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  • 07/23/2021 9:05 AM | Anonymous member (Administrator)

    July 21, 2021, 11:38 AM CDT

    By Laura Strickler

    WASHINGTON — The federal government has forgiven $394.6 billion in more than 4 million loans to businesses through the Paycheck Protection Program (PPP), according to new data published by a group of internal federal watchdogs.

    More than a million of those forgiven Covid relief loans were to companies with just one employee, at a cost of $12.8 billion, or an average of about $11,497 per job, according to an analysis of the data by NBC News.

    The data was released Wednesday by the Pandemic Response Accountability Committee (PRAC), a group made up of 22 inspectors general from different federal agencies that monitors all Covid relief spending for the government.

    In total, according to the data, the Small Business Administration provided 11.7 million loans nationwide totaling more than $798 billion. The most recent batch of loans was sent out on June 30, and no more money is currently available under the program.

    The top franchisees to get funds overall were General Motors franchises at $1.4 billion, according to the newly published data. Following that were McDonald's franchisees, which received $1.3 billion in funds, and Subway stores, which got $672.9 million.

    The vast majority of companies told the federal government they used the money for payroll — $776 billion out of the $798 billion disbursed. As of June 30, businesses said that PPP funding allowed them to retain 90.3 million jobs.

    On June 30, when Covid cases and unemployment had declined and vaccines were abundant, the federal government sent out $33 million in PPP loans to 62 businesses that reported they had a total of 4,469 employees.

  • 07/20/2021 9:42 AM | Anonymous member (Administrator)

    July 19, 2021

    By Ken Tysiac

    FASB issued a standard Monday that is designed to improve the board’s lease accounting rules related to a lessor’s accounting for certain leases with variable lease payments.

    Under Topic 842, Leases, a lessor may be required to recognize a selling loss at lease commencement (day-one loss) for a sales-type lease with variable payments even if the lessor expects that the arrangement will be profitable overall.

    This accounting outcome results in financial reporting that does not accurately represent the underlying economics either at lease commencement or over the lease term.

    The board addressed this issue by amending lessor lease classification requirements. A lessor now is required to classify and account for a lease with variable payments as an operating lease if:

    • The lease would have been classified as a sales-type lease or a direct financing lease; and
    • The lessor would have otherwise recognized a day-one loss.

    A day-one loss or profit is not recognized under accounting for operating leases, therefore FASB expects that the resulting financial reporting would more accurately represent the economics underlying the lease and provide better information to users of financial statements.

    — Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.


  • 07/07/2021 11:37 AM | Anonymous member (Administrator)

    July 1, 2021

    By Brad Polizzano, J.D., LL.M., New York City, and Mark Heroux, J.D., Chicago

    Editor: Valrie Chambers, CPA, Ph.D.

    The IRS and other agencies continue to expand efforts to enforce reporting compliance for taxpayers who transact in virtual currency. This discussion summarizes key recent developments to assist clients with proper reporting on 2020 tax returns and other filings.

    2020 Form 1040

    The 2020 Form 1040, U.S. Individual Income Tax Return, asks the following question on page 1: "At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?" The question appears underneath the name and address fields.

    On the 2019 Form 1040, this same question (except for the year) appeared on Schedule 1, Additional Income and Adjustments to Income. The IRS moved the question to page 1 of Form 1040, presumably to require taxpayers who do not otherwise complete Schedule 1to address the question for the 2020 tax year.

    This revision is a strong signal that the IRS considers virtual currency in the mainstream and is serious about enforcing reporting compliance. Note that the IRS continues to use the phrase "virtual currency" rather than cryptocurrency or cryptoasset.

    The IRS defines "virtual currency" as a digital representation of value, other than a representation of the U.S. dollar or a foreign currency ("real currency"), that functions as a unit of account, a store of value, and/or a medium of exchange (Rev. Ruls. 2014-21 and 2019-24).

    For purposes of reporting on Form 1040, a transaction involving virtual currency includes, but is not limited to:

    • The receipt or transfer of virtual currency for free (without providing any consideration), including from what the IRS defines as an airdrop;
    • An exchange of virtual currency for goods or services;
    • A sale of virtual currency;
    • An exchange of virtual currency for other property, including for another virtual currency; and
    • A disposition of a financial interest in virtual currency.

    A transaction involving virtual currency does not include the holding of virtual currency in a wallet or account, or the transfer of virtual currency from one wallet or account to another wallet or account under the same ownership or control.

    Furthermore, if during 2020 a taxpayer purchased virtual currency with real currency and had no other virtual currency transactions during the year, then, according to the IRS, the taxpayer does not have to answer yes to the question on the 2020 Form 1040 (IRS webpage, "Frequently Asked Questions on Virtual Currency Transactions," Q&A5 (March 2, 2021), available at www.irs.gov). This position seems inconsistent with the plain language in the question "did you . . . otherwise acquire any financial interest in any virtual currency?" A conservative position would be to check yes for the acquisition of any virtual currency. IRS FAQs do not constitute law.

    FBAR reporting

    In December 2020, Treasury's Financial Crimes Enforcement Network (FinCEN) announced in Notice 2020-2 its plans to propose amendments to regulations under the Bank Secrecy Act. FinCEN intends to include a foreign account holding virtual currency as a type of account reportable on an FBAR (FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)).

    At this time, FinCEN has not yet issued those proposed regulations. It is unclear whether the proposed regulations would be effective for 2020. It is also unclear whether the definition will include virtual currency held in "cold storage" wallets under self-control on a hard drive, as well as assets held on a virtual currency exchange located outside the United States. Also unclear is how the value of the accounts should be measured for FBAR reporting purposes, as the assets are not held in U.S. dollars.

    Reporting requirements for banks and money services businesses

    On Dec. 18, 2020, FinCEN proposed regulations that would expand the application of U.S. anti-money laundering rules to virtual currency. If finalized, the regulations would impose reporting and recordkeeping requirements on banks and money services businesses (MSBs), including many virtual asset service providers, that facilitate transactions in convertible virtual currencies and legal tender digital assets with self-hosted wallets and hosted wallets held in jurisdictions that FinCEN identifies as of primary money laundering concern.

    More specifically, the two main components of the proposed regulations require banks and MSBs to (1) report convertible virtual currency (CVC) or digital assets with legal tender status (LTDA) exceeding $10,000; and (2) keep records of a customer's CVC or LTDA transactions and counterparties, including verifying the identity of their customers, if a counterparty uses an unhosted wallet or otherwise covered wallet and the transaction exceeds $3,000.

    More to come

    The messaging from the federal government is clear: Reporting rules for virtual currency will be many, will change, and will require practitioners to stay ahead of the curve to properly advise their clients.

    Contributors

    Valrie Chambers, CPA, Ph.D., is an associate professor of accounting at Stetson University in Celebration, Fla. Mark Heroux, J.D., is a tax principal and leader of the Tax Advocacy and Controversy Services practice at Baker Tilly in Chicago, and Brad Polizzano, J.D., LL.M., is a senior manager at Baker Tilly in New York City. Mr. Heroux is a member of the AICPA Tax Practice & Procedures Committee. For more information on this article, contact thetaxadviser@aicpa.org.


  • 06/18/2021 3:48 PM | Anonymous member (Administrator)

    Kudos to Deloitte for their notable investment in Diversity and Equality including a contribution to the ND CPA Society to be used on DE&I Initiatives!


    NEW YORK, June 2, 2021—Deloitte announced today the establishment of Making Accounting Diverse and Equitable (MADE), a commitment to generate more advisory, auditing, and tax career opportunities and leadership pathways for the next generation of certified public accountants (CPAs). MADE represents a bold vision for the accounting profession, both in terms of increasing racial and ethnic diversity, and helping students of color see and realize their future in business through the prism and possibilities of accounting.

    I couldn’t be more hopeful about the future of the accounting profession—racial and ethnic diversity is an essential part of that future. Accounting is a fascinating career, providing strong job security, high income levels, and many avenues to leadership.

    - Lara Abrash, CEO of Deloitte’s US Audit & Assurance business

    No single act will help create the racial and ethnic parity that is essential to the profession, business, and society at large. MADE combines both financial support and the depth of resources an organization of Deloitte’s size can bring to attract diverse individuals into the accounting field and support them as they chart their pathway from high school to business professional to leadership in the profession. Deloitte is committed to a comprehensive strategy to address major barriers faced by racially and ethnically diverse students and to grow the population of diverse talent, thus helping to transform the future of the accounting profession.

    Included in Deloitte’s $75 million commitment is the Deloitte Foundation Accounting Scholars program. Over the next six years, Deloitte and the Deloitte Foundation expect to fund $30 million in scholarships to students pursuing a fifth-year master’s program in accounting from an accredited college/university program in the United States, in an effort to increase representation of racially and ethnically diverse students in these programs. Scholarships from the Deloitte Foundation will cover 100% of tuition at participating universities with a mutual desire to increase diversity in master’s programs, and, in turn, the accounting profession. Applications for the 2022 school year will be collected in the fall of 2021 by participating universities with scholarships granted in late 2021.

    The remaining $45 million of the strategy includes the following key elements:

    • Stride CPA readiness program: Deloitte seeks to address barriers faced by professionals recruited through various schools or organizations when taking the CPA exam by supporting their preparation with real-time access to and instruction from experienced CPA tutors, providing up to 13-weeks of fully-paid time, the majority of which is dedicated to studying, and covering exam costs. The inaugural Stride CPA readiness program will unfold this summer for a cohort of the Fall 2021 starting class.
    • Deloitte Academy: Accounting Edition program: Deloitte is committed to inspiring and preparing youth for long-term success by collaborating with high schools, colleges, state CPA societies, and various non-profits to bring accounting to life for thousands of historically underrepresented and underserved youth across the country.
    • Historically Black colleges and universities (HBCU)/Hispanic-serving institutions (HSI) strategy: Building upon Deloitte’s existing relationships with HBCUs and HSIs, Deloitte and the Deloitte Foundation will support faculty and administration with additional funding for curriculum development focused on the evolving skillsets needed by accountants.
    • Climb Fellowship program: Deloitte recognizes that Black and Hispanic/Latinx professionals experience different challenges as they progress within their careers. With the goal of developing the next generation of accounting and business leaders, Deloitte is collaborating with academia to launch a fellowship program targeted at bringing mid-career accounting professionals across industries together to create a community and help position them for senior roles within their organizations.
    • MADE working group: Racially and ethnically diverse business, academic, and community leaders bring a vast array of experiences and individual passions to advance equity and inclusion. Deloitte has formed a working group of these individuals to bring leading external perspectives, challenge our thinking, and create a forum to engage with one another.

    While these efforts specifically focus on the broader accounting profession, they complement and build on Deloitte’s already stated goal of increasing the number of Black and Hispanic/Latinx professionals in its overall US workforce by 50% by 2025.

    Key Quotes

    We are very excited about this next step in our path towards racial diversity. In order to address the disparity, conscious and deliberate effort must be taken. We know that unless we tackle the underlying problems, the best of intentions will not get the profession to where it needs to be or position youth of color to be part of the next generation of business leaders. Deloitte is uniquely positioned and will be a leader in addressing this complex and transformative issue facing the profession.

    - Thalia Smith, Audit & Assurance partner

    Accounting has long been considered the language of business which creates opportunities for those who speak it. In an increasingly complex business world, this skill is and will continue to be more valuable than ever. The representation of racially and ethnically diverse CPAs in our profession is unacceptably low and bringing these voices to the conversation requires decisive, bold investments.

    - Lara Abrash, CEO of Deloitte’s US Audit & Assurance business

    As leaders in the accounting profession, I believe it’s our responsibility to enable the change we want to see—in this case, taking concrete steps to create racial and ethnic diversity. I am optimistic about the impact this program will have on those pursuing a career in accounting and excited about creating pathways for the next generation of diverse business leaders.

    - Steve Kimble, chair and CEO of Deloitte of Tax LLP

    At Deloitte, we know that teams made up of diverse, inclusive professionals are more powerful, innovative, and productive. We’re thrilled to make this contribution to help foster diversity in future generations of accounting professionals and ensure those from all backgrounds thrive in this profession we care so deeply about.

    - Joe Ucuzoglu, CEO, Deloitte US

    About Deloitte
    Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world’s most admired brands, including nearly 90% of the Fortune 500® and more than 7,000 private companies. Our people come together for the greater good and work across the industry sectors that drive and shape today’s marketplace—delivering measurable and lasting results that help reinforce public trust in our capital markets, inspire clients to see challenges as opportunities to transform and thrive, and help lead the way toward a stronger economy and a healthier society. Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them. Building on more than 175 years of service, our network of member firms spans more than 150 countries and territories. Learn how Deloitte’s more than 330,000 people worldwide connect for impact at www.deloitte.com.

    About the Deloitte Foundation
    The Deloitte Foundation, founded in 1928, is a not-for-profit organization that supports education in the U.S. through a variety of initiatives that help develop the next generation of diverse business leaders, and their influencers, and promote excellence in teaching, research and curriculum innovation. The Foundation sponsors an array of national programs relevant to a variety of professional services, benefiting high school students, undergraduates, graduate students and educators. Learn more about the Deloitte Foundation.

  • 05/20/2021 3:27 PM | Anonymous member (Administrator)

    May 19, 2021

    By Jeff Drew

    The Restaurant Revitalization Fund (RRF) will officially stop accepting applications Monday, May 24, at 8 p.m. ET, the U.S. Small Business Administration (SBA) announced.

    While the application window won’t close until Monday, it realistically remains open only to the smallest providers of on-site food and drink. The SBA revealed last week that the RRF had received applications seeking more than twice the $28.6 billion allocated by Congress to fund grants to restaurants, bars, and other eligible businesses hard-hit during the COVID-19 pandemic.

    In a news release Tuesday night, the SBA said that the RRF program has received more than 303,000 applications, requesting a total of nearly $70 billion, but that more than $220 million remained available from $500 million set aside for eating establishments that posted 2019 annual revenue of no more than $50,000.

    Food and beverage providers that meet $50,000 revenue standard are encouraged to apply through SBA-recognized point-of-sale vendors or directly via the SBA online application portal, the agency said.

    Congress created the RRF to provide food and beverage providers with grants equal to their pandemic-related revenue loss, up to $10 million per business and no more than $5 million per physical location. The funds can be used for eligible expenses, such as payroll and rent.

    The vast majority of RRF funds appear destined for eligible businesses owned by women, veterans, and socially and economically disadvantaged individuals. The American Rescue Plan Act, P.L. 117-2, which created the RRF, mandated that those businesses receive priority review for the first 21 days of the program, which opened May 3.

    During the first two weeks of the program, the SBA received applications from more than:

    • 122,000 women business owners.
    • 14,000 veteran business owners.
    • 71,000 economically and socially disadvantaged individuals.

    Those groups represent 57% of the RRF applications received by the SBA and the vast majority of the $6 billion in grants approved by the SBA for 38,000 applications.

    AICPA members can access a detailed summary of the RRF.

    AICPA experts discuss the latest on the PPP and other small business aid programs during a virtual town hall held every other week. The webcasts, which provide CPE credit, are free to AICPA members and $39 for nonmembers. Go to the AICPA Town Hall Series webpage for more information and to register. Recordings of Town Hall events are available to view for free on AICPA TV.

    The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

    For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page or subscribe to our email alerts for breaking PPP news.

    — Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.


  • 05/12/2021 1:35 PM | Anonymous member (Administrator)

    May 10, 2021

    Deetra B. Watson CPA, CGMA

    We’ve seen historic levels of federal funding in response to the COVID-19 pandemic. Legislation such as the CARES Act and the recent American Rescue Plan Act of 2021 (ARPA) provided billions of dollars to American businesses, state and local governments and not-for-profits. While this funding has been a huge relief, especially for nonprofits, it causes complications for a lot of recipients.

    When a non-federal entity expends $750,000 or more of federal awards in a fiscal year, a single audit is required. While not all CARES Act recipients need a single audit and we don’t know the single audit ramifications of ARPA, here is a nonauthoritative list of the new programsthat require single audits. Plus, many existing federal programs received significant new funding that will be subject to single audit.

    Many COVID relief fund recipients have never had a single audit before and may not know all the requirements associated with this type of funding. Your existing clients may need a single audit for the first time. You may begin working with new clients who have never had a financial statement audit before. Here are a few tips for how you can help your clients through the single audit process.

    Ask clients what funding they’ve received.

    At my firm, we’re asking all our clients what type of funding they’ve received in the past year. In some cases, we’ve asked to see a copy of their grant agreements so we can help them identify what’s needed on their end, and then on our end as the auditor. Additionally, we send emails to clients with news related to the funding they’ve received. We also update our website with the most current information. The sooner our clients know about important and relevant information, the better prepared they are and the better audit we can perform — so it’s a win-win.

    Encourage your clients to be proactive and ask any questions about funding they’ve received. For example, the controller at one of my clients, the North Carolina Aquarium Society, let me know once she learned her organization would receive relief funding. She knew this funding had stipulations but didn’t know yet that a single audit would be required. She found out about the single audit early in the process. But so many other organizations were unaware of all the requirements until after they had already received these funds.

    Communicate openly with your clients.

    This is a time when you need to have heightened communication with your clients. My firm has found that our clients have a lot of different interpretations of the funding guidelines. As an auditor, you should clarify that your clients truly understand the guidelines for the type of funding they received and make sure they have procedures in place to comply.

    Some of the COVID funding programs, such as the Paycheck Protection Program, do not require a single audit. But clients need to know — even if they’re under the $750,000 threshold — that there are still administrative requirements even if a single audit is not needed. For instance, the funds may be restricted for certain purposes, so make sure your clients fully understand the guidelines for the funds they have received.

    Be aware of audit quality concerns.

    Some first-time single audit clients may be concerned with costs. They’re required to get an additional audit, which will require more work and will cost more than other audits they may have received in the past. Some clients may worry about spending too much on the audit. But, in this situation, they need to make sure they’re getting the highest-quality audit possible.

    As auditors, we have a duty to the public to perform high-quality audits. The public relies on trusted audited information to ensure their tax dollars are spent appropriately. Because of this, audit quality should always be at the forefront on every auditor’s mind.

    Because of the complexity of single audits and the specialized knowledge needed on the rules and compliance requirements, if you are an auditor who doesn’t perform them, you should Consider whether you should even accept a single audit engagement. You can still perform the financial statement audit, but other options for the single audit might be to refer your clients to someone else in your organization with the appropriate experience or to another firm that specializes in single audits. Alternatively, if you have some experience but not much, you could consider engaging another firm to perform a pre-issuance review or other types of consultative assistance to help ensure a high-quality audit. You can use the AICPA’s Peer Reviewer Search tool to find an auditor to refer your clients to or to look for consultative assistance. Additionally, the GAQC has a listing of its member firms with contact information on its Find A Member page.

    If you choose to take on a single audit, there is learning available to help you gain the fundamental knowledge you need.

    Make time for continuing education.

    Lifelong learning is a large part of the accounting profession. My firm has always been big on training and CPE, so we’re making sure that all of our staff gets the required training for their specialization areas. (For instance, as generally accepted government auditing standards (GAGAS) require, auditors who perform single audits must maintain their competency through CPE hours and topics listed in the 2018 Yellow Book.)

    Regarding the new funding in the past year, we pay close attention to any sort of training that federal agencies provide. Additionally, the information we get from AICPA’s GAQC, in particular its COVID-19 Resource page, has been great. I’d also suggest talking to other firms on what resources they may have regarding single audits and COVID relief funds. It’s useful to speak to your peers about what they’re doing and learn from their experiences.

    The pandemic has drastically changed work in many industries, and the accounting profession is no different. My firm has performed more single audits this year, and this is likely happening at other public accounting firms across the country.

    Keeping up with all these changes while continuously striving to be that trusted adviser for your clients is tough. In these times, it’s especially important to be mindful of staff well-being. Organizations need to provide support to the staff to help them remain engaged and avoid burnout. Focusing on well-being can enable staff to do their jobs better, which allows them to better serve their clients and, ultimately, contributes to enhancing audit quality.


  • 05/10/2021 8:52 AM | Anonymous member (Administrator)

    May 6, 2021

    By Ken Tysiac

    Thomas Sneeringer, CPA, likes to say that major program determination within a single audit engagement requires strict adherence to the Uniform Guidance rules and formulas even when they don’t seem to make perfect sense.

    For instance, as auditors scrutinize the pandemic-related aid that organizations have received, it might seem that all this new funding, regardless of amounts expended, should be audited as major programs.

    Sneeringer said that’s not necessarily the case, especially for the smaller programs.

    “I hate to say this about the process, but auditors can get into trouble when they try to use common sense,” he said. “It’s really about being true to the formula, being true to the guidance, and let that walk you until you reach the conclusions.”

    Sneeringer is a partner at RSM US LLP in Gaithersburg, Md., who will serve as a co-presenter for a single audit session at the AICPA & CIMA Not-for-Profit Industry Conference, which is scheduled for June 7–9 online. The conference will include a number of sessions devoted to providing useful information on single audits, and Sneeringer is presenting a case study that will serve as a discussion guide for many important techniques and considerations that practitioners need to use.

    Critical to the correct determination of major programs in a single audit is getting a complete and accurate Schedule of Expenditures of Federal Awards (SEFA) from the client.

    The SEFA for Sneeringer’s presentation (simplified for purposes of illustration) contains the following federal programs and amounts for a Dec. 31, 2020, fiscal-year-end client:


    Federal programs and amounts

    Despite the existence of new coronavirus relief money from the HIV Emergency Project Grants and CRF programs, according to the guidance in the 2020 Office of Management and Budget (OMB) Compliance Supplement and related Addendum, the determination of major programs does not change for the single audit of this client.

    “A lot of auditors think, ‘There’s CARES Act money. Of course it’s high-risk. We’re going to have to audit it.’ Not necessarily,” Sneeringer said. “There’s still a process, a series of required steps we go through, given this mix of awards and knowing what’s been audited in the past and what hasn’t been audited.”

    When total federal expenditures are less than $25 million, a Type A program is one with expenditures of $750,000 or more; the others are Type B programs. A Type A program that has not been audited in the past two audits is considered high-risk and would be considered a major program to be audited.

    A Type A program also is high-risk if in the last audit period it was identified with a material weakness, had a modified opinion, or had known or likely questioned costs of more than 5% of the federal expenditures for that program.

    In the example, the CRF program is brand-new funding that has never been audited before, and at $800,000, it is a Type A program because its expenditures exceed the $750,000 threshold.

    “So we know this is going to be a major program,” Sneeringer said. “It’s a Type A program, never been audited before, 100%, take it to the bank.”

    The Research and Development Cluster is a Type A program as a whole, and the Nursing Research is considered part of that Type A program for single audit purposes even though its funding on its own is just $300,000.

    The Violence Against Women program, meanwhile, is a Type A program because its expenditures are $1 million. In the example, the audit of the program last year found a significant deficiency in its internal controls.

    Despite that, the program still isn’t guaranteed to be high-risk because a material weakness, not a significant deficiency, is the threshold for high risk.

    “A significant deficiency doesn’t get you automatic high risk, you still have to look at the other required steps for risk determination in the Uniform Guidance,” Sneeringer said.

    The HIV Emergency Project Grants expenditures are just $650,000. So, even though it’s new, it’s a Type B program and doesn’t automatically need to be audited. Instead, the Uniform Guidance has the auditor use a formula to identify how many high-risk Type B programs need to be audited (based on the number of low-risk Type A programs) and then the auditor goes through a risk assessment process to determine which high-risk Type B program will be tested as a major program. That determination depends on several factors defined in the Uniform Guidance as well as auditor judgment.

    These are just a few of the nuances related to single audits. Sneeringer said they’re difficult to learn, especially when an auditor performs just a small number of these audits in a year. He encourages those practitioners to be extremely careful on these engagements, or to refer them to an auditor with more experience on single audits.

    “I’ve been doing it for 30-plus years now, and I’m still learning new things, and I have a heavy concentration of doing these engagements in my client deck,” he said. “And I’m still learning. If you are doing one, two, maybe five or less during the year, with the nuances you can make a wrong turn and, before you know it, you have a substandard audit.”

    He encourages those who do perform these audits to adhere to a few basic steps:

    • Do your homework. “You need a thorough understanding of the steps involved,” he said.
    • Spend sufficient time planning the audit. “If you properly plan, then you likely have a much better outcome than if you didn’t plan at all or didn’t properly plan,” he said.
    • Follow the Uniform Guidance, even if it seems counterintuitive. “Work your way through the formula, and don’t make presumptions,” he said.

    It’s also important to remember that things related to single audits are constantly changing and evolving because of the pandemic. There have been several new rounds of pandemic funding in the last several months, and there has been discussion that OMB may temporarily revise the major program selection rules to ensure that certain pandemic funding be selected for audit as major programs. However, it is uncertain at this time whether that will occur.

    Auditors should be alert to any potential changes to the process for their 2021 audits. To stay up to date, follow the activity of the AICPA Governmental Audit Quality Center.

    — Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.


  • 05/06/2021 9:02 AM | Anonymous member (Administrator)

    May 5, 2021

    By Jeff Drew

    The U.S. Small Business Administration (SBA) has stopped accepting new Paycheck Protection Program (PPP) applications from most lenders almost a full month before the $292 billion program’s application deadline.

    The SBA informed lenders Tuesday afternoon that the PPP general fund was out of money and that the only remaining funds available for new applications are $8 billion set aside for community financial institutions (CFIs), which typically work with businesses in underserved communities. The agency also has set aside $6 billion for PPP applications still in review status or needing more information due to error codes.

    This and other PPP issues will be addressed during an AICPA Town Hall at 3 p.m. ET on Thursday.

    Congress in late March extended the PPP application deadline two months to May 31, in part to give the SBA and lenders time to resolve error codes that were holding up nearly 200,000 applications in the SBA’s PPP platform. The unresolved error codes were related to validation checks instituted by the SBA to help prevent fraudulent applications from being funded.

    The PPP Extension Act of 2021, P.L. 117-6, did not include any additional funding for the current round of the PPP, which Congress provided with more than $290 billion to make forgivable loans to small businesses and not-for-profits suffering economic loss related to the COVID-19 pandemic.

    The SBA reported Monday that it had approved more than 5.6 million PPP loans totaling more than $258 billion from the program’s reopening on Jan. 11 through May 2. First-draw PPP loans accounted for $57.3 billion, and second-draw loans totaled nearly $201 billion.

    AICPA experts discuss the latest on the PPP and other small business aid programs during a virtual town hall held every other week. The webcasts, which provide CPE credit, are free to AICPA members and $39.99 for nonmembers. Go to the AICPA Town Hall Series webpage for more information and to register. Recordings of Town Hall events are available to view for free on AICPA TV.

    The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

    For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page or subscribe to our email alerts for breaking PPP news.

    — Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.


  • 04/22/2021 9:21 AM | Anonymous member (Administrator)

    April 1, 2021

    By Cheri H. Freeh, CPA, CGMA, Quakertown, Pa.

    Editor: Valrie Chambers, CPA, Ph.D.

    On March 13, 2020, life as everyone knew it in the United States came to a grinding halt as the president declared a national emergency concerning COVID-19. At first there was a great deal of conflicting information regarding whether accounting firms were permitted to remain open, whether remote working was permitted, if a total shutdown was required, what government services were available, and whether sufficient resources would even be available to continue working if it was permitted. The entire country was in a state of confusion, and accounting firms were no less affected than everyone else.

    Many large regional and national accounting firms were better equipped to handle the situation due to their previous investments in technology and their movements toward becoming paperless offices. Unfortunately, a significant number of small, local CPA firms or sole proprietor CPAs with one or two employees simply were not ready to jump into the paperless and/or remote-working world.

    Initially, the first step for these small firms was to ask the following questions:

    Are we permitted to work?: This may seem like an odd question, but it was not completely evident at the beginning. For example, in Pennsylvania, the initial order from Gov. Tom Wolf required accounting firms to cease all operations. It was determined a day later that accounting firms were considered essential and were permitted to open their offices or work remotely. In a survey conducted by Arizent, Accounting Today's parent company, larger accounting firms were far more likely to have closed offices or locations, while only 11% of firms with fewer than 50 staff members reported closing their offices (Hood, "Despite Productivity Drops, Firms Commit to Remote Work in Reopening," Accounting Today (July 7, 2020), available at www.accountingtoday.com).

    How can we complete our work and keep everyone safe?With the importance of limiting contact, it became necessary to work remotely. Many small firms had to scramble to set up secure methods for their staff to work from home. Since many of the clients of these small firms are not technologically savvy, working with client-provided paper documents was also necessary. To accommodate the needs of staff to pick up and drop off records and use copiers and scanners at the office, it became critical to limit the number of staff members who could access the office at any one time. Initially, there were so many unknowns that concerns arose regarding the safety of handling client documents. To ensure staff safety, many small offices were closed to the public; dropboxes were used to accept client records; records were received by mail; and once received, records were quarantined for a period in a location with ultraviolet light systems or other disinfecting treatments.

    How can we meet the needs of our employees?: Besides the need to access client records and office equipment, employees needed ways to perform their work while, in many cases, educating their children at home and/or caring for other family members. There were also psychological concerns to consider. Staff members had different comfort levels, and employers had to be sensitive. In many cases generational differences determined the importance of various concerns.

    How can we meet the needs of our clients?As mentioned previously, a large portion of the clientele of small firms do not have the ability to scan and upload documents and may not even have a computer, let alone a printer. This presents challenges to any firm, no matter how advanced the technology is at the firm level. The general public was scared. As Congress worked to address economic concerns, accountants worked to keep their clients aware of the various new stimulus, loan, and grant programs arising to address their economic needs. It became very common that the small firm practitioner was not only a tax preparer but also a source of comfort and advice to his or her clients.

    How can we make sure client records are safe and secure?Above all, security of client records is crucial. Detailed documentation of the location of all client files and records was necessary. A master file of the location of all client documents was absolutely necessary. Staff training was also necessary to ensure that all staff handled client documents and files in a safe and secure manner.

    Besides dealing with all these issues, accountants also had to learn about Paycheck Protection Program loans, Economic Injury Disaster Loans, stimulus payments, and unemployment benefits to assist their clients. Small firms do not have the benefit of dedicated research and training departments to provide information to staff members. As a result, additional time was necessary to track down information to pass on to clients.

    What to carry into the future

    After enduring all the questions, stresses, unknowns, and challenges presented by the pandemic, what lessons have small firms learned that can be taken into the future?

    Technology is critical to facing the future. Small firms need to be ready for remote-working conditions when necessary, and this means working with a qualified IT professional to ensure secure connectivity. Remote working may be required due to many circumstances other than a pandemic; for example, snowstorms, natural disasters, civil unrest, child care issues, or even having to be home to meet an appliance repair technician. When the proper technology is in place, staff members can be productive at times when they would not have been in the past.

    Small firms can become more competitive in hiring talent if they are able to offer full or partial remote-work options. Work/life balance is highly important, and the ability to avoid the time and stress of commuting can be a big selling point for a firm.

    Electronic remote meetings can be huge time-savers. It has been said that one of the most common phrases uttered during 2020 was, "I think you're on mute." While electronic remote meetings get a bit old after several months, with no end in sight, they do have their merits and, when used sporadically, can save travel time and costs.

    All firms, large and small, should evaluate the office space necessary to operate their businesses. With increased remote working, the need for dedicated office space for each employee will correspondingly decrease. Some firms are moving to a "hotel" model for providing staff offices. Staff members are not provided their own offices and, instead, reserve an office if they choose to come into the firm office for a day or a period of time to meet a client.

    Communication and training with both staff and clients help to create efficiencies. The pandemic has, at times, been scary and confusing and has created uncertainty and insecurities. Clear communication helps shape expectations and can be used to reduce uncertainty and fear.

    The AICPA has multiple resources available on its website to assist small firms in meeting various needs (visit future.aicpa.org/topic/covid-19). These resources can save precious time and help firms provide top-notch services to clients.

    The pandemic has been challenging, yet small CPA firms across the country have navigated through and survived the storm and have learned to prepare for the worst but still hope for the best. Experience is the best teacher, and many lessons have been learned through this experience. As someone once said to me (in a remote meeting), "You shouldn't let a good pandemic go to waste."

  • 04/09/2021 8:27 AM | Anonymous member (Administrator)

    April 8, 2021

    AICPA

    The situation regarding the May 17 bifurcated filing and payment due date with IRS keeping the 1st quarter estimated payment at April 15 is extremely fluid. There is also uncertainty regarding filing an extension for gift tax returns due April 15. Unfortunately, there are no clear answers. Our recommendations as of the time of this statement are as follows:

    • In order to ensure that the 1st quarter 2021 estimate is credited to April 15, the taxpayerwill need to pay the estimate on a Form 1040-ES or make an online payment directed to2021 on or before April 15.
    • To file an extension for a gift tax return (Form 709), Form 4868 or Form 8892 should befiled on or before April 15.

    Statement and suggestions

    The situation regarding the May 17 bifurcated filing and payment due date with IRS keeping the 1st quarter estimated payment at April 15 is extremely fluid as AICPA releases this statement and suggestions. There are significant efforts underway on Capitol Hill where (1) a bill has been drafted in the House that would change the 2021 1st quarter estimated payment due date to May 17; (2) a companion bill is being considered in the Senate; and (3) IRS Commissioner Rettig has been called to testify at an April 13 Senate Finance Committee hearing on “The 2021 Filing Season and 21st Century IRS.”

    Despite our efforts, the IRS continues to maintain that the due date for taxpayers required to make a first quarter estimated tax payment will remain as April 15. We are aware that April 15 is fast approaching, and every day relief is not granted presents enormous challenges for many taxpayers and their CPAs. We remain grateful for the pending Congressional relief and hopeful that those of you continuing to struggle at this late hour will benefit.

    Q1 2021 estimated tax payment

    We have received thousands of questions from tax practitioners, business organizations, governmental entities and even some desperate taxpayers with nowhere else to turn, about how to handle the payment of the 1st quarter 2021 estimate, which as of the time of this statement, is due April 15. Additionally, tax practitioners have sought clarification on the treatment of applying overpayments to the 1st quarter estimate from a Form 1040 if a payment is made with the federal extension, Form 4868 that might be filed by May 17. This has long been a standard practice and is helpful when taxpayers and their CPAs do not have sufficient information or time to prepare and file a complete and accurate return and corresponding quarterly payment amount. The issue in question is whether payments made with the extension on May 17 will be counted as timely when applied back. There is no conclusive guidance available from the IRS on how to handle this issue.

    While not ideal, our recommended course of action to ensure that the 1st quarter 2021 estimate is credited to April 15, is to pay the estimate on a Form 1040-ES or make an online payment directed to 2021 on or before April 15. Given that we are not certain that a payment with a Form 4868, even if paid by April 15, will be credited by the IRS as paid by April 15, this recommendation is the most conservative approach.

    Unfortunately, a clear answer does not exist, and opinions are mixed. However, we were able to gather information on best practices. While we cannot advise on an authoritative solution, we hope that our small firm members and those without a large network will have access to options, to create their own process, or receive validation that they are not alone in their chosen approach.

    In some cases, CPAs have indicated to us that if the amount of the estimated tax payment is “immaterial,” they are including the payment with an extension at May 17 – not making an April 15 estimated payment - and informing their clients of the potential for additional calculated interest for one month. Others are planning to file extensions including a 1st quarter payment at April 15.

    Form 709 gift tax return extensions

    Tax year 2020 Form 709 gift tax returns or extensions are due by April 15, 2021 (for taxpayers not in declared disaster areas). IRS has indicated on its website that “Filing Form 4868 or Form 2350 after April 15, 2021 ... will not extend the due date for filing your 2020 federal gift tax return – it only will extend the due date for filing your 2020 income tax return.”

    The best option is to file the Form 4868 to extend both the Form 1040 and the Form 709 with a reasonable estimate by April 15, even though the Form 4868 for extending individuals is not due until May 17 this year.

    The second option is to file Form 8892 by April 15 to extend gift tax returns. This option should be used when a reasonable estimate by April 15 is not possible. We note that there is a checkbox on Form 8892 that indicates “If you are applying for an automatic 6-month extension of time to file Form 709 but are not applying for an extension of time to file your individual income tax return, check here.” If the taxpayer is planning to file the Form 1040 or extend the individual return after April 15 and by May 17 (for taxpayers not in declared disaster areas), some firms are writing “See Attachment” on the line and then on the attachment, writing “Taxpayer will not file for an extension of taxpayer’s income tax return by the due date of the taxpayer’s gift tax return.”

    Despite our efforts to share our concerns on these issues with the IRS, there may still be unanswered questions into next week.


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