    A U.S. accounting firm is not prohibited by a White House executive order regarding U.S. sanctions against Russia from providing tax advisory and preparation services to the U.S. subsidiary of a Russian company in certain scenarios, according to guidance issued Thursday by Treasury's Office of Foreign Assets Control (OFAC).

    On May 8, the United States announced expanded sanctions against Russia in response to the war in Ukraine. Those sanctions prohibited "U.S. persons from providing accounting, trust and corporate formation, and management consulting services to any person in the Russian Federation," according to a White House statement.

    Practitioners had questions about the sanctions' applying to various types of services, including tax-related services, and some clarity has been provided by an update to frequently asked questions (FAQs) posted by OFAC.

    The OFAC FAQs describe several scenarios in which services to a non-Russian subsidiary of a Russian person would not be prohibited. Here is question No. 1059:

    Does the determination made pursuant to Executive Order (E.O.) 14071 on May 8, 2022, "Prohibitions Related to Certain Accounting, Trust and Corporate Formation, and Management Consulting Services" ("the determination"), prohibit U.S. persons from providing services to persons located outside of the Russian Federation that are owned or controlled by persons located in the Russian Federation?

    And the answer:

    No, provided that the provision of services is not an indirect export to a person located in the Russian Federation. For the purposes of this determination, OFAC interprets the "indirect" provision of the prohibited services to include when the benefit of the services is ultimately received by a "person located in the Russian Federation."

    FAQ 1059 goes on to say that OFAC "would not consider to be prohibited the provision of services to a non-Russian company that has a physical presence and operations outside of the Russian Federation, including such a company owned or controlled by persons located in the Russian Federation, provided that the services will not be further exported or reexported to persons located in the Russian Federation."

    Here are two such scenarios from the FAQ that would not be prohibited under the determination:

    • A U.S. accounting firm provides tax advisory and preparation services to the U.S. subsidiary of a Russian company. This U.S. subsidiary has an office and employees in the United States and conducts business in the United States, and the services will not be exported or reexported to the Russian parent company.
    • A U.S. management consulting firm provides strategic business advice to the subsidiary of a Russian company located in a third country. This subsidiary has an office and employees in the third country and conducts business in this third country, and the services will not be reexported to the Russian parent company.

    However, FAQ 1059 says that the following would be prohibited:

    • A U.S. corporate service provider administers a trust established under the laws of a U.S. state, where the trust exists predominantly to hold, sell, or purchase assets on behalf of a settlor, trustor, or beneficiary who is an individual ordinarily resident in Russia. 
    • A U.S. corporate service provider registers a limited liability company in a third country on behalf of an individual ordinarily resident in Russia for the purpose of holding real estate assets, and this company has no other physical presence or operations in the third country. 

    A statement issued May 9 by the Association of International Certified Professional Accountants, the combined voice of the American Institute of CPAs (AICPA) & The Chartered Institute of Management Accountants (CIMA), expressed support for implementing economic and trade sanctions and other measures in response to the Russian military invasion of Ukraine.

    "We will continue to monitor the situation to address any further impacts on the profession. Our primary focus remains on members, students, and staff impacted by this war. We are developing and releasing resources to help our members and the broader accounting and finance profession address the urgent economic challenges stemming from sanctions, supply chain disruption, and other issues."

    In March, the Association announced an indefinite suspension of services in Russia and Belarus.

    Visit the Ukraine-Russia War Resource Center for more information.

  • 06/03/2022 11:55 AM | Anonymous member (Administrator)

    June 2, 2022

    Hosted by Neil Amato

    On May 24 in New York, the AICPA and CPA.com hosted the inaugural ESG Symposium, bringing together a group of accounting leaders, investors, standard setters, and others to exchange ideas and perspectives on environmental, social, and governance (ESG) issues.

    One presenter and a leader in the ESG field is Ami Beers, CPA, CGMA, senior director–Assurance and Advisory Innovation at the AICPA.

    In the episode, Beers explains the reasons for increased focus on ESG, what she took away from the symposium, and what's coming next. She mentions several resources that can be found online. One good place to start is the AICPA's ESG-focused resource page.

    What you'll learn from this episode:

    • More details on what the letters in ESG signify.
    • An overview of the recent ESG Symposium in New York.
    • Why Beers says that "accountants are the right people to be leading in this area."
    • The five drivers of ESG implementation, according to Beers.
    • The reason Beers says "there is a lot to learn" still about ESG topics.

    Play the episode below or read the edited transcript:

    Transcript:                                                            

    Neil Amato: Thanks for coming back for another episode of the Journal of Accountancy podcast. It's the first episode in June, and our focus today is an interview on the topic of ESG. And we'll also have mention of a news topic: the IRS Dirty Dozen tax scams. First, here's a word from our sponsor.

    Amato: Hello and welcome to the Journal of Accountancy podcast. This is Neil Amato. Today's episode is a focus on ESG — that is, environmental, social, and governance — and ESG topics are one of rising importance for CPAs. We'll also be talking about an ESG symposium held recently at the AICPA's New York office.

    That rising importance is the result of both proposed regulations and growing interests from potential clients, as well as growing demand for advisory services. To talk about ESG and the symposium, I'm joined for this segment by Ami Beers. Ami is a CPA and colleague of mine who is senior director–Assurance and Advisory Innovation. Ami, first, I think people understand maybe what the E in ESG stands for and means, but could you tell me more about the S and the G?

    Ami Beers: Sure, and thank you very much for having me today. I agree. I think a lot of people automatically think of E and think of the climate and capturing of carbon emissions and reporting on that information. But E really encompasses other environmental matters that are having an impact on companies' value or business model; so information about water usage and waste and biodiversity and how these impact some industries.

    When we talk a little bit about the S in ESG, which is really becoming increasingly important, especially after the pandemic, these social issues cover people and relationships, so the health and safety of workers, the diversity and equity inclusion within companies, as well as a company's brand or reputation and the policies that they instill, specifically potentially related to, say, child labor laws.

    These are really important issues for employees and customers, but investors are also very interested in these topics. They want to understand how a company manages these social issues and the risks, because these risks have an impact on the company's value.

    Then finally G, governance. Very important to understand that companies have the right structure and policies in place. Some of the topics that fall under this governance pillar, policies related to, say, executive compensation or board composition, or even risk management.

    Amato: Ami, your role at the Association obviously includes a focus on ESG because you know a lot about it, you talk about it, but what is it about that focus area that interests you?

    Beers: Here at the Association, we have been working in sustainability and enhanced business reporting for years. However, recently, ESG issues have become really important, and they've taken a big interest amongst many stakeholders because ESG issues impact a company's long-term value creation, and so that is of interest to investors, boards, employees.

    There are risks and opportunities related to ESG that are imposed on companies. Companies really need to manage these risks and have a strategy to mitigate them, so this falls right into an accountant's sweet spot. Finance and accounting professionals really need to provide the trust in that information.

    As it relates to ESG, some of the things that need to be done is establishing processes and controls and collecting the right data to report on, measuring that data against established standards, using the information for decision-making, and allowing companies to tell their story to stakeholders. This information is reported to external parties, and then, of course, providing the assurance on that information provides that confidence and trust.

    Accountants are the right people to be leading in this area, and that is really what my focus has been on, is really providing the profession the tools to be able to engage in this area and really lead in this area.

    Amato: I mentioned the ESG symposium. It was May 24th in New York. What would you say was the goal of that symposium?

    Beers: Yeah, as I mentioned, we believe that the finance and accounting profession needs to lead in the ESG ecosystem, and so we brought together the top leaders in the ESG space. We looked at people in the investment community, we looked at firm leaders, technologists, CFOs, and really brought them together to really understand the ESG ecosphere and how it would impact the profession.

    The goal was to discuss this accelerating market demand for ESG services, understand the opportunity for the accounting and finance profession, and help lead the way for our Association to support that journey.

    Amato: I mentioned the demand for ESG knowledge or advisory services is growing. There's obviously evidence for that all around. Some people still might think that ESG is not all that important, but why, in your mind, is it something that's here to stay?

    Beers: I think that there are about five key drivers for ESG implementation, and those are first, regulations; movement in the reporting standards, number 2; three is really the investors and the investor demand. Four is companies themselves and their supply chains, and fifth would be your customers and your employees.

    The first is regulation. Obviously, the US is joining a growing list of countries that are mandating disclosure in this area.

    The SEC had announced in its regulatory agenda last year that it would be issuing four different ESG-related rules. The first two were released in March of this year, one on cybersecurity reporting and the other on climate-related disclosure.

    We're expecting two more in the remainder of 2022, which would be one on board diversity and another on human capital management. We're also seeing within the states and at the local level that these organizations are looking to have some level of reporting in this area, both on climate-related issues as well as social issues.

    The second is standards, and where we've been in the past is that reporting on sustainability information has been all over the place with lots of different frameworks and different standards, and what we've been seeing recently is that the major standard setters in the ESG space are coming together.

    The IFRS Foundation had announced in this past November that it was be forming a new standards board called the International Sustainability Standards Board. That standards board will be sitting as a sister organization to the International Accounting Standards Board, which sets financial reporting standards.

    What we're seeing is that sustainability standards setting is becoming really important just at the same level as financial reporting, and that's because investors are very interested in it. Which is my third driver of why ESG is becoming so important. Because investors are demanding that companies start reporting on this information.

    They understand that ESG risks impact the value creation of a company and that it has a real impact over decisions related to capital allocation and investment. They want to understand a company's strategy, risk, and how they're mitigating these risks. They want them to be reporting on the KPIs and metrics and the progress against any commitments companies are making towards ESG policies.

    The fourth area: companies themselves. Companies are making commitments and setting targets regardless of whether they're required to by the SEC or by some other regulator. They're not only setting these targets, but they are setting targets that impact the companies that they do business with, so their supply chains. Specifically when it comes to carbon emissions, companies look at up and down their value chains.

    Scope 3 carbon emissions — really what that means is that your Scope 3, which is any carbon emissions that are indirectly related to or someone else's direct carbon emissions. Some of these companies are asking their suppliers to sign pledges to reduce carbon emissions and to even make commitments on some of the social issues that I talked about before in terms of child safety and child labor laws, and employee health and welfare, and diversity and inclusion.

    That leads me to my fifth driver, and that is customers and employees. That is why these companies are in business. More and more, we're starting to see customers make decisions based on a company's sustainability strategy.

    The younger generations really care about these issues. They will change their purchasing habits for companies that they believe meet their values. They also want to work for companies that align to those values.

    We're looking at this war against talent and how important talent is to a company. Well, so it's really important for companies to be able to attract new talent, to be able to demonstrate that they have strategies in this area.

    Amato: What would you say are some of the key takeaways for you after hearing the group's discussion on May 24th?

    Beers: I think that one of the most important things we heard were that, obviously, the investors are very interested in this information. They want comparable and reliable information. Quality is so important to them. They want to be able to rely on ESG reporting in the same manner that they rely on financial reporting.

    The profession will have a strong voice in helping shape the future of these global ESG standards. We know that CPAs are well positioned to meet marketplace demands. They have the skills, the experience, and the systems to provide assurance and quality services. They have independence, integrity, and competency.

    We already know that firms are starting to build on these services to help their clients with ESG strategy, reporting, and assurance needs. We know corporate finance leaders are beginning their efforts in starting their journeys and starting to gather the information to report on ESG efforts and improve their decision-making and demonstrate that value creation.

    But we also heard that accountants and finance professionals will need to expand their knowledge. They need to get the necessary training that will help them in terms of this new subject area.

    Amato: To you, as a closing thought, what's next regarding ESG?

    Beers: There is a lot to learn. AICPA and CIMA have been developing lots of resources to help upskill our profession for the sea change that is coming. We have many resources on our website that provide education that CPAs in this space will need.

    For example, we've got some educational briefs on understanding ESG, specifically the E, the S, and the G that I talked about earlier on. We actually recently released a paper on carbon accounting.

    We've got additional guidance for the auditors to help them in performing either a separate attestation on sustainability information. Or we also released a practice aid that help auditors deal with ESG risks as they may impact the audit of the financial statements.

    Also, coming soon, we'll be releasing a new course on ESG fundamentals. I suggest please check out our website for these valuable resources that will help you get up to speed.

    Amato: We will link to some of those pertinent resources in the show notes for this episode. Ami, we appreciate you taking the time to be on and sharing your expertise today. Thanks very much.

    Beers: Thank you so much for having me.

    Amato: Again, that was CPA Ami Beers.

  • 05/25/2022 9:26 AM | Anonymous member (Administrator)

    May 18, 2022

    Patrice Mills, CPA, was sunning herself on a Florida beach when she received an alarming phone call. All of her client files had been seized in a ransomware attack, and cybercriminals were demanding payment to release them. Listen in as Mills recounts this experience and shares best practices for keeping your firm’s data safe.

    PCPS resources mentioned in this episode:

    To learn more about Patrice, please visit https://www.millscpa.com.

    This episode is brought to you by the AICPA’s Private Companies Practice Section (PCPS), the home of small firms. To learn more about PCPS, email pcps@aicpa.org and schedule a free webtour.

    Note: If your podcast app does not hyperlink to resources, visit https://aicpasmallfirm.libsyn.com to access show notes with direct links.

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