Friday, December 21, 2012

Time running out on “Reduced User Fee” for applications for reinstatement of tax exempt status

Small tax-exempt organizations still have time to pay the reduced use fee with an application for reinstatement of tax-exempt status with the IRS, but the deadline is approaching.  According to IRS Revenue Procedure 2011-36, applications must be postmarked no later than December 31, 2012.

The IRS automatically revokes the tax-exempt status of organizations required to file an annual return for failure to file the required annual return for three consecutive years.  

The reduced user fee is only available to small organizations that normally have annual gross receipts of not more than $50,000 in their most recently completed taxable year.

For an eligible organization, the amount of the user fee that must be submitted with an application for reinstatement of tax-exempt status postmarked by December 31, 2012 is $100.

The IRS will no longer recognize the organization as tax exempt.  After the December 31, 2012 deadline, the organization must submit an application to the IRS and apply for tax-exempt status (Form 1023 or Form 1024) and pay the applicable user fee ($400) and wait for the IRS to issue a new Determination Letter on the exempt status of the organization.

This information was adapted from the Rev. Proc. 2011-36 on the Internal Revenue website at    

Rhonda Machalk, CPA

Tuesday, December 18, 2012

Non-profit organizations and political campaigns

I recently read an article in the September edition of the Journal of Accountancy called “Ban on political activities: An election-year warning for charities” by Claudia L. Kelly, CPA, PH.D., and F. Douglas Roberts, CPA, PH.D. (  The article addresses non-profit organizations and political campaign activities. 
Non-profit organizations continue to catch the attention and scrutiny of the IRS.  With it being an election year, the IRS is looking for political campaign activities of 501( c)(3) tax exempt organizations.  The article provides links to resources providing guidance and examples concerning political campaign activities.  The article states that a good place to start is Rev. Rul 2007-41 which provides examples of acceptable and unacceptable activities.   The article noted above discusses non-profit organizations and the effect of:
    1. its leaders and other individuals activities, 
    2. candidate speakers and forums, 
    3. issue advocacy vs. political intervention, 
    4. printed materials, websites and social media, 
    5. business activity, 
    6. consequences or political campaign activity, 
    7. advising the organization and its members.  

The article describes multiple tips for non-profits to prevent activities from being classified as political.  Organizations should have a written policy that prohibits political activities and describes what activities are unacceptable.  In addition, organizations should issue disclaimers in any printed material or in any public speeches by members of their organization so it is not misconstrued that the member is acting on behalf of the organization.  The organization should not use or allow the use of its facilities to sponsor political campaign activities.  Any activities involving political candidates should be presented as educational and should not promote the candidate. 

Auditors and tax preparers of non-profit organizations should be on the look-out for disallowed political campaign activities.  Certain types of activity could lead to fines and/or loss of the organization’s tax exempt status.  Political campaign activities are required disclosures on the Form 990 and if such activities could result in a loss of exempt status, auditors of an organization may need to consider disclosure in the financial statements.

Megan Schuler, CPA

Tuesday, December 11, 2012

Be who you are -- especially if you are a non-profit

I, nor anyone I have worked with in my career at Robinson, Grimes & Company, could ever really be considered a fan of the IRS.  I suppose that is the way it should be and the folks who matter to our practice the most – our clients – are okay with that.  However, not too long ago I was researching tax court cases for a client issue and came across a case where I literally became a fan -- at least for a few moments.

The case involved a large “religious” charity, dutifully filed as and approved to be a tax exempt organization.  Just the fact that there was a tax court case titled with a large religious tax exempt organization made me read on.  It seems the founder and his wife drew very meager salaries from the church, a total of $20,000 in 1970, as their desire to minister was reward enough.  However, it also seems that in their time away from the church office they lived on a yacht in the Mediterranean Sea.  They traveled to the most luxurious places on earth -- all on “church business.”  Even in 1970 it would have been difficult for a couple with four children to live their lifestyle on a $20,000 salary.  Well, the IRS and the Tax Court saw through that, as one of the church’s stated policies was to “Make money.”  In the court’s words, the church “fails to qualify for tax-exempt status because a portion of its net earnings inured to the benefit of private individuals. In order to qualify for tax-exempt status, not only must an organization establish that it is organized and operated exclusively for exempt purposes, but it must also prove that no part of its net earnings inures to the benefit of any private shareholder or individual.”  I cheered as I read the verdict – don’t cheat on your income taxes under the guise of religion. 

There have been several high profile court cases over the recent years where the IRS has challenged a non-profit’s earnings and won.  A good example is a nature/environmental organization owning and operating a sawmill and drilling for oil under a preserve.  Really?  They also sold premium land to certain affiliated individuals at significant losses, only to have the individual turn around and “donate” a large sum to the charity, thereby making the organization whole but also giving the buyer a huge tax deduction that was not deserved.  These activities did not line up with their approved tax exempt purpose, and that put everything at risk.  If you are an environmental organization, be an environmental organization.  Cases like these have made the IRS overcompensate and impose burdensome and costly reporting on good-intentioned, well-meaning charities that try to do things the right way.

If you have a charity or are thinking of starting one, here are some points to consider:
    1. Let it pass the “Mom Test.”  If everything -- and I mean everything -- about your organization was posted on the front page of your local newspaper, would your mom approve?  When considering an action, expense, or board decision, think, “would all the details look good in the newspaper?’
    2. Your reputation is your most valuable asset.  Protect it.
    3. Have good “governance.”  Make sure decisions, expenses and activities are in line with the mission. 
    4. Try really hard not to have conflicts of interest between the organization and officers or contributors.  Sometimes organizations are too small and need help from board members or officers.  However, if there HAS to be a transaction that has an appearance of a conflict of interest, have transparency. 
    5. Have good record keeping.  Your best defense to any question is good documentation.  In addition, with the many non-profit failures as described above, the annual filing for tax exempt entities has gotten more and more in depth.  The best way to file complete and accurate returns in a way that is the least administratively burdensome is to maintain good accounting records.  It is also necessary to maintain good records of board and committee minutes. 
    6. Make sure the organization is not involved in any substantial non-exempt activity.
    7. Make sure all your tax filings are up to date and keep them that way.

If we can be of assistance to your tax exempt entity, please give us a call. 

Jason Blair, Partner and very limited IRS fan

Monday, December 3, 2012

80th anniversary fun facts (1952)

In the year, 1952 (twenty years after our founding):

    • The following people were born –Dan Aykroyd, Bob Costas, Jimmy Connors; also, two young future partners, Jay Pease & Charlie Johnson
    • Jackie Robinson becomes the highest paid player in Brooklyn Dodger history
    • Harry Truman announces he won’t seek a 3rd term s president
    • The first airing of “American Bandstand” in Philadelphia
    • Nobel Peace Prize winner is Albert Schweitzer
    • The average cost of a new car was $1,754, a house was $9,075
    • The annual income was $3,850 a year
    • Gas cost $.20 a gallon
    • Hit song: “A Guy is a Guy” by Doris Day
    • Academy Award winner: “The Greatest Show on Earth”

Meanwhile, back in Columbus…

S.M. Wellborn celebrates 20 years of being in the CPA business, while Otis LeMay debates giving up the IRS job he has and considers starting his own accounting practice.

More to come – hope you enjoy!!

Jay Pease, Audit Partner (and Firm Historian)

Monday, November 19, 2012

Georgia vehicle ad valorem tax to end

It may have slipped under your radar this year, but the vehicle ad valorem tax is coming to an end in Georgia.  A bill was passed earlier in 2012 that, once effective in 2013, will combine vehicle sales tax with the ad valorem tax resulting in a new “title tax.”  You only pay this once, at the time of purchase.  And then there will be no yearly birthday tax (ad valorem tax) due.  The title tax will be due on all new and used cars purchased after March 1, 2013.  Purchasers of vehicles in 2012 will have the option to continue to pay the ad valorem tax as everyone has up until this point, or they may opt for the new title tax. 

The title tax will be based off of a percentage of the fair market value of the purchased vehicle, less any trade-in value of another vehicle, which may differ from the purchase price of the vehicle.  For 2013 the tax will be 6.50% of the fair market value less any trade-in value, 6.75% in 2014, and 7.00% from 2015 forward  with a provision to be raised to 9% if deemed necessary to meet revenue projections.  People who move to Georgia will also be required to pay this tax when registering their vehicle in Georgia.  50% of the tax will be due when registering, and the remaining 50% will be due within 12 months.

The longer that an individual maintains ownership and title of a vehicle, the more beneficial this legislative change will likely be to them.  If you purchase a vehicle every few years, this change may be less beneficial to you or it may actually be detrimental.  The greatest savings will likely come to those purchasing new vehicles.  Prior to March 1, 2013, new car purchasers would pay sales tax and yearly ad valorem taxes.  Purchasers after March 1, 2013, will only pay a one-time title tax (similar in percentage to the prior sales tax), and no sales tax or yearly ad valorem taxes.

John Robert Voynich, CPA

Monday, November 12, 2012

Real estate professional election - an IRS hotspot

One of the top areas for IRS exams related to individual returns is Schedule E page 1.  The agents’ eyes glimmer when they see rental losses.   The rules are complicated involving the deductibility of real estate losses, so let me recap the basics:

      1. Typically rental real estate losses are considered passive.  Passive losses can only be deducted to the extent there is passive income; otherwise, they are carried forward to the next year.
      2. If you actively participate in your real estate activities (making significant management decisions, arranging for others to provide repairs services, etc), you can deduct up to $25,000 of passive losses regardless of passive income.
      3. If you qualify as a real estate professional, the losses will not be considered passive and will not be subject to the limitation rules.
      4. To qualify as a real estate professional:
        1. More than half of the time you spend providing services during the year for trade or business activities must be related to your real estate activities
        2. You must materially participate in the real property activities for more than 750 hours during the year (this is determined separately for husband and wife, not aggregated)

Material participation has its own separate tests (7 to be exact), which I will not go into now.  The general idea is that material participation means you are regularly, continuously and substantially involved in the operations of the activity.  

The 750-hour test is tricky, so the most important thing to remember when dealing with rental real estate is to document your time.   Keep a calendar or a daily log.  Document the hours you spend performing services related to your real property trade or business vs. other trade or business time.  Also, make sure you separately document the time you spend on each property. 

While this documentation can be done simply with a spiral bound notebook, today’s technology offers tons of applications for efficient time tracking.    Just from a Google search I found several applications including HoursTracker- Time & Time Tracker (compatible with iPhones and iPads) and Toggl (compatible with Mac, PC, iPhone, IPad, Ipod or Android).  

As always, please discuss any questions you have with your trusted tax professional.  

Jessica Miles, CPA; Supervisor

Monday, October 29, 2012

80th anniversary fun facts (1942)

Ten years had passed since our firm’s founding, in 1932. The country was beginning to turn the tide in World War II. As we continue to share memories of the past, in celebrating 80 years in practice, remember when?

In the year 1942… 

  1. War highlights:
    1. President FDR and British PM Churchill created the United Nations
    2. General MacArthur vowed “I shall return”
    3. Anne Frank went into hiding
    4. Jimmy Doolittle led his raiders on Tokyo
    5. U.S. wins the Battle of Midway
    6. The Manhattan Project was begun 
  2. Meanwhile, back home:
    1. Famous birthdays – Harrison Ford, Muhammad Ali, Barbra Streisand
    2. Famous songs of the day – “Deep in the Heart of Texas”, “White Christmas”
    3. Famous movies – “Casablanca”, “Mrs. Miniver” (Academy Award Winner
    4. Capitol Records was formed
  3. Cost of living:
    1. New car $920 (but no more new cars were made until after the war in 1945)
    2. New house $3,775
    3. Gasoline $.15 a gallon
    4. Average income $1,885 (up $233 in 10 years)
  4. Heisman Trophy winner – Frank Sinkwich, from UGA

...and yes, one other important birthday – Robinson, Grimes current Senior Partner, Lev Norman – October 10, 1942

Next up, 1952 – it was a very good year!!

Jay Pease, Audit Partner (and Firm Historian)

Monday, October 22, 2012

Microsoft Excel - Format Painter and AutoFill

Practically every business, small and large, uses Microsoft Office. Included in this software package is the extremely powerful spreadsheet software (and my personal favorite) Microsoft Excel. Here are two time saving features for Excel that I use almost every day:

1. Format Painter

The Format Painter will copy the formatting from one place and apply it to another. Don't waste time "manually" applying the same formatting (background, font, size, border, etc) over and over to multiple cells - just use the format painter!  Here's how:

i. Locate and select the cell (or range of cells) that currently has the desired formatting.

ii. Click the Format Painter button located in the Home tab, bottom left corner of the ribbon. 

iii. Now select the destination cell (or range of cells) and the formatting from the first cell will be applied to the newly-selected cell(s)! Note this will not change the cell contents - only the formatting.

Tip: If you double-click the Format Painter button, it will lock the paste step, allowing you to paste the copied format multiple times. The selected format will be applied everywhere you click. To unlock the Format Painter simply press the ESC key on the keyboard.

2. AutoFill

The AutoFill feature in Excel will add content to selected cells based on input data and patterns. For instance - in the image above, when you AutoFill, Excel will fill in the other days of the week in proper order and repeat. Numbers will change accordingly, formulas will adjust themselves, and formatting will come along too - there are many ways to use this feature. Play around with it to see what all you can do! Select the cell (or range of cells) you wish to AutoFill. Move your cursor to the bottom right corner of the selected cell and it will change to a solid black "plus" symbol (like in the picture above). This is the AutoFill symbol. Left-click and hold the mouse button down. Now drag the mouse in the direction you wish to AutoFill. Once you have the desired range selected, release the mouse button and the contents of the cells will fill in.

Matt Sellers, CPA; Supervisor (and Excel enthusiast)

Monday, October 15, 2012

80th anniversary fun facts (1932)

As we celebrate our firm’s 80th anniversary, we thought we would share a few interesting facts. We will continue doing so throughout the year. These are courtesy of our Administrative Supervisor, Becky Meeks (no, she hasn’t been here the whole time... she just found a little book that we will pilfer from):

In the year, 1932 (the year of our founding) ……………:

  1. The following people were born – Elizabeth Taylor, Johnny Cash, Meadowlark Lemon, Little Richard, and Kasey Kasem
  2. Franklin Roosevelt defeated incumbent Herbert Hoover for President of the U.S.
  3. Prohibition ended
  4. The parking meter was invented in Oklahoma City
  5. The Zippo lighter was invented
  6. Miss America was………….. no one – The Miss America pageant had not begun yet
  7. The average cost of a new car was $610; a house was $6,515
  8. The annual income was $1,652 a year
  9. Gas cost $.10 a gallon
  10. Hit songs were “All of Me” by Louis Armstrong and “Brother, Can You Spare a Dime?” by Bing Crosby

And, most importantly, the predecessor to Robinson, Grimes,  Mr. S.M. Wellborn began his accounting practice.

More to come – hope you enjoy!!

Jay Pease, Audit Partner (and Firm Historian)

Monday, October 8, 2012

Capital assets

I am often asked about tax deductions - particularly about tax deductions related to major purchases, a.k.a capital assets. Examples of very common questions are, “If I buy a van for my business, can I deduct the total cost of it?” or “When I sell my van that I use entirely for business, what sort of taxes do I have to pay for selling it?” Well, those questions can be pretty complex to answer, hence the reason most people are not sure of the answers. So here’s a quick overview in three parts. First we will determine what constitutes a capital asset. Second we will cover how much you can deduct on your tax return when you purchase a capital asset. Finally we will touch on how you will be taxed when you sell your capital asset.

Capital Asset Defined
There is a general rule for determining whether or not something is tax deductible: If you purchase something for business use, it’s generally deductible. If you purchase something for use around the house or to get to and from work, it’s generally not deductible. The use and treatment of property determines whether or not it is considered a capital asset. Capital assets are things a taxpayer purchases to use in his or her trade or business that will last for more than one year, such as a vehicle, furniture, or machinery.

Investments are also considered capital assets, but there are special rules for how they are taxed. Investments do not have to be used in a trade or business to receive capital asset treatment; however, there are different rules for individuals, partnerships, and corporations. Here we will just talk about investments at the individual level.

If you hold inventory for sale, no matter how expensive each item is, none of your inventory qualifies as a capital asset.

Capital Asset Loss and Tax Deductions
Keep in mind that for purchases to be deductible, they have to be used in a trade or business. Because capital assets last for more than one year, you usually cannot deduct their total cost in the year of purchase. There are special elections you can make that allow for accelerated deductions, but those elections change from year to year. For assets such as a car or furniture, you have to spread your deductions out over two or more years depending on what you purchased. If you realize a loss from the sale of a capital asset such as a car or furniture, the full amount of that loss is deductible.

Investments, as noted earlier, are special. You can’t deduct the cost of an investment until you sell it, and even then there are special rules. If you personally hold investments and you sell your investments at a loss, you may deduct up to $1,500 (if single) or up to $3,000 (if married) of your loss each year. If you lost more than your allowed deduction, you can deduct the rest of your loss in the coming years.

Capital Gain Tax Treatment
When you sell your capital asset for a profit, the difference between your basis (original cost minus depreciation) and the selling price is considered a capital gain. The profit or gain from your sale is taxed at a lower tax rate than your regular income (such as your wages). Also, depending on whether you held your capital asset for longer than one year, your tax rate will vary. It is usually better to hold a capital asset for more than one year for tax purposes. Profits from sales of capital assets changes from time to time, but it is usually somewhere around 15%.

This information really just scratches the surface of capital assets.  You should contact your tax professional for a more in-depth discussion.

Eric Tydings

Monday, October 1, 2012

Backing up your data

We take great care to back up the firm’s data.  You should take great care to back up your personal data.  Consider all the digital pictures, videos, personal correspondence, e-mail, and other data on your home computer.  Now think for a moment about how you would feel if all that data suddenly disappeared.  Not a happy thought, is it?  You should know that it can happen – and it can do so without warning  –  from a hard drive crash, lightning strike, or any number of other uncontrollable events.  You can take some simple and not-too-expensive steps to help save your precious data.  The short answer is to make sure your data exists on multiple devices and/or in multiple places.

One of the simplest ways to make sure your data is protected from a hard drive crash is to back up your data to an external hard drive.  There are many options sitting on the shelf at Best Buy, Office Depot, or even Wal-Mart.  You can expect to spend about $100 for a device that has plenty of capacity to back up the data on your computer.  These external hard drives connect to your computer via USB cable and typically use included software to keep your data backed up.  Some rely on the backup software that is built in to Microsoft Windows.

For a more convenient setup with added protection consider an online backup provider.  A good example is Carbonite, but there are many, many choices.  At the time of this writing Carbonite costs $59 per year for its most basic service.  To use an online backup provider you typically begin by signing up on the company's Web site, download some software to your computer, and then let that software walk you through the setup process.  Once the software is configured your data is copied to “the cloud” on a regular basis – you don’t have to do anything else.  Plus, you get the added protection of the data being stored offsite, which provides protection against theft, fire, lightning, and other “local” problems that could render a backup made to a nearby USB hard drive useless.

There are other approaches and solutions that could work, as well.  The point is to get you thinking about backing up your data.  If you are not backing up your data at all right now, you should start doing so right away!

Craig Rhinehart, Director of IT Services

Monday, September 24, 2012

Managing work-related stress

Every professional has to deal with stress in some form. We are simultaneously juggling our careers, our family, and various clubs and activities. I discovered these helpful tips for dealing with stress from the website TargetWoman, which is an Award winning Information portal dedicated to Women. Here are some helpful ways to manage work stress:
  • Don’t miss breakfast: Poor nutrition alters biochemical profile, start the day with nutritious low-fat breakfast. Eat regular balanced meals throughout the day.
  • Effective time management: You have limited time in the day, so make the most of it.  Analyze core values, schedule activities, create realistic expectations, straighten priorities and divide time for different aspects of your life. Learning to say ‘no’ in a friendly but firm manner, requesting help when you certainly need it, and not desiring to meet unrealistic goals is also important.
  • Breaks help: Take small breaks from work. Ensure you make use of lunch times and other break times. It helps to increase productivity.
  • Take deep breaths: At times when you are feeling overwhelmed by the amount of tasks or if you face a confronting situation, take deep breaths. You body and mind will benefit from the extra oxygen and you will feel relaxed and cool.
  • Choose your company: The company of optimistic and confident people will help in finding new dimensions to various issues that you are likely to face in work area. You will develop a positive attitude and will feel confident and less pessimistic. Keep away from negative company -- negativism sucks positive energy. Learn to take things lightly. Smile and laugh often.
  • Use the gym: Exercise regularly for physical as well as mental benefits.  Exercise helps relieve stress.  Learning the art of meditation can bring about long lasting wonders for the psyche.
  • Plan back-ups: Unforeseen domestic changes will add up to stressful situations. Develop strategies to face unexpected developments like backup ride for kids, plan for dinner etc.
  • Network: Meeting new people outside work area, developing friendship with like-minded individuals, sharing views on current affairs, participating in social welfare programs improves your sense of social connection.

Carolyn Kobek, CPA

Monday, September 17, 2012

Financial Literacy – Never too early to learn

According to a phone survey conducted by the American Institute of CPAs, 61 percent of parents pay their children an allowance, averaging $65 per month.  However, only 1 percent of parents said their children save any of their allowance.  Teaching children financial responsibility early can have a huge impact on their financial habits as they become adults.

Along with another local CPA, I spent several hours this summer volunteering with girls aged 13-15 discussing topics such as balancing a checkbook, budgeting and saving, and credit cards.  We even talked about payroll deductions and examined a W-4 and W-2.  These are topics that are rarely mentioned in school.

Several of the girls had opened their own checking accounts, and they had overheard their parents talk about credit cards.  However, many of them were shocked to learn what is deducted from a paycheck.  And, they had never really thought about budgeting.

While I cannot say I kept them fully engaged each hour, many of the girls asked relevant questions.  Because the math skills varied among the girls, we kept examples simple.  We used a financial calculator in Excel to show the impact of paying more than the minimum payment on a credit card, which was surprising to girls who were paying attention.

I hope to continue this volunteer project in the future.  I truly believe the more children see good examples of financial responsibility, the more confident they will be to take control of their financial future.  In the meantime, I’m open to any ideas to make W-2s and budgets more exciting to teenagers.

Jessica Miles, CPA

Monday, September 10, 2012

Tax record retention policies

Have you ever wondered how long you should keep the documents and record that support the items included on your income tax returns? When determining how long to keep records, we typically look at the relevant statute of limitations period – the period of time a taxpayer can amend a return to claim a credit or refund or the IRS can assess additional tax. For most taxpayers this period is three years from the original due date of the return or the date the return is filed, if later. However, if a return includes a substantial understatement of income (defined as omitting 25% or more of the gross income reported on the return), the statute of limitations period is extended to six years.

A good rule of thumb for keeping tax records is to add a year to the statute of limitations period. Using this approach, you should keep most of your income tax records for a minimum of four years. Certain tax records should be kept longer. Records documenting the cost basis of property that could be sold (like investment property or business fixed assets) should be retained based on the record retention period for the year the property is sold. Tax returns, IRS and state audit reports, business ledgers and financial statements normally should be retained indefinitely.

Keep in mind there may be non-tax reasons to keep certain tax records beyond the time needed for tax purposes. For example, insurance policies, leases, real estate closing statements and employee payroll records might need to be kept longer. As a final note, with many businesses moving to a more “paperless” environment, the same recommendations apply to computer records and electronic storage systems, as to paper documents.

Jim Story, Manager - Tax Department

Tuesday, September 4, 2012

Converting your C-Corp - It may be now or never

You may have recently considered the pros and cons of converting your C Corporation to an S Corporation or LLC.  The Tax Adviser recently included a detailed article emphasizing that now may be the time.  So why is now a critical time?  I'm so glad you asked:

  • Due to the extended Bush tax cuts, tax rates are currently at historic lows.  These rates once again are set to expire at the end of this year.  With great uncertainty in a presidential election year, we cannot count on the tax cuts being renewed.
  • Unfortunately real estate values are also at historic lows.  Because converting a C corporation to a passthrough entity (partnership or S Corporation) can trigger gain based on the fair market value of the corporation’s assets, lower real estate value can be a good thing from a tax standpoint. 

Once you come to the decision (and work up the nerve) to convert your C Corp, you must decide between an S Corporation or LLC.  Both forms are passthrough entities - meaning income will be passed through to the individual level and will be reported and taxed when you file your individual tax return.

Converting to an S Corporation is easier and less costly than converting to a LLC.  I’m assuming you are now thinking “OK - stop right here.  Why would I even consider converting to a LLC?”  Depending on your corporation’s current needs and future goals, converting to an S Corporation may not be desirable (or even possible).  Here are a few basic rules for becoming an S Corp:

  • It must be a domestic corporation.
  • The corporation cannot have more than 100 shareholders.
  • Shareholders can only be individuals who are US citizens or residents, certain estates, certain trusts, and certain tax-exempt organizations (i.e. partnerships cannot be a shareholder in an S Corp).
  • The corporation can only have one class of stock outstanding.  Special allocations of earnings to certain shareholders can create a separate class of stock, which will revoke the corporation’s S election.  Generally, all shareholders will need to have identical rights to distributions and liquidation proceeds.

Usually the “one class of stock rule” is the most challenging limitation for our small C Corp clients.  Transactions such as compensation arrangements and leases between the corporation and shareholder can violate the "one class of stock" requirement.

Every business is unique.  This brief discussion by no means describes all of the issues you will need to consider when converting your C Corp.  If you have any questions, please don’t hesitate to contact one of our tax specialists at Robinson Grimes.

Jessica Miles, CPA

Tuesday, August 28, 2012

Five lessons in leadership from Mongolia to Antarctica (or, What I did on my summer vacation)

On a recent trip to the Gobi Desert in Mongolia, my husband and I and a group of 25 other people participated in an Astronaut Leadership Experience Program through the International Space School Education Trust (  I learned some important truths about myself on the trip, but it was a recommendation at the end our excursion that inspired me.   Hazel, a magistrate from Wales, introduced me to the book Shackelton’s Way:  Leadership Lessons from the Great Antarctic Explorer by Margot Morrell, Stephanie Capparell, and Alexandra Shackelton.  This book is a roadmap for effective leadership.

Many know that, against all odds, Shackelton didn’t lose a single crew member during the grueling Endurance expedition to Antarctica.  Shackelton’s Way tells the story of Shackelton’s leadership journey and how he embraced practical leadership principles that ultimately saved his crew.  Five of these principles resonate with me as I continue on my own leadership journey.  They are:

Lesson 1:  A leader knows that optimism is contagious and important to productivity and harmony.  Shackelton was an optimist and he insisted on optimism from his crew.  The authors observed, “Shackelton kept malcontents close to him to contain their effect and to try to win them over.”

Lesson 2:   A leader uses celebrations and good humor to unite his team and create loyalty.  Shackelton was intentional about celebrating holidays and honoring birthdays, and he believed in balancing work and fun.  One of his crew wrote, “it was a rule to hold a concert on Saturday nights and this rule was seldom broken.”  Shackelton’s efforts to unite his crew paid off during the most trying times of the expedition. 

Lesson 3:  A leader understands that all team members need challenging and meaningful work and that sharing the load, including the least desirable chores, breaks down social  and status barriers that create cliques.  A crew member wrote, “I must say that I think scrubbing the floors is not fair work for people who have been brought up in refinement... but it humbles one and knocks out of one any last remnants of false pride... and for this reason I do it voluntarily.”

Lesson 4:  A great leader is selfless.  “Shackelton always put the well-being of his crew first.  He always weighed the cost of a goal against the expense of reaching it.”  The authors’ observation contrasts Shackelton’s leadership style with that of Robert F. Scott --with whom Shackelton had served in an earlier, failed expedition.

Lesson 5:  An effective leader plans, plans, and plans but remains flexible.  The authors note, “Shackelton was bold in his plans, but cautious in their execution, paying close attention to detail.”  At one point in the expedition when the ship could not be saved, a crew member observed, “As always with him, what had happened had happened; it was in the past and he looked to the future...  Without emotion, melodrama or excitement he said, ‘Ship and stores have gone, so now we’ll go home.’”

Many leaders -- from CEO’s to entrepreneurs to the US Secretary of the Navy -- have successfully utilized Schackelton’s principles to lead their own organizations.  The next leg of my own leadership journey includes the GSCPA Leadership Academy.  Rest assured this “roadmap” will be among the tools in my arsenal as I move toward the goal of effective leadership.

Daria Cruzen, MBA, CPA; Manager, Audit Department

Monday, August 20, 2012

A different way to think about “the cloud.”

The cloud (using servers, services, or applications located somewhere on the Internet - a.k.a the "cloud”) is a somewhat polarizing subject.  Many (but not all) IT folks are wary of it for varied reason (security concerns, implementation complexities, fears about what it will mean for their job).  Many executives and business owners are enthusiastic about it because of the many touted benefits (lower cost, better uptime, less day-to-day hassle). One reason for these differing feelings is that many view the cloud as an all-or-nothing proposition. It doesn't have to be this way.

I am not convinced we'll see great success in total cloud migration for the masses any time soon. In many cases the move to the cloud is better as a calculated, application-by-application endeavor - a "hybrid" approach, if you will - with some applications remaining in-house and some moved to the cloud.  Perhaps it’s cloud backup where you begin your migration.  Or maybe it's outsourcing your spam filtering or even your entire e-mail server. Perhaps it’s an online financial or line-of-business application.  

By choosing a specific area that makes sense for moving to the cloud (backup is a great first step), an organization can move, evaluate, and then plan the next step in its cloud migration.  This gradual migration approach permits IT to better address and get comfortable with security and other technical considerations.  It can also give management an opportunity to measure and assess each move before going “all-in.”  Finally, this gradual approach allows an organization’s culture to adjust, which just may be something that nobody is thinking about (but should be).

Craig Rhinehart, Director of IT Services

Wednesday, August 8, 2012

Notices from the IRS and State Taxing Authorities

Have you experienced the dread of opening correspondence from the IRS or from a state taxing authority even though you were confident that your return was prepared correctly?  Letters of this sort that indicate that you owe additional tax, and sometimes even penalties and interest, can be very unsettling.

Although to you, receiving a letter like this can be intimidating, the reality is that this type of correspondence is very routine in the course of these taxing authorities administering the collection of taxes.  Many of the letters are simply requesting clarification of an item that you reported, or additional information that is readily available to you.  Most of the notices our clients receive can be resolved by providing the requested information within the time allowed (usually thirty days).  Often, the notices received are clearly in error, and require basic documentation to resolve.

Here are a few suggestions if you receive a notice:

  1. Seek to resolve the issue as soon as possible (note the deadline to respond).
  2. Don’t assume that the notice is correct and pay the amount requested, without investigating further.  Many notices are simply incorrect.
  3. If you paid someone to prepare the return in question, make sure the preparer receives a copy of the notice as soon as possible. (You will also need to sign a Form 2848 Power of Attorney to authorize the preparer to talk directly with the IRS.)
  4. Secure any documentation requested.  Cancelled checks, bank statements and acknowledgements form charities regarding charitable contributions are among the most common documents needed.
  5. Send a letter (or have your preparer send a letter) addressing the issues raised in the notice.  The letter should be courteous, but business-like and should be directed to the issues at hand without providing information to any unrelated issue. (Respond to only the information requested.)
  6. Attach documentation that supports your position.
  7. If the amount of tax is significant, you might consider mailing your letter certified mail or use some sort of certificate of mailing.

We correspond with the IRS and state taxing authorities on behalf of our clients, and find that by following these steps, most issues can be resolved without the need for additional stress or frustration. 

David Payne, Manager, Tax Department

Monday, July 30, 2012

80 years and ac-counting!!

The Roaring 20’s had just come to a crashing end. A new president was talking about a recovery thing called the “New Deal”. And in 1932, in downtown Columbus, a young CPA named Sam Wellborn, Jr. hung out a fresh shingle to begin a new accounting practice. Mr. Wellborn continued his practice for 44 years. Near the end of his time in practice, one of his senior partners was a true southern gentleman named Keith Grimes (we’ll come back to him in a minute).

It was a more robust time, the post-war 1950’s, when Mr. Otis LeMay gave up his IRS career of fighting organized crime, moved to Columbus, and started his own CPA firm. Years later, one of his senior partners was another southern gentleman named Ross Robinson.

And so it was, that on May 31, 1980, two of the most successful accounting practices in Columbus -  Robinson, Oliver and Norman , along with Grimes, Snipes and Ellison - were merged to form Robinson, Grimes and Company, P.C.  It was truly a unique blend of the community’s two largest firms, combined to form what today has become one of the premier practices in our region.

With that little look back into our history, Robinson, Grimes takes great pride, here in 2012, celebrating our 80th Anniversary.  It has been an amazing journey, from the early days of our country and community’s re-birth to today’s fast-paced, technology-charged business world. Through it all, Robinson, Grimes and all of our predecessor partners and staff have served clients of various industries, locations and sizes. We have shared in their development over the years, as we remain “Committed to Your Success.”

Jay Pease, Audit Partner (and Firm Historian)

Friday, July 27, 2012


Welcome to the Robinson, Grimes & Company blog!  The goal with this blog is to share our business and accounting-related insights in a timely, informal format.  We plan to post entries written by our firm’s personnel about once per week.  We’ll provide our thoughts on tax, audit, accounting, personal finance, general business, and even information technology.  I hope you find the information here pertinent and informative.  Please visit this site often – and let me know what you think.  We welcome your suggestions on topics for future entries, as well.

Scott Voynich, Managing Partner