Category Archives: Tips

City of Chicago February 2019 Business Education Workshops

Each month the City of Chicago offers twice-weekly (Wed & Fri) FREE business education workshops presented by experts in private practice as well as representatives from various city departments. There are quite a few good ones this month — see the list below — and they’re all offered at City Hall (right downtown and near public transit). To register for any of them, email BACPoutreach@cityofchicago.org or call 312.744.2086.

City Inspections – Ask Questions, Get Answers
Wed, February 6, 3:00 PM – 4:30 PM
City Hall, 121 N. LaSalle St. – 8th Floor, Room 805
Presented by the City of Chicago
To operate a successful business in Chicago you need to know what it takes to maintain compliance. Officials from several City departments will provide insight on how to operate safely, stay compliant, help prepare for inspections and highlight the do’s and don’ts of operating a business.

Create Your 2019 Social Media Plan
Fri, February 8, 9:30 AM – 11:00 AM
City Hall, 121 N. LaSalle St. – 8th Floor, Room 805
Presented by Business Bragger
Set goals each quarter for 2019, determine which platforms are best for you to use your business, create a messaging concept and set KPIs to track your results.

New Food Code Workshop
Wed, February 13, 3:00 PM – 4:30 PM
City Hall, 121 N. LaSalle St. – 8th Floor, Room 805
Presented by Gerrin Butler, City of Chicago Department of Public Health
This workshop will provide information for retail food establishments to prepare for the City of Chicago new food code requirements. These requirements are based on the latest science, conform to federal guidelines, state and local laws.

Get Capital for Your Small Business with Kiva and Accion
Fri, February 15, 9:30 AM – 11:00 AM
City Hall, 121 N. LaSalle St – 8th Floor, Room 805
Presented by Kiva and Accion
Hear from Kiva, a nonprofit that provides 0% interest loans of up to $10,000 to small business owners and entrepreneurs, and from Accion, a small business lender with loan ranges of up to $100,000 for small and existing businesses.

How to Open a Concession at O’Hare or Midway Airport
Wed, February 20, 3:00 PM – 4:30 PM
City Hall, 121 N. LaSalle St – 8th Floor, Room 805
Presented by Chicago Department of Aviation – Concessions Department
Are you interested in operating a restaurant or shop at O’Hare or Midway International Airport, but don’t know where to begin? Come and learn about the Request for Proposals (RFP) process, how to operate a business at the airport, and a summary of the Airport Concessions Disadvantaged Business Enterprise (ACDBE) program.

What You Need to Know About Your Business & Taxes
Fri, February 22, 9:30 AM – 11:00 AM
City Hall, 121 N. LaSalle St. – 8th Floor, Room 805
Presented by the Internal Revenue Service (IRS) and Ladder Up (LU)/Center for Economic Progress (CEP)
Topics include: Are you required to file a tax return? Is your worker an independent contractor or an employee? What will the IRS request during an audit? Are you required to make estimated tax payments? What resources does the IRS have for small business owners?

Customer Service
Wed, February 27, 3:00 PM – 4:30 PM
City Hall, 121 N. LaSalle St – 8th Floor, Room 805
Presented by the Better Business Bureau (BBB)
One element of every successful business is Customer Service. It’s importance should never be underestimated. Nor should it be assumed employees understand it. This presentation by the Better Business Bureau uses the latest research to help businesses understand how customers themselves view customer service, and how a “better business” is defined by customers.

To register for a workshop, email BACPoutreach@cityofchicago.org or call 312.744.2086.

Also, in case you weren’t aware, BACP offers a Business Start-Up Certificate Program, designed to give business owners the essential elements in starting and growing a business. Attend nine workshops at BACP and learn the essentials of business planning, financing, marketing, legal issues, technology and more. Complete the program workshops within six months and earn your certificate, as well as get free advice on your business plan. You can register for the Business Start-Up Certificate Program at any BACP workshop. Learn about the full set of BACP offerings here.

And visit their Business Video Library here.

Source: City of Chicago :: Business Education Workshop Calendar

Tax Preparer Due Diligence Checklist Expands for 2018 Returns

I recently sent out the email to clients that I’ve been dreading for months, explaining that I have no choice but to raise rates because of the new tax law. As fate would have it, I have the most amazing client base in history, and all of the responses I’ve received have been overwhelmingly supportive, ranging from, “good for you” to “it’s about time”.

The three main reasons I cited for the increase in fees were:

  1. I have spent over a full month of non-billable time learning the ins-and-outs of the legislation, researching issues, running calculations and scenarios, and attending tax update seminars.
  2. Due to the complexity of certain areas of the new regulations that concern small businesses — and because I service mostly small business clients — I anticipate that on average, the amount of time it will take me to prepare each return (as well as examine potential alternatives or changes for 2019) will double.
  3. The due diligence requirements for tax preparers have been increasing my liability every year, and I’ve been ignoring these risks and costs — the additional requirements for 2018 tax returns are even more far-reaching.

It’s this third point I’d like to discuss today, for the benefit of my colleagues who prepare tax returns, but also for my clients and colleagues who do not prepare returns, so they understand what demands are being placed on us as tax practitioners.

The Journal of Accountancy recently shared an article summarizing the new requirements and related penalties. These “due diligence” rules, as they’re called, are a way to force tax preparers into delving deeper into the questions about whether or not their clients truly qualify for some of the tax benefits they are claiming. In effect, it’s shifting the burden of proof from the individual and the IRS onto the paid preparer.

It used to be that a client could give a tax practitioner their information and we were allowed to take it “as is” — unless there were egregious claims that failed the “sniff test” and would cause your average tax professional to ask follow-up questions about their accuracy.

However, over the past many years, the IRS has instituted an ever-growing list of “due diligence” questions that practitioners are required to ask, regardless of any evidence that the client is not being entirely honest and accurate in their claims.

As explained in the article:

Form 8867 consists of a series of questions verifying the paid preparer’s due diligence in requesting information from clients regarding a series of credits and deductions that have been subject to substantial tax fraud. This form transfers the burden of responsibility from the taxpayer to the paid preparer.

The new question for head-of-household status is, “Have you determined that the taxpayer was unmarried or considered unmarried on the last day of the tax year and provided more than half of the cost of keeping up a home for the year for a qualifying person?”

The other dependent credit is new for 2018. It provides a credit of up to $500 for dependents who are not qualifying children for purposes of the child tax credit. The due-diligence questions for the other tax credit are the same as for the child tax credit or the American opportunity tax credit.

And the penalties for any tax preparer who does not comply are increasing as well:

The law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, expands the penalties for failure to prepare the due-diligence checklist. Under prior law the penalty was imposed on each failure and could expose a practitioner to a potential $1,560 penalty on each return (see Rev. Proc. 2017-58). Under the TCJA, the penalty is increased to a maximum of $2,080 on a single tax return for returns and refund claims filed in 2018 ($2,120 for 2019).

The article lists the preparer requirements for interviewing the taxpayer, filling out the form, and retaining records.

So in case you’re wondering why fees are on the rise, take a look at those penalties and risks and ask yourself how you would handle taking a fall for a dishonest or unorganized client… and before you complain that your tax preparer is requiring you to submit documents of a personal nature, like birth certificates and proof of your child’s residency with you — when you know darned well that she’s met them in-person more than once — please remember that we’re all under a lot of pressure to protect your butts, ours, and that of the US Treasury.

Source: Paid preparer’s checklist expands to include head-of-household, other tax credit questions – Journal of Accountancy

List of State Payroll Tax Returns Filed by Gusto

Just a quick post — courtesy of a conversation I had with Gusto support yesterday. For those of you using Gusto for your payroll needs (and I highly recommend them — far superior to any payroll company I’ve ever used, and their integration with QuickBooks Online is seamless and available at no extra charge), it turns out there’s a comprehensive list of the state tax returns they file on behalf of their payroll clients.

I (and my clients) have often received payroll documents from various state and local tax agencies and wondered, “is this something I’m supposed to be filling out or does Gusto handle it for me?” In the past I’ve emailed their support team to ask, but at some point apparently they came up with a list, so I don’t have to take that extra step anymore. I figured I’d post it here so that other Gusto users can now do the same thing when that confusing notice arrives at your place of business.

And if you’re not already using Gusto and are interested, use my referral link to get the first month of your subscription free.

Source: State taxes filed by Gusto

Hobby Loss Rules – You Can’t Deduct Your Expenses If You Aren’t In It To Make A Profit

My favorite tax writer has done it again — Tony Nitti does an amazing job in this article of explaining the nine factors the IRS takes into consideration when deciding whether an activity is a business or a hobby.

Where I see this come up most frequently is when someone loves a product (or service) — some examples I’ve seen are essential oils, diet supplements, a brand of clothing, or even a coaching method — and they realize that if they become a reseller of that product or service, they get deep discounts on the products. Bam! All of a sudden they have a business, right? Wrong. If the reason they enter into the activity is to get a personal discount on personal products, that’s not a business. There are specific guidelines and definitions about what constitutes a business, and that’s not one of them.

However, if they engage in that same activity in a businesslike manner and with an intent to make a profit, then it is possible that it might be treated as a business and therefore the expenses can be deducted against the income.

I’ll quote the master to explain further, since he does such a good job with it; but ultimately what I want you to do if you’re in this area (or have a friend claiming they can deduct everything related to their part-time hobby) is to just read the article. I promise, it’s both entertaining and educational.

Some excerpts:

Many activities are not entered into “with the intent of making a profit.” And when that happens, the activity is a hobby rather than a business.

The ramifications of being categorized as a hobby are severe: while a business can generate a loss, when you’re conducting a hobby, you may only deduct your expenses to the extent of your income. But here’s the rub: these hobby expenses have historically been deducted as other miscellaneous itemized deductions on Schedule A. That makes a hobby classification particularly painful in 2018, because as part of the Tax Cuts and Jobs Act, there are no more “other miscellaneous itemized deductions.” So you get the idea: from 2017 on, if you’re conducting a hobby, and not a business, you have to include all of the income, but can’t deduct any of the expenses.

The case history surrounding the hobby loss rules extends FAR beyond 2018. There are countless decisions covering everything from horse breeding to rental activities to cattle ranching to motocross racing… a common theme would quickly emerge: if you don’t take your business seriously, then the IRS and the courts won’t either. Thus, it is absolutely imperative that you conduct your activity in a businesslike manner, and a good start would be to do the following:

  • have a mission statement,
  • maintain a separate bank account,
  • keep separate, accurate, books and records,
  • use those books and records to manage the business; i.e., if a business line isn’t profitable, perhaps you should consider abandoning it,
  • consult with people in the industry to see what has worked for them,
  • make efforts to cut costs if losses are continuing to mount.

In sum, it’s not enough to keep a QuickBooks account. You have to show that you’re really trying to generate a profit, and that means you have to actually, you know… use the information contained within those books and records to try and turn a loss into a profit.

Source: The Top Tax Court Cases of 2018: Reunited With The Hobby Loss Rules And It Feels So Good

New IRS “Tax Transcript” Email Scam

From the IRS, November 27th 2018:

The IRS and Security Summit partners recently warned the public of a problematic scam affecting businesses. A surge of fraudulent emails impersonating the IRS and using tax transcripts as bait to entice users to open documents containing malware are on the rise. If a business’s employees open the malware, it can spread throughout the network and potentially take months to successfully remove.

This well-known malicious code, known as Emotet, generally poses as specific banks and financial institutions in its effort to trick people into opening infected documents. However, in the past few weeks, the scam masqueraded as the IRS, pretending to be from “IRS Online.” The scam email carries an attachment labeled “Tax Account Transcript” or something similar, and the subject line uses some variation of the phrase “tax transcript.”

Businesses should instruct employees to not open the email or the attachment, and to instead delete or forward the scam email to phishing@irs.gov.

Source: Tax Scams/Consumer Alerts | Internal Revenue Service

Censured Tax Professionals Can Now Be Looked Up Online

When looking for a tax professional, you want to make sure they’re in good standing with the IRS. However, until recently, the public could only learn that a practitioner was sanctioned by reviewing each of the announcements of discipline published in the Internal Revenue Bulletin (IRB) on irs.gov, or by using a commercial subscription service that reports instances of “Circular 230” discipline (Circular 230 is the document that describes who is covered by the standards we must follow, and what those are).

The Office of Professional Responsibility’s (OPR, the organization responsible for making sure tax professionals follow the standards of their practice) solution was to compile the information into a searchable Excel document file; their disciplinary look-up contains searchable information regarding censures of practitioners for Circular 230 misconduct and suspensions and disbarments of individuals from practice before the IRS.

The list contains basic information on over 3,000 OPR censures, suspensions, disbarments, and miscellaneous restrictions on practice, such as permanent injunctions and denials of limited practice to unenrolled tax return preparers due to misconduct; it covers the last 25 years. The spreadsheet is searchable using the “Sort & Filter” and “Find & Select” features, and will be updated to add new entries when a disciplinary announcement is published in the IRB.

Hopefully this new tool will make folks more inclined to report unprofessional behavior to the OPR, knowing that it will be made public and others could be prevented from similar experiences. To report issues, concerns or any problems, contact the OPR at Internal Revenue Service, Office of Professional Responsibility, SE:OPR, Room 7238/IR, 1111 Constitution Avenue NW., Washington, DC 20224 or fax to (202) 317-6338.

Source: Search for Disciplined Tax Professionals | Internal Revenue Service

Help Clients Save Money On Prescription Drugs & Medicare Part D

When studying to become an accountant, it never occurred to me to take psychology classes; but in fact, much of the work we do involves areas of clients’ lives that are deeply personal. Yet no one ever trains us in divorce consulting, human resources, vehicle purchasing, credit counseling, health insurance brokerage, or, in the case of this recent interesting article I’d like to share: prescription drug coverage.

The author, James Sullivan, is a financial planner who specializes in working with clients suffering from chronic illnesses (and their families). He recently published a piece on how to assist clients when choosing a Medicare Part D prescription coverage plan, and related tips on saving money at the pharmacy. He offers a simple follow-along example that illustrates the main points:

Clients need to consider more than cost when choosing a Part D plan. Before selecting one, they should think about several questions:

Is your prescription drug(s) on the plan’s formulary?

Is your favorite local pharmacy in-network, a preferred pharmacy, or out-of-network?

What is your out-of-pocket cost if you use the local pharmacy versus using mail order?

Are you comfortable using mail order?

Once these questions are answered, the client should consider the plan’s annual deductible, the co-payments and co-insurance, its drug tiers, and any drug restrictions.

I encourage you to read the full article in Journal of Accountancy here, especially for the real-life illustration that offers some great tips.

Source: Help clients save money on prescription drugs

Tax Year 2017 E-filing Ends Nov 17

An important announcement from the IRS today:

Do you still need to file a 2017 tax return? If you intend to file electronically, do so by Saturday, Nov. 17. E-File closes for 2017 tax returns on that date, even if the taxpayer is in a presidentially declared disaster area. Paper filing will remain available.

Preparers and taxpayers — make sure you get those final lagging returns e-filed asap, or you just bought yourselves a bunch of extra processing time, as well as unnecessary administrative effort.

In case you’re wondering why the cut-off, the IRS explains:

IRS Modernized e-file, the system that processes electronically-filed individual returns, will shut down after Nov. 17, enabling the IRS to perform annual maintenance and to reprogram the system for the upcoming 2019 tax-filing season.

Source: For Tax Year 2017, e-file closes on Nov. 17; After that, disaster victims, others need to file on paper | Internal Revenue Service

IRS Side-By-Side Comparison For Businesses Of Tax Cuts & Jobs Act

I found the recent IRS release on the new tax law — a side-by-side comparison for businesses showing “before-and-after” rules — to be well-written and clear, and it does a good job of highlighting the key changes in order of relative importance to most companies. As such, I’m reprinting the recent IRS newsletter to small businesses in its entirety below.

From the IRS e-News for Small Business, Issue #36:

The Tax Cuts and Jobs Act (TCJA) changed deductions, depreciation, expensing, tax credits and other tax items affecting businesses. This side-by-side comparison can help businesses understand the changes and plan accordingly.

Some provisions of the TCJA affecting individual taxpayers can also affect business taxes. Businesses and self-employed individuals should review tax reform changes for individuals and determine if and how these provisions may concern their business situation.

Visit IRS.gov/taxreform regularly for tax reform updates. Businesses can find details and the latest resources at Tax Reform Provisions that Affect Businesses.

Vacation Time Is Key to a Better Business

I’ve had the privilege to work with many wonderful clients through the years, among them, Honey Butter Fried Chicken and Sunday Dinner Club, both brainchildren of talented chefs Christine Cikowski and Josh Kulp.

Recently, Christine’s writing was featured in the James Beard Foundation’s op-ed series, where luminaries from the culinary world get a chance to share their unique perspectives. Here, she:

explores the structures and cultural assumptions of the industry that disincentivize taking time off, and why she and her co-owner Josh Kulp decided to make the benefit of paid leave a top priority.

These chef-owners have always made fair wages, benefits and PTO a priority in their business, but in this article, she lays out why this commitment has resulted in a return on investment (ROI) — not just an ethical responsibility. Christine breaks it down into three main areas:

1) What started simply as a pledge to take care of our people has gifted our small business back with big benefits. Staff are happier and healthier when they have the resources to care for themselves. They come to work with higher energy, and give better service. They stay with us longer, which yields less turnover.

2) We view this as a benefit not just to staff, but to the restaurant itself. It’s smart business for our team to experience what it is like when their co-workers are out: how to cover positions and how to run lean… Our team has embraced a culture that supports time off. We all pitch in and work a little more when people are out, because at some point it will be our turn.

3) It’s good business for [owners] to take time off, too. It allows me to rest and reset… all of which have made me a much better business partner, leader, and human. It’s beneficial for all of us: not just in terms of my own health as an owner… but for my staff as well. It gives them the opportunity to run the business, to troubleshoot and fix things. It allows them to grow into their roles and shine on their own. If we owners and chefs never take a day (or even an hour) off, our teams won’t gain these experiences.

Her closing paragraph sums it up perfectly, in my opinion, and echoes some of the key teachings of thought-leaders throughout the business world:

It takes a village to run a restaurant—so we let them run it. I don’t believe we are, nor should be, crucial to the daily survival of our kitchens and businesses. Especially if we want to be in business for five, 10, or 20-plus years. And if we want our amazing staff to stick around and come on that journey with us, we need to make sure they’re taken care of. We must provide them the means to take time off when they need to—so that they can be strong and healthy along the way.

Read the full article here: Why Vacation Time Is the Key to a Better Restaurant | James Beard Foundation