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2018 – 06/15 – Which intangibles should private firms report following a merger?

Accounting for M&As under U.S. Generally Accepted Accounting Principles can require a lot of red tape. Fortunately, there’s a private company reporting alternative that exempts noncompetes and certain customer-related intangibles from being identified and reported separately on the balance sheet after a business combination. But it doesn’t apply to public companies or other types of acquired intangibles, such as trade names or patents. Contact us for help deciding whether this alternative could simplify your postacquisition financial reporting.


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2018 – 06/11 – 2 tax law changes that may affect your business’s 401(k) plan

When you think about recent tax law changes and your business, retirement benefits probably aren’t what first come to mind. But if your business sponsors a 401(k) plan, be aware of two changes: 1) Beginning in 2018, former employees with outstanding plan loan balances have until their tax return filing due date (plus extensions) to repay the loan or contribute the outstanding balance to an IRA or other qualified plan and avoid taxes and penalties. 2) Beginning in 2019, limits on employee 401(k) hardship withdrawals will increase. Contact us to learn more.


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2018 – 06/05 – Factor in state and local taxes when deciding where to live in retirement

Thinking about retiring to another state? Consider state and local taxes. A state that has no personal income tax may appear to be the best option. But if you don’t also factor in property, sales and estate taxes, you could be hit with unpleasant tax surprises. Also look at what types of income a state taxes. Some don’t tax wages but do tax interest and dividends. Others offer tax breaks for retirement plan and Social Security income. And keep in mind the TCJA’s new $10,000 limit on the federal deduction for state and local taxes. Contact us to learn more.


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2018 – 06/08 – Auditing related-party transactions

Business owners generally prefer to work with entities they know and trust. But the risk of double dealing abounds when a company does business with its parent company, a subsidiary, the owner’s family members or other related parties. Such transactions are sometimes priced at less (or more) favorable terms than those in similar arm’s length transactions between unrelated third parties. Contact us for help finding, disclosing and reporting these transactions in a transparent manner that complies with U.S. Generally Accepted Accounting Principles.


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2018 – 05/29 – Saving tax on restricted stock awards with the Sec. 83(b) election

If you receive restricted stock from your employer, you may have a tax-saving opportunity: the Section 83(b) election. Income recognition for restricted stock normally is deferred until the stock is vested or you sell it, when you pay taxes on the fair market value at your ordinary-income rate. But if you make the Sec. 83(b) election, you recognize ordinary income when you receive the stock. This converts future appreciation from ordinary income to long-term capital gains income taxed at lower rates. We can help determine whether the election makes sense for you.


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2018 – 05/22 – Sending your kids to day camp may provide a tax break

When school lets out, kids participate in a wide variety of summer activities. If one of the activities your child is involved with is day camp, you might be eligible for a tax break! Day (not overnight) camp is a qualified expense under the child and dependent care credit, which generally is worth 20% of qualifying expenses, up to $3,000 for one qualifying child and $6,000 for two or more. Eligible costs for care must be work-related, and additional rules apply. Contact us for help determining your eligibility for this credit and other tax breaks for parents.


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2018 – 06/01 – Don’t let collaborative arrangements cause financial reporting headaches

Businesses often enter into so-called “collaborative arrangements” when embarking on a major project, such as designing a new medical device or producing a film. However, the rules for reporting shared costs and revenue under U.S. GAAP are unclear, and the new revenue recognition standard has added to the confusion. In April, the Financial Accounting Standards Board issued a proposal to help clarify matters. We’re atop recent developments on reporting collaborative arrangements. Contact us with questions or to help you implement the latest guidance.


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It’s time for a midyear checkup!

Time flies when you’re busy running a business. But it’s important to occasionally pause and assess interim performance — otherwise you’re likely to be surprised by the year-end results. When reviewing midyear financial reports, however, recognize their potential shortcomings. These reports might not be as reliable as year-end financials, unless a CPA prepares them or performs agreed-upon procedures on specific accounts.

Diagnostic benefits

Monthly, quarterly and midyear financial reports can provide insight into trends and possible weaknesses. Interim reporting can be especially helpful for businesses that were struggling at the end of 2017.

For example, you might compare year-to-date revenue for 2018 against 1) the same time period for 2017, or 2) your annual budget for 2018. If your business isn’t growing or achieving its goals, find out why. Perhaps you need to provide additional sales incentives, implement a new ad campaign or alter your pricing.

You can also review your gross margin [(revenue – cost of sales) ÷ revenue]. If your margin is slipping compared to 2017 or industry benchmarks, find out what’s going wrong — and take corrective actions.

Don’t forget the balance sheet. Reviewing major categories of assets and liabilities can help detect working capital problems before they spiral out of control. For instance, a buildup of accounts receivable may signal collection problems. Or, if your company is drawing heavily on its line of credit, operations might not be generating sufficient cash flow.

Potential shortcomings

When interim financials seem out of whack, don’t panic. Some anomalies may not be caused by problems in your daily business operations. Instead, they might be caused by informal accounting practices that are common midyear (but are corrected by your CPA at year end).

For example, some controllers might liberally interpret period “cutoffs” or use subjective estimates for certain account balances and expenses. In addition, interim financial statements typically exclude costly year-end expenses, such as profit sharing and shareholder bonuses. Interim financial statements, therefore, generally paint a rosier picture of a company’s performance than its year-end report potentially may.

Furthermore, many companies perform time-consuming physical inventory counts exclusively at year end. Therefore, the inventory amount shown on the interim balance sheet might be based solely on computer inventory schedules or, in some instances, the controller’s estimate using historic gross margins. Similarly, accounts receivable may be overstated, because overworked controllers may lack time or personnel to adequately evaluate whether the interim balance contains any bad debts.

Proceed with caution

Contact us for help interpreting your midyear results, as well as detecting and correcting potential problems. Unlike year-end financials, interim reports are seldom subject to external audit or rigorous internal accounting scrutiny. We can remedy any shortcomings by performing additional testing procedures on your interim financials — or preparing audited or reviewed midyear statements that conform to U.S. Generally Accepted Accounting Principles.

© 2018

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2018 – 05/29 – Putting your child on your business’s payroll for the summer may make more tax sense than ever

For business owners with kids in high school or college, hiring them for the summer can provide many benefits. One is tax savings. By shifting business income to a child as wages for services performed, you can turn high-taxed income into tax-free or low-taxed income. The Tax Cuts and Jobs Act’s near doubling of the standard deduction means your child can shelter more income from taxes. Changes to the “kiddie tax” make income shifting via earned income rather than unearned income even more appealing. Many rules apply; contact us to learn more.


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2018 – 05/15 – Be aware of the tax consequences before selling your home

In many parts of the country, summer is peak season for selling a home. If you’re planning to put your home on the market soon, don’t neglect to consider the tax consequences. The TCJA preserves the home sale gain exclusion, so if you’re selling your principal residence, you can exclude up to $250,000 ($500,000 for joint filers) of gain, as long as you meet certain tests. A loss generally won’t be deductible, but if part of your home is rented out or used exclusively for your business, the loss attributable to that portion might be. Contact us with any questions.


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