It has been highlighted by some studies that procurement fraud is the second most frequently reported form of economic crime behind asset misappropriation. Procurement fraud is the act of gaining a dishonest advantage by abusing a position of decisive power in the procurement process; either by the individual responsible for this position in his or her own action, or by those seeking to win the opinion of that individual, resulting in a decision of benefit to themselves. Procurement fraud may be committed by procurement officers, vendors or subcontractors, but always involves the act of collusion in order to obtain the unmerited advantage. Fraudsters use the procurement process as part of their scheme to further their own interests in lieu of serving the interests of the procuring company.

Fraud & Forensic Investigations

Forensic Accounting

Department of Justice announces procurement collusion strike force

Recording An estimated 77 percent of organizations in the world have been victimized by one or more cyber attacks. In this on-demand webinar, we discuss the current state of cybersecurity including evolving cyber breach trends, and the latest strategies to protect against and address an imminent breach. Key learning objectives After attending this webinar, you will be able to: Describe the latest cybersecurity developments and future cyber risk landscape Recognize the motivations of potential attackers and how these map to potential risks in your organization Identify and prioritize key risks and controls in the context of your industry and business risk profile Who should watch the webinar Senior management, IT and finance professionals involved in overseeing or managing cybersecurity risk and programs.  For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

In this on-demand webinar, we discuss the current state of cybersecurity including evolving cyber breach trends, and the latest strategies to protect against and address an imminent breach.

Real Estate

Real Estate Investors

Cybersecurity

Cybersecurity threat briefing: managing emerging threats and risks

2019 has been a transition year as taxpayers filed their first returns under the Tax Cuts and Jobs Act (TCJA). Not only have taxpayers become acquainted with the legislation, the IRS and Treasury continue to issue regulatory guidance interpreting the TCJA. While we are nearly two years in since its passage, substantial guidance in certain areas has yet to be issued. Compliance with the TCJA is not the only issue affecting taxpayers (both businesses and individuals): After 10 years of economic growth, possible signs of recession are on the horizon. A tightening labor market creates hiring challenges for employers. Uncertainty in the ever-changing world of tariffs and trade policy makes planning difficult for many businesses, especially manufacturers and others operating internationally. In addition, entities facing downturns can no longer carry back net operating losses (NOLs) to obtain much-needed cash (via a tax refund) since the TCJA has repealed NOL carrybacks for most taxpayers. Consequently, managing cash and minimizing current taxes is even more critical if you anticipate a downturn in the economy. We expect the remainder of 2019 and 2020 to be a dynamically changing time as additional TCJA guidance is issued and international tensions continue to impact trade and tariffs. We remind you that tax planning should be addressed throughout the year as an integral part of overall financial health. As always, we encourage you to contact your Baker Tilly advisor to discuss how these issues affect your tax position. Download the 2019 year-end tax planning letter > Visit the sections below for more information about the most pressing year-end tax issues: Potential impact of rising tariffs Developing rules under TCJA and technical corrections Tax reform – full expensing of assets Revenue recognition rules finally arrive Opportunity zone considerations Employee benefits and executive compensation update Affordable Care Act update Emerging technologies and the R&D credit International taxation State and local tax update
- How Wayfair changed the sales and use tax landscape 
- Focus on state income, franchise and business entity taxes We will continue to keep you informed of the latest developments by sending updates to assist you with planning throughout the remainder of the year. See our 2019 Tax Planning Guide for additional ways to help you reduce your taxable income by taking advantage of every tax break to which you are entitled. -- The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely.  The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

Baker Tilly’s annual year-end tax planning letter delves into guidance and regulations issued over the last year that may complicate how you file your taxes next year. Our professionals also look at international, federal, state-and-local and compensation tax issues among other areas.

Dental Practices

Federal Tax

State & Local Tax

International Tax

Research & Development Credits

Accounting Methods

Advantage

2019 year-end tax letter

The IRS recently released draft 2019 forms and instructions for Form 1065, U.S. Return of Partnership Income, and the corresponding Schedule K-1. In an effort to make audit issues more readily identifiable, partnership returns now require additional information be included. Some of this material is particularly complex and will require taxpayers and their advisors to spend more time and resources to ensure it is reported accurately.  While the forms and instructions are in draft format, all indications from the Treasury Department and commentators lead us to believe the IRS is unlikely to make substantial modifications. The new requirements are the result of an effort to make certain partners are correctly reporting certain partnership transactions. Furthermore, the data is necessary to administer compliance needs under the Tax Cuts and Jobs Act for computing items such as the business interest expense deduction limitation, the qualified business income deduction and the limitation on excess business losses of noncorporate taxpayers.  Despite the additional compliance burden, we view this as an excellent opportunity to review the economics of the partnership and to confirm that the reporting on the tax return accurately reflects the economic deal among the partners. This is the best way to ensure the tax benefits and burdens are shared in accordance with your economic deal and to avoid unexpected allocations of taxable income or loss. Key changes The following summarizes significant changes in the draft 2019 Form 1065 and corresponding Schedule K-1. Question L on the K-1 will now require reporting of tax basis capital. Reporting capital on GAAP or other methods on this line is no longer permitted. 
For 2018 returns, the IRS mandated disclosure if any partner had negative tax capital at the end of the year. For 2019 returns, all partner K-1s require tax basis capital reporting on line L. 
Tracking tax capital generally has been considered the responsibility of the partner, however, the IRS now compels the partnership to track and report tax capital for all partners.  Any unrealized gain or loss under section 704(c) (built-in gain (BIG) property) must be reported for each partner in every tax year.  
Both beginning and ending net unrecognized section 704(c) gain or loss must be disclosed. Previously, if a partner contributed BIG property, a disclosure was required in the year of contribution, but not in subsequent years.             
Section 704(c) gain or loss occurs when a partner contributes property to the partnership and the property’s tax basis differs from its fair market value. 
The section 704(c) disclosures will also apply to partnerships that have revalued capital accounts under section 704(b). Guaranteed payment reporting was expanded to separately report guaranteed payments for services and guaranteed payments for the use of capital, presumably to assist the IRS in tracking whether guaranteed payments for the use of capital are reclassified as interest for computing the business interest expense deduction limitation. The K-1 and page one of Form 1065 have boxes to be checked if the partnership has grouped activities for either at-risk or passive loss purposes. If a partnership interest is owned by a disregarded entity (DRE), the DRE owner’s name and taxpayer identification number must also be disclosed on the Schedule K-1. Form 1065 has a new question about disguised sale transactions. If your partnership has not maintained or historically reported tax capital, we urge you to meet with your Baker Tilly advisor to address these new requirements as soon as possible. For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

In an effort to ensure partnership transactions are more accurately reported, the IRS released draft forms for partnership returns that will require significantly more information.

Law Firm & Professional Services

Manufacturing & Distribution

Major partnership reporting changes for 2019

Video The opportunity zone (OZ) program, a product of the Tax Cuts and Jobs Act of 2017, enables investors to take unrealized capital gains and defer payment of federal gains tax by investing those gains as equity into a “new activity” within an qualified opportunity zone within 180 days.  Virtually any individual or entity required to report capital gains can receive opportunity zone benefits. This includes individuals, C corporations (including regulated investment companies and real estate investment trusts), partnerships, S corporations, and trusts and estates. This informational presentation provides an overview of the program and the “why” behind investing capital gains into qualified opportunity zones. Our presenters also debunk the many misconceptions about the program.   The webinar also covers: An overview of the OZ program and tax benefits for investors  Market update and program misconceptions   How OZs fit into an asset diversification strategy using non-correlated investments  How to use OZ investments for estate planning Available investment opportunities  Download the presentation > For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.  --- The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments. Baker Tilly Capital, LLC disclosure
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Informational-recorded webinar: Understand the financial benefit of  investing realized capital gains in qualified opportunity zones to  enhance investment diversification and as a powerful estate planning  vehicle.

Opportunity Zones

Investment Banking 

Incentives Advisory 

Project Finance

The “why” behind investing in opportunity zones

On Sept. 24, 2019 the United States Department of Labor announced that it published a final overtime rule, making the minimum salary for exempt salaried employees $35,568.00. This minimum annual salary includes non-discretionary bonuses, commissions and incentives up to 10% of an employee’s salary level, as long as bonuses are paid annually. This means that the bonuses, commissions and incentives that are paid annually can make up $3,556.80 of the salary.  The FLSA’s exemption threshold for highly-compensated employees is set at $107,432.00. The 10% of bonuses, commission and incentives for highly compensated employees can make up $10,743.20 of their annual salary. If you have any employees that fall under the new threshold, there are two options: Switch the employee to hourly/nonexempt: this will require you to track the employee’s hours and pay any overtime worked Raise the employee salary above the new minimum threshold – $35,568.00 or $107,432.00 for highly-compensated employees The final overtime rule could affect more than the status of an employee as either exempt or non-exempt. It could also impact your employee benefit plans. For example, an employee benefit plan with criteria for eligibility and contributions based on classification of salary/hourly or exempt/non-exempt may experience a shift in participants. It could also affect non-discrimination testing or top-heavy results. We suggest you review your employee benefit plans to determine whether they will be impacted. These changes will take effect on Jan. 1, 2020. We recommend looking through your employees’ pay to determine who will be affected well ahead of the new year so you can be ready to make the updates when they become effective. Following is a link to the U.S. Department of Labor’s website that goes over the changes: https://www.dol.gov/newsroom/releases/whd/whd20190924. --- The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

On Sept. 24, 2019 the United States Department of Labor announced that it published a final overtime rule, making the minimum salary for exempt salaried employees $35,568.00. This minimum annual salary includes non-discretionary bonuses, commissions, and incentives up to 10% of an employee’s salary level, as long as bonuses are paid annually. This means that the bonuses, commissions, and incentives that are paid annually can make up $3,556.80 of the salary.

U.S. Department of Labor salary overtime changes

In this article series, Baker Tilly specialists define Agile, walk through its applications to internal audit and offer lessons learned through case study approaches.   In our previous article, we discussed the role of internal audit, introduced the history of Agile, addressed some common misconceptions about agile auditing and set the baseline for the journey ahead. Progressing forward in our journey, we explore the Agile manifesto and how Agile principles can be applied to internal audit.  An example agile internal audit manifesto: We are uncovering better ways of executing internal audits by doing it and helping others do it. Through this work we have come to value: Individuals and interactions over processes and tools Influential audit reports over extensive audit documentation Business owner collaboration over audit report negotiation Responding to change over following a plan While there is value in the items on the right, we value the items on the left more In understanding the manifesto, the items on the right are very important, but the focus should be on investing more time, and determination of greater “value,” on the items on the left (in bold).   Uncovering better ways of executing internal audits The first part of the manifesto focuses on a mindset, a dedication to continuous improvement. It’s the adherence to a culture of not accepting the status quo, not being complacent with the usual audit programs, or utilizing the same audit testing approach just because “that’s what’s worked”. More importantly, it also focuses on helping others. As an internal partner, the goal is not just to execute but to train, develop and help improve internal audit processes. Consider the following key questions about your internal audit department: Do you set aside time to discuss better ways of executing internal audits as a team, function or group? Do you have a center of excellence or committee within internal audit that exists to identify, develop, implement and monitor the impact of your changes and improvements? Have you aligned your training and talent needs to emerging risk identification? If using a shared services model for internal audit, do you ask your provider the questions above and do they provide continuous improvement? If co-sourcing, do you have takeaways and key learnings from your provider that are institutionalized for future efficiencies? Individuals and interactions over processes and tools Many internal audit departments focus on efficiency and consistent delivery and communications amongst team members related to various stages within the audit planning, fieldwork and reporting cycle. Such actions include implementation of systems, governance risk compliance (GRC) software, internal audit software and tools and templates. The use of systems and processes are foundational to an efficient means of completing and communicating audit results. Nonetheless, the manifesto value statement intentionally focuses more on the relationships, embracing more face time, understanding that the human element of meaningful interactions drive progress, solutions and agreement. It’s not the GRC system or the templates that helped create an effective and valuable audit. It’s the interactions, the relationship and common understanding with the business process owner, the collaboration on recommendations and communication throughout the audit that drives success and value.  Influential audit reports over extensive audit documentation  There are misconceptions that being agile means less documentation. That is not necessarily the case and should be clarified. Being agile in internal audit can mean focusing on the minimum required documentation of information that is sufficient, reliable, relevant and useful and that will support the engagement results and conclusions.  The Institute of Internal Auditors (IIA) International Professional Practices Framework (IPPF) Standard 2330 – documenting information states, “Perhaps most importantly, workpapers contain sufficient and relevant information that would enable a prudent, informed person, such as another internal auditor or an external auditor, to reach the same conclusions as those reached by the internal auditors who conducted the engagement.”  In considering the manifesto, place more value on the “organizational value” of the results of the documentation and conclusions reached. Consider the following key questions in evaluating this part of the manifesto and where efficiencies in documentation can be gained: Have you reviewed your workpaper documentation process and considered assessing where excess or redundancies exists? Have you received feedback on your reports from management and the audit committee on your report style?  Have you held a brainstorming session and received internal audit report examples from other vendors or companies on how information can be better and more concisely presented?  Does management respond the majority of the time in agreement to your audit recommendations? Business owner collaboration over audit report negotiation Consider how the role of internal auditor can add value to and improve the organization’s operations. Management is ultimately responsible for its action plans and implementation of action plans determined to address internal audit findings. However, when internal audit is providing consulting and advisory engagements, you are creating a clear path and alignment to business owner collaboration and improving the organization.  The IPPF Mandatory Guidance Core Principle 10 is promoting organizational improvement. Released in August 2019, the Supplemental Practice Guide to the IPPF “Demonstrating the Core Principles for the Professional Practice of Internal Auditing, Enablers and Key Indicators” elaborates on the Core Principle 10: “Although the internal audit activity may provide assurance, it may fail to provide consulting/advisory services and may miss opportunities to recommend ways the organization could increase efficiency or streamline the provision of assurance services, ultimately conserving resources and reducing costs. The internal audit activity may also fail to identify root causes, thus leaving the organization open to risks that could have been mitigated” The opportunities to increase efficiency and streamline assurance is implemented through action taken by business owners. We as internal auditors would agree that when we are collaborating with management before, during and after the audit there is more value gained, a better relationship established and more buy-in from management to the value added.  Responding to change over following a plan As businesses continue to evolve and expand and find new ways to navigate and manage strategic risks and disruptions – whether it's new technologies, new innovation, or just new product offerings – the pace of change continues to accelerate.  Internal audit is changing. Risk-based audit plans have evolved so they are now updated more frequently and are integrated more with enterprise risk management (ERM) groups to align the view of risk across the organization. Moving to agile auditing will link the internal audit strategy to the organization strategy so that the work that audit is doing can pivot and adapt at any time as business needs or challenges change over the course of time. The most important aspect of the manifesto statement is the mindset that we are in a position to respond to change, to update the audit plan on a more frequent basis and to be in a position during audits to quickly adapt and shift our fieldwork approach as needed. Agile principles The original Agile manifesto authors developed 12 guiding principles that support the values of the manifesto. We have included the original 12 principles below and transformed them into agile internal audit principles:   Focus on outcomes, meeting the needs of the audit committee, executive management and key stakeholders, trusting your team, moving quickly and efficiently. The principles drive a different mindset and culture shift and support self-enablement of teams, creativity and being able to adapt before, during and after an audit. While the principles above are only examples, consider reviewing the manifesto and the principles. Discuss them with your internal audit department and how they can be modified and adapted to fit your specific needs and facilitate a successful agile internal audit journey.  In the next article we will elaborate on methods using the Scrum framework and how to adapt sprints, iterations, quicker reporting and dedicated team resourcing to your audit fieldwork. We will compare and contrast the difference between traditional auditing and agile auditing.  For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

Part 2 explores the Agile manifesto and how Agile principles can be applied to internal audit.

Department of Justice announces procurement collusion strike force

Cybersecurity threat briefing: managing emerging threats and risks

2019 year-end tax letter

Major partnership reporting changes for 2019

The “why” behind investing in opportunity zones

U.S. Department of Labor salary overtime changes

The Agile Internal Audit Journey: Part 2 – Applying the Agile manifesto and principles to internal audit

Department of Justice announces procurement collusion strike force

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