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What's Happening in Finance?
| Upcoming Finance Section Meeting - 1099 Reporting For Trust Payments Wednesday, June 25th, 2008 |
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| Time: | 12:00 PM - 1:00 PM |
| Location: | Lane Powell PC 1420 5th Avenue, 40th Floor US Bank Center Building Seattle, WA 98033 |
| Information: | 1099 Reporting For Trust Payments - Learn about 1099 requirements for settlements, client litigation costs, pass through payments and more. Authoritative materials will be presented and discussed. |
| Contact: | John S. Street Phone: 206.223.7974 Email: streetj@lanepowell.com |
April 17, 2008
Subject: Wells Fargo What's New in Banking Conference
In lieu of the regular Finance Section meeting for April, PSALA Members were invited to attend the Wells Fargo Global Payment Conference held at the Westin on April 17th. Many topics were presented in one hour sessions. In this article I cover two that have broad application to most law firms.
Credit Card Security – Protect your clients and your firm
Wells Fargo teamed with Visa to present a session on credit card security. In order to promote standardized security practices, the major credit card issuers have created the Payment Card Industry Security Standards Council PCISSC (Caution, acronym overload is a danger if you explore this area). The Council has created a Data Security Standard (PCI DSS) to help merchants, credit card gateways and credit card issuers keep their data secure. Adherence to the Standard is not required for most businesses. However, it was suggested that compliance with the PCI DSS would help protect your firm from liability in the event of a security breach.
The best way to learn about the DSS is to visit the PCISSC web site at https://www.pcisecuritystandards.org/index.htm . From the home page scroll down to the section titled “PCI DSS Self-Assessment Questionnaire” and click on the link for more information (there is also a link to a webinar link that I did view). Now click on the Instructions and Guidelines link https://www.pcisecuritystandards.org/pdfs/instructions_guidelines_v1-1.pdf .
The Instructions give an overview of the process. Basically, you need to determine your level and type of credit card payment processing and then complete a certification questionnaire that is submitted to the PCISSC. Larger businesses might also need to contract with a Qualified Security Assessor to perform an audit of their credit card operation.
Whether or not you choose to go through the formal questionnaire process, a thoughtful examination of the materials will help you assess your security risk. Some helpful hints:
• Check to see if your payment processing gateway is PCI DSS compliant. Request a copy of the company’s security audit report. Visa offers a list of compliant vendors. Go to Visa.com then click Merchants accepting Visa / Information and support / Cardholder Information Security Program / CISP List of Compliant Service Providers http://usa.visa.com/download/merchants/cisp_list_of_cisp_compliant_service_providers.pdf?it=c|/merchants/risk_management/cisp.html|CISP%20List%20of%20Compliant%20Service%20Providers .
• Do not store card holder data such as account numbers, expiration dates and CCV numbers. Electronic storage is especially dangerous. Paper forms should be shredded after the payment is processed.
• Make sure that you use separate, secret logins for all people using your credit card processing gateway.
Preventing Payment Fraud – The Latest Trends in Risk Management
Payment fraud occurs when an unauthorized debit is made to your bank or credit card account. This session addressed payment fraud trends, types of fraud and fraud prevention strategies.
Much of the material presented can be found in the Association of Finance Professionals 2008 Payments Fraud and Control Survey http://www.afponline.org/pub/pdf/2008PaymentsFraudandContolSurvey.pdf
Payment fraud is a real concern for US businesses. Wells Fargo documented a 163% increase in fraud attempts on its customers in the past three years. Fortunately, losses were avoided 98% of the time. The AFP survey found that 71% of respondents experienced attempted payment fraud in 2007.
Check fraud is still by far the most prevalent type of payment fraud. The best way to prevent check fraud by outsiders is to establish a positive pay program with your bank. Positive pay means that you transmit check data to your bank and the bank matches checks as they clear against the data you sent. If a check is presented that does not match, the bank will hold it pending your review. I can personally attest to the efficacy of positive pay. A while back we experienced a series of fraudulent checks that used our bank account and routing number and that were widely accepted by merchants in (where else) Los Vegas. Positive pay blocked every bad check and my firm did not lose a cent.
If positive pay is not available or is too expensive, then it is recommended that you reconcile your account daily (at least the outstanding check list and other debits). This might sound hard but it isn’t. Most banks have on-line access. Just develop a routine to look at the checks clearing your bank each day and match them to your check register. This is a five minute job. The bank account reconciliation is also your best tool to prevent internal fraud. The task should be performed by someone outside of your payment process.
ACH or electronic debit fraud is the next most common type of fraud and it is growing. There are two principal types of service that banks offer to prevent electronic debit fraud. One type is an ACH filter. ACH debits such as tax payments are blocked until you verify that the sender is valid. Once you validate the sender, future ACH debits will be allowed. The other type is like positive pay for ACH. You send expected ACH debits to your bank and if a debit does not match it is blocked. Again, if you don’t have the service you should be checking your bank account daily.
Fraud prevention and the establishment of internal controls are often neglected in the push to get the daily work done. However, a small investment of time can pay off in a relatively large increase in your peace of mind.
January 24, 2008
Subject: Navigating the Class 4 White Water Rapids that are the New B&O Tax Allocations
Handouts from our Monthly Chapter meeting "Navigating the Class 4 White Water Rapids that are the New B&O Tax Allocations":
January Monthly Meeting Outline (City B&O) intro.doc
RCW 35.102.130.doc
RCW 35.102.130 APPORTIONMENT OF SERVICE CLASSIFICATION INCOME.doc
New Square Footage Tax Effective January 1.doc
(I hope you find these handouts useful. Please email me if you have other questions. Richard Wood, former Co-Chair Finance Section)
Speaking panel at the January Chapter Meeting - From left to right: Joseph Cunha and Mel McDonald, both from the City of Seattle Revenue Affairs department and John Street and
Richard Wood both members of the Association of Legal Administrators Puget Sound Chapter.
December 17, 2007:
City of Seattle Square foot tax ordinance
December 10, 2007:
Subject: Washington City B&O Tax filing rule changes
With approximately 15 participants in attendance, the Finance Section met on December 10th to discuss the upcoming changes to city business & occupation (B&O) taxes being implemented on January 1, 2008. In an effort to prevent overlapping taxes, the Washington State Department of Revenue (DOR) has intervened and created a new system of apportionment. In other words, the State is trying to prevent cities from taxing businesses multiple times on the same revenue. While it is good news that overlapping taxation should be easier to avoid, the new system appears to be very confusing and difficult to employ. If your firm hasn't done so already, look into the following sources of information:
RCW 35.102.130 (
AWC Fact Sheets/ Finance/City B&O Tax (
EHB 2030 (
In addition, there is some concern that the Washington DOR is in the process of eliminating a law firm's ability to write off expenses advance to the client. For some firms, this would create a significant increase in taxable income. We'll monitor this and let everyone know how it progresses.
September 13, 2007:
Subject: E-Billing
The Tech and Finance Sections met in a combined meeting on September 13th to discuss E-billing. Presenting were Judi Cardillo, Director of Client Services at Allegient Systems, Inc., an E-billing company, and Cindy Powers, E-billing clerk for Wilson Smith Cochran Dickerson. Both presented aspects of the E-billing process. A good discussion by attendees ensued, and the meeting seemed to be a success for the 17 attendees.
A few points in the discussions were:
Subject: E-Billing
The Tech and Finance Sections met in a combined meeting on September 13th to discuss E-billing. Presenting were Judi Cardillo, Director of Client Services at Allegient Systems, Inc., an E-billing company, and Cindy Powers, E-billing clerk for Wilson Smith Cochran Dickerson. Both presented aspects of the E-billing process. A good discussion by attendees ensued, and the meeting seemed to be a success for the 17 attendees.
A few points in the discussions were:
- Is there an easy way to resubmit invoices where parts have been rejected? Answer: No.
- Several attendees noted that some e-billing websites charge the law firms (quite a lot of money) for the service of uploading invoices even though it's the law firm's client who chooses the e-billing site.
June 21, 2007
Subject: Q&A with the Department of Revenue Audit Manager regarding Law Firm Client pass-through expenses - "Taxable or Not Taxable"
What a great meeting!! I wanted to thank the TWENTY-FIVE attendees for attending to this meeting. I hope you all found it as interesting as I did.
First off, Mr. Gillespie will email me his responses to my original questions and any further information/questions he gathered at today’s meeting. When I receive that information I will pass it all on to you.
For those of you who didn’t get to come there were two VERY strong themes to the meeting: 1) What is considered a “direct litigation expense” vs. a classification of “expense necessary to provide the services” (it was worded differently several different times). In essence, it’s VERY difficult for even them to make consistent determinations, though Mr. Gillespie did a pretty good job of being as clear as possible. 2) Use tax.
The greatest debate in the room (seems that I always found myself RIGHT in the middle!) was regarding outside copying expenses. The clarification was… less than satisfactory. “If the copy job (outside copying only) was a ‘direct litigation expense’, meaning it directly contributed to the case materials, then it was exempt from tax. However, if the copy job was not case materials but instead ‘contributed to the firm being able to perform their legal services’ then it was taxable.”
Clear as mud, right? As I type this is SEEMS a little more clear, however ONE of the last remaining pieces to this puzzle is how to determine and classify categories for each TYPE of copy job (or portion of copy job!). I think he was quite empathetic with our dilemma.
Though the topic seemed to go over well with the group it REALLY is still an item for continued discussion between us and with the DOR. One fascinating suggestion that he shared was that law firms can actually lobby for changes to rules like these that are unclear or ‘inaccurate’ for the times. Perhaps that can be one of our future roles! I would have no idea where to start, but it DOES sound like it would be a viable option for a group like ours.
On a more promising note, Mr. Gillespie mentioned that it would be a good idea for the DOR to create a B&O taxation guide for attorneys (aka law firms). The room practically broke out into cheers!
He made an interesting (and unsuccessful attempt thanks to "one member") at pointing out that these rules must be fairly clear for attorneys since an attorney wrote the rule 207! To which "one member" kindly replied, “And, sir, that’s why they hire us to take care of those details.” (Or something quite similar, witty, and true)
Regarding Use Tax, it was merely a conversation of forgetting to file it, or being confused on what classifies.
I have a great Use Tax strategy that I have implemented a couple places I’ve worked. I create a specific GL account for Use Tax. Then when I book an expense that SHOULD be included in the Use Tax category I book a debit and a credit for the Use Taxable amount to the new GL Account.
So it looks like this:
Account DR | CR
Cash $10
Expense $10
Use Tax $10
Use Tax $10
Note the in and out in the Use tax account. This way, at the end of the month you only have to add up the debits (or credits) of that account for the period to determine how much you declare (be sure you don’t confuse the issue and use the “net” because that should ALWAYS be zero).
Just my two cents on that matter.
Mr. Gillespie welcomed future contact from us and us contacting him directly for any other questions we might have about specific or unspecific circumstances. He also added that it’s best to communicate to anyone in the DOR in writing since a verbal agreement cannot be documented and will not stand.
Here is Mr. Gillespie’s contact information in case any of you didn’t get his card:
Patrick T. Gillespie, CFE
Field Audit Manager
Audit Standards & Procedures
Department of Revenue
6500 Linderson Way SW, STE 101
PO Box 47474
Tumwater, WA 98504-7474
Phone: (360) 725-7584
Fax: (360) 586-5886
patrickg@dor.wa.gov
http://dor.wa.gov
For any more information about this meeting please contact me, Richard Wood, at
What a great meeting!! I wanted to thank the TWENTY-FIVE attendees for attending to this meeting. I hope you all found it as interesting as I did.
First off, Mr. Gillespie will email me his responses to my original questions and any further information/questions he gathered at today’s meeting. When I receive that information I will pass it all on to you.
For those of you who didn’t get to come there were two VERY strong themes to the meeting: 1) What is considered a “direct litigation expense” vs. a classification of “expense necessary to provide the services” (it was worded differently several different times). In essence, it’s VERY difficult for even them to make consistent determinations, though Mr. Gillespie did a pretty good job of being as clear as possible. 2) Use tax.
The greatest debate in the room (seems that I always found myself RIGHT in the middle!) was regarding outside copying expenses. The clarification was… less than satisfactory. “If the copy job (outside copying only) was a ‘direct litigation expense’, meaning it directly contributed to the case materials, then it was exempt from tax. However, if the copy job was not case materials but instead ‘contributed to the firm being able to perform their legal services’ then it was taxable.”
Clear as mud, right? As I type this is SEEMS a little more clear, however ONE of the last remaining pieces to this puzzle is how to determine and classify categories for each TYPE of copy job (or portion of copy job!). I think he was quite empathetic with our dilemma.
Though the topic seemed to go over well with the group it REALLY is still an item for continued discussion between us and with the DOR. One fascinating suggestion that he shared was that law firms can actually lobby for changes to rules like these that are unclear or ‘inaccurate’ for the times. Perhaps that can be one of our future roles! I would have no idea where to start, but it DOES sound like it would be a viable option for a group like ours.
On a more promising note, Mr. Gillespie mentioned that it would be a good idea for the DOR to create a B&O taxation guide for attorneys (aka law firms). The room practically broke out into cheers!
He made an interesting (and unsuccessful attempt thanks to "one member") at pointing out that these rules must be fairly clear for attorneys since an attorney wrote the rule 207! To which "one member" kindly replied, “And, sir, that’s why they hire us to take care of those details.” (Or something quite similar, witty, and true)
Regarding Use Tax, it was merely a conversation of forgetting to file it, or being confused on what classifies.
I have a great Use Tax strategy that I have implemented a couple places I’ve worked. I create a specific GL account for Use Tax. Then when I book an expense that SHOULD be included in the Use Tax category I book a debit and a credit for the Use Taxable amount to the new GL Account.
So it looks like this:
Account DR | CR
Cash $10
Expense $10
Use Tax $10
Use Tax $10
Note the in and out in the Use tax account. This way, at the end of the month you only have to add up the debits (or credits) of that account for the period to determine how much you declare (be sure you don’t confuse the issue and use the “net” because that should ALWAYS be zero).
Just my two cents on that matter.
Mr. Gillespie welcomed future contact from us and us contacting him directly for any other questions we might have about specific or unspecific circumstances. He also added that it’s best to communicate to anyone in the DOR in writing since a verbal agreement cannot be documented and will not stand.
Here is Mr. Gillespie’s contact information in case any of you didn’t get his card:
Patrick T. Gillespie, CFE
Field Audit Manager
Audit Standards & Procedures
Department of Revenue
6500 Linderson Way SW, STE 101
PO Box 47474
Tumwater, WA 98504-7474
Phone: (360) 725-7584
Fax: (360) 586-5886
patrickg@dor.wa.gov
http://dor.wa.gov
For any more information about this meeting please contact me, Richard Wood, at
Updated: Dec 17, 2008