Category Archives: Tips

Academy time: Five films to inspire CPAs

“My father was fond of saying you need three things in life: a good doctor, a forgiving priest, and a clever accountant. The first two, I’ve never had much use for.”  -Oskar Schindler

I know, we’re all busy with tax season right now, but take a short break and read this charming (and brief) article from AICPA’s Journal of Accountancy, and maybe add a couple to your Netflix queue for April 19th.

Source: 5 films to inspire CPAs

Fullerton/Milwaukee Small Business Improvement Fund — Learn How To Apply for a Grant for Capital Improvements

Do you have a small business in Chicago along Milwaukee Ave. from Armitage to Belmont?  Please come to a meeting this Thursday from 9:30-10:30 am at Hairpin Lofts to learn about city grants to help pay for capital improvements!

A map of the TIF district is here — http://www.cityofchicago.org/city/en/depts/dcd/supp_info/tif/fullerton_milwaukeetif.html

Please spread the word.

Source: Fullerton/Milwaukee SBIF(Small Business Improvement Fund) Rollout Meeting

Chicago Business Workshops for February

Business Workshops for February
All workshops are free and are located at the City of Chicago Department of Business Affairs & Consumer Protection – City Hall, 121 N. LaSalle St., Chicago, Room 805.
2/10: How to Obtain a Sidewalk Cafe Permit
3:00 to 4:30 p.m.
Presented by BACP, Small Business Center (SBC) – Public Way Use (PWU) Unit, Anthony Bertuca
Attendees will learn the Sidewalk Cafe Permit Application process, and the requirements which will assist in preparation to submit an application. The entire application process may take 30 – 45 days, and the 2016 Sidewalk Cafe Season begins on March 1st.
2/17: Understanding Employee Classification: Hourly vs. Salaried & Contractors vs. Employees
3:00 to 4:30 p.m.
Presented by Charles Krugel, a Management Side Labor, Employment & Human Resources Attorney
There are changes coming to the definitions of hourly & salaried employees (overtime eligible vs. not) & independent contractors vs. employees (W2 vs. 1099). Over the next few years, fewer businesses will be able to avoid overtime & classifying workers as W2 employees. Management side labor & employment attorney Charles Krugel will discuss these proposals, including enforcement, & answer any of your questions concerning these topics.
2/19: Setting the Groundwork
9:30 to 11:00 a.m.
Presented by Lema Khorshid, Fuksa Khorshid, LLC
There are many legal considerations to keep at the forefront of your mind before starting your new business. This presentation explores different sources to fund your business venture, basic principles of how to protect yourself in the claws of litigation, employment laws, lease agreements and how to implement a solid intellectual property plan.
2/24: C Corp, S Corp, LLC – Which Is Right for My Business?
3:00 to 4:30 p.m.
Presented by The Law Project
The Law Project’s Small Business Program offers legal support to entrepreneurs who are starting or have their own small businesses as a strategy to create financial independence. Since most entrepreneurs operate on a shoestring budget, obtaining legal advice is often unaffordable. This workshop will provide entrepreneurs with information about choosing the correct corporate structure for their business.
2/26: Tax Issues for Self-Employed Individuals & Businesses
9:30 to 11:00 a.m.
Presented by Eric Sternberg of the Center for Economic Progress & Yolanda Ruiz of the Internal Revenue Service
This workshop will give an introductory understanding of common tax issues that self-employed individuals often encounter. Participants will learn when they must file a tax return, how to identify worker classifications, how to prepare for an IRS audit, how to make quarterly estimated payments, and how to navigate the IRS website. Participants will benefit from the perspectives of both the individual taxpayer and the Internal Revenue Service.
Click here to view a full monthly calendar.

Tax-time Resources for Clients

Information on tax return due dates, some answers to the most-commonly-asked questions from clients during tax season, and some additional resources I’d recommend; enjoy!

The IRS will begin accepting individual tax returns on January 19. Of course, most taxpayers won’t receive their information returns (Forms W-2, 1099, 1098, 1095, etc.) until the first week of February, so at our firm (which specializes in small businesses and more complex individual returns) we typically wait to file until February 6th.

Corporate tax returns (both C- and S-Corps) are due by March 15, and partnership tax returns are due April 18th.  (Spoiler alert: stay tuned for an upcoming post on due date changes for next year that will line these up better with individual tax due dates and extensions.)

Individual tax returns are due April 18 (Saturday, April 16, 2016 is Emancipation Day in the District of Columbia, and the holiday is observed on Friday, April 15… this pushes the tax deadline to Monday, April 18, since the IRS deadlines never land on weekends).

Some important tax-time resources for IRS and Illinois taxpayers:

Where’s My IRS Refund — https://www.irs.gov/Refunds
Where’s My IDOR Refund — https://mytax.illinois.gov –> Click on Individuals –> Click on “Where’s My Refund?”

Look Up IDOR Estimated/Extension Tax Payments — https://mytax.illinois.gov –> Click on Individuals –> Click on “Look up my estimated/extension payments”

Order an IRS tax return transcript online — https://www.irs.gov/Individuals/Get-Transcript
Order a copy of a prior tax return — https://www.irs.gov/pub/irs-pdf/f4506.pdf

Make An Online Payment to the IRS — https://www.irs.gov/uac/EFTPS-The-Electronic-Federal-Tax-Payment-System
Make An Online Payment to IDOR — https://mytax.illinois.gov –> Click on Individuals –> Click on “Make an IL-1040, IL-1040-ES, or IL-505-I payment”

Where’s My IRS Amended Return — https://www.irs.gov/Filing/Individuals/Amended-Returns-(Form-1040-X)/Wheres-My-Amended-Return-1

2016 Standard Mileage Rates — https://www.irs.gov/uac/Newsroom/2016-Standard-Mileage-Rates-for-Business-Medical-and-Moving-Announced

The Affordable Care Act and your tax return — https://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Health-Care-Law-and-Your-Tax-Return

IRS FAQ — https://www.irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers

Contact the IRS by phone — https://www.irs.gov/uac/Telephone-Assistance
Contact your local IRS Office (long lines; don’t recommend it) — https://www.irs.gov/uac/Contact-Your-Local-IRS-Office-1

Restaurant Tipping – How It Works

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!

Last-Minute Tax-Planning Strategies | Accounting Today

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

NCBA Cooperative Professionals Conference, Nov 9-11

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!

Interview on the new Green Apple Podcast highlighted in Accounting Today

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.

 

 

Crowdfunding and Taxes

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.