Davidson / Pargman and Company

Certified Public Accountants and Advisors

News

News

We are hiring! Full Time Tax Manager

DPC is a full-service CPA and business advisory firm with a flexible work from home environment and an office in Bloomingdale, Illinois.  DPC is a growing firm with many opportunities. Our firm was founded on the premise of a commitment to client relationships and providing a value, objective resource for a variety of financial, tax, and advisory needs.   We offer a competitive salary with excellent benefits (including BC/BS health plan, paid holidays, paid vacation, simple IRA, FSA, phone, internet, and mileage reimbursement), work from home with flexible work arrangements, discretionary bonus twice a year, paid society memberships, training, and continuing education.  Salary is based on experience.  Our vision is to provide a fun and challenging workplace for talented people.

Position Summary:

The Tax Manager is a highly specialized employee with expertise in the preparation and review of all aspects of personal, fiduciary, and business tax. The Tax Manager would be a hybrid professional who not only knows their skill set but is also extremely personable and works well with clients. The Tax Manager is responsible for organizing, applying tax laws, and coordinating clients’ financial information for the accurate, timely completion of partnership, corporate, individual, and fiduciary tax returns.  Tax Managers exhibit the same positive characteristics as the rest of the firm.

Responsibilities:

  • Ability to retain detailed knowledge regarding preparation and review of complicated tax provisions and provide recommendations on the tax implications.
  • Ability to monitor and apply tax-related legislation and IRS pronouncements.
  • Ability to maintain knowledge of tax compliance, tax reporting, tax research and tax planning.
  • Recognizes client issues, opportunities, risk tolerance and provides appropriate guidance.
  • Oversee the effort of multiple client engagements, including supervising tax planning and business succession engagements with the ability to manage to budget.
  • Consult with partners, business, and individual tax clients on various matters
  • Assist in administrative functions as assigned by the partners

Requirements:

  • BA/BS Degree in Accounting, Finance, or related field with CPA certification
  • Good time management and organizational skills
  • Effective verbal and written communication skills
  • Proficient in Microsoft Office, Adobe, Prosystem Tax/ CCH Axcess Tax, Prosystem Engagement, Prosystem Fixed Assets
  • Proficient in QuickBooks or equivalent accounting software
  • Minimum of five years’ experience preparing all types of personal and business tax returns with a public CPA firm
  • Minimum of two years’ experience reviewing all types of personal and business tax returns

Working Environment:

  • Position involves working from your home office most of the time.  There would also be work performed on the client’s premises or Bloomingdale office which may require the use of your personal car with mileage reimbursement.
  • Extra work hours (including weekends) will be required to complete business, individual, and fiduciary tax engagements.  Most of the extra hours will be required during the months of tax season.  Some will be required on or around extended tax deadlines.  We are willing to allow a more flexible schedule during non-tax season time.

If you are interested in this position, please contact mdavidson@dpc-advisors.com or kpargman@dpc-advisors.com .

Once you file your tax return, consider these 3 issues

The tax filing deadline for 2021 tax returns is April 18 this year. After your 2021 tax return has been successfully filed with the IRS, there may still be some issues to bear in mind. Here are three considerations:

1. You can throw some tax records away now

You should hang onto tax records related to your return for as long as the IRS can audit your return or assess additional taxes. The statute of limitations is generally three years after you file your return. So you can generally get rid of most records related to tax returns for 2018 and earlier years. (If you filed an extension for your 2018 return, hold on to your records until at least three years from when you filed the extended return.)

However, the statute of limitations extends to six years for taxpayers who understate their gross income by more than 25%.

You should keep certain tax-related records longer. For example, keep the actual tax returns indefinitely, so you can prove to the IRS that you filed a legitimate return. (There’s no statute of limitations for an audit if you didn’t file a return or you filed a fraudulent one.)

What about your retirement account paperwork? Keep records associated with a retirement account until you’ve depleted the account and reported the last withdrawal on your tax return, plus three (or six) years. And retain records related to real estate or investments for as long as you own the asset, plus at least three years after you sell it and report the sale on your tax return. (You can keep these records for six years if you want to be extra safe.)

2. Waiting for your refund? You can check on it

The IRS has an online tool that can tell you the status of your refund. Go to irs.gov and click on “Get Your Refund Status” to find out about yours. You’ll need your Social Security number, filing status and the exact refund amount.

3. If you forgot to report something, you can file an amended return

In general, you can file an amended tax return and claim a refund within three years after the date you filed your original return or within two years of the date you paid the tax, whichever is later. So for a 2021 tax return that you file on April 15, 2022, you can generally file an amended return until April 15, 2025.

However, there are a few opportunities when you have longer to file an amended return. For example, the statute of limitations for bad debts is longer than the usual three-year time limit for most items on your tax return. In general, you can amend your tax return to claim a bad debt for seven years from the due date of the tax return for the year that the debt became worthless.

We’re here year round

If you have questions about tax record retention, your refund or filing an amended return, contact us. We’re not just available at tax filing time — we’re here all year!

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Renewing your commitment to employee performance reviews

Employee performance reviews don’t always get the respect they deserve. Although many employers carry out a thorough and diligent annual or semiannual process, others let performance reviews slip into a brief formality or even neglect to do them altogether.

If your organization’s commitment to this often-stressful ritual ever starts to falter, remind yourself and your supervisors of its importance.

Why they’re critical

There’s no doubt that performance reviews consume a substantial amount of time and resources. However, they’re mission critical for virtually every kind of employer for several reasons.

First, reviews are designed to provide feedback and counseling to employees about how the organization perceives their respective job performances. When staff members feel undervalued or ignored, they’re much more likely to leave.

Second, reviews enable supervisors and employees to set objectives for the upcoming year (or other performance period) and assist in determining any developmental needs. And third, reviews create a written record of performance and assist in allocating rewards and opportunities, as well as justify disciplinary actions or termination.

Conversely, giving annual reviews short shrift by only orally praising or reprimanding an employee leaves a big gap in that worker’s written history. The most secure companies, legally speaking, document employees’ shortcomings — and achievements — as they occur. They fully discuss performance at least once annually.

What not to do

To ensure your annual reviews are as productive as possible, make sure your supervisors are well-trained and aren’t committing any of the most common worst practices.

To begin with, they shouldn’t wing it. Establish clear standards and procedures for annual reviews. For example, supervisors should prepare for the meetings by filling out the same documentation for every employee.

Also, supervisors shouldn’t perform reviews in a vacuum. If a team member works regularly with other departments or outside vendors, the supervisor should contact individuals in those other areas for feedback before the review. You can learn some surprising things this way, both good and bad.

In addition, nothing in a performance review should come as a major surprise to an employee. Be sure supervisors are communicating with workers about their performance throughout the year. An employee should know in advance what will be discussed, how much time to set aside for the meeting and how to prepare for it.

Last, supervisors need to follow through and follow up on performance review discussions. Ensure they’re identifying and elucidating key objectives for each employee for the coming year (or period). It’s also a good idea to establish checkpoints in the months ahead to assess the employee’s progress toward the goals in question.

Refine your process

Employee performance reviews are easy to take for granted — particularly if your organization has been following the same process for years. Confirm that your leadership team holds them in high esteem. Beyond that, regularly review and refine the way you conduct reviews to improve the experience for everyone involved.

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Selling mutual fund shares: What are the tax implications?

If you’re an investor in mutual funds or you’re interested in putting some money into them, you’re not alone. According to the Investment Company Institute, a survey found 58.7 million households owned mutual funds in mid-2020. But despite their popularity, the tax rules involved in selling mutual fund shares can be complex.

What are the basic tax rules?

Let’s say you sell appreciated mutual fund shares that you’ve owned for more than one year, the resulting profit will be a long-term capital gain. As such, the maximum federal income tax rate will be 20%, and you may also owe the 3.8% net investment income tax. However, most taxpayers will pay a tax rate of only 15%.

When a mutual fund investor sells shares, gain or loss is measured by the difference between the amount realized from the sale and the investor’s basis in the shares. One challenge is that certain mutual fund transactions are treated as sales even though they might not be thought of as such. Another problem may arise in determining your basis for shares sold.

When does a sale occur?

It’s obvious that a sale occurs when an investor redeems all shares in a mutual fund and receives the proceeds. Similarly, a sale occurs if an investor directs the fund to redeem the number of shares necessary for a specific dollar payout.

It’s less obvious that a sale occurs if you’re swapping funds within a fund family. For example, you surrender shares of an Income Fund for an equal value of shares of the same company’s Growth Fund. No money changes hands but this is considered a sale of the Income Fund shares.

Another example: Many mutual funds provide check-writing privileges to their investors. Although it may not seem like it, each time you write a check on your fund account, you’re making a sale of shares.

How do you determine the basis of shares? 

If an investor sells all shares in a mutual fund in a single transaction, determining basis is relatively easy. Simply add the basis of all the shares (the amount of actual cash investments) including commissions or sales charges. Then, add distributions by the fund that were reinvested to acquire additional shares and subtract any distributions that represent a return of capital.

The calculation is more complex if you dispose of only part of your interest in the fund and the shares were acquired at different times for different prices. You can use one of several methods to identify the shares sold and determine your basis:

  • First-in first-out. The basis of the earliest acquired shares is used as the basis for the shares sold. If the share price has been increasing over your ownership period, the older shares are likely to have a lower basis and result in more gain.
  • Specific identification. At the time of sale, you specify the shares to sell. For example, “sell 100 of the 200 shares I purchased on April 1, 2018.” You must receive written confirmation of your request from the fund. This method may be used to lower the resulting tax bill by directing the sale of the shares with the highest basis.
  • Average basis. The IRS permits you to use the average basis for shares that were acquired at various times and that were left on deposit with the fund or a custodian agent.

As you can see, mutual fund investing can result in complex tax situations. Contact us if you have questions. We can explain in greater detail how the rules apply to you.

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Fully deduct business meals this year

The federal government is helping to pick up the tab for certain business meals. Under a provision that’s part of one of the COVID-19 relief laws, the usual deduction for 50% of the cost of business meals is doubled to 100% for food and beverages provided by restaurants in 2022 (and 2021).

So, you can take a customer out for a business meal or order take-out for your team and temporarily write off the entire cost — including the tip, sales tax and any delivery charges.

Basic rules

Despite eliminating deductions for business entertainment expenses in the Tax Cuts and Jobs Act (TCJA), a business taxpayer could still deduct 50% of the cost of qualified business meals, including meals incurred while traveling away from home on business. (The TCJA generally eliminated the 50% deduction for business entertainment expenses incurred after 2017 on a permanent basis.)

To help struggling restaurants during the pandemic, the Consolidated Appropriations Act doubled the business meal deduction temporarily for 2021 and 2022. Unless Congress acts to extend this tax break, it will expire on December 31, 2022.

Currently, the deduction for business meals is allowed if the following requirements are met:

  • The expense is an ordinary and necessary business expense paid or incurred during the tax year in carrying on any trade or business.
  • The expense isn’t lavish or extravagant under the circumstances.
  • The taxpayer (or an employee of the taxpayer) is present when the food or beverages are furnished.
  • The food and beverages are provided to a current or potential business customer, client, consultant or similar business contact.

In the event that food and beverages are provided during an entertainment activity, the food and beverages must be purchased separately from the entertainment. Alternatively, the cost can be stated separately from the cost of the entertainment on one or more bills.

So, if you treat a client to a meal and the expense is properly substantiated, you may qualify for a business meal deduction as long as there’s a business purpose to the meal or a reasonable expectation that a benefit to the business will result.

Provided by a restaurant

IRS Notice 2021-25 explains the main rules for qualifying for the 100% deduction for food and beverages provided by a restaurant. Under this guidance, the deduction is available if the restaurant prepares and sells food or beverages to retail customers for immediate consumption on or off the premises. As a result, it applies to both on-site dining and take-out and delivery meals.

However, a “restaurant” doesn’t include a business that mainly sells pre-packaged goods not intended for immediate consumption. So, food and beverage sales are excluded from businesses including:

  • Grocery stores,
  • Convenience stores,
  • Beer, wine or liquor stores, and
  • Vending machines or kiosks.

The restriction also applies to an eating facility located on the employer’s business premises that provides meals excluded from an employee’s taxable income. Business meals purchased from such facilities are limited to a 50% deduction. It doesn’t matter if a third party is operating the facility under a contract with the business.

Keep good records

It’s important to keep track of expenses to maximize tax benefits for business meal expenses.

You should record the:

  • Date,
  • Cost of each expense,
  • Name and location of the establishment,
  • Business purpose, and
  • Business relationship of the person(s) fed.

In addition, ask establishments to divvy up the tab between any entertainment costs and food/ beverages. For additional information, contact your tax advisor.

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Deciding between cash and accrual accounting methods

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Small businesses may start off using the cash-basis method of accounting. But many eventually convert to accrual-basis reporting to conform with U.S. Generally Accepted Accounting Principles (GAAP). Which method is right for you?

Cash method

Under the cash method, companies recognize revenue as customers pay invoices and expenses when they pay bills. As a result, cash-basis entities may report fluctuations in profits from period to period, especially if they’re engaged in long-term projects. This can make it hard to benchmark a company’s performance from year to year — or against other entities that use the accrual method.

Businesses that are eligible to use the cash method of accounting for tax purposes have the ability to fine-tune annual taxable income. This is accomplished by timing the year in which you recognize taxable income and claim deductions.

Normally, the preferred strategy is to postpone revenue recognition and accelerate expense payments at year end. This strategy can temporarily defer the company’s tax liability. But it makes the company appear less profitable to lenders and investors.

Conversely, if tax rates are expected to increase substantially in the coming year, it may be advantageous to take the opposite approach — accelerate revenue recognition and defer expenses at year end. This strategy maximizes the company’s tax liability in the current year when rates are expected to be lower.

Accrual method

The more complex accrual method conforms to the matching principle under GAAP. That is, companies recognize revenue (and expenses) in the periods that they’re earned (or incurred). This method reduces major fluctuations in profits from one period to the next, facilitating financial benchmarking.

In addition, accrual-basis entities report several asset and liability accounts that are generally absent on a cash-basis balance sheet. Examples include prepaid expenses, accounts receivable, accounts payable, work in progress, accrued expenses and deferred taxes.

Public companies are required to use the accrual method. But small companies have other options, including the cash method.

Tax considerations

Thanks to the Tax Cuts and Jobs Act (TCJA), more companies are eligible to use the cash method for federal tax purposes than under prior law. In turn, this change has caused some small companies to rethink their method of accounting for book purposes.

The TCJA liberalized the small business definition to include those that have no more than $25 million of average annual gross receipts, based on the preceding three tax years. This limit is adjusted annually for inflation. For tax years beginning in 2021, the inflation-adjusted limit is $26 million. For 2022, it’s $27 million. Under prior law, the gross-receipts threshold for the cash method was only $5 million.

In addition, for tax years beginning after 2017, the TCJA modifies Section 451 of the Internal Revenue Code so that a business recognizes revenue for tax purposes no later than when it’s recognized for financial reporting purposes. So, if you use the accrual method for financial reporting purposes, you must also use it for federal income tax purposes.

For more information

There are several viable reasons for a small business to switch to the accrual method of accounting. It can help reduce variability in financial reporting and attract financing from lenders and investors who prefer GAAP financials. But, if you’re eligible for the cash method for tax purposes, you may want to switch to that method for the simplicity and the flexibility in tax planning it provides. Contact us to discuss your options and pick the optimal method for your situation.

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