 
The Arkansas Public Accountant Robin
Clatworthy is now officially our representative on the Arkansas State
Board of Public Accountancy. If you have anything that he needs to help
you with you can reach him: Email:
robclat@hnb.com P.O.
Box 1307 Marvell,
AR 72366 PRESIDENT’S
MESSAGE Dear
Members: Twenty-one
years ago I was writing my first letter to you as your new president.
Now I find myself in the same position. The past couple of weeks I’ve
been reflecting over the changes I’ve seen since I joined ASPA in
1973. One of the most obvious is the faces I see. Several of those who
served with me back then and who had such an impact on shaping our
Society into the organization it is today, as well as helping me get
ready for a leadership role, are with us now only in spirit. Of
course the first one who comes to mind would be my dad, Tom Hill, who
was responsible for getting me in this organization and was my mentor in
my profession; Mary Ella Smith, our first woman president, who was
president when I joined; Quinton Long and Lowell Perkins, who served as
presidents while I was on the Board and who were responsible for
bringing us the seminars we know as “Gear Up” today; Paul Williams,
who held us together as our executive secretary for years. These, as
well as the ones who came before and after them worked tirelessly to
help make our organization what it is today.
I am proud to be a part of an organization that affords us the opportunities to do just that. Whether it’s the CPE, the interaction with other members, the rapport we try to maintain with IRS, monitoring the State Board of Public Accountancy activities, maintaining a close relationship with the National Society of Accountants, or representing you on anything else that may come up throughout the year. Your Board is always working with your best interests in mind. I pledge to you that I, as well as the rest of the Board will continue to keep ASPA an organization that you will be proud to be a part of. Sincerely, Shelly
F. Russell
GEAR UP 1040 SEMINAR DECEMBER 18 & 19,
2000. ROBINSON CENTER AND DOUBLE TREE HOTEL. REGISTRATION HAS BEEN SENT IF YOU HAVE NOT RECEIVED ONE, CONTACT ME. LaVerne Long,: mailto:llonga@ipa.net: Phone (870) 523-5329. (If no answer, please leave message) Fax (870) 217-0154. Regular mail: P.O. Box 758, Newport, AR 72112-0758. NSA
NEWS FROM YOUR STATE Hello!
You haven’t heard from me for a while in the newsletter, but I am
still here. It was good to see many of you at the convention earlier
this month. Your
new NSA officers elected in August are President - Ralph McBride who is
from Georgia; 1st Vice President - Steve Desdier from California and 2nd
Vice President - Harold Krieger who is from Missouri. Terry Bayless from
Idaho was elected Secretary - Treasurer. Wanda Samek from Texas was
elected District VIII Governor. We were fortunate to have both Wanda and
Harold at our convention and have them conduct the installation of our
officers. I thank them for being here. Wanda
replaces our own, Donny Woods who served as District VIII Governor for
four years. He represented us well and should be commended for giving so
willingly of his time. Thanks Donny for a great job. I have had the
opportunity to work with Wanda in the past and I know that she will do a
good job also. NSA
has a new liability insurance program. Some of our own members are
already singing the praises of this program - they have gotten more
coverage for less premium. If you need information on the program,
please contact me at (501) 268-5876. I have an information brochure and application form I can send to
you. And if you are not a member of NSA, you may join for $99 (instead
of the regular $150 membership fee) if you fill out an application for
insurance at the same time. So, if you aren’t a member of NSA, take
advantage of this opportunity now! If you are already a member, the
insurance program is worth looking into. WIFE
NOT LIABLE
for tax from business her husband ran as sole proprietor. Marvin and
Barbara Barmes owned “Barbara’s Gift Shop.” Although the business
was named after Barbara, their tax returns reported that Marvin operated
it as a sole proprietorship. When the IRS found the business had not
paid employment taxes it owed, it assessed back taxes and imposed liens
against both spouses. Court: Barbara
was not liable for the taxes because the business was run separately by
Marvin as a sole proprietor. So the assessment and liens against her
were invalid. Marvin 1. Barnes & Barbara j. Barnes, CA7, 2000-1
USTC p. 51,003.
Speculative
dot-com
companies and the IRS.
What happens if you are an investor in a dot-com company that expects to
go public within the next six months and you either die or give the
stock away next week? Valuation problems have always plagued taxpayers
and the IRS but now the stakes are much higher. A dot-com company that
investment bankers have valued at $50 million to $75 million even before
it has earned a single dollar of revenue does not fit within traditional
valuation models. Expect the
worst: The IRS will attempt to use a very high value based on the
investment banker’s anticipated value when the company is taken
public. Best
defense: Hire
“creative valuation” experts who can support compelling arguments to
reduce the value by applying relevant discounts. SILENT
AUCTION HUGE SUCCESS
This
year’s Silent Auction held at the 55th ASPA Annual Convention at the
Holiday Inn Select was a huge success. Members brought several nice
items to put in the auction. The bidding was done during the annual
business meeting and the first day of the accounting seminar. The total
money raised this year was $524. The money raised through the auction
this year together with the money raised last year enables ASPA to
donate $1000 to the NSA Scholarship Foundation to help a student who is
majoring in accounting. I would like to thank everyone who brought items
and helped with the auction. It was a lot of fun for everyone who
participated. Suzanne
Baltz, Chairman REVOCABLE LIVING TRUSTSpros
& cons Many
promoters advertise the wonders of living trusts. Indeed, such trusts
offer many advantages to their creators. definitions Trusts
fall into two categories….
Living
trusts are further divided into two types....
A
revocable trust must be a living trust, i.e., set up while you are
alive. However, many types of living trusts must be irrevocable, such as
an insurance trust. Simply
put, a revocable trust is impermanent. You
generally can serve as trustee and beneficiary of a revocable trust you
create. Therefore, you can retain control over any assets you transfer
into the trust.
Incapacity
protection. For those who
become ill or incompetent, a successor trustee can take over management
of the trust assets. And - there will be no costly, public,
time-consuming court battle for control of your finances. This
type of transfer cannot be handled as seamlessly by relying on a power
of attorney. How
it works:
When you create your revocable trust and name yourself as trustee, you
also select a successor trustee. You might also designate co-successors,
perhaps including an institution that will assume financial
responsibility. Strategy:
When the trust is created you should spell out the circumstances in
which you no longer can manage your own affairs - and who should make
that determination. Example:
Two doctors have to state in writing that you are incapacitated. In
the event this should occur, the successor trustee can step in
immediately. And, the
successor or successors will have a fiduciary responsibility to protect
your interests. Example:
Joe Smith’s estate was to go to his two nieces. As he grew
older, he could no longer care for himself. His nieces, then could
provide him with quality long-term care…or they might not, hoping to
preserve Joe’s assets that they would eventually inherit. Fortunately,
Joe had drawn up a revocable trust, naming a bank along with the nieces
as successor trustees. The trust documents required the successors to
provide the best care for Joe, and the bank made sure this instruction
was carried out to Joe’s comfort. Vital: It’s best to go through the formalities of transferring assets into
your revocable trust so the trustee will have funds to carry out
required responsibilities. Reality:
In most states, probate is not burdensome or expensive. Many localities
offer a simplified probate process that you may be able to use. Many
types of assets are excluded from probate anyway, whether or not you
have a revocable trust. Example:
Jointly held property passes to the surviving owner
automatically. Insurance proceeds and retirement accounts (including
IRAs) go to the designated beneficiary. Out-of-state
property.
If you own property in another state, your survivors will have to go
through a separate probate for the out-of- state asset. That may mean
hiring an attorney far away ... or making unwanted trips. Holding
out-of-state property in a revocable trust avoids this ancillary probate
as well as local probate. Trap:
Using a revocable trust to hold out-of-state property works fine
for a vacation home. However, such trusts don’t provide asset
protection (see below), so investment property should be held in a LLC
or family limited partnership (FLP), for asset protection as well as
ancillary probate avoidance. Administrative
rigor.
One of the unsung benefits of creating a revocable trust is the need to
get your affairs in order. This will help you mange your affairs as you
grow older and assist your heirs in handling your estate. Example:
Betty Jones created a revocable trust and began putting assets in
the Betty Jones Trust. She found that she had 17 mutual funds, four
brokerage accounts, and two bank accounts. In re-titling her assets, she
consolidated them to a few accounts, making record keeping easier and
reducing expenses.
No
tax benefits.
Despite what you might hear or read, revocable trusts are neutral from a
tax point of view. For
income tax purposes, trust income is taxed to you as the grantor. For
estate tax purposes, assets transferred to a revocable trust are
included in your taxable estate. Trap:
Misinformation about revocable trusts can lead you to neglect
necessary tax planning, especially when it comes to estate tax. Good
news:
Virtually all sophisticated estate and income tax planning strategies
can be used in conjunction with revocable trusts. Example:
After transferring your assets into a revocable trust you can
give away trust assets to reduce your taxable estate, using the $10,000
(per recipient) annual gift tax exclusion. A recent change in tax law
erased doubts about this tactic. No
asset protection.
Assets held in a revocable trust are just as vulnerable to your
creditors as assets you hold personally. Example:
If you hold investment property in a revocable trust, a tenant
whose child eats lead paint may sue you personally for damages. As
mentioned earlier, a family limited partnership or limited liability
company should be used for asset protection. Complacency. Merely setting
up a revocable trust won’t provide you with a complete estate plan.
You also should………..
single
or joint Married
couples must decide whether to use a joint revocable trust or to have
each spouse create his/her own trust. Individual
trusts are generally best for the following reasons……….
Trap:
Be wary of any attorney who tells you that the cost of creating two
separate trusts will be much greater. There should be only a token extra
charge. For
more on revocable living trusts, including a sample document, visit http://www.laweasy.com/ Lemon
Drops The
local bar was so sure its bartender was the strongest man around that
they offered a standing $1,000 bet. The bartender would squeeze a lemon
until all the juice ran into a glass, and hand the lemon to a patron.
Anyone who could squeeze one more drop of juice out would win the money.
Many people had tried over time (weight lifters, longshoremen, etc.) But
nobody could do it.
The
crowd’s laughter turned to total silence as the man clenched his fist
around the lemon and six drops fell into the glass. As the crowd
cheered, the bartender paid the $1,000 and asked the little man, “What
do you do for a living? Are you a lumberjack, a weight lifter, what?” The
man replied ”I’m an IRS agent.” THE DEATH PENALTY In
the United States, some states have the death penalty. A judge may
sentence the accused to death if the jury finds that person guilty by
unanimous consent of murder in the first degree. The sentence is handed
down after many years of hearings and appeals. An
article written for the Los Angeles Times by Henry Chu and
printed in the Star Tribune on August 2nd of this year, states
that China executes more people every year than the rest of the world
combined. On June 22nd of this year, a 31 year-old woman was executed by
a firing squad in Beijing along with six other persons for drug
trafficking. Judges in China not only hand down death sentences for
murder and rape, but for bribe taking, credit card fraud on a big scale
and tax evasion. Yes, tax evasion. According
to the article, public support for the death penalty remains high, and
execution for economic crimes are extremely popular, particularly as the
poor in China watch a swelling elite enrich itself through shady
practices and misuse of funds. What is wealth worth if you lose your
life, soul, and reputation? Paying
Taxes By Credit Card The
IRS says it wants taxpayers to make tax payments by credit card - for
taxpayer convenience and to ease its own paperwork. But
unlike businesses that accept credit card charges, the IRS doesn’t
give any “credit” for the processing fee collected by the credit
card company - so the fee is charged in addition to the tax bill. Fees
vary by size of tax payment, typically 2% to 3.5%. This
is more than the average 1 % “reward” some credit card companies
offer on charges - so tax payments charged on credit cards typically
cost taxpayers extra money. This table shows how much....
The
result is that it is still less expensive to pay taxes the old fashioned
way - by check. Roth
IRAs
are being underused because people are shortsighted tax wise. Roths have
an immediate tax cost compared with traditional IRAs. Contributions
aren’t deductible, and conversions to Roth IRAs are taxable. But
people who focus on the Roth’s up-front tax costs neglect long-term
tax benefits that may be much larger………
A
case can’t be dismissed for one failure to appear.
A taxpayer filed a court complaint alleging the IRS had illegally placed
a levy on his bank account. After he failed to appear at a hearing the
court dismissed his case. Court of
Appeals: The dismissal was too severe a penalty for a single such
instance. The taxpayer complied with previous court orders and had a
good excuse for his absence. Bruce
F. Gardner, CA-DC. 2000-1 US TC p.50,484
Until
not such agreements have been available only to large corporations. The
agreements manage factual mailers that otherwise could lead to audit
disputes. Example: In the
newly expanded tip reporting program, employers agree to educate
employees about the need to report tips in income. The IRS then agrees
not to conduct tip reporting audits. The new Voluntary Agreements on
Compliance will be offered industry wide through the office of the
IRS’s new Small Business/Self-Employed Division. Beware
of state tax traps when you telecommute across state lines. If
you provide services in your “home” state for your employer located
in another state, then that other state may try to tax you even if you
never go there. New York recently held that a Pennsylvania man who
worked for a New York company from his home in Pennsylvania owes New
York nonresident income tax. Burden
of proof defeats tax lien.
The IRS tried to enforce a $1.4 million lien against a taxpayer whom it
said had under reported business income. But the taxpayer argued the IRS
tax assessment was unsupported. Court:
The IRS’s main evidence was a Revenue Agent’s report analyzing
the taxpayer’s business records - but it couldn’t be verified
because the IRS had lost the records it was based on. Similarly, other
work papers presented by IRS could not be independently verified. Thus,
IRS had failed to present “the minimum factual foundation” needed to
shift the burden of proof regarding unreported income to the taxpayer,
and the lien was not enforced. Gilbert
Mark Crisp, E.D., Ca., 2000 - 1
USTC p. 50,130.
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DON’T
FORGET!
Undercover
sting operations
pro
living trusts
drawbacks
One
day a scrawny little man came into the bar wearing thick glasses and a
polyester suit, and said in a tiny squeaky voice, “I’d like to try
the bet.” After the laughter had died down, the bartender said,
“OK”, grabbed a lemon, and squeezed away. Then he handed the
wrinkled remains of the rind to the little man.
Prefiling
agreements can reduce audit risk for small businesses.