By Nereida Gomez and Ernest J. Markezin, Committee Services

NYYSCPA Proposes Redesigned Form K-1

Soon after the Internal Revenue Service unveiled for comment its “Vision Draft” of a redesigned Schedule K-1, the New York State Society of Certified Public Accountants submitted its own proposal for a redesigned K-1 to deal with the ever-increasing complex transactions faced by practitioners.

As many practitioners are aware, the IRS instituted a K-1 matching program in 2002 that was fraught with “mismatches” of complex reporting items that were in fact reported correctly. Though the program was suspended by August, it did not mean that the K-1 matching program disappeared. The IRS is continuing to match some very basic items while having employed some safeguards to avoid a repeat of the previous problems.

At the same time, the practitioner community voiced its opinion to the IRS that it cannot put into place a K-1 matching program without understanding what it is that CPAs do with the K-1, and how they translate information from that form to the 1040. Society members have been in many discussions with the IRS on the matching program and even participated in a major segment of one of the IRS “Tax Talk Today” programs.

The IRS was receptive to the advice of various practitioner organizations that the form K-1, along with Schedule E and other forms, needed to be revised, and the Service agreed to start with form K-1. The IRS asked for assistance in this process, and the Society welcomed the opportunity to draft and propose a redesigned form K-1. (See the proposal at www.nysscpa.org/commentletter/model_letter.doc.)

The proposal, drafted in principal by Taxation of Financial Institutions and Products Committee Chair Leon Metzger, Relations with the IRS Committee Chair Gerard Borod and Tax Division Oversight Committee liaison Bob Goldstein, is for a long form K-1 to better manage the more complex partnership and investment transactions that practitioners face with increasing regularity. The Society submitted the proposal and comment letter to the IRS on June 26.

“We have no illusion that the proposal is perfect or will be accepted as submitted by the IRS,” Goldstein said, adding that many organizations, as well as the IRS internally, are working on the K-1 revision. “Our intent was to provide a workable document, a ‘road map’ that will convey to the Service the complexity of the K-1 and the many issues involved in our use.”

Real Estate Committee

The Real Estate Committee, chaired by Barry Moss, held a CPE session on July 8 on FIN 45: Guarantors Accounting and Disclosure Requirements for Guarantees. Designed for real estate professionals, the session’s objective was to gain familiarity with effects of FIN 45.

Construction Contractors Committee

The Construction Contractors Committee, chaired by Kenneth C. Gardiner, held a CPE session on the paperless construction audit. Designed for CPAs in practice planning for audits of construction contractors, the session’s objective was to provide an overview of a paperless audit.

Mergers and Acquisitions

The Mergers and Acquisitions Committee, chaired by Randy Schwartzman, held a discussion at their July 17 meeting on the final and temporary regulations applying to stock acquisitions involving multistep transactions. The committee also discussed other items such as contingent stock acquisitions, new 382 rules, recent guidance on spin-offs, and merger and acquisition issues involving S corporations.