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2009-2010 PA Budget - Overview of Tax Changes Order Tax Season


									                       Fall   2009

The Magazine Of The Pennsylvania Society of Public Accountants

   3 2009-2010 PA Budget -
     Overview of Tax Changes
   3 Order Tax Season Products
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          Visit us at
 PSPA Officers
  Paul J. Cannataro, CPA, MST, President     A Message From The President
    Barry L. Meyer, PA, President Elect
Lamont B. Anderson, PA, 1st Vice President
    Francis J. Cellini, EA, ABA, ATA, ATP,
                                                                     The autumn is in full swing and the Fall Classic
            2nd Vice President
       Frank H. Kelly, EA, Secretary                              is coming up soon. As I write this letter the Phillies
    John J. Komarnicki, CPA. Treasurer                            are up two games to one and have a tough road
                                                                  ahead with the Dodgers. But those darn (you
       Board of                                                   know what I wanted to say) Yankees look like they
       Directors                                                  have bought themselves another World Series
           Donald L. Allen, CPA                                   championship. Nevertheless think Red and Go
        Lamont B. Anderson, PA                                    Phillies!
          Randy L. Brandt, CPA
        Richard Brasch, Jr., CPA
                                                                     This season has been particularly busy with the
       Gerald L. Brenneman, CPA                                   chapter visitations. But I have enjoyed meeting
        W. Raymond Bucks, CPA                 PSPA members from around the state. The welcome provided to me has
         Paul J. Cannataro, CPA               been overwhelming and I want to thank the chapters I have visited for
           M. Stephen Caskey                  their overwhelming support. There is no doubt in my mind what makes
          B. Joseph Cellini, PA               PSPA a great organization. It’s our members.
          Francis J. Cellini, EA
             Arlan Christ, EA                   IRS is concluding their final meeting on the Return Preparer Review
          Maureen Christy, CPA                and they should begin discussions with their various components
           Frank L. Corso, CPA                to finalize the
       Bernard A. Deverson, CPA               recommendations
            Dawn L. Douglas                   they will make to the
              Penny Erbe, EA
             Debra S. Eremus
                                              President and Congress.
            David E. Fleck, PA                We will keep our
         James S. Frederick, PA               members apprised of the
         William C. Graham, PA                developments that will
           Charles J. Hafer, PA               shortly be forthcoming.
           John P. Hassler, PA                Stay tuned.
          Joyce P. Huttman, PA
    Marvin R. Huttman, CPA, CFP, MST            Our ad hoc committee
          Mary Lew Kehm, CPA                  will be meeting to make
            Frank H. Kelly, EA                recommendations
          Richard B. Kelly, CPA               on how our By-Laws
        John J. Komarnicki, CPA               should change to
          M. Michael Lerner, PA
                                              accommodate the new
            Barry L. Meyer, PA
          Brenda Milovich, CPA                Regulatory Model that
      H. Richard Neidermyer, CPA              Commissioner Shulman
       Thomas E. Ostrowski, CPA               will be introducing.
           Howard Pachter, PA
                                                In closing I want to
            Janet Pastor, CPA
          Norma J. Ridder, CPA                wish all of our members
           Linda M. Roth, CPA                 and their families a
        Timothy Sundstrom, CPA                happy and healthy
          Barbara Thomas, CPA                 holiday season. Be
          Neil C. Trama, Jr., PA              grateful for the many
         Daniel J. Vecchio, CPA               blessings that we have as
                                              Americans. And say a
          Sherry L. DeAgostino,
           Executive Director                 prayer for those who are experiencing some of life’s challenges.
                                                      Respectfully Submitted,
    Pa. Society of Public Accountants                 Paul J. Cannataro, CPA
       20 Erford Road, Suite 200A
          Lemoyne, PA 17043
            1(717) 737-4439
            1(800) 270-3352

                                                           Fall 2009
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                                                      Fall 2009
                                    PENNSYLVANIA TAX UPDATE
                                         2009-2010 PA BUDgET - oVErVIEw of TAX chANgES
                                                                    By Sharon R. Paxton

   Governor Rendell signed                  12.5% of taxable income.
appropriation and tax bills on                                                             pit CheCkoFFS extenDeD
Friday, October 9th. Unfortunately,                  Cni SaleS FaCtor                    Personal Income Tax refund
although the budget reduces                        Weighting inCreaSeD                 checkoffs for Breast and Cervical
spending from 2008-2009 levels, it             In addition, the Corporate Net          Cancer Research and for Juvenile
includes a substantial tax increase for     Income Tax apportionment formula           Diabetes Cure Research have
Pennsylvania businesses. Adjustments        will be modified. The weighting for        been reenacted without sunset
to major corporate taxes will generate      the Sales Factor will be increased         dates. Checkoffs for Wild Resource
an additional $300 million in fiscal year   from 70% to 83% for taxable years          Conservation, Organ and Tissue
2009-10 and $460 million in 2010-11.        beginning after December 31, 2008,         Donation Awareness and Military
                                            and to 90% for taxable years beginning     Family Relief Assistance have been
Capital StoCk & FranChiSe tax               after December 31, 2009.                   extended through 2013.
        phaSe-out DeFerreD
   The Capital Stock and Franchise                 ManageD Care groSS                   pit WithholDing reMittanCe
Tax (“CSFT”) rate for calendar year                      reCeiptS tax                           DeaDlineS reviSeD
2009 and tax years beginning in 2009           Effective October 1, 2009, Managed         New, accelerated deadlines have
is increased by 53% - from 1.89 mills       Care Organizations that are party to a     been established for employers
to 2.89 mills (the 2008 rate). And,         Medicaid managed care contract are         withholding more than $20,000
the phase-out of the tax is delayed -       subject to a tax of 59 mills on gross      of Personal Income Tax annually.
the 2.89 mill rate will apply for 2010      receipts from Medicaid managed care        Beginning in June 2010, such
(previously scheduled at 0.89 mills)        contracts. The tax will be terminated      employers will be required to remit
and 2011 (previously scheduled as the       if determined to be in violation of        the tax on the Wednesday following
first post-phase-out year). Now, the        federal law. Proceeds from the tax will    payday if payday falls on Wednesday-
rate will be reduced to 1.89 mills in       augment the capitation appropriation       Friday, and to remit by the following
2012 and to 0.89 mills in 2013, with full   of the Department of Public Welfare.       Friday if payday is on Saturday-Tuesday.
elimination in 2014.                                                                   The thresholds for classification of
   The rate change will be slightly           Cigarette & “little CigarS”              filers have also been revised to annual
offset by an increase in the valuation                         tax                     amounts, instead of quarterly amounts.
deduction, from $150,000 to $160,000,          The Cigarette Tax is expanded to
effective for taxable years beginning       include “Little Cigars,” and the tax         FilM proDuCtion tax CreDit
after December 31, 2009.                    rate is increased by 25 cents per pack,       The amount available under the
   The rate increase will not be            effective November 1, 2009. Special        Film Production Tax Credit program
factored into estimated tax payments        provisions apply to retailers and other    is reduced from $75 million to $42
due prior to January 1, 2010.               persons in possession, on the effective    million for fiscal 2009-10, then
   While the CSFT rate change will          date, of untaxed little cigars and         increased to $60 million in 2010-11.
have a broad impact on Pennsylvania         cigarettes on which the additional tax
businesses, some will enjoy at least a      has not been paid, to ensure that the                 r&D tax CreDit
small benefit from other changes.           new and additional taxes will be paid.       The R&D Tax Credit provisions have
                                            Cigarette stamping agent commission        been amended to eliminate the one-
   Cni net loSS Cap expanDeD                rates are adjusted. Procedures are         year holding period before a credit
  In one of the few bright spots in         established for remittance and             may be sold. However, the amounts
Pennsylvania business taxes, the            enforcement of tax due on unstamped        available for award have been reduced
Corporate Net Income Tax (“CNI”)            cigarettes.                                by 50% for fiscal 2009-10 and 55% for
Net Loss Carryforward cap is increased                                                 2010-11.
to the higher of $3 million or 15%                 heliCopter Sale anD
of Pennsylvania taxable income                       repair exeMption                              eDuCational
for taxable years beginning after              Effective immediately, the sale and         iMproveMent tax CreDit
December 31, 2008, and to the higher        use of helicopter and similar rotorcraft     The amount available under the
of $3 million or 20% of Pennsylvania        are exempted from Pennsylvania             Educational Improvement Tax Credit
taxable income for taxable years            sales and use tax. Repair parts and        program is reduced from $75 million
beginning after December 31, 2009.          components, as well as installation in     to $60 million in fiscal 2009-10, and
The cap previously was $3 million or        such craft, also are exempted.             to $50 million in 2010-11. The statute

                                                          Fall 2009
has been amended to clarify that            eligible taxes. Participants who become    panel reached the same result in a
where a pass-through entity transfers       delinquent beyond certain parameters       companion case including a leased
a tax credit to its shareholders,           within two years after the end of the      MRI scanning system on leased
members or partners, an election            amnesty period will lose their penalty     premises (Medical Associates of the
may be made to use the credit in the        and interest forgiveness under amnesty.    Lehigh Valley, P.C. v. Commonwealth,
year of contribution or the following       Participants will waive all rights to      No. 50 F.R. 2006). On August 19,
year. The definition of “pass-through       file a petition for refund or otherwise    2009, the Commonwealth filed
entity” now explicitly includes single      contest taxes reported under amnesty.      exceptions to the panel decisions
member limited liability companies             Any taxpayer failing to report and      in both of these cases. The Court
treated as disregarded entities for         pay an eligible tax during the amnesty     recently denied the exceptions filed
federal tax purposes. Credits continue      period will be subject to a special,       by the Commonwealth, and a further
to be granted on a “first-come, first-      additional 5% penalty. The 5% penalty      appeal by the Commonwealth to
served basis” except that if applications   will not apply where a taxpayer has        the Pennsylvania Supreme Court is
received prior to October 1, 2009,          entered into a deferred payment plan       expected shortly.
exceeded the allocation, such               or filed an administrative or judicial        This is the first time that a
applications will be granted pro-rata.      appeal during the amnesty period.          Pennsylvania court has applied the
                                               The Department of Revenue will          Sheetz test for sales tax purposes. Under
        other tax CreDitS                   publish amnesty guidelines and sample      the Sheetz test, in determining whether
  The total amount available in 2009-       forms by December 8, 2009.                 items that are affixed to real estate
10 under the Call Center, EIP, REAP,                                                   but can be removed without material
Job Creation, Neighborhood Assistance                philaDelphia SaleS                injury to themselves or to the real
and First Class Cities Economic                          tax inCreaSe                  estate should be treated as realty or
Development District Tax Credits               Effective October 8, 2009, Act          personalty, the following three factors
are reduced by 50%. The Alternative         44 of 2009 authorized the City of          must be considered: (1) the manner in
Energy Investment Credit is suspended.      Philadelphia to impose an additional       which the item is physically attached or
                                            1% sales and use tax, increasing the       installed, (2) the extent to which the
 tax aMneStY planneD For 2010               total state and local tax to 8% within     item is essential to the permanent use
   The fiscal 2009-10 Pennsylvania          the City. This increased tax rate is       of a building or other improvement,
budget package includes a Tax               effective until June 30, 2014.             and (3) the objective intention of
Amnesty to be conducted from                                                           the parties regarding permanence.
April 26, 2010, through June 18,               MeDiCal SCanning SYSteMS                Importantly, the Court rejected the
2010. The amnesty will apply to                ruleD “real eState” For pa              Commonwealth’s contention that an
state taxes (and related interest and        SaleS tax purpoSeS – realtY/              item must be essential to all possible
penalties) delinquent as of June               perSonaltY teSt ClariFieD               uses of a building to be essential to the
30, 2009. Taxpayers who, during                On July 29, 2009, a three-judge         permanent use of the building. The
the amnesty period, report and pay          panel of the Commonwealth Court,           Court also reiterated that absolute
eligible delinquent taxes and 50%           with one dissent, issued a decision in     permanence is not required for a
of applicable interest will be relieved     Northeastern Pennsylvania Imaging Center   fixture to become part of the real
of penalties and the other 50% of           v. Commonwealth, No. 635 F.R. 2007,        estate. Rather, it is sufficient if the item
applicable interest. In the case of         clarifying the “realty v. personalty”      will remain in place so long as the
liabilities for which no return has         test for Pennsylvania sales and use        property continues to be used for its
been filed or liabilities that have been    tax purposes. The court applied the        current purpose or until the item wears
underreported on a filed return, if the     principles established in In re Appeal     out or becomes obsolete.
taxpayer has not been contacted by          of Sheetz, in which the court ruled
the Revenue Department, liability for       that canopies placed over gasoline           legiSlative reMeDY Sought
similar taxes due prior to July 1, 2004,    pumps became part of the real estate              to ClariFY BuSineSS
will be forgiven. Only the Pennsylvania     for local property tax purposes, and         privilege tax liaBilitieS oF
portion of IFTA fuel taxes will be          ruled that MRI and PET/CT scanning          ConStruCtion ContraCtorS
eligible for amnesty. Payment must be       systems became part of the real estate      anD other ServiCe proviDerS
by certified check, money order, EFT,       upon installation. Therefore, the            Doing BuSineSS in Multiple
credit card, cash or its equivalent.        imaging center was entitled to a refund        loCal tax JuriSDiCtionS
   In addition to filing a tax amnesty      of sales tax paid on its purchase of         Recent court decisions have created
return, participants will be required       these systems, which were installed        confusion concerning the scope of
to file complete tax returns for all        pursuant to construction contracts.        a municipality’s authority to impose
unfiled taxes, and to file complete         In an unreported opinion issued on         a business privilege tax (“BPT”) on
amended returns for all underreported       August 5, a majority of a three-judge      construction contractors and other

                                                          Fall 2009
service providers doing business in        business” within a taxing jurisdiction.        Pleas held that the job trailer was
multiple local tax jurisdictions. Senate   See, e.g., Township of Lower Merion v.         a “field office” which constituted
Bill 601 introduced by senator Pat         QED, Inc., 738 A.2d 1066 (Pa. Cmwlth.          sufficient presence to support
Browne would amend the Local Tax           1999), appeal denied, 775 A.2d 811 (Pa.        imposition of the tax.
Enabling Act to provide that a BPT         2001). Earlier court decisions had                On appeal, the parties treated the
on the “privilege” of doing business       also established that a construction           tax as one imposed on the privilege
within a local taxing jurisdiction may     job trailer was not generally viewed           of conducting business in the city,
be imposed only on taxpayers with          as a “base of operations.” See, e.g.,          as opposed to a tax on business
a “base of operations” in that taxing      Northwood Construction Co. v. Township         “transacted” in the city. Following a
jurisdiction. Senate Bill 601 would        of Upper Moreland, 856 A.2d 789 (Pa.           line of cases requiring the presence
also define a “base of operations” as      2004); G.A & F.C. Wagman, Inc. v.              of a “base of operations” before a
“an actual, physical and permanent         Manchester Township, 535 A.2d 702 (Pa.         company could be subjected to a
place of business from which a             Cmwlth. 1988). Under the Rendina               “privilege-based” tax, see, e.g., QED,
taxpayer manages, directs and              decision, it appears that a “privilege-        supra, the parties focused their
controls its business activities” and      based” BPT may be imposed on a                 arguments on whether or not the job
clarify that “permanent” means “a          company that conducts significant              trailer should be considered a “base of
building or other structure owned          activities within a taxing jurisdiction        operations” in the city. A divided panel
or rented or used by the taxpayer          whether or not it regularly maintains          of the Commonwealth Court reversed
that is permanently attached to the        an office or other place of business           and struck the tax, holding that
ground via a fixed foundation or           there. Exactly how much “activity” is          Rendina’s jobsite trailer was not a “base
similar construction and which cannot      required in a local taxing jurisdiction        of operations.” The city then appealed
be removed without demolition              to support imposition of a “privilege-         to the Pennsylvania Supreme Court.
or dismantling.” Various interest          based” BPT is not clear.                          Somewhat surprisingly, the
groups are supporting this proposed                                                       Pennsylvania Supreme Court
legislation.                                         renDina DeCiSion                     completely side-stepped the question
   As discussed in more detail below, in      In Rendina, the Pennsylvania                of whether the job trailer constituted a
late 2007, the Pennsylvania Supreme        Supreme Court upheld the City of               “base of operations.” In fact, the court
Court issued a decision in V. L.           Harrisburg’s right to impose its BPT on        suggested that whether a company has
Rendina, Inc. v. City of Harrisburg and    a contractor performing construction           a “base of operations” in the taxing
Harrisburg School District (“Rendina”),    work, but not maintaining a traditional        municipality is relevant only when the
938 A.2d 988 (Pa. 2007), which             business office, in the city. Three            municipality seeks to tax income from
rejected and eliminated the “bright-       justices joined in the opinion of the          activities outside the municipality. In
line” test established by a line of        court, one concurred, one dissented,           Gilberti v. City of Pittsburgh, 511 A.2d
Commonwealth Court decisions that          and two did not participate.                   1321 (Pa. 1986), the court ruled that
had required the presence of a local          From 1999 to 2001, Rendina                  revenues from activities outside the
“base of operations” to support a tax      constructed a major office building in         city could not have been taxed by the
imposed on the “privilege of doing         Harrisburg. The company maintained             City of Pittsburgh if its tax had been
                                                                        the usual         imposed on business “transactions”
                                                                        jobsite trailer   within the city. However, Pittsburgh’s
                                                                        but did not       tax was imposed on the privilege of
                                                                        have any          doing business from a location within
                                                                        other office      the city. Since the services provided by
                                                                        in the city.      Gilberti were directed and controlled
                                                                        Rendina           from Gilberti’s office or “base of
                                                                        paid the          operations” in the city, the court held
                                                                        city’s BPT        that revenues from those services were
                                                                        and then          fairly related to the exercise of the
                                                                        filed a           privilege of doing business in the city
                                                                        refund            and could be taxed.
                                                                        claim. The           The Rendina court refused to require
                                                                        city’s appeals    the inverse of Gilberti - to preclude
                                                                        board and         a privilege-based tax in the absence
                                                                        the Dauphin       of a “base of operations” in the
                                                                        County            municipality. The court noted that
                                                                        Court of          the Local Tax Enabling Act (“LTEA”)
                                                                        Common            broadly authorizes local taxing

                                                          Fall 2009
bodies to impose taxes on “persons,         C.D. 2008 (unreported opinion),              the following general principles now
transactions, occupations, privileges,      affirmed the trial court’s finding           apply to local business privilege taxes
subjects and personal property              that a construction company had              in Pennsylvania (subject to potential
within the limits of such political         failed to meet its burden of proving         modification by Senate Bill 601):
subdivisions ....” 53 P.S. § 6924.301.1.    that it maintained business offices            1. Pursuant to Rendina, a “privileged-
And, the City of Harrisburg’s tax           at locations outside of the taxing                based” tax may be imposed
ordinance and regulations defined           district in which its headquarters was            on revenues from significant
“business” broadly, so as to encompass      located, to which some of its income              activities carried on within the
local construction activities. In this      was attributable for business privilege           taxing jurisdiction, whether or
light, the court held that Rendina’s        tax purposes. The applicable taxing               not the taxpayer has an office or
presence in the City of Harrisburg          ordinances contained an exemption                 other “base of operations” in the
for “a major long-term construction         for receipts attributable to an office or         jurisdiction. It seems unlikely that
project” represented an exercise of the     place of business regularly maintained            tax may be imposed for an isolated
privilege of doing business afforded        outside the limits of the taxing district.        activity.
by the city. Furthermore, the court         The court held that this exemption             2. Pursuant to Gilberti and its
indicated that Rendina’s activities were    applies to offices serving as a “base of          progeny, a properly-drafted
subject to tax “regardless of whether       operations” in another taxing district            ordinance or resolution may
the job site trailer was used as a ‘base    and to revenues subject to BPT in                 impose a “privilege-based” tax
of operations’ ..., or whether the three-   another jurisdiction. There was no                on intrastate gross receipts
year construction project can, in some      evidence that BPT had been imposed                attributable to activities carried
sense, be viewed as constituting a single   on the disputed receipts by another               on outside the jurisdiction but
lengthy ‘transaction.’”                     local taxing district. In addition, the           managed and controlled from a
   Justice Baer, in a concurring            court stated that the taxpayer had not            “base of operations” within the
opinion, indicated that the Majority        demonstrated that any of its “offices”            jurisdiction.
Opinion unnecessarily blurred the           in other jurisdictions constituted a base      3. Under a “transaction-based” tax,
lines between the local taxation of         of operations. The taxpayer argued                the taxing jurisdiction may not tax
“privileges” and of “transactions.” He      that the court did not apply the correct          revenues from business transacted
would adhere to the requirement             standard in determining whether its               outside the jurisdiction. See J&K
of a “base of operations” to support        various field offices qualified for the           Trash Removal, Inc. v. City of Chester,
imposition of a privilege-based tax,        “office exemption.” The taxpayer’s                842 A.2d 983 (Pa. Cmwlth. 2004),
and would not view a jobsite trailer        application for reargument was denied             appeal denied, 867 A.2d 524 (Pa.
as a “base of operations.” However,         on July 30, 2009. The taxpayer filed a            2005). However, the Rendina
he also opined that, under the LTEA,        Petition for Allowance of Appeal with             majority’s reluctance to draw
a local government was permitted            the Pennsylvania Supreme Court on                 clean lines and the willingness
to adopt a “hybrid tax” on both the         August 28, 2009. The Supreme Court                of the concurrence to view a
exercise of a privilege to do business      has not yet acted on that Petition.               tax as both a “privilege-based”
and on transactions within the taxing                                                         and “transaction-based” tax may
jurisdiction. In his opinion, Harrisburg         general Bpt prinCipleS                       encourage municipalities and
had adopted a “hybrid tax.”                   Each “business privilege tax”                   school districts to argue that their
Justice Cappy dissented, indicating         ordinance or resolution must be                   tax ordinances and resolutions
that he agreed with the reasoning of        construed to give effect to its specific          are both “privilege-based” and
the Commonwealth Court majority,            terms. For example, BPT ordinances                “transaction-based.” We will
that the contractor’s job trailer did not   contain varying definitions of the term           be faced with sorting out often
constitute a “base of operations” within    “business.” In addition, in contrast              imprecise or conflicting language
the taxing jurisdiction and that the tax    to a traditional “privilege-based” tax,           in tax ordinances and resolutions.
could not be upheld in the absence of       some local taxing jurisdictions have           4. A Pennsylvania municipality
a “base of operations.”                     adopted taxes that are labeled as a               or school district must fairly
                                            “business privilege tax,” but which               apportion receipts derived from
            a&l DeCiSion                    impose tax only on the “volume of                 interstate operations, even when
  On June 4, 2009, in the first post-       business transacted” within the taxing            the taxpayer’s only permanent
Rendina BPT decision issued by              jurisdiction and not on a taxpayer’s              place of business is located within
an appellate court addressing the           entire gross receipts. Although these             the municipality.
applicability of BPT to a construction      “principles” are subject to the specific
contractor, a three-judge panel of          terms of a particular BPT ordinance          Sharon R. Paxton is a member of McNees
the Commonwealth Court, in A & L,           or resolution, case law developments,        Wallace & Nurick LLC’s State and Local
Inc. v. Township of Rostraver, No. 1651     including the Rendina decision, suggest      Tax Group.

                                                          Fall 2009
Firm:                                                                                             Contact:


City: State:                                                                                      Zip:

Phone: Fax:                                                                                       Email:
Annual Fees: $_________ YIE: __________        In the past three years, how many firm members attended a loss control seminar ____
Number of accountants (with years of
                                               On what date was the firm established___________
                                               Within the past 5 years:
             F/Time:         P/Time*:
   5+ years: ________         ________            Has the firm provided services to a client that is engaged in the issuance, offering,
   4 years:   ________        ________            registration or sale of securities or bonds; or provided clients with forecasts or
                                                  projections for inclusion in sales literature, etc., of any securities or bonds?
   3 years:   ________        ________            YES o NO o
   2 years:   ________        ________
                                                  Has any member of the firm provided services or acted as a
   1 year:    ________        ________
                                                  director/officer/committee member for any financial institution? YES o     NO o
   <1 year:   ________        ________
Total:        ________        ________            Has any member of the firm had an accounting license or authority to practice
                                                  accounting revoked, or been subject to disciplinary action, fine reprimand, or criminal
*Average of 25 hours per week or less             penalty related to performance of professional services? YES o NO o

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

Approximately percentage of income received from the following activities for the last annual period:
                     Activity                            %                                       Activity                          %
Audit: Public Companies**                                             Litigation Support
Audit: Other                                                          Management Advisory Services
Review                                                                Assurance Services
Compilation                                                           Financial Planning
Bookkeeping                                                           Asset Management
Tax                                                                   Sale of Mutual Funds
Business Valuation                                                    SEC/Sarbanes Oxley Related Services**
Computer Consulting                                                   Other*
Litigation Support                                                    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 (if
   closed)                      $ ______________________          $ ______________________          $ ______________________
   Reserve amount
   (if open)                    $ ______________________          $ ______________________          $ ______________________

           Please return to Custom Brokers Insurance, 3659 Green Road Suite 209, Beachwood, Ohio 44122
               Tel: 800-969-7475 – Fax: 216-831-6819      Email to: –
                             NSA State Director’s Message
                     Report on            4) Proposed Bylaw To Allow Online          preparers, Hawkins mentioned by
                     NSA Annual           Voting for NSA Officers, District          way of example. However, Hawkins,
                     Meeting held         Governors, State Directors and Bylaw       who is a licensed lawyer in California,
                     in San Diego         Amendments                                 said that lawyers and CPAs have yet
                        NSA held          propoSeD BYlaW taBleD until                to convince her that there is anything
                     their 64th Annual    next Year                                  inherent in attaining their licenses that
                     Meeting in San                                                  makes them qualified or competent tax
                     Diego, CA on         NSA Awards Banquet                         return preparers. “I am not convinced
                     August 12-15,          During the awards portion of the         that they should be exempted from
 NSA State Director 2009. Elected         event, PSPA was awarded a plaque           testing by the mere fact that they are
     of the Year     as President was     for successfully “Monitoring the State     licensed by their state bar or by their
                     robert l. Cross of   Board of Accountancy”. In addition,        state accountancy board,” she said.
Northglenn, CO. Donny J. Woods of         Mary Lew Kehm won an award for                In addition, many unenrolled and
Nashville, AR was elected as First Vice   the “Best Single Article in an ASO’s       unlicensed preparers who have been
President. In a contested election for    publication.”                              preparing returns for a long time
Second Vice President, former                                                        support the grandfathering concept, as
District Governor Sharon Cook was         More News Related to                       they do not think they should have to
successful in her bid for election.       Tax Preparer Registration                  take a test this late in their careers, she
Steven J. hanson of Cokato, MN was           In October, NSA Executive Director      said. These individuals often do not
re-elected as Secretary/Treasurer.        John Ams reported his attendance           enroll or become licensed because they
In addition, elections were held for      at several IRS Tax Preparer Forums         just want to prepare returns and do not
all District Governors in the “odd”       held in September. In October,             want to represent taxpayers in front
numbered districts and all State          Executive Director Ams issued an           of the IRS, Hawkins said. She noted
Directors in the “even” numbered          NSAlert regarding Tax Preparer             that groups like NSA, H & R Block and
districts. There was only one contested   Regulation. As part of the NSAlert,        the ABA have expressed the view there
election for Governor of District IX.     John referenced remarks presented          should be some kind of examination
Joyce Funkhouser-Lingelbach from          by OPR Director Karen Hawkins at           process to test an individual’s
Oregon was successful in her bid, and     the fall meeting of the American Bar       minimum tax competency, with some
will be the new Governor. All other       Association. According to her remarks,     exceptions for those who have already
positions were unopposed.                 the introduction of tax preparation        taken a competency exam that IRS
                                          software for commercial preparers has      deems sufficient. The consensus at
Proposed Bylaw Changes                    made it possible for people who never      the Tax Preparer Forums held by
  In addition to election of officers,    would have considered it before to start   IRS, most recently on September
there were four major bylaw changes       their own tax preparation businesses.      30 in Chicago, is that “minimum
proposed.                                 She was particularly critical of those     competency” is knowledge of the
                                          “who use this software and rely on it      tax law as found in Publication 17.
1) Proposed Bylaw Amendment to            as if it does everything for them.” She    Clearly, since any ACAT examination is
allow all Active and Life Members of      noted that the software makers have        more difficult than the Pub. 17-based
NSA to participate in and vote on all     expressed the view that their product      test contemplated above, we have
matters at the Annual Meeting             does not make anyone a tax expert.         asked the IRS to exempt from any
propoSeD BYlaW Change                     Hawkins said she thinks it is legitimate   testing requirement ACAT credential
approveD                                  to consider having individuals take        holders who have passed a valid ACAT
                                          some sort of test to gain authorization    examination.
2) Proposed Bylaw to Allow Board          to prepare tax returns. Questions             Even the potential requirement for
Members to receive a salary or fees       that have arisen on this issue include     continuing education has caused some
from NSA with Board Approval              whether certain groups or individuals      controversy, according to Hawkins. She
propoSeD BYlaW Change                     should be exempt from an exam or if        noted that some individuals, primarily
approveD                                  they can be “grandfathered” into the       CPAs and attorneys, are required to
                                          system, she said. Individuals currently
3) Proposed Bylaw to Change the NSA       subject to Circular 230 believe they       NSA State Director’s
Name                                      should not have to take an additional      Message
propoSeD BYlaW DeFeateD                   test to qualify to register as paid        continued on page 18
                                                        Fall 2009
New Video Series Helps                    for people who have questions about        body, management, policies and
Exempt Organizations                      the redesigned Form 990. It looks at       procedures and disclosure practices.
Understand Redesigned                     some of the key things to consider         It also focuses on Schedule L, which
Form 990 Requirements                     about the Form 990 and the various         requests information on transactions
   The Internal Revenue Service           schedules that exempt organizations        with interested persons, such as
has launched a new case study and         may need to complete, particularly         directors, officers, key employees and
video program to help exempt              Schedule R.                                their family members.
organizations and their tax preparers
better understand the newly revised       revenue and expenses                       Summary, Schedules, Signatures
Form 990 series which must be filed          This segment covers two of the             This segment covers Parts I, II
for the 2008 tax year.                    financial statement portions: Part         and IV of the Form 990—Summary,
   The Form 990 series, redesigned        VIII, Statement of Revenue, and Part       Signature Block and Checklist of
for the first time in nearly 30           IX, Statement of Functional Expenses.      Required Schedules. It also provides
years, requires more disclosure           It looks at how to fill out the required   an overview of several new schedules
and transparency by exempt                columns of information for revenue         to the Form 990.
organizations. With some exceptions,      and expenses.                                 “The New Form 990: Getting
organizations that are exempt for                                                    Started” is only one of the online
federal taxation are required to file     Balance Sheet, Supplemental                resources the IRS offers for 990 filers.
the Form 990 information return.          Financial Statements, and Schedule D       There is a five-part interactive course
The additional information will give         This video reviews Part X of the        at
the IRS and the public a better view of   Form 990, the Balance Sheet, and Part      and a series of 990 filing tips, plus the
how the exempt organizations work,        XI, which covers Financial Statements      990 form, schedules and instructions
especially in terms of expenditures       and Reporting. It explains some            at
and executive salaries.                   differences between the redesigned
   To help illustrate key points and      and previous version of Form 990. It       New IRS Retirement Plan
answer important questions about          also focuses on parts of Schedule D,       Navigator Aims to Help
the new Form 990, the IRS’ Exempt         Supplemental Financial Statements.         Small Businesses
Organizations Division developed                                                        The Internal Revenue Service has
“The New Form 990: Getting Started,”      program Services, other irS Filings        created a new Web-based tool to help
a case study about a hypothetical         and tax Compliance                         small business owners determine
organization – Exempt Organization           This video focuses on Part III,         which tax-favored pension plan best
for Disaster Relief (EODR).               which allows an organization to            suits their needs and how to keep
   The hypothetical case study            “tell its story” and describe its          their plans in compliance.
includes a set of facts describing        program services, and Part V, which           The IRS Retirement Plan Navigator
organizational and financial aspects      covers other IRS filings and areas         is intended to provide employers
of EODR, and a completed Form 990         of tax compliance. Part V will alert       with an easy-to-use guide that focuses
based on those facts. A video series      organizations if they have other filing    on three areas: choosing a plan,
walks you through key reporting           obligations besides the Form 990           maintaining a plan and correcting a
issues common to most organizations       and will help them to determine if         plan.
required to file Form 990.                they engage in activities that raise tax      By using the navigator, employers
   Before starting the videos, people     compliance concerns.                       may find that choosing and
should read the hypothetical EODR                                                    maintaining a pension plan is not
case study and review the example         Compensation                               as daunting as they thought. Some
Form 990. The series of videos, each         This segment reviews the Form           plan types are less costly and easier to
between five and ten minutes long,        990 compensation reporting in Part         establish than others.
cover a key area of the Form 990,         VII. It explains who needs to be listed       The navigator does not suggest
using facts from the case study.          in Part VII and explains the three         which plan may be best for a specific
   The videos are listed in an order      types of compensation to report.           employer but it does lay out the
based on the sequencing list found on     It also highlights Schedule J, the         options to allow them to choose one
page 5 of the Form 990 instructions.      compensation continuation schedule.        that best fits their situations. The
However, they can be viewed in any                                                   navigator includes a side-by-side
order. Included in the video series       governance                                 comparison of pension plans and
are:                                        This segment describes how to            their requirements.
                                          complete Part VI of the redesigned            The navigator provides a checklist
overview                                  Form 990, which requests information       and suggested resources for
 This video is a good place to start      about the organization’s governing         maintaining compliance. Pension

                                                  Fall 2009
laws change frequently. Employers can        who are not reimbursed to use in             a purchase price determined prior
minimize problems by doing a once-           computing the deductible costs they          to exercise if the parties reasonably
a-year review to ensure they maintain        pay or incur for business meal and           believe that the price will not be less
compliance.                                  incidental expenses, or for incidental       than the fair market value of the energy
   The IRS also recognizes that mistakes     expenses only if they pay or incur no        property at the time the right may be
can be made unintentionally, and             meal expenses, while traveling away from     exercised, clarifies how section 469
many errors can be corrected without         home. Use of a method described in this      applies to credits generated by wind
notifying the agency. The navigator offers   revenue procedure is not mandatory,          energy facilities, clarifies that the revenue
suggested options to employers seeking       and a taxpayer may use actual allowable      procedure only provides safe harbor
to correct errors and bring their plans      expenses if the taxpayer maintains           requirements and makes conforming
back into compliance.                        adequate records or other sufficient         changes to the revenue procedure to
   Although the Retirement Plan              evidence for proper substantiation. The      reflect these three changes.
Navigator is aimed at small business         new high-low rates are $258 for high cost
owners, it also can help mid-size            areas and $163 for all others.               Enrollment of Actuaries
businesses review their options as                                                          REG-159704-03 contains proposed
well. Individuals who want to better         The IRS has issued                           amendments to 20 CFR part 901 relating
understand their employer’s plan may         Publication 4128, Tax Impact                 to the enrollment of actuaries under
also find it of use.                         of Job Loss                                  section 3042 of the Employee Retirement
   The Web-based guide will be kept up         The publication discusses the taxability   Income Security Act of 1974 (ERISA)
to date as pension laws and regulations      of various employer and government             The proposed amendments would
change.                                      payments, getting your W-2 from a            update the eligibility requirements for
                                             bankrupt employer, tax consequences of       performing actuarial services for ERISA-
Microsoft’s HealthVault to                   taking money from your retirement plan.      covered employee pension benefit plans,
Assist in Disability Process                                                              including the continuing education
   Social Security has entered into an       Overstatement of Basis                       requirements, and the standards for
agreement with Microsoft to test the            The IRS has issued temporary              performing such actuarial services. The
use of Microsoft’s HealthVault service       (replacing an existing final regulation)     proposed amendments would affect
in the disability process. HealthVault is    (T.D. 9466) and proposed (REG-108045-        employee pension benefit plans and the
a free online service people can use to      08) regulations defining an omission         actuaries providing actuarial services to
gather, store, and manage their families’    from gross income for purposes of the        those plans.
health information. They can share the       six-year minimum period for assessment
information with doctors and healthcare      of tax attributable to partnership items     Revenue Filing Out of State
providers.                                   and the six-year period for assessing        Liens
   “The use of personal health records       tax. The temporary regulations resolve          The PA Department of Revenue has
holds great promise for ensuring that        a continuing issue as to whether an          begun filing liens against out of state
the medical information we collect from      overstatement of basis in a sold asset       businesses that owe Pennsylvania tax
someone applying for disability benefits     results in an omission from gross income.    liabilities of at least $5,000.
is accurate and complete,” said Michael J.   The regulations will affect any taxpayer        The goal of the lien effort is to
Astrue, Commissioner of Social Security.     who overstates basis in a sold asset         encourage out-of-state businesses
“Combined with other advancements            creating an omission from gross income       operating in the commonwealth to
in health information technology, our        exceeding twenty-five percent of the         comply with Pennsylvania tax laws.
use of HealthVault should result in faster   income stated in the return.                 The program will make businesses
decisions for disability applicants.”                                                     accountable in their home state for tax
   Learn more about this new partnership     The IRS has released an                      liabilities assessed in Pennsylvania.
by reading the press release at www.         updated version of                              The Department of Revenue uses         Publication 393, Employment                  the original liens filed in Pennsylvania
                                             Tax Forms                                    against a company to export and
2009-47 (IRB 2009-42) –                        The package includes sample Forms          domesticate the liens in the business
Change to: Travel Rules                      W-2 and W-3 and instructions for the         taxpayer’s state of domicile. Prior to
Updated                                      2009 tax year.                               filing a lien, however, the department
   2009-47 (IRB 2009-42) updates the                                                      notifies each taxpayer of its intent to lien
rules for employer who are reimbursed        Clarification to Energy                      and provides one final opportunity for
for lodging, meals, and incidental           Property Purchases                           the taxpayer to satisfy its tax obligations.
expenses, or meals and incidental              Announcement 2009-69(IRB 2009-40)
expenses only, while traveling away from     includes changes to Revenue Procedure        New Service Allows
home, to substantiate the expenses by        2007-65. Specifically, the announcement      Inheritance Tax Extension
per diem allowance in lieu of actual         expands the rights of developers and         Requests to Be Submitted Via
expenses. The revenue procedure              owners to enter into agreements for the      Email
also provides an optional method for         purchase of the wind energy property           Taxpayers and professionals are
employees and self-employed individuals      owned by the partnership to permit           encouraged to use the PA Department of
                                                            Fall 2009
Revenue’s Inheritance Tax Divisions new        contribution plans under Section 415(c)       remains unchanged at $550.
e-mail address RE-InheritanceTaxExt@           (1)(A) remains unchanged for 2010 at             The limitation under Section 408(p) to file for extension requests.    $49,000.                                      (2)(E) regarding SIMPLE retirement
Questions may be directed to the division         The Code provides that various other       accounts remains unchanged at $11,500.
at 717-787-8327.                               dollar amounts are to be adjusted at the         The limitation on deferrals under
                                               same time and in the same manner as           Section 457(e)(15) concerning
IRS Announces Pension Plan                     the dollar limitation of Section 415(b)       deferred compensation plans of state
Limitations for 2010                           (1)(A). After taking into account the         and local governments and tax-exempt
   The Internal Revenue Service                applicable rounding rules, the amounts        organizations remains unchanged at
announced cost-of-living adjustments           for 2010 are as follows:                      $16,500.
applicable to dollar limitations for              The limitation under Section 402(g)           The compensation amounts under
pension plans and other items for Tax          (1) on the exclusion for elective deferrals   Section 1.61-21(f)(5)(i) of the Income
Year 2010.                                     described in Section 402(g)(3) remains        Tax Regulations concerning the
   Section 415 of the Internal Revenue         unchanged at $16,500.                         definition of “control employee” for
Code provides for dollar limitations              The annual compensation limit under        fringe benefit valuation purposes
on benefits and contributions under            Sections 401(a)(17), 404(l), 408(k)           remains unchanged at $95,000. The
qualified retirement plans. Section            (3)(C), and 408(k)(6)(D)(ii) remains          compensation amount under Section
415(d) requires that the Commissioner          unchanged at $245,000.                        1.61-21(f)(5)(iii) remains unchanged at
annually adjust these limits for                  The dollar limitation under Section        $195,000.
cost-of-living increases. Other limitations    416(i)(1)(A)(i) concerning the                   The Code also provides that several
applicable to deferred compensation            definition of key employee in a top-heavy     pension-related amounts are to be
plans are also affected by these               plan remains unchanged at $160,000.           adjusted using the cost-of-living
adjustments under Section 415. Under              The dollar amount under Section            adjustment under Section 1(f)(3). After
Section 415(d), the adjustments are to be      409(o)(1)(C)(ii) for determining              taking the applicable rounding rules into
made pursuant to adjustment procedures         the maximum account balance in an             account, the amounts for 2010 are as
which are similar to those used to adjust      employee stock ownership plan subject         follows:
benefit amounts under Section 215(i)(2)        to a 5-year distribution period remains          The adjusted gross income limitation
(A) of the Social Security Act.                unchanged at $985,000, while the              under Section 25B(b)(1)(A) for
   The limitations that are adjusted by        dollar amount used to determine the           determining the retirement savings
reference to Section 415(d) will remain        lengthening of the 5-year distribution        contribution credit for married taxpayers
unchanged for 2010. This is because the        period remains unchanged at $195,000.         filing a joint return is increased from
cost-of-living index for the quarter ended     The limitation used in the definition         $33,000 to $33,500; the limitation
September 30, 2009, is less than the cost-     of highly compensated employee                under Section 25B(b)(1)(B) remains
of-living index for the quarter ended          under Section 414(q)(1)(B) remains            unchanged at $36,000; and the limitation
September 30, 2008, and, following the         unchanged at $110,000.                        under Sections 25B(b)(1)(C) and 25B(b)
procedures under the Social Security              The dollar limitation under                (1)(D), remains unchanged at $55,500.
Act for adjusting benefit amounts, any         Section 414(v)(2)(B)(i) for catch-up             The adjusted gross income limitation
decline in the applicable index cannot         contributions to an applicable employer       under Section 25B(b)(1)(A) for
result in a reduced limitation. For            plan other than a plan described in           determining the retirement savings
example, the limitation under Section          Section 401(k)(11) or Section 408(p)          contribution credit for taxpayers filing
402(g)(1) on the exclusion for elective        for individuals aged 50 or over remains       as head of household is increased from
deferrals described in Section 402(g)          unchanged at $5,500. The dollar               $24,750 to $25,125; the limitation
(3) will be $16,500 for 2010, which is         limitation under Section 414(v)(2)(B)         under Section 25B(b)(1)(B) remains
the same amount as for 2009. This              (ii) for catch-up contributions to an         unchanged at $27,000; and the limitation
limitation affects elective deferrals to       applicable employer plan described in         under Sections 25B(b)(1)(C) and 25B(b)
Section 401(k) plans and to the Federal        Section 401(k)(11) or Section 408(p)          (1)(D), remains unchanged at $41,625.
Government’s Thrift Savings Plan, among        for individuals aged 50 or over remains          The adjusted gross income limitation
other plans.                                   unchanged at $2,500.                          under Section 25B(b)(1)(A) for
   Effective January 1, 2010, the limitation      The annual compensation limitation         determining the retirement savings
on the annual benefit under a defined          under Section 401(a)(17) for eligible         contribution credit for all other taxpayers
benefit plan under Section 415(b)(1)           participants in certain governmental          is increased from $16,500 to $16,750; the
(A) remains unchanged at $195,000. For         plans that, under the plan as in effect       limitation under Section 25B(b)(1)(B)
participants who separated from service        on July 1, 1993, allowed cost-of-living       remains unchanged at $18,000; and the
before January 1, 2010, the limitation         adjustments to the compensation               limitation under Sections 25B(b)(1)(C)
for defined benefit plans under Section        limitation under the plan under Section       and 25B(b)(1)(D), remains unchanged
415(b)(1)(B) is computed by multiplying        401(a)(17) to be taken into account,          at $27,750.
the participant’s compensation                 remains unchanged at $360,000.                   The deductible amount under §
limitation, as adjusted through 2009, by          The compensation amount under
1.0000.                                        Section 408(k)(2)(C) regarding                Professional’s Corner
   The limitation for defined                  simplified employee pensions (SEPs)           continued on page 14
                                                              Fall 2009
Professional’s Corner                             Corporation Tax Package X                2009-50) that because of very mild
continued from page 12                         (instructions, tax reports and schedules    inflation, tax rate brackets and various
                                               will no longer be printed and mailed.       tax benefits indexed for inflation will
219(b)(5)(A) for an individual making             Personal Income Tax Package X            remain unchanged or change only
qualified retirement contributions             (instructions, returns and schedules)       slightly in 2010.
remains unchanged at $5,000.                   will no longer be printed and mailed – a       By law, the dollar amounts for a
   The applicable dollar amount under          letter/order form will be mailed in its     variety of tax provisions must be revised
Section 219(g)(3)(B)(i) for determining        place.                                      each year to keep pace with inflation.
the deductible amount of an IRA                   PA-V (Payment Voucher for Individual     As a result, more than three dozen
contribution for taxpayers who are             Income Tax Returns) will only be printed    tax benefits are subject to inflation
active participants filing a joint return      and mailed to those taxpayers who used a    adjustments each year, but because
or as a qualifying widow(er) remains           2008 PA-V to submit their payment to the    recent inflation factors have been
unchanged at $89,000. The applicable           department.                                 minimal, many of these benefits will
dollar amount under Section 219(g)(3)             2010 PA-40ES (Individual, Fiduciary      remain unchanged or change only
(B)(ii) for all other taxpayers (other than    and Partnerships/PA S Corporation           slightly for 2010. Key provisions affecting
married taxpayers filing separate returns)     Estimated Payment Coupons) estimated        2010 returns, filed by most taxpayers in
is increased from $55,000 to $56,000.          coupon packets for taxpayers who used       early 2011, include the following:
The applicable dollar amount under             coupons prepared by their practitioner’s       The value of each personal and
Section 219(g)(7)(A) for a taxpayer            software in 2009 will no longer be          dependency exemption available to most
who is not an active participant but           mailed.                                     taxpayers is $3,650, unchanged from
whose spouse is an active participant is          PA Schedule C-F Reconciliation           2009.
increased from $166,000 to $167,000.           (Adjusting Federal Business Expenses for       The new standard deduction for
The adjusted gross income limitation           PA Tax Purposes) is being discontinued.     heads of household is $8,400, up from
under Section 408A(c)(3)(C)(ii)(I) for            PA Schedule A/B (Interest Income/        $8,350 in 2009. For other taxpayers, the
determining the maximum Roth IRA               Dividend Income) duplicate copy is          standard deduction remains unchanged
contribution for married taxpayers filing      being removed from PA-40 booklet.           at $11,400 for married couples filing a
a joint return or for taxpayers filing            PA Schedule E [Rents and Royalty         joint return and $5,700 for singles and
as a qualifying widow(er) is increased         Income (Loss)] duplicate copy is being      married individuals filing separately.
from $166,000 to $167,000. The                 removed from PA-40 booklet.                 Nearly two out of three taxpayers take
adjusted gross income limitation under            PA Schedule J/T (Income from             the standard deduction rather than
Section 408A(c)(3)(C)(ii)(II) for all          Estates or Trusts/Gambling and Lottery      itemizing deductions, such as mortgage
other taxpayers (other than married            Winnings) duplicate copy is being           interest, charitable contributions, and
taxpayers filing separate returns) remains     removed from PA-40 booklet.                 state and local taxes.
unchanged at $105,000.                            PA-20S/PA-65 (PA S Corporation/             Various tax bracket thresholds will see
                                               Partnership Information Return) will no     minor adjustments. For example, for a
Philadelphia Local Sales and                   longer be printed and mailed.               married couple filing a joint return the
Use Tax Rate Increase Went                     All the above mentioned forms will be       taxable income threshold separating the
into Effect October 8, 2009                    available on the department’s Web site,     15 percent bracket from the 25 percent
   The City of Philadelphia raised its local                    bracket is $68,000, up from $67,900 in
sales and use tax rate form 1 percent to 2                                                 2009.
percent, except for the Philadelphia local     No Social Security COLA in                     The annual gift tax exclusion remains
hotel occupancy tax which will remain at       2010                                        unchanged at $13,000.
1 percent. This is in addition to the state       Because consumer prices were down
sales, use and hotel occupancy tax rate        over the past year, Social Security and     IRS Issues Erroneous
which remains at 6 percent.                    Supplemental Security Income benefits       Requests for Form 941
   Under Act 44 of 2009, signed into           will not automatically increase in 2010.    Schedule B
law on September 18, 2009, this tax rate       This will be the first year without an         The IRS has announced that due to
change is effective from October 8, 2009       automatic Cost-of Living Adjustment         a scanning error some small businesses
to June 30, 2014.                              (COLA) since they went into effect in       have received notices asking them to
                                               1975.                                       submit Form 941 Schedule B although
PA Revenue Department to                          Social Security has creased a            they filed the form with their return.
Reduce Printing and Mailing                    prominent link on their home page           If you received one of the erroneous
in 2010                                        at to a         notices please resubmit the appropriate
  Pennsylvania taxpayers and                   portal site with useful information about   Schedule B along with the notice to
practitioners will see fewer materials         the COLA, as well as frequently asked       the IRS as soon as possible to avoid
printed and mailed from the PA                 questions (FAQs).                           additional erroneous notices.
Department of Revenue this coming year.
  The following changes will be made for       Various Inflation Adjustments               First-Time Homebuyer’s
tax year 2009 and 2010 forms, booklets         Remain Unchanged                            Credit Extended
and coupon packets:                             The IRS has announced (Rev. Proc.            President Obama signed the Worker,

                                                             Fall 2009
Homeownership and Business Tax Act
of 2009. The provision of most interest
                                              IRS Provides Additional Clarification
is the extension of the $8,000 home              (Frequently Asked Questions)
buyer tax credit until April 30, 2010
for purchases under contract and June                   Regarding 7216
30, 2010 for sale closing. The benefits
have expanded to include a $6,500           The following questions (number 21-25) have recently been posted by the IRS. Questions 1-20 were
credit for all home buyers and a higher              formerly posted on the IRS website and can be obtained by going to:
income phase-out amount. The bill
includes some new restrictions, mostly      Q21. on the Consent to use, do both the taxpayer and spouse have to sign before a
aimed at preventing fraud. The bill also    practitioner can begin the return and discuss a bank product with them? Many times,
includes an expansion of the carryback      one spouse comes by, does the return and then the other comes by and signs later.
of operating losses for 2008 or 2009        a.21. If it’s a joint return, yes.
(removing the size restriction). The bill
increases the failure-to-file penalties     Q22. is a tax practitioner required to obtain a disclosure consent for financial planning
for S corporations and partnerships         advice when the practitioner is both the tax preparer and the financial advisor for the
and delays the effective date for the       client.
worldwide interest allocation benefit.      a.22. In this case the preparer is required to obtain a signed consent to use tax return
                                            information if the financial planning advice will be based on information obtained
Military Spouses Residency                  in connection with the preparation of a tax return. A separate signed consent form
Relief Act                                  to disclose tax return information would be required in order for the taxpayer to
   On Veterans Day, President Obama         authorize the preparer to share tax return information with another person for a
signed the Military Spouses Residency       purpose other than tax return preparation, e.g., to obtain financial advice, products
Relief Act (S. 475), which will affect      or services. Refer to Treasury Regulation section 301.7216-3(b) regarding timing
how the income and property of some         requirements and limitations for soliciting consents.
spouses of military personnel are taxed.
The Act amends the Servicemember            Q23. is a practitioner required to get written disclosure consent from their client to
Civil Relief Act (hereinafter, “SCRA”)      disclose tax return information if the client’s tax return information is to be used for
to provide that a spouse shall neither      financial planning purposes by the practitioner who prepared the return?
lose nor acquire domicile or residence      a.23. In this case the preparer is required to obtain a signed consent to use tax return
in a state when the spouse is present       information if the financial planning analysis will be based on information obtained
in the state solely to be with the          in connection with the preparation of a tax return. A separate signed consent form
servicemember in compliance with the        to disclose tax return information would be required in order for the taxpayer to
servicemember’s military orders if the      authorize the preparer to share tax return information with another person for a
residence or domicile is the same for       purpose other than tax return preparation, e.g., to obtain financial advice, products
both the servicemember and spouse.          or services. Refer to Treasury Regulation section 301.7216-3(b) regarding timing
                                            requirements and limitations for soliciting consents.
New York Posts Tax                
Preparer Registration
Information                                 Q24. What happens when a practitioner sells their tax practice to another practitioner?
   The New York State Department            how is the disclosure of the client’s tax information to the purchasing practitioner
of Taxation and Finance has posted          handled?
information on its Web site about its       a.24. Refer to Treasury Regulation section 301.7216-2(o). Disclosures are permitted
new tax return preparer registration        without taxpayer consent. The purchaser of the practice is subject to the section 7216
requirements at:      statute and regulations.
   Only New York-licensed CPAs and          Q25. if a client wants to have the practitioner forward a copy of their tax return to
attorneys are exempt from this law.         a bank for mortgage purposes how is this going to be done if the client did not sign
You can see a list of who else is exempt    a disclosure statement before the tax returns was prepared. For example: return is
at           prepared in March. no disclosure consent was signed. Client gets new job in June and
tpregmore.htm                               has to move. they need a copy of the return for the bank to get a mortgage for their
   There will be online registration        new home. is the only option for the practitioner to send the copy of the tax return to
available soon, according to the site.      the client who will then give it to the bank?
A bill (A9028) to repeal the law was        a.25 Refer to Treasury Regulation sections 301.7216-3(b) and 3(c)(2).* Preparers
passed in the Assembly during the           may not solicit consents after a completed return is provided to the taxpayer for
summer, but after it was referred to the    signature. The same restriction does not apply to taxpayers. Taxpayers may ask their
Senate Rules Committee, no action has       preparer to use or disclose their tax return information at any time. In this case
been taken.                                 the preparer is required to secure a signed consent form from the taxpayer before
   PSPA will continue to update the         disclosing the tax return to the bank. Taxpayers may also obtain a copy of their return
membership of future developments.          from the preparer and supply it to the bank without signing a consent form.
                                                             Fall 2009
                                                                                                                                                                    Introducing Quickfinder’s Guide to
                                                                                                                                                                    the 2008 and Spring 2009 Tax Acts
                                                                                                                                                                    Be prepared to answer client questions and save tax dol-
   2 0 0 9 TA X Y E A R P R O D U C T S                                                                                                                             lars! This new perfect-bound book is packed with all the
                                                                                                                                                                    significant tax acts and legislation passed in 2008 and
                                                                                                                                                                    through the spring of 2009.
               Pennsylvania Society
               of Public Accountants                                                                                                        Premium Quickfinder Handbook
                                                                                                                                            A handy combination of the most important 1040 and Small Business
                                                                                                                                            topics that you need to complete tax returns. Price: $65 $63 Donation $6
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                                   -                                 -                                  -                                   Handbook-Based Self-Study CPE                     Per course       $25        $19        $3.00 ea
                                                                                                                                            Ethics Self-Study CPE                             Per course       $25        $19        $3.00 ea

                                                                                                                                            Tax Training CPE (DT1T, DT2T, DT3T, DCTT)         Per course       $89        $79        $3.00 ea

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                     The more MVP                         STEP 1                                STEP 2                 Determine Your MVP Price Column                                                   STEP 3
                     Items you order,                     Total MVP Items                                                                                                                              Calculate Cost
                                                                                   Order any          Order any          Order any        Order any      Order any          Order any
                     the more you save
                     on each item!
                                                           A                             1                 2              3–5            6 –10          11– 20               21+                     Example: If “Total MVP
                                                                                    Total MVP       Total MVP       Total MVP       Total MVP       Total MVP       Total MVP                      Items” equals 7 Total MVP
                                                                                  Item, use this Items, use this Items, use this Items, use this Items, use this Items, use this                   Items, then use the “6 – 10
        Build Your Own                                        Sum of
                                                                                  price column price column price column price column price column price column                                      Total MVP Items” price
        Value Package!                                       Column                for the item. for both items. for each item. for each item. for each item. for each item.                          column for each item.
                    MVP Items                                Quantity                    Use the Price Column equal to your “Total MVP Items”                                                      Item Price           Cost
                                   Deluxe Edition                       ×         $ 69       $ 65   $ 67       $ 63     $ 65   $ 61      $ 64   $ 60    $ 63     $ 59   $ 62        $ 58       $                   =$
    Book                              1040 Edition                      ×         $ 44       $ 41   $ 43       $ 40     $ 42   $ 39      $ 41   $ 38    $ 40     $ 37   $ 39        $ 36       $                   =$
   Series               Small Business Edition                          ×         $ 44       $ 41   $ 43       $ 40     $ 42   $ 39      $ 41   $ 38    $ 40     $ 37   $ 39        $ 36       $                   =$
    and                        All States Edition                       ×         $ 76       $ 71   $ 74       $ 69     $ 72   $ 67      $ 70   $ 65    $ 68     $ 63   $ 67        $ 62       $                   =$
   Binder                    TheTaxBook Binder                          ×         $ 16       $ 13   $ 15       $ 12     $ 14   $ 11      $ 13   $ 10    $ 12     $9     $ 11         $8        $                   =$
                             TheTaxBook WebCD                           ×         $ 99       $ 91   $ 92       $ 84     $ 85   $ 77      $ 78   $ 70    $ 71     $ 63   $ 64        $ 56       $                   =$
                             WebCD Site License                         ×         $ 289 $ 279 $ 269 $ 259 $ 249 $ 239 $ 229 $ 219 $ 209 $ 199 $ 189 $ 179                                      $                   =$
 ClientTax         Pocket Calendars (30 pack)                           ×         $ 45       $ 42   $ 42       $ 39     $ 39   $ 36      $ 36   $ 33    $ 33     $ 30   $ 30        $ 27       $                   =$
   Tools           Donation Trackers (30 pack)                          ×         $ 45       $ 42   $ 42       $ 39     $ 39   $ 36      $ 36   $ 33    $ 33     $ 30   $ 30        $ 27       $                   =$
                      1040 and Small Business                           ×         $ 16       $ 13   $ 14       $ 12     $ 12   $ 11      $ 11   $ 10    $ 10     $9         $9       $8        $                   =$
  FastTax                    Starting a Business                        ×         $ 16       $ 13   $ 14       $ 12     $ 12   $ 11      $ 11   $ 10    $ 10     $9         $9       $8        $                   =$
                              Employee Benefits                         ×         $ 16       $ 13   $ 14       $ 12     $ 12   $ 11      $ 11   $ 10    $ 10     $9         $9       $8        $                   =$
                                     Depreciation                       ×         $ 16       $ 13   $ 14       $ 12     $ 12   $ 11      $ 11   $ 10    $ 10     $9         $9       $8        $                   =$
   TheTax                 New Tax Law Review                            ×         $ 38       $ 35   $ 35       $ 32     $ 32   $ 29      $ 29   $ 26    $ 26     $ 23   $ 23        $ 20       $                   =$
   Review                    Deluxe Tax Review                          ×         $ 49       $ 47   $ 45       $ 43     $ 41   $ 39      $ 37   $ 35    $ 33     $ 31   $ 29        $ 27       $                   =$
   Series                Individual Tax Review                          ×         $ 38       $ 36   $ 35       $ 33     $ 32   $ 30      $ 29   $ 27    $ 26     $ 24   $ 23        $ 21       $                   =$
  Study CPE        Small Business Tax Review                            ×         $ 38       $ 36   $ 35       $ 33     $ 32   $ 30      $ 29   $ 27    $ 26     $ 24   $ 23        $ 21       $                   =$
   Courses)                  IRS Rules for Ethics                       ×         $ 32       $ 31   $ 30       $ 29     $ 28   $ 27      $ 26   $ 25    $ 24     $ 23   $ 22        $ 21       $                   =$

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Customer #                                                                                                                            Total Non-MVP Items: B
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                                                                                                                        Charge Per Item    item         item       item           item      item         item
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Day Phone

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  PAYMENT OPTIONS                  Remember to include credit card number & expiration date.                                              Step 6                        Step 4 + Step 5 = Grand Total $
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  Credit Card: ❑ MasterCard ❑ Discover                    ❑ Visa ❑ American Express                                     Toll Free: 866-919-5277 •

              –                                                                                                                                            15105 Minnetonka Ind. Rd., Suite 221
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               ❑ Check or Money Order payable to: Tax Materials, Inc.
                                                                                                                                                           Toll Free: 866-919-5277
                                                                                                                                                           Fax: 952-746-5278
NSA State Director’s                       $1,000 to NSA’s
Message                                    Scholarship
continued from page 9                      program. NSA’s
have a specified number of hours on
                                           Foundation is
continuing education, but that CPE
                                           now accepting
is not necessarily required to be tax-
                                           applications for
related, raising the question of what
                                           its 2010 program.
to require for those who are currently
                                           Applications must
licensed and must participate in
                                           be postmarked
continuing education anyway. IRS does
                                           by March 10,
not want to increase burden on anyone
                                           2010 and sent
concerning continuing education,
                                           to Scholarship
“although I would say that I don’t think
it would do anybody any harm to have
                                           Services, a division
to take maybe a couple extra hours a
                                           of Scholarship
year that was on current developments
                                           America, which
and hot topics in tax law,” Hawkins
                                           manages the
said. She gave the distinct impression
that there would be a requirement for
tax-related CPE for those who are not
otherwise required to have any CPE.
                                           information can
                                           be found online
Scholarship News
                                           at: www.nsacct.                           Society of Accountants is currently
   Since 1969, the National Society
                                           org/foundation.asp                        offering 4 Bonuses for active and
of Accountants (NSA) Scholarship
Foundation has provided nearly $1                                                    associate first year applicants joining at
                                           Education Programs                        $189/year:
million to deserving undergraduate
                                             Following is a rundown of webinars          B
                                                                                       •   onus 1: A Free 2009 TAx
and graduate students who are
                                           scheduled so far to be held from              YeAr 1040 or SmAll BuSineSS
committed to pursuing a career in
                                           November 2009 – January 2010:                 QuickFinder—A $44 VAlue!
accounting, helping to develop more
qualified young accountants. This year,                                                  B
                                                                                       •   onus 2: Free AcceSS To The 2010
                                             •   ign Your Work with Excellence           income & FeeS SurVeY—A $125
28 students will receive scholarships
                                               (Creating a New Image for Your            VAlue!
ranging from $500 - $2,000. These
                                               Practice)                                 B
                                                                                       •   onus 3: Free SuBScripTion To
recipients were selected from more
                                               Dec. 17, 2009, 2:30 p.m. EDT              cch’S WhAT’S neW in TAx—dAilY
than 750 applicants on the basis of
                                               CPE Credit: 1 Hour/Business               TAx & AccounTing neWS!
an overall outstanding academic
                                               Management and Organization               B
                                                                                       •   onus 4: $25,000 group Term liFe
record, demonstrated leadership and
                                             •   oing the Right Thing, Even When         inSurAnce AT no coST For 1 YeAr!
participation in school and community
                                               the Right Thing is Unpopular
activities, honors, work experience,
                                               January 21, 2010, 2:30 p.m. EDT         Please feel free to contact me with
stated goals and aspirations, and
                                               CPE Credit: 1 Hour/Regulatory         any questions via email at rbraschcpa@
financial need. This year’s recipients
sponsored by PSPA are as follows:
   Jennifer Viens from Harrison City,
                                           Newest Member Benefit                             Respectfully submitted,
PA (Penn Township) was the recipient
                                           NSA members will now get access to                richard Brasch Jr., Cpa
of the PSPA sponsored scholarship.
                                           free Tax Research and updates using               NSA State Director -
She attends the State University of New
                                           NSA’s newest member benefit, CCH                  Pennsylvania
York at Binghamton.
                                           IntelliConnect. The free service is now
   Nathan Weaver from Harleysville,
                                           online on the member only webpage at
PA (Buxmont PSPA Sponsored) was
the recipient of the Robert Zaleski
Scholarship. He attends Messiah
   PSPA once again contributed
                                           For a limited time only, The National

                                                         Fall 2009
             RIA FEDERAL TAX HANDBOOK, 2010 Edition.
              Place Your Order Today and Pay Just $33!
                     Designed to answer the tax questions             of 2008 and the Emergency Economic Stabilization, Energy,
                     and resolve the tax problems that arise          Extenders and AMT Relief Acts of 2008. It also reflects other key
                     in everyday business and personal                developments (such as new regulations, rulings and revenue
                     transactions.                                    procedures) affecting the 2009 reture and the 2010 tax year.
                    The RIA Federal Tax Handbook helps in
                    preparing 2009 federal income tax returns         The Handbook includes:
                    and provides specific guidance to tax                    D
                                                                          •    etailed coverage of the latest tax legislation
                    consequences of transactions occurring                   C
                                                                          •    urrent and future income tax rates, current estate, 
in 2010. The 2010 edition is now available in print and for                  gift and excise tax rates, excise and Social Security tax
Checkpoint subscribers online.
                                                                          •    uidance on which forms to use to report transactions
The RIA Federal Tax Handbook continues to be the premier                     A
                                                                          •    nd extensive professional guidance based on the 
source for today’s federal tax law.                                          experience of RIA’s expert editorial team
                                                                          •    heckpoint subscribers who receive the Handbook 
The 2010 Handbook reflects federal tax legislation to the date of            online can utilize the RIA Speedlink icon to help them
publication, including the American Recovery and Reinvestment                enhance and speed their tax research.
act of 2009, The Worker, Retiree, and Employer Recovery Act

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                                                               Fall 2009
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                                            CLASSIFIED ADVERTISEMENTS
     ACCOUNTING PRACTICE(S) WANTED - PITTSBURGH, PA                                              BUSINESS OPPORTUNITY - DAUPHIN OR
   Established accounting firm is interested in acquiring local accounting                                LEBANON COUNTY AREA
      practice(s). Interested persons should contact RLO & Company,               CPA interested in purchasing a tax/accounting practice in Dauphin or Lebanon
         Robert L. Omer at 412-279-8110,                         County Area. Interested parties should fax a letter of interest to the PSPA
              All responses will be held in strictest confidence.                                               Executive Office at
                                                                                              717-737-6847. Please reference #0307 in your letter.
  If you are thinking of retiring, scaling back or your clients are just plain                       ACCOUNTING PRACTICE WANTED
grating on your last nerve, I am interested in aquiring your practice... (while     Lehigh Valley CPA Firm is seeking to purchase an accounting practice for
  I still have some nerve left). Contact me at if            retirement minded practitioners wishing to retire in the next year or two.
                                   interested.                                    Interested parties should fax a letter of interest to the PSPA Executive Office
                                                                                            at 717-737-6847. Please reference #230 in your letter.
      Licensed tax professional in Yardley PA seeking to associate with              The PA Accountant is published four times annually by the Pennsylvania
   like-minded practitioner. Inquiries to P.O. Box 417 Yardley, PA 19067             Society of Public Accountants, 20 Erford Road, Suite 200A, Lemoyne,
                                                                                     PA 17043. All editorial correspondence, manuscripts, etc, should be
                                                                                     sent to: PSPA, 20 Erford Road, Suite 200A, Lemoyne, PA 17043. This
                   ACCOUNTING PRACTICE WANTED                                        publication is designed to provide accurate and authoritative information
  CPA Firm located in Plymouth Meeting wishes to purchase an accounting              in regard to the subject matter covered. The publication is not engaged in
 practice. Good opportunity for retirement minded practitioners wishing to           rendering legal, accounting or other professional services.
   retire in one to two years. Please contact Fred Katz at 610-238-5311.
                                                                                                                   Editor’s Note:
                                                                                     If you would like to submit an article for publication please contact
                                                                                     the PSPA Executive Office at 1-800-270-3352 or (717) 737-4439 for
                                                                                     submission deadlines and for a copy of the author guidelines.

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