Identity theft tips and PPP-related employee retention credit changes

The onset of COVID-19 meant that more people became online shoppers out of necessity. Ordering groceries by phone or computer also means more of us are putting potentially sensitive information online. Robert Westley, CPA/PFS, shares advice to avoid becoming a victim of identity theft, expanding on the tips in a recent Journal of Accountancy article. Alistair Nevius, J.D., the JofA’s editor-in-chief, tax, explains more on recent legislative changes to the employee retention credit. Also, the AICPA Auditing Standards Board has issued proposed standards designed to change the way firms manage quality in their accounting and auditing practices.

What you’ll learn from this episode:

• The link between a rise in e-commerce and potential identity theft.
• Reminders about best practices when shopping online.
• More detail on the changes to employee retention credits by the IRS.

Play the episode below or read the edited transcript:

Accounting firms can prepare and process applications for the PPP on the CPA Business Funding Portal, created by the AICPA, CPA.com, and fintech partner Biz2Credit.

AICPA experts discuss the latest on the PPP and other small business aid programs during a biweekly virtual town hall. The webcasts, which provide CPE credit, are free to AICPA members. Go to the AICPA Town Hall Series webpage for more information and to register.

To comment on this episode or to suggest an idea for another episode, contact Neil Amato, a JofA senior editor, at Neil.Amato@aicpa-cima.com.

Transcript:

Neil Amato: Welcome back to the Journal of Accountancy podcast. This is senior editor Neil Amato with a look at what’s making news in the accounting profession. I’m joined by Robert Westley, a member of the AICPA’s National CPA Financial Literacy Commission. Robert, thank you for being on, and thanks also for providing advice in a recent JofA article about identity theft.

Robert Westley: It’s great to be here, Neil. Thanks for having me on.

Amato: For consumers more accustomed these days to shopping online but maybe not accustomed to worrying about identity theft, what should they be aware of?

Westley: Right, so there’s a few things that consumers should be aware of, especially with this uptick in online shopping. First is that they really should have a strong password that is complex and difficult to guess. They should really make sure that they’re changing that password every few months and, most importantly, using different passwords across the different websites that they’re shopping on.

Another key fact that consumers who are spending more time online should be aware of is that they should really look closely at the websites that they’re shopping on. Make sure that those websites are secure and are using encryption, because that’s what’s going to protect their financial information.

Amato: You’re a senior wealth adviser, but given the amount of threats out there in the cyberworld, do you kind of feel like you’re also a cybersecurity adviser, a cybersecurity expert these days?

Westley: Yes, certainly. It’s so important, especially since we’re seeing these cybercriminals really become more sophisticated in using technology to their advantage just every single day. Every client and consumer is really at risk, so it’s really important to counsel them to be on top of this. One of the most important ways people can be on top of this is by routinely getting in the habit of checking bank statements, credit card statements, your credit report. Because that’s really where you’re going to see any fraudulent activity, and you want to find out as soon as possible, because that’s going to enable you to take fast, proactive actions to prevent that situation from really getting worse and out of hands.

Amato: That’s good advice for consumers. For CPAs and those offering financial planning services, what are one or two takeaways related to the findings in that survey about online activity and identity theft?

Westley: I think the main findings of the survey is that, unsurprisingly, more Americans are spending time online and online shopping, especially due to the COVID-19 pandemic, because they’re sheltering in place. So, cybersecurity is just becoming even more important. The other facet of the survey is really showing that given this uptick in online shopping, consumers are also not taking the necessary steps to protect their financial information. So, in that survey, it was found that less than half of Americans are actually checking their bank and credit card statements on a regular basis.

The survey also found that Americans are using the same password and username across all the websites they’re shopping on, and these findings are clearly not optimal from a cybersecurity standpoint. So, as a CPA financial planner advising clients, it’s important to bring this up to them and really help them to develop good online cybersecurity habits.

And as we talked about before, that’s having a strong password, that’s routinely checking bank statements, credit card statements, your credit report, that’s being aware of the websites that you’re entering your financial information on, and that’s also making sure that the software that’s running on your smartphone and your computer is up to date, because many times cybercriminals will use known flaws in these operating systems to gain access to your financial information.

And those ongoing updates are an important way to patch those flaws, so just keeping on top of clients and making sure they’re developing good online habits is very important.

Amato: Robert, thank you very much, this has been excellent.

Westley: Great, thank you so much, Neil. Thanks for having me.

Amato: Next, I’d like to bring in Alistair Nevius, the editor-in-chief, tax, for the Journal of Accountancy, to talk more about changes to employee retention credits. Alistair, one big change enacted in the Consolidated Appropriations Act (CAA) last December was to make employers who receive a Paycheck Protection Program loan also eligible to claim the employee retention credit. What can you tell us about that credit?

Alistair Nevius: The employee retention credit (ERC) was originally enacted as part of the CARES Act last March. It was designed to help employers who had to close due to the COVID-19 pandemic. And originally, under the CARES Act, employers had to choose between taking a PPP loan or claiming the ERC. If an employer received a covered PPP loan, they were not eligible to claim an employee retention credit. But the Consolidated Appropriations Act changed all that to provide that employers who receive PPP loans may still qualify for the ERC with respect to wages that are not paid with the forgiven PPP proceeds.

Amato: What are some of the other changes to the ERC?

Nevius: Well, there were several made by the CAA. Under the CARES Act, the credit was available for wages paid in 2020, and the CAA extended that to June 30, 2021.

But it also made a number of other changes, which mostly affect 2021 wages — that is, the amendments are mostly effective for calendar quarters that begin after Dec. 31, 2020. It increased the credit rate from 50% to 70% of qualified wages. It increased the limit on per employee creditable wages from $10,000 for the year to $10,000 for any quarter. And it reduced the required year-over-year gross receipts decline for the business from 50% to 20%. Those are some of the big ones; there were also several others.

Amato: So, with those changes you mention, I guess there are still some outstanding issues?

Nevius: Yes, there are. And we’re still waiting for IRS guidance on a lot of these issues. Certainly, the new provision that employers who receive PPP loans can also qualify for the ERC with respect to wages that aren’t paid with forgiven PPP proceeds — that’s raised a lot of questions about how reporting wages as payroll costs on a PPP loan forgiveness application might affect an employer’s ability to claim the ERC.

There’s lots of people who put in a forgiveness application before December 27 on the assumption they were not eligible for the ERC. So, the AICPA has requested guidance from the IRS and Treasury on that, and the AICPA is recommending that that guidance provide that filing a loan forgiveness application does not constitute an election to forgo the ERC for the wages that do not exceed the amount of wages that were needed for loan forgiveness. So that’s an important one.

I’m getting lots of questions from readers about just how exactly all sorts of various changes work and how they affect 2020 or 2021 wages. And as I said, we are awaiting guidance from the IRS really on the nuts-and-bolts mechanics of how that all works, but we have not received that guidance yet. So, we need to stay tuned.

Amato: Definitely we need to stay tuned. Thank you, Alistair, for that.

Nevius: You’re welcome.

Amato: In other news, the AICPA Auditing Standards Board has issued an exposure draft related to quality management of firms’ accounting and auditing practices. The proposed standards include a new approach to quality management systems within firms, an approach that is risk-based and scalable. The comment period on the exposure draft runs through June 11.

The proposal is based on the International Auditing and Assurance Standards Board’s recently released quality management standards, and it is built to enable firms to tailor their quality management processes to their individual circumstances.

In the podcast show notes, we’ll have links to the JofA articles on these topics, or visit journalofaccountancy.com for more news. Thank you for listening to the Journal of Accountancy podcast.