December 2001

The Arkansas Public Accountant is the monthly publication of the Arkansas Society of Public Accountants.  The society is a professional organization composed of Licensed Public Accountants, Enrolled agents and persons holding out to be accountants or tax preparers with their services available to the public.  This organization is dedicated to helping our members give the best possible service to their clients.  We are happy to accept articles and/or advertising that would be of interest to our members and ask that you submit any thing for publication by the 25th of the month to be included in the next month’s publication.  Please send to: LaVERNE LONG, Editor P.O. BOX 725 NEWPORT, AR 72112-0725 llonga@ipa.net

The Arkansas Public Accountant

OFFICERS & GOVERNORS 2001 - 2002

OFFICERS

BOARD OF GOVERNORS

District I District II District III District IV District V District VI

Suzanne Baltz Donna Gowan Lonnie Taylor George Simpson Carl Dalrymple Jr Ronnie Woods

Pocahontas Searcy West Memphis Little Rock Prescott Nashville

FROM THE PRESIDENT’S PEN

Dear Members:

This has been one of the busiest weeks of the year for me.  I just returned to the office from the Gear Up 1040 seminar and Thanksgiving.

I noticed several faces missing at the seminar, you were missed.  For those of you who were unable to make it, you missed a very good program.  There are not a lot of changes for 2001, but we were brought up to speed on a lot of changes for 2002 and thereafter.  If you have the opportunity to attend the Gear Up Seminar at some other location, it will be time well spent.

We handed out a questionnaire at the seminar and asked all of the participants to complete it and turn it in before leaving.  The questionnaire asked questions pertaining to the types of continuing education programs the attendees would like to have in the future, if they would be interested in changing the location and types of convention formats we've used in the past and a few other things.  We had a wonderful response to the questionnaire with a very high percentage of participants filling it out and turning it in.  We did bribe them a little by giving them a very useful highlighter/staple puller for their efforts.  We will try to let you know the results of the survey at a later date, when all the data has been compiled.  I would like to thank Shelly Russell, Brian Thompson and Donna Gowan for a job well done on designing the questionnaire.

On Friday, November 16, 2001, the officers of ASPA held a joint meeting with officers of the Arkansas Society of Certified Public Accountants and the members of the Arkansas State Board of Public Accountancy.  Several things were discussed, but the one thing that stands out in my mind is the high percentage of substandard reports submitted for Quality Review.  There are also additional regulations that have been enacted to limit the amount of continuing educations derived through correspondence courses.  These and other changes can be reviewed at http://www.state.ar.us/asbpa/ (this is the state boards web page) if you have access to the internet.  Look under proposed changes.

This will be the last issue of our bulletin until after the first of the year.  I would like to take this opportunity to wish you all  "Merry Christmas and a "Happy Tax Season."

Sincerely,

James C. Hodge, President - ASPA

December 2001

REPORT ON OCCUPATIONAL FRAUD

 By: John e. Montgomery, EA, ATA

Certified Fraud Examiner

1. The following summarizes data from the annual report on Occupational Fraud by the National Association of Certified Fraud Examiners:
2. Over the past 10 years a total of $15 billion has been lost to occupational fraud.
3. The average business loses over $9 per day per employee to fraud.
4. The average business loses about 6% of its total revenue to fraud by its own employees.
5. Average loss caused by males - $185,000; average loss by females - $48,000.
6. Typical perpetrator: college educated white male.  Men committed 3/4 of fraud.
7. Victims: The most costly abuses occur in businesses with less than 100 employees.  The education industry experienced the lowest median losses. The real estate financing sector experienced the highest losses.
8. Methods: Asset misappropriation; fraudulent statements; bribery and business corruption.
9. Married employees commit the greatest number and most costly frauds.
10. Those employees with post graduate degrees commit the most costly frauds; those with college degrees commit the next most costly frauds.
11. Median Loss in education is $32,000; in real estate financing , $475,000.
12. Lowest median losses were in cash; highest median losses were in accounts receivable.
13. 47% of the fraud incidents involved cash; only 10% involved  payroll.

Conclusions: Occupational fraud is a serious business problem.  There is a direct correlation between employee's age, sex and position and loss due to fraud.  Smaller organizations are most vulnerable to fraud.  Failure to recognize fraud is a large part of the problem.  Relatively few frauds are discovered through routine audits.  Computers are increasing losses due to fraud.  Occupational fraud losses will likely continue to rise.

NEWS FROM NSA

I enjoyed seeing so many of you at the recent 1040 seminar.  I hope that you visited my display and helped yourself to the snack that was there as well as any materials that you might have an interest in.

If you picked up a membership application, please fill it out and send it in.  NSA needs you to join and avail yourself of all their services.

NSA's new Director of Federal & Legislative Affairs, Mike Chakarun, and Federal Taxation Committee Vice Chair, Bill Stevenson, met with the House Ways and Means Committee to voice concerns about the IRS administration of the Offer in Compromise program and the denial of installment agreements to certain taxpayers.  The staff indicated they were aware of problems and were working on a solution.  IRS has said they would like to institute a $450 filing fee for an Offer in Compromise, and NSA went on record as being strongly opposed.

NSA also was represented by two staff members at the Internal Revenue Service Advisory Council Public Meeting recently to keep abreast of other issues of interest to our profession.

I have received a preliminary schedule for the NSA 2002 Convention in Honolulu, HI.  The opening session and education sessions will begin Tuesday, August 20, and the Installation Banquet will close out the Convention Friday, August 23.  The Hilton Hawaiian Village will be our hosts.  If you're ready to call in reservations, the number is 1-800-445-8667.  I will be passing on additional information as the months go by, but please mark your calendars now for this special event.

Best regards,

Shelly Russell

NSA State Director

Tax Information from IRS

Provided by SB/SE Taxpayer Education & Communication

Nashville, TN

Money Services Businesses Must be Registered by December 31, 2001 or Face a $5,000 Per Day Penalty.

The Bank Secrecy Act requires any person who owns or controls a money services business (which the statute refers to as a "money transmitting business"), whether or not the business is licensed as a money services business in any State, to register by filing the form TD 92-22.55 by December 31, 2001 pr within 180 days after the business begins operations, whichever is later.

Money services businesses include:

• money transmitters;
• currency exchangers (except those who do not exchange more than $1,000 for any one customer on any one day);
• check cashers (except those who do not exchange more than $1,000 for any one customer on any one day);
• issuers of traveler's checks or money orders (except those who do not issue more than $1,000 in these checks or money orders for any one customer on any one day);
• sellers or redeemers of traveler's checks or money orders (except for those who do not sell or redeem more than $1,000 in checks or money orders for any one customer on any day.)

A money services business that exists solely because it serves as an agent of another money services business is not required to register.  A money services business that has agents must prepare and maintain a listing of its agents.  This list must be updated annually and retained by the business at the location reported on the registration form.

Form TD 92-22.55 can be downloaded from the IRS web site at www.irs.gov , Bank Secrecy Act (BSA) forms and other BSA related information can be found at Financial Crimes Enforcement Network (FinCEN) web site www.treas.gov/fincen.

The New & Improved Offer in Compromise Program

Following implementation of the IRS Restructuring and Reform Act of 1998 (RRA98), the Service saw an upsurge of applications on it's Offer in Compromise (OIC) Program.  An OIC is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax liability.  It allows the IRS to settle, or "compromise," federal tax liabilities by accepting less than full payment under certain circumstances.

In 1998, the IRS made changes to the processability gridlines.

These changes eliminated several OIC "processability" criteria, making almost all offers processible unless the taxpayer was in bankruptcy or had not filed a tax return.  This change led to a tremendous increase in OIC cases nation wide, straining collection staffs and causing long delays in servicing taxpayers and tax professionals.  Additionally, RRA98 incorporated some changes to the OIC program that made it more attractive to taxpayers.  There changes included criteria for offers filed under Effective Tax Administration guidelines, and a provision that required an independent review of all rejected offers.  RRA98 also prohibited the rejection of a OIC based solely on the amount of the offer submitted by a low-income taxpayer.

A comprehensive review of the OIC revealed that, while a majority of taxpayers and preparers were making appropriate use of the program, others were merely using an offer as a vehicle to delay the collection process.  Collection personnel were investing significant time on cases that might never come to resolution.  To focus IRS resources on working offers that represent true opportunities for account resolution, the Service has now clarified when it is appropriate to return an offer.

At the same time, the Service has sought to promote work efficiency by centralizing the locations where the OIC is received and processed into two IRS centers - Brookhaven and Memphis.  By using revised procedures at the new consolidated sites, the Agency hopes to streamline the processing of approximately 120,000 applications submitted each year.  The centers will assemble files for all new OIC applications submitted to the IRS and make process determinations where appropriate.  OIC applications already assigned to other locations will be processed at IRS field offices.  

With casework underway in the new OIC sites, the Service then issued Delegation Order 11 to change levels of authority to accept, reject, return or acknowledge withdrawal of offers in compromise.  Among the changes, the delegation order:

• adds authority for Centralized Service Center officials
• establishes at the Territory Manager's level the authority to accept Effective Tax Administration offers based on special circumstances.
• adds authority for issues surrounding the death of a taxpayer

The former procedures required at least two attempts to request information from a taxpayer prior to the return of an offer for failure to provide requested financial information/verification.  This procedure has been reduced to require only one request during the offer investigation.  The new procedures will allow the Service to focus on opportunities for OIC account resolution, render determinations in a more timely fashion, speed the closure of simple, low risk cases, and to better control the inventory.

An OIC application may now be returned, or rejected, based on the following criteria:

• Taxpayer resubmits an offer that is no materially different from a previous offer that was either previously rejected with appeal rights or returned.  The resubmission reflects an amount that is substantially similar to, the same, or less than the prior offer without a material difference in the taxpayer's financial situation or appearance of special circumstances.
• Taxpayer resubmits an offer within one year of having defaulted and received a termination letter.  The taxpayer has failed to resolve the previous default situation and the new submission is substantially similar to, the same, or less than the prior offer without there being a change in the taxpayer's financial situation or special circumstances
• An offer is filed solely to delay enforcement actions after a collection employee has determined and communicated to the taxpayer the intent to enforce collection through a levy or seizure.  The taxpayer has a clear and present ability to pay substantially more than the offer amount and special circumstances do not exist.
• An offer will be returned during the investigation if the taxpayer does not demonstrate compliance with estimated tax payments and fails and/or neglects to make the required estimated tax payment(s).

Offers that are returned based on resubmission after a prior reject, return, or default situation, or for failure to make estimated tax payments, will not be subject to independent review.  Offers that are returned based on a determination that the offer was submitted solely to delay an enforcement action will be subject to an independent review.

The OIC program will be continuously monitored, along with other programs underway across the Service, as part of the strategic panning process.  The effectiveness of the changes to the OIC program will be measured over time so that additional improvements can be made as needed.

The re-tooled offer program should better position the IRS to meet customer service goals, as well as the intend of Congress - the quick and fair compromise of tax liabilities for those who are eligible for this collection option.

IRS Authorizes Electronic W-2s

The IRS has authorized the e-mail as an appropriate delivery method for 2001 W-2 forms.  Proposed and temporary regulations (REG-107186-00;T.D.8942) on the delivery of W-2 forms do not specifically allow the use of e-mail.  George Blaine, IRS representative from the chief counsel's office, in a recent speech to the Information Reporting Program Advisory Committee, indicated that the regulations were intentionally vague on the subject, thus allowing for a variety of secure electronic delivery mechanisms including e-mail.

Mr. Blaine states that employers can provide all W-2s to employees via e-mail, regardless of employee consent for such a delivery choice, as long as security measures are addressed.

Employers are still required to provide a paper copy of a W-2 if an employee requests it.

The IRS has requested that the law requiring first class mail delivery of paper W-2 forms be eliminated, indicating that the war on terrorism may cause many anxieties about mail delivery.

DON'T FORGET!!!

• THE STANDARD MILEAGE RATE OF BUSINESS USE OF A VEHICLE IS 36.5 CENTS
• CHARITY WORK REMAINS AT 14 CENTS
• THE MEDICAL RATE IS 13 CENTS
• MOVING EXPENSES IS ALSO 13 CENTS

SEE YOU NEXT YEAR!

IMPORTANT NOTICE

THE MAILING ADDRESS FOR THE

ARKANSAS SOCIETY OF PUBLIC ACCOUNTANTS HAS CHANGED

FROM THIS POINT ON PLEASE ADDRESS ALL CORRESPONDENCE THRU THE U.S. MAIL TO:

POST OFFICE BOX 725

NEWPORT, AR 72112-0725

Newsletter | By Laws | Officers & Governors | Membership Types | Event Calendar | Information Links | Contact
Entire Contents Copyright © 2001 Arkansas Society of Public Accountants. All Rights Reserved.
Legal Notice

RETURN TO MAIN SITE