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October 2016
In This Issue
Register Today!

BRC Financial Symposiums

Presented by Bernard Robinson & Company, L.L.P.

Topics include tax updates, employment law and compliance, economic outlook for business planning, and more!

8 hours of CPE eligible

Three dates and locations for your convenience!

Click here to register,
space is limited!

Winston-Salem Symposium-
October 25, 2016

Greensboro Symposium-
October 27, 2016

Raleigh Symposium-
November 3, 2016 

Your BRC Team

BRC in the Community for
Day of Service

On Friday, September 23, 2016, as part of the North Carolina Association of Certified Public Accountants (NCACPA) CPA Day of Service, BRC closed its doors at all three office locations (Greensboro, Winston-Salem, and Raleigh) in order for employees to spend the day volunteering, showing our support for the communities where we live and work. 

Check out more pictures on our Facebook page!

BRC Donates Supplies and Funds to Hurricane Matthew Victims

The team from BRC came together last week to support the victims of Hurricane Matthew in eastern North Carolina. In just a few short days we collected a truck full of non-perishable food, water, toiletries, baby products, cleaning supplies and other relief items, as well as $1,700 cash to donate to our neighbors in need.

Noteworthy Links
IRS Tax Calendar for Businesses & Self-Employed
Social Security Administration Announces Large Increase in 2017 Wage Base
IRS Gives Expanded Tax Relief to Victims of Hurricane Matthew; Parts of Four States Eligible; Extension Filers Have Until March 15 to File
Protecting Your Information
By Wade Pack, CPA, Managing Partner

It seems like almost every day we hear about another email scam or the hacking of a company's or individual's computer system.  These cybercrimes are often very costly, causing business interruption, lost or stolen data, and myriad legal ramifications. 
One of the things our firm has done recently to combat these ever-growing threats is to employ the utilization of Citrix ShareFile, a web-based enterprise file synchronization and sharing service.  We selected this service based primarily on security, flexibility, and ease of use.
ShareFile allows us to share emails and documents with clients, other providers, and internally among our staff across multiple devices in a secure environment.  Storage options can be specifically tailored to meet client needs, and access to information contained in individual client folders can be allowed or disallowed.
ShareFile is very easy to set up and use.  Once the account and folders are created, sending and receiving files takes very little additional time.  Through the encryption process, along with other security features, the information being shared remains not only confidential, but also easy to retrieve.
As a trusted advisor to our clients, protecting the information they provide to us is of paramount concern.  Likewise, our staff's personal information is just as important for us to handle safely and securely.  By using the ShareFile service solution, our firm has enhanced its capabilities in meeting those continuous goals.
Commercial Lease Negotiations
By Jill Clark, CPA, Manager
Negotiating a Commercial Lease?  Don't Pay More Tax Than You Should.

In commercial lease negotiations, the lessee often seeks allowances to upfit the leased property.  The question then becomes:  Are those allowances taxable?  And as you might expect, the answer is: It depends.
The general rule requires the tenant to recognize income in the year in which the allowance is received and then depreciate the assets purchased over their useful life.  The result is paying tax in the initial year with the offsetting benefit being received over as long as 39 years.
However, there is an often overlooked exception to the general rule.  Internal Revenue Code Section 110 provides a safe harbor which allows the taxpayer to exclude from income the amount of qualified construction allowance received from a landlord to the extent the allowance does not exceed the actual costs incurred to improve the leased space.  For tenant allowances to be considered qualified, the lease must be (a) short term (15 years or less) and (b) be for retail space.  Retail space is defined as space that is "leased, occupied, or otherwise used by the lessee in its trade or business of selling tangible personal property or services to the general public."   The lease agreement must also meet specific requirements. Additionally, certain statements must be included with the tax return filed for the year the allowance is received.
While there are some complexities to the rules of Section 110, with proper planning such allowances can be excluded from income.  Before negotiating your next lease, contact a tax advisor with experience in the treatment of commercial leases to discuss the requirements and options for structuring these types of payments.
Changes in Lease Accounting Standard - Part 2
By Tonia Hedrick, CPA, Manager

In our May newsletter, we shared that the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02, Leases. This update affects how leases, most significantly those currently categorized as operating leases, are recorded and recognized in financial statements. Previously, operating leases have been off balance sheet transactions and shown on the income statement as rent expense. The new guidance calls for all leases lasting longer than 12 months, including those currently categorized as operating leases, to be recognized on the balance sheet as a right-of-use asset and a liability. The goal of the new guidance is to provide greater transparency in organizations' financial statements, regardless of whether assets are leased or purchased.

The new standard will impact leases for all property, plant, and equipment, including items from office equipment to real property. While most leases will now be shown as an asset and liability, lessees will still need to differentiate between operating and finance leases to properly recognize the change in assets and liabilities on the income statement and statement of cash flows.  

There may be situations for which operating leases, or portions of operating leases, may not need to be capitalized. For instance, leases which are for a term of one year or less may qualify to be expensed.  As well, the service agreement portion of a lease contract would not typically be required to be shown with an asset and related liability. Consideration also needs to be given as to whether an existing lease will still qualify as a lease under the new standard, depending on the right to control the specified asset.

The new standard is effective for fiscal years beginning after December 15, 2018 for public business entities and some not-for-profits and employee benefit plans. For all other entities, it is effective for fiscal years beginning after December 15, 2019. While the effective date is two years away, it is not too early to begin evaluating which of your organization's lease agreements will be affected by the new standard. The new guidance could result in changes to both financial statement presentation and procedures and controls related to leased assets.

Please consult a CPA to determine the effect the new standard may have on your organization's financial statements to allow sufficient time to prepare for the changes.
Tax Fraud and Email Scam Update
By Mark Batchek, Supervisor

On September 22, 2016 the Internal Revenue Service (IRS) issued a news release (IR-2016-123) to warn of fake tax bills.  The IRS and Security Summit partners issued an alert to all tax professionals and taxpayers to be aware and cautious of emails claiming to contain an IRS tax bill related to the Affordable Care Act.

There have been numerous reports of imposters sending out fraudulent CP2000 notices related to the 2015 tax filing period. The scammers are sending out these false notices via email.  A CP2000 notice is a common IRS notice, and is mailed to taxpayers using the United States Postal Service. The IRS will never email a CP2000 notice to a taxpayer. The counterfeit notice contains some of the following information:
  • The underpayment of tax issue is in relation to the Affordable Care Act, and the notice requests information regarding the taxpayer's 2014 coverage;
  • The notice is issued from an Austin, Texas address;
  • The payment voucher that is attached to the notice lists the letter number as 105C;
  • The notice also includes a request that the taxpayer make a check payable to "I.R.S." and mail it to the "Austin Processing Center" using a P.O. Box for an address;
  • The email also contains a fraudulent link for electronic payment.
The IRS has asked any taxpayer or tax professional who receives this fraudulent email to forward it to [email protected].

The IRS has partnered with states and the private tax industry to try and help protect taxpayer accounts against identity theft, fraud, and other scams that have become more prevalent over the past couple of years. Following are some links from the IRS web site to help taxpayers learn more on how they can help protect themselves from these scammers. 
Email fraud and scams will continue to happen over time. We must try to protect ourselves and be extra cautious when receiving email from unknown sources.  If you receive a suspicious email claiming to be from the IRS, please contact a tax professional to help determine the validity of the communication. 

Bernard Robinson & Company, L.L.P. | (336) 294-4494 |  [email protected] |
1501 Highwoods Blvd, Ste 300
Greensboro, NC 27410
BRC Strategy is designed to provide information of a general nature and is not intended as a substitute for professional consultation and advice.  The opinions and interpretations expressed should not be construed or used as legal or tax advice, written or otherwise, and cannot be used for the purpose of avoiding any penalties that may be imposed under federal, state or local law.