WELCOME TO THE DIGITAL CPA WEBCAST SERIES!

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DIGITAL CPA WEBCAST SERIES:

TWO EMERGING CATEGORIES FOR THE TRUSTED BUSINESS ADVISORJuly 16, 2015

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CPA.com an AICPA company• Empowering CPAs and Businesses for the Digital

Age

Erik Asgeirsson, President and CEO, CPA.com• Industry leader with over 20 years of experience

leading technology organizations• Consistently recognized as one of Accounting

Today’s “Top 100 Most Influential People”• BS Electrical Engineering, George Washington

University, and MBA in Finance, NYU Stern School of Business

Webcast Panelists

Steve ParishPrincipal, Tax Practice, McGladrey LLP

• Principal for state and local tax services in the Charlotte office and the National Automation Lead for McGladrey’s state and local tax practice

• Experienced consultant on traditional sales and use tax • More than 30 years of experience with sales and transaction tax matters

Eric EnserProduct Manager – Health Care Solutions, Paychex

• ACA regulatory expert; in constant communication with IRS • Paychex for 14 years• Graduate of St. Bonaventure University

Digital CPA Webcast Series – Building a community of digital CPAs who embrace change and the transformational effects of technology on today’s practice

•Leadership and Change Management Strategies, Pat Williams, VP Orlando Magic, additional guest speaker

September 22nd

•December 7-9, 2015DCPA15 (onsite & virtual)

Agenda

Two Opportunities for Trusted Business Advisors:

1. Affordable Care Act (ACA) has Arrived

2. State and Local Taxes Service (SALT) Is Coming

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OPPORTUNITIES FOR TRUSTED BUSINESS ADVISORS

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BPO – Client Accounting Services

Financial Tracking

& Reporting

Bill Payment Payroll

SALT Complianc

e

Traditional Tax

Services

Emerging Service Areas For Client Accounting

Existing Service Areas

HR Reporting/

Mgt

Some Emerging Service Areas

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Tactics for Trusted Business Advisors In Providing Services

Streamline current processes to enhance operational efficiencies while increasing value

Identify technology solutions which are scalable to each client’s individual’s needs – ‘One Size Doesn’t Fit All’

Support client with execution of strategy and identification of tools to ensure future successo BPO Modelo Education based programs and webinarso Legislative Updates

Trusted Advisors Future Opportunity

‣ Transcend the routine

‣ Develop specialized knowledge

‣ Stay ahead of automation wave

‣ Be valued for expertise and insight

‣ Translate data into wisdomSource: “The Big Switch & Beyond” – Nicholas Carr, author, 2014 Digital CPA Conference Keynote

ACA HAS ARRIVEDAffordable Care Act is Here

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Refresher on Employer Shared Responsibility

Employer Shared Responsibility – IRC 4980H

Employer Shared Responsibility – a.k.a.o Play-or-Payo Employer Mandateo “ESR”

In general, employers with 50 or more full-time employees, including full-time equivalents, may be subject to a fee if they:o Do not offer health coverage to their full-time employees and

dependents, OR

o Offer coverage that is considered unaffordable or does not meet minimum actuarial value

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Look-back Period Timeline

• When and how do I know I’m an ALE?• Who are my full-time employees THIS year?• Am I offering adequate and affordable coverage?• How and when do I file the information?• 12 month Measurement and Stability Periods

- Transition relief allows a shorter measurement period but not less than six months, and beginning no later than July 1 for 2014

Measurement Period(4/15/2014 – 10/14/2014)

Stability Period(1/1/2015 – 12/31/2015)

Admin Period

(10/15 – 12/31/14)

20152014

Measurement Period(10/15/2014 – 10/14/2015)

Stability Period(1/1/2016 – 12/31/2016)

Admin Period

(10/15 – 12/31/15)

2016 2017

Tax Filing (1/1/16-3/31/16)

Tax Filing (1/1/17-3/31/17)

ALE Determination Period for Calendar Year 2015(1/1/2014 – 12/31/2014)

ALE Determination Period for Calendar Year 2016(1/1/2015 – 12/31/2015)

ALE Determination Period for Calendar Year 2017(1/1/2016 – 12/31/2016)

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Penalty Comparison

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Potential Annual Penalty*Employer Size (>100 FT + FTEs) 2015 2016 (and beyond)

ER with 50 full-time employees $0/year $40,000/year

ER with 100 full-time employees $40,000/year $140,000/year

ER with 200 full-time employees $240,000/year $340,000/year

ER with 500 full-time employees $840,000/year $940,000/year

2015 (Number of full-time employees – 80) x $2,0002016 (Number of full-time employees – 30) x $2,000

* Note: all penalties are assessed on a per-month basis and will be adjusted for inflation beginning in 2015.

Recent Supreme Court Decision - King v Burwell

Lawsuit challenged the legality of premium tax credits in 37 stateso Exact wording in ACA states premium tax credits must be obtained

through exchanges established by the state. o Only 14 states (including DC) currently fit that descriptiono Impacts to affordability, individual mandate, and employer mandate

Final Decision – premium tax credits ARE legal in all states

No change to compliance or IRS tax reporting requirements for 2015

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Delay for Some EmployersALEs with 50-99 o Employers with 50-99 full-time employees (including full-time equivalents)

may not be assessed ESR penalties for 2015

Non-calendar-year health planso The months in 2016 that are associated with the 2015 health plan may not

be assessed penalties

To Qualify - Must maintain workforce size and hourso The employer must not reduce its workforce size or hours – between

February 9, 2014 and December 31, 2014 – in order to stay under the 100 full-time employee including FTE, threshold

To Qualify – Must maintain coverage through 2015o The employer must not eliminate or materially reduce any health care

coverage offered as of February 9, 2014

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What Employers Need for Filing

Quick Comparison – Section 6056 vs 6055

IRC Section 6056o ALE members must file a Form 1094-C and file/furnish Forms 1095-C

Single-Combined Form Reporting for ALE Memberso Part I & II – Section 6056 Informationo Part III – Section 6055 Information

Reporting by ALE Memberso Self-Insured ALE Members

> Parts I, II & IIIo Fully-Insured ALE Members

> Part I & Part II

Non-ALE Members Reporting under IRC Section 6055 Onlyo Use Forms 1094-B and 1095-B

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1094-C – Employer Reporting

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What Needs to be Reported – Employees (1094-C)

Monthly ALE Member Information

Aggregated ALE Group Members

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1095-C - Employee Reporting

Self-Insured Reporting Only

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Important Filing Dates

Filing of 1094-C o Must be filed by February 29, 2016o March 31, 2016 if filing electronically

Filing of 1095-Co Employees must receive copies of 1095-C by February 1, 2016

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Filing Method

Paper Forms - Can be submitted to one of the following addresses, depending on location:

Department of the TreasuryInternal Revenue Service Center

Austin, TX 73301Or

Department of the TreasuryInternal Revenue Service Center

Kansas City, MO 64999

Electronic Filing - IRS E-File is available to any ALEo Employers with 250+ 1095-Cs MUST file electronically

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Filing Penalties

Regular return’s penalties apply to 6056o Guidance noted that, when implementing new information reporting requirements, short-term

relief from penalties frequently is provided if a good-faith effort to comply with the regulation was made

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General Informatio

n Reporting

Return Penalties

Correctly filed within 30 days of the due date

• $50 per form• Maximum penalty is $500,000/year

($175,000 for small business)

Correctly filed more than 30 days after the due date, but by August 1

• $100 per form• Maximum penalty is $1.5 million/year

($500,000 for small businesses)

Correctly filed after August 1, or not filed

• $250 per form• Maximum penalty is $3 million/year

($1 million for small businesses)

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Further Discuss Firm Opportunities:

1. Trusted Business Advisor Role

2. Add Human Resource Information System (HRIS) Platform As Part of BPO/Client Account Service

3. Other

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SALT - SALES & USE TAX: THE NEXT ‘ACA’ & FUTURE CAVEATS

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Current Nexus Standards

Thresholds for determining nexus differs for I/F and S&U tax (Exclusive of other various gross receipts based taxes – OK BAT, OH CAT, TX MT, NM Commerce Tax)o I/F Tax – Governed by PL 86-272 (provides protected activities)

o S&U Tax – PL 86-272 does not apply to non income producing taxes

Physical presence necessary – (people, property-real or tangible personal property, payroll, systematic representation)

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The New NEXUS?

Attributional NexusAgency NexusEconomic Presence NexusClick-Through Nexus (‘Amazon Tax’)

32Legislative Update – Burning issues and Current Trends in S&U

Marketplace Fairness Act (3 renditions over past few years – “The Good, The Bad and The Ugly”)Over past few years, 23 states have passed regulatory measures which address taxation of remote sellers and or defining new definitions for determining nexusRemote Transactions Parody Act (currently in front of Congress – H.R. 2775 – Mr. Chaffetz))o Introduced two weeks agoo Combination of previous House and Senate versions of the MFA – Bipartisan supporto Phases in collection responsibility for remote sellers – 3 year tiered reduction (10M, 5M, 1M) in qualifying

‘remote’ saleso Places a greater burden on the States to fund technology necessary from CSP’s for compliance

requirementso Doesn’t address how provider of technology and Trusted Advisors will be reimbursed and by whom (CSP or

State)Direct Marketing Association vs. Brohl - (Taxpayer Victory or New Can of Worms?)o Colorado passed legislation requiring remote sellers with sales over $100,000 to Colorado customers to

either: Collect and remit sales tax voluntarily, or Comply with notice and reporting requirementso District court enjoined enforcement of notice and reporting requirements, but 10 th Circuit reversed based on

Tax Injunction Act (TIA)o Issue before the Court: Does the TIA bar a suit to enjoin the enforcement of the Colorado notice and

reporting law

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Legislative Update Continued

10th Circuit Court of Appeals will consider the Comity issue as well as Commerce Clause implicationso Comity doctrine—federal courts refrain from interfering with states when federal rights are preservedo 10th Circuit’s request that parties revisit the Commerce Clause issue could mean the Appeals Court will

reconsider the holdings of the 1992 Quill decision per Justice Kennedy’s request.

Justice Kennedy writing in a concurring opinion indicated that the time has come for the Court to reconsider their prior holdings on physical presence nexus based on the modern economic realities at play (and potentially Congress’ inaction since Quill).

“The Internet has caused far-reaching systemic and structural changes in the economy, and, indeed, in many other societal dimensions. Although online businesses may not have a physical presence in some States, the Web has, in many ways, brought the average American closer to most major retailers. Today buyers have an almost instant access to most retailers via cell phones, tablets, and laptops. As a result, a business may be present in a State in a meaningful way without that presence being physical in the traditional sense of the term.”

o “The legal system should find an appropriate case for this Court suitable to address whether the rationale in National Bellas Hess and Quill is still viable in the modern world.”

34Federation of Tax Administrators (FTA) – TAX COMPACTS

SEATA – Southeastern Association of Tax Administratorso Twelve member states (FL, GA, AL, MS, LA, AR, TN, KY, NC, SC, WV, VA)o Most active of FTA tax compactso Information sharing program between member states as well as the Secretary of State

NESTOA – North Eastern States Tax Officials Associationo Twelve member states (CT, DE, DC, ME, MD, MA, NH, NJ, NY, PA, RI & VT)o Information sharing program between member states as well as the Secretary of State

MSATA – Midwestern States Association of Tax Administratorso Twelve member states (IL, IN, IA, KS, MI, MN, MO, NE, ND, OH, OK, SD & WI)o Information sharing program between member states as well as the Secretary of State

WASATA - Western States Association of Tax Administratorso Fourteen member states (AK, AZ, CA, CO, HI, ID, MT, NV, NM, OR, TX, UT, WA & WY)o Information sharing program between member states as well as the Secretary of State

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How Small Businesses Should Respond

Review all aspects of business/sales operations on regular and systematic basisAssess future impact on operations – Develop case scenariosAssess current ability and resource needs to effectively handle the added administrative burden should any rendition of ‘MFA’ be enactedContact their local CPA Firm, Trusted Advisor or CPA.com to receive guidance on ‘best practices’ approach to address increase in administrative burden and to explore tax planning opportunitiesDevelop a plan for future complianceExecute plan when applicable

WHAT IS YOUR STRATEGY?Having this update, what should be your next steps?

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Potential BPO Opportunity for SALT

1. Advisory Opportunity: o Perform Assessments of Clients To Determine:

> Sales/Use Tax Compliance Needs> Nexus Filing Requirements

2. BPO Opportunityo Determine right solution and process for ongoing tax compliance

> Support system set-up> Support configuration of tax attributes> Support tax research> Support filing needs

Potential ACA Strategies for Firms

First, help the client make the right decision about benefitso Estimate the client’s size – are they an Applicable Large Employer?o Financials of offering coverage vs potential penalty

> How many employees might qualify and obtain a tax credit if no offer?> Can they optimize contribution strategy for group plan?> Defined contribution vs defined benefit?

Evaluate alternatives to offering a group plano Private exchange and/or consumer-driven health plan options such as HRA, HSA, FSA

packages

Integrate an HRIS platformOutsource ACA service BPO

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QUESTIONS?

Resources

Digital CPA Webcast Serieso Featuring Pat Williams, VP of Orlando Magico September 22, 2015, 2-3pm ET

CPA.com Blog

Follow @CPAcom on Twittero #DigitalCPA

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Please take a moment to share your feedback by clicking here.

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Thank you!#DigitalCPA

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ADDENDUM

Resources and Tools for ACA

• IRS Guidance:

– IRS and Treasury Final Regulations: http://www.gpo.gov/fdsys/pkg/FR-2014-02-12/pdf/2014-03082.pdf

– http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions-for-Employers

– Draft 1094-C and 1095-C Forms: http://www.irs.gov/pub/irs-pdf/f1094c.pdf http://www.irs.gov/pub/irs-pdf/f1095c.pdf

– Filing Instructions: http://www.irs.gov/pub/irs-pdf/i109495c.pdf

• Paychex Resources:

– Employer Shared Responsibility:

http://www.paychex.com/health-reform/esr/

– Employer Shared Responsibility Penalty Calculator :

http://www.paychex.com/health-reform/resources/esr-calculator.aspx

– Employer Shared Responsibility Services:

http://www.paychex.com/health-reform/esr/services.aspx

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Resources for SALT

DMA caseMcGladrey Tax Alerts – WYNN, DMA, NV nexuso Maryland updates Wynne FAQ o US Supreme Court issues Wynne ruling o US Supreme Court issues Wynne ruling o U.S. Supreme Court issues DMA ruling Draft of Remote Transactions Parity Act of 2015

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Keep the Discussion Going

Twitter follow o #ACAo #SalesandUseTaxo #DigitalCPA

LinkedIn Groupso AICPA Trusted Business Advisor Solutions http://www.linkedin.com/groups?about=&

gid=2820791&trk=groups%2Fhome-h-share