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S e p t e m b e r / O c t o b e r 2 0 0 5

The Magazine Of The Pennsylvania Society of Public Accountants

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2S e p t e m b e r / O c t o b e r 2 0 0 5

A Message From The President

Summer has been a busy and productive time for thePennsylvania Society of Public Accountants. As we com-mence our 59th year, our mission is as relevant today as itwas fifty-nine years ago:

• to elevate and maintain a high standard of proficiency and integrity among our members,

• to promote and protect the interests of Pennsylvaniapublic accountants,

• to cultivate a spirit of professional cooperation among our members,

• to promote local chapters of public practitioners, and

• to establish goodwill and understanding between the general public and the public accounting profession.

To that end, practitioners from across the Commonwealth met in July fora two-day retreat to review our mission, our accomplishments, ourresources, and our continuing responsibilities. Under the chairmanshipof President-Elect, Daniel Vecchio, the Long-Range Planning Committeehas developed realistic and achievable long-term, short-term, and immediate goals. Many of these recommendations have already beenimplemented by our volunteer committees. As a result of mutual planning, the PSPA officers, committee members, and executive officeare united in:

• maintaining and expanding affordable and quality continuing professional education programs,

• proactively protecting the practice rights of the small practitioner,

• promoting the organization, the chapters, and the individual members through internet presence and marketing media,

• seeking expansion of member benefit programs and affinity sponsorship programs, and

• continuing the outstanding growth of the organization throughreferrals by members like you.

In addition to a summer of productive committee activity, a delegation ofPSPA leaders attended the National Society of Accountants Annual Convention in Las Vegas, Nevada, where PSPA was recognized by theNSA State Regulation and Oversight Committee for our dedicatedefforts in monitoring the Pennsylvania State Board of Accountancy.Many thanks to our monitoring committee and our executive directorfor their vigilance and the honor that they have earned for our society.

The national convention afforded us the opportunity to lend ideas, aswell as, learn from our peers, by sharing our experiences and mutualconcerns with affiliated state organizations from across the nation. It hasindeed been a busy and productive summer for PSPA. I am pleased toreport to the members that the leaders of your organization are focused,committed and determined to uphold the high standards of ourfounders, while meeting the ever changing needs of today’s practitioners.

Respectfully Submitted,

Linda M. Roth, CPAPSPA President

PSPA OfficersLinda M. Roth, CPA, President

Daniel J. Vecchio, CPA, President ElectGerald L. Brenneman, CPA, 1st Vice President

Randy L. Brandt, CPA, 2nd Vice PresidentMichael H. Agin, CPA, TreasurerIrving Braunstein, EA, Secretary

Board ofDirectors

Michael H. Agin, CPALamont B. Anderson, PA

Randy L. Brandt, CPARichard Brasch, Jr., CPA

Irving Braunstein, EAGerald L. Brenneman, CPAW. Raymond Bucks, CPA

M. Stephen CaskeyB. Joseph Cellini, PAFrancis J. Cellini, EAArlan R. Christ, EA

Emile P. Cianfrani, CPAFrank L. Corso, CPA

Bernard A. Deverson, CPADavid E. Fleck, PA

James S. Frederick, PAWilliam C. Graham, PAJoann Y. Hauer, CPA

Joyce P. Huttman, PAMarvin R. Huttman, CPA

Mary Lew Kehm, CPAM. Michael Lerner, PA

Alliene Lewis, EASusan F. Mancuso, PAKevin J. Matschner, EAJohn R. Matschner, PA

Barry L. Meyer, PAMichael A. Napolitano, PA

H. Richard Neidermyer, CPAAndrew J. Piernock, Jr.

Linda M. Roth, CPARobert P. Skarlis, PA

Timothy Sundstrom, CPANeil C. Trama, Sr., PA

Daniel J. Vecchio, CPARaymond A. Wolownik, CPA

Sherry L. DeAgostino,Executive Director

Fred McKillop,Government Consultant

Pa. Society of Public Accountants20 Erford Road, Suite 200A

Lemoyne, PA 17043(717) 737-4439

1(800) 270-3352

In thisIssue ...A Message From The

President ............................................2

Pennsylvania Tax Update..........4-5

Tax Corner ......................................6-7

Is The AMT Really an “Alternative

Minimum Tax”? ................................7

USI Colburn - PSPA’s Endorsed

Company for Consumer Directed

Healthplans ......................................10

Tech Talk ............................................11

Chapter Meeting Dates ................12

Seminars Dates................................13

NSA State Director’s Message ....16

News You Can Use ..........................19

Use Tax Compliance Program....22

IRS Notice 2005-61........................22

Apply for Reimbursement

If You Can ..........................................22

IRS Announces Mileage Rate

Increase..............................................22

Classifieds ........................................24


PA Department of Revenue - Business Paperless Plan -

Employer WithholdingBased on the tremendous success of electronic filing for Sales and Use

Tax returns, the PA Department of Revenue is now making preparations toeliminate the coupon system for filing Employer Withholding Tax returnsin 2006.

The Department will be contacting employers later this year with moreinformation. However, there is no reason to wait until 2006. All employersare currently able to file and pay Employer Withholding Taxes by using theInternet based e-TIDES system at www.etides.state.pa.us, or by calling theDepartment's Business Tax TeleFile system at 1-800-748-8299. Third-partycomputer software will be available in 2006. A list of vendors will be postedon the Department's Web site at www.revenue.state.pa.us once they areapproved.

Some of the advantages to filing electronically include:

• Elimination of preparation and processing errors.

• Immediate acknowledgement of receipt of returns and payments.

• Access to an online account history.

• Increased security.

• Ability to file early and set up a payment for the due date.

More than 78,200 businesses, or about 23 percent of the total required tofile Employer Withholding Tax returns, are already registered with the e-TIDES Internet filing system.

While ACH debit, an available method of Electronic Funds Transfer(EFT), ACH credit and credit cards are accepted; taxpayers will continue tohave the option of making their payments by check. EFT is mandatory forpayments over $20,000 and voluntary for payments under $20,000.

TECHTALK

The PSPA Chapters are committed to providing increased benefits andprograms to the PSPA membership as was evidenced in the level of financialsupport for the past year. The PSPA Board of Directors, Officers and Staff ofthe PSPA wish to thank the chapters for their overwhelming support. Manyof the programs currently offered by the PSPA would not be possible withoutthe cooperation and support of each of the chapters.

The 2005 Chapter Contributions are as follows:Buxmont Chapter $18,000 + *$7,000 matching fundsCentral/South Central Chapters $10,000Lehigh Valley Chapter *$7,500Northeast Chapter *$4,000Philadelphia Chapter *$7,500Western Pennsylvania Chapter $4,000* indicates an increase from the 2004-2005 year.

Through the efforts of Michael Agin, CPA, Buxmont Chapter President,the chapter issued a challenge to the other PSPA chapters. Buxmont Chapteroffered matching funds for any contribution amount that exceeded thechapter's prior year contribution. The Buxmont Challenge raised an additional$14,000 in chapter contributions and matching funds.

PSPA Thanks Chapters forRecord Contributions

PENNSYLVANIA TAX UPDATEStreamlined Sales and Use Tax Agreement Scheduled To

Take Affect October 1st By Sharon R. Paxton

After more than five years ofplanning and negotiations, theStreamlined Sales and Use Tax Agreement (“SSUTA”) is scheduled totake effect on October 1, 2005. Certain features of the streamlinedsystem offer benefits to all companiescollecting tax on sales to customers inmember states.

The Streamlined Sales Tax Project(“SSTP”) is a national initiative bystate governments, with input fromlocal governments and the privatesector, to simplify and modernize salesand use tax collection and administration.The stated goals of the SSTP are:uniform definitions within tax laws,rate simplification, state leveladministration of all state and localsales and use taxes, uniform sourcingrules, simplified exemptionadministration, uniform auditprocedures and state funding of technology models. State governmentshope that the streamlined sales tax

system will encourage (or require, ifCongress enacts federal legislation)out-of-state retailers, primarily catalogand Internet vendors, to collect tax onsales to customers located in memberstates.

In order for the SSUTA to becomeeffective, at least ten states representing at least 20% of thepopulation must be in compliancewith the requirements of the SSUTAor qualify as “associate members.” Thisthreshold has been satisfied throughthe approval of Indiana, Iowa, Kansas,Kentucky, Michigan, Minnesota,Nebraska, North Carolina, Oklahoma,South Dakota and West Virginia as fullmembers and Arkansas, NorthDakota, New Jersey, Ohio, Tennessee,Utah and Wyoming as associate members. Associate members canbecome full members after theyeffectively amend their sales tax lawsto comply with the SSUTA. AlthoughPennsylvania has participated in the

SSTP, it is not presently expected tobecome a member state. Based on theeffective date of sales tax amendmentsapproved by their legislatures, NewJersey and Ohio will become fullmembers on October 1, 2005, and in2008, respectively.

Registration SystemThe SSUTA provides a central

online registration system that can beused as an alternative to the traditional registration system of member states. Central registrationconstitutes registration with everymember state (including states thatbecome members after the seller’s registration) and imposes an obligationto collect tax on sales made to customers in all member states,whether or not the seller has a physical presence there. Registeredsellers may continue to report basedon traditional reporting systems ormay choose among three other methods of calculating, reporting andremitting tax. These methods includethe selection of a Certified ServiceProvider (to be compensated by mem-ber states), a Certified Automated System or, under limited circumstances, the seller’s ownproprietary system. Sellers whoparticipate in one of the certifiedreporting models will either not beaudited or will have limited scopeaudits, depending on the modelselected. Central registration may notbe used as a factor in determiningwhether a seller has nexus with amember state.

One potential advantage ofvoluntary registration is themandatory amnesty program. Withlimited exceptions, the SSUTArequires member states to providecomplete amnesty for uncollected orunpaid sales and use taxes, penaltiesand interest to sellers who registerwithin twelve months of the state’sparticipation in the SSUTA. Theamnesty program applies only to taxesdue on property sold by a vendor andnot to taxes due on property purchasedby a vendor. 4

S e p t e m b e r / O c t o b e r 2 0 0 5


Exemption CertificatesThe SSUTA standardizes exemption

administration by providing a uniformexemption certificate and eliminatingthe “good faith” requirement for sellersaccepting exemption certificates.Thus, absent fraud or collusion, sellerswho accept properly completedexemption certificates at the time ofpurchase from customers in memberstates will be relieved from liability forimproperly claimed exemptions.Effective January 1, 2008, a seller will,though, be liable for uncollected tax ifit accepts an invalid exemption certificatewhen (1) property is delivered at theseller’s business location and theexemption certificate provided by thepurchaser claims an entity-basedexemption which has been affirmativelydeclared unavailable for that state, or(2) the purchaser claims a “multiplepoints of use” exemption for tangiblepersonal property other than computer software for which thisexemption is available under theSSUTA.

Exemption certificates accepted byvendors must in all events contain specificidentifying information about the purchaser and the type of exemptionclaimed. Effective on and after January1, 2008, however, each member statewill be required to permit sellers toobtain fully completed exemption certificates or equivalent evidencewithin 90 days after the date of sale orto prove that the transaction was notsubject to tax by other means orobtain a fully completed exemptioncertificate, taken in good faith, within120 days after the state’s request forsubstantiation. For purposes of thealternative documentation option,member states will continue to applytheir own standards of good faith untila uniform standard is adopted.

Drop Shipment SalesAnother benefit to vendors from

the SSUTA will be more uniformtreatment of drop shipment transactionsin member states. Beginning in 2008,member states will be required toallow a drop shipper to claim a resaleexemption based on an exemptioncertificate provided by its customer/re-seller or other acceptableinformation evidencing qualificationfor a resale exemption, whether or

not the customer/re-seller is registeredto collect and remit sales and use taxin the state where the sale is sourced.

New Jersey’s SSUTALegislation

The New Jersey Division of Taxationhas issued a series of notices to provide guidance on legislativechanges enacted to conform the NewJersey Sales and Use Tax Act to theprovisions of the SSUTA. Thesenotices (available atwww.state.nj.us/treasury/taxation)address changes in definitions, thetreatment of food and food products,leases and rentals of tangible personalproperty, direct mail and fur clothing.

The tax treatment of leases andrentals of tangible personal propertyhas been substantially modified foragreements entered into on or afterOctober 1, 2005. Currently, New Jerseyimposes tax on the lessor whenproperty is leased for a period of morethan 28 days and requires up-frontpayment of the entire tax liability. For“rentals” with terms of 28 days or less,tax is imposed on the lessee. Underthe new rules, the legal incidence ofthe sales tax will be on the lessee in allcases. For leases and rentals with aterm of more than six months, thelessor will be required to immediatelycollect and remit the full amount oftax due for the entire term of thelease. The new rules also allow forallocated tax refunds if leased propertyis relocated outside New Jersey beforeexpiration of a lease.

Another change that may impactcompanies delivering products to NewJersey customers is the liberalizationof New Jersey’s sales tax bad debtprovisions. Under current law, sellersmust apply for refunds of sales taxattributable to bad debts and noallocation between the purchase priceand tax is permitted for paymentsreceived on the account. The newprovisions define bad debts byreference to federal law and permitsellers to take a deduction on theirsales and use tax returns. Finally,based on New Jersey’s adoption of theuniform definition of “delivery charges,”separately stated charges for handlingand/or packing will be treated as tax-exempt delivery charges as ofOctober 1. Under prior law, such

charges were treated as part of thepurchase price.

Change to Ohio SourcingLaw

Ohio has enacted changes to itssourcing rules to bring its tax laws intocompliance with the SSUTA. Ohiopresently uses origin based sourcingfor local sales tax. Under the newdestination provisions, vendors thatdeliver property across county lines inOhio will charge the sales tax rateimposed in the county where themerchandise will be delivered, not therate imposed where the property issold. As of January 1, 2005, retailerscan voluntarily implement the sourcingchange. Compliance is mandatory byJanuary 1, 2008, except that earlierdeadlines have been provided forvendors with taxable delivery sales inexcess of certain amounts. Once avendor changes to destination sourcing,it may not return to origin based sourcing.

ConclusionCompanies making sales in member

states will benefit from the SSUTAwhether or not they choose toparticipate in central registration or toadopt a certified reporting model.Benefits include rate simplification,uniform definitions, state-level collection, standardized exemption certificate procedures, etc. The uniformbad debt rules will also benefit companies doing business in somemember states, such as New Jersey,that were required to liberalize theirbad debt procedures to comply withthe SSUTA. The only additional benefits to be obtained by voluntaryregistration after the effective date ofthe SSUTA appear to be the amnestyprogram and a simplified collectionprocess. More detailed information,including a complete copy of theSSUTA, may be obtained at theSTTP’s website atwww.streamlinedsalestax.org.

Sharon R. Paxton is a member of McNeesWallace & Nurick LLC’s State and LocalTax Group. Additional Pennsylvania taxinformation may be obtained at the firm’s“Pennsylvania Tax Page” on the Internetat: www.mwn.com.


Pennsylvania’s “FairShare Act” DeclaredUnconstitutional

On July 26, 2005, the Commonwealth Court of Pennsyl-vania ruled, in DeWeese v. Weaver,that Pennsylvania’s Fair Share Act isunconstitutional.

The Fair Share Act (“Act”),which was enacted in 2002, substantially reformed the conceptof “joint and several” liability incivil cases involving multiple defendants. Prior to the Act, aplaintiff was permitted to recoverthe full amount of the allowedrecovery from any defendant in anegligence case. Thus, a jury couldhold one defendant responsible foronly 1% of the harm, yet thatdefendant could be forced to pay100% of the damages. While defendant(s) who paid more thantheir percentage share of the damages had the right to seek contribution from other defendant(s), in many cases such arecovery was not feasible. With certain exceptions, the Act limitedthe liability of each defendant in anegligence case to its proportion ofthe total liability, unless that defendant was found to be 60% ormore at fault.

The challenge to the Act was notbased on its substance. Rather, theAct was struck down on proceduralgrounds - on the basis that itsenactment violated the “single subject” requirement of the Pennsylvania Constitution. In otherwords, the terms of the Act werenot “germane” to the other subjectsin the Senate Bill in which it wasincluded. (The provisions of theAct were added to the DNA Detection of Sexual and ViolentOffenders Act.)

An appeal has been filed withthe Pennsylvania Supreme Court. Ifthe Supreme Court affirms theCommonwealth Court’s decision,which many commentators think islikely, the unfair doctrine of “jointand several” liability will again

apply in Pennsylvania. Althoughthe General Assembly may pass astand-alone replacement statuteadopting comparative negligencerules (see, e.g., House Bill 138),such a statute will almost certainlyapply only to actions arising afterits enactment. Changes to Maryland’sWitholding Requirementsfor Sales or Transfersof Real Property andAssociated PersonalProperty by Nonresidents

The Revenue AdministrationDivision of the Comptroller ofMaryland’s office announced arecent change in Maryland’s withholding requirements for salesor transfers of real property andassociated personal property byNonresidents under Section 10-912(c)(1) of the Tax-General Arti-cle, Annotated Code of Maryland.This change was made by the Maryland General Assembly duringthe 2005 Legislative Session (H.B.147, Chapter 444, Acts of 2005)and was effective on July 1, 2005. Itrequires a new amount to bewithheld from the Total Paymenton a sale or transfer of real property and associated personalproperty in Maryland by a Nonresident Individual.

The new withholding amount isequal to the sum of the rate of thetax imposed under Md. Code Ann.,Tax-Gen. § 10-106.1 (currently1.25%) and the top marginal Stateincome tax rate for individualsunder Md. Code Ann., Tax-Gen. §10-105(a) (currently 4.75%). Thismeans that, when applicable, 6 percent of the Total Paymentamount must be withheld.In summary, this change specifically applies to the following:

• A Nonresident Individual(individual is defined to includea natural person or fiduciary);

• Who does not qualify for a fullexemption from withholding; and

• Who sells or transfers Mary-land real property and associatedpersonal property.

The tax withheld (6 percent of theTotal Payment) must be paid to theclerk of the circuit court for thecounty in which the real property islocated in order for the deed orother instrument of transfer to berecorded and must be accompanied by Copies A and B ofForm MW506NRS.

For additional information pleasecontact [email protected],or call 1-800 MD TAXES (1-800-638-2937).IRS Completes First ofTaxpayer ServiceReductions

The Internal Revenue Servicecompleted the first in a series oftaxpayer service reductions thataim, in part, to shift agencyresources toward tax law enforcement, but the reductionsand their effect on taxpayer compliance continue to concernkey IRS constituents. Telefile,which allowed taxpayers to file taxforms using a telephone, is permanently discontinued following the expiration of theextended deadline for filing Forms1040EZ for tax year 2004.Contesting Taxes inTax Court

Your ability to contest your taxesin Tax Court can depend onwhether or not the IRS has issued anotice of deficiency. In Randy R.Romano (T.C. Memo. 2005-193)the Court held that where thevalidity of the underlying tax liability is properly in issue, theCourt will review the matter denovo. However, where the validityof the underlying tax liability is notproperly in issue, the Court willreview the IRS’ administrativedetermination for abuse of discretion. Although the taxpayerreceived a notice of deficiency forthe 1998, 1999, and 2000 tax years,he did not avail himself of the

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The Alternative Minimum Tax(AMT) is one topic that we would alllike to forget. As more and moretaxpayers become subject to the AMT,we come to the realization that thegovernment’s definition of “wealthy”has greatly expanded and includes the“not so wealthy.” When the AMTlegislation was originally enacted intolaw in 1969, only a few hundredwealthy taxpayers actually paid theadditional tax. However, as thedefinition of a “preferential” item hasexpanded to include ordinary andcommonplace deductions, thenumber of taxpayers subject to theAMT has skyrocketed. Recent studiesindicate that almost 4 milliontaxpayers will be subject to the AMT in2005, with middle class familiesshouldering the burden.

Historically, the AMT has been aseparate method of calculatingincome tax liability. The originalminimum tax was an add-on minimumtax; however, the current AMT is aseparate and parallel system of incometaxation. All taxpayers subject to theregular tax system are also subject tothe AMT’s tax computation. Taxpayersare required to first compute theirregular income tax liability prior tocalculating their potential tax underthe AMT system. The AMT resultswhere the calculation for the“Tentative Minimum Tax” results in ahigher tax liability than thecalculation for the regular income tax.The AMT represents the excess of thistentative minimum tax over thetaxpayer’s regular tax computation.The original legislative intent behindthe AMT was to ensure that alltaxpayers would pay at least someminimum amount of income tax.Therefore, when calculating the AMT,certain tax benefits available underregular tax rules are limited orprohibited under the AMTcalculation. Consequently, the AMT is

calculated under a different set ofrules than for regular tax purposes,resulting in the disallowance of theseso-called “tax-preference” items.

The AMT calculation starts with ataxpayer’s taxable income, which isthen modified to reflect the impact oftax-preference items by eliminating orreducing certain deductions. Inaddition, certain items of tax-exemptincome (i.e., certain private activitybond interest) are added-back for theAMT calculation.

Although the AMT computationprovides a rather generous exemption($58,000 for couples filing a jointreturn, $40,250 for singles, and$29,000 for married individuals filingseparately), the exemption quicklydisappears when alternative minimumtaxable income (AMTI) exceeds aspecified threshold (e.g., $150,000 forMFJ). The exemption is reduced by25% of AMTI in excess of thethreshold. Both exemption amountsand the threshold vary by filing status.In fact, the exemptions are scheduledto fall back to lower year 2000amounts (e.g., $45,000 for marriedcouples filing jointly and $33,750 forsingles) next year unless Congress actsto extend the higher AMTexemptions.

It appears that middle classtaxpayers with as little as $75,000 to$125,000 of adjusted gross income areexperiencing an increase in exposureto this “alternative tax.” The increaseis due primarily to a handful of“preferential” items. Although thepresent day AMT system applies toindividuals, corporations, estates, andtrusts, more and more “not so high-income” individuals are beingsubjected to the AMT. My experienceindicates that the overwhelmingmajority of taxpayers subject to theAMT are those living in cities andstates that impose an income tax (or

Is the AMT Really an“Alternative Minimum Tax”?

Written by Thomas M. Brinker, Jr., J.D., LL.M., CPA/PFS, Professor of Accounting,Arcadia University, Department of Business/Health Administration and Economics450 S. Easton Road • Glenside, PA 19038 • [email protected] •(215) 572-4039

continued on page 15

opportunity to file a petition for redetermination with the Court. Section 6330(c)(2)(B) therefore precluded the taxpayer from contest-ing his liability for the underlyingtaxes for those years in the hearing.

Revenue Ruling 2005-60In Rev. Rul. 2005-60 (IRB 2005-37)

the IRS held that the employer subsidy for maintaining prescriptiondrug coverage provided under Section 1860D-22 of SSA as added by section 101 of MMA (Medicare Prescription Drug, Improvement andModernization Act of 2003) is nottaken into account in computing theapplicable employer cost for purposesof determining whether the minimumcost requirement of section 420(c)(3)is satisfied.

Employee Stock Ownership Plans

The IRS has issued proposed regulations (REG-133578-05) underSections 162(k) and 404(k) relatingto employee stock ownership plans(ESOPs). The regulations provideguidance concerning which corporation is entitled to the deduction for applicable dividendsunder Section 404(k). These regulations also clarify that a paymentin redemption of employer securitiesheld by an ESOP is not deductible.

Employment Tax Report-ing Compliance

The Treasury Inspector General forTax Administration (TIGTA) hasissued a report evaluating whether theIRS has an effective strategy to measure employment tax reportingcompliance. The report noted the IRScurrently has data that suggest theForms 941 are not accurate. The IRS’Combined Annual Wage Reporting(CAWR) program has data for allForms 941 and all of the Wage andTax Statements (Forms W-2) that havebeen filed. The IRS stated there are720,612 Forms 941 nationwide that donot balance with the Forms W-2 datafor Tax Year 2003. These inaccuraciescould represent unpaid tax. Thereport recommended the IRS developmethodologies designed to evaluatethe extent of the underreporting byemployers.


One of the best strategies availableto help your business manage healthcare costs is Consumer DirectedHealthplans (CDH). The team at USIColburn Insurance Service are expertsin employee benefits, includingCDHs. They were developed toaddress the root causes of health careincreases through real plan incentivesfor good use of health care, supportfor people with existing chronic conditions and tools to help membersunderstand health care quality andcost. The basic elements of these plansare a high deductible health plan toprotect the member from catastrophicloss and a savings account that can beused to cover routine expenses wherethe amounts not used can be saved forfuture healthcare or retirement needs.There are two types of CDH programsprimarily available to employers:

• Health Reimbursement Accounts(HRA) - HRA’s are an employerprovided benefit, where theemployer establishes a certainamount of money for employees

to use for qualified benefits.Unused amounts can then beadded to the benefit in the nextplan year. Typically employers areproviding a benefit of $500 - $1000per single and $1,000 to $2,000 perfamily. These benefits are notallowed to convert into cash. Theemployee may not contribute tothem and the employer can placelimitations and exclusions as towhat can be covered. The employeronly has to provide funding for thisaccount when claims are presentedto the plan.

• Health Savings Accounts (HSA) -HSA’s are real money contributedto an actual savings account eitherby an individual, employee oremployer. In 2005, individuals candeposit up to $2,650 and families upto $5,250. The contributions aretax-favored. In addition, employerssave on FICA taxes and interestearned in the HSA accumulates taxfree. The money in the account is

available to the employee for qualified expenses, the use of thefunds is the responsibility of theemployee, and when the accountbalances grow the employee canthen invest their health savings inmost investment vehicles (similar toa 401(k) plan). These plans must becombined with a high deductiblehealth plan with deductibles notlower than $1,000 for single cover-age and $2,000 for family coverageand the contribution to the HSAmay not exceed the plan’sdeductible.

Premium savings from the highdeductible health plan combined withemployees who are motivated to usetheir health care dollars wisely haveprovided real savings to employersover the last several years. Regardless,these plans are relatively new and careneeds to be taken to insure that theplans are designed to encourage people to seek care when needed and

USI Colburn - PSPA’s Endorsed Company forConsumer Directed Healthplans

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T A LT A LOne of the first

questions youshould ask yourselfwhen thinkingabout setting upan office network

is: Should I install a wireless network?As long as the security is configuredproperly, there are many advantages toimplementing a wireless networkinstead of a wired network.

One of the major benefits of a wireless network is that no additionalcables need to be run. If you haverecently moved into a new office orthere is no cabling in your existingspace, a wireless network will allow youto quickly connect all of your machinesand share their resources without needing to run a cable to eachmachine. To set up a wireless network,you’ll need a wireless router. These canbe purchased for $50-$100 at Best Buy,Circuit City or some other retail store.Popular brands include Netgear,Linksys and D-Link. Then, you’ll needto make sure that all of your PC’s have awireless network adapter in order toconnect to the wireless router. If theydon’t, you can purchase then for $20-$50 each. There are a couple of typesof wireless adapters. I recommend buy-ing an external USB adapter. Theexternal USB adapter is easier to installas it won’t require you to open up the

With Steve Ramseyof Focal Tech, Inc.

machine to install it. A second benefit of the wireless

network is that you’ll be able to sharefiles between your machines. Insteadof needing to copy files to a portablestorage media (CD, Zip Disk, USB Key,etc.), you’ll have the ability to connectdirectly to the machine where the fileis stored. Also, if you have a DSL,Cable or T1 Internet connection,you’ll be able to browse the web fromeach machine on the wireless network.

The biggest concern with goingwireless is security. A very large percentage of wireless networks arenot secured. In our office buildingalone, there are three wireless networksthat I could connect to that do notrequire any type of authentication. Ican walk the streets of downtown StateCollege and see up to one hundredavailable unsecured wireless networks.

Your wireless router will be connected to one or more PC’s with anetwork cable. A machine that is wiredto the router will be able to login tothe router via a web browser andchange the default settings. The firstthing to do is change the admin password for the router to somethingother than the default password. Next,you’ll want to change the network id orSSID of the router. Usually, the routeris named “default”, “netgear”, “linksys”or something similar. You’ll want tochange it to something unique to youbut not something that gives away whoyou are to anyone browsing for a wireless network to connect to. You

don’t want to entice someone to try toconnect/hack your network based onthe name. Once this is changed, you’llwant to enable a wireless securitymethod. The encryption method I usefor my wireless network at home is WEP.With WEP encryption, you specify up tofour access keys. If you provide a 13-digit key, the router will provide youwith 104-bit encryption. Each connection that is made to your wirelessnetwork will require one of the WEPkeys in order to access the resources available via the wireless network. Thereis no limit to the number of PC’s thatcan use each key, so you could set up allof your machines to use the same WEPkey. The connection and key information is configured and savedwhen you connect the individual PC’s.For more information on how to setupthe security on your wireless router, consult the manual that comes with thedevice.

I would not recommend a wirelessnetwork for a company that works withlarge files such as CAD files, GIS layers,etc. These files can be several hundredMB in size and would not perform wellover a wireless connection. But, formost of the systems I’ve seen installed insmall to mid-size accounting firms, awireless network would be an ideal solution. The key is to make sure thesecurity is configured properly so youdon’t have someone browsing your network that shouldn’t be there.

Chapter Meeting DatesChapter Meeting DatesBuxmont Chapter

All meetings are held on the fourth Tuesday of the month at Williamson’s Restaurant in Willow Grove

unless otherwise noted.

SEPTEMBER 27, 2005TOPIC: Elder Law

SPEAKER: Larry Scott Auerbach, Esq.CPE: 2 Hours Other

OCTOBER 25, 2005TOPIC: FASB Update

SPEAKER: John D. Rossi, III MBA, CPACPE: 2 Hours A&A

NOVEMBER 22, 2005TOPIC: IRS Ethics & Tax Update

SPEAKER: Richard G. Furlong, Jr., Senior IRS Tax SpecialistCPE: 2 Hours Ethics (Circular 230), 2 Hours Tax

DECEMBER 20, 2005

Lehigh Valley ChapterMeetings are held the third Tuesday of the month at the

Holiday Inn Bethlehem, Route 22 & 512 unless otherwisenoted. Meetings begin at 6:00 P.M. (Dinner), 7:00-9:00 P.M.

CPE Program unless otherwise noted. Fees are $30 (members)/$40 (nonmembers) unless otherwise noted.

OCTOBER 18, 2005 TBA CPE: 2 Hours A&A

NOVEMBER 15, 2005 TBACPE: 4 Hours Tax IRS

Northeast ChapterOCTOBER 19, 2005

TOPIC: EthicsSPEAKER: Richard G. Furlong, Jr., Senior IRS Tax Specialist

CPE: 2 Hours Ethics (Circular 230)

DECEMBER 9, 2005Holiday Party - Sibio’s Restaurant

South Central ChapterOCTOBER 19, 2005

TOPIC: Small Business Borrowing/New Bankruptcy LawSPEAKER: PNC Bank Representative

LOCATION: Spring Garden Conference Center, MiddletownCPE: 4 Hours Other

Southeast ChapterThird Wednesday of the month at the Townhouse

Restaurant, Media

OCTOBER 19, 2005 TBA

DECEMBER 21, 2005 TBA

Philadelphia ChapterMcCall’s Meeting & Conference Center, Upper Darby

OCTOBER 19, 2005TOPIC: Mini Seminar: Federal/State Tax Update

Legislator Appreciation NightSPEAKER: Jeffrey Creveling – PA Department of

Revenue/IRS RepresentativesCPE: 6 Hours Tax

NOVEMBER 7, 2005TOPIC: Social Security, Medicare, Medicaid - Part II

SPEAKER: Dana Breslin, Esquire; Ross Schritman, andNan Rosner

CPE: 6 Hours Other

Western Pennsylvania ChapterMeetings are held at the Edgewood Country Club

OCTOBER 26, 2005TOPIC: K-1 Oil Gas Workshop. Bring your laptops to work

on your problems.SPEAKER: Kevin Matschner, EA

CPE: 1.5 Tax

TOPIC: Business Law with an emphasis onBars/Restarants and Human Relations with emphasis

on Hiring/FiringSPEAKER: Attorney Lawrence N. Paper

CPE: 2 Other

NOVEMBER 16, 2005TOPIC: Small Business Cash Flow Statements and Cash

Transaction ReportingSPEAKER: PNC

CPE: 2 Accounting

TOPIC: Accounting / EthicsSPEAKER: TBD

CPE: 2 Accounting

JANUARY 18, 2006TOPIC: PA State Tax Update/PA LLC Issues

SPEAKER: Chuck Potter, CPA, JDCPE: 2 Hours Tax



Gear UP 1040 Tax Seminars

OCTOBER 31 & NOVEMBER 1, 2005LOCATION: Wyndham Hotel, Harrisburg

SPONSORED BY: Joint Education CommitteeCPE: 16 Hours Tax

NOVEMBER 2 & 3, 2005LOCATION: Woodlands Resort, Wilkes Barre

SPONSORED BY: Northeast ChapterCPE: 16 Hours Tax

NOVEMBER 3 & 4, 2005LOCATION: Days Inn Conference Center, State College

SPONSORED BY: PSPA Education CommitteeCPE: 16 Hours Tax

NOVEMBER 14 & 15, 2005LOCATION: Springfield Country Club, Springfield

SPONSORED BY: Philadelphia & Southeast ChaptersCPE: 16 Hours Tax

NOVEMBER 21 & 22, 2005LOCATION: Wyndham Hotel, Harrisburg

SPONSORED BY: Joint Education CommitteeCPE: 16 Hours Tax

NOVEMBER 21 & 22, 2005LOCATION: Holiday Inn, Bethlehem

SPONSORED BY: Lehigh Valley ChapterCPE: 16 Hours Tax

DECEMBER 8 & 9, 2005LOCATION: Radisson, Trevose

SPONSORED BY: Buxmont ChapterCPE: 16 Hours Tax

DECEMBER 15 & 16, 2005LOCATION: Radisson, Monroeville

SPONSORED BY: Western PA ChapterCPE: 16 Hours Tax

Gear Up Accounting Seminar

SEPTEMBER 30, 2005LOCATION: Holiday Inn, Bethlehem

SPONSORED BY: Lehigh Valley Chapter

CPE: 8 Hours A&A

DECEMBER 12, 2005LOCATION: Springfield Country Club

SPONSORED BY: Philadelphia Chapter

CPE: 8 Hours A&A

Gear Up Business Entities SeminarOCTOBER 19, 2005

LOCATION: Edgewood County Club

SPONSORED BY: Western PA Chapter

CPE: 8 Hours Tax

OCTOBER 20 & 21, 2005LOCATION: Radisson Trevose

SPONSORED BY: Buxmont Chapter

CPE: 16 Hours Tax

PA Department of Revenue Seminar

SEPTEMBER 29, 2005LOCATION: Holiday Inn Bethlehem

SPONSORED BY: Lehigh Valley Chapter

CPE: 8 Hours Tax

Seminar DatesSeminar Dates

Firm: Contact:

Address:

City: State: Zip:

Phone: Fax: Email:

Annual Fees: $_________ YIE: ________Number of accountants (with years ofexperience):

F/Time: P/Time*:5+ years: ________ ________4 years: ________ ________3 years: ________ ________2 years: ________ ________1 year: ________ ________<1 year: ________ ________

Total: ________ ________

*Average of 25 hours per week or less

In the past three years, how many firm members attended a loss control seminar ____

On what date was the firm established___________

Within the past 5 years:

Has the firm provided services to a client that is engaged in the issuance, offering,registration or sale of securities or bonds; or provided clients with forecasts orprojections for inclusion in sales literature, etc., of any securities or bonds?YES � NO �

Has any member of the firm provided services or acted as adirector/officer/committee member for any financial institution? YES � NO �

Has any member of the firm had an accounting license or authority to practiceaccounting revoked, or been subject to disciplinary action, fine reprimand, or criminalpenalty related to performance of professional services? YES � NO �

Renewal: ___/___/___ Insurer: ___________________ Limit: $ ___________ Deductible: $ ___________ Premium: $ __________What is the retroactive date on your current policy ___/___/___ � None � N/A

Approximately percentage of income received from the following activities for the last annual period:

Activity %Audit: Public Companies**

Audit: Other

ReviewCompilation

Bookkeeping

TaxBusiness ValuationComputer Consulting

Litigation Support

Activity %Litigation Support

Management Advisory Services

Assurance ServicesFinancial Planning

Asset Management

Sale of Mutual FundsSEC/Sarbanes Oxley Related Services**Other*

Total 100%

••Calls for a supplement

CLAIMS HISTORY (within the past five years):

Date claim(s) Reported One: ____/____/19 ______ Two: ____/____/19 ______ Three: ____/____/19 ____

Amount Paid, including $ ____________________ $ ____________________ $ ____________________Defense Expenses (ifclosed) $ ____________________ $ ____________________ $ ____________________Reserve amount(if open) $ ____________________ $ ____________________ $ ____________________

Please return to Custom Brokers Insurance, 3659 Green Road Suite 209, Beachwood, Ohio 44122Tel: 800-969-7475 – Fax: 216-831-6819 Email to: [email protected] – http:www.cpagold.com


Regular Tax Calculation(2005)

AGI $100,000

Itemized Deductions (28,000)

Exemptions (5 @ $3,200) (16,000)

Taxable Income $56,000

Regular Tax $7,670

AMT Calculation (2005)

Taxable Income $56,000Adjusted for:+Excess Depreciation 10,000+Itemized Deductions 18,000+Exemptions 16,000Alternative MinimumTaxable Income 100,000AMT Exemption (58,000)AMT Income Base 42,000AMT Rate X 26%Tentative AMT 10,920Less: Regular Tax (7,670)Alternative MinimumTax (ATM) $3,250

individuals deducting sales taxes), andthose individuals who have children.

Some of the most significantpreferential items are noteworthy inthat they impact the majority of middleclass taxpayers:

• Adjustments related to itemizeddeductions (Schedule A):

- State and local income taxes (ordeduction for sales taxes)

- Real estate taxes

- Personal property taxes

- Miscellaneous itemizeddeductions in excess of 2% ofadjusted gross income (includingunreimbursed employee expenses,safe deposit box fees for taxableinvestments, union dues, taxpreparation andfinancial/investment fees)

- Only Medical expenses in excessof 10% of adjusted gross income.However, for regular tax purposes,a 7.5% ceiling applies to medicalexpense deductibility.

However, the 3% reduction of itemizeddeductions for high-income taxpayersin computing the regular taxcalculation does not apply to the AMT.

• For those taxpayers claiming thestandard deduction in lieu ofitemizing their deductions, thestandard deduction is added back totaxable income in calculating theAMT.

• Personal and dependencyexemptions are not allowable incomputing the AMT.

Although there are numerous othertax-preference items, theaforementioned items are typicallyinvolved in a very average individualtax return calculation. There isnothing preferential about thestandard deduction or personal anddependency exemptions.

The following typical tax scenarioillustrates the impact of the AMT:

Mr. and Mrs. Smith are married and havethree children. In 2005, the Smith’s had anadjusted gross income of $100,000 withthe following itemized deductions: state andlocal income taxes ($5,500), property taxes

Alternative Minimum Taxcontinued from page 7

($6,750), mortgage interest expense($10,000), tax returnpreparation/advisory fees ($2,000),unreimbursed employee business expenses($4,750) and medical expenses ($8,500).As a result, the Smith family had $28,000of Schedule A “itemized deductions” afterthe applicable AGI limitation for medicalexpenses. In addition, Mr. Smith had“excess depreciation” in his soleproprietorship of $10,000 (200% MACRSReg. vs. 150% MACRS for AMT).

Therefore, positive AMT adjustment =$28,000 (REG) - 10,000 (AMT) = $18,000

As more and more middle classtaxpayers fall prey to the AMT, theyquickly discover that the promised taxrelief under 2003’s legislation was amirage. A 2004 study by the UrbanInstitute-Brookings Institution TaxPolicy Center projects that about 30million taxpayers will be subjected tothe AMT within the next 7 years, withmore than 20 million taxpayerssubject to the AMT by 2006. Thisunusual phenomenon may also be theresult of lower individual tax rates(39.6% reduced to 35%) and an AMTsystem not indexed for inflation. TheAMT rates have remained constant at26% on the first $175,000 of the AMTIncome Base and 28% on amountsabove $175,000.

The AMT needs to be an“Alternative Minimum Tax.” Congressneeds to revisit the original intentbehind the initial legislation. Whileevery taxpayer should pay their fair

share, the current structure ispenalizing taxpayers for usingcommon itemized deductions andexemptions. However, repeal may beout of the question. CurrentCongressional research indicates thatby simply eliminating the add-backfor taxes on Schedule A or thestandard deduction and personal anddependency exemptions, themajority of America’s middle classhouseholds subject to the AMT canbe eliminated. The CongressionalBudget Office believes these changeswill exempt 18 million taxpayersfrom the AMT. However, the revenueloss is staggering! This “simple”change will cost our government$440 billion over the next ten years.In addition, the Joint ConferenceCommittee on Taxation hasestimated that total repeal of theAMT would deprive our federalgovernment of over $611 billion ofrevenues over the next decade.

1. Medical Expenses >7.5% of AGI $1,000

>10% of AGI $0

2. State and Local 5,500 0Income Taxes

3. Property Taxes 6,700 0

4. Mortgae Interest 10,000 10,000

5. Miscellaneous Itemized 4,750 0Deductions

TOTALS $28,000 $10,000

Regular v.AMT Deductions

RegTax

AMT


At the end ofAugust, I attended the60th Annual Convention of theNational Society ofAccountants (NSA)held in Las Vegas,Nevada, and waselected to serve a two

(2) year term as NSA State Director ofPennsylvania. Margaret Romain-Johnson was presented an awardacknowledging her six years of dedi-cated service as NSA State Director ofPennsylvania from 1999 to 2005.Wanda L. Samek of Denton, Texaswas elected as President of theNational Association of Accountantsfor the coming year.

The Pennsylvania Society of PublicAccountants (PSPA) was presentedwith NSA’s “Proud of You Award”,acknowledging its growth inmembership and PSPA’s many accomplishments throughout theyear. Pennsylvania also received anaward for monitoring the State Boardof Accountancy. At the conclusion ofthe meeting of NSA’s Board of Governors, District II GovernorRobert Sommer acknowledged PSPAas one of the finest run AffiliatedState Organizations in the country.

Legislative NewsBack in April 2005 legislation was

introduced in the US Senate, S. 832,to regulate individuals (except thosecurrently regulated under Circular230) who prepare federal tax returnsfor a fee. If enacted, Treasury wouldbe required to develop andadminister an examination to test theknowledge and competency of thoseindividuals every three years. TheTreasury would have one year fromthe date of enactment to issue theregulations to administer this provision. The approval would likelyadd additional strain to the IRSOffice of Professional Responsibilitywhich is currently soliciting to out-source the Special Enrollment Exami-nation. In July 2005, Robert L. Cross,Chairman of NSA’s Right to PracticeCommittee testified before the Subcommittee on Oversight of the

House Ways and Means Commitee.The hearings were held by the Houseas a prelude to Senate hearings so theHouse can be poised to act once theSenate hearings are held. Cross recommended that Congress consideradopting existing systems as an alternative to imposing a new andonerous regulatory scheme on the taxpreparer industry. In his testimony,Cross stated that the AccreditationCouncil for Accountancy and Taxation (ACAT), which is the testingand credential arm of NSA, could satisfy the standards that the Senatebill seeks to achieve. It is anticipatedthat Senate hearings will be delayeduntil the Supreme Court nominationof John G. Roberts, Jr. is resolved, probably after the first of the year,and before the end of the 109th Congress next June.

Education

NSA will once again hold theirAnnual Accounting & Tax Symposium, offering 16 hours of CPE(6 hours Accounting, 2 hours Ethicsand 8 hours Taxation) for only $100for members of NSA. This year’s program has been expanded to twolocations: Baltimore (September 26-27) and Las Vegas (November 14-15).In addition, NSA will jointly sponsor aNational Tax Update with theAccounting, Financial and Tax Professionals of New Jersey (AFTPNJ)at the Atlantic City Hilton onDecember 5-6, 2005. The programwill offer 16 hours of CPE (14 hoursin taxation; 2 hours in Ethics).

Peer ReviewFollowing extensive testimony at a

meeting of the NSA Board of Governors held prior to the 60thAnnual Convention, a vote was takento terminate NSA’s Peer Review Program. Chairman Steve Hansoncited mounting budget costs necessary to maintain the ever changing review process, and an overall lack of significant participation as the reasons behindthe decision.

Membership

In honor of the 60th Anniversary ofthe National Society of Accountants,and for a limited time only, PSPAmembers can join NSA for $119, andsave $60 off the regular $179 membership fee. In addition tonational representation, NSA members receive the following magazines and publications as part oftheir annual membership:

• NPA Magazine, a targeted journal published six times a year.

• NSA Technology Advisor(formerly Software News), published eight times a year.

• NSAlert, a bi-weekly e-mail bulletin devoted to timely legislative, tax, and law updates.

• MemberLink, a bi-weekly e-mailnewsletter filled with ideas, tools,news and information.

If you are not an NSA member, whynot complement your valuable PSPAmembership by joining NSA. At thisprice you can’t afford not to join. Amembership application has beenincluded on the next page for yourconvenience. Please feel free to contact me with any questions regarding NSA via email at:[email protected]

Respectfully submitted,Richard Brasch Jr., CPANSA State Director

NSA State Director’s Message

Pennsylvania delegation attendsInstallation Dinner at NSA Convention inLas Vegas. Left to Right: Neil C. Trama,PA; Linda M. Roth CPA, PSPAPresident; W. Raymond Bucks, CPA;Richard Brasch, Jr., CPA, NSA StateDirector. Missing from photo is FrankKelly, EA.

Hurry! This offer is only good through December 31, 2005!

$119 Discount offer ends12/31/05.

Hurry!

Healthcare is expensive and there isno end in sight to the increases asadvancements in medical technology,growing use of prescription drugs andan aging population place higherdemands on the healthcare system.To help lessen the financial burdenand create options for purchasinghealthcare for your firm, or for yourbusiness clients, consider tax-advantaged Health Savings Accounts(HSAs).

What is an HSA?HSAs allow the tax-free savings,

accumulation and use of funds formedical expenses when the HSA ispaired with a qualified highdeductible health plan (HDHP).

HSAs are designed to lowerhealthcare expenses through theHDHP while providing tax-advantagedsavings to the consumer. The HDHPprovides the necessary insurancecoverage (many plans includepreventive medicine with copays)while the HSA gives the employee andemployer the means to fund thesecosts on a pre-tax basis.

Small businesses eager for relieffrom the steep escalation of medicalinsurance costs have showntremendous interest in this new way tofund employee health insurance. Thecombination of a tax advantagedsavings account and an HDHP givesconsiderable savings power andflexibility to the employee whilereducing the cost of the underlyinginsurance coverage.

Advantages of HSAs: HSAs allow anyone under the age of65, who is enrolled in a qualifiedHDHP, to make tax-freecontributions.

• Both the employee and employercan contribute to the HSA. Thesecontributions can total up to 100%of the annual deductible for theplan.

• Unlike some other tax-advantaged plans, the funds in the

account are not forfeited if they arenot used during the plan year(there is no “use it or lose it”provision). Savings can continue toaccumulate and be used even intoretirement.

HSAs are 100% taxdeductible, or paid for withpretax dollars, and areemployee owned.

• They earn interest tax-free anddo not create a taxable event whenfunds are used to pay for qualifiedmedical expenses. Funds in theHSA can be allocated amongdifferent investment options tomaximize savings potential. • However, taxes and penalties willbe imposed if account ownersunder age 65 withdraw funds fornon-qualified expenses. Fundswithdrawn by an account owner age65 or older will be taxed as incomeif they are used for non-medicalexpenses; however, they will not besubject to any other penalties.

Additional Advantages • If an employee leaves thecompany, he can roll the funds intoanother HSA plan. • Money not spent remains in theaccount from year to year.• Technology has made access tothe accounts, its investments andother tracking and tax reportingmuch easier. Plans that offer debitcards also make paying for medicalexpenses quick and simple.

Contribution Limits• For the employer’s health plan toqualify as an HDHP it must have aminimum of a $1,000 deductible foran individual or $2,000 for a family.The maximum contribution to anHSA cannot exceed the deductibleof the chosen plan or the limitsspecified by law.• The maximum contributionlevels are adjusted each year toallow additional contributions per apredetermined schedule. For 2005the maximum contribution limit is$2,650 for an individual or $5,250for families. There are also catch-up provisions for individuals whoare 55 years or older.

The insurance carrier typically teamsHSAs with the HDHP. This package

helps make understanding andadministering the programstraightforward. A business shouldalso have a Section 125 plan in placein order to gain the most advantagesof from its HSA program.

Obtaining medical careonce your businessestablishes an HSA

After the HSA and HDHP are setup, employees obtain medical care inmuch the same way as they docurrently.

• Most HDHPs are modeled afterexisting Preferred ProviderOrganization (PPO) plans. Theyoffer care through a network ofphysicians and hospitals.• The main difference is how thedeductible is paid for. Employeescan simply withdraw funds out oftheir HSA either by cash, check ordebit card. Many HDHP programsoffer preventive care for a flat dollarcopay (e.g. $25 for a physician wellvisit).

Next StepsHSAs are not for everyone and it

may take some incremental changesin current benefit plans in order toprepare employees for a switch to anHSA. HDHPs vary regarding servicescovered and employee copays.Conduct thorough research of allpotential group health insurancepolicies.

The exact amount of savingsrealized by adopting an HDHP willdepend upon the makeup of theemployee group and type of HDHPchosen. It will be very important toeducate employees on theadministration and value of an HSA.

The future of health insuranceproducts and options continues toevolve. While no option is perfect,and several others exist — e.g. HealthReimbursement Accounts (HRA) orMedical Expense ReimbursementProgram (MERP) — HSAs are worth alook in the challenging andincreasingly expensive healthcarearena.


Health SavingsAccounts (HSAs)


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PSPA members save 40%on all titles availablefrom CCH. Go towww.tax.cchgroup.comto view a complete list ofavailable titles. If you areinterested in purchasinga title that does notappear on this formplease contact the PSPAExecutive Office at 1-800-270-3352 or email yourrequest to [email protected].

CCH's Scheduled Release Date for the four titles listed above is December 2005.

Federal Tax Handbook,2006 Edition, A convenient but thorough authority for 100s of critical tax questions.

The RIA Federal Tax Handbook is themost authoritative, accurate and easy-to-use paperback reference for day-to-day tax questions on 2005 and 2006

taxes. The 2006 edition of this essential tool is the mostextensive ever -- containing answers to hundreds of taxquestions plus guidance on the latest tax topics andchanges. Portable and easy-to-read, it provides comprehensive answers to questions on individual andcorporate taxation, pension plans, IRAs, Roth IRAs,employee benefits, deductions, estate and gift taxes, andmuch more.

The Federal Tax Handbook includes: • Detailed coverage of the latest tax legislation • Current and next year's income tax rates and the

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• Guidance as to which IRS forms to use to report, fileand make elections

• Extensive professional advice based on the experience of RIA's expert editorial team, not foundin cited authorities (and you won't find it with thecompetition either)

• A comprehensive topic index with words practitioners know and use.

• A margin index on the back cover helps you locatechapters quickly and saves you time

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USI Colburncontinued from page 10

to continue receiving proper preven-tive care. The better ConsumerDirected Healthplans offer preventivecare carve outs, debit cards for pay-ment, high quality health care infor-mation, wellness programs, diseasemanagement programs, nurse hot-lines, and other useful tools to helpemployees make better decisionsabout their healthcare.

Regardless of whether you want toconsider a CDH program or a tradi-tional program, using USI Colburnwill lead your business to real savingsand individual members of the associ-ation can get group rates onlythrough the associations program. Asthe insurance administrator for the PaSociety of Public Accounts, we havethe product, expertise and depth youneed to select the right program.


The Department of Revenue willbegin a focused, proactive campaignto increase business taxpayers'awareness of reporting and paying PAUse Tax. The goal of the Department'sUse Tax campaign is to stimulatevoluntary compliance.

The Department's Use TaxCompliance Program will have twophases, an education and outreachphase and an enforcement phase. TheDepartment plans to educatetaxpayers to encourage voluntarycompliance. As part of the initialeducation phase, the Department willinvite various professional andbusiness associations to meet anddiscuss the Use Tax complianceprogram plans. The Department willsolicit input from these associations onhow to best communicate thevoluntary compliance message to theirbusiness members. During this phase,the Department will also send information packets to businesses,explaining the Use Tax and steps to betaken by taxpayers to assure theircompliance.

At the conclusion of the educationand outreach programs, theDepartment will move to anenforcement phase. The Departmentwill mail self-audit Use Tax returns totaxpayers, permitting them to self-report and pay their Use Taxobligations. Finally, the Departmentwill conduct a series of limited,focused examinations and field audits.

Businesses that have a PennsylvaniaSales Tax License should report andremit Use Tax along with their SalesTax returns. The PA-1 Use Tax Returnmay be printed and used by taxpayerswho do not have a Sales Tax License.

Taxpayers who wish to voluntarilydisclose and pay delinquent Use Taxmay do so by contacting the VoluntaryDisclosure Program Office at (717)787-9832. Additional information canbe found in the Voluntary DisclosureProgram - Guidelines andParticipation Parameters brochure.

IRS AnnouncesMileage Rate

Increase

The rate will increase to 48.5 centsa mile for all business miles drivenbetween SEPTEMBER 1 andDECEMBER 31, 2005. This is anincrease of 8 cents from the 40.5 centrate in effect for the first eightmonths of 2005.

In recognition of recent gasolineprice increases, the IRS made thisspecial adjustment for the finalmonths of 2005. The IRS normallyupdates the mileage rates once a yearin the fall for the next calendar year.

The IRS has not yet announced the2006 rate, saying they would hold offon setting the 2006 rate until closer toJanuary.

This applies to all miles driven forwork using the optional businessstandard mileage rate in lieu of theextra burden of tracking actual costs,and to businesses who reimbursetheir employees for business-relatedmileage.

Use TaxCompliance

Program

Apply forReimbursement

If You CanYou can’t deduct personally

business expenses incurred by acorporation if you could bereimbursed by the business butfailed to seek reimbursement. Ifthe corporation has a policy of notreimbursing, for all or certainexpenses, you can deduct thempersonally. That applies to largecorporations and closely heldbusinesses. In Ronnie O. Craft etux. (T.C. Memo. 2005-197) thetaxpayer was a 50% shareholder inan S corporation. The corporationadopted a resolution requiring thetaxpayer and the othershareholder, as vice president andpresident of the corporationrespectively, to incur expenses asmay be necessary or required andstating that they shall not bereimbursed by the corporation.The taxpayer did incur validbusiness expenses as an employee.He deducted the expenses on aSchedule C. He reported noincome. The Court held that theexpenses should be deducted onSchedule A as a miscellaneousitemized deduction, subject to the2% limitation.

IRS Notice2005-61

Notice 2005-61 clarifies thereporting requirements for Form W-2 for employers which haveamended their Section 125 cafeteriaplans to provide a grace period forqualified dependent care assistance(under Section 129) immediatelyfollowing the end of a cafeteria planyear. Employers may continue to usethe safe harbor in Notice 89-111.Notice 2005-61 will be published inInternal Revenue Bulletin 2005-39,dated Sept. 26, 2005.

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The PA Accountant is published five times annually by the PennsylvaniaSociety of Public Accountants, 20 Erford Road, Suite 200A, Lemoyne, PA17043. All editorial correspondence, manuscripts, etc, should be sent to:PSPA, 20 Erford Road, Suite 200A, Lemoyne, PA 17043. This publicationis designed to provide accurate and authoritative information in regard to thesubject matter covered. The publication is not engaged in rendering legal,accounting or other professional services.

Editor’s Note:If you would like to submit an article for publication please contact the PSPAExecutive Office at 1-800-270-3352 or (717) 737-4439 for submissiondeadlines and for a copy of the author guidelines.

CLASSIFIED ADVERTISEMENTS

SEEKING ACCOUNTING & TAX PRACTICEPhiladelphia area CPA seeking to purchase an existing practice. If interested please

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