With all the changes COVID-19 has brought upon the world, it is easy for some to slip your mind. We wanted to remind you of the tax change to meals deductibility because of COVID. Certain meal expenses are now 100% deductible instead of 50% deductible.

The new rules surrounding meals deductibility are in effect for expenses that are paid or incurred after December 31, 2020, and before January 1, 2023. Fiscal year-end businesses whose year may have begun before December 31, 2020 will have to ensure the expenses were incurred after December 31, 2020 to take advantage of this benefit. Otherwise, this will begin for businesses using a 2021 calendar tax year.

According to the updated rules, meals that are now 100% deductible strictly apply to food or beverages provided by a restaurant. The IRS implemented the new rule to incentivize businesses to still make purchases from restaurants struggling due to Covid. The IRS rule defines a restaurant as a “business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises.” That means if you bought food from a restaurant and brought it back to the office for a meeting this will still qualify for 100% deductibility since you made the purchase from a restaurant.

While this may apply to the majority of expenses in your meal’s account balances, it is important to note that the IRS indicates that any place that primarily sells pre-packaged food or beverages not for immediate consumption does not constitute as a restaurant. Businesses will have to watch out for grocery store, convenience store, and Amazon expenses and the like and delineate those expenses in the accounting records.

Note, the remaining meals and entertainment rules that went into effect with the Tax Cuts & Jobs Act of 2017 remain in effect. See below for a refresher on those.

1) Entertainment expenses, such as sporting events and club memberships that were 50% deductible under the old law are not deductible under TCJA.

2) Meals, water, coffee, snacks, etc. at the office for benefit of employees are now eligible for only a 50% deduction, unless brought in from a restaurant as noted above. Under the prior law, these expenses were eligible for the full deduction. 

We suggest that your accounting records isolate entertainment, meals (from a restaurant), prepackaged meals and office snacks in separate accounts to identify the proper deductibility of these expenses. Please note that picnics and holiday parties held primarily for the benefit of your employees will continue to be fully deductible. We suggest that this amount be recorded in a separate account from the entertainment, meals, and office snacks accounts. 

Keep in mind that meals with clients and others for business purposes still require substantiation (the amount, time and place, business purpose, and business relationship). 

Cray Kaiser is here to help if you have further questions about the deductibility of meals and entertainment expenses. Please contact us today at 630-953-4900.

When you’re in the midst of building or growing a business, the last thing on your mind is what happens if the owner suddenly dies. How does the business move forward if this tragic circumstance occurs?

If the business was established as a partnership and the surviving partner has equity in the business, then a buy-sell agreement can provide a quick solution, particularly if an insurance policy has been set up specifically to facilitate the buyout. Working with an experienced attorney or accountant when establishing the business generally helps to ensure that there is a plan in place, whether there’s a partnership or not. Unfortunately, that is not often the case.

The absence of the driving force behind a business affects employees, customers, and family members who may have relied on the organization for income. If you find yourself in this unfortunate situation, you need to know the steps and options available to you, and how best to approach the many issues that will arise.

The First Decision: Whether to Save the Business or Not

The initial reaction to the death of a business owner may be to try to keep the business going. However, that is not always the best nor the smartest answer. Every situation is different, and decisions need to be made from a practical standpoint rather than an emotional one.

If the business owner was a professional and the entire entity was dependent upon them, their strengths, skills, and personality, then no amount of good intentions is likely to save the business. For instance, continuing to run a medical practice with a new physician will result in some patients staying on, while the majority are likely to move to another practice. The exception to this would be where there was already a partnership, or an heir of the business owner is able to assume their responsibilities in a way that makes the clientele comfortable. But even that transition represents a risk, as the time between the death and resetting the business is likely to be filled with costs for which revenue is not being generated.

Deciding whether to preserve and continue a business requires planning, realism, and perhaps most important of all, capital. Unless the estate has the funds available to keep things afloat while a new plan is agreed to, the challenges are likely to mount.

In the absence of a contingency plan with funds set aside to support it, the business owner’s estate is free to decide to walk away from the business. In many cases, the value of the operation may have rested almost exclusively on the deceased individual’s popularity and relationships with clientele, and when that is the case, the decision is clear, though often painful. Walking away from a business can feel like a second death, and it is easy to feel compelled to try to save the owner’s creation – but doing so can lead to financial losses that make the death feel even more painful.

Who is in Charge?

The first step in the process is ensuring there is a clear understanding of who the decision-maker is. If the owner held the business in his or her own name, the Estate will likely be the new owner. In that case, the Executor of the Estate would become the personal representative of the estate. If Trusts are involved a Trustee may be the lead. It’s important to work with legal counsel to review relevant documents to ensure there is an understanding of who can work on the deceased owner’s behalf.

Control of the Business’ Bank Accounts

One of the most important things that a newly assigned curator will take charge of is the business’ bank accounts, especially if the deceased owner is the only signatory. Banks will not allow checks to be written or withdrawals to be made without an authorized person’s signature and will freeze all accounts once they learn of a business owner’s death. This may result in bills not being paid and employees not receiving paychecks. These limitations will lead to services or goods not being provided to the business’ customers. Once legal control of the business has been established, whether permanent or temporary, the bank needs to be made aware of the new person’s identity and must be provided with legal documents that prove their authority. This may involve having the personal representative name themselves the new president – in the interim, inform the bank of the change and provide a new signature card.

Control of the Business’ Digital Assets

Today’s business environment is heavily reliant upon a digital, online presence. As such, the executor, administrator, or other decision maker of the affected business will need to gain access to passwords, so that they can control and make decisions relating to those assets.

Laws are being passed in several states to facilitate the transfer of this information, including in the state of California, where a Uniform Fiduciary Access to Digital Assets Act has been passed. This new legislation provides authority over digital assets to those who are fiduciaries of a business. Fiduciaries are those the court has recognized as having obtained authority from the deceased business owner in the absence of explicit instructions. This shows the importance of having guidance from an attorney or accountant, early on, in the establishment of a business, to pre-address issues and avoid potential problems in the event of the death of a business owner.

Selling the Business

If the decision is made to sell the business, it is essential that an outside entity such as a valuation expert is engaged to provide reliable, data-driven information on the business’ value. It would be prudent for the personal representative to familiarize themselves with the concepts involved in a valuation.

There are some scenarios where there is an obvious prospective buyer. This may be a competitor or an individual who has long worked alongside the deceased owner. This is often the easiest and most sensible option, as well as the one that is most likely to deliver favorable, uncomplicated terms. Working with a friendly buyer can expedite the process and alleviate stress.

Be Aware of Personal Guarantee Issues

After the death of a long-time owner, many vendors and creditors might be unwilling to do business with a new individual. This is particularly true for items or services that are capital-intensive or involve incurring significant expenses. The problem is often addressed by asking for a personal guarantee from the new owner – but offering one may not be a good idea. Making long-term decisions and commitments is generally not advised until the disposition of the business has been resolved; so issues such as signing a new lease or purchasing a new piece of equipment might best be delayed until after the larger decision regarding disposition has been made.

If you are the heir to a business owner who did not leave explicit instructions about what to do with their business in the event of their death, it is possible that they assumed or intended that their business would die with them. Even if that is the intention, it is helpful for business owners to make those intentions clear by documenting them.  Consider it the final gift to your heirs.

If you’d like to review your current business plan with one of our advisors, please call the Cray Kaiser office at (630) 953-4900.

The Internal Revenue Service (IRS) is reminding entities with Employer Identification Numbers (EINs) of their responsibility to update that information whenever the contact information or responsible party changes. IRS regulations require EIN holders to update responsible party information within 60 days of any change. Notifying the IRS of those changes is easily accomplished by filing Form 8822-B, Change of Address or Responsible Party – Business.   

Especially given the pandemic, taxpayer contact information may be outdated due to moves, office closures, etc. By alerting the IRS to your new address, you will ensure that you are receiving tax notifications on a timely basis.

The IRS is urging those entities with EINs to update their applications if there has been a change in the responsible party or contact information, calling it a key security issue.  According to the IRS, the data around the “responsible parties” for business-type entities is often outdated or incorrect, meaning that the IRS does not have accurate records of who to contact for potential fraudulent claims or identity theft issues. Inaccurate information results in a time-consuming process to identify the point of contact so the IRS can inquire about a suspicious tax filing.

It is estimated that there are approximately 100,000 EIN holders with outdated responsible party information. The IRS completed a mail campaign to these EIN holders in August.  

Responsible Party: Generally, a responsible party is the individual (a natural person) who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. The person identified as the responsible party should have a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the person, directly or indirectly, to control, manage, or direct the entity and the disposition of its funds and assets.

• Tax-exempt organizations: The responsible party is generally the same as the “principal officer” as defined in Form 990 instructions.
• Trusts: The responsible party is a grantor, owner, or trustor.
• Decedent estates: The responsible party is the executor, administrator, personal representative, or other fiduciary.

Here are some tips for completing Form 8822-B (used by businesses):

• P.O. Box: Enter your box number instead of your street address only if your post office does not deliver mail to your street address.
• “In Care of” Address: If you receive your mail in care of a third party (such as an accountant or attorney), enter “C/O” followed by the third party’s name and street address or P.O. box.
• Signature: An officer, owner, general partner or LLC member manager, plan administrator, fiduciary, or an authorized representative must sign. An officer is the president, vice president, treasurer, chief accounting officer, etc. If you are a representative signing on behalf of the responsible party, you must attach a copy of your power of attorney to Form 8822-B. To do this, you can use Form 2848. The Internal Revenue Service will not complete an address or responsible party change from an “unauthorized” third party.

If you need to change both the business and personal contact information, use Form 8822 to change your home address. Although the IRS will automatically update their records to match a taxpayer’s most recent tax filing, it is wise to file Form 8822 to make sure you receive any correspondence from the IRS since the IRS is only required to mail correspondence to your last known address. 

If you have a state filing obligation, you should also notify the appropriate state agencies of the changes.

After you file either Form 8822-B or Form 8822, please forward a copy to this office so we can update your file. If you need assistance with these tax forms, Cray Kaiser can help. Please give us a call to discuss changes in your contact information.  

More and more Americans are on the move these days. Remote work is increasingly popular and allows employees the flexibility to not necessarily live where they work. Additionally, tax changes introduced by the 2017 Tax Cuts and Jobs Act (TCJA) limited the important SALT (State and Local Tax) deduction to $10,000 for single and married individuals. That deduction had previously made residing in high-tax states less costly for affluent individuals.

When you combine those two factors alone, it makes sense that people are looking to see where the grass may be greener. There’s also the fact that states may begin adding new taxes to make up for budget shortfalls, or in the case of Illinois, seeking to increase taxes among select taxpayers. So, it comes as no surprise we are getting a lot of questions about relocating.

If you’ve found yourself looking at real estate ads in a different state, it is important that you take a 360-degree view of what moving would mean for you. As attractive as it may seem to pack up your things and move to a state with a more appealing tax scheme, there are other things to think about. If you move, make sure you do so in a way that accomplishes your tax goals.

Be sure to factor the following into your decision-making process.

Taxes Are Not the Only Consideration

Moving to another community is a shock to the system in more ways than one, but moving to a different state will have an even greater impact. Not only do you need to think about the quality-of-life issues involved, but also the implications of owning multiple homes in multiple states. You will need to choose where your primary residence is going to be, and make sure you can prove compliance. Non-tax-related considerations include:

• Quality of life issues include proximity to family and friends, familiarity with resources, culture, climate, and access to mass transportation hubs for those who enjoy travel. These are just a few things that directly affect your level of satisfaction and enjoyment of life. Moving may leave you feeling isolated and uncertain after years of confidently navigating life at your current address.
• Availability of state-of-the-art medical care is not something to be taken for granted. Especially if you currently live in an area with major teaching hospitals nearby, you should consider that moving to a more remote location may limit your immediate access to quality health care.
• Different areas of the country have vulnerabilities to hurricanes, earthquakes, and other types of disasters. If you are moving to an area that has a higher risk for damage due to weather or other natural causes, investigate what your homeowners’ insurance costs are going to be. And consider whether you are willing to live with the potential risk of natural disasters.

The Taxes Worth Considering

If you’ve already included the non-tax considerations listed above and you are still intent on making a move, then it is time to understand what doing so will mean to your economic picture. It’s a good idea to sit down and discuss your plans with your financial advisors long before putting your home up for sale, as you may have second thoughts after weighing the consequences of a move. Among your considerations are:

• There may be more to a state’s taxes than what you are thinking about. States require tax revenue to support public services, so though you may think you are considering a no-tax state, there is really no such thing. You should review other taxes imposed, such as local sales taxes and real estate taxes, to name a few.
• If you receive income from a trust or retirement plan, you will need to look into exactly how it is taxed at the state level in the state you’re thinking about relocating to. Every state has its own strategy, and you may not be happy with what you learn.  For example, under current law, Arizona taxes retirement income; Illinois does not.
• If your compensation scheme includes deferred bonuses or salaries that will be paid out during your retirement, it is important to determine how the state you are considering relocating to treats deferred compensation and how your specific pay will be treated.
• If you will maintain your current home and employment, beware of special state tax laws that may keep you ensnared in your current home state tax regime. New York, for example,  is aggressively auditing employees that maintain connections to the state and sought to avoid New York state tax.

Made Up Your Mind? Here Are Your Next Steps

Like everything else in life, relocating to another state and making it your primary residence is not as easy as just deciding to do it. It is important that you do your due diligence to make sure that you have complied with everything required of your new home. You need to follow several essential steps in order to reap the tax rewards that you are seeking. Here are just a few of those steps:

• Change your vehicle registration to your new address
• Apply for a driver’s license for your new address
• Register to vote from your new address
• Find out whether your state requires a “Declaration of Domicile” or similar document, and if so, apply for and file it
• File your federal tax returns from the new address
• Obtain property and casualty insurance at the new address
• File state taxes as a new resident, as well as former state tax returns as a non-resident if you earn any income in that state
• Adjust all banking records, legal documents, and credit card records to reflect your new address
• Change the address on your passport
• Get established with community, professional, religious and social networks associated with the new address
• Establish relationships with medical providers proximal to the new address

Add contacting the Cray Kaiser office at (630) 953-4900 to your to-do list to make sure that all-important items have been addressed and everything is reviewed and updated with your estate plan.

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 Kathy Myli.

GETTING TO KNOW KATHY

As an Administrative Assistant for Accounts Receivables, Accounts Payable and CK Bookkeepers, Kathy is never at a loss for something to do. She assists the Accounts Receivable team with application of payments, invoicing, producing statements, and helping clients with their inquiries. On the Accounts Payable side, Kathy is responsible for receiving invoices, entering approved invoices into our AP system, reconciling monthly credit cards, and answering vendor inquiries.

Kathy also provides administrative support for the CK bookkeeping team as well as all partners and staff. She has created various reports for monitoring internal processes and provides computer support and general office maintenance – if it stops working Kathy is on the scene troubleshooting the problem whether it be hardware or software. Willing to help wherever needed, you can also find Kathy answering phones.

Kathy joined Cray Kaiser in 2013 working three days a week and moved to full-time in 2015.

Before joining the CK team, Kathy held a variety of positions with a common theme, helping others. She worked as a front desk supervisor for Marriot Courtyard, as an HR administrator for a manufacturing company, did administrative work for a medical insurance company during the time HIPAA was enacted, and provided childcare in her home for 12 years.

Kathy attended Harper College and Elmhurst College studying math, science, and business.   

WHY CK?

Kathy names integrity as the CK value that means the most to her because it encompasses other values too. “I don’t think you can have integrity without being someone that can be trusted; a person who is willing to share your abilities and continue to grow in knowledge.” CK is all about true caring she added, “people are there for each other in times of need and times of joy!”

Her desire to help her CK family keeps Kathy at the firm as well as her dedication to her own family. “I want both of my families to be proud of who I am and what I do for others.”

For those who are just getting started in the accounting industry Kathy advises “It’s a great career but remember to keep a good balance between work and family.” She has learned at CK that the little things count. So slow down and when things get too fast, reset, and enjoy the ride.

MORE ABOUT KATHY

• What motto do you live by?

Family, friends, and honesty – together we can accomplish anything!

Never stop learning and growing.

• Tell us about your family.

My husband Larry is a Solutions Architect for Caterpillar. I have three daughters Mariah, a veterinary lab tech, Miranda, a wildlife ecologist and Makayla, a professionally trained pastry chef, and a stepdaughter Lyndsay. I am also grandmother to Arianna, William, Aislyn and Elenya. 

• Do you have a special/hidden talent or hobby?

I enjoy spending time lounging by the pool, snow skiing, camping, and most of all family time. I can sew and have a knack for guessing the end of movies, especially who done it.

Fun fact, I was once certified as a scuba ice diver, and I have 7 skydiving jumps under my belt with 2 freefalls.

• What was your favorite vacation? Or, what is the #1 place on your vacation list?

My favorite vacation was a great family camping trip at Custer State Park in South Dakota. We had fabulous views and saw so many animals. At one point we were in the middle of a herd of about 1,500 buffalo, it was amazing!

I also love Hawaii!!

• What is your favorite movie or TV show?

A good mystery, detective show or forensics with a little sci-fi thrown in.

• What’s on your music playlist?

Everything from good old rock to country, I listen to it all.

Throughout 2021 we have kept you informed of significant regulatory matters related to the Employee Retention Credit (ERC). This credit was first introduced to us in 2020 through the Coronavirus Aid, Relief, and Economic Security (CARES) Act and was further modified in the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021. The ERC was designed to incentivize employers to maintain their payroll during the coronavirus pandemic. We are seeing it assist many businesses in obtaining cash through refunds of payroll taxes paid or by reducing the outlay of cash during the payroll cycle. With the modifications in 2021, we are now assisting many businesses to realize benefits from an ERC application and wanted to make resources available to assist other businesses in applying. 

These templates will assist you in determining your specific qualification and the potential credit to your business.

DOWNLOAD THE ERC TEMPLATES

The ERC is currently set to expire on September 30, 2021. Therefore, it is important to determine your qualification and act quickly on these credits should you qualify. It is not too late to claim the ERC as you can amend previously filed payroll tax returns and request cash refunds for quarters that have already been filed and processed.

Just as working through the math for PPP funds was worthwhile for many, we are putting those numbers to work once again to relieve the tax burden via the ERC for many clients. Should any questions arise as you complete these calculations using the ERC templates, please contact Cray Kaiser at 630-953-4900.

“The only constant in life is change,” observed the Greek philosopher Heraclitus thousands of years ago. That statement seems to only ring truer in today’s world. In the midst of such rapid change, we at CK embrace opportunities for introspection, alignment and growth. It is in that spirit that we are pleased to announce that Jim Scherzinger will be passing the role of Managing Principal of our firm to Deanna Salo on September 27, 2021.  

The Managing Principal is responsible for driving the strategic vision of our firm while continuing to manage our day-to-day operations along with our other Principals. It is a role in which Jim excelled as the growth of our firm can attest. Jim will continue to serve as a Principal of CK and most-trusted advisor to his clients, providing the utmost in counsel, dedication and care as he has done his entire career.

As Deanna steps into the Managing Principal role, her entire career has, without a doubt, prepared her to lead our firm. Deanna has spent her career at CK, joining in 1986 and becoming a Principal in 2001. Her ability to identify strategic opportunities as well as uncover the smallest of details – an ability to focus on both the forest and the trees, if you will – will undoubtedly serve CK as well as it has served her clients for decades. Deanna will remain a most trusted advisor for her clients as she continues to educate and care for them while also serving in her new role as Managing Principal.   

Deanna, Jim, all our other Principals, and all CK team members remain fully committed to living our Mission of being the team of trusted advisors for companies and individuals, empowering you to succeed financially and in all aspects of your businesses. No matter the changes that the world may bring, or the pace of those changes, the last two years have only reaffirmed our commitment to each other and to you.

As always, please don’t hesitate to contact Deanna, Jim or any CK team member should you have any questions.

We at Cray Kaiser believe in lifelong learning. We know that knowledge is empowering and leads to success for both our team members and our clients. In fact, we are so passionate about education and sharing knowledge, it is one of our core values.

CK takes pride in providing employees a well-rounded experience.  Whether working on the tax side or assurance side, our team members have the ability to expand their area of knowledge through hands-on experience.  

Education and knowledge sharing isn’t just confined to the team members inside the firm.  No matter the shape or size of our clients, understanding their financial results can be very intimidating. We are intentional about teaching our clients and empowering them with the knowledge to deepen their understanding of their business to make better decisions, every day.

Click below to hear Cray Kaiser team members Karen Hoban and Josh Auskalnis share their perspectives on education and the role it plays in the CK experience.

If you’ve spent any time on LinkedIn lately you’ve no doubt seen multiple posts talking about company culture, all with the similar theme—culture can make or break an organization.

At Cray Kaiser we are extremely proud of the company culture we have created. Our core values of education, integrity, people, care and trust define our work and our actions.

CK is not just an accounting firm, we are a community. Our family atmosphere promotes strong relationships. We care not only about our work, but about each other on a personal level. Which leads to greater engagement and a healthy work environment.

We believe that every member of our team has something to offer, regardless of title or experience level. We all have a common goal, and everyone contributes to the success of the firm and our clients.

To learn more about our culture listen to what Aaron McWilliams, Eva Koziel, Raimonda Kesler, and Maria Gordon have to say.

As college students are heading back to campus and beginning to hunt for the perfect internship, Cray Kaiser asked interns Thomas Cirrincione and Priyangiben Patel to reflect on their time at CK. From discussing their daily roles as interns to sharing their favorite parts of the experience, listen in on how impactful a CK internship can be for you!

In his two summers interning at Cray Kaiser, Thomas Cirrincione experienced many aspects of the business, from administrative work to employee audits and working in the field. His time at CK allowed him to connect the dots between classroom curriculum and real-world situations.

Hear Thomas reflect on his time spent interning with the CK Team in the audio recording below.

Priyangiben interned with Cray Kaiser for seven months and is excited to apply the knowledge she gained at CK when she heads back to the classroom. She credits Cray Kaiser with giving her clarity on which aspect of accounting to pursue after her graduation from DePaul University.

Listen to Priyangiben’s audio blog below to hear more about her CK internship experience.

If you are interested in learning more about  internship opportunities at Cray Kaiser, learn more here.