Member of Russell Bedford International, a global network of independent professional service firms.
Member of Russell Bedford International, a global network of independent professional service firms.
At Cray Kaiser, we believe in a simple yet powerful philosophy: that behind every number is a person. Our dedication to melding numbers with our clients’ narratives has been a central pillar of our ethos. And guess what? This commitment has once again been validated by our latest NPS score for 2023.
For anyone unfamiliar with it, Net Promoter Score, or NPS, is a standardized metric used across industries to gauge customer loyalty and satisfaction. How does it work? Customers are asked one straightforward question: “On a scale from 1 to 10, how likely are you to recommend our business to a friend or colleague?”
From the responses, customers fall into one of three groups:
The formula to derive the NPS is as straightforward as the question itself—subtract the percentage of detractors from the percentage of promoters.
To give some context: A score above zero is already good, surpassing 50 is deemed excellent, and anything beyond 80 is simply incredible.
Comparing against industry standards and rivals provides a clear view of where a business stands. With an astounding NPS of 89 this year, Cray Kaiser has once more surged past the accounting industry’s average.
But that’s not the end of our story. Cray Kaiser’s NPS still shines when juxtaposed against market leaders across different sectors. We’re talking scores higher than industry titans like Target, Amazon, and Apple.
It’s more than just a number for us. It’s an affirmation that our clientele trusts and values the service we provide.
Your success stories are ours, too. In 2023 and the years ahead, our focus remains unwavering: to be impeccable with our numbers and unparalleled in our people skills. Cheers to another year of achieving together!
Illinois lawmakers passed a new bill (HB1197) this summer which increases the threshold requirements for obtaining an “Audited” financial statement by an independent accountant for nonprofit organizations (NFPs). The bill also sets new requirements for NFPs that sit between the old threshold and the new threshold to get “Reviewed” financial statements. The new law becomes effective for tax years beginning January 1, 2024 and currently set to expire after tax years ending December 31, 2028.
Previously, most NFPs soliciting for contributions to the general public were required to get “Audited” financial statements if their total contributions for an annual period were above $300,000. The new bill increases the Audit threshold to $500,000.
However, the bill sets a new requirement for those NFPs with total contributions between the old threshold of $300,000 and the new threshold of $500,000 to get “Reviewed” financial statements. This means that the NFPs resting in this window are not completely off the hook for getting an independent sign off on their financials. However, the accounting and administrative burden should be less expensive and less time consuming since a Review does not require as much validation or substantiation by an independent accountant as an Audit.
The new law was enacted in May of 2023 and Illinois is still ironing out the kinks. There may be additional guidance to follow as forms are reworked for the 2023/2024 filing season. CK will make sure to update you on any amendments or guidance related to the bill as it becomes finalized by Illinois lawmakers and the Attorney General’s Office.
Reminder:
For the purposes of the reviewed and audited financial statement thresholds “Contributions” include all funds raised by solicitation activities to the general public. This includes donations, pledges, program service revenue, fundraising events, etc. However, there is an exception in the law to exclude admission/ticket revenue for music or theatrical performances by nonprofits organized under 501(c)(3) with the mission/purpose of providing live public performances on a regular basis.
For more information on the increase in the Audit threshold, the new Review requirements, or understanding on what constitutes “Contributions” for the purpose of these thresholds, please contact the CK nonprofit team by calling (630) 953-4900.
If you’ve been thinking about ways to save on medical expenses, now may be the perfect time to open a Health Savings Account (HSA). Thanks to persistent inflation, the IRS recently announced historic bumps to contribution limits for HSAs, making planning for health savings more beneficial than ever.
Established in 2003 as part of the Medicare Prescription Drug, Improvement, and Modernization Act, Health Savings Accounts (HSAs) are a type of medical savings account with tax advantages. Individuals contribute pre-tax income to savings accounts that may be used to pay for qualified medical expenses. Funds in an HSA roll over from year to year, meaning it is possible to establish significant reserves for future medical costs while saving money by lowering your taxable income.
HSA funds can be used for a variety of qualified medical expenses, including office visits, dental care, eyeglasses, over-the-counter medications, and more. Funds may even be used for costs related to healthcare, like transportation expenses.
HSAs are available to those enrolled in High-Deductible Health Plans (HDHP). HDHPs are defined as a plan where the deductible is higher than the average, as determined by the IRS. For 2024, an HDHP includes any plan “with an annual deductible that is not less than $1,600 for self-only coverage or $3,200 for family coverage, and for which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $8,050 for self-only coverage or $16,100 for family coverage.”
In addition to being enrolled in an HDHP, you may not be enrolled in Medicare and must not be claimed as dependent on someone else’s tax return.
For 2024, the IRS has raised the contribution limit for an individual to $4,150, an increase of $300 from the previous year, and $8,300 for family coverage, an increase of $550 from 2023. These amounts represent the largest yearly adjustments since the accounts’ inception and reflect rising healthcare-related expenses due to ongoing inflation.
HSAs can provide advantages in both the short term, by lowering your taxable income, and in the long term, by helping establish a cushion for future medical expenses. Increased contribution limits make HSAs more beneficial than ever. If you have any questions about HSAs or tax-advantaged medical savings accounts, please call Cray Kaiser at (630) 953-4900 or contact us here.
We’ve talked previously about opportunities to reduce the tax bite from capital gains. For example, the 2017 Tax Act brought us opportunity zones; by investing in these programs, the capital gains tax exposure can be minimized or even eliminated. You are also likely familiar with tax-deferred exchanges, commonly referred to as 1031 exchanges. But there are other provisions that are sometimes overlooked by investors.
Internal Revenue Code Section 1244 benefits investors that take the risk of starting a small business that fails. Section 1244 provides special tax treatment to the disposition of certain qualifying stocks of small businesses. It essentially allows losses up to $50,000 ($100,000 for married taxpayers filing jointly) to be subject to the more favorable ordinary loss treatment. Why is this beneficial? The loss is all deductible in the year of the loss rather than being treated as a capital loss limited to a per-year loss of $3,000 ($1,500 for married taxpayers filing separately). In addition, Sec 1244 stock losses are allowed for net operating loss purposes without being limited by non-business income.
Congress originally created this benefit to encourage investment in small business enterprises. It may also be a factor in determining the choice of entity when originally initiating a business. In addition to the benefits provided by Sec 1244, another part of the Internal Revenue Code, Sec 1202, allows gain from C corporation stock to be excluded from income where the aggregate gross assets of the corporation immediately after the issuance (determined by considering amounts received in the issuance) does not exceed $50 Million, the corporation meets an active business requirement, and the stock is held more than 5 years. The maximum excludable gain under Sec 1202 can’t exceed $10 million ($5 million, if married filing separately).
Section 1202 stock has been a hot topic in the tax planning world. In particular, start-up companies have been keen to organize the entity in such a way that investors will qualify for the Section 1202 gain exclusion.
1244 Stock – In general the term 1244 stock means stock in a domestic corporation if at the time such stock is issued:
Taxpayers taking advantage of the Section 1244 stock rules should document the factors that allow them to qualify. This could include corporate minutes and resolutions, accounting and bank records, and even operational records.
1202 Small Business Corporation Stock Defined – A corporation is treated as a small business corporation if the aggregate amount of money and other property received by the corporation for stock, as a contribution to capital, and as paid-in surplus, does not exceed $1,000,000. The determination under the preceding sentence is made as of the time of the issuance of the stock in question but also includes amounts received for such stock and for all stock previously issued.
The losses are reported by the individual stockholder; however, individual stockholders do not include trusts or estates.
If you would like to discuss the benefits of either the Section 1244 or Section 1202 stock provisions, call Cray Kaiser at (630) 953-4900 or contact us here.
Illinois shoppers can expect their grocery bill to increase a bit in July. The sales tax holiday on groceries, implemented in July 2022, is set to expire on June 30, 2023. The sales tax holiday was part of a state budget plan to provide residents relief from the rising costs of groceries. The sales tax rate for groceries in Illinois was already low, at 1%, but the State suspended the 1% sales tax rate from July 1, 2022, to June 30, 2023.
What does this mean for your business? Effective July 1, 2023, retailers should resume collection of the 1% grocery tax. Certain products, such as alcohol, candy, and soda, remain subject to the general sales tax rate of 6.25%. Note that the 1% is a state rate and local tax rates may also apply.
According to the U.S. Department of Agriculture, grocery prices are expected to grow more slowly in 2023 than in 2022. However, the increases are still substantial, and consumers are feeling the effect. The Consumer Price Index for food purchases was 7.1% higher in April 2023 compared to April 2022.
Cray Kaiser can assist in ensuring that your business is charging the appropriate sales tax on groceries. Please contact us here or call us at (630) 953-4900 if you have questions.
The most recent Illinois informational bulletin on the grocery tax suspension may be found here.
In Cray Kaiser’s Employee Spotlight series, we highlight a member of the CK team. We couldn’t be prouder of the team we’ve grown and we’re excited for you to get to know them. This month we’re shining our spotlight on Raychel Korn.
Raychel is a staff accountant at Cray Kaiser. Her day is mostly filled with corporate and not-for profit audits, reviews, compilations, and employee benefit plan (401k) audits. When tax season begins, she works on preparing individual tax returns.
During her time at Aurora University, Raychel interned for the winter tax season at CK. Once she graduated, she joined the team as a full-time staff accountant in May 2022.
Raychel was drawn to CK because of the learning environment. She appreciates how all members of the staff, managers, and partners value continuing education and take the time to educate others when needed. It’s no surprise that the two core values that mean the most to her are Education and Care. “At CK, we all care for each other and the clients,” says Raychel. “We are always there for each other even if it is personal or work related.
“To those who are just getting started in the accounting industry, your light bulb moment will come,” says Raychel. She says every project will have its own nuances. But each engagement or project will help you gain more and more knowledge until everything just clicks.
When asked about some of her favorite times with the CK group, Raychel says Saturday games during tax season are always a blast. “We all laugh, have fun, and have team bonding! My favorite games are when it’s Team Tax vs. Team Assurance. Go, Team Assurance!”
I would want to be an expert scuba diver. I think it would be cool to travel and see the different marine life around the world.
I enjoy going to concerts and music festivals with my friends. I enjoy dancing and singing to my favorite artists.
I try to always be positive. My motto is, “Don’t worry, be happy.”
You have heard from us about the benefits of the Employee Retention Credit (ERC). And you have probably received solicitations from third parties on the credit or even seen and heard commercials on the television and radio. The ERC is definitely a hot topic, given the advertised claims of billions of dollars returned to employers.
The Internal Revenue Service (IRS) has heard the chatter as well and is aggressively cracking down on so-called “ERC mills” – promoters of the credit making very misleading claims about the benefits.
The IRS has stepped up audit and criminal investigation work involving these claims. In fact, criminal charges have begun to be filed against the promotors of fraudulent claims. Businesses, tax-exempt organizations and others considering applying for this credit need to carefully review the official requirements for this limited program before applying. Those who improperly claim the credit face follow-up action from the IRS. Additionally, if the credit is overstated, the credit – plus penalty and interest – will need to be repaid.
“The aggressive marketing of the Employee Retention Credit continues preying on innocent businesses and others,” said IRS Commissioner Danny Werfel. “Aggressive promoters present wildly misleading claims about this credit. They can pocket handsome fees while leaving those claiming the credit at risk of having the claims denied or facing scenarios where they need to repay the credit.”
The IRS notes the following warning signs of aggressive ERC marketing:
Cray Kaiser continues to be at the forefront of understanding whether you qualify for the ERC. If you would like us to review your situation to determine credit eligibility, please call our office today at (630) 953-4900 or connect with us here.
In Cray Kaiser’s Employee Spotlight series, we highlight a member of the CK team. We couldn’t be prouder of the team we’ve grown and we’re excited for you to get to know them. This month we’re shining our spotlight on Tatyana Jackson.
Tatyana is one of CK’s Accounting Service Specialist/Staff Accountants. Her days are spent calculating monthly transactions on clients’ books. She also performs year-end accounting and tax compilations. During tax season, Tatyana has a hand in preparing business and individual tax returns.
Prior to joining CK, Tatyana was part of a very small accounting company located in Little Rock, Arkansas where her role was similar to the role she holds now at CK. A unique fact about Tatyana is that she immigrated to the United States from Russia in 2016. She spent nearly 7 years living in Arkansas where she received a bachelor’s degree in accounting from the University of Arkansas at Little Rock. Tatyana also holds a master’s degree in education.
Tatyana joined the CK team in July of 2022 and was immediately drawn to the rich culture CK provides. She was also impressed by the strong female presence within CK. When asked which of CK’s core values mean the most and why, Tatyana answered, “Education means the most. I believe in lifetime learning and appreciate that CK provides that to its employees.” Tatyana enjoys working in the accounting department because she has the opportunity to learn from the best– her team everyday. “All CK team members are helpful and always willing to jump in and teach when needed,” says Tatyana.
When asked about her favorite CK group outing, Tatyana answered, “Our bowling event right before tax season was a lot of fun! I enjoy bowling and it was great to have outing prior to the busy season to give us all a boost in energy.”
“The Golden Mean in everything.”
Right now, the #1 place I would love to visit is the Grand Teton National Park in Wyoming. As for an overseas destination, I would love to visit London, UK.
“Ozark” on Netflix!
Master and Margarita by Mikhail Bulgakov.
Many of us have just put our 2022 taxes in the rearview mirror, but it’s still not too early to start planning for 2023. A little thinking ahead now can help you avoid unpleasant year-end surprises with your tax bill. In 2020, the IRS introduced a new format for the W-4 withholding certificate, which is the form you use to tell your employer how much to take out of your paycheck towards your income tax. Because the new W-4 works a bit differently than the old one, this has caused confusion, and many people find that their payroll withholding now falls short of covering their tax liability at the end of the year. Some taxpayers who were used to always breaking even or getting refunds when they filed their returns now find that they owe money.
The nature of this new W-4 requires a little additional planning, and to help with this, the IRS has introduced a withholding calculator to help you estimate what you should be withholding each pay period. Just input your earnings and withholding for the year so far and estimate some of your deductions and credits. Then you’ll get a general idea of whether your withholding will be enough for the year.
Click here to access the IRS estimator.
When completing the estimator, it is recommended that you have your most recent paystub handy (including your spouse’s if married), as well as the previous year’s tax return. Most of the information the estimator asks for will come from your paystub. The calculator also allows you to go into as much detail as you like with credits and deductions. We typically suggest keeping it simple by using the numbers from your prior year’s return. If you used the standard deduction, go with that again. If you itemized, start with the prior year’s numbers and adjust to reflect anything major that might have changed. Unless you expect significant life events like marriage, a new baby, or a child beginning college, most people will get accurate results using numbers from the previous year.
The estimate from the calculator will give you a rough idea of whether the tax you are withholding through your W-2 will cover your tax bill at the end of the year. If the calculator shows you’re likely to owe, you can ask your employer to adjust the amount taken out of your check each pay period. The easiest way to do this is to take the estimated amount owed from the calculator and divide it by the number of pay periods left in the year. Then round that to an even number and ask your employer to withhold that additional amount from each paycheck. The person responsible for HR or payroll at your employer will normally be the one who can provide that form and make the adjustment for you.
It’s important to keep in mind that this is only an estimate. Many events can affect your final tax liability, like a bonus, a raise, a new job, or increased income earned outside of your W-2, like dividends or gig work. If your situation changes during the year, you can always revisit the calculator and adjust again. And of course, you can always connect with your Cray Kaiser advisor with any questions. Give us a call at (630) 953-4900 or connect with us here.
The issue of foreign tax reporting has been in flux for the last few years. For the 2021 tax year, the IRS hastily published regulations without warning, that made it onerous for many passthrough entities, and created more complexity and paperwork than many believe was necessary. These were the K-2 and K-3 schedules, which run about 20 pages per owner, and which many of you might have noticed when you received your 2021 K-1’s from S-Corps or Partnerships.
The goal of these schedules was to provide information on the portion of the income from the S-Corp or Partnership related to foreign activities. However, the implementation by the IRS was heavy-handed and made the process complex which added time and cost to the income tax preparation process.
For the current year, the IRS has bowed to pressure and has provided two exemptions that give relief to most passthrough entities with little or no foreign activity. While in theory, this is good news, the qualifications to utilize the exemption are complicated.
To qualify, passthrough entities must only have direct partners and shareholders who are U.S. citizens, resident aliens, or certain domestic estates and trusts, and any foreign activity is limited to less than $300 of foreign taxes paid or accrued. If these definitions are met, then an election can be made to exclude the K-2 and K-3 schedules.
This is where things get a little convoluted. Before the passthrough entity can file the return with this election, they must provide each owner a K-1 with a disclosure that K-3 will only be provided if the owner specifically requests it. The owner has up to one month before the return is filed to request a K-3. If this is the case, one owner can cause the S-Corp or Partnership to file the return with K-2 and K-3s, and the owner who requested the K-3 will receive it with their K-1. This can hold up filing the S-Corp and Partnership return to much later, causing all owners to file their individual returns later than desired.
Another exemption to the K-2 and K-3 filing requirements is if all owners qualify for the Form 1116 exemption. If so, the S-Corp or Partnership doesn’t have to file K-2 or K-3.
Form 1116 reports foreign income and foreign taxes paid on the individual income tax return. The exemption from filing this form is if an individual receives less than $600 ($300 for single filers). By doing so, the individual return is more simplified. However, it disallows any foreign taxes carried over to be utilized.
This exemption will likely be less often utilized because it requires every owner to disclose their intent and qualification for Form 1116 exemption to the S-Corp or Partnership. In addition, the time frame for notifying the S-Corp or Partnership is much shorter than the first exemption; owners were required to disclose their intention by February 15 of the current year for 2022 tax returns, a month before the S-Corp or Partnership’s unextended due date.
At CK, we are working with our clients directly to ensure that the exceptions to filing the K-2 and K-3 schedules are reviewed and disclosed appropriately. If you have questions about these exemptions and if they apply to your S-Corp, Partnership, or your individual return, please call Cray Kaiser today at 630-953-4900.
