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.
As we observe International Women’s Day, we want to recognize and celebrate the strong women of Cray Kaiser. These women make invaluable contributions to the accounting profession and are blazing a bold path forward for women’s equality in the world.
At Cray Kaiser, we are proud that 50% of our team is made up of women, with the firm being 66% women-owned. These talented women provide expert accounting, tax and advisory services to our clients.
As we work towards a more equitable future, International Women’s Day reminds us to continue to champion women’s empowerment and equal opportunities across all sectors and roles. Our world is better when diverse perspectives and backgrounds are represented and valued.
Please join us in celebrating the remarkable achievements of women in accounting and financial services this International Women’s Day!
In this first audio blog in a series about business valuations, Micah Vant Hoff will delve into the critical distinction between fair market value and fair value in business appraisal. Understanding the nuances between these two standards of value is crucial as they can impact assessments due to their differing definitions.
Transcript:
Fair market value versus fair value. We need to be able to determine whether it’s going to be under one or the other because fair value will generally not include discounting, where it’ll just be the business value, absent any form of discounting, generally speaking. And fair value is defined differently depending on what jurisdiction you’re in. Whereas fair market value will generally be using the IRS’s definition of fair market value, and will incorporate potentially discounting or premiums for lack of marketability and lack of control, or conversely premiums for control, potentially even marketability.
So that’s going to be the big difference there where we’re looking at what standard of value. Determining the standard of value is important. It’s an important first step in defining the engagement and whether you’re going to be operating under fair market value or fair value or even something else is going to drive the consideration of discounts or even premiums inherent in the business value and whether you’re considering those things or not. And even within a term like fair value, that can be differently defined based on what jurisdiction you’re operating in. So for example, fair value in Illinois is defined in the Illinois Business Corporation Act. Fair value in Indiana may be defined slightly differently. That’s going to be more jurisdictional as opposed to fair market value which is going to be more universal.
In this video, Maria Gordon, Tax Supervisor of State and Local Taxation, delves into the intricacies of sales tax nexus, taxable items and customer exemptions. She also talks about the invaluable lifeline offered by the voluntary disclosure programs offered by some states.
Transcript:
My name is Maria Gordon. My title is Tax Supervisor of State and Local Taxation. Each of the states really wants to get a piece of their pie from taxpayers.
There’s lots of different types of taxes that businesses need to be concerned about. Income tax is an obvious one, but also requirements for sales taxes are continually changing with the states. And then we have local income taxes, we have personal property taxes and even gross receipts taxes based upon total receipts collected in a state and franchise taxes.
So, a business needs to determine whether or not they’re required to collect sales tax in the various states where they ship product or they do services and determining whether that business has nexus for sales tax is different from determining nexus for income tax.
In the past, if the business didn’t have any physical presence in the state, they really didn’t have to worry about sales tax, but that all changed in 2018 when the Supreme Court ruled on South Dakota versus Wayfair.
And now the states, all of the states, have enacted economic thresholds, whereby if you have sales into that state over a certain threshold, even if you don’t have any physical presence there, you are required to begin collecting sales tax from your customers in that state. And this has been an area over the past few years that businesses have really had to keep a close eye on. So, this is something that each year, you know, we’re taking a look at that to see where our clients have exceeded those nexus thresholds.
Once a business decides that they are subject to collecting sales tax in a state, then the next step is to really determine what of their products or services are taxable. And this varies again from state to state. So, in some states, services across the board, you know, pretty much are not taxable and other states only specific services might be taxable. And then in this day and age, we have additional considerations like computer software. You know, when is that software considered a taxable product? Or when is it considered a non-taxable service?
So, there’s a lot to consider there just in determining what items are taxable. Once that’s determined, you also need to take a look at your customers and find out who of your customers are taxable because you may have resellers who you don’t have to charge tax to because they’re taxing the end customer that they sell to and so another really big aspect of protecting your business is to collect those exemption certificates, make sure that you have those on hand, and also make sure that they’re current. You know, if it’s been a few years since you’ve collected one, it’s always a good idea to go back to your customers and request an updated certificate from them.
But a business discovers that they have nexus in a state for income tax or for sales tax and that that nexus has existed for the last several years. There is a way that they can go to the states and get some protection and this is called voluntary disclosure. So many of the states offer a voluntary disclosure program where the taxpayers are coming forward and saying, you know, we recognize that we should have been filing income tax or collecting sales tax in your state. We’d like to make it right and the states in response to that coming forward place a limit on the look back period, so they may only go back three or four years to collect tax and then also they often will waive penalties. So it is it’s a great program to protect the business from back audit exposure because it limits those years and the states are very willing to work with taxpayers to get them into compliance.
The tax bill put forth a few weeks ago, the Smith-Wyden Tax Act, has the potential to bring about significant changes for both individual and business taxpayers in 2024 and possibly even retroactively to 2022 and 2023. Although the bill passed the House, it is currently stalled in the Senate. Here’s a highlight of the tax provisions that we believe will be most impactful to our clients:
R&D Expense Correction:
Child Tax Credit Expansions:
Bonus Depreciation Reinstatement:
Business Interest Expense Limitation:
Section 179 Small Business Expensing Cap:
We will continue to monitor the Act – whether it continues to move through Senate or stalls. Given the proximity to the tax filing due date for calendar year entities, we are advising our affected clients to extend their 2023 tax returns to avoid possible amendments to their returns should the Act pass on a retroactive basis. If you have any questions on how the Act may impact your tax situation, please call us at 630-953-4900.
In this video, Maria Gordon, Tax Supervisor of State and Local Taxation, sheds light on the crucial topic of tax incentives offered by states and localities to businesses. From empowerment and edge credits to research and development incentives, she underscores the vast array of opportunities available.
Transcript:
My name is Maria Gordon. My title is Tax Supervisor of State and Local Taxation. Businesses should really be thinking about tax incentives that many states and localities offer to them.
The states really want to see economic development in their state and even certain areas, and so often they will offer empowerment, credits, edge credits where your business is employing people there, investing in capital. And these credits are very specific. You apply for it with the state. And then it helps businesses to really expand and get some credit, some benefits there. And some states offer, you know, research and development credits. You can get that at the federal level, but if you are also doing research and experimentation in a state, you may be able to receive a state -level credit as well.
And then there’s even states that have credits that have to do with your activities such as the Wisconsin Manufacturing Tax Credit, that’s a credit against income tax. So, there is an awful lot out there with respect to state incentives and if a business isn’t thinking about these things, they really could be missing out on some benefits.
One benefit that business owners have had had for the last couple years is taking advantage of the pass-through entity tax, which is a tax whereby the business can pay state income tax at the entity level rather than having it paid at the individual level for partnerships and s-corporations where the income would generally flow through to the owners.
Now as a workaround to the state and local tax deduction cap, businesses can pay those at the entity level and get a state tax deduction against the business income. For most states, this is set to expire after 2025. So, we’re doing all we can to take advantage of those deductions right now.
I think the hope is that some of these states will extend that provision, but as of now for most of them it’s expiring 2025 and this is just an issue that we’re going keep up on and make sure we know all the changes that are happening over the next couple of years.
CPA | Senior of Accounting Services
What is outsourced accounting? It is generally defined as an option for a business to hire an outside third party to complete accounting and finance functions for the organization. This can include but is not limited to bookkeeping, accounting and compliance work. It typically can encompass accounts payable and receivable and payroll as well as month-end closing tasks such as reconciliations and bookkeeping and tax and compliance preparation. Increasingly common are other engagements such as financial reporting, budgeting, financial planning as well as ad hoc projects, advisory and consulting services. Business owners seeking more time to focus on their core business are increasingly turning to firms such as Cray Kaiser that can do everything from performing the bookkeeping and accounting tasks to providing CFO-level financial analysis and advice.
In the past, accounting and finance was a function that was required to be in-house for access to records and other company resources and employees. Outsourcing is losing its stigma. The negative connotations associated with hiring out tasks are fading as the pace of life accelerates, work-life balance priorities shift, entrepreneurship expands, and business challenges grow increasingly complex. With the availability of cloud-based software and advances in technology, outsourced accounting has become easy to implement and is a proven time and cost savings for many businesses. Our firm can be on the same system and remotely share files and documents, allowing for real-time conversations. Owners of small businesses gain valuable time to focus on growing their business instead of managing and running the accounting functions. Businesses benefit from cost savings and efficiency by considering outsourcing many of the accounting functions to a team of specialists that offer expertise and flexibility to meet business needs as they change.
Some thoughts about the positive impact of outsourced accounting so you can grow your business not your management of accounting functions:
Important considerations when reviewing outsourcing options and engaging a firm:
Cray Kaiser can help – let’s start a conversation as to how best to help your business grow and gain efficiencies in order for you to reach the ultimate goal of focusing on your core business and areas of growth. If you feel now is the best time to learn more about outsourcing your accounting department give us a call at (630) 953-4900 to discuss options and opportunities offered in our Accounting Services Division.
Starting January 1, 2024, a significant number of businesses were required to comply with the Corporate Transparency Act (“CTA”). The CTA was enacted into law as part of the National Defense Act for Fiscal Year 2021. The CTA requires the disclosure of the beneficial ownership information (otherwise known as “BOI”) of certain entities from people who own or control a company.
It is anticipated that 32.6 million businesses will be required to comply with this reporting requirement. The BOI reporting requirement intends to help U.S. law enforcement combat money laundering, the financing of terrorism and other illicit activity.
The CTA is not a part of the tax code. Instead, it is a part of the Bank Secrecy Act, a set of federal laws that require record-keeping and report filing on certain types of financial transactions. Under the CTA, BOI reports will not be filed with the IRS, but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury.
Below is some preliminary information for you to consider as you approach the implementation period for this new reporting requirement. This information is meant to be general-only and should not be applied to your specific facts and circumstances without consultation with competent legal counsel and/or another retained professional adviser.
What entities are required to comply with the CTA’s BOI reporting requirement?
Entities organized both in the U.S. and outside the U.S. may be subject to the CTA’s reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
Domestic entities that are not created by the filing of a document with a secretary of state or similar office are not required to report under the CTA.
Foreign companies required to report under the CTA include corporations, LLCs or any similar entity that is formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or any similar office.
Are there any exemptions from the filing requirements?
There are 23 categories of exemptions. Included in the exemptions list are publicly traded companies, banks and credit unions, securities brokers/dealers, public accounting firms, tax-exempt entities and certain inactive entities, among others. Please note these are not blanket exemptions and many of these entities are already heavily regulated by the government and thus already disclose their BOI to a government authority.
In addition, certain “large operating entities” are exempt from filing. To qualify for this exemption, the company must:
Who is a beneficial owner?
Any individual who, directly or indirectly, either:
-Exercises “substantial control” over a reporting company, or
-Owns or controls at least 25 percent of the ownership interests of a reporting company
An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title or if they have no ownership interest in the reporting company.
The detailed CTA regulations define the terms “substantial control” and “ownership interest” further.
When must companies file?
There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information.
What sort of information is required to be reported?
Companies must report the following information: full name of the reporting company, any trade name or doing business as (DBA) name, business address, state or Tribal jurisdiction of formation, and an IRS taxpayer identification number (TIN).
Additionally, information on the beneficial owners of the entity and for newly created entities, the company applicants of the entity is required. This information includes — name, birthdate, address, and unique identifying number and issuing jurisdiction from an acceptable identification document (e.g., a driver’s license or passport) and an image of such document.
Risk of non-compliance
Penalties for willfully not complying with the BOI reporting requirement can result in criminal and civil penalties of $500 per day and up to $10,000 with up to two years of jail time. For more information about the CTA, visit www.aicpa-cima.com/boi.
If you have any questions about how the CTA affects you and your business, please contact the experts at CK by calling 630-953-4900.
We are proud to share the promotion of Natalie McHugh, CPA from Manager to a Principal/Shareholder at Cray Kaiser.
With an impressive career spanning over 25 years, Natalie has amassed a wealth of experience. She began her career at CK as a Tax Manager, providing comprehensive tax planning, compliance, and consulting services. Her passion for her work shines through, particularly in moments perceived as “scary,” often involving the IRS. Natalie takes pride in leveraging her expertise to assist clients in all aspects, providing holistic tax guidance on the business, individual, trust and estate platforms. Her promotion to Principal reflects her dedication and expertise in navigating the intricacies of taxation for the benefit of CK and its clients.
Natalie’s journey into accounting was serendipitous, discovering her passion during her first year at DePaul University. Through her first internship, she realized that accounting is not merely about numbers but revolves around individuals. This realization has remained a driving force throughout her career, evident in every interaction with colleagues and clients. Natalie’s promotion to Principal reflects her dedication and ability to combine her love for numbers with a genuine connection to people.
Please join us in congratulating Natalie on her new role at CK!
Designations
Memberships & Associations
Education
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 Steve Benzinger.
GETTING TO KNOW STEVE
Steve is an In-Charge Assurance Accountant at Cray Kaiser. His role includes assisting staff in completing their responsibilities while serving as a point of contact for the client. His day-to-day consists of participating in compilation, review, and audit engagements, primarily performing detailed testing of areas such as accounts receivables/payables, expenses, cash – during reviews/audits. During compilations, Steve leads the preparation of the client’s financials and assists in classifying transactions.
Steve joined the CK team in November of 2023. He was most excited about joining a team large enough to serve as trusted advisors to clients while also being small enough to connect personally with clients and identify areas of growth and change. He enjoys working directly with the Principals and Managers on a daily basis and having the opportunity to learn from those around him.
Before joining CK, Steve worked for two years at Grant Thornton. He received a Bachelor of Accountancy from Northern Illinois and holds a CPA in Illinois.
WHY CK?
Steve finds the opportunity to work closely and learn from the knowledgeable people who make up the CK team invaluable. So, it’s no surprise that the CK values that resonate the most with him are Education and People. Steve said, “Trying new things can be uncomfortable and challenging, and this is how one develops.”
When asked about advice he would give to someone just starting in the accounting industry, Steve suggests being open to new opportunities. He said, “Find what speaks to you and lean into it. Be willing to ask questions.” He also wants people new to the industry to understand that they won’t know everything immediately and that’s okay.
While there have been many notable moments in his career, Steve revealed that his most impactful moment has been passing the CPA exam. That achievement was a culmination of many late nights and weekends of studying.
MORE ABOUT STEVE
If you could be an expert at anything, what would it be and why?
Cooking! I like to eat and have recently been moving away from pre-prepared/heavily processed foods. Living away from family/parents will do this – My body and wallet thank me!
How do you like to spend your weekends/time off? Bonus question: what do you want to do most when tax season is over?
I like to cook and try new recipes. I recently have been working on a recipe for chicken drumsticks that I can make large batches to have for lunches and dinners. I also like to play trivia.
When tax season is over, other than sleeping, I hope to expand on my cooking capabilities.
What motto do you live by?
No one is perfect – It is okay to make mistakes, so long as you learn from them.
Comparison is the thief of joy – Looking to others and what they have and know does not lead to fulfillment. People learn and develop at their own pace and comparing yourself to what others have done can lead to despair. Be proud of what you have accomplished in your own sense.
Tell us about your family.
My father owns a print shop, my mother is a kindergarten teacher, and my brother is a chemist. My family has a cat named Phoebe, a Nebelung breed. My girlfriend likes to say that I have a stepson, her German Shepard, named Chunga.
Do you have a special/hidden talent or hobby?
I played competitive dodgeball in college. This was a great way to relieve stress and meet people from other areas of the school.
What’s your favorite movie or tv show?
Arrested Development – the absurdity of the situations is hilarious.
Reservoir Dogs (anything from Tarantino), Blade Runner, Fear and Loathing in Las Vegas, Grand Budapest Hotel (anything from Wes Andeson), Bill and Ted’s Excellent Adventure.
What’s on your music playlist?
Sum 41 – I have seen them live three times, it is always a high energy affair, and you will find me in the mosh pit!
Primus – Never a dull song, unique absurdity around every corner.
Iron Maiden – I appreciate the story telling along with the fast-paced guitar and drums.
What’s the last book you read?
The last few books I’ve read include Valley of the Dolls, The Princess Bride, Fight Club, and Requiem for a Dream.
In the complex landscape of state taxation, businesses face a myriad of challenges as they navigate the ever-evolving requirements imposed by each state. Watch the above video where CK Tax Supervisor of State and Local Taxation, Maria Gordon, talks about the broad spectrum of activities that can establish nexus and the critical roles played by services, vehicle presence, and employee locations when it comes to paying state income tax.
Transcript:
My name is Maria Gordon. My title is Tax Supervisor of State and Local Taxation.
Each of the states really wants to get a piece of their pie from taxpayers. There’s lots of different types of taxes that businesses need to be concerned about. Income tax is an obvious one, but also requirements for sales taxes are continually changing with the states. And then we have local income taxes. We have personal property taxes, and even gross receipts taxes based upon total receipts collected in a state and franchise taxes.
Businesses need to be concerned about whether or not they have enough connection with the state to be required to file income tax and that connection is called nexus. Each state has their own specifics about what creates nexus within their state, but very generally speaking for income tax, if a business is performing any sort of services in a state, then they’re going to be required to file income tax there. If they are driving their own vehicles into a state, then they would have nexus. Really, the one instance when a business does not have to worry so much about income tax is if they’re merely shipping products to customers in the state, and that’s their only activity. They may have salesmen in the states, but as long as those salespeople don’t do any services, then generally speaking, the business won’t have nexus with the state. We often ask our clients each year, what the activities look like in states where they have employees, and then we make that determination on a state-by-state basis.
The landscape of workers has changed a lot over the past 10 years. A lot of companies now have remote workers in states where they may or may not have filed in past years and so it is something to be concerned about and it all depends upon what activities the employee is doing for that business as to whether or not that’s going to trigger a nexus with the state. So it is very important to be mindful when you’re adding new employees in states or if an employee who works from home is moving to another state, you always want to take a look at those state requirements to find out if the business would suddenly be responsible for income tax filing.
So if a business determines that they have nexus within a state for income tax, then they need to determine what is their taxable income in that state. And we start with federal taxable income and then each state has their own modifications that they make to federal taxable income. Some really common ones are depreciation of fixed assets. States have different methods of depreciating than what’s allowed on your federal tax return. The states do not allow certain deductions like state income tax deduction. So once you make those modifications to the federal taxable income, then at that point you need to decide which portion of this is going to all of these different states. And there are formulas that the states use for that. Most of the time, it’s just looking at sales to that state versus everywhere.
But there are also states that take a look at the amount of payroll that you have in each state and property. So once you come up with that percentage, you’ve got your state taxable income.
It’s important to remember that when you add a state filing responsibility, if you kind of look at the whole pie, you’re not necessarily paying more state tax, it’s just a question of which state are you paying that tax to. And certainly there are some states with higher tax rates that it’s less favorable to file in those states but it’s best to kind of think of it as a pie and as long as you’re filing where you’re required to then that protects the business going forward.
