Year 2000 issues for tax practitioners.As Jan. 1,2000 draws closer, most people have some notion of what is meant by the statement "the Y2K problem Y2K problem or Y2K bug: see Year 2000 problem.
(Year 2000 problem) The inability of older hardware and software to recognize the century change in a date. ." Total unawareness is not the same problem it was two or more years ago. Rather, the problem is related to a propensity for procrastination; most businesses (including tax practices), while having a conceptual understanding of both the problem and the procedures to fix it, have not yet made an effort at implementation.
For tax practices, this "blast faire" attitude may be partially attributable to the rate of technological change that occurs in many practices not directly related toY2K compliance. For example, tax preparation software has been evolving to a Windows platform for several years. Some of the Windows-based packages are suitable only for computers running Windows9x or Windows NT (Windows New Technology) A 32-bit operating system from Microsoft for Intel x86 CPUs. NT is the core technology in Windows 2000 and Windows XP (see Windows). Available in separate client and server versions, it includes built-in networking and preemptive multitasking. . These operating systems Operating systems can be categorized by technology, ownership, licensing, working state, usage, and by many other characteristics. In practice, many of these groupings may overlap. and applications require significantly more computer power than their predecessor systems running on MSDOS MSDOS Microsoft Disk Operating System . Therefore, practitioners tend to assume that their natural technological progressions will insulate them from the problem (i.e., relatively new hardware running up-to-date software). That notion is partially accurate. However, tax practices generally use computers for many functions besides return preparation. These functions often are not upgraded as frequently as tax preparation software.
The problem now is time, compounded by the number of changes (both hardware and software) being compressed into 1999. Most tax practices cannot accommodate much change between January 1 and April 15; from a practical standpoint, any correctional plans not finished by Dec. 31, 1998 will have only an eight-month window for execution.
The Technical Issue
The Y2K problem is not a virus; a virus is an infection from an external source. It is not a bug; a bug is something that causes a software program not to work as designed. The Y2K problem results from a major design flaw located in hardware, firmware (chip-based software), software or all three. It occurs when some date-dependent routine stores only the last two digits of the year (with the first two digits assumed to be 19). When the embedded clock (referred to as real time clock or RTC See real time clock. ) rolls from Dec. 31, 1999 to Jan. 1, 2000, these devices actually go back in time to Jan. 1, 1900. Additionally, while Jan. 1, 2000 is often referred to as the new millennium, the first day of the new millennium is actually Jan. 1, 2001; it is not just Jan. 1, 2000 that is vulnerable.
Many counting routines violate one of the rules for computing leap years Leap Years is a 2001 drama television series that aired on the Showtime cable network. The show was created by Ron Cowen and Daniel Lipman, who had created the American version of the series Queer as Folk. It followed a group of friends in New York City. . That rule states that every centesimal centesimal /cen·tes·i·mal/ (sen-tes´i-mal) divided into hundredths.
n in homeopathy, a 1/100 part dilution of natural, organic, or mineral substances in alcohol or lactose. year devisable by 400 (1600, 2000, 2400, etc.) is a leap year leap year: see calendar. . Subsequently, if this rule is not considered, even if the counting routine could correctly reach 2000, the device/system will not correctly calculate Feb. 29, 2000. Also, some systems "look one year ahead" for certain functions. For these systems (calculating Jan. 1, 2000 a year early), problems could occur on Jan. 1, 1999.
Not Just Computers
For the last 20 years, there has been an increasing number of devices that function based on a chip with an embedded RTC. For example, these chips may be found in photocopiers, fax machines, telephone systems, credit card systems, time clock systems, cellular telephones, VCRs and projection systems. Within buildings, these chips may be in heating and cooling systems cooling systems
for housed animals include spraying of roofs with water, evaporative pads with fans, foggers and misters; for pastured animals shelter from the sun by trees or artificial shade devices and cooling ponds are used. , lighting systems, fire control systems, security monitoring systems, card entry systems, elevators and parking systems. Similarly, specialized industries, such as health equipment, ATM machines, process control systems and traffic systems, may also have these chips. Most tax practitioners are well aware of deficiencies within IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. systems. (Ironically, the Service may have the most experienced cadre of COBOL COBOL: see programming language.
in full Common Business-Oriented Language.
High-level computer programming language, one of the first widely used languages and for many years the most popular language in the business community. program patchers around.) In addition to a firm's own computer systems, many of these systems directly and indirectly affect tax practices.
When a computer boots up, it reads instructions contained in a chip. Several of these instructions, generally referred to as firmware, comprise the basic input-output system (BIOS). One of the BIOS functions deals with the date. Therefore, if a date routine within a computer's BIOS uses the two-digit year scheme (most AT-class machines running DOS, Windows 3.11 or earlier versions), there will be BIOS problems. While it is possible to update the firmware in these older machines, it is not generally cost effective.
CMOS (Complementary Metal Oxide Semiconductor) Pronounced "c-moss." The most widely used integrated circuit design. It is found in almost every electronic product from handheld devices to mainframes.
Each computer stores attributes about its components (e.g., keyboard, display and disks) in a complementary metal oxide semiconductor See CMOS.
(integrated circuit) Complementary Metal Oxide Semiconductor - (CMOS) A semiconductor fabrication technology using a combination of n- and p-doped semiconductor material to achieve low power dissipation. (CMOS) chip. The RTC is an attribute. Sometimes the BIOS will be able to set and read the century correctly but will not be able to correctly maintain the RTC in the CMOS. So, even when the BIOS works, the CMOS might not. There are so many variations and versions of BIOS and CMOS that it is impossible to predict when a problem will occur.
Will Windows 3.x Windows 3.x can refer to either an individual or all of the following versions of Microsoft Windows:
Microsoft has posted patches on its Website for the Windows 3.x and Windows95 File Managers to correct Y2K See Y2K problem and Y2K compliant.
Y2K - Year 2000 date display problems ("The Year 2000 FAQ (Frequently Asked Questions) A group of commonly asked questions about a subject along with the answers. Vendors often display them on their Web sites for use as troubleshooting guidelines. " (Version 2.3, May 5, 1998), from ftp://www.year2000.com/pub/ year2000/y2kfaq.txt, states that Windows NT 4.0 and Windows98 do not exhibit a date rollover problem.) The patches can be downloaded (see the chart above). These files are self-extracting and include a new WINFILE.EXE and a TXT file from Microsoft explaining their use. (The files should be dated Dec. 2, 1997 or later.)
Generally, Windows95 does not have a date problem with the Y2K; it can go forward to the year 2099 and backward to 1980.
Windows98 and Windows NT 4.0
According to Microsoft, machines with "bad" BIOSes are automatically adjusted by Windows98 and Windows NT 4.0. The File Managers also correctly display dates (no downloads required). Therefore, upgrading the operating system seemingly compensates for some Y2K hardware shortcomings A shortcoming is a character flaw.
Shortcomings may also be:
in full Microsoft Disk Operating System
Operating system for personal computers. MS-DOS was based on DOS, developed in 1980 by Seattle Computer Products. Microsoft Corp. bought the rights to DOS in 1981, and released MS-DOS with IBM's PC that year. or Windows 3.x.
Steps for Coping
Many firms have not yet completed comprehensive surveys of the hardware, firmware and software employed in their everyday business operations. There will often be legacy products still being used for some important functions. Tax practice firms should conduct surveys as soon as possible. Remedies may require more than 12 months to accomplish. Many firms will probably have to outsource this task in order to discover vulnerabilities, plan solutions and execute plans. Claims by any computer troubleshooter of 100% effectiveness should be viewed with skepticism. Because chips have become so pervasive in so many products, some problems will remain obscure even after a thorough search. Similarly, a firm should be cautious about the level of assurance it gives in assisting clients managing Y2K risks. Some CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. firms have withdrawn from performing Y2K consulting engagements because of exposure to liabilities from undiscovered problems. Conversely, assisting clients with their Y2K issues may not only increase firm profitability but, also, firm credibility. However, some professional liability insurance carriers are disclaiming coverage of Y2K issues.
Generally, the IRS has indicated that costs associated with converting or repairing existing software for Y2K compliance are currently deductible. Problems will arise, however, when conversions also include improvements that go beyond compliance. It is likely that any undepreciated hardware removed from service should be expensed as obsolete. Replacement hardware may be subject to normal capitalization rules. However, it is not clear when hardware replacement is being mandated by the software required to cure a problem. For instance, upgrading a Windows 3.x machine to Windows NT 4.0 could solve some dilemmas. Often, such a transition will require more robust hardware. That raises the question of whether the new hardware cost is simply part of the software correction costs. Some interesting developments should be expected as tax returns incurring costs are examined.
There is a wealth of information accessible via the Internet regarding the Y2K issue. The information base is constantly growing. The chart above provides an entry point to obtain information.
RELATED ARTICLE: Microsoft Patches
W95FILUP. EXE Exe (ĕks), river, c.55 mi (90 km) long, rising in the Exmoor, Somerset, SW England, and flowing S across the Cornwall peninsula, past Exeter to the English Channel at Exmouth. : Updated File Manager for Windows95: http://premium.microsoft.com/support/downloads/dp2902.asp ftp://ftp.miscrosoft.com/Softlib/MSLFILES/W95FILUP.EXE
W31FILUP. EXE: Updated File Manager for Windows 3.1: http://premium.microsoft.com/support/downloads/dp 2903.asp ftp://ftp.miscrosoft.com/Softlib/MSLFILES/W31FILUP. EXE
WFWFILUREXE: Updated File Manager for Windows for Workgroups A version of Windows 3.1 introduced in 1992 that added peer-to-peer networking. See Windows.
(operating system) Windows for Workgroups - (WFW, WFWG) A version of Windows 3.1 which works with a network. Although stand-alone 3. 3.11: http://premium.microsoft.com/support/downloads/dp2904.asp ftp://ftp.microsoft.com/Softlib/MSLFILES/WFWFILUP.EXE
RELATED ARTICLE: Y2K Guidance
(the author's web site)
http://www.sandismith.com (CPA Y2K consultant and author of AICPA AICPA
See American Institute of Certified Public Accountants (AICPA). publication entitled Solving the Year 2000 Dilemma; product #93008)
http://www.year2000.com (a broad base of documents and links to other sites)
http://www.aicpa.org/stream/index.htm (AICPA web site; currently publishes the above book and a video--clip viewable at the site)
Editor's note: Mr. Maida and Mr. Rubenstein are members of the AICPA Tax Division's Tax Technology Committee. Mr. Prescott is chair of that committee.
If you would like additional information about this article, contact Mr. Maida at (609) 882-6874 or email@example.com, Mr. Rubenstein at (202) 736-8411 or firstname.lastname@example.org, or Mr. Prescott at (252) 756-4463 or email@example.com.