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.
Please note that this blog is based on laws effective March 21, 2020 and may not contain later amendments. Please contact Cray Kaiser for most recent information.
On Friday, March 20, Steve Mnuchin, Secretary of the Treasury, released a statement that the federal tax filing deadline has moved in response to the ongoing coronavirus (COVID-19) pandemic. The new deadline of July 15, 2020 corresponds with the tax payment deadline previously rescheduled earlier in the week. We do not yet have clarity on tax deadlines for certain states, including Illinois. We will keep you posted as guidance is provided.
What this means for you:
Due to the extenuating circumstances surrounding COVID-19, and the Illinois “stay at home” requirement, our office has closed to the public and our employees are working from home. See more about how our operations have been affected below.
We’re here to help:
We understand that this situation can be extremely frustrating. We empathize with what you are feeling as we all navigate this situation together. Please know we are doing all that we can to complete work in an accurate and efficient manner.
If you have any questions regarding the latest update regarding the federal tax filing deadline, or simply want to chat about your current situation, please do not hesitate to contact our office at 630-953-4900.
These are certainly trying times and we want to reiterate that Cray Kaiser is here for you. As things continue to evolve in light of the COVID-19 pandemic, we at CK are taking additional precautions for the benefit of our team members and our clients.
Effective immediately:
We want to remind our clients of our portal access and your ability to safely and securely share your information with our team. We ask that you email efile@craykaiser.com to request your portal access. This will eliminate the need for you to drop off your tax information at our office.
Thank you for your patience and understanding during this challenging time. We wish you, your family, and your business health and safety. We will continue to support you as best as we can while keeping each other’s health a priority. If any changes occur during the course of the next few days, we will update our website.
Please note that this blog is based on laws effective March 18, 2020 and may not contain later amendments. Please contact Cray Kaiser for most recent information.
This afternoon, the IRS issued formal guidance on tax payment relief. Notice 2020-17 establishes the following:
Keep in mind the Notice only deals with payment relief, not filing relief. Based on our understanding of the law, valid extension requests of time to file will be required.
The Notice also does not mention relief of any other federal taxes, including payroll taxes. As such, it’s critical that if cash is tight, you continue to make payroll tax deposits. Failure to do so can be very costly.
Finally, we are still awaiting guidance from a number of state tax authorities including Illinois to determine what filing and/or payment relief might be available. We will continue to keep you abreast of developments as they come.
These are certainly trying times and we want to reiterate that Cray Kaiser is here for you. As things continue to evolve in light of the COVID-19 pandemic, we at CK are taking additional precautions for the benefit of our team members and our clients.
Effective immediately:
We want to remind our clients of our portal access and your ability to safely and securely share your information with our team. We ask that you email efile@craykaiser.com to request your portal access. This will eliminate the need for you to drop off your tax information at our office.
Thank you for your patience and understanding during this challenging time. We wish you, your family, and your business health and safety. We will continue to support you as best as we can while keeping each other’s health a priority. If any changes occur during the course of the next few days, we will update our website.
Please note that this blog is based on laws effective March 17, 2020 and may not contain later amendments. Please contact Cray Kaiser for most recent information.
There has been much speculation surrounding the impact of the Coronavirus (COVID-19) pandemic on the U.S. tax filing deadline. At a Tuesday White House briefing, Treasury Secretary Steven Mnuchin announced new relief measures that are effective immediately.
The Internal Revenue Services (IRS) has extended the tax payment deadline for 2019 income taxes for individuals who owe up to $1 million and corporations that owe up to $10 million.
Eligible taxpayers can defer payment for up to 90 days without accruing interest or penalties. This puts the new tax payment deadline at July 15. As of now, the tax filing deadline remains April 15, though this could still change. Regardless of a change in deadline, our firm will continue to operate with the goal of completing tax filings without relying on extensions.
We remain on alert to any news about this situation. If the IRS announces a filing extension, we will contact you as soon as possible. It is expected that many states will follow suit in granting similar payment relief. We will be sure to keep you informed of any new updates at both the federal and state levels.
In the meantime, please do not hesitate to contact us with any questions you have regarding these circumstances. We will continue to work diligently to provide the services you count on from our team.
These are certainly trying times and we want to reiterate that Cray Kaiser is here for you. As things continue to evolve in light of the COVID-19 pandemic, we at CK are taking additional precautions for the benefit of our team members and our clients.
Effective immediately:
We want to remind our clients of our portal access and your ability to safely and securely share your information with our team. We ask that you email efile@craykaiser.com to request your portal access. This will eliminate the need for you to drop off your tax information at our office.
Thank you for your patience and understanding during this challenging time. We wish you, your family, and your business health and safety. We will continue to support you as best as we can while keeping each other’s health a priority. If any changes occur during the course of the next few days, we will update our website.
Congratulations on making it to half a century! Your fifties can be a time of change. Maybe not having to work anymore sounds like a dream, but you might be concerned you don’t have enough saved for your upcoming retirement. Those concerns definitely aren’t unfounded as 40 million households in America have no retirement savings at all. Additionally, the Federal Reserve found that as of 2016, the median account balance of most retirement assets was only $60,000 with an average of $228,900. Given that healthcare and housing costs alone can easily deplete that amount during retirement, this is a growing concern nationwide.
This is why your fifties are a crucial period to continue to build up your retirement savings. This is especially true if you didn’t get to save as much when you were younger due to lower earnings, recessions, caring for children, or other roadblocks. While you may be facing new difficulties, you still must prioritize retirement savings. The good news is that there are many tax-advantaged savings strategies you can leverage once you reach age 50 or 55 to start catching up to where your retirement contributions should be. Here are some smart money moves you can make when you turn 50:
Most standard retirement plans have a catch-up contribution that kicks in once you turn 50. These catch-up caps are separate of the indexed annual cap on your retirement contributions:
For example, if you have a 401(k) at work, the cap for 2020 is $19,500 so your total annual contribution can be as high as $26,000 if you are 50 or older. If you have an employer match, you should take advantage of this cap and additional catch-up contribution to maximize your savings as employer matches are the closest you can get to free money.
Medical expenses are a cold hard reality at any age, but especially once retirement approaches. HSAs are tax-advantaged savings plans where the funds grow tax-free, and distributions are also tax-free provided that you had medical bills.
You must be enrolled in a high-deductible health plan, and Medicare enrollees aren’t allowed, so you need to take advantage of this strategy while you are still enrolled in a health plan. For self-only coverage, the minimum deductible is $1,400 and maximum is $6,900 for 2020 ($2,800 and $13,800 respectively for family coverage).
Your contribution limit can vary based on the type of health coverage you have, your age, when you became eligible, and when you’re no longer eligible. Assuming your coverage is consistent, you can contribute up to $3,550 to an HSA if you have self-only coverage ($7,100 for family).
HSAs often function as supplementary retirement assets because you don’t pay any tax on distributions made after you turn 65, or you become permanently and totally disabled. They are frequently overlooked, but you should contribute to an HSA so long as you have a qualified health plan.
The need for care is going to be a reality for millions of Americans who may not have much family to help them out in retirement age or don’t want to burden their loved ones. Keep in mind that 70% of Americans over 65 end up needing long-term care. If you don’t already have long-term care insurance, you need to start comparing rates now. Some policies are even bundled with life insurance, or act as a hybrid of the two insurances, if you want to ensure that your loved ones will be cared for if anything happens to you sooner.
If you are self-employed, you can deduct your long-term care insurance premiums. Some states also offer tax benefits regardless of employment, such as New York, Idaho, and Indiana. For federal tax purposes, you can deduct long-term care insurance premiums as a medical expense exceeding 10% of your adjusted gross income, although the 2018 tax reform has vastly reduced the number of taxpayers who itemize.
Entering your fifties can feel like a pivotal transition. No matter how much saving and preparing you were able to do earlier in your life, there is still plenty of time (and you have many options) for “catching up” or continuing to improve your financial position for the long-term. If you are looking for a trusted advisor to help you navigate financials, please don’t hesitate to contact Cray Kaiser.
Please note that this blog is based on tax laws effective in March 2020 and may not contain later amendments. Please contact Cray Kaiser for most recent information.
In this audio blog, CK Principal Karen Snodgrass walks us through the complexities of Illinois taxes. If you live and/or own a business in Illinois, you know that taxes have continued to rise. To put it simply, it’s a tough time to be a resident. That’s why many individuals and companies are looking for ways to move out of state and reduce their tax burden.
But is it as simple as moving out of Illinois? Unfortunately, it’s not. There are many steps required to establish domicile in a new state, and even then, Illinois will look for ways to keep taxing you. So, if you’re one of many residents considering a move out of Illinois, listen to the audio blog below to learn more about what that entails:
If you have questions about your tax situation, please don’t hesitate to contact Cray Kaiser today.
Successful entrepreneurs need drive, passion, the will to follow things through, and the hustler’s spirit that enables you to constantly try that new thing or relentlessly chase that next big opportunity. Not all entrepreneurs are numbers people, and that’s okay, because there are plenty of numbers people out there willing to offer support.
But whether you’re a serial entrepreneur or simply looking to grow your small business to a sustainable level, it’s crucial to have an understanding of your venture’s financial results. While small businesses don’t require the same horsepower in their accounting department—or even require an accounting department at all yet—as large companies and quickly-growing startups, it’s still integral for entrepreneurs of all calibers to have an iron grip on their financial controls, processes, and results to prevent roadblocks.
Your business financials aren’t solely about how much revenue the company has brought in stacked up against your expenses, or how many strategic maneuvers can be deployed to minimize your business tax burden. Understanding your key ratios, terminology, and the stories behind your numbers (and having the right accountants and advisors who can help you interpret them) will take you from simple compliance to long-term stabilization that allows you to grow your business.
And not only that, but where is it going? It can seem like operations are running smoothly because cash is regularly deposited, the bills are paid, and imminent tax filings don’t feel like a shakedown where you have to scramble to get the funds together. But while your bottom line might look good on your next attempt to raise capital, you could find yourself in hot water if it turns out that only one client constitutes most of your revenue. If that client goes out of business or otherwise decides to stop or reduce their payments, it could be significantly harder to pay back the loan you took out or demonstrate to your investor that you’re worth the investment.
Demonstrating that you can make a profit is important for raising capital, but raising capital isn’t a be-all and end-all. The time that you spend trying to qualify for loans, grants, and outside investment might be better spent getting more clients, users, views, income-producing property, or other important revenue drivers first. This could prove to be even more important than trying to keep your burn rate (cash outflow) under control. Constrained cash flow is usually why most companies fold within the first two to three years of operation, and often gets overlooked by busy entrepreneurs focusing primarily on raising funds or posting an impressive profit.
In your quest for capital, your focus is likely to be directed toward the numbers investors are going to pay attention to: margins, profit generated relative to the capital you already invested, and how many users you have. But in being transparent about your finances, you’re not just being compliant with the law, you’re also giving a more accurate picture of where your business currently is and where you expect it to go.
Early stage companies are more likely to get investment less from promising financials and more from showing promise with the actual product and business model, so you don’t need to worry about getting the best-looking numbers to show. Banks, on the other hand, have stricter requirements for loan repayment and will be more stringent concerning financial compliance. They will want to see a proven track record and put more emphasis on your profit than growth potential, especially if you’re not a very capital-intensive business with significant collateral such as vehicles or real estate to secure the loan.
Regardless of whether you go for the more dynamic risk-taking with investor funding or the predictable repayment process with a business loan, all external capital sources will want to see proof of proper cash management even more than having stellar revenue numbers.
The ability to adequately control your cash inflows and outflows is what will help your company weather any storm. And a surefire way to make that happen is utilizing Mike Michalowicz’s “Profit First” model that changes the Revenue – Expenses = Profit expression into Sales – Profit = Expenses. While this is not an official figure to report on financial statements, it’s an excellent cash flow management mindset that helps business owners prioritize their personal and business savings so that operating expenses, expansion, taxes, and personal income are always being paid.
By “paying yourself” first, it ensures that your financial results are based on having enough cash on hand before you pay any expenses.
Any small business is required to furnish a cash flow statement to most investors and some banks, but you shouldn’t wait until you have one at the end of the month, quarter, or year. Go over your cash flow every week. In addition to expenses that could be cut or revenues that could be added or bolstered, you might have bottlenecks in your cash collection processes that could be eliminated and you hadn’t even realized it. To learn more about managing cash flow, click here.
The team at Cray Kaiser prides itself on not just being numbers people, but people people. Not only can we help you conceptualize financial results, but we can talk to you about what it means for your business and work with you to create strategies that lead to growth. Please contact us if you’d like to learn more.
With technology driving change in the accounting world so quickly, you may be overwhelmed with how this change can impact you and your business. Although you may have moved to a virtual work environment for day-to-day accounting processes, there is so much more you can do to streamline and customize your accounting to meet your operational demands. Last fall, the CK accounting services team attended the QuickBooks Connect conference in San Jose, CA where the theme was “Own Your Future”. Thousands of business owners, self-employed individuals, and accounting professionals came together to gain and share knowledge, skills, and insights to better run their businesses.
The takeaway from the conference was that the accounting world is evolving, and we need to be part of that evolution by using technology to streamline processes. Our mission as accountants and QuickBooks Pro Advisors is to assist you in understanding your operations, streamlining your processes, maintaining your control functions and providing you with trending applications to help you succeed. This technology is not meant to recreate the wheel but revolutionize the process through artificial intelligence (AI).
As a small business owner, you wear several hats ranging from accounting, marketing, and hiring. Accounting may not be your passion but keeping your books up to date and organized is crucial to your success. Meaningful financial statements can be a click away through applications and the automation of your accounting tasks. In this blog we’re providing an overview of a few ways to free up your time so you can spend it on other aspects of your business.
Bank Feeds: This feature allows you to link your bank and credit cards to QuickBooks Online (QBO) and automatically download cleared transactions. This process significantly reduces manual data entry and makes the month-end reconciliation process much simpler.
Bank Rules: This is an additional feature that can further automate the bank feeds by recognizing and categorizing transactions by certain details, including description, bank text and dollar amounts.
QuickBooks Payments: This feature gets you paid faster by allowing your customers to make a payment directly from your emailed invoice with one click. The payments are automatically received against open invoices, and deposits are automatically recorded in QuickBooks. Payments can easily be made by bank transfer or credit card.
ReceiptBank
Ditch the shoebox! With ReceiptBank, your clients can simply take a picture of an invoice or receipt and upon uploading, ReceiptBank reads the information and automatically publishes it in QuickBooks as a transaction.
Bill.com
Spend up to 50% less time paying bills. Bill.com delivers everything you need to simplify every step of your bill pay process with automated approval workflows, paperless document management, domestic and international payment options, seamless integration with QuickBooks software, and more.
AR Collect
Get paid faster. This app helps manage receivables and makes collections easier by syncing with QuickBooks and Sage products to send batch emails in a single click, automatically send past due notices based on number of days past due, send advance reminders prior to upcoming due dates, and much more.
QBO Full-Service Payroll
This is an automated payroll solution with integrated time tracking and tools that help you grow your business. It’s truly full service! Once you submit your payroll, they take care of everything else such as paying employees via direct deposit, submitting all tax payments, and filing quarterly and annual tax filings electronically (even W-2s). And the best part? Payroll is automatically recorded in your general ledger.
T-Sheets
This web-based and mobile time tracking and employee scheduling app can help keep you and your team organized. TSheets is an ideal system for businesses with employees who always, or sometimes, work outside the office. Remote employees can clock in and out using the TSheets mobile app, laptop computers, telephones, text messages or even Twitter.
There are many other industry-specific apps that can provide your company with a more robust accounting platform. Contact us for more information.
As AI continues to revolutionize the growth of applications it will continue to simplify and automate work, eliminate tedious tasks, and provide you with information so you can run your business successfully. The CK Accounting Services team is available to provide clients with direction on how to select the right tech stack. Contact us today to request a needs assessment and discuss ways your accounting processes can be enhanced through the use of apps and related technology.
You likely already know that the tax code places limits on the amounts that individuals can gift to others (as money or property) without paying taxes. This limit is meant to keep individuals from using gifts to avoid the estate tax that is imposed upon inherited assets. It can be a significant issue for family-owned businesses when the business owner dies, and the business has to be sold to pay the resulting inheritance (estate) taxes. This is, in large part, why high-net-worth individuals invest in estate planning.
Current tax law provides both an annual gift-tax exemption and a lifetime unified exemption for the gift and estate taxes. Because the lifetime exemption is unified, gifts that exceed the annual gift-tax exemption reduce the amount that the giver can later exclude for estate-tax purposes.
This inflation-adjusted exemption is $15,000 for 2020. Thus, an individual can give $15,000 each to an unlimited number of other individuals (not necessarily relatives) without any tax ramifications. However, unlimited amounts may be transferred between spouses without the need to file such a return – unless the spouse is not a U.S. citizen. Gifts to noncitizen spouses are eligible for an annual gift-tax exclusion of up to $155,000 in 2020.
For example, Jack has four adult children. In 2020, he can give each child $15,000 ($60,000 total) without reducing his lifetime unified exemption or having to file a gift tax return. Jack’s spouse can also give $15,000 to each child without reducing either spouse’s lifetime unified exemption. If each child is married, then Jack and his wife can each also give $15,000 to each of the children’s spouses (raising the total to $60,000 given to each couple) without reducing their lifetime unified tax exemptions. The gift recipients are not required to report the gifts as taxable income and do not even have to declare that they received the gifts on their income tax returns.
If any individual gift exceeds the annual gift-tax exemption, the giver must file a Form 709 Gift Tax Return. However, the giver pays no tax until the total amount of gifts in excess of the annual exemption exceeds the amount of the lifetime unified exemption. The government uses Form 709 to keep track of how much of the lifetime unified exemption that an individual has used prior to that person’s death. If the individual exceeds the lifetime unified exemption, then the excess is taxed at the current rate of 40%.
The gift and estate taxes have been the subject of considerable political bickering over the past few years, particularly the asset value at which estate tax should apply. In 2020, the lifetime unified exemption is $11.58 million per person. By comparison, in 2017 (prior to the recent tax reform), the lifetime unified exemption was $5.49 million.
This history is important because the exemptions can change significantly at Congress’s whim. For this reason, individuals have been hesitant to make large gifts as there was concern that the gifts could be “clawed back” into their estate if the estate tax limits were reduced in the future. However, the IRS recently came out with guidance to alleviate these concerns and provide a significant planning opportunity for donors. According to the IRS, “Individuals planning to make large gifts between 2018 and 2025 can do so without concern that they will lose the tax benefit of the higher exclusion level once it decreases after 2025.”
For example, a wealthy donor may be hesitant to gift $10 million, although that amount gifted would be under their lifetime exemption and thus not taxable. The concern is that a new administration would only allow for a $5 million estate tax; meaning half of the gift would remain in his estate. Under new IRS guidance, no matter when the person dies the full amount would remain exempt, even if the exclusion is reduced in the future.
With the additional clarification of the lifetime gift exclusion availability for future estates, wealthy donors should strongly consider ensuring that their gifting strategy maximizes future tax benefits.
All donors, wealthy or not, should be cognizant of other gift tax exclusions such as certain gifts of medical expenses and tuition. When planned for correctly, these gifts are nonreportable and do not count against an annual or lifetime exclusion.
Cray Kaiser is here to help you understand the complexities of gift tax and estate tax. Please contact us at 630-953-4900 if you’d like to discuss your personal gifting strategy.
The CK team gets many calls about crowdfunding and the taxability around the money raised. We recently shared a blog about the basics of crowdfunding, specifically for nonprofits, but wanted to elaborate a little more about the tax implications and tax consequences of crowdfunding.
Many crowdfunding platforms such as GoFundMe, Kickstarter and Indiegogo have fees ranging from 5% to 9%. Each platform specifies its own charges, limitations, and withdrawal processes. And in addition to those fees, funds raised may be taxable, depending on the purpose of the campaign. Here’s how each type of crowdfunding goal is taxed:
When an entity raises funds for its own benefit and the contributions are made out of detached generosity (and not because of any moral or legal duty or the incentive of anticipated economic benefit), the contributions are considered tax-free gifts to the recipient.
On the other hand, the contributor is subject to the gift tax rules if he or she contributes more than $15,000 to a particular fundraising effort that benefits one individual. In that case, the contributor is required to file a gift tax return. Unfortunately, regardless of the need, gifts to individuals are never tax deductible.
A “gift tax trap” occurs when an individual establishes a crowdfunding account to help someone else in need (the beneficiary) and takes possession of the funds before passing the money on to the beneficiary. Because the fundraiser takes possession of the funds, the contributions are treated as a tax-free gift to the fundraiser. However, when the fundraiser passes the money on to the beneficiary, the money then is treated as a gift from the fundraiser to the beneficiary; thus, if the amount is over $15,000, the fundraiser is required to file a gift tax return and reduce his or her lifetime gift and estate tax exemption. Some crowdfunding sites allow the fundraiser to designate a beneficiary so that the beneficiary has direct access to the funds which keeps the fundraiser from encountering any gift tax problems.
Gifts to specific individuals, regardless of the need, are not considered a charitable contribution under tax law (i.e. raising funds to help pay for someone’s funeral expenses). Another example, which includes a little tax twist, would be raising money to help someone pay for their medical expenses. Because it is a gift, it is not taxable to the recipient, but if the recipient itemizes their deductions, any amount of the gift the recipient spends to pay for their or a spouse’s or dependent’s medical expenses can be included as a medical expense on the recipient’s Schedule A.
Even if the funds are being raised for a qualified charity, the contributors cannot deduct the donations as charitable contributions without proper documentation. Taxpayers cannot deduct cash contributions, regardless of the amount, unless they can document the contributions in one of the following ways:
Thus, if the contributor is to claim a charitable deduction for the cash donation, some means of providing the contributor with a receipt must be provided.
When raising money for business projects, two issues must be contended with: 1) the taxability of the money raised and 2) the Security and Exchange Commission (SEC) regulations that come into play if the contributor is given an ownership interest in the venture.
Maybe. It depends on the aggregate number of backers contributing to the fundraising campaign and the total amount of funds processed through third-party transaction companies (i.e. credit card, PayPal, etc.). These third-party processors are required to issue a Form 1099-K reporting the gross amount of such transactions. There is a de minimis reporting threshold of $20,000 or 200 reportable transactions per year. It all depends on if the third party follows the de minimis rule.
If you have questions about crowdfunding-related tax issues, please contact Cray Kaiser today.
Beginning January 1, 2020, Illinois has a new Minimum Wage Credit. Below is key information on the credit and you can click here to read full details.
Employers with 50 or less full-time equivalent employees and that have employees that had been earning less than the required minimum wage but are now being paid the required minimum wage.
The Minimum Wage Credit will be allowed against the Illinois withholding tax liability of employers.
The maximum credit is 25% and will decrease each year in the future. As Cray Kaiser knows more about the credit in the future, we’ll keep you informed.
It’s important to make sure your HR is tracking employees’ pay to determine each person’s eligibility. Alternatively, if you are using an outside payroll provider, inquire as to whether they will track this for you.
For more information on the Minimum Wage Credit, please click here. If you have any questions about this credit, please don’t hesitate to contact Cray Kaiser today.
Please note that this blog is based on tax laws effective in January 2020 and may not contain later amendments. Please contact Cray Kaiser for most recent information.
