July 2012

CPAs who are fluent in the language of financial statements have an edge in client loyalty and career advancement.

True fluency is more than a number-crunching ability. It is the ability to translate financial statements on the fly, explain in simple terms what the numbers mean for the client’s business, and make recommendations.

Financial-statement fluency is a continuum, says Linda Keith, CPA, CSP, independent consultant and a new instructor for CPE Link.

“There are clients who don’t know the language at all. For them, a financial statement is like a foreign newspaper; they recognize it as a newspaper, but they can’t get anything out of it. There are CPAs who can study the statements and get some useful information for decision-making, but it takes time and focus. There are other CPAs who can look at a set of financials and draw conclusions almost instantly. And finally, there are some who can translate what they see so obviously in the financial statements into language that the client understands.”

These adept CPAs are a select few, says Keith. “Any assumption that, because we have an accounting degree or have attained a CPA license, we are as far along that continuum as our clients or our employers would like us to be is not accurate.” says Keith.

As a public accountant, Keith’s favorite part of the job wasn’t creating the financial statements; it was explaining them. So she began training bankers how to analyze tax returns to determine cash flow available to pay debt. “Lenders don’t need to know everything the CPA knows about tax returns, but the part they do need to know, they really need to understand well,” says Keith.

Since 1979, Keith has been a trainer on a mission to improve the ability of CPAs and others to translate financial statements. “In many cases CPAs in public practice are providing financial statements but not adding the extra explanation that will lead to actionable insights by clients. And clients often don’t realize they could get more benefit from what the CPA is doing. Let’s move from numbers to insights that allow us to make or recommend decisions,” she urges.

Why go to the trouble? The answer is simple: client loyalty, says Keith. Clients’ loyalty to an accounting firm depends on the value they get from the relationship. If they can get the same thing from every other CPA in town, they have no reason to be loyal. “No one recommends with much gusto a CPA who just spits out the numbers,” says Keith. “But give them insights about what’s going on in their business and they’ll keeping coming to you as a trusted advisor,” says Keith.

How fluent are you with financial statements? View Keith’s free webinar on Financial Statement Basics: Balance Sheets, Income Statements and Cash Flow.


The California Tax Education Council (CTEC) recently approved CPE Link as a continuing education provider. With the addition of this California Registered Tax Preparer group, CPE Link is now serving six categories of financial professionals.

When CPE Link launched in 2008, it attracted CPAs from just a few states. Over the past four years, it has increased its reach, bringing its online curriculum to CPAs in all states plus international learners as well. Participants now include Certified Financial Planners (CFPs), Certified Management Accountants (CMAs), Enrolled Agents (EAs), and Registered Tax Return Preparers (RTRPs). CPE Link targets its programs to qualify for each group’s special requirements.

Practitioners governed by CTEC must complete 20 hours of continuing tax education each year in order to renew their license. These hours are broken down into specific topic requirements: 10 hours federal tax, 3 hours federal tax updates, 5 hours California tax and 2 hours of Ethics.

CTEC professionals will be able to choose from a line-up of live webcasts that fit their required categories. These California tax practitioners can stay up to date with CPE Link’s “Quarterly Tax Updates” or choose hot topics like “The Battle between W-2 and 1099.” Live webcasts currently on the summer schedule include “Representing Your Client at a 1040 Audit” and “Curing the Addicted Tax Delinquent”—both part of Eva Rosenberg’s popular IRS Practice series.

In addition to live webcasts, CPE Link offers self-study courses—delivered completely online, allowing users to study at their own pace and take the final exam when ready. With topics like “California Tax Differences,” “Health Care Provisions,” and “Death of a Taxpayer,” California tax preparers will be able to easily satisfy their annual continuing education requirements and find topics of interest and benefit to their tax practices.

CPE Link is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education as well as the state boards regulating public accounting in Illinois, New Jersey, New York, and Texas.

This tax credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low‐ and moderate‐income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.

For tax years 2010 through 2013, the maximum credit is 35% for small business employers and 25% for small tax‐exempt employers such as charities. (See Code Sec. 45R(g).)

An enhanced version of the credit (50%) will be effective beginning Jan. 1, 2014. Additional information about the enhanced version will be added to IRS.gov as it becomes available. In general, on Jan. 1, 2014, the rate will increase to 50% and 35%, respectively.

A small business employer who did not owe tax during the year can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit.

To be eligible, the employer must cover at least 50% of the cost of single (not family) health care coverage for each of its employees. The employer must also have fewer than 25 fulltime equivalent employees (FTEs) and those employees must have average wages of less than $50,000 a year.

What is a full‐time equivalent employee? Basically, two half‐time workers count as one full‐timer. Here is an example, 20 half‐time employees are equivalent to 10 full‐time workers. That makes the number of FTEs 10, not 20. Example: assume the employer pays total wages of $200,000 and has 10 FTEs. To figure average wages divide $200,000 by 10 – the number of FTEs – and the result is the average wage; the average wage would be $20,000.

Also, the amount of the credit the employer receives works on a sliding scale. The smaller the business or charity, the bigger the credit. So if the employer has more than 10 FTEs or if the average wage is more than $25,000, the amount of the credit it will receive will be less. Taxpayers must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. A small business will include the tax credit as part of the general business credit on its income tax return.

This information is shared from a CPE Link webcast featuring speaker, Dennis J. Gerschick, Attorney, CPA, PFS, CFA. Get a complimentary recording of the full one-hour webcast Tax Implications of the Upheld Patient Protection and Affordable Care Act.

Hundreds of thousands of Registered Tax Return Preparers (RTRPs) are working on meeting the IRS’s new licensing and education requirement. And the industry is preparing to serve this new group of financial professionals with exam preparation assistance as well as ongoing continuing education courses needed for their annual license renewal.

CPE Link has brought together some powerful resources into one affordable package to help RTRP candidates prepare for the new IRS exam and earn their required CPE credits in 2012.

Part 1 of the package features veteran tax practitioner and Enrolled Agent, Eva Rosenberg (aka Tax Mama) teaching an on-demand 8-hour RTRP preparation course. Rosenberg’s course includes coverage of the subjects included in the exam–plus essential testing tips. Topics include: Preliminary Work and Collection of Taxpayer Data, Overview of the 1040 and Related Parts, Exemptions and Filing Requirements, Treatment of Income and Assets, Adjustments to Income, Deductions, Credits and Other Taxes.

Part 2 provides the Wiley Registered Tax Return Preparer Exam Review book—a virtual tome of tax code guidance—the perfect guide to help practitioners brush up on tax law and pass the comprehensive RTRP test. The course, complete with extensive exercises and a final exam review, provides a solid foundation on the subject of taxes, and the preparation of an accurate and complete income tax return.

Part 3 contains the 15 hours of Continuing Professional Education (CPE) courses necessary to meet the 2012 CPE requirement. These are all delivered conveniently online by CPE Link.

• Ethics: Ethics for Tax Professionals: Circular 230 Guidance (2 hrs)
• Federal Tax Law: Conducting Tax Research with Increased Confidence (5 hrs), 1099 Reporting: 2012 and Beyond (3 hrs), Tax Treatment of Individual Retirement Arrangements (2 hrs)
• Federal Tax Law update: What’s New in 2011 (3 hrs)

These combined resources and training assistance all packaged into one Ultimate RTRP Value Bundle–for only $99, will help these folks step gracefully into their new role as registered tax return preparers.

That letter on your client’s desk, the one from the IRS. How long has it been lying there unopened?  If only you knew about it sooner!

Fresh from this year’s Los Angeles IRS Stakeholder meeting with the tax professionals, TaxMama, Eva Rosenberg reports that the IRS will be sending out advance notices of field visits to some taxpayers in a pilot program, being newly tested. Rosenberg is the publisher of TaxMama.com, author of the syndicated Ask TaxMama column, and instructor of the popular IRS Practice Series available through CPE Link.

Meanwhile, impromptu, unannounced visits will continue, of course, in response to high-risk filers – even in the pilot program, says Rosenberg, but some lucky taxpayers will receive advance notice of visits. Advance notice—what an advantage! However, that advantage disappears if clients avoid opening the dreaded envelope or telling you, their tax professional, about it.

Rosenberg stresses that it’s important for tax professionals to:

  1. Drum it into clients to always call you the same day they receive letters from the IRS. Or immediately when an IRS agent shows up at their door. Never, ever delay.
  2. Get the power of attorney from clients on file NOW. Why? If your clients become paralyzed with anxiety, it won’t matter. The IRS will send that advance visit notice to you, as well.
  3. Be proactive with the IRS to correct systemic problems that affect your clients. Rosenberg has learned from her years as an IRS Stakeholder that the IRS wants to fix problems. “There’s nothing that can’t be fixed. . . if you work long enough at it,” she adds.

And remember, even if your clients try to handle the audit themselves, you can fix it. Rosenberg knows this because she and her teaching partner Michael Rozbruch have done it thousands of times. You can learn how in the IRS Practice Series webinar on “Representing Your Client at a 1040 Audit” on August 7.

“The IRS Practice Series is your best source of information about how to fix tax problems without ever leaving your office,” says Rosenberg. Get the free IRS Practice Series: Overview of Collection Issues to get an overview of what’s involved in working with your client and the IRS on collections.