Plan For 2020 To Be Your Best Year Yet!

December 10, 2019 By PWB CPAs

A little planning goes a long way.

The holidays are upon us, and the new year is around the corner. Yes, it can be a frenetic time of year. But don’t let that keep you from planning ahead. Taking a moment to strategize now could make 2020 your best (and most peaceful) year yet.

Schedule Your Planning Session

Tax Planning

Within the past year, have you…

Sold or purchased a business or real estate?
Received or exercised stock options?
Been self-employed, or received income from a flow-through business?
Experienced cash-flow issues due to unforeseen tax liabilities?
Recorded significant investment gains or losses?

If you answered yes to any of the above, tax planning is especially important. We can conduct a tax projection to estimate your 2019 liability or refund, and offer tax-planning strategies for you to implement before year-end.

A tax projection is the best way to plan for your specific situation. For general tax-reducing tips, be sure to download our free Tax Planning Guide.

Business Planning

What will the new year bring for your business? Prioritize goals and put them into action with support from a PWB business consultant. Here’s how we can help you prepare for 2020:

Obtain timely and accurate financial statements through one of our Outsourced Bookkeeping options
Conduct a financial performance review to increase profit, benchmark yourself against industry standards, and value your business
Create a 2020 budget for disciplined spending
Streamline internal accounting processes for better controls and efficiency
Evaluate your payroll platform and benefits structure
Determine how the new revenue recognition and lease accounting standards could affect your business

Year-End Financial Statements

Consistent, annual financial statements can help to prepare your company for a future sale. They can also provide some level of comfort to absentee owners. Certain industries, regulators, contracts, and grants require them. Involving PWB with your year-end financial statements benefit your company in several ways. Here are a few examples:

Secure better terms from lenders
Lower your insurance premium bill
Access more credit from vendors
Strengthen credibility with your customers

Make the most of 2020

Even a small amount of planning can pay off in big ways. And it doesn’t have to take up a lot of your time. We’re here to help you make it happen as quickly and as painlessly as possible. [Cue sigh of relief.] Call your PWB accountant today to get started.

Contact PWB

763-550-1100

Financial Statement Preparation, Compilation, Review, or Audit: Which Is Right for You?

October 28, 2019 By PWB CPAs

By Marjorie Heap, CPA

Financial statements are meant to identify, measure, and communicate information about an organization to interested parties. They can be prepared by your organization’s management, an outside vendor, or a CPA. Depending on the needs of your organization, you may be required to provide them to a creditor, regulatory agency, your owners and stockholders, or others that do business with you. Financial statements also come in handy if you’re selling a business.

When a CPA gets involved, it typically happens at one of four service levels: preparation, compilation, review, or audit. Each service level is unique, and each has its own merits. Think of the four levels—from a preparation to an audit—as a spectrum of the amount of assurance and service the CPA provides.

So, how do you know which service level is right for your organization? To help you better understand your options, here’s a quick look at each:

Preparation

A financial statement preparation is the lowest level of service on the spectrum. Typically, your accountant will take your numbers and put them in the form of a financial statement. A preparation does not provide any form of assurance; it’s most often used for monthly financial write-ups, and it may or may not include a written report. A preparation is the simplest way to produce a financial statement. You could give it to a third party if you wish.

Compilation

Like a preparation, a compilation does not provide any form of assurance. It does, however, include a report as well as the accountant’s name, giving it a higher degree of credibility than a preparation.

A compilation can be done in different presentations (e.g., a tax basis) and can omit certain disclosures and/or cash flow information, depending on your needs. In a compilation, your accountant will provide accounting and financial expertise to assist with the presentation of your financials but will not provide an opinion on the completeness or accuracy of them.

Review

A financial statement review provides limited assurance. The accountant must be independent, and the statements must include certain disclosures and cash flow information. To achieve this, your accountant will ask certain questions and perform reconciliations. The result is an analytical review of your organization’s financial statements that doesn’t go as deep as an audit; it’s more of a flyover.

You will also provide your accountant with written representations saying you’ve answered their questions, provided the necessary information, and taken ultimate responsibility for the financial statements. Your accountant will not provide an opinion. Instead, he or she will provide a report stating that “we’re not aware of any material modifications,” meaning no significant, unresolved issues were found during the review.

Audit

An audit is a full-blown examination of your financial statements that provides reasonable assurance and includes an audit report in the form of an opinion. It follows its own set of standards, known as Generally Accepted Auditing Standards (GAAS), whereas the other three levels of service follow Statements on Standards for Accounting and Review Services (SSARs).

An audit is a much deeper dive than a review. Your accountant will have to understand your organization’s internal controls, assess the risk of material misstatement due to error or fraud, and perform procedures to verify selected information. This often includes confirmation with third parties and the examination of source documents, as well as looking at reconciliations and performing analytical procedures. The goal is to receive an “unqualified audit opinion,” meaning the auditor completed the audit and has reasonable assurance that there are no material errors.

While a clean audit opinion is not a seal of approval, it’s the highest level of service a CPA can provide. A clean audit opinion lends a great deal of credibility to your financial statements.

We’re here to help.

Financial statements do more than provide third parties with information about your organization. They’re a valuable tool for monitoring your business. PWB can help you determine the level of service that best meets the needs of your organization and the users of its financial statements. Our accountants and auditors ask the right questions, so you can have peace of mind that your numbers add up. If you have questions about your financial statements, contact us today.

Contact your PWB advisor today.
763-550-1100

Expertise for the Everyday and the Exceptional:
Meet Jeff Johnston and Susan Nash

April 2, 2019 By PWB CPAs

Sometimes life just doesn’t go the way we thought—or hoped—it would. If you’ve ever been in this situation, you know how stressful it can be, especially if you’re not sure where to turn for support.

With this in mind, we made a decision last year to broaden PWB’s expertise and services to better support our clients in the midst of life’s storms. We are pleased to announce we’ve recently achieved this goal by welcoming Jeff Johnston and Susan Nash to our team.

Get to Know Jeff Johnston

Throughout his 30-plus-year career, Jeff has directed hundreds of forensic accounting, litigation support, insurance recovery, and business valuation engagements for public and private companies. His experience includes conducting complex damage studies involving everything from lost sales to valuing a business, as well as testifying as an expert witness in court and arbitration. In every engagement, Jeff’s goal is to help his clients make informed decisions in a fair and timely manner.

As a PWB partner, Jeff leads our new Advisory practice. He is available to advise both companies and counsel on a broad slate of tax and legal matters ranging from complicated business disputes to damages studies.

Learn more about Jeff.

Get to Know Susan Nash

Sue specializes in helping individuals navigate the unexpected. With deep knowledge of taxation, particularly as it relates to estates, trusts, and gifts, she’s known for breaking complex issues into manageable steps.

In her role at PWB, Sue supports clients in the decision-making process while also helping to minimize tax liabilities. She is available to support estate attorneys and planning teams in complex estate tax matters, too.

Learn more about Sue.

Expertise for Wherever Life Takes You

If you’re facing a complicated personal or business-related challenge, please know Jeff, Sue, and the entire PWB team are here for you. We understand how critical the right expertise is to a successful outcome, and we are committed to making sure you have the support you need in any situation.

Give us a call anytime.
763.550.1100

Spouses Are Guilty Until Proven Innocent

March 18, 2019 By PWB CPAs

When you got married, you knew it was for “better or worse.” But you might not know about laws that hold you responsible if your spouse cheats on a tax return.

Married couples filing jointly should be aware that:

You are both responsible for tax, interest and penalties — even after a divorce or the death of a spouse.
The IRS may hold you responsible for all the tax due even if there is a divorce decree stating that your ex-spouse is accountable for previous joint returns.
You can be liable for tax even if none of the income on a tax return is attributed to you.

To illustrate how the law works, let’s say you have a wage-earning job and your spouse is self-employed. You file joint tax returns.

Next year, you get divorced and a year later, the IRS audits your tax return. Your ex-spouse is nowhere to be found and auditors determine that he or she didn’t report all the income from the business.

What Could Happen?

You are generally liable for paying the tax due, plus interest and any penalties. Your wages can be seized by the IRS even if you paid every penny owed on your share of the family income.

Fortunately, there may be a way to get off the hook. In some situations, the tax law provides “innocent spouse” relief if you can prove:

There is a substantial understatement of tax attributable to the grossly erroneous items of your spouse or ex-spouse.
The hidden income belonged to your ex-spouse and you didn’t benefit from it.
You didn’t know or have reason to know about the understatement.
It would be inequitable to hold you liable.

In January of 2012, the IRS released proposed streamlined procedures that make it easier to obtain equitable relief. In addition, the new guidelines includes an exception to the requirement that items must be attributable to the ex-spouse when that spouse’s fraud is the cause of the understatement or deficiency.

Be aware that the IRS is required to notify an ex-spouse that relief has been requested so that he or she can elect to participate. There are no exceptions, even for victims of domestic violence.

“Innocent” versus “Injured” Spouse

If your current or former spouse has gotten you into tax trouble, you may be able to get help from the IRS.

It all depends on whether the tax agency considers you “injured” or “innocent.” You probably think you qualify as both but they are two different legal terms:

An injured spouse files a joint return and loses all or part of a refund because of a spouse’s debts.

An innocent spouse claims no liability for items on a joint tax return that belong to a spouse or ex-spouse.

Let’s say you and your current spouse file a joint tax return and are expecting a large refund. But you receive a notice from the IRS stating that your refund is being seized to pay a debt owed only by your spouse. For example, back taxes from before you married, past due child support, a delinquent student loan or other federal debt.

You may be able to recover your portion of a joint tax refund that the IRS seized. To qualify, you must have earned your own income and made your own federal tax payments. Ask your tax adviser for more information if you think you qualify.

Advice: Don’t count on innocent spouse relief if you know your spouse is cheating on tax returns. The IRS often denies relief.

Consider filing separate tax returns — especially if you’re in the process of a divorce. It may save you a bundle in the future. For more information about your situation, consult with your tax advisor.

How Tax Reform Affects Tax Planning for C Corporations

August 20, 2018 By PWB CPAs

One of the biggest changes under the Tax Cuts and Jobs Act (TCJA) is the permanent installation of a flat 21% federal income tax rate for C corporations for tax years beginning after 2017. The new 21% rate applies equally to personal service corporations (PSCs). (Under prior law, PSCs were taxed more heavily than other C corporations.) This is great news if you own or manage a C corporation, including a PSC. Here are some specific tax planning considerations for these entities under the TCJA. [Read more…]