Author: KraftCPAs

For tax purposes, Dec. 31 means more than New Year’s Eve celebrations. It affects the filing status box that will be checked on your tax return for the year. When you file your return, you do so with one of five filing statuses, which depend in part on whether you’re married or unmarried on Dec. 31.

More than one filing status may apply, and you can use the one that saves the most tax. It’s also possible that your status options could change during the year.

Here are the filing statuses and who can claim them:

1. Single. This status is generally used if you’re unmarried, divorced, or legally separated under a divorce or separate maintenance decree governed by state law.
2. Married filing jointly. If you’re married, you can file a joint tax return with your spouse. If your spouse passes away, you can generally still file a joint return for that year.
3. Married filing separately. As an alternative to filing jointly, married couples can choose to file separate tax returns. In some cases, this may result in less tax owed.
4. Head of household. Certain unmarried taxpayers may qualify to use this status and potentially pay less tax. The special rules that apply are described below.
5. Qualifying widow(er) with a dependent child. This may be used if your spouse died during one of the previous two years and you have a dependent child. Other conditions also apply.

Head of household status

Head of household status is generally more favorable than filing as a single taxpayer. To qualify, you must “maintain a household” that, for more than half the year, is the principal home of a “qualifying child” or other relative that you can claim as your dependent.

A “qualifying child” is defined as someone who:

• lives in your home for more than half the year
• is your child, stepchild, foster child, sibling, stepsibling, or a descendant of any of these
• is under 19 years old or a student under age 24, and
• doesn’t provide over half of his or her own support for the year

Different rules may apply if a child’s parents are divorced. Also, a child isn’t a “qualifying child” if he or she is married and files jointly or isn’t a U.S. citizen or resident.

Maintaining a household

For head of household filing status, you’re considered to maintain a household if you live in it for the tax year and pay more than half the cost of running it. This includes property taxes, mortgage interest, rent, utilities, property insurance, repairs, upkeep, and food consumed in the home. Don’t include medical care, clothing, education, life insurance, or transportation.

Under a special rule, you can qualify as head of household if you maintain a home for a parent of yours even if you don’t live with the parent. To qualify, you must be able to claim the parent as your dependent.

Marital status

You must generally be unmarried to claim head of household status. If you’re married, you must generally file as either married filing jointly or married filing separately, not as head of household. However, if you’ve lived apart from your spouse for the last six months of the year, a qualifying child lives with you, and you “maintain” the household, then you’re treated as unmarried. In this case, you may be able to qualify as head of household.

If you have questions about your filing status, please contact us at KraftCPAs.

© 2019

Last year, medical device vendor Zoll was conducting what the organization saw as a routine migration of its servers. After what they referred to as a “data security incident” that occurred in either November or December 2018, they notified their 277,319 patients that their data had been compromised. The data included names, Social Security numbers, dates of birth, medical history, and other personally identifiable information.

All patient data was eventually secured, and no identity theft was reported as a result of the incident. But the very threat of more repercussions after the initial breach underlined the vulnerability of medical devices as cybersecurity threats continue to grow on a national level.

Cybersecurity is an emerging concern across all sectors. The healthcare sector may be one of the most vulnerable because so many of its components rely on cyber systems, such as the transfer of electronic personal health information as well as the maintenance, management, and operation of medical devices. That’s why it should be at the forefront of every healthcare facility’s list of threats to address.

Why you should care about medical device cybersecurity

There are a variety of cyber vulnerabilities that can impact medical devices, especially as these devices within a hospital or health system become more and more connected. A few types of vulnerabilities include, but are certainly not limited to:

Data breaches. Many medical devices contain sensitive patient data such as electronic health records. If exposed during a data breach, patient personal health information (PHI) can be used for nefarious purposes by a malicious actor.

Ransomware or malware attacks. With the onset of email phishing scams, medical devices have never been more vulnerable to a ransomware or malware attack. Ransomware attacks are when a medical device’s IT systems are corrupted by a malicious actor in return for a payment.

Interference with the medical care provided by devices. As more and more medical devices come online, the potential for the disruption of medical devices exists. This can lead to direct (and negative) consequences for patient care.

Outdated software. Some medical device manufacturers use old software without the latest security patches, in some cases prohibiting patching so as not to interfere with the device. This can leave devices vulnerable to cyberattacks or other unanticipated performance issues.

Methods for prevention

There are mechanisms for securing medical devices, and while they aren’t necessarily simple, there are basic, high-level best practices to improve the cyber hygiene of your facility’s devices.

Patch, patch, patch. Ensuring that your systems are up-to-date with the latest patches will give you the best chance of avoiding infection from ransomware or malware.

Incorporate cyber practices into your continuity of operations (COOP) procedures. Your facility has emergency response plans, checklists, and other types of guidance on how to best respond to disruptions or disasters. Ensure that medical device security incidents are incorporated into these plans. For example, if there is a data breach of one of your medical devices occurs, you should have documentation on the proper procedures for managing the breach.

Educate your staff. Having a response plan documented is only valuable if you have staff trained on the ability to execute the instructions. Emphasize the importance of good cybersecurity practices with your staff, the importance of maintaining them, and hold training on how to do so.

Maintaining proper cyber health for your facility’s devices is a critical yet daunting task. Luckily, there are resources available to help hospitals and other healthcare facilities do just that.

FDA resources

The U.S. Food and Drug Administration is the lead within the federal government for medical device cybersecurity. They offer multiple information resources to assist healthcare facilities, including:

FDA Website on Cybersecurity. This website provides a high-level overview of medical device cybersecurity from the FDA perspective.

The FDA’s Role in Medical Device Cybersecurity. This fact sheet outlines FDA’s role in assisting with the national security of medical devices. It dispels several myths as well.

Interference with Pacemakers and Other Devices. This web page discusses how radiofrequency energy can interact with and potentially disrupt medical devices.

Content of Premarket Submissions for Management of Cybersecurity in Medical Devices. Released in October 2018, this document provides recommendations to the private sector regarding cybersecurity considerations to be included in premarket submissions for devices that are susceptible to cyberattacks.

Cybersecurity for Networked Medical Devices Containing Off-the-Shelf (OTS) Software. This document outlines software maintenance to manage cyber vulnerabilities within medical devices.

Healthcare and Public Health Sector Partnership resources

The Healthcare and Public Health Sector Partnership consists of federal, state, local, and private sector healthcare representatives who collaborate with the U.S. Department of Health and Human Services (HHS) and the Department of Homeland Security (DHS) to help secure healthcare and public health critical infrastructure. DHS includes cybersecurity within its definition of critical infrastructure. This group has a variety of resources dedicated to increasing awareness of medical device cybersecurity.

Medical Device and Health IT Joint Security Plan. This document developed by the Healthcare and Public Health Sector Coordinating Council’s Joint Cybersecurity Working Group is “a consensus-based total product lifecycle reference guide to developing, deploying, and supporting cyber secure technology solutions in the healthcare environment.”

Healthcare Industry Cybersecurity Practices. Also developed by the Joint Cybersecurity Working Group, this product is a four-volume document that outlines common cybersecurity threats and best practices. It offers a more holistic approach to addressing cybersecurity at a healthcare facility, of which medical device security is an important component.

The Healthcare and Public Health Sector Highlights – Cybersecurity Edition. This email newsletter, sent every Friday morning by the HHS Office of the Assistant Secretary for Preparedness and Response, includes links to reports, products, and webinars related to medical device cybersecurity. These emails include weekly reports and cyber threat briefings from the Healthcare Cybersecurity Coordination Center (HC3), HHS’s cybersecurity information sharing and analysis center. Many of these briefings include information on medical device cyber vulnerabilities.

Summary

Every hospital or healthcare facility needs to consider the cybersecurity of their medical devices as a major risk to its operation, but you can take steps to mitigate these risks through education and implementation of best practices. Using the resources outlined above is a good start to help make you and your staff more aware of this security issue.

For more information on how to improve the cybersecurity of your medical devices, contact us at Kraft Technology Group today.

This article originally appeared in the Nashville Medical News.

A solid system of internal controls translates into more reliable financial reporting and can help companies prevent, detect, and correct financial misstatements. In contrast, weak controls can result in costly errors — potentially even fraud.

Internal controls have become a hot-button issue for companies in the 21st century. If your company seems to be putting more hours into evaluating its control systems, it’s not alone. Many companies have spent more time assessing and improving internal controls in recent years.

The basics

According to the Committee of Sponsoring Organizations of the Treadway Commission (COSO), internal controls should be “designed to provide reasonable assurance [of] the achievement of objectives in the effectiveness and efficiency of operations, reliability of financial reporting, and compliance with laws and regulations.”

COSO lists five components of internal controls:

• control environment
• risk assessment
• control activities
• information and communication
• monitoring

Companies must continually review and improve internal control performance. AICPA auditing standards also require external auditors to evaluate their client’s internal controls as part of their audit risk assessment procedures. Private auditors tailor audit programs for potential risks of material misstatement, but they aren’t required to specifically perform procedures to identify control deficiencies — unless they’re hired to perform a separate internal control study.

Management letters

Statement on Auditing Standards (SAS) No. 115, Communicating Internal Control Related Matters Identified in an Audit, requires auditors to consider whether controls are sufficient to prevent and detect misstatement, as well as whether they enable management to correct misstatements in a timely manner. Under SAS 115, management letters must identify two types of deficiencies in internal controls unearthed during audit procedures:

1. Material weaknesses. Such shortcomings refer to “a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis.”
2. Significant deficiencies. This type of concern is “less severe than a material weakness, yet important enough to merit attention by those charged with governance.” Note that a control deficiency is dependent on the potential for misstatement; misstatement need not actually have occurred.

SAS 115 permits significant leeway in how auditors classify internal control weaknesses, such as lack of segregation of duties, inadequately trained accounting personnel, restated prior-period financial statements, and material audit adjustments.

When classifying deficiencies as material or significant, auditors evaluate the probability and magnitude of the potential misstatement. They also consider “compensating controls,” which are substitute procedures that limit the severity of a deficiency.

Public company SOX compliance

In addition to SAS 115, Section 404 of the Sarbanes-Oxley Act (SOX) requires a public company’s management to assess its internal control over financial reporting (ICFR). The provision also requires the company’s external auditor to attest to the effectiveness of management’s internal controls.

Last year, roughly half (51%) of the public companies in a survey by consulting firm Protiviti reported spending more time checking ICFR than they had in the previous fiscal year. Why? The main reasons reported are:

• accounting standard changes (in particular, the new guidance on revenue recognition and reporting leases)
• the use of technology (such as robotic process automation and artificial intelligence) that requires testing of new controls
• rigorous inspections of controls by the Public Company Accounting Oversight Board (PCAOB)

Among the companies that reported an increase in their Section 404 compliance hours, 59% reported an increase of more than 10% over the prior year. Only 15% of the respondents reported a decrease in compliance hours. The increase in the time devoted to complying with Section 404 was more evident among larger companies than small ones.

Need help?

Internal controls are just as important for privately held companies as they are for publicly traded ones. In fact, smaller private companies are often less resilient to frauds caused by weak controls — and they also tend to have less-sophisticated internal audit and accounting departments than public companies.

Contact us at KraftCPAs if you need help understanding the recent changes to the accounting and tax rules. We can also help brainstorm cost-effective ways to improve your existing internal controls system.

© 2019