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Member of Russell Bedford International, a global network of independent professional service firms.
CPA | CK Principal
On July 3rd, Congress passed the sweeping One Big Beautiful Bill Act (OBBBA). This bill is a landmark tax and spending package that makes key provisions from the 2017 Tax Cuts and Jobs Act (TCJA) permanent, introduces significant changes for businesses and individuals, and redefines international tax and alters clean energy incentives. The bill was signed into law by President Trump over the July 4th holiday weekend.
With so many changes packed into one bill, understanding the immediate and long-term effects is essential. We also recognize that more guidance will come in the way of Regulations that will interpret these rules. Below, we’ve outlined some of the most impactful provisions and what they could mean for you or your business.
Key updates for individuals include:
For more information about tax law changes for individuals and families, listen to this audio blog.
If you own or manage a business, several provisions in the OBBBA could immediately improve cash flow and reduce tax liabilities:
For more information about tax law changes for businesses, listen to our audio blog.
OBBBA overhauls the U.S. approach to international taxation:
If your business has a global footprint, coordinate with your CK tax advisor soon to determine how these changes affect your effective global tax rate and compliance burden.
The OBBBA substantially scales back clean energy incentives introduced by the Inflation Reduction Act (IRA):
Consider fast-tracking clean energy investments and projects to ensure eligibility before key expiration dates. Also, keep tabs on the news, as recent commentary from President Trump suggests further scaling back.
The OBBBA includes both immediate and long-term provisions. For many businesses and individuals, it could reduce estimated taxes as early as Q3 2025. But the real value comes from aligning your tax, business, and wealth strategies around these sweeping changes.
Businesses should re-evaluate capital expenditures, R&D planning, and entity structure decisions in light of these changes. Now is also the time to revisit your personal tax and wealth strategy, especially if you own a business, anticipate large charitable contributions, or are considering estate planning moves.
We recommend:
Whether you’re navigating new compliance requirements or rethinking your business strategy, the Cray Kaiser team is ready to guide you through the opportunities and implications of the One Big Beautiful Bill Act. You’ll be hearing more from us soon as we do a deeper dive into the nuances of the Act.
Are you earning money from a side hustle or creative pursuit? It’s important to understand how the IRS classifies that activity. Is it a legitimate business or just a hobby? In this video, Matt Richardson, a Senior Tax Accountant at CK, explains how the IRS makes that distinction, what factors they consider and why it matters. Whether you’re selling art, playing music or driving for a rideshare app, Matt breaks down what you need to know.
Transcript
My name is Matt Richardson. I’m a senior tax accountant at Cray Kaiser. So if you do anything that earns money on your own time, the IRS will either consider it a hobby or a trade or business. And for the IRS, a trade or business is something that you’re doing to earn a profit or to make a living. Whereas a hobby is something that you do mostly for fun. And to decide whether your activity is a hobby or a business, the IRS will look for a profit- seeking motive. So the IRS has a few different ways to look for a profit-seeking motive. But the big theme is whether you operate your activity like a for-profit business would. A major part of that is whether it is something a lot of people would do recreationally. Whether or not you made or lost money. And for example, a lot of people might play music just for fun. So the IRS might question whether your weekend rock band is a true business. But not many people do accounting just for fun. So that’s a kind of business that’s less likely to get questioned by the IRS.
Other sources of income are also part of what the IRS looks at. If it’s your only means of support, they’ll usually accept that it’s a business that you’re trying to earn a living from. But if you also receive a six-figure salary from a day job, then they’re more likely to question the business aspect of your activity.
And a few other things they look at can include your expertise in the activity, how much time and effort you put in, the amount of profit you’ve earned in past years, whether you keep detailed financial records, how actively you seek out customers, and whether you have a written business plan, including a budget and growth strategies.
So for taxes, the main difference is if you’re a business, you’re allowed to deduct your expenses. You’re only taxed on what’s left over after you take what you earned and subtract what you spent in the process of doing that. If it’s a hobby, you have to pay taxes on all the money that you earn, but you can’t deduct those expenses. So, obviously, that makes a pretty big difference in your tax liability, so the IRS can be pretty assertive in questioning things that it thinks might really be a hobby.
So, unfortunately, there’s no clear-cut dividing line between a business and a hobby. As the IRS likes to say it depends on all the facts and circumstances. So they’ll look at the activity in the context of everything that you do to decide whether it looks like a hobby or it looks like a business. They do have one general rule that will protect you in most cases, which is if you if you earn a profit in three out of the last five years then they’ll usually accept your classification as a business.
So overall the IRS is more likely to ask questions if the activity would let you claim expenses on property that you’d likely own anyhow, especially if it’s recreational. Some specific examples are horse racing has a lot of specific rules, things like auto racing, creative things like arts, crafts, and design. Writing, especially self-published books or blogs that might earn income are things they might look at. For social media, if you’re posting or live streaming and earning some money on the side that’s something that they might look at as being a hobby and not a real business. Music is another thing they’ll look at. A lot of people wish they could deduct their $60,000 Fender Stratocaster guitar, but if you’re just playing a couple of gigs a month with some friends, they’re probably not going to consider that to be a true business. Aviation is another area they look at. People might own an airplane and charge their friends a few dollars to ride around in it, hoping that they can deduct the expense as a business but chances are the IRS will will question you on that. And even rideshare driving like Uber or Lyft if you’re doing it just a few hours a week on the side that’s even something that the IRS might question you on is whether it’s a true business or not.
So a simple example of something that could go either way would be someone who paints watercolors in their spare time and decides to sell them. So you’ll probably be considered a business if you’re actively promoting your paintings and going to arts and crafts shows. If you’re keeping detailed financial records of your costs and supplies and booth rental fees. And if you’re charging a price for those paintings comparable to what most people would charge for those at similar arts and crafts shows. You’ll probably get classified as a hobby, if you’re only customers are friends, family, neighbors, people that you already know, and you don’t really advertise more widely. If you keep no records of how much you’ve spent on supplies, and make no effort to track expenses separately from personal expenses, and if you charge less for paintings than the canvas and the materials cost, chances are that will get you classified as a hobby.
So nothing can totally guarantee that the IRS won’t challenge you, they can essentially challenge you on anything. But there are four things that will help you be pretty secure. Keep detailed financial records, keep detailed records of the time you spend in the activity, maintain written business records, including a budget and a business plan, and of course talk to your tax advisor. That’s what we’re here for.
In this video, Carl Thomas, a manager at CK, provides a clear overview of a Statement of Functional Expense. This is a key financial report for not-for-profit organizations. Learn how this statment breaks down expenses into three essential categories: program services, management and general and fund raising. Each of these categories reflects how an organization allocates its resources to fulfill its mission. Whether you’re a nonprofit leader or simply curious about nonprofit finances, this is an important foundational topic to understand.
Transcript
I’m Carl Thomas. I’m a manager at Cray Kaiser focusing on the assurance line of business. Not-for-profits have unique financial reporting requirements – a little bit different than your average for-profit organization and government, of course. And one of the unique financial statements that is produced is called a Statement of Functional Expense. Now, what this does is it breaks up expense by three main categories, which we call functions. Now, a function is – a good way to think about it is – what is the organization doing with the money? What is the activity? What is the action, correct? So, the three main categories are what we will call management and general. So, you can think of this as, you know, the chief financial officer, probably human relations, certain sort of back-office functions, if you will.
And then another category that is used is program. Now, program is really the deliverance of the service that the organization exists for. So, for example, if it’s a childcare entity, it’s going to be the people taking care of the kids every day, in a simple sense. Now, the third category is fundraising. Now, this is pretty self-explanatory, I think, but at the end of the day, it’s money spent to, I guess, raise more money, right? So, for example, like gala might be a good example, where donors are coming and having a nice time, and there’s perhaps a silent auction – different things like that.
Not-for-profit organizations really do need to think pretty hard about this statement because it can have implications for donors, for granting, et cetera, and so forth. It’s really important to try to break down, at a detailed level, where the expenses are going. If an organization is showing a lot of management and general expense, what you may have is – you may have donors getting a little nervous, saying, “Oh, well, a lot of money is going to overhead,” is kind of what that’s saying in a financial sense. Donors typically want to see their money going to program. The organization needs overhead. It has overhead. It’s never going to get rid of the overhead. But to the extent that a lot of thought can go into this statement to reflect the true reality, the organization is going to be presenting themselves that much better to the public and to potential donors, grantors, and those types of stakeholders.
Well, thank you for tuning in today. If anything we’ve talked about is resonating with you or sounds like something you want to discuss further, please feel free to call the dedicated Cray Kaiser not-for-profit team. We’re always available. The number is listed on our website. You can ask for Carl or Amy to start, but anyone can point you in the right direction. Thank you.
CPA | Manager
Whether you are a general contractor or a subcontractor, reviewing, updating, and maintaining your work in progress (WIP) schedule is a never-ending process. With multiple active projects, keeping it up-to-date can feel overwhelming. You may have even asked yourself why do we go through this process every month? Is there a more efficient way to review our WIP schedule? What should I be looking for? How can I spot early signs of job performance issues? The key to answering these questions lies in understanding the key components of the WIP schedule and how it drives revenue recognition.
Your estimating and bidding department put together a winning bid and the contract was awarded and signed. The job is entered into your accounting system based upon the awarded contract amount and the estimator’s cost budget information. The job is now underway, materials are ordered, and labor is on-site. Come month end close, what are some issues, we as accountants, should be reviewing?
Clear communication ensures the contract value aligns with reality.
As the job continues to progress and change orders are issued what is happening to the original cost budgets? Do your change orders also include budget information and are these used to update the overall cost budget on the contract? Unfortunately, it’s common to see the revenue from change orders entered, but cost updates are forgotten. This can lead to critical issues such as:
A best practice is to ensure change orders include both revenue and cost adjustments which are used to update the contract and cost budget amounts. Clear and consistent communication between the accounting team and project managers is critical to accurately capturing and reporting this activity on the WIP schedule.
In a traditional work in progress schedule costs drive revenue. For example:
As more costs are incurred, the higher the percent completion will be, and the more revenue and profits a contractor will recognize. This is why accurate job costing is critical in the financial reporting process.
Some best practices to ensure accurate job costing include:
The final step in reviewing the work in progress schedule is the Company’s ability to progress bill for the work performed. If you’ve incurred significant costs on the job but haven’t billed:
Underbillings raise these types of red flags with both internal accounting teams and external financial statement users. Careful monthly review of the WIP schedule and monthly check-ins with project managers are key to keeping underbillings in check and improving cash flow.
There are many moving parts when it comes to your Work in Progress schedule. To manage them effectively:
The more often these discussions occur the fewer surprises you’ll face at month-end, quarter end, and year end.
If your team could use guidance with your work in progress schedule, contact the trusted experts at Cray Kaiser at 630.953.4900 or complete this form. Our team understands the unique challenges contractors face and can help you with your WIP review process and improve financial reporting.
Bringing a new employee into your organization involves more than evaluating their skills and cultural fit, it also requires a clear understanding of the financial impact. A new hire can significantly affect your company’s cash flow, both in the short term and long term. Here are key financial considerations to keep in mind when making this important decision:
1. Salary and Compensation Structure
The most immediate and ongoing cost of hiring is the employee’s compensation. Your company must decide whether to offer a fixed salary, performance-based pay or a hybrid approach. Each structure has unique implications for cash flow:
Project how these structures will impact your monthly budget and cash flow to ensure financial stability during and after onboarding.
2. Onboarding and Training Costs
Investing in onboarding and training is essential for long-term productivity but also comes with costs. You must consider:
Tracking these costs and evaluating their return on investment (ROI) can help determine when the new hire will begin contributing to the bottom line.
3. Employee Benefits and Related Expenses
Beyond direct compensation, employee benefits can be a significant part of total employment costs. Common benefits include:
Understanding the full cost of your company’s benefits package and how it impacts your cash flow is vital for effective financial planning.
4. Technology and Tools
Ensuring that new hires are equipped with the right tools to do their job is a cost that shouldn’t be overlooked. You need to factor in:
While these tools are necessary, their costs must be integrated into your hiring budget.
5. Revenue or Productivity Potential
One of the most important items to factor into hiring expenses is estimating how and when the new employee will contribute value. Make sure you consider:
This analysis helps ensure your hiring decision supports the company’s profitability goals.
6. Ramp-Up Time and Cash Flow Impact
New employees often need time to become fully productive. It’s important to prepare for this adjustment period:
Accurate forecasting helps set expectations and supports smoother financial management during transitions.
7. Long-Term Financial Considerations
Beyond initial costs, hiring decisions should align with your company’s broader financial strategy. Keep in mind:
Hiring a new employee is a strategic decision that affects more than just your team dynamics, it can have lasting financial implications. With thoughtful planning and financial foresight, the right hire can become a long-term asset. By considering these financial factors, upfront, your business can better manage costs while building a stronger, more capable team.
If you’re evaluating the financial impact of a new hire, Cray Kaiser offers expert financial analysis and business consulting to support smart, sustainable growth. Our team can help you assess hiring costs, forecast cash flow and align your staffing strategy with your financial goals. Contact us at 630.953.4900 or fill out our contact form to learn more about how we can support your hiring decisions.
In the not-for-profit world, maintaining strong internal controls can be a challenge, especially when working with limited budgets, small teams and basic account software. Watch our video and learn more about common internal control issues, practical workarounds like compensating controls and strategies to strengthen financial oversight, even with limited resources.
Transcript
I’m Carl Thomas, I’m a manager at Cray Kaiser focusing on the assurance line of business. In my experience working with not-for-profit organizations, a big challenge is internal controls and segregating duties and making sure that the process is well protected from error and mistakes and things.
A couple of reasons these challenges may exist is limited budget constraints and limited staffing in the finance office. Another challenge is that a lot of smaller and not-for-profit organizations use off-the-shelf accounting software, which may not be able to limit access controls in terms of who can do what in the system. With a small finance office, there’s also limited FTEs. So you can’t necessarily break a process up amongst three, four people if your finance office is maybe only two people. So that’s also a challenge.
A good way to work around these limitations is what we call compensated controls in the industry. Now, compensated controls would be something that is outside of that process. So it could have a time lag where it happens after it, or it could be someone even outside of the finance office looking at something. An example would be after payroll was run, the president or CEO may run a report for what we call an exception report, for example, where they’re looking for paychecks that may be populated for a plus or minus 10 percent different than the last period. This would really target the review by someone who is not familiar with the usual finance processes and make it very efficient. And since that person, in general, does not have access to assets or the accounting system, it would provide sort of an independent check on that process. In this case, this would be a pretty good control for payroll. However, it is important to understand that that person, again, should not have access to any of the accounting system or assets. Otherwise, it kind of negates the value of that process because controls could be overridden. We call that management override in our business.
Another good compensated control is keeping the board of directors engaged. Now, the board should be reviewing financial information regularly. Balance sheet, investment reports, profit and loss statement, and potentially even cash flow statements. This helps the board be informed about operations and how the organization is performing. It’s very important that the board assess performance. Now, it’s also interesting because this is a control. And so it’s important to keep the board engaged because the board being engaged is actually a great control.
Other good things to have in process are what we would call entity level controls. And when we talk about these, we’re talking about things that are outside of that transactional process. For example, good tone at the top is actually pretty important. If there’s a good tone at the top with the board of directors and management, it cascades down. And this is actually very paramount in our industry. If we do not have a good tone at the top, it can lead to problems in the organization. So that is actually a very good control and that is very hard to quantify, but it is something that organizations should be thinking about. It’s very important.
Going along with the entity level concept, too, it’s really important to have well-defined policies and procedures. For example, employee handbook, perhaps a code of conduct can also be quite helpful. People operate better when they have a framework of what’s expected, I think, and that’s also another great entity-level control. Something from a blocking and tackling standpoint could be maybe a tip line. All right, tip line. If you see something, say something.
Going again with the entity-level control, something that organizations may also wish to think about is keeping their employees and their stakeholders engaged. And a great way to do this could be something what we call maybe a suggestion box or a way to keep engaged where there’s a two-way communication between employees, management, and the board of directors. In this way, certain things that may not be visible at some levels of the organization may be apparent if there’s good two-way communication. Two-way communication is also a foundational principle of auditing. Auditors have to have good two -way communication with our boards of directors so that everyone is informed of matters that are relevant.
These challenges and issues are inherent to many small, medium, and even large-sized not -for-profit organizations. If some of these challenges are resonating with you, feel free to give us a call. Cray Kaiser is a full-service CPA firm with a dedicated team to not-for-profits, and we’d be very happy to hear from you.
Important changes to Illinois sales tax rates are coming your way. Effective July 1, 2025, several taxing jurisdictions in Illinois will impose new local sales taxes or update their existing rates on general merchandise sales.
What’s Changing?
The following local sales taxes will be affected:
These updates will be collectively referred to as “locally imposed sales taxes.”
What’s Being Taxed?
This locally imposed sales tax will apply to the same items of general merchandise reported on Line 4a of Forms ST-1 and ST-2 that are subject to State sales tax.
Locally imposed sales taxes do not apply to:
What Steps Should I Take Before July 1, 2025?
Make sure any cash registers and computer programs are updated to reflect the new tax rates beginning July 1, 2025. If a software vendor manages these processes, contact them immediately to begin implementing the changes.
Use the MyTax Illinois Tax Rate Finder here to verify your new combined sales tax rate (State and local sales taxes).
If a prior sale was subject to a sales tax rate different from the current sales tax rate, this should be reported on Line 8a of Forms ST-1 and ST-2.
What About Business District Sales Taxes?
Your business address determines whether business district sales tax applies to your sales. Remote retailers and marketplace facilitators who meet the tax remittance threshold should pay extra attention. If property is shipped or delivered to an address within a business district, the tax likely applies.
For more information, refer to the MyTax Illinois Tax Rate Finder, which provides a detailed list of business district addresses and corresponding rates.
Don’t Get Caught Off Guard
Avoid headaches and prepare now for this sales tax rate update. If you have questions or need assistance navigating these changes, Cray Kaiser is here to help. Contact your trusted advisors at (630) 953-4900 to ensure you’re ready for the July 1, 2025, rollout.
CPA | CK Principal
As we await possible significant changes to the 2026 tax law, the IRS has provided guidance on Health Savings Accounts (HSA). Specifically, they’ve recently released the inflation-adjusted contribution limits for 2026 related to HSAs and high-deductible health plans (HDHPs). While there are modest increases in the contribution limits, the HSA catch-up contribution amount remains unchanged.
Important Reminder: You can only contribute to an HSA account if you are enrolled in a High Deductible Health Plan (HDHP). The IRS sets specific criteria for what qualifies as an HDHP, including minimum deductibles and maximum out-of-pocket expenses.
One key tax benefit of HSAs that stands out is that contributions are tax-deductible even if you don’t itemize deductions. Additionally, these funds grow tax-free over time.
When HSA funds are used for qualified medical expenses, such as doctor visits, prescriptions, and certain medical procedures, withdrawals from an HSA are tax-free. However, if you use HSA funds for non-medical purposes, you will owe income tax plus a 20% penalty (10% after age 65).
To read more about the benefits of an HSA, click here. If you’d like to explore how an HSA could fit into your financial planning, please contact our office at 630.953.4900 or fill out this form.
CPA | CK Principal
In a world where resources are stretched thin and regulatory compliance is more demanding than ever, many organizations are asking the same question: How can we effectively plan for and manage our external financial statement audits?
The answer for many is to leverage outsourced support, particularly through Client Accounting Advisory Services (CAAS). If you’re skeptical about how an external team can integrate with your team’s processes, you’re not alone. But with the right support, you can significantly reduce the workload on your team, meet deadlines and stay in compliance, without sacrificing accuracy or transparency. Here’s how CAAS can help you simplify and strengthen your external audit process.
Many firms have dedicated teams specializing in client accounting and advisory services (CAAS or CAS). These teams are experts in audits, financial reporting and compliance. When you engage a CAAS team, you gain access to seasoned professionals who can assist your in-house accounting functions in planning for the year-end financial statement audit without disrupting your day-to-day operations. Here are several key areas where CAAS support can make a real difference:
Planning for your next external audit doesn’t have to be stressful or overwhelming. If you consider the topics discussed above and look to outsource some of these tasks to professionals who can guide you through the process, you will be able to save time and resources for your internal team.
Let CK’s CAAS team help. We offer tailored solutions to support your audit readiness and financial transparency. Reach out today to learn how our experts can help your organization move through the audit process with ease.
CPA | CK Principal
Illinois taxpayers looking to give back while receiving a tax benefit now have a new opportunity with the Illinois Gives Tax Credit Act. Effective January 1, 2025, the act allows donors to receive a 25% state tax credit for qualified charitable contributions made to permanent endowments at approved community foundations.
However, the State has capped the program at $5 million in total tax credits per calendar year through 2029. Additionally, the credits are distributed based on the order in which the donations are received. Because of these limitations, we recommend that you act early if interested in the credit.
Only permanent endowment funds held by Qualified Community Foundations are eligible to receive donations that generate the credit.
Donations can support or establish funds that:
Qualified Community Foundations are specifically designated as such by the State. Additionally, each Qualified Community Foundation can issue up to $750,000 in credits per year (15% of the $5 million available in total annual credits).
Be sure to inquire on eligibility before starting the contribution process.
The Illinois Gives Tax Credit offers a limited amount of State tax credits no matter if donors itemize or take the standard federal deduction.
The credit can only offset your state income tax liability each year. Any excess credit is carried forward and applied to your tax liability in the subsequent five taxable years.
Donors should apply online at MyTax.Illinois.gov and request a Contribution Authorization Certificate (CAC). Once the CAC is received, you have 10 business days to make your gift to a Qualified Community Foundation.
If you have questions about the Illinois Gives Tax Credit or are ready to take advantage of the new credit but need assistance, contact Cray Kaiser at 630-935-4900 or visit here.
