AICPA's tax accountants get immersed in tips, new law, and sunshine

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Approximately 120 tax practitioners from small firms across the country are meeting this week in the heat of southern Florida to learn about the latest tax tips and tools that they can use to improve their practices, as well as getting an update on what is going on in Washington. The annual AICPA Small Business Practitioners' Tax Conference is being held from July 11-13, 2010 in Coral Gables, Florida.

Ronald B. Hegt, conference chairman and partner with Crowe Horwath in New York City, kicked off the conference with a session on recent legislative activity affecting tax issues. Several laws were discussed, some of which are already enacted, some of which are pending. Some of the new legislation comes with some interesting baggage in the form of big changes for accountants as well as unanswered questions.

The Worker Homeownership and Business Assistance Act of 2009 is the legislation that, among other things, is going to require all tax preparers who prepare more than 10 tax returns to electronically file all of their tax returns starting in 2011. "This goes back to the day when the IRS was given a mandate by Congress to get 70 percent of tax returns e-filed", Hegt reminded his audience. He said that this original mandate went a long way toward getting storefront tax preparation services like H&R Block to get on the e-filing bandwagon",but the CPA that prepared a more sophisticated return was resistant to making changes." Hegt told his audience that New York has had a mandatory e-filing program in effect for the past two years and that, while accountants originally were "pulled kicking and screaming into the program", once they started e-filing, the response was",Why didn't we do this a long time ago?"

The Hiring Incentives to Restore Employment (HIRE) Act provides employers with incentives, in the form of payroll tax reductions and income tax credits, to hire employees, but it also provides some anomalies. For example, the Act forgives the employer portion of the FICA tax for wages paid from March 19, 2010 through December 31, 2010 to a newly hired employee, however Hegt pointed out that the law doesn't address the issue of whether an employee counts as a new-hire for purposes of the Act if the employer fires an employee in one location and hires a new employee in another location. Additionally, the law doesn't address the issue of how long an employer must wait before hiring a qualifying replacement employee if he lets another employee go. Without explanation for these issues, it would appear that employers could fire their staff and then go out and hire new employees and get tax benefits for doing so.

Buried in the health care legislation that was signed into law earlier this year is a provision that Hegt emphasized all accountants need to be paying attention to and planning for right now. That is the part of the law that requires that 1099 forms be issued for every business-related transaction over the $600 threshold. The corporate exemption that allowed businesses not to have to issue 1099 forms to corporations when more than $600 in business was done with a corporation during a calendar year is revoked effective 1/1/12. Hegt offered this example: Under the new law, beginning in 2012, if a business purchases $800 worth of office supplies from a Staples office supply store during the course of the year, that business needs to get the employee ID number from Staples and issue the company a 1099 at the end of the year.

Issues that Hegt described as "frightening" include what this law means to intercompany transactions, to employee reimbursement policies (for example – a company has an accountable plan and many of the company's employees like to eat at the same restaurant – does the employer need to capture information from each of the employee's expense accounts to determine if the company paid more than $600 to one restaurant?), and to franchise companies (for example, if a company has its employees buy gas from one type of filling station – do 1099s need to be issued to the individual station owners or to the parent gas company?).

Hegt encouraged the accountants in his audience to start preparing their clients now to help them deal with the mechanics of complying with this law, however as Erik Asgeirsson, CEO of CPA2Biz pointed out in a conversation with AccountingWEB, it's likely this part of the health care legislation will be overturned prior to 2012. "This isn't going to happen", Asgeirsson said, mentioning that there are lobbying efforts in place to encourage a change in this part of the law.

One thing that is certain, there is no shortage of accounting- and tax-related legislation coming out of the current Congress, and there is more to come before the mid-term elections later this year. Staying on top of the legislation is imperative for accountants with clients who stand to be impacted by the changes. Conferences like the AICPA Small Business Practitioners' Tax Conference help accountants keep up-to-date and provide a relaxing atmosphere where practitioners can catch their breath between changes in the laws.

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