New Principal Spotlight: Get to Know Michael Evrard

Michael Evrard, CPA, along with Marisa Ahrens, CPA, Jessica Rolfe, CPA, and Jennifer Tobias, CPA, was promoted to principal effective January 1, 2022.

Michael Evrard is a member of the firm’s Nonprofit Services Group, the Audit Services Group and the Education Services Group. He joined Yeo & Yeo in 2010 and is based in the firm’s Kalamazoo office. He assisted in developing the firm’s award-winning YeoLEAN audit process and provides audit services for school districts, construction companies and nonprofit organizations. Michael is a frequent contributor to Yeo & Yeo’s blog and the firm’s Nonprofit Advisor eNewsletter. He holds the AICPA Advanced Single Audit Certification and is a Leadership Genesee graduate.

Let’s learn more about Mike and his insights on a career in accounting.

You have been a key member of our Audit, Nonprofit, and Education Services Groups. How has this experience shaped your career?

I learned very early on that I would rather be a master of few than satisfactory at several. Being part of Yeo & Yeo’s niche service groups allows for a specific, drilled-down exchange of knowledge and ideas to ensure we are serving our clients in the best possible way. Focusing on just a few key industries has allowed me to develop superior technical skills in these areas and use them to directly benefit our clients.

What do you enjoy most about your career?

The people! I am fortunate to work with a fantastic group of clients. I have worked with some clients for my entire career and look forward to seeing them for the annual audit. I’m also fortunate to work with a great group of individuals at Yeo & Yeo, both in my local office and across the firm. We are truly a team that works together to serve our clients and help each other. Coworkers can make or break your work experience wherever your career takes you, so I am lucky to be around such a great group of professionals. This has been one of the contributing factors to working with the firm for my entire post-college life.

How do you define success?

Success, to me, is happiness. If you are happy with where you are, personally and professionally, you are successful. Success should be measured according to your desires, rather than against expectations or ideals from someone else.

What is the most exciting thing in accounting right now?

One change brought about by the pandemic has been the need to do many things remotely. In the past couple of years, we’ve had to reevaluate how to accomplish our work. Some changes we have seen include remote board meetings, fewer days of on-site audit work, improvements in the functioning of file exchange portals, and remote screen-sharing collaboration among both internal employees and clients. Many of these changes have been quite positive, and it seems the business environment realizes efficiencies from them. It’ll be interesting to see which changes are here to stay.

What is your most significant contribution to the Yeo & Yeo team?

I take pride in working directly with other auditors during their first couple of years at the firm and helping them to be successful. I have been fortunate that I mainly work in small teams of the same individuals, which allows me to direct their development substantially. It is fulfilling to do what I can to help others grow into high-performing professionals.

Do you have hobbies or a passion for something unique?

I love to take trips up north to experience all the great things northern Michigan offers. I enjoy competition and love almost all games – sports, cards, board games and trivia, to name a few. I have a passion for animals and their well-being. I am also a huge music and Detroit Lions fan, and I love trying different foods, cocktails and craft beer!

Marisa Ahrens, CPA, along with Michael Evrard, CPA, Jessica Rolfe, CPA, and Jennifer Tobias, CPA, was promoted to principal effective January 1, 2022.

Marisa Ahrens leads the firm’s Employee Benefit Plan Audit Services Group. She specializes in employee benefit plan audits and advisory services, including 401(k) and 403(b) plan audits, defined benefit plan audits, employee stock ownership plan (ESOP) audits, internal controls, and efficiency consulting. She is based in the firm’s Saginaw office. Marisa has more than 13 years of experience providing audits for nonprofits, healthcare organizations and for-profit companies.

In the community, she serves as treasurer of the Mid-Michigan Children’s Museum and assistant treasurer of St. Lorenz Church. She is also board secretary for the Yeo & Yeo Foundation.

Let’s learn more about Marisa’s career path and strengths.

When did you know you wanted to be a CPA, and why did you gravitate toward this profession?

My dad inspired me to major in accounting as the experience and education could open up a lot of opportunities in business. Shortly after college, I was offered a career at Yeo & Yeo. I was excited to see the successful work-life balance that employees were provided and the upward growth opportunity for those who pursued their CPA license. Within a few short years, I earned my CPA and began my growth journey with the firm. Now, 13 years later, I am very thankful for my dad’s advice. I have been made a partner at my firm, and I am grateful for the work-life balance I experience.

You have been a board member for the Mid-Michigan Children’s Museum and the Saginaw County Business & Education Partnership. What have you taken away from those experiences, and how have they helped develop your ability to serve clients?

Being a treasurer on a board for several years has opened my perspective, particularly on the client’s end. I understand the important roles that board members play in organizations. I can also understand the audit process from the other side, which helps me better serve my audit clients.

What do you enjoy most about your career?

The flexibility that I have within my career surprised me. I can achieve success within my career and at home with my family. I rarely miss a school function, and I am often on the sidelines as a coach for one of the many activities that my kids are in. Also, working with such a great group of people is amazing. The people here are so intelligent. It’s great to bounce ideas off them and talk things through. Plus, it’s nice to work with people you consider your friends – it makes my career much more enjoyable!

How do you define success?

I define success as being happy. A successful career is one where you generally enjoy going to work each day. It is also one that provides flexibility and a positive work-life balance. Being successful here at Yeo & Yeo has helped me provide an amazing life for my family.

What is your most significant contribution to the Yeo & Yeo team?

I believe my concern and compassion for others is my biggest contribution. I truly care about everyone I work with and the clients that I serve. I can be a great role model to other working moms and parents. My coworkers and clients understand the importance of family to me, yet they can see my career doesn’t take a back seat, and their needs are met. I make being a great employee and a great mom work.

Many small and mid-sized companies use Intuit’s QuickBooks program. One of the program’s features is sending customers invoices via email. The payee can click on a “Review and pay” button in the email to pay the invoice.

Unfortunately, phishing criminals use QuickBooks’ popularity to send business email compromise (BEC) scams. The emails appear to be coming from a legitimate vendor using QuickBooks, but if the potential victim takes the bait, the invoice they pay will be to the scammer. Worse, the payment request can require that the payee use ACH (automated clearing house) method, which requires the payee to input their bank account details. So, if the victim falls for the scam, the criminal now has their bank account information. Not good.

The fake QuickBooks’ payment emails look very similar to legitimate emails. Here are some red flags you can look for to determine if the email is from a legitimate sender:

Do you recognize the company sending the email? If not, it could be a scam.
Do the links in the email take you to the same site the email content says it will? If not, the email could be malicious.
Does the email tell you to click a link or open an attachment? Not every attachment or link is malicious. However, this can be another clue that the email is fraudulent.
Does the email create a sense of urgency? If so, it could have been sent from a cybercriminal. Be sure to slow down, evaluate what the email is asking and always think before you click.

Keep in mind that email invoices sent from QuickBooks arrive from intuit.com. The scam ones usually do not.

Other QuickBooks Scams

Fraudulent calls pretending to be QuickBooks support agents asking you to renew the license
Fraudulent emails claiming to be QuickBooks’ emergency security updates
Emails about supposed pricing discounts

Intuit has a list of known phishing scams here.

Protect Your Organization

Millions of people and businesses use QuickBooks to run their business with tons of customers used to receiving and paying QuickBooks-generated email invoices. If it is an unexpected QuickBooks-generated email invoice, check the email header to see if it originated from intuit.com or not. Or contact the involved vendor using a trusted alternate method to verify before paying.

Yeo & Yeo Technology offers email protection solutions with features like email filtering, cloud backup and incident response technology. We can also help train your employees to identify malicious emails with our security awareness training and testing. Contact us to learn more.

Information in this article was provided by our partners at KnowBe4.

Economic changes wrought by the COVID-19 pandemic, along with other factors, drove historic global mergers and acquisitions (M&A) activity in 2021. Professionals expect 2022 to be another busy year for dealmaking.

In many cases, M&A opportunities arise when a business adversely affected by economic circumstances decides that getting acquired by another company is the optimal — or only — way to remain viable. If you get the chance to acquire a distressed business, you might indeed be able to expand your company’s operational scope and grow its bottom line. But you’ll need to take due care before closing the deal.

Looking at the long term

Although so-called “turnaround acquisitions” can yield substantial long-term rewards, acquiring a troubled target can also pose greater risks than buying a financially sound business. The keys are choosing a company with fixable problems and having a detailed plan to address them.

Look for a business with hidden value, such as untapped market opportunities, poor leadership or excessive costs. Also consider cost-saving or revenue-building synergies with other companies that you already own. Assess whether the return on investment will likely exceed the acquisition’s immediate costs and ongoing risks.

Doing your homework

Successful turnaround acquisitions start by understanding the target company’s core business — specifically, its profit drivers and roadblocks.

If you rush into the acquisition, or let emotions cloud your judgment, you could misread the company’s financial statements, misjudge its financial condition and, ultimately, devise an ineffective course of rehabilitative action. This is why so many successful turnarounds are conducted by buyers in the same industry as the sellers or by investors, such as private equity funds, that specialize in a particular sector.

During the due diligence phase, pinpoint the source(s) of your target’s distress. Common examples include:

Excessive fixed costs,
Lack of skilled labor,
Decreased demand for its products or services, and
Overwhelming debt.

Then determine what, if any, corrective measures can be taken. Don’t be surprised to find hidden liabilities — such as pending legal actions or deferred tax liabilities — beyond those you already know about.

You also might find potential sources of value, such as tax breaks or proprietary technologies. Benchmarking the company’s performance against that of its industry peers can help reveal where the potential for profit lies.

Identifying cash flows

Another critical step in due diligence is identifying cash flows, both in and out. Determine what products or services drive revenue and which costs hinder profitability. Does it make sense to divest the business of unprofitable products, services, subsidiaries, divisions or real estate?

Implementing a long-term cash-management plan and developing a forecast based on receipts and disbursements is also critical. Revenue-generating and cost-cutting measures — such as eliminating excessive overtime pay, lowering utility bills, and collecting unbilled or overdue accounts receivable — can often be achieved following a thorough evaluation of accounting controls and procedures.

Reliable due diligence hinges on whether the target company’s accounting and financial reporting systems can produce the appropriate data. If these systems don’t accurately capture transactions, and fully list assets and liabilities, you’ll likely encounter some unpleasant surprises and struggle to turn around the business.

Structuring the deal

Parties to a business acquisition generally structure the deal as a sale of either assets or stock. Buyers generally prefer asset deals, which allow them to select the most desirable items from the target company’s balance sheet. In addition, the buyer receives a step-up in basis on the acquired assets, which lowers future tax obligations. And the buyer gets to negotiate new contracts, licenses, titles and permits.

On the other hand, sellers typically prefer to sell stock, not assets. Selling stock simplifies the deal, and tax obligations are usually lower for the seller. However, stock sales may be riskier for buyers because the business continues to operate uninterrupted, and the buyer takes on all debts and legal obligations. The buyer also inherits the seller’s existing depreciation schedules and tax basis in the company’s assets.

Developing a plan

Current market conditions will likely continue to generate turnaround acquisition opportunities in many industries. We can help you conduct data-driven due diligence and develop a strategic M&A plan that minimizes potential risks and maximizes long-term value.

To help you make sure you don’t miss any important 2022 deadlines, we’ve provided this summary of when various tax-related forms, payments and other actions are due. Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them.

Date	Deadline for
January 31	Individuals: Filing a 2021 income tax return (Form 1040 or Form 1040-SR) and paying tax due, to avoid penalties for underpaying the January 18 installment of estimated taxes. Businesses: Providing Form 1098, Form 1099-MISC (except for those that have a February 15 deadline), Form 1099-NEC and Form W-2G to recipients. Employers: Providing 2021 Form W-2 to employees; reporting income tax withholding and FICA taxes for fourth quarter 2021 (Form 941); and filing an annual return of federal unemployment taxes (Form 940) and paying any tax due. Employers: Filing 2021 Form W-2 (Copy A) and transmittal Form W-3 with the Social Security Administration.
February 10	Individuals: Reporting January tip income of $20 or more to employers (Form 4070). Employers: Reporting income tax withholding and FICA taxes for fourth quarter 2021 (Form 941) and filing a 2021 return for federal unemployment taxes (Form 940), if you deposited on time and in full all of the associated taxes due.
February 15	Businesses: Providing Form 1099-B, 1099-S and certain Forms 1099-MISC (those in which payments in Box 8 or Box 10 are being reported) to recipients. Individuals: Filing a new Form W-4 to continue exemption for another year, if you claimed exemption from federal income tax withholding in 2021.
February 28	Businesses: Filing Form 1098, Form 1099 (other than those with a January 31 deadline) and Form W-2G and transmittal Form 1096 for interest, dividends and miscellaneous payments made during 2021. (Electronic filers can defer filing to March 31.)
March 10	Individuals: Reporting February tip income of $20 or more to employers (Form 4070).
March 15	Calendar-year S corporations: Filing a 2021 income tax return (Form 1120S) or filing for an automatic six-month extension (Form 7004) and paying any tax due. Calendar-year partnerships: Filing a 2021 income tax return (Form 1065 or Form 1065-B) or requesting an automatic six-month extension (Form 7004).
March 31	Employers: Electronically filing 2021 Form 1097, Form 1098, Form 1099 (other than those with an earlier deadline) and Form W-2G.
April 11	Individuals: Reporting March tip income of $20 or more to employers (Form 4070).
April 18	Individuals: Filing a 2021 income tax return (Form 1040 or Form 1040-SR) or filing for an automatic six-month extension (Form 4868) and paying any tax due. (See June 15 for an exception for certain taxpayers.) Individuals: Paying the first installment of 2022 estimated taxes, if not paying income tax through withholding (Form 1040-ES). Individuals: Making 2021 contributions to a traditional IRA or Roth IRA (even if a 2021 income tax return extension is filed). Individuals: Making 2021 contributions to a SEP or certain other retirement plans (unless a 2021 income tax return extension is filed). Individuals: Filing a 2021 gift tax return (Form 709) or filing for an automatic six-month extension (Form 8892) and paying any gift tax due. Filing for an automatic six-month extension (Form 4868) to extend both Form 1040 and, if no gift tax is due, Form 709. Household employers: Filing Schedule H, if wages paid equal $2,300 or more in 2021 and Form 1040 isn’t required to be filed. For those filing Form 1040, Schedule H is to be submitted with the return and is thus extended to the due date of the return. Trusts and estates: Filing an income tax return for the 2021 calendar year (Form 1041) or filing for an automatic five-and-a-half-month extension to September 30 (Form 7004) and paying any income tax due. Calendar-year corporations: Filing a 2021 income tax return (Form 1120) or filing for an automatic six-month extension (Form 7004) and paying any tax due. Calendar-year corporations: Paying the first installment of 2022 estimated income taxes.
May 2	Employers: Reporting income tax withholding and FICA taxes for first quarter 2022 (Form 941) and paying any tax due.
May 10	Individuals: Reporting April tip income of $20 or more to employers (Form 4070). Employers: Reporting income tax withholding and FICA taxes for first quarter 2022 (Form 941), if you deposited on time and in full all of the associated taxes due.
May 16	Exempt organizations: Filing a 2021 calendar-year information return (Form 990, Form 990-EZ or Form 990-PF) or filing for an automatic six-month extension (Form 8868) and paying any tax due. Small exempt organizations (with gross receipts normally of $50,000 or less): Filing a 2021 e-Postcard (Form 990-N), if not filing Form 990 or Form 990-EZ.
June 10	Individuals: Reporting May tip income of $20 or more to employers (Form 4070).
June 15	Individuals: Filing a 2021 individual income tax return (Form 1040 or Form 1040-SR) or filing for a four-month extension (Form 4868), and paying any tax and interest due, if you live outside the United States. Individuals: Paying the second installment of 2022 estimated taxes, if not paying income tax through withholding (Form 1040-ES). Calendar-year corporations: Paying the second installment of 2022 estimated income taxes.
July 11	Individuals: Reporting June tip income of $20 or more to employers (Form 4070).
August 1	Employers: Reporting income tax withholding and FICA taxes for second quarter 2022 (Form 941) and paying any tax due. Employers: Filing a 2021 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or requesting an extension.
August 10	Individuals: Reporting July tip income of $20 or more to employers (Form 4070). Employers: Reporting income tax withholding and FICA taxes for second quarter 2022 (Form 941), if you deposited on time and in full all of the associated taxes due.
September 12	Individuals: Reporting August tip income of $20 or more to employers (Form 4070).
September 15	Individuals: Paying the third installment of 2022 estimated taxes, if not paying income tax through withholding (Form 1040-ES). Calendar-year corporations: Paying the third installment of 2022 estimated income taxes. Calendar-year S corporations: Filing a 2021 income tax return (Form 1120-S) and paying any tax, interest and penalties due, if an automatic six-month extension was filed. Calendar-year S corporations: Making contributions for 2021 to certain employer-sponsored retirement plans, if an automatic six-month extension was filed. Calendar-year partnerships: Filing a 2021 income tax return (Form 1065 or Form 1065-B), if an automatic six-month extension was filed.
September 30	Trusts and estates: Filing an income tax return for the 2021 calendar year (Form 1041) and paying any tax, interest and penalties due, if an automatic five-and-a-half-month extension was filed. Employers: Establishing a SIMPLE or a Safe-Harbor 401(k) plan for 2021, except in certain circumstances.
October 11	Individuals: Reporting September tip income of $20 or more to employers (Form 4070).
October 17	Individuals: Filing a 2021 income tax return (Form 1040 or Form 1040-SR) and paying any tax, interest and penalties due, if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States). Individuals: Making contributions for 2021 to certain existing retirement plans or establishing and contributing to a SEP for 2021, if an automatic six-month extension was filed. Individuals: Filing a 2021 gift tax return (Form 709) and paying any tax, interest and penalties due, if an automatic six-month extension was filed. Calendar-year C corporations: Filing a 2021 income tax return (Form 1120) and paying any tax, interest and penalties due, if an automatic six-month extension was filed. Calendar-year C corporations: Making contributions for 2021 to certain employer-sponsored retirement plans, if an automatic six-month extension was filed.
October 31	Employers: Reporting income tax withholding and FICA taxes for third quarter 2022 (Form 941) and paying any tax due.
November 10	Individuals: Reporting October tip income of $20 or more to employers (Form 4070). Employers: Reporting income tax withholding and FICA taxes for third quarter 2022 (Form 941), if you deposited on time and in full all of the associated taxes due.
November 16	Exempt organizations: Filing a 2021 calendar-year information return (Form 990, Form 990-EZ or Form 990-PF) and paying any tax, interest and penalties due, if a six-month extension was previously filed.
December 12	Individuals: Reporting November tip income of $20 or more to employers (Form 4070).
December 15	Calendar-year corporations: Paying the fourth installment of 2022 estimated income taxes.

If you donated to charity last year, letters from the charities may have appeared in your mailbox recently acknowledging the donations. But what happens if you haven’t received such a letter — can you still claim a deduction for the gift on your 2021 income tax return? It depends.

The requirements

To prove a charitable donation for which you claim a tax deduction, you need to comply with IRS substantiation requirements. For a donation of $250 or more, this includes obtaining a contemporaneous written acknowledgment from the charity stating the amount of the donation, whether you received any goods or services in consideration for the donation and the value of any such goods or services.

“Contemporaneous” means the earlier of:

The date you file your tax return, or
The extended due date of your return.

Therefore, if you made a donation in 2021 but haven’t yet received substantiation from the charity, it’s not too late — as long as you haven’t filed your 2021 return. Contact the charity now and request a written acknowledgment.

Keep in mind that, if you made a cash gift of under $250 with a check or credit card, generally a canceled check, bank statement or credit card statement is sufficient. However, if you received something in return for the donation, you generally must reduce your deduction by its value — and the charity is required to provide you a written acknowledgment as described earlier.

Temporary deduction for nonitemizers is gone

In general, taxpayers who don’t itemize their deductions (and instead claim the standard deduction) can’t claim a charitable deduction. Under the COVID-19 relief laws, individuals who don’t itemize deductions can claim a federal income tax write-off for up to $300 of cash contributions to IRS-approved charities for the 2021 tax year. This deduction is $600 for married joint filers for cash contributions made in 2021. Unfortunately, the deduction for nonitemizers isn’t available for 2022 unless Congress acts to extend it.

Additional requirements

Additional substantiation requirements apply to some types of donations. For example, if you donate property valued at more than $500, a completed Form 8283 (Noncash Charitable Contributions) must be attached to your return or the deduction isn’t allowed.

And for donated property with a value of more than $5,000, you’re generally required to obtain a qualified appraisal and to attach an appraisal summary to your tax return.

We can help you determine whether you have sufficient substantiation for the donations you hope to deduct on your 2021 income tax return — and guide you on the substantiation you’ll need for gifts you’re planning this year to ensure you can enjoy the desired deductions on your 2022 return.

Yeo & Yeo is pleased to announce the promotion of three associates.

Jordan Hale, CPA, has been promoted to Manager. Hale holds a Master of Science in Accounting from Michigan State University. He specializes in audits for nonprofits and real estate entities. Hale serves on the Yeo & Yeo Foundation board as the Grants/Giving Chair. In the community, he is involved in the Boys and Girls Club of Lansing, the Greater Lansing Food Bank, the Capital Area Humane Society and Meals on Wheels. He joined Yeo & Yeo in 2013 and is based in the firm’s Lansing office.

Randy Howard, CPA, has been promoted to Manager. His areas of expertise include partnership tax, trust, gift and estate taxation, and Form 5500 preparation for welfare and retirement plans. He is a member of the firm’s Tax Services Group and holds a Bachelor of Business Administration in Accounting from Northwood University. He is a member of the Northeastern Michigan Estate Planning Council and the Central Michigan University Research Corporation Entrepreneur Incubator. In the community, he serves as treasurer for the Saginaw Township Business Association and secretary for the Saginaw County Animal Care & Control Advisory Council. He joined Yeo & Yeo in 2017 and is based in the firm’s Saginaw office.

Megan Taylor, CPA, has been promoted to Manager. Taylor is a member of the Client Accounting Software Team. She holds a Master of Science in Accountancy from Western Michigan University. Her areas of expertise include business consulting and advisory services, complex individual tax returns and managerial accounting solutions with an emphasis on QuickBooks. In the community, she serves as treasurer, finance committee member and executive committee member for Gryphon Place. She joined Yeo & Yeo in 2016 and is based in the firm’s Kalamazoo office.

If you’re in business for yourself as a sole proprietor, or you’re planning to start a business, you need to know about the tax aspects of your venture. Here are eight important issues to consider:

1. You report income and expenses on Schedule C of Form 1040. The net income is taxable to you regardless of whether you withdraw cash from the business. Your business expenses are deductible against gross income and not as itemized deductions. If you have any losses, they’re generally deductible against your other income, subject to special rules relating to hobby losses, passive activity losses and losses in activities in which you weren’t “at risk.”

2. You may be eligible for the pass-through deduction. To the extent your business generates qualified business income, you’re eligible to take the 20% pass-through deduction, subject to various limitations. The deduction is taken “below the line,” so it reduces taxable income, rather than being taken “above the line” against gross income. You can take the deduction even if you don’t itemize and instead take the standard deduction.

3. You might be able to deduct home office expenses. If you work from home, perform management or administrative tasks from a home office or store product samples or inventory at home, you may be entitled to deduct an allocable portion of certain costs. And if you have a home office, you may be able to deduct expenses of traveling from there to another work location.

4. You must pay self-employment taxes. For 2022, you pay self-employment tax (Social Security and Medicare) at a 15.3% rate on your self-employment net earnings of up to $147,000 and Medicare tax only at a 2.9% rate on the excess. An additional 0.9% Medicare tax is imposed on self-employment income in excess of $250,000 for joint returns, $125,000 for married taxpayers filing separately, and $200,000 in all other cases. Self-employment tax is imposed in addition to income tax, but you can deduct half of your self-employment tax as an adjustment to income.

5. You can deduct 100% of your health insurance costs as a business expense. This means your deduction for medical care insurance won’t be subject to the rule that limits your medical expense deduction to amounts in excess of 7.5% of your adjusted gross income.

6. You must make quarterly estimated tax payments. For 2022, these are due April 18, June 15, September 15 and January 17, 2023.

7. You should keep complete records of your income and expenses. Carefully record expenses in order to claim all of the deductions to which you are entitled. Certain expenses, such as automobile, travel, meals and home office expenses, require special attention because they’re subject to special recordkeeping requirements or limits on deductibility.

8. If you hire employees, you need a taxpayer identification number and you must withhold and pay over employment taxes.

We can help

What’s the best thing I can do to protect my business from a cyber-attack?

Typically, it’s your people who are your weakest link. Criminals spend a lot of time trying to fool them. Invest in good cybersecurity training to identify risks and promote best practices.

Do we really need to backup our business data?

Yes! Imagine the worst-case scenario, where all your data is deleted or stolen. Your client information, your projects, everything. How long would your business survive without it? No more than a few weeks. A good backup is a business basic.

I know we need to encrypt our data, but what does that actually mean?

When you encrypt data, it goes from a ‘plain text’ version that anyone can read to a coded version of the text that you need a unique key to unlock. It means if your data falls into the wrong hands, the information can’t be read or decoded.

Information used in this article was provided by our partners at MSP Marketing Edge.

Footnotes appear at the end of a company’s audited financial statements. These disclosures provide insight into account balances, accounting practices and potential risk factors — knowledge that’s vital to making well-informed lending and investing decisions. Here are examples of key risk factors that you might unearth by reading between the lines in a company’s footnotes.

Contingent (or unreported) liabilities

A company’s balance sheet might not reflect all future obligations. Auditors may find out the details about potential obligations by examining original source documents, such as bank statements, sales contracts and warranty documents. They also send letters to the company’s attorney(s), requesting information about pending lawsuits and other contingent claims.

Detailed footnotes may reveal, for example, an IRS inquiry, a wrongful termination lawsuit or an environmental claim. Footnotes may also spell out the details of loan terms, warranties, contingent liabilities and leases. Liabilities may be downplayed to avoid violating loan agreements or admitting financial problems to stakeholders.

Related-party transactions

Companies may give preferential treatment to, or receive it from, related parties. It’s important that footnotes disclose all related parties with whom the company — and its management team — conducts business.

For example, say a retailer rents space from its owner’s grandparents at below-market rents, saving roughly $240,000 each year. If you’re unaware that this favorable related-party deal exists, you might believe that the business is more profitable than it really is. When the owner’s grandparents unexpectedly die and the rent increases, the company’s stakeholders could be blindsided by the undisclosed related-party risk.

Accounting changes

Footnotes disclose the nature and justification for a change in accounting principle, as well as that change’s effect on the financial statements. Valid reasons exist to change an accounting method, such as a regulatory mandate. But dishonest managers can use accounting changes in, say, depreciation or inventory reporting methods to manipulate financial results.

Significant events

Footnotes may even forewarn of a recent event — including something that’s happened after the end of the reporting period but before the financial statements were issued — that could materially impact future earnings or impair business value. Examples might include the loss of a major customer, a natural disaster or the death of a key manager.

Critical piece of the financial reporting puzzle

Footnotes offer the clues to financial stability that the numbers alone might not. But drafting footnote disclosures requires a delicate balance. While most companies want to be transparent when reporting their results, indiscriminate disclosures and the use of boilerplate language may detract from the information that’s most meaningful to your company’s stakeholders. Contact us to discuss what’s right for your situation.

If you run a business and accept payments through third-party networks such as Zelle, Venmo, Square or PayPal, you could be affected by new tax reporting requirements that take effect for 2022. They don’t alter your tax liability, but they could add to your recordkeeping burden, as well as the number of tax-related documents you receive every January in anticipation of tax-filing season.

Form 1099-K primer

Form 1099-K, “Payment Card and Third-Party Network Transactions,” is an information return that reports certain payment transactions to the IRS and the taxpayer who receives the payments. Since it was first introduced in 2012, the form has been used to report payments:

From payment card transactions (for example, debit, credit or stored-value cards), and
In settlement of third-party network transactions, when above a certain minimum threshold amount.

For 2021 and prior years, the threshold was defined as gross payments that exceeded $20,000 and more than 200 such transactions. Note that no minimum threshold applies to payment card transactions — all such payments must be reported.

Taxpayers should receive a Form 1099-K from each “payment settlement entity” (PSE) from which they received payments in settlement of reportable payment transactions (that is, a payment card or third-party network transaction) during the tax year. Form 1099-K reports the gross amount of all reportable transactions for the year and by month. The dollar amount of each transaction is determined on the transaction date.

In the case of third-party network payments, the gross amount of a reportable payment doesn’t include any adjustments for credits, cash equivalents, discounts, fees, refunds or other amounts. In other words, the full amount reported might not represent the taxable amount.

Businesses (including independent contractors) should consider the amounts reported when calculating their gross receipts for income tax purposes. Depending on filing status, the amounts generally should be reported on Schedule C (Form 1040), “Profit or Loss From Business, Sole Proprietorship;” Schedule E (Form 1040), “Supplemental Income and Loss;” Schedule F (Form 1040), “Profit or Loss From Farming;” or the appropriate return for partnerships or corporations.

Understanding the new rules

The American Rescue Plan Act (ARPA), which was signed into law in March of 2021, brought significant changes to the requirements regarding Form 1099-K. The changes are intended to improve voluntary tax compliance.

Beginning in 2022, the number of transactions component of the threshold for reporting third-party network transactions is eliminated, and the gross payments threshold drops to only $600. The change is expected to boost the number of Forms 1099-K many businesses receive in January 2023 for the 2022 tax year and going forward.

The ARPA also includes an important clarification. Since Form 1099-K was introduced, stakeholders have been uncertain about which types of third-party network transactions should be included. The ARPA makes clear that these transactions are reportable only if they’re for goods and services. Payments for royalties, rent and other transactions settled through a third-party network are reported on Form 1099-MISC, “Miscellaneous Information.”

The ARPA changes heighten only the reporting obligations of third-party payment networks; they don’t affect individual taxpayer requirements. They might, however, reduce your odds of inadvertently underreporting income and paying the price down the road.

Taking steps toward accurate reporting

While the increased reporting doesn’t require any specific changes of affected taxpayers, you’d be wise to institute some measures to ensure the reporting is accurate. For example, consider monitoring your payments and the amounts so you know whether you should receive a Form 1099-K from a particular PSE. Notably, you’re required to report the associated income regardless of whether you receive the form.

You’ll also want to step up your recordkeeping to allow you to reconcile any Forms 1099-K with the actual amounts received. If you have multiple sources of income, track and report each separately even if you receive a single Form 1099-K with gross payments for all of the businesses. For example, if you process both retail sales and rent payments on the same card terminal, your tax preparer would report the retail sales on Schedule C and the rent on Schedule E.

If you permit customers to get cash back when using debit cards for purchases, the cash back amounts will be included on Form 1099-K. Those amounts generally aren’t included in your gross receipts or businesses expenses, though, making it critical that you track cash-back activity to prevent inclusion.

Amounts reported could be inaccurate if you share a credit card terminal with another person or business. Where required, consider filing and furnishing the appropriate information return (for example, Form 1099-K or Form 1099-MISC) for each party with whom you shared a card terminal. In addition, keep records of payments issued to every party sharing your terminal, including shared terminal written agreements and cancelled checks.

Other potential landmines include:

Incorrect amounts due to mid-tax year changes in entity type (for example, from a sole proprietorship to a partnership),
Forms issued to you as an individual, with your Social Security number, rather than to your C corporation, S corporation or partnership, with its taxpayer identification number,
Incorrect amounts due to a mid-tax year sale or purchase of a business, and
Duplicate payments that appear on both a Form 1099-K and either a Form 1099-MISC or a Form 1099-NEC, “Nonemployee Compensation.”

If you receive a form with errors in your taxpayer identification number or payment amount, request a corrected form from the PSE and maintain records of all related correspondence.

Don’t dawdle

It may seem tempting to put off the steps necessary to establish solid recordkeeping procedures for payments from third-party networks, but that would be a mistake. We can help you set up the necessary processes and procedures now so you’re in compliance and not scrambling at tax time.

Yeo & Yeo is pleased to announce the promotion of Rachel Van Slembrouck, CPA, to Senior Manager.

“We are proud to recognize Rachel for her leadership and expertise,” said Suzanne Lozano, Consulting Service Line leader. “Rachel demonstrates great leadership and outstanding client service. She truly listens to her clients and develops solutions that meet their unique needs.”

Van Slembrouck is a member of the Healthcare Services Group and the Small Business Software Group as a certified QuickBooks ProAdvisor. Her areas of expertise include business consulting and advisory services, strategic planning, tax planning and preparation, and QuickBooks consulting. She also leads the Paycheck Protection Program (PPP) Loans team and is highly knowledgeable on PPP loans and the Employee Retention Credit program. Rachel is a recipient of the firm’s Spirit of Yeo award, which recognizes an individual within the firm who exemplifies the attributes of the organization’s mission and core values.

She has been instrumental in expanding the firm’s outsourced accounting solutions and is an excellent trainer and mentor to staff. In addition to over nine years of accounting experience with Yeo & Yeo, Van Slembrouck earned her bachelor’s degree in accounting from Saginaw Valley State University. She joined Yeo & Yeo in 2013 and serves clients from the firm’s Saginaw office.

In the community, Van Slembrouck is a board member for the Saginaw County Animal Control Advisory Council, and was treasurer for the Saginaw County Animal Control millage campaign in 2018. She serves as the treasurer for the Saginaw Valley State University College of Business and Management’s Young Alumni board and volunteers as a volleyball coach at Bethlehem Lutheran School.

Welcome to Everyday Business, Yeo & Yeo’s podcast. We’ve had the privilege of advising Michigan businesses for more than 95 years, and we want to share our knowledge with you.

Covering tax, accounting, technology, financial and advisory topics relevant to you and your business, Yeo & Yeo’s podcast is hosted by industry and subject matter professionals, where we go beyond the beans.

On episode 16 of Everyday Business, host Thomas O’Sullivan, managing principal and member of Yeo & Yeo’s Cannabis Services Group, is joined by Alex Wilson, senior manager and leader of the Cannabis Services Group.

Listen in as Tom and Alex discuss the cannabis industry in Michigan in the first of our two-part podcast series focusing on cannabusiness.

How did we get here? The legalization of cannabis in Michigan (1:30)
Cannabis industry regulations (3:35)
Medical and recreational legalization in Michigan (4:57)
Insight on the cannabusiness licensing and vetting process (7:25)
The different types of licenses (8:37)
Michigan cannabis restrictions (13:30)
Federal regulations and how they affect Michigan cannabusiness (16:45)
Banking rules (18:15)
Important notes for those looking to start a cannabusiness (20:16)
Takeaways from part one (23:20)

Thank you for tuning in to Yeo & Yeo’s Everyday Business podcast. Yeo & Yeo’s podcast can be heard on Apple Podcasts, PodBean and, of course, our website. Please subscribe, rate and review.

For more business insights, visit our Resource Center and subscribe to our eNewsletters.

DISCLAIMER
The information provided in this podcast is believed to be valid and accurate on the date it was first published. The views, information, or opinions expressed during the podcast reflect the views of the speakers. This podcast does not constitute tax, accounting, legal or other business advice or an advisor-client relationship. Before making any decision or taking action, consult with a professional regarding your specific circumstances.

Ever since the Affordable Care Act was signed into law, business owners have had to keep a close eye on how many employees they’ve had on the payroll. This is because a company with 50 or more full-time employees or full-time equivalents on average during the previous year is considered an applicable large employer (ALE) for the current calendar year. And being an ALE carries added responsibilities under the law.

What must be done

First and foremost, ALEs are subject to Internal Revenue Code Section 4980H — more commonly known as “employer shared responsibility.” That is, if an ALE doesn’t offer minimum essential health care coverage that’s affordable and provides at least “minimum value” to its full-time employees and their dependents, the employer may be subject to a penalty.

However, the penalty is triggered only when at least one of its full-time employees receives a premium tax credit for buying individual coverage through a Health Insurance Marketplace (commonly referred to as an “exchange”).

ALEs must do something else as well. They need to report:

Whether they offered full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan,
Whether the offered coverage was affordable and provided at least minimum value, and
Certain other information the IRS uses to administer employer shared responsibility.

The IRS has designated Forms 1094-C and 1095-C to satisfy these reporting requirements. Each full-time employee, and each enrolled part-time employee, must receive a Form 1095-C. These forms also need to be filed with the IRS. Form 1094-C is used as a transmittal for the purpose of filing Forms 1095-C with the IRS.

3 key deadlines

If your business was indeed an ALE for calendar year 2021, put the following three key deadlines on your calendar:

February 28, 2022. This is the deadline for filing the Form 1094-C transmittal, as well as copies of related Forms 1095-C, with the IRS if the filing is made on paper.

March 2, 2022. This is the deadline for furnishing the written statement, Form 1095-C, to full-time employees and to enrolled part-time employees. Although the statutory deadline is January 31, the IRS has issued proposed regulations with a blanket 30-day extension. ALEs can rely on the proposed regulations for the 2021 tax year (in other words, forms due in 2022).

In previous years, the IRS adopted a similar extension year-by-year. The extension in the proposed regulations will be permanent if the regulations are finalized. No other extensions are available for this deadline.

March 31, 2022. This is the deadline for filing the Form 1094-C transmittal and copies of related Forms 1095-C with the IRS if the filing is made electronically. Electronic filing is mandatory for ALEs filing 250 or more Forms 1095-C for the 2021 calendar year. Otherwise, electronic filing is encouraged but not required.

Whether you’re a paper or electronic filer, you can apply for an automatic 30-day extension of the deadlines to file with the IRS. However, the extension is available only if you file Form 8809, “Application for Extension of Time to File Information Returns,” before the applicable due date.

Alternative method

If your company offers a self-insured health care plan, you may be interested in an alternative method of furnishing Form 1095-C to enrolled employees who weren’t full-time for any month in 2021.

Rather than automatically furnishing the written statement to those employees, you can make the statement available to them by posting a conspicuous plain-English notice on your website that’s reasonably accessible to everyone. The notice must state that they may receive a copy of their statement upon request. It needs to also include:

An email address for requests,
A physical address to which a request for a statement may be sent, and
A contact telephone number for questions.

In addition, the notice must be written in a font size large enough, including any visual clues or graphical figures, to highlight that the information pertains to tax statements reporting that individuals had health care coverage. You need to retain the notice in the same location on your website through October 17, 2022. If someone requests a statement, you must fulfill the request within 30 days of receiving it.

Identify your obligations

Although the term “applicable large employer” might seem to apply only to big companies, even a relatively small business with far fewer than 100 employees could be subject to the employer shared responsibility and information reporting rules. We can help you identify your obligations under the Affordable Care Act and assess the costs associated with the health care coverage that you offer.

Traditional IRAs and Roth IRAs have been around for decades and the rules surrounding them have changed many times. What hasn’t changed is that they can help you save for retirement on a tax-favored basis. Here’s an overview.

Traditional IRAs

You can make an annual deductible contribution to a traditional IRA if:

You (and your spouse) aren’t active participants in employer-sponsored retirement plans, or
You (or your spouse) are active participants in an employer plan, and your modified adjusted gross income (MAGI) doesn’t exceed certain levels that vary annually by filing status.

For example, in 2022, if you’re a joint return filer covered by an employer plan, your deductible IRA contribution phases out over $109,000 to $129,000 of MAGI ($68,000 to $78,000 for singles).

Deductible IRA contributions reduce your current tax bill, and earnings are tax-deferred. However, withdrawals are taxed in full (and subject to a 10% penalty if taken before age 59½, unless one of several exceptions apply). You must begin making minimum withdrawals by April 1 of the year following the year you turn age 72.

You can make an annual nondeductible IRA contribution without regard to employer plan coverage and your MAGI. The earnings in a nondeductible IRA are tax-deferred but taxed when distributed (and subject to a 10% penalty if taken early, unless an exception applies).

You must begin making minimum withdrawals by April 1 of the year after the year you reach age 72. Nondeductible contributions aren’t taxed when withdrawn. If you’ve made deductible and nondeductible IRA contributions, a portion of each distribution is treated as coming from nontaxable IRA contributions (and the rest is taxed).

Contribution amounts

The maximum annual IRA contribution (deductible or nondeductible, or a combination) is $6,000 for 2022 and 2021 ($7,000 if age 50 or over). Additionally, your contribution can’t exceed the amount of your compensation includible in income for that year. There’s no age limit for making contributions, as long as you have compensation income (before 2021, traditional IRA contributions weren’t allowed after age 70½).

Roth IRAs

You can make an annual contribution to a Roth IRA if your income doesn’t exceed certain levels based on filing status. For example, in 2022, if you’re a joint return filer, the maximum annual Roth IRA contribution phases out between $204,000 and $214,000 of MAGI ($129,000 to $144,000 for singles). Annual Roth contributions can be made up to the amount allowed as a contribution to a traditional IRA, reduced by the amount you contribute for the year to non-Roth IRAs, but not reduced by contributions to a SEP or SIMPLE plan.

Roth IRA contributions aren’t deductible. However, earnings are tax-deferred and (unlike a traditional IRA) withdrawals are tax-free if paid out:

After a five-year period that begins with the first year for which you made a contribution to a Roth, and
Once you reach age 59½, or upon death or disability, or for first-time home-buyer expenses of you, your spouse, child, grandchild, or ancestor (up to $10,000 lifetime).

You can make Roth IRA contributions even after reaching age 72 (if you have compensation income), and you don’t have to take required minimum distributions from a Roth. You can “roll over” (or convert) a traditional IRA to a Roth regardless of your income. The amount taken out of the traditional IRA and rolled into the Roth is treated for tax purposes as a regular withdrawal (but not subject to the 10% early withdrawal penalty).

If you operate a business, or you’re starting a new one, you know you need to keep records of your income and expenses. Specifically, you should carefully record your expenses in order to claim all of the tax deductions to which you’re entitled. And you want to make sure you can defend the amounts reported on your tax returns in case you’re ever audited by the IRS.

Be aware that there’s no one way to keep business records. But there are strict rules when it comes to keeping records and proving expenses are legitimate for tax purposes. Certain types of expenses, such as automobile, travel, meals and home office costs, require special attention because they’re subject to special recordkeeping requirements or limitations.

Here are two recent court cases to illustrate some of the issues.

Case 1: To claim deductions, an activity must be engaged in for profit

A business expense can be deducted if a taxpayer can establish that the primary objective of the activity is making a profit. The expense must also be substantiated and be an ordinary and necessary business expense. In one case, a taxpayer claimed deductions that created a loss, which she used to shelter other income from tax.

She engaged in various activities including acting in the entertainment industry and selling jewelry. The IRS found her activities weren’t engaged in for profit and it disallowed her deductions.

The taxpayer took her case to the U.S. Tax Court, where she found some success. The court found that she was engaged in the business of acting during the years in issue. However, she didn’t prove that all claimed expenses were ordinary and necessary business expenses. The court did allow deductions for expenses including headshots, casting agency fees, lessons to enhance the taxpayer’s acting skills and part of the compensation for a personal assistant. But the court disallowed other deductions because it found insufficient evidence “to firmly establish a connection” between the expenses and the business.

In addition, the court found that the taxpayer didn’t prove that she engaged in her jewelry sales activity for profit. She didn’t operate it in a businesslike manner, spend sufficient time on it or seek out expertise in the jewelry industry. Therefore, all deductions related to that activity were disallowed. (TC Memo 2021-107)

Case 2: A business must substantiate claimed deductions with records

A taxpayer worked as a contract emergency room doctor at a medical center. He also started a business to provide emergency room physicians overseas. On Schedule C of his tax return, he deducted expenses related to his home office, travel, driving, continuing education, cost of goods sold and interest. The IRS disallowed most of the deductions.

As evidence in Tax Court, the doctor showed charts listing his expenses but didn’t provide receipts or other substantiation showing the expenses were actually paid. He also failed to account for the portion of expenses attributable to personal activity.

The court disallowed the deductions stating that his charts weren’t enough and didn’t substantiate that the expenses were ordinary and necessary in his business. It noted that “even an otherwise deductible expense may be denied without sufficient substantiation.” The doctor also didn’t qualify to take home office deductions because he didn’t prove it was his principal place of business. (TC Memo 2022-1)

We can help

Contact us if you need assistance retaining adequate business records. Taking a meticulous, proactive approach can protect your deductions and help make an audit much less difficult.

Revenue and expenses, as reported on your company’s income statement, have limited usefulness to people inside the organization. Managers often need information presented in a different format in order to make operational and strategic decisions. That’s where activity-based costing comes into play. This costing system is commonly used in the manufacturing and construction sectors to determine which products and customers are profitable, to identify and eliminate waste, and to more accurately price products or bid jobs going forward.

4 steps

With activity-based costing, you assign cost codes (think of them as price tags) to each activity completed based on the resources consumed. These cost codes define the activity; the equipment, materials and labor used to complete it; and how long it takes to finish the task.

Here are four basic steps used to create a cost code in activity-based costing:

1. Identify activities. Create a list of tasks your company performs to complete a job. Define each activity in such a way that there’s no overlap between them.

2. Allocate resources. For each activity, list resources used. These include material, equipment, labor hours and, if applicable, subcontracting costs.

3. Calculate the per-unit cost of each resource. Choose a standard, measurable unit of each resource and calculate the cost per unit. Sometimes, you’ll have to calculate an average cost based on purchase receipts for a specific period. For example, if a box of screw anchors holds 100 and costs $30, the per-unit cost of screw anchors would be 30 cents if you consider one “unit” to be a single screw anchor. For labor hours, the measurable unit would be the wage paid per hour.

4. Determine how much of each resource is used for each activity. Multiply the per-unit cost of each resource by the number of units consumed. Add indirect costs to determine the total cost. These may include rents, machinery payments, salaries and other expenses that don’t directly contribute to completing an activity.

Potential benefits

Companies can use activity-based costing to learn what’s working — and what’s not. For example, let’s say a job is costing more than it should, or is taking too long to complete. Activity-based costing will quantify for each task: 1) the materials consumed, 2) which pieces of equipment were deployed, and 3) how many labor hours were spent to complete it. This process allows you to track the progress of jobs in real time, so you can correct mistakes and inefficiencies before losing money to them.

You also may be able to uncover excessive spending trends, so you can better control purchasing. For strategic planning purposes, the process can provide a clearer picture of what types of activities and jobs will likely boost the bottom line and enable you to grow your business. Likewise, it can help assess whether your current product mix needs to be modified to boost profits.

Furthermore, with price tags attached to everything, estimators can “cut up” a prospective job into well-defined activities and then calculate estimates for each of those tasks, resulting in a more accurate overall project estimate. If the scope changes, thereby increasing or decreasing the number of activities, it’s much easier to recalculate the estimate. Activities essentially become line items that can be added or deleted.

One size doesn’t fit all companies

Activity-based costing can be used to supplement, but not replace, your company’s traditional cost accounting system. Although this process may seem confusing, software solutions can help shorten the learning curve. Contact us to learn how your business can benefit from activity-based costing and how to effectively implement this process based on the nature of your operations.

Now that 2022 is up and running, business owners can expect to face a few challenges and tough choices as the year rolls along. No matter how busy things get, don’t forget about an easily accessible and highly informative resource that’s probably just a few clicks away: your financial statements.

Assuming you follow U.S. Generally Accepted Accounting Principles (GAAP) or similar reporting standards, your financial statements will comprise three major components: an income statement, a balance sheet and a statement of cash flows. Each one contains different, but equally important, information about your company’s financial performance. Together, they can help you and your leadership team make optimal business decisions.

Revenue and expenses

The first component of your financial statements is the income statement. It shows revenue and expenses over a given accounting period. A commonly used term when discussing income statements is “net income.” This is the income remaining after you’ve paid all expenses, including taxes.

It’s also important to check out “gross profit.” This is the income earned after subtracting the cost of goods sold from revenue. Cost of goods sold includes the cost of direct labor and materials, as well as any manufacturing overhead costs required to make a product.

The income statement also lists sales, general and administrative (SG&A) expenses. They reflect functions, such as marketing and payroll, that support a company’s production of products or services. Often, SG&A costs are relatively fixed, no matter how well your business is doing. Calculate the ratio of SG&A costs to revenue: If the percentage increases over time, business may be slowing down.

Assets, liabilities and net worth

The second component is the balance sheet. It tallies your assets, liabilities and net worth to create a snapshot of the company’s financial health on the financial statement date. Assets are customarily listed in order of liquidity. Current assets (such as accounts receivable) are expected to be converted into cash within a year. Long-term assets (such as plant and equipment) will be used to generate revenue beyond the next 12 months.

Similarly, liabilities are listed in order of maturity. Current liabilities (such as accounts payable) come due within a year. Long-term liabilities are payment obligations that extend beyond the current year.

True to its name, the balance sheet must balance — that is, assets must equal liabilities plus net worth. So, net worth is the extent to which assets exceed liabilities. It may signal financial distress if your net worth is negative.

Other red flags include current assets that grow faster than sales and a deteriorating ratio of current assets to current liabilities. These trends could indicate that management is managing working capital less efficiently than in previous periods.

Inflows and outflows of cash

The statement of cash flows shows all the cash flowing in and out of your business during the accounting period.

Cash inflows typically come from selling products or services, borrowing and selling stock. Outflows generally result from paying expenses, investing in capital equipment and repaying debt. The statement of cash flows is organized into three sections, cash flows from activities related to:

Operating,
Financing, and
Investing.

Ideally, a company will generate enough cash from operations to cover its expenses. If not, it might need to borrow money or sell stock to survive.

The good and the bad

Sometimes business owners get into the habit of thinking of their financial statements as a regularly occurring formality performed to satisfy outside parties such as investors and lenders. On the contrary, your financial statements contain a wealth of data that can allow you to calculate ratios and identify trends — both good and bad — affecting the business. For help generating accurate financial statements, as well as analyzing the information therein, please contact us.

Yeo & Yeo congratulates Christopher M. Sheridan, CPA, CVA, for being recognized by the National Association of Certified Valuators and Analysts^® (NACVA) and Consultants Training Institute^® (CTI) as a 2021 40 Under Forty award honoree. The program recognizes individuals under age 40 who have made extraordinary advances in, and contributions to, the business valuation and forensic accounting professions and their local communities.

Sheridan is a senior manager and co-leader of the firm’s Business Valuation and Litigation Support Group. His areas of expertise include business valuation and litigation support, business consulting, and fraud investigation and prevention. As a Certified Valuation Analyst (CVA), Sheridan provides defensible, objective business valuation services for attorneys and business owners. He is based in the firm’s Saginaw office.

Yeo & Yeo’s Business Valuation and Litigation Support Group brings expertise to a broad spectrum of valuation and litigation support situations. The specialists use their professional training, experience and third-party objectivity to conduct valuations effectively and help business owners make sound decisions.

“Chris’s inclusion in the 40 Under Forty is a tribute to his superior client service and dedication to the business valuation and litigation support industry,” said John W. Haag Sr., CPA/ABV, CVA, CFF. “He earned his CVA credential in quick order, spent countless hours helping to update our processes, and is already making a big impact with clients by providing them with excellent valuation services.”

Sheridan is a member of the National Association of Certified Valuators and Analysts, the Michigan Association of Certified Public Accountants’ Manufacturing Task Force, and the Michigan Manufacturers Association. In the community, he serves as a board member for the Great Lakes Bay Economic Club, the Delta College Accounting Advisory Committee, and Bay Future.

The IRS began accepting 2021 individual tax returns on January 24. If you haven’t prepared yet for tax season, here are three quick tips to help speed processing and avoid hassles.

Tip 1. Contact us soon for an appointment to prepare your tax return.

Tip 2. Gather all documents needed to prepare an accurate return. This includes W-2 and 1099 forms. In addition, you may have received statements or letters in connection with Economic Impact Payments (EIPs) or advance Child Tax Credit (CTC) payments.

Letter 6419, 2021 Total Advance Child Tax Credit Payments, tells taxpayers who received CTC payments how much they received. Since the advance payments represented about one-half of the total credit, taxpayers who received CTC payments need to file a return to collect the rest of the credit. Letter 6475, Your Third Economic Impact Payment, tells taxpayers who received an EIP in 2021 the amount of that payment. Taxpayers need to know the amount to determine if they can claim an additional amount on their tax returns.

Taxpayers who received an EIP or CTC payments must include that information on their returns. Failure to include this information, according to the IRS, means a return is incomplete and will require additional processing, which may delay any refund owed to the taxpayer.

Tip 3. Check certain information on your prepared return. Each Social Security number on your tax return should appear exactly as printed on the Social Security card(s). Likewise, make sure that names aren’t misspelled. If you’re receiving your refund by direct deposit, check the bank account number.

Failure to file or pay on time

What if you don’t file on time or can’t pay your tax bill? Separate penalties apply for failing to pay and failing to file. The penalties imposed are a percentage of the taxes you didn’t pay or didn’t pay on time. If you obtain an extension for the filing due date (until October 17), you aren’t filing late unless you miss the extended due date. However, a filing extension doesn’t apply to your responsibility for payment. If you obtain an extension, you’re required to pay an estimate of any owed taxes by the regular deadline to avoid possible penalties.

The penalties for failing to file and failing to pay can be quite severe. (They may be excused by the IRS if your lateness is due to “reasonable cause,” such as illness or a death in the family.) Contact us for questions or concerns about how to proceed in your situation.