Author: Alexis Long

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Financial Institutions and Banking

Get Ready for General Qualified Mortgage Final Rule

In April 2021, the Consumer Financial Protection Bureau (CFPB) delayed the deadline for compliance with its revised general qualified mortgage (QM) rule to October 1, 2022. But it’s a good idea for banks to start reviewing the requirements now and determine how they’ll need to update their procedures to incorporate the new rule. QMs — which avoid certain risky features and meet other requirements designed to make them safer and easier for borrowers to understand — are presumed to comply with ability-to-repay rules.

Currently, for a loan to be a QM, the borrower must have a total monthly debt-to-income ratio (including mortgage payments) of 43% or less. The revised rule greatly simplifies the definition of a QM by discarding the debt-to-income limit in favor of a price-based model. For loan applications received on or after March 1, 2021, but before October 1, 2022, lenders have the option of complying with either the current or the revised general QM loan definition. (Note: Separate rules apply to “seasoned” QMs.)

New lease accounting rules back on banks’ radar

After several delays — including a one-year postponement due to COVID-19 — the new lease accounting standard is scheduled to take effect for private companies for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. If your compliance efforts have been on hold, it’s time to ramp them up again. The upcoming transition to the new rules may influence current negotiations between banks and their loan customers, and banks that lease their facilities, equipment or other fixed assets should prepare for the rules’ potential impact on their balance sheets and regulatory capital. Plus, the standard’s transition approach may require banks to implement certain changes before the rules take effect.

Guide to conducting due diligence on FinTech companies

Community banks are under increasing pressure to provide their customers with digital products and services, and many banks are partnering with financial technology (FinTech) companies as a strategy for developing innovative, customized, cost-effective solutions. These partnerships can be complex ventures that involve a variety of risks, so thorough due diligence is critical. To assist banks with these efforts, federal banking agencies have published “Conducting Due Diligence on Financial Technology Companies: A Guide for Community Banks.”

The due diligence practices described in the guide are voluntary and don’t establish any new risk-management requirements. But they provide valuable guidance on what community banks should be looking for when they evaluate potential FinTech providers in six areas: 1) business experience and qualifications, 2) financial condition, 3) legal and regulatory compliance, 4) risk management and controls, 5) information security, and 6) operational resilience.

For more guidance regarding your bank’s compliance, contact Jack Matthis at jmatthis@atacpa.net.

© 2022

Categories
Helpful Articles Tax

IRS Suspends Automatic Collection Notices

Per IRS News Release IR-2022-31, February 9th, 2022

It’s widely known that the IRS is experiencing difficulties processing tax returns from last year. In fact, it was recently reported that several million taxpayers are still waiting for the IRS to process their 2020 tax returns, with some refunds held up for 10 months or more. Because of this, the IRS will suspend the mailing of more than a dozen letters, including the mailing of automated collection notices normally issued when a taxpayer owes additional tax and the IRS has no record of the taxpayer filing a tax return.

Be aware that some people may still receive these notices during the next few weeks. The IRS has advised that there’s no need to respond to them. Click this link to read more on the suspension of these letters from the IRS.  Contact us with any questions regarding this backlog.

 

 

Categories
Tax

IRS Announces Transition Away from Use of Third-Party Verification Involving Facial Recognition

The IRS announced it will transition away from using a third-party service for facial recognition to help authenticate people creating new online accounts. The transition will occur over the coming weeks in order to prevent larger disruptions to taxpayers during filing season.

During the transition, the IRS will quickly develop and bring online an additional authentication process that does not involve facial recognition. The IRS will also continue to work with its cross-government partners to develop authentication methods that protect taxpayer data and ensure broad access to online tools.

“The IRS takes taxpayer privacy and security seriously, and we understand the concerns that have been raised,” said IRS Commissioner Chuck Rettig. “Everyone should feel comfortable with how their personal information is secured, and we are quickly pursuing short-term options that do not involve facial recognition.”

The transition announced today does not interfere with the taxpayer’s ability to file their return or pay taxes owed. During this period, the IRS will continue to accept tax filings, and it has no other impact on the current tax season. People should continue to file their taxes as they normally would.

*from IRS Newswire

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Financial Institutions and Banking Milan, TN

What’s Your Bank’s Plan to Counter Ransomware Attacks?

Cybersecurity continues to be a key risk that businesses face today, and banking is among the industries most affected by cyberattacks. Some experts estimate that around a quarter of all malware attacks target financial institutions. Of particular concern are ransomware attacks, which have increased dramatically in the past couple of years.

The threat of ransomware is so serious that the National Institute of Standards and Technology (NIST) — developer of a widely used cybersecurity framework — recently published a draft Cybersecurity Framework Profile for Ransomware Risk Management (the Ransomware Profile).

Ransomware and risk management

Ransomware is a type of malware that encrypts an organization’s data. Once malware has infected a system, the attackers demand payment in exchange for the encryption key that unlocks the data. In some cases, they may also steal an organization’s information and demand additional payment to avoid disclosure of that information to authorities, competitors or the public.

The Ransomware Profile outlines several basic preventive steps organizations can take to protect themselves against the ransomware threat, including:

  • Use antivirus software at all times,
  • Keep computers updated with the latest security patches,
  • Segment internal networks to prevent malware from proliferating among potential target systems,
  • Continuously monitor for indicators of compromise or active attack,
  • Block access to potentially malicious web resources,
  • Allow only authorized apps, and avoid use of personal apps — such as email, chat and social media — on work computers,
  • Use standard user accounts, rather than accounts with administrative privileges, whenever possible,
  • Restrict personally owned devices on work networks,
  • Educate employees about social engineering (for example, to not open files or click on links from unknown sources without scanning for viruses or taking other precautions), and
  • Assign and manage credential authorization for all enterprise assets and software, and periodically verify that each account has only the appropriate access.

Organizations also should take steps that will help them recover from future ransomware events, including developing and implementing rigorous backup and incident recovery plans.

Backup strategies and incident response plans

Simply keeping backups of data isn’t enough. Any significant gaps in recoverable data or delays in restoring systems can be devastating for banks. So, they must back up data daily and test and periodically validate it. Also, banks should store backups offline to prevent a ransomware attack.

A well-designed backup strategy is worthless, however, without a solid incident response plan. This critical step helps banks restore systems quickly and minimize downtime in the event of a ransomware or other attack. A cyberattack is highly stressful. So, to avoid a paralyzing panic, your response plan should provide step-by-step instructions on who does what and when. The plan also should be kept offline to ensure that it’s accessible if your systems aren’t.

Be prepared

All banks should have a comprehensive cybersecurity plan to prevent ransomware and other cyberattacks and to minimize damages should an attack occur. If your bank doesn’t have a plan or you’re unsure whether your plan provides the protection you need, contact one of our industry leaders about conducting a cybersecurity risk assessment with ATA Secure.

© 2022

Categories
Helpful Articles Tax

Help Safeguard Your Personal Information by Filing Your 2021 Tax Return Early

The IRS announced it is opening the 2021 individual income tax return filing season on January 24. (Business returns are already being accepted.) Even if you typically don’t file until much closer to the April deadline (or you file for an extension until October), consider filing earlier this year. Why? You can potentially protect yourself from tax identity theft — and there may be other benefits, too.

How tax identity theft occurs: In a tax identity theft scheme, a thief uses another individual’s personal information to file a bogus tax return early in the filing season and claim a fraudulent refund. The actual taxpayer discovers the fraud when he or she files a return and is told by the IRS that it is being rejected because one with the same Social Security number has already been filed for the tax year. While the taxpayer should ultimately be able to prove that his or her return is the legitimate one, tax identity theft can be a hassle to straighten out and significantly delay a refund.

Filing early may be your best defense: If you file first, it will be the tax return filed by a potential thief that will be rejected — not yours. Note: You can still get your individual tax return prepared by us before January 24 if you have all the required documents. But processing of the return will begin after IRS systems open on that date.

Your W-2s and 1099s: To file your tax return, you need all of your W-2s and 1099s. January 31 is the deadline for employers to issue 2021 W-2 forms to employees and, generally, for businesses to issue Form 1099s to recipients for any 2021 interest, dividend or reportable miscellaneous income payments (including those made to independent contractors). If you haven’t received a W-2 or 1099 by February 1, first contact the entity that should have issued it. If that doesn’t work, you can contact the IRS for help.

Other benefits of filing early: In addition to protecting yourself from tax identity theft, another advantage of early filing is that, if you’re getting a refund, you’ll get it sooner. The IRS expects most refunds to be issued within 21 days. However, the IRS has been experiencing delays during the pandemic in processing some returns. Keep in mind that the time to receive a refund is typically shorter if you file electronically and receive a refund by direct deposit into a bank account. Direct deposit also avoids the possibility that a refund check could be lost, stolen, returned to the IRS as undeliverable or caught in mail delays.

If you were eligible for an Economic Impact Payment (EIP) or advance Child Tax Credit (CTC) payments, and you didn’t receive them or you didn’t receive the full amount due, filing early will help you to receive the money sooner. In 2021, the third round of EIPs were paid by the federal government to eligible individuals to help mitigate the financial effects of COVID-19. Advance CTC payments were made monthly in 2021 to eligible families from July through December. EIP and CTC payments due that weren’t made to eligible taxpayers can be claimed on your 2021 return.

Contact us if you have questions or need to make an appointment with your tax preparer.

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News Owensboro, KY

WATHEN AND COMPANY, PLLC MERGES WITH ALEXANDER THOMPSON ARNOLD PLLC

Owensboro, Ky. — Regional accounting firm Alexander Thompson Arnold PLLC (ATA) is expanding its presence in Owensboro, Ky. through the acquisition of local firm Wathen and Company, PLLC owned by Vernon Wathen, CPA, effective January 1, 2022.

ATA has built a presence in Owensboro as a result of a 2017 acquisition of Myriad CPA Group. The acquisition of Wathen and Company allows for ATA’s further growth in the Owensboro area. 

“As we continue to grow, it is our top priority to join with firms that embody similar values as ATA,” said ATA managing partner John Whybrew. “Wathen and Company is a natural fit, and we see a bright future for our firm in the Owensboro area.”

Wathen and two staff members will continue to serve clients as ATA team members as a result of this transition. ATA Owensboro will operate at a new location at 300 Southtown Boulevard Floor 3, Owensboro, KY 42303.

Wathen can be reached directly at @vwathen@atacpa.net.

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About Alexander Thompson Arnold PLLC (ATA)

ATA is a long-term business advisor to its clients and provides other services that are not traditionally associated with accounting. The ATA Family of Firms consists of a team of experts that can benefit every area of your business. Revolution Partners provides financial planning expertise; ATA Technologies provides trustworthy IT solutions; ATA Secure provides cybersecurity services; Sodium Halogen focuses on growth through the design and development of marketing and digital products; Adelsberger Marketing offers video, social media, and digital content for small businesses; and ATAES is a comprehensive human resource management agency. 

ATA has 15 office locations in Tennessee, Arkansas, Kentucky and Mississippi. Recognized as an IPA Top 150 regional accounting firm, it provides a wide array of accounting, auditing, tax and advisory services for clients ranging from small family-owned businesses to publicly traded companies and international corporations. ATA is also an alliance member of BDO USA LLP, a top five global accounting firm, which provides additional resources and expertise for clients.

 

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Financial Institutions and Banking Helpful Articles

Keeping Branch Banking Profitable in the Digital Age

The COVID-19 pandemic has led to an increase in online banking; however, the transition to virtual banking was already well underway. As community banks look to the future, they need to re-imagine branch banking for the digital age. This means strengthening what’s working and getting rid of what isn’t. Direct banking at branches can still be vital to community banks’ financial health as long as they measure branch performance and correct as necessary.

Customer location

A significant challenge in measuring branch performance is assigning customers to particular locations. Traditional measures (such as new accounts opened or teller activity) no longer suffice. Just because a customer opened an account at a branch doesn’t necessarily mean that account should count toward the branch’s performance.

What if the customer relocated? What if he or she uses more than one branch? What if the customer does everything online and doesn’t visit branches at all? There are no easy answers to these questions. To get an accurate picture of branch performance, banks need to develop models that better reflect a branch’s interactions with customers and its contribution to the bank’s overall performance.

Measurement strategies

Some banks are developing point systems to measure the value of products sold, customer service and retention. For example, core accounts like checking accounts generally are more valuable than CDs, which often constitute “hot money” — that is, funds frequently transferred between financial institutions in an attempt to maximize returns. The analysis might be different, however, if a checking account has a small average monthly balance or if a CD has a relatively long term.

For services, one set of point values might be assigned to transaction processing — such as cashing checks or accepting deposits — with higher values assigned to loans or consultative services.

According to financial services technology provider Fiserv, customers with one banking product stay with a bank around 18 months on average. The average relationship increases to four years for customers with two products and to almost seven years for customers with three products. So, branches with more customers purchasing multiple products tend to contribute more value, and transfers of funds among branches affect branch profitability.

Differences in markets

Too often, banks’ business development plans fail to reflect the differences among their branches’ local markets, which can be dramatic. Many simply allocate their budgets uniformly among locations and demand that each branch achieve similar profitability and growth goals.

There are two problems with this approach. First, it establishes unachievable goals for branches in some markets, while allowing other locations to coast. Second, it may cause a bank to miss opportunities to enhance branch performance.

A better approach is to benchmark the bank’s performance against that of its peers. After identifying areas in which performance is falling short, the bank can examine individual branches, analyze their local markets and develop strategies for enhancing performance.

It’s important to analyze each branch’s current customer base as well as the various commercial and consumer segments that make up its local market. Armed with this information, you can develop marketing strategies that make the most of each location’s unique profitability and growth opportunities.

For example, a branch in an area with a lot of high-income consumers might target those consumers and also focus on cross-selling to existing customers. (Of course, it’s important to keep in mind fair lending exposure and Community Reinvestment Act considerations.) As noted above, providing multiple products to customers improves retention rates. On the commercial side, analyzing local markets may reveal opportunities to serve previously untapped commercial sectors or business niches.

Analysis and measurement are key

Your community bank will thrive if its branches thrive. Understanding your local customers and their banking preferences has never been more challenging — or more important. Closing branches if they’re no longer profitable is one solution, but developing them in ways that make them more useful to customers might be the best strategy over the long run.

© 2022

Categories
General Healthcare News

Supreme Court Blocks Vaccine-or-Testing Mandate for Large Employers

On Thursday, January 13, the U.S. Supreme Court blocked efforts by the Biden Administration to put a vaccine-or-testing mandate in place for large employers in a 6-3 vote. The mandate would have required proof of vaccination or weekly COVID testing for businesses that employ at least 100 individuals.

While a vaccine-or-testing mandate will not go into effect for general employers, employees of healthcare facilities that receive money through the Medicare and Medicaid programs must be vaccinated against COVID-19 by the end of February 2022, as decided in a 5-4 ruling.

For more details about the Supreme Court’s ruling on the vaccine-or-testing mandate, visit https://www.reuters.com/world/us/us-supreme-court-blocks-biden-vaccine-or-test-policy-large-businesses-2022-01-13/.

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Helpful Articles Tax

New Reporting Guidelines for Third-Party Payment Services

As a result of the American Rescue Plan Act of 2021, sellers that receive at least $600 in a calendar year for goods and services transactions through a Third-Party Settlement Organization (TPSO) such as PayPal or Venmo will be required to report this income to the IRS when filing taxes for 2022. This reporting threshold was significantly lowered from 2021’s threshold of $20,000 in payments and 200 transactions. 

This is not a tax change, it is a reporting change. The new regulations make it possible for the IRS to verify the income business owners receive through TSPOs. No extra tax will be applied to these amounts.

These guidelines are not applicable to:

  • Amounts sent as a gift
  • Amounts from selling personal items at a loss
  • Amounts sent as reimbursements

Several TSPOs, including Venmo, allow users to mark a payment as a goods and services transaction, making it easier for sellers to keep records of their income. 

At the end of the calendar year, TSPOs will send Form 1099-K to users that received more than $600. This form will be provided to the user’s tax preparer when filing a 2022 tax return in 2023. These guidelines will not affect 2021 tax returns. 

Business owners and independent contractors should be prepared to provide their employer identification number (EIN), individual tax identification number (ITIN), or Social Security number to TSPOs in order to continue utilizing the services and to receive their 1099-K.

For more information regarding this reporting change, contact your ATA representative today.

Categories
Helpful Articles Tax

Key Q1 Tax Deadlines

Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2022. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact your tax preparer to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

January 17 (The usual deadline of January 15 is a Saturday)
-Pay the final installment of 2021 estimated tax.

-Farmers and fishermen: Pay estimated tax for 2021.

January 31
-File 2021 Forms W-2, “Wage and Tax Statement,” with the Social Security Administration and provide copies to your employees.

-Provide copies of 2021 Forms 1099-NEC, “Non-employee Compensation,” to recipients of income from your business where required.

-File 2021 Forms 1099-NEC, reporting non-employee compensation payments in Box 7, with the IRS.

-File Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” for 2021. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 10 to file the return.

-File Form 941, “Employer’s Quarterly Federal Tax Return,” to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2021. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return. (Employers that have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944, “Employer’s Annual Federal Tax Return.”)

-File Form 945, “Annual Return of Withheld Federal Income Tax,” for 2021 to report income tax withheld on all non-payroll items, including backup withholding and withholding on accounts such as pensions, annuities and IRAs. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.

February 28
-File 2021 Forms 1099-NEC with the IRS if: 1) they’re not required to be filed earlier and 2) you’re filing paper copies. (Otherwise, the filing deadline is March 31.)

March 15
-If a calendar-year partnership or S corporation, file or extend your 2021 tax return and pay any tax due. If the return isn’t extended, this is also the last day to make 2021 contributions to pension and profit-sharing plans. © 2022