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April 2017
In This Issue
Noteworthy Links
IRS Tax Calendar for Businesses & Self-Employed
IRS: Tax Scams / Consumer Alerts
So You've Maxed Out Your 401(k)-Now What?
Who Gets Fooled Most by Phone Fraud?
Pollen Season is Here with a Vengeance: Here's How to Deal
A New Generation and Beyond
By Dan Hayes, CPA, Partner

I arrived at Bernard Robinson & Company in April 1988.  My journey to BRC started in Virginia, where I worked as a cost accountant for Burlington Industries for a short time before moving to a regional CPA firm for about three years.  I returned to North Carolina in 1985, when I took a job with a national CPA firm in Greensboro.  I progressed to the position of manager and my clients got larger, but the interactions I enjoyed - those with owners and management - happened less often.  
When I received a call in 1988 about a position at BRC, I was ready to consider another move that would provide me more of what I liked about being a CPA.  I couldn't find much about BRC, but knew it was a much smaller firm operating primarily as a tax practice.  This didn't exactly match my audit and accounting background.  I also thought it strange when my interview was scheduled for early April because tax season must be one of the firm's busiest times.  The interview was conducted by two tax partners, Freddy Robinson and Bob Shuman, and Pat Price, a tax manager that came to BRC a year earlier from a large regional firm.  During the interview, everyone was open, honest, and friendly.  I was given all the time needed to get to know about the firm and the people.  This made me feel as important to them as tax season.  I also discovered that the three founding partners (Bernard "Bernie" Robinson, Joe Robinson, and Joe Kent) were looking to retire soon.  I saw a future for myself and immediately accepted an offer as an audit manager.  I soon found out that my interview was not a fluke, and that the BRC culture was unlike any I had previously experienced.  I was very happy, but must admit that moving from a sixty person office with a national firm to a thirteen person firm with no formalized audit policies and procedures caused me some concern.  
My first task was to create audit programs and procedures to serve as a quality control system for the firm's auditing and accounting practice.  Creating this system proved to be challenging at times.  There was some resistance from others, but Freddy, Bob and Pat gave me their full support, so I was successful.  Pat and I later made partner and Bob left the firm.  Freddy, Pat and I continued on sharing the same vision for the firm's future and became the second generation of BRC partners.  We proceeded to expand the client base and grew beyond the existing group of closely held businesses and their owners.  As we grew, new people joined and new partners were made, all of which shared our vision and understood the secret to our growth was providing excellent client service and an environment where people could excel.  As our growth continued, more new clients and industries were added, and the firm soon grew to over a hundred people and into one of the largest CPA firms in the Triad.  We knew we had something special because the growth was mostly organic through referrals from existing clients.  In 2012, we expanded by acquiring a small firm in Raleigh and opening a Winston-Salem office.
The firm now stands at over one hundred and twenty strong.  Pat has recently retired, and Freddy and I know our days are numbered.  Soon BRC will have a third generation of partners, but we are comforted to know that one thing will always remain the same: our vision and commitment to client service and taking care of our people.
Employer-Owned Life Insurance
By Judy Hernandez, CPA, Manager

Are you filing the proper form with your annual tax returns for all employer-owned life insurance?

The Pension Protection Act of 2006 created code section 101(j), "Treatment of Certain Employer-Owned Life Insurance Contracts."  This code section requires an informational annual filing with your company's tax return so that it does not have to include the life insurance proceeds on its insured employees as part of its taxable income. 

Normally, in the case of an employer-owned life insurance contract under code section 101(j), the life insurance proceeds are taxable to the employer unless the employer fills out and includes Form 8925 (Report of Employer-Owned Life Insurance Contracts) with its yearly tax returns.  This form is solely informational. 

A company must file Form 8925 if it is the policyholder on an employee's life insurance policy as of the date the contract was issued and if it was issued or materially changed after August 17, 2006.  The company must also have written consent prior to issuing the policy in order to qualify for the 101(j) exception.

The notice and consent requirements consist of the following:
  • The insured employee must be provided written notification stating that the company intends to insure the employee's life and the maximum face amount for which the employee could be insured at the time the contract is issued,
  • Written notification to the employee that the company will be a beneficiary of any proceeds payable upon death of the employee, and
  • Receive written valid consent from the employee.  In order for the consent to be valid, the employee must provide written consent to be insured under the contract and state that coverage may continue after the insured terminates employment.  This consent must be received before the issuance of the employer-owned life insurance contract.  Also, the contract must be issued within a year after the consent was executed or before the employee terminates employment with the company. 
A company is considered a policyholder for an employer-owned life insurance policy if it is engaged in a trade or business that employs the insured and is the direct or indirect beneficiary.  An employee includes officers, directors or highly compensated employees that are either U.S. citizens or residents. 

Please be sure to notify your tax advisor if your company has employer-owned life insurance policies.  The advisor will need you to provide the following information in order to properly fill out Form 8925:
  • Confirmation that the company/policyholder has a valid consent from the insurer,
  • Number of employees the policyholder had at the end of the tax year,
  • Number of employees included in the total employees at the end of the tax year who were insured at the end of the tax year under the company/policyholder's employer-owned life insurance contract issued after August 17, 2006, and
  • Total amount of employer-owned life insurance in force at the end of the tax year for each insured employee.
Keeping Your Company's Retirement Plan in Compliance
By Victor Blackburn, CPA, Partner

If your company has a retirement plan, it is important to review the plan to ensure it does not violate compliance requirements.  Below are some compliance requirements or potential legal issues that could cause issues for the plan and fiduciaries of the plan:
  • Compensation - Fiduciaries assigned to the retirement plan should ensure the amount of compensation used to determine the salary deferral and employer matching calculation agrees to the definition of compensation according to the approved plan documents.  Many plans have had compliance issues due to improperly excluded compensation, such as year end bonuses or commissions.  This resulted in incorrect amounts being submitted to the plan, and lost earnings that the organizations had to calculate and contribute to the employees who were in the plan during that time period.
  • Investments - Many plan participants have sued fiduciaries for not administering plans in accordance with the fiduciary responsibility associated with retirement plans.  These suits range from the plan not providing a broad and well diversified investment portfolio to a lack of review of fees charged to the plans.  One way to demonstrate that the fiduciary responsibility is taken seriously is to develop an investment committee that has the responsibility to prepare a written investment policy, evaluate the results of current investments, and negotiate fees charged to the plan and participating employees.
  • Hardship Distributions - The plan document should be reviewed to ensure that specific purposes for hardship distributions are allowed by the Internal Revenue Service, and that proper documentation verifying that such distributions comply with the plan document and Internal Revenue codes are being provided and kept.
  • Fidelity Bond - Many insurance providers recommend that you carry a fidelity bond that equals 10% of plan assets that are over $500,000.  The bond should cover all listed fiduciaries and any other employees or third party entities involved in the administration of the retirement plan.
Please take a few minutes to review these areas to ensure that your company's retirement plan is complying with current laws and regulations and limiting legal exposure.  If you have concerns about your plan, please contact your service provider to ensure the company, the plan, and the fiduciaries of the plan remain in compliance and out of trouble.
Fraud Expectation Gaps
By Ben Ripple, CPA, Senior Manager

Based on data compiled in 2016 by the Association of Certified Fraud Examiners (ACFE), external audits are responsible for the detection of fraud in less than 4% of fraud cases.  For reference, "By Accident" came in at almost 6% and "Other" was at 5.5%.  I point this out not to make anyone question the validity of the work performed by auditors, but to try to align the expectations and realities of what an auditor does with respect to fraud.

Auditing standards set by the American Institute of Certified Public Accountants (AICPA) address the auditor's responsibilities for fraud in section AU-C Section 240.  Paragraph 5 of Section 240 states that the auditor "is responsible for obtaining reasonable assurance that the financial statements as a whole are free from material misstatement, whether caused by fraud or error."  The only specific areas mentioned in the standard for areas of testing revolve around management override of controls via journal entries, manipulation of estimates, and transactions outside the normal course of business.  So, let's say that Jim the inventory guy is stealing $50 of supplies each week.  The audit process is generally not designed to catch this activity, since the fraud is probably immaterial to the financial statements.

I would like to use the analogy of a police department (or at least the police departments that I have seen on television) to explain the roles of various groups in preventing, detecting, and responding to fraud.  Auditors are the guys in "CHIPS" cruising around the streets, trying to keep the public safe, and occasionally clocking someone driving 70 in a 55.  Fraud examiners are the detectives from "CSI: Miami" looking to gather information to find the guilty party after the crime has been committed.  Management and internal audit are like the people on "The Wire," because they are involved in the gritty day to day battle to prevent the crime from happening.  And the actual police are "Walker, Texas Ranger," because actual police officers have the option of roundhouse kicking a suspected fraudster if they try to run away (whereas if I roundhouse kick someone it is assault).

For further results from the ACFE study mentioned in the first paragraph, please see  If you think fraud has occurred at your business, please reach out to trained professionals, including your current accountants or licensed certified fraud examiners (there are currently three at Bernard Robinson & Company).

Bernard Robinson & Company, L.L.P. | (336) 294-4494 | |
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.