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.
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 Matt Richardson.
Matt is one of CK’s In-Charge Accountants, with much of his day revolving around the many steps of tax preparation with both business and personal taxes. For businesses, Matt is often involved in reviewing clients’ accounting records and closing books in addition to executing the return itself. He also will occasionally jump in to assist with the review and audit teams to help with tax-related issues. Matt is currently a generalist but over time plans to grow into a more specialized role.
Prior to joining CK, Matt’s career looked a bit different. He studied trombone and music history at Cleveland’s Oberlin Conservatory and went on to complete a PhD in music history at Northwestern. After teaching for a few years at Northwestern and at Wisconsin, he decided to change career paths and use his social and critical thinking skills in accounting.
Matt joined the CK team in November of 2022 and was immediately drawn to the firm’s focus on people. When asked what about CK made him excited to work at the firm, he said, “Whether it’s co-workers or clients, I’ve always personally believed it’s important to remember that it all comes down to how you treat people, so the values at CK really resonated with me.” He enjoys the environment at CK and feels it’s one conducive to growth and learning.
When asked which of CK’s core values mean the most to him and why, Matt answered, “I think people and integrity resonate with me the most. To me, integrity means we take pride in the accuracy and quality of our work as trusted advisors to our clients. And ultimately, it all comes down to People. Nothing else we do can happen without strong relationships with the people we work with.”
I love trying new restaurants whenever I have a chance. Some of my favorites are Italian and Japanese. After tax season (besides catching up on sleep), I’m looking forward to a vacation. This year I’m hoping to make it out to L.A. for a weekend to catch an Angels game and a Dodgers game.
My favorite place I’ve been to is Tokyo. There are so many fantastic restaurants and cafés, and I always manage to meet so many people and discover interesting new things when I’m there. The #1 place I’d like to visit is Vienna. I love opera and symphonic music so I’d love to hear the Vienna Philharmonic and the Vienna State Opera.
I think my favorite movie has to be The Empire Strikes Back. I loved watching the Star Wars movies with my dad growing up, and I never get tired of re-watching them.
I’ve been working my way through some funk and soul – a lot of things like James Brown, Stevie Wonder, Billy Ocean, and Lionel Richie. And I’m always cycling in some classic 80’s Japanese pop, like Akina Nakamori, Seiko Matsuda, and Yu Hayami.
The Illinois Department of Revenue has issued an informational bulletin on the enforcement of the Illinois Secure Choice Savings Program Act (Secure Choice Program).
Under the Illinois Secure Choice Savings Program Act, the following Illinois employers must either begin offering a qualified plan or automatically enroll their employees into the Illinois Secure Choice Savings Program (“Secure Choice”):
Secure Choice is a program administered by the Illinois Secure Choice Savings Board to provide a retirement savings option to private-sector employees in Illinois who lack access to an employer-sponsored plan. Employers who do not meet their required enrollment deadlines or report an exemption from Secure Choice may be subject to financial penalties. Employers who do not comply will receive a Tier I penalty of $250 per employee, calculated for the first calendar year of noncompliance or a Tier II penalty of $500 per employee for each subsequent calendar year the employer is non-compliant.
The Department of Revenue is responsible for enforcing penalty provisions for non-compliant employers. The Department will begin issuing IDOR-2P-NT (Notice of Proposed Assessment) and IDOR-2-BILL-NT (Notice of Assessment) in February 2023. Employers can avoid proposed assessments by complying within 120 days of the notice date.
Employers who receive a notice should take one of the following actions:
For more information about the Illinois Secure Choice rules, visit here or contact Cray Kaiser at 630-953-4900.
On December 16, 2022, section 197.3181, Florida Statutes (F.S.) was signed into law providing a prorated refund of ad valorem taxes for residential improvements rendered uninhabitable by Hurricanes Ian or Nicole.
The following information from the Florida Department of Revenue will help homeowners understand the new statute.
If a residential improvement was rendered uninhabitable for at least 30 days due to Hurricanes Ian or Nicole, a homeowner may be eligible for a partial refund of 2022 property taxes for the time the property was uninhabitable. Under section 197.3181 F.S., “’uninhabitable” means the loss of use and occupancy of a residential improvement for the purpose for which it was constructed resulting from damage to or destruction of, or from a condition that compromises the structural integrity of, the residential improvement which was caused by Hurricane Ian or Hurricane Nicole during the 2022 calendar year.”
Homeowners should contact the county property appraiser for the county in which the property is located to start the application process. The property appraiser will provide the Application for Hurricane Ian or Hurricane Nicole Tax Refund form. Homeowners must provide supporting documentation to determine uninhabitability. The maximum number of days that can be claimed in 2022 is 95 days for Hurricane Ian, and 52 days for Hurricane Nicole.
The application and supporting documentation must be submitted to the property appraiser by April 3, 2023. A homeowner who fails to file the application by this date waives their claim for a tax refund under the new law.
The refund amount is calculated by applying the percent change in value to the number of days the residential improvement was uninhabitable. The percent change in value is found by subtracting the January 1, 2022 just value of the residential improvement from the January 1, 2022 just value of the entire parcel to establish the post-disaster value and then calculating the percent change in value. The example below depicts these calculations.
Step One:
Find the percent change in value by subtracting the parcel’s post-disaster just value from the pre-disaster just value using the following calculations:
Change in value: $300,000 less $225,000 = $75,000
Percent change in value: $225,000 divided by $300,000 = .75 or 75%
Step Two:
Find the percent of days the residence was uninhabitable by dividing the number of days in 2022 the residential improvement was uninhabitable by the number of days in the year using the following calculations:
Percent of uninhabitable days: 95 days divided by 365 days = .26 or 26%
Step Three:
Find the damage differential by applying the percent change in value to the percent of uninhabitable days using the following calculation:
Damage differential calculation: .75 multiplied by .26 = .195
Step Four:
The refund amount is calculated by applying the damage differential to the total of 2022 property taxes paid using the following calculation:
Refund calculation: $2,250 multiplied by .195 = $438.75 refund due
The property appraiser will approve or deny a homeowner’s eligibility for a refund based on the Application for Hurricane Ian or Hurricane Nicole Tax Refund form (Form DR-5001). Homeowners will be notified no later than June 1, 2023 of eligibility status. If the homeowner is eligible, the property appraiser is also responsible for notifying the tax collector.
If the homeowner is found ineligible, a petition may be filed with the value adjustment board requesting that the refund be granted. A final petition must be filed on or before the 30th day following the issuance of the notice by the property appraiser.
Understanding the ins and outs of a new statute can be complex unless
What makes Roth IRAs so appealing? Primarily, it’s the ability to withdraw money from them tax-free. But to enjoy this benefit, there are a few rules you must follow, including the widely misunderstood five-year rule.
To understand the five-year rule, you first need to understand the three types of funds that may be withdrawn from a Roth IRA:
Contributed principal. This is your after-tax contributions to the account.
Converted principal. This consists of funds that had been in a traditional IRA but that you converted to a Roth IRA (paying tax on the conversion).
Earnings. This includes the (untaxed) returns generated from the contributed or converted principal.
Generally, you can withdraw contributed principal at any time without taxes or early withdrawal penalties, regardless of your age or how long the funds have been held in the Roth IRA. But to avoid taxes and penalties on withdrawals of earnings, you must meet two requirements:
Withdrawals of converted principal aren’t taxable because you were taxed at the time of the conversion. But they’re subject to early withdrawal penalties if you fail to satisfy the five-year rule.
As the name suggests, the five-year rule requires you to satisfy a five-year holding period before you can withdraw Roth IRA earnings tax-free or converted principal penalty-free. But the rule works differently depending on the type of funds you’re withdrawing.
If you’re withdrawing earnings, the five-year period begins on January 1 of the tax year in which you made your first contribution to any Roth IRA. For example, if you opened your first Roth IRA on April 1, 2018, and treated your initial contribution as one for the 2017 tax year, then the five-year period started on January 1, 2017. That means you were able to withdraw earnings from any Roth IRA tax and penalty-free beginning on January 1, 2022 (assuming you were at least 59½ or otherwise exempt from early withdrawal penalties).
If you’re withdrawing converted principal, the five-year holding period begins on January 1 of the tax year in which you do the conversion. For instance, if you converted a traditional IRA into a Roth IRA at any time during 2017, the five-year period began on January 1, 2017, and ended on December 31, 2021.
Unlike earnings, however, each Roth IRA conversion is subject to a separate five-year holding period. If you do several conversions over the years, you’ll need to track each five-year period carefully to avoid triggering unexpected penalties.
Keep in mind that the five-year rule only comes into play if you’re otherwise subject to early withdrawal penalties. If you’ve reached age 59½, or a penalty exception applies, then you can withdraw converted principal penalty-free even if the five-year period hasn’t expired, but you would still pay taxes on your earnings.
You may be wondering why the five-year rule applies to withdrawals of funds that have already been taxed. The reason is that the tax benefits of Roth and traditional IRAs are intended to promote long-term saving for retirement. Without the five-year rule, a traditional IRA owner could circumvent the penalty for early withdrawals simply by converting it to a Roth IRA, paying the tax, and immediately withdrawing it penalty-free.
Generally, one who inherits a Roth IRA may withdraw the funds immediately without fear of taxes or penalties, with one exception: The five-year rule may still apply to withdrawals of earnings if the original owner of the Roth IRA hadn’t satisfied the five-year rule at the time of his or her death.
For instance, suppose you inherited a Roth IRA from your grandfather on July 1, 2021. If he made his first Roth IRA contribution on December 1, 2018, you’ll have to wait until January 1, 2023, before you can withdraw earnings tax-free.
The consequences of violating the five-year rule can be costly, but fortunately, there are ordering rules that help you avoid inadvertent mistakes. Under these rules, withdrawals from a Roth IRA are presumed to come from after-tax contributions first, converted principal second and earnings third.
So, if contributions are large enough to cover the amount you wish to withdraw, you will avoid taxes and penalties even if the five-year rule hasn’t been satisfied for converted principal or earnings.
Many people are accustomed to withdrawing retirement savings freely once they reach age 59½. But care must be taken when withdrawing funds from a Roth IRA to avoid running afoul of the five-year rule and inadvertently triggering unexpected taxes or penalties. The rules are complex — so when in doubt call us at Cray Kaiser at (630) 953-4900 before making a withdrawal.
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 Natalie McHugh.
As Cray Kaiser’s newest Principal, Natalie helps manage the workflow and people in the tax department. Her days typically consist of reviewing returns and spending time consulting, whether projecting tax costs for clients, researching complex tax situations or assisting clients through a sale transaction. Her niche is estates, gifts and trusts, high-net wealth individuals and partnerships.
Natalie is a DePaul University graduate and interned at KPMG in their personal financial planning department during her college career. After graduation, she joined the firm full-time and it was there that she found her passion for taxes, specifically personal, trust, estate and gift tax returns.
Natalie joined CK in December of 2013. She was instantly drawn to the CK culture, the variety of clients and having female partners at the firm. Knowing this, Natalie could see herself progressing at CK. When asked why she has stayed at CK, Natalie says, “Our clients. I enjoy helping our clients navigate through their tax situations and helping educate them along the way. I also love the variety of client work we have here. Every day there is something new and I’m constantly learning.”
To Natalie, CK’s core values of Care and People are her two favorites. She is passionate about the amount of care that takes place at CK. She says, “We value a solid work product and want to make sure our clients are taken care of.” When it comes to People, Natalie says, “Each person on the CK team has unique talents that contribute to our solid work product.”
Soak it up! Learn from those around you and learn what you enjoy the most. There are many different lanes in accounting, from audit to tax to industry. Also, ask lots of questions! Your colleagues are there to help.
I spend a lot of time with family – I love to plan activities like bowling, dinners, and game nights. My daughter plays travel softball and a lot of time is spent over the summer at tournaments watching games and socializing with the families of the team. I work out regularly to balance my sitting at the office. I also love to read and listen to books during my commute.
I live with my husband, Matt and 13-year-old daughter, Eleanor and 2 dogs, Pepper and Stitch. My 26-year-old daughter has her masters in School Counseling and works at a magnet school. She just moved to Wrigleyville, and we enjoy visiting her and going to Cubs games, taking walks with her 2 dogs and visiting different restaurants and bars.
I’ve become the unofficial Mexico all-inclusive travel agent for friends and colleagues. I will find them good prices and give them resort suggestions and then send them over to my travel agent who will deal with the hard work.
Mexico all-inclusives are a favorite after a tax season as there is minimal planning ahead of time. I can enjoy relaxation, socialization, reading, exercise and some Vitamin D! However, I’d like to jump across the pond and expand into Europe in the next couple of years.
Everything! My Spotify starts with the 1940s and contains every decade through current. I warn colleagues that I usually have Spotify on shuffle and you never know what you are going to get – some jazz, classical, hair bands, hip hop, 80’s hits, etc.
Many companies are eligible for tax write-offs for certain equipment purchases and building improvements. These write-offs can do wonders for a business’s cash flow, but whether to claim them isn’t always an easy decision. In some cases, there are advantages to following the regular depreciation rules. So, looking at the big picture and developing a strategy that aligns with your company’s overall tax-planning objectives is critical.
Taxpayers can elect to claim 100% bonus depreciation or Section 179 expensing to deduct the full cost of eligible property up front in the year it’s placed in service. Alternatively, depending on how the tax code classifies the property, they may spread depreciation deductions over several years or decades.
Under the Tax Cuts and Jobs Act (TCJA), 100% bonus depreciation is available for property placed in service through 2022. Without further legislation, bonus depreciation will be phased down to 80% for property placed in service in 2023, 60% in 2024, 40% in 2025, and 20% in 2026; then, after 2026, bonus depreciation will no longer be available. (For certain properties with longer production periods, these reductions are delayed by one year. For example, 80% bonus depreciation will apply to long-production-period property placed in service in 2024.)
In March 2020, a technical correction made by the CARES Act expanded the availability of bonus depreciation. Under the correction, qualified improvement property (QIP), which includes many interior improvements to commercial buildings, is eligible for 100% bonus depreciation following the phaseout schedule through 2026 and retroactively to 2018. If bonus depreciation isn’t claimed, QIP is generally depreciable on a straight-line basis over 15 years.
Sec. 179 also allows taxpayers to fully deduct the cost of eligible property. Still, the maximum deduction in a given year is $1 million (adjusted for inflation to $1.08 million for 2022), and the deduction is gradually phased out once a taxpayer’s qualifying expenditures exceed $2.5 million (adjusted for inflation to $2.7 million for 2022).
While 100% first-year bonus depreciation or Sec. 179 expensing can significantly lower your company’s taxable income, it’s not always a smart move. Here are three examples of situations where it may be preferable to forgo bonus depreciation or Sec. 179 expensing:
The above rules apply to federal income tax. However, many states have decoupled with either or both bonus depreciation and Section 179 provisions. For example, Illinois no longer allows the bonus depreciation deduction but does follow federal law with respect to Section 179 deductions. So, if you are projecting an overall federal loss, you will want to also project state taxable income to account for the federal to state tax differences.
Keep in mind that forgoing bonus depreciation or Sec. 179 deductions only affect the timing of those deductions. You’ll still have an opportunity to write off the full cost of eligible assets; it will just be over a longer time period. Cray Kaiser can analyze how these write-offs interact with other tax benefits and help you determine the optimal strategy for your situation. You can contact us today at 630-953-4900.
Even though the overall IRS audit rate is currently low, it’s expected to increase as a result of provisions in the Inflation Reduction Act signed into law in August. So, it’s more important than ever for taxpayers to follow the rules to minimize their chances of being subjected to an audit. How can you reduce your audit chances? Watch for these 10 red flags that can trigger IRS scrutiny:
Of course, this isn’t the end of the list. There are many other potential audit triggers, depending on a taxpayer’s particular situation. Also, keep in mind that some audits are done on a random basis. So even if you have no common triggers on your return, you still could be subject to an audit (though the chances are lower).
With proper tax reporting and professional help, you can reduce the likelihood of triggering an audit. And if you still end up being subject to one, proper documentation can help you withstand it with little or no negative consequences. Cray Kaiser is here to help guide you with best practices in documenting your tax records. If you receive an audit notice, don’t panic; call us at (630) 953-4900 as we have significant experience dealing with tax audits.
Companies that wish to reduce their tax bills or increase their refunds shouldn’t overlook the fuel tax credit. It’s available for federal tax paid on fuel used for nontaxable purposes.
The federal fuel tax, which is used to fund highway and road maintenance programs, is collected from buyers of gasoline, undyed diesel fuel and undyed kerosene. (Dyed fuels, limited to off-road use, are exempt from the tax.)
But purchasers of taxable fuel may use it for nontaxable purposes. For example, construction businesses often use gasoline, undyed diesel fuel or undyed kerosene to run off-road vehicles and construction equipment, such as front loaders, bulldozers, cranes, power saws, air compressors, generators, and heaters.
As of this writing, a federal fuel tax holiday has been proposed. But even if it’s signed into law (check with your Cray Kaiser tax advisor for the latest information), businesses can benefit from the fuel tax credit for months the holiday isn’t in effect.
Currently, the federal tax on gasoline is $0.184 per gallon and the federal tax on diesel fuel and kerosene is $0.244 per gallon. Therefore, calculating the fuel tax credit is simply a matter of multiplying the number of gallons used for nontaxable purposes during the year by the applicable rate.
For instance, a company that uses 7,500 gallons of gasoline and 15,000 gallons of undyed diesel fuel to operate off-road vehicles and equipment is entitled to a $5,040 credit (7,500 x $0.184) + (15,000 x $0.244).
This may not seem like a large number, but it can add up over the years. And remember, a tax credit reduces your tax liability dollar for dollar. That’s much more valuable than a deduction, which reduces only your taxable income.
Keep in mind, though, that fuel tax credits are includable in your company’s taxable income. That’s because the full amount of the fuel purchases was previously deducted as business expenses, and you can’t claim a deduction and a credit on the same expense.
You can claim the credit by filing Form 4136, “Credit for Federal Tax Paid on Fuels,” with your tax return. If you don’t want to wait until the end of the year to recoup fuel taxes, you can file Form 8849, “Claim for Refund of Excise Taxes,” to obtain periodic refunds.
Alternatively, if your business files Form 720, “Quarterly Federal Excise Tax Return,” you can claim fuel tax credits against your excise tax liability.
No one likes to pay taxes they don’t owe, but if you forgo fuel tax credits that’s exactly what you’re doing. Given the minimal burden involved in claiming these credits — it’s just a matter of tracking your nontaxable fuel uses and filing a form — there’s really no reason not to do so.
If you have questions about how you might benefit from the fuel tax credit, please call the experts at Cray Kaiser today at 630-953-4900.
You may be thinking “They’re just numbers people” but we can assure you, we are people people too. Being part of the CK team means so much more than facts and figures. We show up every day as trusted advisors to our clients and supportive teammates to our colleagues. And those days are also filled with lots of fun! To help show you what we’re all about at Cray Kaiser, we asked three team members to share what a typical day looks like and what it means to work here. Click below to hear their stories.
“The learning opportunities and personal growth I’ve received at Cray Kaiser have been tremendous.”
Click here to read a transcript of this video.
“I feel that my opinion and knowledge are always valued at Cray Kaiser.”
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“There is so much opportunity at Cray Kaiser for anybody looking to make their mark in public accounting.”
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If you are interested in a career with Cray Kaiser,
please click here to learn more.
At Cray Kaiser, we believe the relationships we build with our clients make us more than just an accounting firm. Client satisfaction is our number one goal, which is why we solicit feedback each year via an online survey. Through the use of the Net Promoter Score (NPS) method, we are able to determine if “the CK way” is providing our clients with long-term value while developing their loyalty.
We are proud of our most recent NPS score of 94 which indicates our clients are highly satisfied with our services and are likely to recommend Cray Kaiser to their friends and colleagues. We continue to be appreciative of our clients that remain committed to the CK team.
Here’s what our clients are saying:
We are thankful to all our clients who participated in the 2020 survey. We promise to do our best to continue to meet and exceed your needs. If you have any questions, please contact us today.
