All posts by Nancy McClelland

Education, Illinois, Tips

Restaurant Tipping – How It Works

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UPDATE 11/12/2019 — in 2018, changes were made by the Department of Labor to allow tip pooling with back-of-house employees as long as the state does not have more restrictive laws. This article does a great job of summarizing the changes:

Do You Know Where Your Tip Money Is Going? – Eater

In recent discussions with clients and friends about this year’s change in Chicago minimum wage for tipped versus non-tipped employees (and how that intersects with minimum wage rules for tipped employees at the Federal level or in other states), as well as conversations about restaurant “service charges”, and how they differ from tips… I realized that many folks — even restaurant owners — don’t understand how tipping works from a business perspective, and may not be reporting their tips — or paying their employees — appropriately.  I found this particular Chicago Tribune article from last year to give an especially good overview explanation:

How Restaurant Tipping Works – Chicago Tribune

Another site, the “Wiser Waitress,” writes from the perspective of employees — who unfortunately, often are misinformed or uninformed about their rights, about tip pools, about tracking and reporting and paying taxes on their tips.  This site is not as well-written, and it’s not an Illinois-specific set of information, but it does cover many of the issues that tend to be sticky points.  I also find it helpful to read from the angle of someone who is being taken advantage of — because, in my business, we’re always looking at the poor restaurant owner, who has to pay their employees more than they pay themselves.  It’s interesting to see how waitstaff see it.

The Wiser Waitress – Wages & Tips

Lastly, but in some ways most importantly, the Illinois Restaurant Association has an excellent FAQ regarding various governmental, tax, and labor requirements that apply to restaurants.  This organization is well-worth a membership if you are a restaurant owner or someone who works with restaurants.  They offer different membership types with different benefits, and their website is quite informative:

Illinois Restaurant Association FAQ

Tipping, service charges, minimum wage, front of house, back of house… it’s all substantially more complex than you’d think.  Make sure to learn the rules, track your tips (employees), tip payouts (employers), and educate others wherever you can.

UPDATE: I came across an excellent, two-part, detailed article from the Restaurant Accounting pro herself, Stacey Byrne, on the topic of “Accounting & Payroll Issues for Restaurant Tips and Service Charges” (Part One & Part Two), and want to share it here for you as well. Must-read resources for anyone doing restaurant accounting!

IRS, Tips

Last-Minute Tax-Planning Strategies | Accounting Today

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Accounting Today just published a nice little article on last-minute tax-planning strategies, and touched on a few other topics as well, such as the flip-flop between partnership and C-Corp tax return due dates.  A short and worthwhile read for accountants.  My favorite excerpt, by Matthew Frooman, a member at the Atlanta office of Top 100 Firm Warren Averett:

“It helps to have a process, a mental or written checklist of how to approach the planning opportunities in that industry,” he said. “So you have a hierarchy of tax planning which starts with a tax-free way to have income. If you can’t figure out a way to have tax-free income, then you go to offsets in terms of deductions from basis or deferral. Then you look at the tax rate itself, the character of the income as to capital gains or ordinary income, and finally you get down to the tax itself. After that, you consider additional offsets in the form of credits.”

“You can approach every engagement with that structure and work through what are the ways of making something tax-free, offsetting income, deferring income, getting a lower tax rate and generating a credit, and then the possibility of buying a credit,” Frooman said. ”Every tax technique should fall into at least one of those categories. For myself, there are too many tools to think through without some sort of structure, so the solution is to prioritize, and decide which tool has the highest impact and is the easiest to apply.”

Read the entire article here: Last-Minute Tax-Planning Strategies | Accounting Today News

Education, IRS, Tips

NCBA Cooperative Professionals Conference, Nov 9-11

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Are you a legal or accounting professional working for or with a cooperative? The 2015 Co-op Professionals Conference, scheduled for November 9 – 11 in Minneapolis, Minnesota, is your chance to share best practices with colleagues and earn up to 12 hours of Continuing Legal Education (CLE) and Continuing Professional Education  (CPE) credit. With in-depth discussions on co-op organization, governance, financing and taxation, attendees will become experts on the unique legal and accounting issues co-ops face.

Last year I attended the National Cooperative Business Association’s first-ever “Cooperative Professionals Conference“.  It was incredible — as much as I’d learned at the National Society of Accountants for Cooperatives conference earlier in the year, I’d felt like it catered to large-scale industries like agriculture and rural electric… where were the worker co-ops, grocery co-ops, housing co-ops?  Where were the types of cooperatives that I worked with and of whom I was a member?

Here they are!  Although NCBA works on behalf of cooperatives everywhere, they definitely serve as the primary resource for small business co-ops.  The conference — which invited accountants and attorneys from across the country to learn and network together — was a resounding success, and they decided to do it again this year.  I was honored to be invited to join the plenary committee and to co-chair two of the workshops, and I couldn’t be more excited about them.  See the schedule here.

This conference is not just for accountants and attorneys that already work with cooperatives.  In fact, one of the sessions I am co-chairing is a “Co-ops 101” pre-conference… designed to provide the basics of cooperatives, as well as legal, accounting and taxation issues specific or common to co-ops.  It should be amazing.  Please join us in Minneapolis this November 9-11, and spread the word!

Illinois, Site News

2015 Best of Logan Square Winners + Honorable Mentions | LoganSquarist

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LoganSquarist’s 2015 Best of Logan Square Winners + Honorable Mentions came out last week, but in my excitement about the Green Apple podcast interview, I haven’t yet made time to share!  SO many deserving local businesses made the list, many of whom are clients — congratulations to these folks in particular:

Dill Pickle Food Co-op
Winner, Best Grocery Store
Winner, Best Community-Focused Business

City Lit Books
Winner, Best Bookstore

Wolfbait & B-Girls
Winner, Best Clothing Boutique

Rosetta Magdalen, Flamenco Chicago
Winner, Best Business Owner
Honorable mention, Best Community Member

Cafe Mustache
Winner, Best Karaoke Venue
Honorable mention, Best Place To Work While Enjoying a Drink Or Two

Logan Square Farmers Market
Winner, Best Place to Make New Friends/Meet New People
Winner, Best Family Activity
Honorable mention, Best Unique Event
Honorable mention, Best Community Member (Paul Levin)

DAS Doner
Honorable mention, Best Place to Get Late Night Grub
Honorable mention, Best New Restaurant
Winner (among three), Best Brunch Menu Item – Donuts

Das Radler
Winner, Friendliest Staff at a restaurant or bar
Honorable mention, Best Place To Take A Date at a restaurant or bar
Honorable mention, Best Business Owner (Nathan Sears)

Check out the rest of the winners — many longtime friends and favorites made the list, here!

Education, Site News, Tips

Interview on the new Green Apple Podcast highlighted in Accounting Today

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A month ago, I received an intriguing email from a guy named John Garrett — a CPA-turned-comedian who gives frequent keynote addresses, and who is working on a podcast and book about accountants who stand out in their careers: in part due to being recognized for their interesting hobbies.  One of the fine folks at CPA.com had suggested to him at a recent conference that he speak with me.

Turns out we got along really well — he’s an engaging, funny person and asks interesting questions, and he interviewed me for his Green Apple Podcast (as the folks he hopes to highlight stand out, “like green apples in a red-apple world”).  It went so well, in fact, that he decided to feature me as his first interviewee when the podcast went live this past week.  Quite the honor — and as if that weren’t enough, Accounting Today picked up the news and mentioned me in their post!

If you’re a fellow accountant, I strongly recommend this podcast series.  The first three episodes are up now, and they really are inspiring and entertaining.  And if you’re not a fellow accountant, I suggest you listen anyway — much of what John’s trying to share is generally applicable, especially if you’re in the corporate world and feel disconnected from your colleagues.  He also speaks a lot about how we can inspire each other to share, to follow our dreams, and to conquer fears.  Can’t wait to hear more from this series.  Check it out here.

 

 

Education, IRS, Tips

Crowdfunding and Taxes

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I’m seeing so many small businesses and individuals jump on the bandwagons that an internet economy has provided us: crowdfunding, airbnb/vrbo, and ride-sharing are among the most common. And in each of these situations, the ease of doing business belies the complexity of the accounting and taxation principles and rules underlying the true nature of the transactions.

These two articles do an amazing job of explaining the factors to consider when evaluating how (or in less frequent instances, if) crowdfunding income should be taxed. I’ve taken excerpts and copied/pasted a summary here, but I strongly encourage both accountants and small businesses/individuals considering crowdfunding to read the entirety of each article.

The first, “Crowdfunding and income taxes,” deals with income tax ramifications, and the second, “Crowdfunding Contributions and State Sales and Use Taxes,” deals with sales and use tax considerations (note: as of the publication date, the link to this second article is incorrect where referred to in the first article; however, the link here is accurate).

Thousands of businesses and individuals have succeeded in attracting funding through crowdfunding sites, but often with little thought to the ramifications for income taxes. Congress and the IRS have not addressed crowdfunding income specifically, leaving scant guidance for CPA tax advisers whose clients may have this source of income. Still, applying common tax principles and common sense may help tax preparers and advisers in talking through the issues with their clients who have taxable crowdfunding income and deciding how to report and pay taxes on it.

Crowdfunding in the United States falls into three distinct types:
1) for creative enterprises, which can be characterized as reward-based crowdfunding;
2) as a means of personal fundraising, or donation-based crowdfunding; and,
3) equity-based crowdfunding, which raises capital for companies.

While pledges received from donation-based crowdfunding are likely to be considered nontaxable gifts, reward-based crowdfunding is likely to carry income tax ramifications for the project creator. As for which expenses should be deductible against the income, that depends on several factors, including:
– Whether the crowdfunding activity is deemed a trade or business or a hobby;
– Whether the activity is deemed a startup business;
– The method of accounting used by the creator; and,
– The value of rewards given to backers.

[Note: in my practice, I most often see crowdfunding used for startups and expansions, and therefore follow the rules for capitalization of costs — and in certain situations, deferral of income until the year the trade or business becomes active. If you are working in this context, please read that section of the article carefully and do your due diligence in researching the particulars, as it is a ‘facts and circumstances’ situation.]

It is important to recognize that amounts received as a reward-based crowdfunding campaign which promises a reward that has some value is unlikely to be considered a gift, and much more likely that at least some portion of it should be considered a purchase. This should lead to a discussion of how sales and use taxes should be handled on purchases of products. Factors to consider, addressed in the second excellent article, include:
– Nexus
– Taxability
– Tax Base
– Timing

To reiterate what I said at the beginning of this post: I’m seeing so many small businesses and individuals jump on the bandwagons that an internet economy has provided us: crowdfunding, airbnb/vrbo, and ride-sharing are among the most common. And in each of these situations, the ease of doing business belies the complexity of the accounting and taxation principles and rules underlying the true nature of the transactions.

Education, Illinois, Tips

2015’s Most & Least Fair State Tax Systems

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WalletHub just released what I find to be a fascinating and well-analyzed study of state tax systems in the United States, evaluating each on many criteria that, combined, represent what a “fair” tax system might look like.  (Local folks, FYI: Illinois scored near the bottom.)

With loads of great charts and graphs, this report is worth a read, if only to examine whether you agree or not with their evaluation of what makes a tax system “fair”.  Interesting philosophical discussion that should be fascinating to many, not just us tax accountants.

Read the report here: 2015’s Most & Least Fair State Tax Systems | WalletHub®

Education, Illinois

FREE Small Business Workshops in Chicago

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The City of Chicago is going nuts with the workshops this month.

Their biggest event, Small Business Center on the Road, takes over the 12th floor of the Merchandise Mart on September 19th from 10 am-2 pm.  Among the 40+ exhibitors will be various local Chambers of Commerce, the Department of Revenue and Secretary of State, as well as consultants from the Small Business Center.  They’re offering a tax clinic, legal clinic, workshops on marketing, financing, and social media, and City of Chicago Business Consultants ready to help with licensing needs and answer questions.  Register at chismallbizexpo.com — it’s FREE!

 

Also, The City of Chicago’s Outreach & Education group is offering a bunch of workshops this month.  Please share with friends, family, or colleagues who could use the assistance!

 

How to Obtain a Mobile Food Dispenser/Prepare License

Presented by the City of Chicago Department of Business Affairs & Consumer Protection (BACP). 

This workshop will give you all the information you need to become either a Mobile Food Dispenser (MFD) or Mobile Food Preparer (MFP) licensed food truck operator. We will walk you through the MFD/MFP licensing process including inspections, the application, mobile food vehicle, and operational requirements, as well as the optional pre-application Mobile Food Vehicle Assessment.

Wednesday, September 16th

3:00 p.m. to 4:30 p.m. 

121 N. LaSalle

8th Floor – Room 805

 

Small Business Success

Presented by YWCA Metropolitan Chicago 

Learn the ins and outs of starting a small business and gain insight that will help you reach your goals. This workshop will cover starting your entity, marketing it for success and the intangibles of navigating the start-up arena.

Friday, September 18th

9:30 a.m. to 11:00 a.m. 

121 N. LaSalle

8th Floor – Room 805

 

How to Efficiently Manage Business Operations

Presented by Illinois SBDC at the Chicagoland Chamber of Commerce and Blackwell Energies 

This workshop will focus on operations management and how to find savings at the operational level. It will cover operations management, energy and utilities, and other areas where savings can be obtained in the operation of a business. You will learn techniques that can quickly result in savings on operational costs and fatten your bottom line in the process!

Wednesday, September 23rd

3:00 a.m. to 4:30 p.m.

121 N. LaSalle

8th Floor – Room 805
LinkedIn: Converting Connections to New Business

Presented by Digital Professional Institute and Dean DeLisle, Founder and CEO of Forward Progress

Dean DeLisle, Founder and CEO of Forward Progress, will take proven steps from our Social Selling Boot Camp and show you the most effective methods of connecting with your targets, gaining quality appointments, and finding the potential new clients in your network. You will also see what it takes to get THEM to find YOU by using LinkedIn for less than 20 minutes a day! Topics include optimize your profile, attract new prospects, leverage your connections to close business, increase targeted referrals, gain more powerful introductions, expand your pipeline and find new business channels.

Friday, September 25th

9:30am to 11:00am

121 N. LaSalle

8th Floor – Room 805

 

Protecting your Tech Start Up: Legal Considerations

Presented by Lema Khorshid, Fuksa Khorshid, LLC

Before opening the doors to your new technology concept, it’s important to be aware of legal risks that exist so you can properly protect your business. This workshop will explore different sources to fund your business venture and teach you some basic principles of how to protect yourself in litigation. We will also discuss intellectual property laws and provide practical approaches on how to implement a solid intellectual property plan. Also, we will talk about important employment laws as well as review lease agreements to help demystify confusing legalese.

Wednesday, September 30th

3:00pm to 4:30pm

121 N. LaSalle

8th Floor – Room 805

IRS, Software, Tips

IRS — Making Quarterly Tax Payments Easier

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My clients and colleagues are always amazed by my attitude about the IRS — fact is, I really think they do an incredible job, given the nature of their work and the constant budget constraints dealt them by Congress.

I’m sharing a couple examples today that relate to upcoming quarterly estimated tax payments.

The IRS manages to stay fairly up-to-date with technology, compared to most federal and state government agencies, at least.  It used to be such a pain to sign up for EFTPS and make payments, but now they offer “Direct Pay,” where you can both make and look up payments.

They also offer a mobile app, known as the “IRS2Go Mobile App,” which you can use to look up refund status, as well as to access the Direct Pay feature I just mentioned.

Considering the challenges the IRS is always up against, I think they do a great job, on the whole; and I, for one, am pretty jazzed about these new technological features.  Way to go, IRS!