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Wednesday, 17 January 2018 05:05

New Pass-Through Entity Rules

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January 2018 Client Memo

New Pass-Through Entity Rules

One of the most important – and complicated – changes in the new tax reform act is to tax rules affecting small businesses that are treated as “pass-through entities.”

The good news is that if you own one of these businesses you may get as much as a 20 percent reduction to the taxation of business net income under the new rules.  However, calculating the actual deduction can become very complex. It depends upon several factors, including your level of income, your profession, the amount your business spends on wages and property acquired during the year.

Tax reform background

Most small businesses in the U.S. use pass-through business structures, which pass their profits on to their individual owners. Owners pay tax on those profits at their individual tax rates, in conjunction with other income. The new tax rates range from 10 percent to 37 percent in the 2018 tax year. Pass-through business structures include S corporations, partnerships and LLCs. Sole proprietorships handle business income in a similar way using Form 1040 Schedule C and are also covered by the new rules.

Because the Tax Cuts and Jobs Act signed in late December 2017 changed the corporate tax rate structure to a flat 21 percent rate from a progressive scale with a top rate of 35 percent, that meant many pass-through business structures would pay more than regular C corporations. To offset this, Congress gave pass-through owners the new 20 percent business income deduction.

But Congress also put in place special rules limiting the ability of “specified service trades” to take the full deduction. The list includes health, law, consulting, athletics, financial services, brokerage services, accounting firms, “or any trade or business where the principal asset … is the reputation or skill of one or more of its employees or owners.” An earlier version of the bill included the engineering and architectural professions, but those were later taken off the list, so they are considered exempt from the limits.

How to figure out your deduction – easy cases

First, make a rough calculation of your expected qualified business income (QBI), which is generally your net income other than income in the way of compensation. This figure excludes business losses, as well as factoring in amortization and capitalized expenditures. QBI is figured separately for each business activity, not on a per-taxpayer basis.

Easy Case 1: If your QBI is less than $157,500 as an individual filer, or $315,000 as a married couple filing jointly – you can take the full 20 percent deduction.

Easy Case 2: If your QBI is greater than $207,500 as an individual filer, or $415,000 as a married couple filing jointly, AND you are in one of the specified service professions (health, law, consulting, athletics, financial services, accounting, brokerage services, etc.) – you can’t take any of the deduction.

How to figure out your deduction – hard cases

If you don’t fall into either of the easy cases, figuring out your pass-through deduction gets much more difficult.

Who is affected: Small business owners with QBI of more than $157,500 as individual filers ($315,000 for married filing jointly) but less than the phaseout of $207,500 as an individual filer ($415,000 married filing jointly).

After your QBI passes the threshold amount of $157,500 as an individual filer, or $315,000 as a married couple filing jointly, special wage and capital limits that reduce your deduction start to apply.

After your QBI passes the threshold amount PLUS the phaseout amount, which is $207,500 as an individual filer, or $415,000 as a married couple filing jointly, the wage and capital limits are applied fully to reduce your deduction. You’ll still get a reduced deduction (unless you are in one of those specified service professions – then your deduction is eliminated completely).

The formula for calculating the wage and capital limits is based on the greater of 50 percent of the W-2 wages paid by your business, OR 25 percent of the W-2 wages, plus 2.5 percent of the unadjusted basis of all qualified property acquired by your business during the year.

Sound confusing? In most cases the calculation will be straightforward – but not for everyone.

REMINDER: If you’re familiar with the wage and capital limits calculation, it may be because your small business used the Domestic Production Activities Deduction (DPAD) in the past, which uses a somewhat similar calculation. The DPAD was repealed in the Tax Cuts and Jobs Act for 2018 and subsequent tax years, so keep that in mind as you chart your business plans.

The rules are in flux

Every tax reform bill is subject to technical amendments that clarify and adjust what is confusing or not working as lawmakers intended. The Tax Cuts and Jobs Act will likely be no different. The pass-through rules are among the most complicated parts of the act, so many of the moving parts will change over the coming months. We will know more as 2017 taxes are completed and the focus turns to the 2018 rules.

If you own a pass-through business, you will need help navigating the choppy waters of tax reform. When the storm of the recent passage subsides and the details are clarified, reach out to schedule a consultation to chart a course for your business in 2018.

Note: The threshold amounts cited in this memo are for tax year 2018 and are indexed to inflation in subsequent years.

 

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Bonus Questions and Answers

You likely have more questions about the new 20 percent income deduction rule than anyone can possibly answer right now. Clarification from the IRS is coming in the following months. Until then, here are answers to some common questions businesses are asking.

 

Q.  Why is there a wage and service business limit calculation in the deduction?

A.  Lawmakers were concerned that the owners of service businesses would change how they pay themselves in order to reduce their tax burden. They said they intended to “deter high-income taxpayers from attempting to convert wages or other compensation for personal services to income eligible for the 20-percent deduction.”

Source: U.S. Congress Conference Report, page 37.

 

Q.  I’ve heard that rental property owners could possibly get this deduction. Is this correct?

A.  Yes, in all likelihood Schedule E filers will also be eligible for the deduction. While most of these entities do not have wages, the capital portion of the calculation may result in a deduction for these businesses.

 

Q.  What about losses? Do they affect my ability to get the deduction?

A. Yes, losses will lower your eligible income. Excess losses will carry over to future years, limiting your ability to take the deduction in the future.

 

Q.  How is qualified property calculated? How does bonus depreciation and Section 179 expensing affect the 2.5 percent property calculation?

A.  These answers can get pretty complicated and will require clarification from the IRS. While we wait for that, here is a short explanation based on what we know now: Qualified property must be tangible property subject to depreciation and available for use in a qualified trade or business. The calculation for businesses subject to limitation will be based on 2.5 percent of the property value. The value of the property appears to be its basis after it is placed into service, and it must be actively used as of the end of the year. There will be provisions to account for the leveling out of different recovery period calculations and the prior use of accelerated depreciation methods. But stay tuned; this area could be full of further clarifications and guidance.

 

Q.  Where is the deduction taken on Form 1040?

A.  The deduction probably will be taken on page 2 of Form 1040, following the calculation of adjusted gross income. 

 

Q. What about my hobby activity, does it get this deduction?

A.  Probably not. It’s likely that you would need to pass the threshold rules relating to hobby versus business activity. But this area too, could use some help with clarification.

 

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This brief summary of the pass-through rules in the tax reform act is provided for your information. Any major financial decisions or tax-planning activities in light of this new legislation should be considered with the advice of a tax professional. Call if you have questions regarding your particular situation.

Tuesday, 16 December 2014 06:03

Do you need a certified public accountant?

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Having a good big organization is the dream for all but still there are various different aspects which matter a lot and it is just they that can actually help you increase all the sales and ultimately get you best profits. From amongst all the different activities one which is of great importance includes the maintenance of the right kind of accounts. The reason for this is because it is just then that you will be able to know the finances in the organization and will also be able to know whether what is the amount that you can actually spend and in return what can you earn. Managing these accounts is not a small thing and thus it is important for you to learn the fact that you go along with the best accountant. In these cases the certified public accountants are the ones who will give you good results and will also help you in making the right financial decisions which are always important.

There are many different kinds of financial decisions which have always to be taken up and you being so busy with the set up always may not get good amount of time to do so. It is thus very much important that you go along with good professionals who not juts know what is it that is important but also knows about the different logics and basics of accounting. Getting along with a good certified public accountant can be one challenging thing but then always see to it that you just get along with the right ones because it is only then that you will be able to handle all of your work very easily and will also be able to take care of the fact that you are having correct inflow and outflow of finances even after the right amount of investments and other expenses which are paid.

It is very much important that you get along with the right kind of such certified public accountant for your organization because it is just then that you will actually be able to plan all of your finances and will then be able to take up right decisions about what has to be done and how. You can also outsource all of your work to the accountants but then one thing that you should know is that getting the accounting work done by a professionals is not just reasonable but also safe.

Certified Public Accountants (CPAs) do small business income tax return. Nevertheless often accountants prep income tax return likewise. With regard to your firm obligation readying, should you use a or a certified public accountant?

Numerous could evaluate expense 1st. The shall most likely get a more significant hourly charge than an accountant. The Certified Public Accountant may well be fast. Nevertheless, the entire rate shall probably be a lot more having a Certified Public Accountant (CPA). Use an auditor then? Not actually so that fast. There is actually additional at concern than the levy readying charge. The CPA can be simply more provided to discover all attainable tax write-offs. Primarily if one receive an extra involved federal tax return. If your only income is actually as an employee and someone obtain no possible deductions, a, or some other low cost option can be simply the most effective selection.

This carries out certainly not intend your levy is going to most certainly become less. One could certainly must pay back a lot more if the income tax return is actually created by a Certified Public Accountant. The Certified Public Accountant can bear in mind restrictions on deductions not known to the bean counter. The bean counter may well provide the deduction, triggering low initial obligation. A scrutiny, obligation penalties, and passion might follow as a result. All your tax groundwork price discounts, and also considerably more could be gone.

So far, you have reviewed the genuine revenue created merely. Certified Public Accountant levy preparation could trigger long term obligation cost savings, versus bean counter obligation groundwork. Via accomplishing your federal tax return, the Certified Public Accountant (or else clerk), shall turn into used to your small establishment.

With this know-how of your budgets, the Certified Public Accountant (CPA) could be much more slick to give solid levy help and foreseeable future obligation cost savings than the . Again, if your return is actually even more complicated, CPA tax preparation is actually even more necessary. A Cpa can do in order to decrease your tax responsibilities if one have a modest establishment. If someone are certainly a personnel by using no write-offs, a Certified Public Accountant is actually certainly not demanded for your levy arrangement.
A certain instance can explain. I accomplished a federal tax return for a client. Since part of my treatment, I assessed prior acknowledgments which were certainly readied by a various obligation preparer. One return included a considerable net operating decrease (NOL). The NOL occurred in a levy yr where taxpayers were permitted a NOL carryback of 5 years. Though the revenue was certainly right, the value of the NOL was simply certainly not conveyed to the taxpayer. Prior to the statute of limits termination, I created amended returns to take advantage of the NOL, triggering an enormous refund through a couple takings, four as well as five yrs previously. The taxpayer received a repayment of over $ 44,000.

This may be actually handy to consider your levy mixture fee identical to charge people pay for many other insurance coverage. It is actually dubious that one home may experience a fantastic casualty loss (e.g. flames) next year. Proper coverage might produce a substantial cost savings if there was certainly a flames. If there is actually no flames, people still have piece of mind by means of this insurance. Likewise, one probably will not actually gain an extra refund of $ 44,000 just because one chose a CPA. The modest added rate, nevertheless, becomes your finest security from producing a large mistake on your return. Thus, there is extra piece of thoughts.

Obligation teller Kim Huddleston includes a legislation degree and wizards in obligation law from the School of Washington College of Law. He has already tax expert on the radio. This individual advises tiny establishments in the Seattle Bellevue Federal Approach & Tacoma place on numerous tax concerns. His firm, Huddleston Obligation Accountants, also supplies obligation readying product, quickbooks consulting as well as typical accounting and also accounting solution. Figuration details on John Huddleston as well as the CPAs applied by way of Huddleston Obligation Accountants is readily available at certified public accountant Tax Teller Profile. Seattle Bellevue Tacoma levy auditor Buck Huddleston is simply a frequent publisher of obligation conserving plans.

Sunday, 14 December 2014 05:38

Why Find A CPA (Certified Public Accountant)?

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A cpa (CPA) is a proficient individual who manages their own or is a part for an accounting company. A state-licensed accountant (CPA) is generally in charge of checking and monitoring the budgetary records for an unique and establishment. Each year millions for Americans question if that they will employ an certified public accountant (CPA). Why contract a CPA is a question that several consumers request themselves.

There are a number of people as well as business owners who are not coordinated. Being unorganized may make it virtually unfeasible with regard to a personal and business owner in order to correctly monitor all for their funds. This is why plenty of people generate judgment to contract a certified public accountant (CPA). Yet another incentive a lot of consumers or business owners could find a certified public accountant (CPA) is considering they perform just not include ample occasion in order to monitor budgetary records on their personal. An additional cause is considering bulk of chartered accountants (CPAs) happen to be developed and experienced experts.

To become a certified public accountant (CPA) people will need to satisfy assured demands that are enforced by the American Institute of Certified Public Accountants (AICPA). These qualifyings measures generally offer around one hundred and also fifty school hours that are actually put on to an accounting show. A cpa (CPA) also is demanded in order to pass a CPA exam that is developed by the American Institute for Certified People Accountants (AICPA). There are some positions that involve an individual be approved and possess a certain quantity of job expertise prior to running an accounting establishment; nevertheless, not actually all conditions receive these conditions. By using all of the training and also experience that a number cruncher have to receive it is evident that they happen to be a lot more competent in cleared out of accounting. Although this is just not guaranteed a certified public accountant (CPA) happens to be most likely to present more suitable results than a typical accountancy firm.

A large number for individuals employ the services of an auditor all season sequence in order to be sure that their finances are in purchase. Although many accountants happen to be selected on a long-term premise there happen to be tellers that happen to be only selected to professionally prep federal tax return. When being trained in the spots of accounting a certified public accountant (CPA) also understands the best way in order to finalize many different federal as well as tax return. Why employ a CPA to do your taxes? solution is because plenty of certified discover precisely how to achieve their clients increase number for tax deductions as well as that they in addition exactly how discover in order to properly coordinate stubs as well as additional paper verifications with respect to those tax deductions.

When employing a (CPA) a lot of people and business owners are encouraged in order to establish volume of experience and certifications that an accountancy firm possesses. When seeking a certified public accountant lots of individuals and entrepreneur like in order to work with a regional accountancy firm. A number of individuals seem that associating with a regional accountancy firm is much simpler ought to an item unexpected occur; nevertheless, there are a number of tellers that serve an effective accounting outfit or run their very own personal accounting company across the country. Each consumer or business owner may must generate their own judgment about which sort of certified personalized accountant (CPA) they want to find.

Why hire a CPA? solution is effortless because it is an uncomplicated to solution in order to have your monetary records in order and your income tax return appropriately finished. larger part of cpas guarantee their work; for that reason, there truly is not any sort of incentive a certified public accountant (CPA) really should not actually be contracted. Instead of having to spend hrs evaluating and arranging via your finances you must grasp your regional phone or utilize web to a minimum of timetable an examination appointment having a certified public accountant(CPA) to identify if selecting one is right with regard to you and your situation.

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City workers get caught all the time doing private work at their government jobs, but an accountant in the Comptroller’s Office broke all records Thursday when she admitted running a CPA business from her desk for nearly 16 years.

Mary Chien, who works in the comptroller’s Bureau of Asset Management, said she prepared 200 documents for private clients from 1998 to 2014 on her city computer during work hours.

She agreed to pay a fine of nearly $14,000 in a settlement with the Conflicts of Interest Board.

Chien not only worked on tax returns, but confessed to writing letters on behalf of clients to the other government agencies, including the IRS and the state Department of Taxation, using her city e-mail address.

She was fined the equivalent of 45 days of work, or $13,891, and will be ­allowed to keep her job.

Chien, who joined the city in 1979, did not return calls seeking comment.

Another employee in the Comptroller’s Office was busted for a similar offense, running his eBay business when he should have been tending to the city’s business.

Richard Avellino agreed to pay $388, the equivalent of two days’ pay, for using a city computer during work hours to update his sales records and e-mail them to his personal account.

A trainee in the Bureau of Audits, Avellino admitted to updating his eBay sales ledger on eight different occasions from November 2013 through June 2014.

Avellino, who also got to keep his job, did not ­return a call for comment.

In another settlement with the ethics panel, a high-school principal agreed to pay a $2,400 fine for ordering three staffers to work as his personal assistants.

The designated gofers performed errands for Max Jean Paul, principal of the Brooklyn Bridge Academy in Canarsie, that included depositing his personal checks, picking up clothes from the cleaners, shopping for ­liquor and groceries, and making breakfast and lunch deliveries.

Paul was apparently trying to save a few bucks where he could because some of the shopping trips were to a “wholesale club.”

He has been employed by the Department of ­Education since 2000.

The board also collected a $1,600 fine from a Bronx teacher who admitted making photocopies of ­official parking placards.

Kim Judin, a teacher at PS 86, said she won a lottery at her school in November 2012 for one of a limited number of parking placards.

She said she gave it up in March 2013 so another teacher could use it, but then made unauthorized copies for her private vehicle.

Thursday, 11 September 2014 19:07

AICPA Plans Revamp of CPA Exam

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The American Institute of CPAs is asking for feedback as it plans the next version of the Uniform CPA Examination to respond to changing needs in the CPA profession.

 

The AICPA issued an Invitation to Comment on Monday, requesting feedback from key stakeholders to shape the next version of the Uniform CPA Exam as the skills demanded of the CPA profession are quickly changing. The comment period opened Monday and runs through December 2.

The Invitation to Comment – Maintaining the Relevance of the Uniform CPA Examination is the first document available for public comment in the Practice Analysis, a comprehensive research study that the AICPA said it is conducting to determine the outline for the next Uniform CPA Exam. The document explains the stages of the Practice Analysis and includes results from the AICPA’s preliminary research, along with specific questions about the potential changes under consideration.

“The Invitation to Comment is an opportunity for key stakeholders such as state boards of accountancy, standard setters, public accounting firms, academics and state CPA societies to review our preliminary research and provide feedback,” said AICPA vice president of examinations Michael A. Decker in a statement. “This valuable input will help influence the development of the Exam, and ultimately ensure that we’re continuing to protect the public interest, while setting the standard for testing accounting professionals.”

As part of the Practice Analysis, the AICPA’s research has found that the skills required of newly licensed CPAs are changing rapidly, underscoring the importance of ensuring the exam continues to meet the needs of today’s ever-evolving business world.

The Invitation to Comment is available at aicpa.org/NextCPAExam, which includes instructions for submitting comments. Stakeholders are invited to comment on any or all of the proposals, all of which address AICPA’s initial research finding.

The Practice Analysis is sponsored by the AICPA’s Board of Examiners, in collaboration with the National Association of State Boards of Accountancy.

 

Wednesday, 10 September 2014 19:03

CPA group finds US execs optimistic about economy, Hiring

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Not since 2007 have U.S. accountants in industry felt as optimistic about the future of their companies and the state of the domestic economy as they do now, according to the American Institute of CPAs' third-quarter economic outlook survey.

The number of financial executives optimistic about the U.S. economy rose to 52 percent from 51 percent in the second quarter, which was it had passed the 50 percent mark since since the recession.

The survey polled CEOs, CFOs, controllers and other certified public accountants in U.S. companies who hold executive and senior management accounting roles.

Meanwhile, the CPA Outlook Index — a gauge of executive sentiment within the survey — rose two points in the third quarter to 74, the highest mark since the first quarter of 2007. An index rating above 50 indicates a positive outlook.

Fifty-one percent of companies reported they have the right number of employees and 9 percent said they have too many, both unchanged from the second quarter. Of those that need employees, 20 percent plan to hire, up from 17 percent in the second quarter; however, the remaining 18 percent are reluctant to hire.

The survey of AICPA Business & Industry members was conducted between Aug. 6 and Aug. 26, 2014, and had 1,110 qualified respondents.

 

Not since 2007 have U.S. accountants in industry felt as optimistic about the future of their companies and the state of the domestic economy as they do now, according to the American Institute of CPAs' third-quarter economic outlook survey.

The number of financial executives optimistic about the U.S. economy rose to 52 percent from 51 percent in the second quarter, which was it had passed the 50 percent mark since since the recession.

The survey polled CEOs, CFOs, controllers and other certified public accountants in U.S. companies who hold executive and senior management accounting roles.

Meanwhile, the CPA Outlook Index — a gauge of executive sentiment within the survey — rose two points in the third quarter to 74, the highest mark since the first quarter of 2007. An index rating above 50 indicates a positive outlook.

Fifty-one percent of companies reported they have the right number of employees and 9 percent said they have too many, both unchanged from the second quarter. Of those that need employees, 20 percent plan to hire, up from 17 percent in the second quarter; however, the remaining 18 percent are reluctant to hire.

The survey of AICPA Business & Industry members was conducted between Aug. 6 and Aug. 26, 2014, and had 1,110 qualified respondents.

- See more at: http://www.staffingindustry.com/Research-Publications/Daily-News/CPA-group-finds-US-execs-optimistic-about-economy-hiring-31374#sthash.iozDKWKw.dpuf

 

 

Not since 2007 have U.S. accountants in industry felt as optimistic about the future of their companies and the state of the domestic economy as they do now, according to the American Institute of CPAs' third-quarter economic outlook survey.

The number of financial executives optimistic about the U.S. economy rose to 52 percent from 51 percent in the second quarter, which was it had passed the 50 percent mark since since the recession.

The survey polled CEOs, CFOs, controllers and other certified public accountants in U.S. companies who hold executive and senior management accounting roles.

Meanwhile, the CPA Outlook Index — a gauge of executive sentiment within the survey — rose two points in the third quarter to 74, the highest mark since the first quarter of 2007. An index rating above 50 indicates a positive outlook.

Fifty-one percent of companies reported they have the right number of employees and 9 percent said they have too many, both unchanged from the second quarter. Of those that need employees, 20 percent plan to hire, up from 17 percent in the second quarter; however, the remaining 18 percent are reluctant to hire.

The survey of AICPA Business & Industry members was conducted between Aug. 6 and Aug. 26, 2014, and had 1,110 qualified respondents.

- See more at: http://www.staffingindustry.com/Research-Publications/Daily-News/CPA-group-finds-US-execs-optimistic-about-economy-hiring-31374#sthash.iozDKWKw.dpuf

Not since 2007 have U.S. accountants in industry felt as optimistic about the future of their companies and the state of the domestic economy as they do now, according to the American Institute of CPAs' third-quarter economic outlook survey.

The number of financial executives optimistic about the U.S. economy rose to 52 percent from 51 percent in the second quarter, which was it had passed the 50 percent mark since since the recession.

The survey polled CEOs, CFOs, controllers and other certified public accountants in U.S. companies who hold executive and senior management accounting roles.

Meanwhile, the CPA Outlook Index — a gauge of executive sentiment within the survey — rose two points in the third quarter to 74, the highest mark since the first quarter of 2007. An index rating above 50 indicates a positive outlook.

Fifty-one percent of companies reported they have the right number of employees and 9 percent said they have too many, both unchanged from the second quarter. Of those that need employees, 20 percent plan to hire, up from 17 percent in the second quarter; however, the remaining 18 percent are reluctant to hire.

The survey of AICPA Business & Industry members was conducted between Aug. 6 and Aug. 26, 2014, and had 1,110 qualified respondents.

- See more at: http://www.staffingindustry.com/Research-Publications/Daily-News/CPA-group-finds-US-execs-optimistic-about-economy-hiring-31374#sthash.iozDKWKw.dpuf

Optimism about the US economy continues to grow among CPAs and financial executives, and with that, more companies are expecting to increase hiring in the near future, according to results of a new survey released by the American Institute of CPAs (AICPA) on Thursday.

While more than half (51 percent) of the 1,100 respondents believe their companies or organizations have the right amount of employees, nearly one in five (20 percent) businesses expect to hire new staffers in the coming year, the AICPA noted in its third quarter 2014 Business and Industry US Economic Outlook Survey. This is up from 17 percent last quarter and 13 percent at the end of 2013.

The percentage of companies reluctant to hire decreased two points, from 20 percent in the second quarter to 18 percent in the third quarter.

The survey, which is released by the AICPA each quarter, tracks hiring and business-related expectations for the next 12 months. For the third-quarter study, the AICPA polled CEOs, CFOs, controllers, and other CPAs in US companies who hold executive and senior management accounting roles.

However, one hiring dilemma continues: Many respondents felt that finding the right job candidates with the right skills remains difficult. For the second-straight quarter, “availability of skilled personnel” was cited as the No. 3 top challenge for businesses. The No. 1 challenge for the third quarter was “regulatory requirements/changes;” No. 2 was “domestic economic conditions.”

“AICPA’s survey results echo a key concern for businesses, which is the mismatch between open staff positions and the pool of qualified candidates available to fill them,” Valerie Rainey, CPA, CGMA, vice chair of the AICPA’s Business and Industry Executive Committee, said in a written statement.

Rainey, who is also CFO and senior vice president of corporate development and finance for Parsippany, New Jersey-based INTTRA, a leading multicarrier e-commerce network for ocean shipping, added that the results may explain why the survey’s findings show an uptick in plans for spending on training and other workforce investments.

Economic Optimism Trends Upward
The number of CPAs and financial executives optimistic about the US economy improved another point to 52 percent, after passing the 50 percent mark in the second quarter for the first time since the recession. In early 2009, at the height of the economic downturn, the level of optimism stood at just 5 percent.

The number of companies optimistic about their own prospects improved from 61 percent in the second quarter of 2014 to 65 percent in the third quarter, while 68 percent have plans for expansion in the third quarter, up from 64 percent.

Another indicator the economy is heading in the right direction is that the CPA Outlook Index – a comprehensive gauge of executive sentiment within the AICPA survey – rose two points in the third quarter to 74, a post-recession high. The index is a composite of nine, equally weighted survey measures set on a scale of zero to 100, with 50 considered neutral and greater numbers signifying positive sentiment.

Every category of the index rose both quarter over quarter and year over year, according to the survey. The largest increases in the past quarter had to do with three key performance indicators (KPIs) – expected profit, revenue, and employment growth, which all rose five points.

Professional, scientific, and technical services topped the charts in terms of the most optimistic sector this quarter with 76 percent of its respondents being positive about the prospects for their own organization. This optimism is also supported by plans for increased headcount of 4 percent over the coming year, up from a 2.6 percent projected increase last quarter.

Technology fell off sharply in terms of optimism – from 72 percent last quarter to only 58 percent in the third quarter. Optimism in both the retail (67 percent) and wholesale (61 percent) trade sectors both improved in the third quarter, while real estate (70 percent), construction (69 percent), and finance and insurance (61 percent) showed minor fluctuations.

Expectations for increased revenues improved from 3.8 percent in the second quarter to 4.4 percent in the third quarter. Projections for higher profits rose from 2.9 percent to 3.6 percent, and expectations for increasing headcount improved from 1.3 percent last quarter to 1.8 percent in the third quarter. Each of these KPIs reached levels not seen since the end of 2007.

The projected salary and benefit cost increase for the upcoming 12 months rose from 2.1 percent to 2.4 percent. Expectations for increased healthcare costs also rebounded to 6.6 percent after declining slightly from the first quarter to the second quarter, according to the survey.

About the survey:
The third quarter 2014 AICPA Business and Industry US Economic Outlook Survey was conducted from Aug. 6 to 26 and included 1,100 qualified responses from CPAs who hold leadership positions, such as CFO or controller, in their companies. The overall margin of error is less than 3 percentage points.

Mahlon Rubin

 

Mahlon Rubin had been a CPA for only a few years in 1952 when he and two college pals formed what would become one of the largest accounting firms in St. Louis, RubinBrown.

Without computers, accountants were still doing their number crunching on adding machines.

“When I started, that’s all I had,” Mr. Rubin recalled in a later interview. At his first job out of college, “we had a rule that we had to keep all the adding machine tapes and run them back through the other way, too. Back then, that was recycling.”

The firm that Mr. Rubin, Harvey Brown and Sidney Gornstein started now employs more than 450 employees in St. Louis, Kansas City and Denver. It bills itself as the second-largest accounting firm in St. Louis and the 43rd largest nationally.

Mr. Rubin died about 3 p.m. Thursday (Sept. 4, 2014), shortly after leaving his company’s office, his family said Friday. He was 89 and lived in Creve Coeur.

Mr. Rubin grew up in East St. Louis and studied engineering at Washington University. He lived near Union and Delmar boulevards and walked and took a streetcar to classes. “I didn’t have a car, nor was I lucky enough to have a friend who had a car,” he recalled.

In 1943, he went into the Army Air Forces and was trained as a meteorologist. “I was actually in the unit that dropped the original atomic bomb on Hiroshima,” he said.

He returned home, enrolled in business school and graduated from Washington University in 1948. As a young accountant, his soon-to-be-former boss told him he could do better on his own.

He, Brown and Gornstein made the decision to go out on their own. They also decided to start their business in Clayton.

“At the time, Clayton was a pretty sleepy little town with the county courthouse,” Mr. Rubin recalled. During tax season, they could keep working until 6 p.m., go home to eat with their families, and return to work late.

They collected clients from closely held and family-owned businesses.

A 1986 profile of him in the Post-Dispatch described Mr. Rubin as affable. He extolled the family-style partnership that he said ran the company.

But he went on to sum up his management style this way: “A benevolent dictatorship is the best way to run an organization. Don’t let anyone tell you differently.”

Mr. Rubin didn’t disclose profits — the company still doesn’t — but said the firm has been consistently profitable.

Mr. Rubin retired in 1990. He continued to go to the office every day, as he had for the past 62 years, said John Herber, managing partner.

Mr. Rubin was the first St. Louisan to serve on the board of the American Institute of Certified Public Accountants. He served on the board of the Barnes-Jewish Hospital Foundation and was past president of the old Jewish Center for the Aged.

The funeral will be at noon Sunday at Berger Memorial Chapel, 9430 Olive Boulevard in Olivette. Interment will follow at Beth Hamedrosh Hagodol Cemetary, Ladue.

Survivors include his wife, Maurine Rubin; and three sons, Larry Rubin and Ken Rubin, both of St. Louis County, and Rich Rubin of Philadelphia.

Friday, 15 August 2014 04:32

Why CPA over CA?

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In the current market scenario, Chartered Accountancy (CA) could be aptly described as "too much for too less", given the fact that the quantum of efforts required is not directly proportional to the rewards. Still, we do observe a large stream of students lining up for the course. Why so?? A lot of the reasoning can be attributed to a lack of awareness - Students and professionals, as a matter of fact are unaware about the existence of other career opportunities in the global accounting scenario. Of the many that are aware, some tend to choose the seemingly easier, local option available.However, an in-depth analysis would prove that the US Certified Public Accountant (CPA) course is probably one of the best career options that give a boost to your career in the world of accounting internationally.The underlying fact that both CPA and CA exams are professional accounting courses of two different countries is unbeatable. Also, each course, in its own way is the crown jewel for accounting in the respective country. Hence, a comparison between both the exams is like comparing apples and oranges. However, a time-cost-benefit analysis between the two courses would give one a quint reasons to choose US CPA over Indian CA.

Firstly, CPA enables a candidate to obtain membership of the world's largest accounting body AICPA i.e. American Institute of Certified Public Accountants whereas CA gives one, a membership to the second largest accounting body ICAI i.e. Institute of Chartered Accountants of India.US CPA has international credibility and is recognized globally as the apex accounting degree. A lot of countries accept US CPA as the highest professional accounting certificate. On the other hand CA's command a lot of credibility inside India, but outside India, scope and visibility for CA's is quite minimal.CPA is a one level exam with 4 papers while CA includes 3 levels (CPT, IPCC, Final) comprising of 15-16 papers. To sum up we get a more credible degree in much shorter time. CPA can be completed within 7-8 months whereas a CA certification requires a minimum of 4-4.5 years. The return on time and efforts invested is relatively much larger for CPA, as compared to CA.

Another reason why students prefer CPA to CA is because the exam pattern for CA, as in contrast to that of CPA, lays more stress on mugging up rather than on concept building. In CA curriculum students have to spend long hours slogging with subjects and topics that are redundant and have lost its practicality in the real world. CPA curriculum on the other hand is crisp up-to-date and follows the multiple choice question pattern, which rewards student more on substance than on form.CPA exams test a candidate's knowledge about IFRS as well as US GAAP whereas CA curriculum deals only with Indian standards. Work experience required for licensing eligibility, in CPA course is flexible as it varies from state to state and several states have even waived the work experience requirement. An Indian CA requires 3 years of rigorous work experience known as Article ship training.

In terms of cost structure, on the face of it, CPA seems more expensive than CA, but if one takes a  closer look and analyses it critically, then one can gather that CPA offers a better cost advantage than CA. CA course requires total expenditure of around 1.5 lacks over a span of 4 years, whereas a CPA course requires an expenditure of 2.75-3 lacks amassed over an year. If we choose CPA over CA, we get a three year head start to our career, undoubtedly. So, to sum up,the present value of the cash flows should be accounted so as to generate a true cost comparison between CPA and CA, which results in CPA providing a greater return.

 

CPA exams are held more frequently i.e. 8 times a year compared to CA exams which are held twice a year. Hence candidates can have a more flexible schedule for preparation and taking the exam. Only a graduate can take CPA exams whereas CA is open to undergraduates and students starting out graduation.From a job opportunities perspective, practically, there is an overflow of CAs in India. As a result, passing an exam is no assurance of getting a job with fair pay. On the other hand, demand for CPA's still outweighs their supply. Hence CPA's enjoy a considerable command over the global job market and have terrific opportunities in various big 4 as well as MNCs. American CPA's automatically qualify for membership in both Canadian and Australian Chartered Accountant societies and get several exemptions from several other institutes across the world. No such exemptions and qualifications are offered to an Indian Chartered Accountant.

Thus, a variety of reasons can be shown as to how CPA proves beneficial over CA. I hope this brief comparison of the courses has helped.

 

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