OFF I C I AL PUBL I CAT I ON OF THE NEBRASKA SOC I ETY OF CPAs ISSUE 4, 2022 NEBRASKA PAGE 22 THE SELF-EMPLOYED NEED RETIREMENT PLANS: CPAS CAN HELP
Together, we’re the sophisticated navigators they need. Helping CPAs statewide, Koley Jessen can be your estate and succession law partner. Your financial expertise helps your clients make vital estate-planning decisions. Our legal prowess can help plot out thoughtful transition plans in the most tax-efficient way. When we work as partners, we offer your clients tailor-made routes to success. ■ Estate Planning ■ Estate & Trust Administration ■ Estate & Trust Disputes ■ Business Succession Planning ■ Charitable Planning & Nonprofit Organizations ■ Wealth Transfer Planning Contact Us Today. 402.390.9500 | koleyjessen.com/services-estate-planning
BOARD OF DIRECTORS ERICA R. PARKS NESCPA CHAIRMAN (402) 431-9805 FORVIS Omaha LORRAINE A. EGGER NESCPA CHAIRMAN-ELECT (402) 965-0328 CyncHealth La Vista NEAL D. LYONS NESCPA SECRETARY (402) 434-7203 UNICO Group Inc. Lincoln DAVID E. SWAN NESCPA TREASURER (402) 420-7758 SP Group, PC Lincoln RYAN L. BURGER NESCPA PAST CHAIRMAN (402) 643-4557 Gabriel, Burger & Else, CPA, PC Seward JODI M. ECKHOUT NESCPA DIRECTOR (308) 995-6151 Woods & Durham, CPA Holdrege MEGAN C. HOLT NESCPA DIRECTOR (402) 342-7600 Mutual of Omaha Insurance Co. Omaha PATRICK A. MEYER PAST CHAIRMAN & AICPA ELECTED REPRESENTATIVE (402) 261-9622 HBE LLP Lincoln SHARI A. MUNRO PAST CHAIRMAN & AICPA ELECTED REPRESENTATIVE (402) 963-4316 Frankel Zacharia LLC Omaha DR. THOMAS J. PURCELL III NESCPA DIRECTOR (402) 280-2062 Creighton University Omaha LINDA M. SCHOLTING NESCPA DIRECTOR (402) 826-6777 Doane University Crete JESSICA L. WATTS NESCPA DIRECTOR (402) 216-6116 Rehmann Omaha DANA J. WEBER WEST NEBRASKA CHAPTER PRESIDENT (308) 635-3008 Dana J. Weber, CPA Scottsbluff JONI SUNDQUIST NESCPA PRESIDENT & EXECUTIVE DIRECTOR joni@nescpa.org KELLY EBERT VICE PRESIDENT kelly@nescpa.org MICHELLE LYONS STAFF ACCOUNTANT & OFFICE MANAGER michelle@nescpa.org LORI VODICKA MEMBERSHIP & CPE ASSISTANT lori@nescpa.org OFFICERS BOARD MEMBERS NESCPA STAFF IPE 1031 | 888.226.0400 | WWW.IPE1031.COM | INFO@IPE1031.COM EXPERTISE From a Respected Industry Leader THE PREMIER SPECIALIST FOR SECTION 1031 EXCHANGES SECTION 1031 EXCHANGE 3 nebraska society of cpas W W W . N E S C P A . O R G
24 16 C O N T E N T S 8 ©2022 Nebraska Society of Certified Public Accountants | The newsLINK Group, LLC. All rights reserved. The Nebraska CPA is published six times each year by The newsLINK Group, LLC for the Nebraska Society of Certified Public Accountants and is the official publication for this society. The information contained in this publication is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the Nebraska Society of Certified Public Accountants, its board of directors, or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. Nebraska CPA is a collective work and as such some articles are submitted by authors who are independent of the Nebraska Society of Certified Public Accountants. While the Nebraska CPA encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at: 855.747.4003. ISSUE 4, 2022 EDITORIAL: The Nebraska Society of CPAs seeks to reflect news and relevant information to Nebraska and other news and information of direct interest to members of the Nebraska Society of CPAs. Statement of fact and opinion are made on the responsibility of the authors alone and do not represent the opinion or endorsement of the Nebraska Society of CPAs. Articles may be reproduced with written permission only. ADVERTISEMENTS: The publication of advertisements does not necessarily represent endorsement of those products or services by the Nebraska Society of CPAs. The editor reserves the right to refuse any advertisement. SUBSCRIPTION: Subscription to the magazine, a bi-monthly publication, is included in membership fees to the Nebraska Society of CPAs. 6 PRESIDENT’S MESSAGE: SOLVING YOUR PROBLEMS IS OUR PASSION BY JONI SUNDQUIST, NEBRASKA SOCIETY OF CPAS 8 STATE BOARD REPORT: OOPS! I FORGOT TO RENEW MY CPA LICENSE! BY DAN SWEETWOOD, NEBRASKA BOARD OF PUBLIC ACCOUNTANCY 10 2022 NESCPA COURSE CALENDAR 14 22ND ANNUAL FALL CPE CONFERENCE 16 COUNSELOR’S CORNER: A TRAP FOR THE UNWARY PUNITIVE PENALTIES UNDER IRC SECTION 409A BY PETER LANGDON, KOLEY JESSEN 18 STATE TAX BRIEFING: WHEN IS A DUCK NOT A DUCK? RECLASSIFICATIONS IN THE WORLD OF STATE TAXES & INCENTIVES BY NICK NIEMANN & MATT OTTEMANN, MCGRATH NORTH LAW FIRM 21 FRIDAY NIGHT TAILGATE PARTY! 22 THE SELF-EMPLOYED NEED RETIREMENT PLANS: CPAS CAN HELP BY MARK J. GILBERT, CPA/PFS, MBA, REASON FINANCIAL ADVISORS 24 MEMBER SPOTLIGHT: A GUIDING LIGHT HALL OF FAMER FRANK HAYES INSPIRES OTHERS BY DWAIN HEBDA 27 MEMBERS IN THE NEWS 29 FIRMS IN THE NEWS 31 2022 REVISED SCHOOL DISTRICTS AUDITING & REPORTING REFERENCE MANUAL AVAILABLE 31 CLASSIFIED ADS 34 WELCOME NEW SOCIETY MEMBERS! 35 IN MEMORIAM I S S U E 4 , 2 0 2 2
PRESIDENT’S MESSAGE BY JONI SUNDQUIST, NEBRASKA SOCIETY OF CPAS SOLVING YOUR PROBLEMS IS OUR PASSION While “busy season” for CPAs has come and gone, summertime at the Nebraska Society of CPAs is one of your organization’s busiest seasons. CPE is full throttle ahead and our Fall Conference and Annual Meeting are just around the corner. Several exciting months lie ahead! At the Nebraska Society of CPAs, we pride ourselves on finding solutions to your concerns and problems. This might mean seeking a legislative solution to help Nebraska CPA firms continue to thrive in our state. Another time, it’s pulling together a group of CPAs to provide input to the Nebraska Department of Revenue on a new form or process. Other times, it’s quickly developing a CPE course on an emerging issue, or publishing an article on a legal matter, or participating in a research study that might result in new strategies, or pursuing a new business partnership to provide you discounted products and services. Whatever your concerns or problems may be, our focus remains: “Every member. Every day.” The Society is continually working for you and your profession. A significant pain point we’re trying to address at this time is the profession’s pipeline problem—defined as the accounting profession’s struggle to recruit students while simultaneously losing unprecedented numbers of CPAs to retirement. Although this issue is not specific to our state, we know there are things we can do to help you right here in Nebraska. Our most recent effort includes the creation of a new video geared toward high school students, featuring Society Past Chairman Ryan Burger of GBE CPA in Seward and produced by RightEye Digital of Lincoln. I S S U E 4 , 2 0 2 2 6 nebraska cpas
Joni Sundquist is president and executive director of the Nebraska Society of CPAs. You may contact her at (402) 476-8482 or joni@nescpa.org. At the Nebraska Society of CPAs, we pride ourselves on finding solutions to your concerns and problems. This might mean seeking a legislative solution to help Nebraska CPA firms continue to thrive in our state. In the video, Burger explores opportunities available in the accounting profession and what it takes to become a CPA. He lets students know that becoming a CPA is an exciting and rewarding career choice. You’ll find the 38-minute lesson online at www.nescpa.org/careers/videos. We encourage you to share the video with your local high schools and accounting teachers! A shout out to Deloitte for providing the funding that made the video possible and to the University of Nebraska-Lincoln College of Business for allowing us to use their facility for filming. Your Society has another video in the planning stages, highlighting the vast opportunities in accounting. We’re discussing other innovative ways to inspire the next generation and help you with the accounting talent shortage. In addition, the Foundation of the Nebraska Society of CPAs is doing its part to grow the CPA pipeline by providing scholarships to accounting students attending 14 universities and colleges in Nebraska—stay tuned for more information about our Foundation and 2022-2023 scholarship recipients in an upcoming issue of the Nebraska CPA journal. And don’t forget that as a member, you can post your organization’s job openings for free on our website at www.nescpa.org/ job-postings/add. What else can we do to help? Please feel free to reach out to me with your thoughts and ideas. • Business succession and exit planning • Partnership taxation structuring and compliance • Tax credit, tax incentives, and alternative financing • Tax-free and tax-deferred acquisitions, mergers, and reorganizations • Tax-deferred Section 1031 exchanges • Wealth transfer planning, including trust and estate taxation • Nonprofit formation and tax-exempt qualification and compliance • Audit response and representation before the IRS, state, and local taxing authorities LET OUR EXPERIENCE WORK FOR YOU 1700 Farnam Street, Suite 1500 Omaha, NE 68102 www.bairdholm.com 7 nebraska society of cpas W W W . N E S C P A . O R G
S TAT E B O A R D R E P O R T OOPS! I FORGOT TO RENEW MY CPA LICENSE! BY DAN SWEETWOOD, NEBRASKA BOARD OF PUBLIC ACCOUNTANCY The Nebraska Board of Public Accountancy administers public accountancy law in Nebraska. Dan Sweetwood is executive director of the Nebraska Board of Public Accountancy. You may contact him at (402) 471-3595 or dan.sweetwood@nebraska.gov. You may also contact State Board Administrator Kristen VanWinkle at kristen.vanwinkle@nebraska.gov or State Board Business Manager Heather Myers at heather.myers@nebraska.gov. Hey, we all get busy and sometimes it is easy to set aside State Board email reminders to renew your active CPA license, inactive registration, or your CPA firm permit to practice. The goal of State Board staff is to assist during the licensing renewal period (from early May until June 30) by sending several reminders to you. Doing so has greatly decreased the number of non-renewals over the years! What happens if I miss the renewal period? If you miss the renewal period, your best course of action is to pick up the phone and call the State Board at (402) 471-3595 or email the State Board staff at kristen.vanwinkle@nebraska.gov or heather. myers@nebraska.gov to start the process. We will try to make it as painless as possible; however, there will be some pain! This includes a $250 administrative fee for active permit holders (CPAs) to return to good standing; this is above and beyond your regular licensing fees. Again, our goal is to get you back to good standing ASAP so you can remove this from your to-do list. It is important you make contact with the State Board office ASAP if you have not renewed based on several factors, including: • Your current permit to practice as a CPA in Nebraska is no longer in good standing. This could impact current engagements you are working on and possibly impact your status with other state boards and regulators. • Eventually, your name will be included in a national database indicating you are not in good standing in Nebraska. • After not renewing for three years, the State Board can implement provisions under the Nebraska Public Accountancy Act to administratively revoke your credentials after notice of a formal hearing. This can directly impact your ability to call yourself a CPA and some state boards will initiate action against you. Simply put, it is very important you remain in good standing with your State Board! If by chance you leave Nebraska and work elsewhere, State Board staff will work with you to provide your best options to remain in good standing in Nebraska or to relinquish your Nebraska credentials. Again, this will depend on your individual circumstances. Never hesitate to reach out to us if you have any questions regarding your CPA license in Nebraska. I S S U E 4 , 2 0 2 2 8 nebraska cpas
NESCPA - Half Page Ad.indd 1 10/26/21 4:33 PM To advertise in this magazine, contact us today. 801.676.9722 | 855.747.4003 thenewslinkgroup.org sales@thenewslinkgroup.com It’s your time to grow. 9 nebraska society of cpas W W W . N E S C P A . O R G
8/25 AA Balancing Security With Operational Efficiency Karl Egnatoff, Taymes LLC Live Webcast 2 8/26 AA Breaking Down the Auditor's Report for Non-ERISA Engagements AICPA Live Webcast 8 8/29 TX Employee Stock Options Surgent, Co-sponsoring with Iowa Society of CPAs Live Webcast 2 8/30 AA Governmental Accounting & Auditing Update AICPA Live Webcast 8 8/30 TX Form 990: Best Practices for Accurate Preparation AICPA Live Webcast 8 8/31 AA 1st Annual Women in Accounting Summit Nebraska Society of CPAs Crete Carrier Riverview Lodge, Mahoney State Park, Ashland 6 2022 NESCPA COURSE CALENDAR DATE TYPE EVENT TITLE VENDOR LOCATION CPE/ ETHICS HOURS AUGUST 9/6-9/9 MA AHI Staff Training - Level 1 - Basic Staff Training AHI Associates Live Webcast 24 9/12 IT Technology for CPAs: Don't Get Left Behind K2 Enterprises Live Webcast 8 9/13 ET Ethics & Technology K2 Enterprises Live Webcast 4 9/13 IT Mastering Advanced Excel Functions K2 Enterprises Live Webcast 4 9/13 AA Revenue Recognition: Identifying Contract & Performance Obligations AICPA Live Webcast 2 9/13 AA Revenue Recogntion: Determining & Allocating Transaction Price AICPA Live Webcast 2 9/13 AA Revenue Recognition: Satisfying Performance Obligations & Special Considerations AICPA Live Webcast 2 9/13 AA Lessee & Lessor Accounting AICPA Live Webcast 2 9/14 IT Microsoft Teams K2 Enterprises Live Webcast 4 9/14 IT Remote Access for Small Businesses K2 Enterprises Live Webcast 4 9/16 TX Estate Planning for 2022 & Beyond Art Werner, Werner Rocca Live Webcast 8 9/199/22 MA AHI Staff Training - Level 2 - Semi-Senior AHI Associates Live Webcast 24 9/19 TX Basis Calculations & Distributions for Pass-Thru Entity Owners - Schedule K-1 Analysis The Tax U, The Garvs LLC Live Webcast 8 9/20 TX Passive Activities & Rental Real Estate Income Tax Issues The Tax U, The Garvs LLC Live Webcast 8 9/21 TX Estate Tax Planning Options for Farmers CLA Live Webcast 4 9/22 AA How FASB Activities Will Impact NFP Financial Reporting AICPA Live Webcast 2 9/22 AA The Impact of Federal Government Activities on Government & NFP Financial Statements AICPA Live Webcast 2 9/27 AA The Most Critical Challenges in Not-For-Profit Accounting Today Surgent Live Webcast 4 9/27 AA Applying the Yellow Book to a Financial Statement Audit Surgent Live Webcast 4 9/28 FN Current Developments & Best Practices for Today's CFOs & Controllers Surgent Live Webcast 8 9/28 TX The Essential Multistate Tax Update Surgent Live Webcast 4 9/29 TX Traps & Pitfalls in Estate Planning Art Werner, Werner Rocca Live Webcast 8 SEPTEMBER I S S U E 4 , 2 0 2 2 10 nebraska cpas
10/4 MA Advanced Controller & CFO Skills AICPA The Thompson Center, UNO, Omaha 8 10/5 MA Controller's Update: Today's Latest Trends AICPA The Thompson Center, UNO, Omaha 4 10/5 MA Finance Business Partnering: The Changing Finance Function & Technology Impacts AICPA The Thompson Center, UNO, Omaha 4 10/12 TX Maximizing Your Social Security Benefits Surgent Live Webcast 4 10/12 ET Ethical Considerations for CPAs Surgent Live Webcast 4 10/13 AA Accounting, Audit & Attest Update for Practitioners With Small-Business Clients Surgent Live Webcast 8 10/18 TX Guide to Real Estate Tax Strategies Larry Stein Mahoney State Park, Ashland 8 10/18 TX The Top Five Tax Issues in Dealing With LLCs & Partnerships Surgent Live Webcast 4 10/18 TX Limited Liability Companies: Losses, Liquidations, Terminations, Continuations & Sales Surgent Live Webcast 4 10/19 TX Pass-Through Entity Immersion Workshop Larry Stein Mahoney State Park, Ashland 8 10/20 MA Management & Leadership Essentials AHI Associates Live Webcast 8 10/20 TX 2022 Guide to Retirement, Income Tax & Estate Planning Strategies (Giving Your 60+ Client a Planning Check-up) Larry Stein Mahoney State Park, Ashland 8 10/20 AA Real World Frauds Found in Not-For-Profits AICPA Live Webcast 4 10/21 TX S Corporation Taxation: Advanced Issues Surgent Live Webcast 4 10/24 IT Securing Your Data: Practical Tools for Protecting Information K2 Enterprises Live Webcast 4 10/24 AA Small Business Accounting Shootout K2 Enterprises Live Webcast 4 10/24 MA AHI Staff Training - Level 1 - Basic Staff Training AHI Associates Live Webcast 24 10/25 IT Technology Update K2 Enterprises Live Webcast 4 10/25 IT Testing & Auditing Excel Workbooks K2 Enterprises Live Webcast 4 10/26 IT Top PDF Features You Should Know K2 Enterprises Live Webcast 4 10/26 IT Working Remotely: The New Normal K2 Enterprises Live Webcast 4 10/26 AA Conquering the New Lease Standard Real World Seminars, Co-sponsoring with Iowa Society of CPAs Live Webcast 8 10/26 AA Accounting for Revenues & Expenses in a Not-For-Profit AICPA Live Webcast 4 10/26 AA Not-For-Profit Financial Reporting AICPA Live Webcast 2 10/2710/28 AA 22nd Annual Fall Conference & Annual Meeting Nebraska Society of CPAs Embassy Suites, La Vista 16 10/31 TX Social Security & Medicare: Planning for You & Your Clients Surgent, Co-sponsoring with Iowa Society of CPAs Live Webcast 8 10/3111/3 MA AHI Staff Training - Level 3 - Beginning In-Charge AHI Associates Live Webcast 24 OCTOBER 11 nebraska society of cpas W W W . N E S C P A . O R G
11/1 TX The Complete Trust Workshop Surgent, Co-sponsoring with Iowa Society of CPAs Live Webcast 8 11/1 AA 2022 Accounting & Auditing Update for the Real World Real World Seminars Quarry Oaks, Ashland 8 11/2 AA 2022 Preparation, Compilation & Review (SSARS) Update for the Local Firm Real World Seminars Quarry Oaks, Ashland 8 11/3 MA Talent Management Summit Jeremy Wortman, HRD Initiatives Shadow Ridge Country Club, Omaha 8 11/3 AA Applying the Uniform Guidance in Your Single Audits AICPA Live Webcast 8 11/7 TX Key Tax Issues Facing Business & Industry Van Der Aa Tax Ed LLC Quarry Oaks, Ashland 8 11/8 TX It's Personal! Individual Tax Update 2022 Van Der Aa Tax Ed LLC Quarry Oaks, Ashland 8 11/9 TX Year-End Tax Planning: Thinking Outside the Box Van Der Aa Tax Ed LLC Quarry Oaks, Ashland 8 11/11 TX Federal Tax Update - Individual and Business - ONE DAY TaxSpeaker, Co-sponsoring with Iowa Society of CPAs Live Webcast 8 11/1411/17 MA AHI Staff Training - Level 4 - Management & Leadership Essentials AHI Associates Live Webcast 24 11/16 TX Reviewing S Corporation Tax Returns: What Are You Missing? AICPA Live Webcast 4 11/16 TX Reviewing Partnership Tax Returns: What Are You Missing? AICPA Live Webcast 4 11/17 TX This Year's Best Income Tax, Estate Tax & Financial-Planning Ideas Surgent Live Webcast 8 11/17 TX Critical Issues Involving Taxation of Construction Contractors Surgent Live Webcast 4 11/17 AA Contract Accounting & Lease Accounting & Their Impact on Contractors AICPA Live Webcast 2 11/18 TX Estate & Life Planning Issues for the Middle-Income Client Surgent Live Webcast 8 11/21 AA Non-GAAP Financial Statement Options: Cash, Modified Cash & Tax Basis Surgent Live Webcast 4 11/21 TX Mastering Basis Issues for S Corporations, Partnerships & LLCs Surgent Live Webcast 4 11/28 IT Advanced Excel K2 Enterprises Live Webcast 8 11/29 IT Excel Best Practices K2 Enterprises Live Webcast 8 11/29 AA Construction Contractors: Non-Revenue & Non-Lease Accounting Considerations AICPA Live Webcast 4 11/29 AA Construction Contractors: Auditing Considerations AICPA Live Webcast 4 11/30 IT Excel PivotTables for Accountants K2 Enterprises Live Webcast 8 NOVEMBER 12/112/2 TX 2022-2023 Two-Day Federal Tax Update - Individuals & Businesses The Tax U, The Garvs LLC Embassy Suites, La Vista 16 12/7 IT Excel Tips, Tricks & Techniques for Accountants K2 Enterprises Live Webcast 8 12/7 TX Getting Ready for Busy Season: Key Changes Every Tax Practitioner Should Know Surgent, Co-sponsoring with Iowa Society of CPAs Live Webcast 4 12/8 IT Artificial Intelligence for Accounting & Finance Professionals K2 Enterprises Live Webcast 4 12/8 IT Emerging Technologies, Including Blockchain & Cryptocurrencies K2 Enterprises Live Webcast 4 12/9 IT Excel Charting & Visualizations K2 Enterprises Live Webcast 4 12/9 IT Introduction to Excel Macros K2 Enterprises Live Webcast 4 12/12 TX Preparing Individual Tax Returns for New Staff & Para-Professionals Surgent, Co-sponsoring with Iowa Society of CPAs Live Webcast 8 DECEMBER I S S U E 4 , 2 0 2 2 12 nebraska cpas
12/1212/15 MA AHI Staff Training - Level 5 - Advanced Management & Leadership Essentials AHI Associates Live Webcast 16 12/12 AA Nonprofit Accounting & Financial Reporting Paul Koehler Hillcrest Country Club, Lincoln 8 12/13 AA Governmental Accounting & Auditing Update Paul Koehler Hillcrest Country Club, Lincoln 8 12/13 TX Tax Forms Boot Camp: LLCs, Partnerships & S Corporations Surgent, Co-sponsoring with Iowa Society of CPAs Live Webcast 8 12/13 AA You Have a SOC 1® Report - Now What? AICPA Live Webcast 4 12/14 TX General Sales Tax & Nebraska Incentive Program Nebraska Department of Revenue Mahoney State Park, Ashland 4 12/14 ET Doing the Right Thing - Continuing to Refresh Your Ethical Foundation Bryan Slone Mahoney State Park, Ashland 4 12/14 MA Working Remotely: Best Practices, Challenges & Opportunities Surgent Live Webcast 2 12/14 MA Work-Life Balance: Maximizing Productivity & Understanding Related Tax Issues Surgent Live Webcast 2 12/14 TX Federal Tax Update Surgent Live Webcast 4 12/15 TX The Complete Guide to Payroll Taxes & 1099 Issues Surgent Live Webcast 8 12/16 TX Four Tiers of Loss Limitations: A Guide to the Rules for Pass-Through Entities Surgent Live Webcast 4 12/19 IT 2022's Biggest Security & Privacy Concerns K2 Enterprises Live Webcast 4 12/19 IT An Accountant's Guide to Blockchain & Cryptocurrency K2 Enterprises Live Webcast 4 12/19 TX 2022 Federal Tax Update for Businesses & Individuals Van Der Aa Tax Ed LLC Quarry Oaks, Ashland 8 12/19 AA Preparation, Compilation & Review Engagements: Update & Review AICPA Live Webcast 4 12/19 AA Financial Reporting Implications of the COVID-19 Pandemic Surgent Live Webcast 4 12/19 TX Social Security & Medicare: Maximizing Retirement Benefits AICPA Live Webcast 4 12/19 TX Employer's Handbook: Health Care, Retirement & Fringe Benefit Tax Issues Surgent Live Webcast 4 12/20 IT Data Analytics for Accountants & Auditors K2 Enterprises Live Webcast 4 12/20 ET Ethics & Technology K2 Enterprises Live Webcast 4 12/20 TX 2022 Federal Tax Update for Businesses & Individuals Van Der Aa Tax Ed LLC Ramada Midtown Conference Center, Grand Island 8 12/20 AA Annual FASB Update & Review Surgent Live Webcast 4 12/20 ET Ethics & Professional Conduct: Updates & Practical Applications AICPA Live Webcast 4 12/20 TX Securing a Comfortable Retirement Surgent Live Webcast 4 12/20 TX S Corporation, Partnership & LLC Tax Update Surgent Live Webcast 4 12/21 TX Reviewing Individual Tax Returns: What Are You Missing? AICPA Live Webcast 4 12/21 TX IRS Tax Examinations & Hot Issues Surgent Live Webcast 4 12/21 AA Current Issues in Accounting & Auditing: An Annual Update Surgent Live Webcast 4 12/21 AA Fraud Basics: Protecting the Company Till Surgent Live Webcast 4 13 nebraska society of cpas W W W . N E S C P A . O R G
22ND ANNUAL FALL CPE CONFERENCE WHEN October 27-28, 2022 WHERE Embassy Suites Omaha – La Vista 12520 Westport Parkway, La Vista, Nebraska FEATURING Okorie Ramsey · Jeremy Wortman · Bryan Slone · And More! WWW.NESCPA.ORG · (402) 476-8482 · SOCIETY@NESCPA.ORG CPE CREDIT Approved by the Nebraska State Board of Public Accountancy for 16 HOURS CPE Credit, including 2 HOURS of Ethics. REGISTRATION Member Fee: $420 Non-Member Fee: $470 Early Registration Deadline: Tuesday, September 27 HOTEL INFO Reserve your room by calling the Embassy Suites at (402) 331-7400. Be sure to request a room in the Nebraska Society of CPAs’ Room Block. 94TH ANNUAL MEETING The Society’s Annual Meeting will be held during the luncheon at noon on October 27, featuring remarks by outgoing Chairman Erica Parks and Chairman-Elect Lori Egger. I S S U E 4 , 2 0 2 2 14 nebraska cpas
Conference Agenda Please check () which breakout sessions you will atend. Thursday, October 27, 2022 7:00 a.m. Registra�on & Con�nental Breakfast 8:00 a.m. State of the Profession – Okorie Ramsey, AICPA Vice Chairman 9:00 a.m. Break 9:20 a.m. Economic Outlook for 2023 – Patrick Regan, The Regan Group 10:20 a.m. Break 10:25 a.m. Federal & State Tax Developments –Matt Ottemann & Jon Grob, McGrath North 11:55 a.m. Luncheon & Annual Mee�ng 1:25 p.m. Leadership During Times of Exponen�al Change –Dr. Jeremy Wortman, HRD Initiatives 2:55 p.m. Break 3:15 p.m. Breakout Sessions 4:10 p.m. o Re�rement Plan Audits – Kelly Mann, AuditMiner o Farm Succession for the Next Generation – Nathan Patterson, Koley Jessen Figh�ng Fraud in a Post-Pandemic World –David Domina, Domina Law Group 5:10 p.m. First Day of Conference Adjourns Friday, October 28, 2022 7:30 a.m. Registra�on & Con�nental Breakfast 8:00 a.m. Ramping Up Nebraska’s Workforce – Bryan Slone, Nebraska Chamber of Commerce & Industry 9:05 a.m. Break 9:10 a.m. A&A Update: The Latest in Audi�ng and Accoun�ng –John Barbagallo & David Anderson, KPMG 10:10 a.m. Break 10:20 a.m. Upping Your Data Analy�cs Game –Dr. Joe Kirby, Bellevue University 11:20 a.m. Break 11:30 a.m. Planning for Succession Success –Brandon Hamm, Koley Jessen 12:30 p.m. Luncheon 1:15 p.m. Breakout Sessions o What’s Next on the Employment Law Horizon? –Erin Schroeder, Koley Jessen o Is Your Cloud-Based Data Safe? –Tim Weidman, Frankel Zacharia Tech Services 2:00 p.m. Break 2:20 p.m. Building an Ethical Culture Starts With You –Dr. Jeremy Wortman, HRD Initiatives 4:10 p.m. Conference Concludes Registration Form Atendee: __________________________________ Firm/Business: ________________________________ Phone Number: __________________________________ Email Address: ________________________________ Contact Name: __________________________________ Contact Number: ________________________________ List Any Special Accommoda�ons: _____________________________________________________________________________________ Payment Choice Check ⃝ MasterCard ⃝ Visa ⃝ Cardholder Name: __________________________________ Card Number: __________________________________ Billing Address: City, State & Zip: __________________________________ __________________________________ Expira�on Date: __________ CVV Code: __________ Signature: _____________________________________ 2022-2023 Fall Conference Planning Committee Lisa Lehan, Chairman Koley Jessen, PC, LLO, Omaha Kate King Wu, Vice Chairman Kate King Wu, CPA, Omaha James Greisch Omaha Donald Kluthe AmeriFirst Finance, Omaha Janice Mullen Eide Bailly, Elkhorn Bryan Robertson U.S. Bank, N.A., Lincoln Michelle Thornburg Koski Professional Group, PC, Omaha Thomas Von Riesen SilverStone Group, Omaha Daniel Wells Koski Professional Group, PC, Omaha Five Ways to Register Online: htps://bit.ly/ 2022-NE-Fall-Conf Email: society@nescpa.org Phone: (402) 476-8482 Fax: (402) 476-8731 Mail: NE Society of CPAs 7435 O St, Ste 100 Lincoln, NE 68510 Check to Select Early Bird Fee ⃝ $420 Member ⃝ $470 Non-Member Standard Fee (a�er 9/27/22) ⃝ $455 Member ⃝ $505 Non-Member Annual Mee�ng Only ⃝ $40 Member TOTAL DUE: ___________ 15 nebraska society of cpas W W W . N E S C P A . O R G
C O U N S E L O R ’ S C O R N E R A TRAP FOR THE UNWARY PUNITIVE PENALTIES UNDER IRC SECTION 409A BY PETER LANGDON, KOLEY JESSEN A critical component to every business is its people. Employees invariably look to employers to provide employee benefits, such as health insurance. An often-overlooked employee benefit that can help both large and small businesses attract, retain, and reward employees is non-qualified deferred compensation. Professional advisors should be familiar with non-qualified deferred compensation to provide optimal professional services in raising this potential benefit and to identify potential issues regarding the maintenance and operation of non-qualified deferred compensation so that punitive penalties may be avoided. Non-qualified deferred compensation is essentially compensation earned in one taxable year and paid in a subsequent taxable year.1 The primary scenario in which non-qualified deferred compensation arrangements arise is the retention of service providers, particularly high-level, or high-performing, team members. A similar situation in which these arrangements arise is when an organization is targeting a particular individual to join its team. Non-qualified deferred compensation arrangements are typically found in employee incentive plans, employment agreements, separation agreements, and individual non-qualified deferred compensation agreements. Non-qualified deferred compensation is typically structured in the form of a plan in which multiple participants participate, as opposed to individual agreements. However, individual agreements providing for non-qualified deferred compensation are not uncommon. As an example, suppose High Tech Inc. wants to retain its chief financial officer (CFO) for a period of time in the future. As a result, High Tech Inc. and its CFO enter into an agreement on Sept. 1, 2022, wherebyHigh Tech Inc. will credit $10,000 to a hypothetical account for the CFO on Jan. 1 of each year for five years beginning in 2023. The CFOwill also contribute a specified portion of the CFO’s annual bonus to the account each year. The CFO’s deferred compensation and the employer’s contributions will then be paid out upon the CFO’s retirement in equal annual installments over a period of 10 years. This arrangement would be subject to Internal Revenue Code (IRC) Section 409A as non-qualified deferred compensation. As an additional example, assume High Tech Inc. wishes to implement a long-term retention tool for a business development executive that provides a benefit of having an interest in the underlying value of High Tech Inc.’s stock so that such individual has “buy in” to grow the company. However, High Tech Inc. does not want to give up any actual equity. High Tech Inc. would be wellsuited to offer this employee shares of phantom stock that track the underlying value of the stock of High Tech Inc. without giving up any actual equity. Alternatively, High Tech Inc. could also consider I S S U E 4 , 2 0 2 2 16 nebraska cpas
Professional service providers should be aware of the benefits of non-qualified deferred compensation for their clients. Such knowledge allows professional service providers to offer unique and beneficial advice. Peter Langdon is an attorney in Koley Jessen’s Employment and Benefits Department. He has extensive experience in advising clients on executive compensation, nonqualified deferred compensation, and alternative equity ownership arrangements under Internal Revenue Code Sections 83, 409A, and 457. He also practices in the areas of employee benefits generally with respect to health and welfare benefits and retirement plans. For more information, contact Langdon at peter.langdon@koleyjessen.com. a stock appreciation rights arrangement. The underlying value of the phantom stock or stock appreciation would then be paid to the business development representative at a certain time in the future. The phantom stock benefit is considered non-qualified deferred compensation, while the stock appreciation arrangement could be considered non-qualified deferred compensation depending on how it is structured. Non-qualified deferred compensation is governed by IRC Section 409A. IRC Section 409A defines non-qualified deferred compensation as “any plan that provides for the deferral of compensation. . . .”2 An arrangement provides for the deferral of compensation if a service provider (e.g., an employee) obtains a legally binding right to compensation in one taxable year that is, or may be, payable in a later taxable year.3 The primary concern under IRC Section 409A are the punitive penalties for non-compliance. In the event of a violation of IRC Section 409A, all compensation deferred for the tax year and all preceding tax years is includible in the applicable service provider’s gross income.4 Additionally, when income is included in a service provider’s gross income as a result of a violation, a 20% penalty excise tax is imposed on the amount included in the gross income of the service provider as well as an interest rate penalty based on the underpayment rate plus 1%.5 The total excise tax is imposed on the service provider. Based on the harsh penalties contained in IRC Section 409A, care must be taken in adopting, maintaining, and operating non-qualified deferred compensation arrangements. Although not exhaustive, some of the more prominent rules that must be dealt with in implementing, maintaining, and operating non-qualified deferred compensation arrangements relate to providing for permissible payment events and the anti-acceleration of payments. Non-qualified deferred compensation can only be paid upon certain permissible payment events, which include: (i) death, (ii) disability, (iii) a change of control, (iv) a specified time, (v) separation from service, and (vi) an unforeseeable emergency.6 If non-qualified deferred compensation provides for, or is paid for, any reason other than those listed, the arrangement will be in violation of IRC Section 409A as either a documentation error or operational failure, as applicable. In the event a non-qualified deferred compensation arrangement includes an impermissible payment event for unvested non-qualified deferred compensation and payments have not yet been made, the plan documentation error may be corrected by amending the plan document, pursuant to Internal Revenue Service (IRS) corrections procedures.7 Similarly, issues arise when non-qualified deferred compensation payments may be accelerated, or paid prior to the time provided 1However, non-qualified deferred compensation arrangements can be structured with significantly more complexity, such as deferral features accompanying stock options and stock appreciation rights plans as well as phantom stock arrangements, but such discussion is beyond the scope of this article. 2IRC § 409A(d)(1). The term “plan” as used in IRC Section 409A generally refers to any plan, agreement, or arrangement that provides for the deferral of compensation. 3Treas. Reg. § 1.409A-1(b)(1). 4IRC § 409A(a)(1)(A). 5IRC § 409A(a)(1)(A). 6Treas. Reg. § 1.409A-3(a)(1)-(6). Each of the permissible payment events is specifically defined in the regulations, except for death. As a result, careful drafting must be applied to ensure the permissible payment events are properly structured within the nonqualified deferred compensation arrangement. 7IRS Notice 2010-6(VII)(A)(2). 8Treas. Reg. § 1.409A-3(j)(1). 9IRS Notice 2010-6(VII)(E). 10IRS Notice 2008-113. for in the governing document. For example, if a plan provides for three annual installment payments upon a separation from service, but also provides that the employer has the discretion to pay the full amount sooner than such three-year period, then IRC Section 409A would be violated based on an impermissible acceleration of payment.8 Corrections for this type of drafting error are available under the IRS correction procedures by amendment, prior to the payment of any accelerated amounts.9 However, if an employer has discretion to accelerate payments and an accelerated payment is actually made under the arrangement, such accelerated payment may be corrected pursuant to IRS correction procedures, but the associated penalties will depend upon when the correction is made.10 Non-qualified deferred compensation allows employers to provide unique benefits with respect to attracting, retaining, and rewarding talent. Professional service providers should be aware of the benefits of non-qualified deferred compensation for their clients. Such knowledge allows professional service providers to offer unique and beneficial advice. Although the rules and regulations contained within IRC Section 409A are complex, in the battle for talent, the benefits significantly outweigh the costs associated with the creation of and compliance with non-qualified deferred compensation. 17 nebraska society of cpas W W W . N E S C P A . O R G
S TAT E TA X B R I E F I N G BY NICK NIEMANN & MATT OTTEMANN, MCGRATH NORTH LAW FIRM WHEN IS A DUCK NOT A DUCK? RECLASSIFICATIONS IN THE WORLD OF STATE TAXES & INCENTIVES While we work on a variety of state and local tax and incentive scenarios, one common thread between many of these is that the Nebraska Department of Revenue or Economic Development will often reclassify a business transaction or type of business based on its view of the economic, business, or legal reality. This can have significant and unwanted tax and incentive effects. Some of the common examples of such reclassifications occur in the following areas: Tangible Personal Property Versus Service (Sales & Income Tax) A critical question for both sales and income tax purposes is whether a transaction constitutes the sale of services or tangible personal property. For many transactions, this distinction is unclear, particularly when a customer receives some tangible personal property combined with significant services. To aid in addressing this question, in addition to some prevailing cases, the Nebraska Department of Revenue issued Rev. Rul. 1-08-6, which provides a test for making this distinction. However, the result even under the ruling can be unclear. This reclassification most commonly affects: a) whether the transaction is subject to sales tax as the sale of tangible personal property; and b) for multistate businesses, how their income is apportioned for state income tax purposes. Bundled Transaction (Sales Tax) An improperly structured purchase transaction, in which a purchaser receives multiple goods or services for one, non-itemized price, can cause tax to be imposed on the purchase of otherwise nontaxable goods or services. This is known as a bundled transaction, in which the Department of Revenue reclassifies nontaxable goods or services into taxable ones. Stock Sale Versus Asset Sale (Sales Tax, Income Tax & Property Tax) Designing the sale of a business as the sale of assets or the sale of stock can have several significant tax effects for sales tax, income I S S U E 4 , 2 0 2 2 18 nebraska cpas
tax, and property tax purposes. Classification may be challenged or become less clear when the buyer and seller agree to an election under Internal Revenue Code Section 336(e) or 338(h)(10) to treat a stock sale as an asset sale. This classification can affect (among other things): a) the valuation and depreciable life of personal property for property tax purposes; b) qualification of the transaction for Nebraska’s capital gains exclusion; and c) certain sales tax exemptions. Classification as Employee Versus Independent Contractor (Incentive, Sales & Withholding Tax) Classification of a person as an independent contractor or employee is a common question that businesses of all types must deal with. There are many tests to apply in making this distinction. For example, the IRS has announced a 20-factor test. The Nebraska Supreme Court has announced a 10-factor test. This reclassification can affect (among other things): a) the state and federal tax withholdings required for a person; b) sales taxation of items produced for your business by the person or firm; and c) inclusion of the person in a company’s Nebraska incentive new job and compensation calculations. Classification of Software Developers (Sales Tax) The Department of Revenue will reclassify custom software developed by outside firms as a taxable sale of software, unless the software development contract meets a three-factor test for the developers to be treated as “temporary employees” of the company for sales tax purposes. This three-factor test is contained in the Department of Revenue’s Rev. Rul. 1-02-1. If a company very precisely includes the three factors for temporary employees in its software development contract, and the contract does not contain various conf licting provisions, Nebraska sales tax will not apply. Taxation of Cloud Computing & Data Center Services (Sales Tax) The Department of Revenue has been reviewing how cloud computing and data center services are classified and has, in multiple instances, attempted to reclassify those transactions under various theories. First, the Department of Revenue has alleged that sales tax is due on a part of cloud computing or data center services, because those services are protected by certain levels of software security measures. In Nebraska, security services are taxable. Second, in certain instances, the Department of Revenue has alleged that companies receiving cloud computing services are really renting tangible personal property, which if that were the case would make the transaction taxable. Use of Step Transaction Doctrine to Treat Multiple Transactions as One The Department of Revenue, like many taxing agencies including the Internal Revenue Service, has increasingly been using the step transaction doctrine to reclassify a series of transactions as one transaction for tax purposes. This denies the business the expected result from the series of transactions and can result in significantly negative tax implications. The U.S. Tax Court has explained this doctrine as follows: “The step transaction doctrine generally applies in cases where a taxpayer seeks to get from point A to point D and does so stopping in between at points B and C. The whole purpose of the unnecessary stops is to achieve tax consequences differing from those which a direct path from A to Dwould have produced. In such a situation, courts are not bound by the twisted path taken by the taxpayer, and the intervening stops may be disregarded or rearranged.” The potential for reclassification under the Step Transaction Doctrine, like other doctrines such as Substance Over Form, Economic Substance, Sham Transaction, and Business Purpose, need to be understood (and planned for) at the time of the transaction and deployed or defended against in the audit or appeal. Classification of Software as Tangible or Intangible Property (Incentives) Following the Nebraska Supreme Court decision in First Data Corp. v. Department of Revenue, the purchase of certain software may be classified and qualify for incentives under Nebraska’s incentive programs as the purchase of tangible property. To qualify, the license contract with the software provider must meet certain specific requirements, including that the business receives a nonexclusive license in the software. The Department of Revenue will still attempt to reclassify software from being qualified tangible property to ineligible intangible property. In so doing, it’s important to properly apply federal income tax law and properly respect key parts of the contract between the business and software provider. Classification of Business Activity (Tax & Incentives) Nebraska’s tax and incentive laws allow for benefits to certain types of qualified businesses. Nebraska law generally has specific definitions for the types of qualified businesses, which may not line up to the way the business views itself and which can result in a reclassification to a less favorable type of business. For example, to qualify as a manufacturer, very specific rules must be met regarding Designing the sale of a business as the sale of assets or the sale of stock can have several significant tax effects for sales tax, income tax, and property tax purposes. 19 nebraska society of cpas W W W . N E S C P A . O R G
the actions that the business performs upon the final product. This means that some businesses that view themselves as manufacturers may not be manufacturers for tax or incentive purposes, as the Departments of Revenue and/or Economic Development may attempt to reclassify the business as performing another activity. Defending against this reclassification requires a detailed understanding of the business model and precise explanation of the model to the Departments of Revenue and/or Economic Development. Classification as Compensation or Dividends (Incentives & Income Tax) Those who have worked on federal income tax audits and appeals are familiar with IRS efforts to reclassify dividends and reasonable compensation in closely held corporation situations. The same reclassification can be applied by the Nebraska Department of Revenue in addressing the amount of compensation for incentive job credits and in addressing compensation income tax deductions versus dividend distributions. Classification as Compensation or Dividends (Unemployment Tax) Classification of ownership distributions as wages for unemployment tax purposes illustrates another dividend versus compensation reclassification. The Nebraska Department of Labor (DOL) recently mailed a letter to all limited liability companies (LLCs) and limited liability partnerships (LLPs) in Nebraska, reminding them of their requirement to pay Nebraska unemployment tax on the distributions to LLC members and LLP partners that constitute wages for Nebraska unemployment tax purposes, resulting in a potential reclassification. Under a Nebraska DOL regulation, a distribution of a share of the profits to a member of an LLC or partner in an LLP will be reclassified as wages if one of three conditions are met: 1. The distribution exceeds the proportion of the total paid in capital investment of the LLC or LLP owned by the recipient. 2. The distribution is made based upon the number of hours, days, weeks, or months the individual performed services. 3. The distribution is made primarily based upon services performed for the LLC or LLP. Many LLCs and LLPs have not treated such distributions as wages, but the Nebraska DOL’s regulation effectively reclassifies the payments as wages—at least for Nebraska unemployment tax purposes. This highlights a common reclassification by taxing agencies— converting ownership distributions to wages and vice versa. To avoid this reclassification, the rules regarding distributions need to be understood and precisely applied to ensure that a payment will have its intended tax result. Classification as a Resident or Nonresident (Income Tax) While you may believe you have left Nebraska and become a Nebraska “nonresident,” the Nebraska Department of Revenue Nick Niemann and Matt Ottemann are partners with McGrath North Law Firm. As state and local tax and incentives attorneys, they collaborate with CPAs to help clients and companies evaluate, defend, and resolve tax matters and obtain various business expansion incentives. For more information, visit www.NebraskaStateTax.com and www.NebraskaIncentives.com. For a copy of their full publication, The Anatomy of Resolving State Tax Matters, or their Nebraska Business Expansion Decision Guide, visit their websites or contact Niemann or Ottemann at (402) 341-3070 or at nniemann@mcgrathnorth.com or mottemann@mcgrathnorth.com, respectively. aggressively applies its multifactor test to find otherwise and reclassify you as a Nebraska resident. It has taken several cases to court in recent years. Conclusion Avoiding each of these reclassifications by the Departments of Revenue, Economic Development, and Labor requires a thoughtful application of the facts of each transaction or business to a detailed understanding of the applicable law, whether that is statutory, regulatory, or case law. The first step is for an advisor to be sure that he or she understands the applicable facts, issues, and legal standards and the potential contentions that each department could make in attempting to reclassify. The second step is to ensure the legal documentation properly exists to support the intended result. BUILD YOUR CAREER HERE. We’re Hiring. Come see what all the noise is about. In a collaborative atmosphere of expertise and knowledge sharing With a team of professionals who value innovation, intelligence and integrity Support in finding your right work/life balance fzacpa.com 402.496.9100 I S S U E 4 , 2 0 2 2 20 nebraska cpas
Join the Nebraska Society of CPAs and AGC Nebraska for a Friday Night Tailgate Party! The fun kicks off at 3:00 p.m. FRIDAY | SEPT. 30 NESCPA & AGC Offices 7435 O Street, Lincoln Food ~ Refreshments ~ Chili Cook-Off ~ Cornhole Tourney ~ Husker Football Ticket Giveaways THANK YOU, SPONSORS! www.nescpa.org I 402-476-8482 21 nebraska society of cpas W W W . N E S C P A . O R G
THE SELF-EMPLOYED NEED They come to us for business advice, so why not retirement advice? As the number of entrepreneurs grows, CPA firms can grow with them by providing needed personal financial planning advice. There are about 16 million workers in the United States who consider themselves to be self-employed now, up from around 13 million in mid-2020, according to the Pew Research Center. While the COVID-19 pandemic primed this growth, both in a positive sense (perhaps the “Great Resignation” lit a fire under the feet of would-be entrepreneurs) and in a negative sense (as businesses let go of thousands of W-2 employees), I believe we’ve entered a period of permanently high entrepreneurship moving forward, even as the economy recovers from its pandemic ills. But what of the retirements of these go-getters? Howmany employer-sponsored retirement accounts have they left behind, and how much of their personal savings has gone into starting their new ventures? I’ve often felt that we CPAs and CPA personal financial planners can make the most impact in the lives of the self-employed and small business owners—and now we have a bigger market than ever to serve. So, how can we as strategic advisors ensure these entrepreneurs meet their long-term financial goals? Assuming that your self-employed clients are already well on their way to covering the basics—think the proper legal and tax structures for their businesses, sound budgeting and cash f low management, and risk management (like business/liability and long-term disability insurance)—you should reinforce the benefits of retirement planning. There are five primary retirement programs available to the self-employed: IRAs, SEP-IRAs, SIMPLE IRAs, solo 401(k) plans, and defined benefit pension plans. Each of these vehicles has different mechanics, pros, and cons to consider. Here are some basics to take into consideration when discussing them with your clients. Flexibility Needs The planning and selection of one or more retirement programs for a self-employed individual should be done in such a way that they establish meaningful holdings in three types of accounts: pre-tax, after-tax, and tax-free. The goal here is to create financial f lexibility for when the time comes to utilize these assets, whether that be for living expenses or another venture. The simple fact is that our tax and financial planning opportunities are greatest when clients have these three pools of assets to access. For example, you might recommend a withdrawal of pre-tax funds in excess of your client’s required minimum distribution (RMD) BY MARK J. GILBERT, CPA/PFS, MBA, REASON FINANCIAL ADVISORS RETIREMENT PLANS: CPAS CAN HELP I S S U E 4 , 2 0 2 2 22 nebraska cpas
www.thenewslinkgroup.orgRkJQdWJsaXNoZXIy MTU2Mjk4Mw==