A study from Salesforce found that 66 percent of clients expect you to know their needs. If you don’t understand a client’s financial goals, you’ll fall short of meeting their expectations. No one wants to feel like a “number,” which is why accountants need to do the following:

• Learn their clients’ goals
• Understand the benefit of goal setting for their client relationships

For example, if you know that a client’s goal is to retire soon, what’s next on their radar? Maybe this individual wants to have money to travel the world and they’re considering selling or handing their business to someone else (perhaps a family member). Each goal comes with its own implications that you can use to meet clients’ expectations.

Exceeding Client Expectations

If your clients seem content with your work, why should you take the extra step to focus on both their personal and business financial goals? Here are a few reasons:

1. Trust: Building trust with a client is one way to ensure long-term success. If you focus on an individual's goals, you can meet their expectations and gain their trust.
2. Satisfaction: The personalization of focusing on financial goals is what your clients want. One survey found that 8-in-10 clients are more likely to purchase if given a personalized experience.
3. Retention: Happy clients will stay with your business. Retaining clients is in your best interest because attracting new ones is always more expensive.

Identifying and Prioritizing Clients' Financial Goals

You won’t know your clients’ goals if you don’t have in-depth conversations with them. An effective technique is to ask open-ended questions, such as the following:

• Where do you envision yourself in five years?
• What milestones need to be met to reach your five-year goal?
• What do you want to do with your business when you retire?

For example, imagine a client saying, “If everything works well, I would like to retire.” You know the client wants to retire, but perhaps “if everything works well” indicates that business needs to stay the same or grow to reach the person’s goal. In this example, you could ask them to define what they mean by “everything works well” and when they would like to retire by.

Setting Goals

Strategies for reaching your client’s goals can be anything because it’s 100-percent reliant on what the client wants to achieve. However, it’s important to create realistic plans and stretch plans.

Why both? Stretch goals can help inspire the client to achieve more and may improve performance and create a sense of urgency. Even if the person doesn’t reach a stretch goal, they’ll often surpass their realistic plan, which is always a good thing. Sticking to SMART (specific, measurable, achievable, relevant and time-bound) goals will put your client on the right track to reaching them.

Throughout the process, whether it’s months or years, it’s crucial to remain in close contact with the client and adjust plans to continue meeting their needs. For example, if the economy impacts the business, you may have to adjust the amount of money the client invests in the company and sets aside for retirement.

Now, finally, how should you go about offering these services? When it comes to offering these services to your clients, you may choose to offer them entirely in-house, partly in-house or partner with another firm to provide these services. What works best for your firm, your team and your clients will vary. As goals come closer to reality, expectations will be met and exceeded, making you an invaluable asset in the process. But first, you'll need to help identify, set and prioritize your client's financial goals. From there, you can tailor your services to help them reach these critical milestones with the services that your firm offers.

Hello from the NJCPA's New CEO

As I begin my first week as the new CEO and executive director of the New Jersey Society of CPAs, it’s wonderful to be part of the excitement at the 2023 NJCPA Convention & Expo in Atlantic City! I have that same level of enthusiasm to serve this great community at such a critical time of transition.

It’s a new day at the NJCPA — one where we start to build on our 125-year history and write our next chapter of impact and growth as the professional home for New Jersey’s accounting and finance professionals. As we look toward the future, meeting the needs of our members and communicating member value are our highest priorities. As we work through some of the industry’s toughest challenges, I want to assure you that the NJCPA will be here for you.

The Society is in the process of implementing new directional initiatives grounded in deepening member engagement, strengthening the overall value proposition for our community and bolstering the pipeline of new professionals. While there are already some specific, concrete ways that strategy has begun to shift the NJCPA’s focus and alignment of resources, one of the most important roles I can play is to listen to you. In the months ahead, NJCPA staff and I will plan a comprehensive listening tour, taking time to meet with members and volunteer leaders to hear what our community needs and wants from us. I look forward to sharing what I learn, and I’m confident that you’ll start to see our listening translate to action on your behalf.

Thank you for being on this journey with me. Together, we’ll ensure that your Society is well positioned for growth and vitality now and in the future. I will work closely with our team, our volunteer leaders and NJCPA stakeholders to meet your needs. I look forward to updating you again soon on our progress!

Accountants and auditors are exiting the field in record numbers. In fact, according to Bloomberg Tax & Accounting, employment numbers in accounting dropped by 17 percent from 2019 to 2021. However, a new source of candidates — neurodiverse talent — is ready to assist in this employment decline by filling back office operations and accounting roles with the necessary certifications.

Neurodiversity describes the differences in brain functions and traits that include but are not limited to autism spectrum disorder, ADHD, dyslexia and dyspraxia. So, why this talent pool? Neurodiverse staff may have skills such as attention to detail and pattern recognition that can help lower error rates in datasets to identify, mitigate and prevent larger issues down the line.

Start at the Beginning

The number-one question I get when interested employers want to implement neurodiversity in their workplace is, where do I start? My answer is always the same: at the beginning. The employee lifecycle begins at the application and interview stages. But for neurodivergent candidates, an inclusive and accessible process is necessary to ensure an adequate opportunity to showcase their skills.

Neurodivergent candidates, many of whom hold advanced degrees, may be rejected for a job due to neurotypical interview standards. Traditional responses hiring managers may look for in a neurotypical employee — maintaining eye contact, having a firm handshake, knowing where they want to be in five to 10 years — are interactions a neurodivergent candidate may struggle with. These are not reasons to disqualify a perfectly qualified candidate for the role.

In lieu of a traditional interview, hiring professionals within accounting can follow these best practices:

• Utilize neurodiversity-certified professionals. Allow them to lead the interview process for a hands-on evaluation. This can often showcase a candidate’s skillsets in a supportive environment.
• Remove the panel-style interview. This kind of interview is not conducive to accurately assess both hard and soft skills.
• Have patience. Candidates may have delayed processing, so it is imperative that you provide ample time to respond.
• Ensure a quiet environment. Whether remote or onsite, eliminating outside distractions from the interviewer is key to maintaining a strong level of focus from the candidate. Interruptions, even from a pet or child, can disorient candidates’ responses.
• Respond with empathy. Neurodivergent candidates have faced trials and tribulations. Being neurodivergent myself with generalized anxiety disorder and depression, I understand what some of those experiences are firsthand. It’s that empathetic response that makes for a stronger leader.

Expand to Onboarding

Onboarding and integration into the workplace culture are both essential in setting employees up to thrive. Neurodivergent employees can be successful when they work with accounting leadership to identify, advocate for and help implement any necessary workplace accommodations that will make it easier to perform. Some accommodations that can greatly improve comfortability and productivity include the following:

• Provide noise-canceling headphones.
• Place desks away from high-traffic areas.
• Avoid overstimulating lighting.
• Use virtual closed captioning or record meetings for later review, which can reduce anxiety for remote or hybrid employees.

Impact Beyond the Workplace

One of my greatest passions in life is helping the neurodiverse community find long-lasting, meaningful and rewarding careers with a life of independence. Being neurodivergent myself, I empathize over workplace nuances that can make it challenging to navigate not only the working world, but life in general.

Proof of reserves (PoR), a method cryptocurrency exchanges and other financial institutions use to demonstrate that they hold the funds they claim to have on deposit, is still in its infancy stage. However, it will continue to be tweaked to meet the standards of compliance and regulatory guidance as needed. The concept behind PoR is to provide transparency and to assure customers and regulators that the institution has the necessary assets to meet its financial obligations.

CPAs need to be aware that there are different ways to prove the existence of reserves, but generally, the most common PoR method is to have the institution provide cryptographic proof that it holds a specific amount of funds in a specific address. This proof is generated by a third-party auditor, which verifies that the institution indeed controls the private keys associated with the address in question.

PoR may help build trust and confidence in the institution, as it gives assurance to users that their assets held by third-party institutions exist. There have also been a few institutions that share their liabilities in a PoR audit for additional transparency. The ability to see a 1:1 ratio between assets and liabilities may help ensure that customer deposits are not being utilized for any other purpose. 

Proof of reserves offers these benefits:

• Increased transparency and trust. Proving reserves can help build trust with stakeholders by providing a clear and verifiable depiction of the organization’s underlying assets and/or liabilities.
• Improved accountability. By proving reserves, organizations can demonstrate that they are responsible stewards of their customers’ assets.
• Enhanced reputation. Proving reserves can enhance the reputation of the organization among its stakeholders, customers and the public.
• Detection of fraud. Proving reserves can help to detect fraudulent activities and ensure that the company’s financial records are accurate.

However, some potential obstacles of PoR include the following:

• There can be significant costs and resources required to perform regular audits to prove reserves.
• The potential for errors or discrepancies to be found during the audit process could lead to negative consequences for the organization.
• Privacy concerns may arise if the process of proving reserves involves disclosing sensitive financial information or a company’s keys.
• It may not provide a complete picture of the company's financial health, as it only focuses on one aspect.

Despite comments by Paul Munter, chief accountant at the SEC, saying, “Investors should not place too much confidence in the mere fact a company says it’s got a proof of reserves from an audit firm,” according to a December Payments.com article, he also mentions that PoR only shows reserves, not liabilities, which would paint a better picture of a company's financial health. To date, only a handful of exchanges have shared a PoR with liabilities included. This will most likely increase as the space matures and as more clarity is provided to the cryptocurrency markets. 

It was once thought that technology and the automation of tasks would be the solver of staffing shortages in the accounting profession. Unfortunately, not only is the technology implementation rate taking longer than expected, but the hard truth is that CPAs are still needed to assess specific intake data, follow the rules, review and input numbers and guide clients. The human component of what CPAs do cannot be replaced in its entirety…well, at least not yet. And, because of a concern about artificial intelligence (AI) some students who would otherwise become accounting majors are shifting gears and seeking out engineering and technology roles, which, by the way, are rich in diversity. Understanding this shift leads to a new way of thinking about who we can hire.

Basic Skills

In breaking down some of the basic skills necessary for entry-level accounting roles and beyond, it’s a given that two highly sought-after skills are math and analytics. If that’s the case, then it would be fair to state that consideration should be given to the following majors: mathematics, statistics, economics, computer science, engineering, physics and actuarial science. These degrees have similar entry-level basics as that of an accounting curriculum and may, in some cases, be more directly suited for candidate roles that companies are desperate to fill. 

Most accounting firms and departments require a degree plus experience after year one. With that said, existing employees are responsible for teaching them the job responsibilities they will have in their particular organization. Would it be fair to say that many of the “accounting” majors you hire, and then teach, end up leaving your company before they become a CPA or on average between two to four years later? If you agree, why wouldn’t you try an alternative to one of the areas lavishly under-represented in these careers, such as academic upbringing?  The firm that realizes that engineering graduates are also insanely great at project management might, in fact, provide audit jobs completely on time.

To be radical, but not off-base, the “come up” of accounting in our firms should require three components of transformation:

• Learn the basics of the job. The employee goes through a series of learning; they learn how to do the job, how to use the technology, the culture of the organization and the ropes.
• Become the teacher. If they stay long enough, then they become the teacher and guide the next layer of new hires along the same path they came.
• Transition to proud employee. Finally, the destination we hope many new employees reach is being proud employees (wearing the logo on their shirt and LinkedIn profile). At this stage, they’ve become subject matter experts or recognized in the area of specialization they’ve chosen, and they can easily sell the organization’s services to clients.

However, most traditional accounting and accounting ancillary degreed individuals likely do not make it up the ranks — more than half of accounting majors, if told that they will grow up to “teach” and “sell,” would choose a different path. With this in mind, psychology, marketing, human resources, entrepreneurship and business and technology degrees also offer huge opportunities for highly sought-after abilities that are often missing in the top tiers of companies. Those individuals make for wonderful candidates who, given the right training (same as accounting degrees), may be the missing link to the growth and expansion of your company. 

Business owners often have the choice to sell equity interests to an outside buyer or to sell internally to employees. Unlike employee stock ownership plans (ESOPs), where there are many employees that will start to have ownership in a company, and there is a fiduciary responsibility had by the ESOP Trustees and management when commencing and managing an ESOP, there is also an opportunity to sell ownership to key employees who might be interested in acquiring equity in the company and ultimately taking over when the selling shareholder retires or wants to slow down. Here are some important considerations for CPAs to relate to clients or their organizations.

Internal Selling Pros and Cons

An employee looking to acquire an equity interest from the owner likely doesn’t have the financial wherewithal to pay a premium price for his or her equity interest. However, they may be able to:

• Take reduced compensation for a period to buy into the company.
• Take out bank financing to help buy out the owner.
• Have the seller take back a promissory note, with principal and interest payments determined.

The positives of doing a transaction like this is that the seller gets commitment and effort from a buyer who wants the company to be successful. Selling internally also allows the seller to plan an exit strategy for him or herself. The company will have a legacy beyond the current owner. It may also allow the seller to work a little longer, in an employee capacity, and to feel connected to the company if the buyer agrees.  

The downside of selling internally versus externally is that the seller may get a lower purchase price when selling to an employee instead of an outside buyer. In valuation, the terms investment value and strategic value refer to a premium over fair market value that may be paid if an acquiror knows the advantages and synergies that may be obtained by owning the target company. The acquiror knows how it might leverage employees, customers, distribution, suppliers, systems, logistics and more, in a transaction. The buyer is willing to pay more because of the anticipated benefits it may receive. 

The valuation standards of value, investment value and strategic value, are perceived as a premium value more than fair market value. For example, if there is a large medical practice with an ambulatory care center and multiple offices, a private equity (PE) firm might pay a premium for that practice because it is buying a substantial medical practice, with work force in place, doctors already on insurance plans, large captive patient base, IT systems in place, and more. The practice may receive a price of six to eight times EBITDA (earnings before interest, taxes, depreciation and amortization) for the whole practice because it is a “strategic” buy for the PE buyer. If the owner of the practice looks to sell it internally, physician employees looking to buy in will not pay this multiple of EBITDA for the practice.  Typically, they don’t have the financial wherewithal, the expertise of private equity investors and the ability to achieve synergies and efficiencies with acquiring the practice. The PE group likely has synergies it will obtain because of other practices it has already or practices it will add onto the first “platform” practice it acquires. 

In a perfect world, when an internal employee buys a minority interest in a company, his or her equity interest value should be discounted by a discount for lack of control and discount for lack of marketability because the employee cannot control the company and the equity interest is illiquid (not readily convertible to cash).  However, owners want to get the highest price they can from an equity interest sale, and usually the value determined will not reflect discounts. When owners are looking to sell internally, they are not interested in discounts to equity interests. They are interested in the value of their company and then they will take a pro-rata percentage of that value as the buy-in price, or at least the starting price in a negotiation. 

Thus, the best way to handle sales to internal employees is to be fair with them and fair to the owner. A reasonable fair market value calculation (or full valuation) should be performed by an appraiser to understand the 100-percent equity value of the company. Then the owner can consider what level of equity they are willing to sell initially. Discussions with employees are important to understand what their expectations are when buying in and when they may want to be a controlling shareholder. Setting proper expectations for everyone is important to making a deal happen and keeping relations positive.

Long behind us are the days when the stereotype of becoming a CPA linked you to a career working alone at your desk. Not only has the economy and technology progressed, but the accounting profession has evolved as well. A CPA in today’s society requires much more than fulfilling a college credit requirement, passing a four-part exam and gaining years of experience through monotonous days of “crunching those numbers.” The evolution of the profession and the meaning behind the license has transformed the goal of an aspiring CPA to become the long-term, most-trusted advisor to clients or their company.

With this newfound role comes a key quality that each CPA and aspiring CPA should develop and continue to foster: being adaptable. It would shock many whose perception of CPAs is solely based on the individual who prepares their tax return, or the auditor who comes around annually asking for paper documents, to learn that almost no day repeats itself. The role of advisor provides CPAs with new challenges and opportunities to service our clients or company on a daily basis through the complete life cycle of the business.

Adaptability in this profession is like an onion — it has many layers. It means not only being able to respond to the changes required in the accounting industry, whether that be due to economy shifts and new regulations (e.g., new grants, tax credits and various programs that were the result of the COVID-19 pandemic), but also adjusting to the internal changes that occur. These internal changes can be due to disruptive technology software updates or conversions, opportunities for innovation, shifts in leadership and changes in firm structure and ownership.   

However, the most unexpected, and yet most important, meaning of being adaptable is adapting to the people you work with, those you report to and those you lead. There are many types of personalities and work styles and being able to pivot between them on a daily basis depending on the team, client or project, while remaining effective, can propel a career. Why is this so important? The behind-the-scenes source of an accounting team’s success is their ability to consistently and cohesively take on the challenges that will inevitability accompany the work.  Clients’ expectations and preferences for receiving their deliverables may be completely different from one another, while the varying teams’ collaboration on achieving the same result may also be unique. How one adapts successfully to the variety of personalities they interact with, styles of work and challenges they face on a day-to-day basis enables the best possible client service and overall leadership within. 

Those who come into this career expecting to have a steady and predictable day to day will have to adjust their mindset. CPAs bring much more to the table than the typical visor-wearing, loud-calculating figure portrayed in cartoons. CPAs offer a wealth of knowledge and expertise across every measure of running a successful business. To become that trusted advisor for our clients or company, we must adapt the services we provide, whether that be advisory and outsourced accounting, human resources, business valuations, estate planning, wealth management, forensic or many others.

CPAs can complete technical trainings and have an abundance of knowledge, but the ability to acclimate to this ever-changing career is a developed skill that is sometimes overlooked as the reason for the success of many leaders. With your CPA license, you have ample opportunity and career path options. And you may find that where you start is not where you end up. Every individual and every business relies on smart financial decisions for success. Executing the details of those decisions will bring many challenges. Adapting to navigate these challenges can lead to a rewarding and long-lasting career. 

The NJCPA’s Future is Bright

As many of you know, I’ll be retiring on June 30 after serving as CEO and executive director of the New Jersey Society of CPAs for the past 23 years. I can’t express how much I’ve loved leading this organization.

When I set out on this journey in 1999, I was laser-focused on meeting and talking to members. That hasn’t changed. Through hundreds of conferences, town hall forums, networking events, firm visits and more, meeting and becoming friends with thousands of Society members over the years has been a highlight of my career. It’s also one of the things that I’ll miss the most!

It’s been an honor to lead this organization as we live out our vision, “To equip and empower New Jersey’s accounting and finance professionals to thrive in their careers.” Each and every day, we advocate for the profession and provide CPAs with meaningful education, information and ways to connect.

As an organization, we’ve never shied away from addressing the challenges impacting the profession — or helping members navigate the change these professional issues necessitated.  

I’m proud of the fact that the Society has established itself as a national thought leader in driving the future of the profession. Every step of the way, we’ve focused on promoting the value of the CPA, knowing that being successful as CPAs in the future means being prepared to navigate a fast-changing and increasingly complex business environment today. I know the next CEO will be just as committed to the Society and the profession.

My parting request is that NJCPA members continue to support the NJCPA Scholarship Fund and the NJ-CPA-PAC. Both entities drive our profession forward and contributing to the Fund and/or PAC is one of the most effective ways to have an impact.

While I won’t miss getting up at 5 a.m. and battling traffic on the Parkway, I will miss talking, debating and laughing with so many of you. I wish the Society and all its members nothing but the best in the future — a future that I know is bright.

The research and development (R&D) tax credit can be a valuable tool for companies that conduct R&D, including the invention of patented products and processes. One of the rationales for patents is that they stimulate economic and technological development and promote competition by creating a financial motivation for invention in return for the disclosure of the invention to the public. The potential of the patent system has been widely recognized in the context of dynamic innovation activities.

One of the major functions of the patent system is the dissemination of technical information. Patent information is a valuable and comprehensive source of technical, commercial and legal information that can be used directly for scientific and experimental purposes and as a basis for stimulating the adaptation and improvement of the technology described in patent documents immediately after their publication. Recognizing the importance of the dissemination of technical information, a growing number of IP offices and organizations are using the internet to offer access to their patent documents' databases.

Considerations to Know About the R&D Tax Credit

• It provides a 14-percent credit on qualifying expenditures.
• The costs and legal fees for IP/patents are considered an R&D expenditure. Note that the R&D costs required to develop the idea being patented cannot be included in the capitalized cost of a patent. These R&D costs are instead charged to expense as incurred.
• R&D is inherently risky, without assurance of future benefits, so it should not be considered an asset.

The FI-Group is an international tax consultancy that specializes in the implementation of state and federal tax incentives and research and development (R&D) tax credits for corporations. The FI team consists of CPAs, engineers, IT, legal and business operation specialists. With more than 13,500 clients in 19 countries, their clients’ benefits exceed more than $2 billion in tax savings annually.

“Guilty!” is heard often in federal court, whether the defendant is pleading to the charge or a jury is finding it as a verdict. In cases involving financial crimes, the main witness will be a government employee who is a forensic accountant testifying to the total financial loss.

During the 2022 fiscal year, IRS-Criminal Investigation had more than 1,500 defendants who were sentenced in white-collar crimes. In almost every sentencing hearing, the federal judge will sign a court order requiring the defendant to pay restitution, which becomes a 20-year judgement against the defendant. This judgement allows the United States Attorney’s Office to find and sell the defendant’s assets to pay for the judgement. If the IRS was a victim in the criminal tax investigation, the court order will be sent to the IRS to be classified as a tax assessment, meaning that adverse IRS civil collection actions can be taken as well.

On average, a criminal tax investigation will take 18 months to complete, and that doesn’t include the judicial process of indictment, arrest, trial and sentencing, which can add additional year or two to the process. In many criminal tax investigations, the defendant will need an expert with financial skills to help the criminal tax attorney and defendant. That’s where the CPA is invaluable to the defense team, because the CPA can assist the attorney in evaluating the evidence and independently calculate the loss and possible restitution.

There are a few key areas where the CPA can bring value to a criminal defense attorney and the defendant:

• Burden of proof is different. Calculating the tax loss in a civil audit is different than in a criminal prosecution. The main reason is the burden of proof on a civil audit is on the taxpayer and not on the government. If a taxpayer does not have the proper documentation for a charitable contribution, the IRS can deny the deduction and assess additional tax. In a criminal trial, however, the burden of proof is always on the government to prove the crime beyond a reasonable doubt, whether the allegations are bank robbery, money laundering, illegal drug sales or a criminal tax violation. A deduction on a tax return is assumed to be true until the government proves otherwise. Knowing this burden of proof, the CPA can properly evaluate the loss amount and not rely wholly on the government’s loss calculations.
• 6020(b) calculations. The IRS is in the business of assessing and collecting taxes. When taxpayers don’t file tax returns, the IRS is allowed in its civil authority to estimate the tax due under Title 26, United States Code, 6020(b). And as you can imagine, the IRS will estimate the liability in their favor. If there are unfiled payroll tax returns, the IRS will assume a 20-percent federal income tax withholding rate. This is more than twice the average withholding rate. The estimated amounts under 6020(b) become the basis to calculate the tax loss, and restitution in criminal court. If a CPA is tasked with reviewing tax calculations, one of the first questions to be asked is if the IRS calculations are from the 6020(b) statute.
• U.S. Courts can estimate loss. The federal government is not required to be precise in calculating the loss and restitution. The U.S. Sentencing Commission issues a report every year that advises federal judges on the appropriate sentence for various federal crimes. In white-collar crimes, the financial loss that is attributed to the defendant is the driving factor in determining the length of imprisonment. If a defendant falsified deductions or had unreported income, the courts are allowed to estimate the tax loss using a flat rate (28 percent for individuals, 35 percent for businesses) if a more accurate calculation is not available. The good news is that a more accurate loss calculation can be used if shown to the court.

These three areas are where a CPA can bring value in litigation support in criminal tax cases. If hired, the CPA should review the tax loss through the lens of the government’s burden of proof, question the IRS’s calculations and, if possible, calculate a more accurate amount so that a federal judge doesn’t have to estimate the tax loss.

There are many ways to value a privately owned business; there is no one “right” way. An appropriate method should be determined based on the reason for, and the use of, the valuation.

Here are eight of the most frequent reasons for a valuation:

1. Determining Fair Market Value

Many people refer to a business’ value as its “fair market value” (FMV), but this is generally a misused term. Its derivation is from IRS Revenue Rulings which specifically address valuations for gift and estate tax purposes and do not necessarily provide a reasonable valuation for other uses.

FMV is defined as the price at which property would change hands between willing and able buyers and sellers with neither being under any compulsion to buy or sell, with both parties having reasonable knowledge of relevant facts and both seeking their maximum economic self-interests. Implicit is that there are “hypothetical,” well-informed buyers and sellers that are able to complete a cash transaction and that the business would have been on the market for a reasonable period to allow market forces to establish a value.

Further, if less than 100 percent of the business is being valued, consideration needs to be given to adjustments to the value for non-controlling and/or swing vote shares and any special difficulty in marketing those shares.

There are limitations to this method when not all of the FMV requirements are met.

2. Reviewing Standards in a Divorce

There are varying methods for matrimonial issues that extend from what a business might be worth in an immediate sale, to what it would cost to recreate it, to what it is worth to the present owner, which are concepts not used in the FMV method. Matrimonial valuations arise in state courts with each state setting their own rules and judges many times deciding on the value in part by using their experience, knowledge and judgment.

3. Selling the Business

Valuing a business an owner wants to sell can be done, but few buyers will base their purchase price on a valuation prepared by the seller. The primary purpose of a valuation here is for the seller to get a sense of the value and guidance on how to address the negotiation process, help determine an opening price and a price for which they should try to settle for, or not sell.

4. Buying the Business as an Investment

This refers to the value of the business’ cash flow and future profits considering the buyer’s expectation of risk, return, potential and type of involvement by them. On some basis, most businesses are acquired with this in mind, but not all.

5. Considering Job Value to the Buyer

This method values the business in terms of the expected salary and benefits from working full-time in the business with return on investment a secondary concern.

6. Analyzing for Strategic Value

Included in this value are synergies and special features of the business that will add incrementally to a buyer’s current business and for which the buyer is willing to pay substantially in excess of the value based on traditional valuations. Here the price will be based on what’s in it for the buyer and not necessarily what the value would be to an investor or someone who will work in the business.

7. Looking at Partners’, Members’ or Shareholders’ Agreements

Different considerations go into valuing a business for a buy-sell agreement. And the agreement could have different valuations depending upon the reason a partner is leaving. Voluntary or forced withdrawal, retirement, disability, death, personal bankruptcy or losing a professional license can call for different methods of valuation. In these situations, either party could be the buyer or seller, and how the payments would be made could significantly factor in the valuation amount.

8. Doing Financial Planning

Many business owners want a value of their business when doing financial planning for their future, retirement or asset allocation. The valuation for estate or gift tax purposes would be at the FMV, but that might have no semblance of reality of what the seller could expect to receive as annual cash flow from the net after-tax proceeds of a sale.

Valuing a business is an art — not a science — even though careful calculations are made to arrive at an appraisal of the business. The above indicates just some of the uses of a valuation and the considerations involved in the process.

The accounting profession is always evolving and updating the professional standards that practitioners follow when completing their work. Although there is no formula for perfection, as each engagement stands alone, below are four things that should be standardized in a firm to maintain quality work product:

1. Have Proper Sign Offs

Although a basic concept, having the proper sign offs is vital to maintain quality work and pass peer review. In the real world, an engagement may not necessarily follow the standard timeframe and could easily be derailed by a slight conflict. While things happen, it is important to remember that some procedures follow a specific timeframe especially during an audit. For example, planning does not happen after the workpapers are complete nor would final procedures be completed first. The proper order typically starts with engagement acceptance as well as planning and preliminary analytical procedures if applicable. This portion of documentation should be signed off first. The main procedures would be signed off next and then concluding with the final procedures such as final analytical if applicable. In the event that a practitioner does not sign off on their work in the proper order, it could give the peer reviewer the interpretation that they may not have designed their procedures based on the actual client.

2. Obtain Documentation

During an engagement, there is an expectation that the CPA will obtain the proper documentation to substantiate their findings. If the primary documentation is not available, the CPA should adjust their procedures accordingly. While going through standard procedures and completing programs and checklists, it is vital that the materials being used are up to date so that the proper steps are taken and suggested documentation is obtained. Often, the programs are intuitive enough to help guide firms to better complete the work to an acceptable professional standard as well as provide a knowledge base to ensure that a new standard is not overlooked by the practitioner. If a firm is not well versed in certain aspects of an engagement, some standardized programs provide detailed descriptions of the procedures to be taken in order to complete the section of work.

3. Properly Identify Risks

In relation to the first and second points, not following the proper order can often lead to improper testing and procedures. When incorrect or outdated standards are being followed, it is possible for a practitioner to assess risk as low but still perform the procedures similar to a high-risk assessment. Inversely, some practitioners could not perform enough procedures and have a risk assessment that’s too high. As this can be common in the industry, many standard templates included in software subscriptions provide some guidance on helping identify risks and figuring out what procedures to perform based on assessments.

4. Leverage Continuing Education

Lastly, all staff working on the engagements should maintain their proper continuing education requirements. If team members do not attend the proper accounting and auditing update courses each year, they are more likely to miss updates to prior standards. Different engagements and licensing may also require specific topics such as government accounting standards (GAS) or employee benefit plans (EBP). If someone doesn’t have the proper knowledge for an engagement and the practitioner is not able to get the proper staff to complete it, then it would not be appropriate to complete that engagement.

While these mistakes may seem trivial, unfortunately many in our profession may inadvertently come across these issues at their firm. Not only is it important for leadership to be aware of these common issues, but each level of the team should be educated on what to do to make sure an engagement would pass peer review. Clients and users of financial statements have an expectation that the practitioner performed high-quality work when preparing financials, so it’s important for practitioners to not only avoid these issues during peer review year but maintain the same quality control from year to year.   

Worker demands for perks on the job are being met head-on by employers these days. Organizations that are eager to keep talented staff and lure potential new candidates to their offices are developing procedures and creating benefit packages that appeal to the masses, according to Frank Karlinski, a senior vice president at Robert Half on an NJCPA webinar earlier this month.

Currently, he said, there are 11 million open jobs nationally, which is 2 million higher than during 2021. This, according to Karlinski, is “a huge jump.” In addition, the quit level, which is the number of people who are voluntarily leaving their job on a monthly basis, is at about 2.7 percent (4.1 million), which is high but down from the record highs over the summer at 3 percent, he added.

With a national backdrop of a strong hiring market, low unemployment rate of 3.4 percent nationally and unemployment related to accounting and finance of a little over 2 percent, it’s no wonder that retaining people is a top priority, he said. Some of the lowest levels of unemployment are in financial planning and analysis (FP&A), corporate accounting, public tax accounting and audit, and some specific roles within accounting and finance, which are almost at zero unemployment.

According to Robert Half research, national employers are attracting skilled workers by the following breakdown:

• Higher starting salaries (46 percent)
• Signing bonuses (34 percent)
• Flexible work options (33 percent)
• Hiring of remote candidates (31 percent)

Compensation Trends

A common hiring trend currently is employers having to offer higher salaries, he said. “Companies need to be proactive in addressing employee needs regarding compensation. If you are not doing this, you will lose people,” he said. “Signing bonuses is something where we’ve seen a pretty big uptick.”

However, accounting and finance organizations, in particular, are faced with internal equity challenges such as people being hired at higher salaries than what the existing people at a similar level are making. “It’s absolutely a problem and absolutely something that companies need to be proactive in addressing,” he admits. “Sixty percent said existing employees have raised concerns about this. Eighty-two percent have given raises to those who raised concerns. If you are not doing this, from my experience in my day-to-day job, you will lose people.”

So, how does an organization keep people? “It is challenging to retain people because the best people are sought after.” But, compensation helps, he admits, as does incorporating remote and hybrid work options. See table 1.  


Table 1

Hybrid/Remote/Flexible Opportunities

Allowing workers to use hybrid/remote work is a necessity in today’s market. “This is a differentiating factor that employers can offer, and should offer, but there’s a benefit to the employers too.” This applies specifically to remote options, but hybrid options as well, he said. “Flexible work is really no longer seen as a benefit that a company offers it; it’s more or less an expectation at this point.”

And when that kind of work option is presented as too much of a bonus or benefit and not the norm, often employees come to consider it as one of the sole reasons they are working there at all. “Sixty percent of employees are working fully remote or on a hybrid basis at this point. I would argue in New Jersey that number is higher in accounting and finance,” he said, noting that within public accounting he has seen a huge increase in firms letting employees work in this manner. “It’s been a very useful tool in attraction and retention to employees, specifically in public accounting.”

Flexible work schedules and altering times of the workday, such as time blocking and work blocking, are also popular. These have become so much in demand that, according to Robert Half data, more than 40 percent of the current workforce on a national scale is planning to find a new job looking for these attributes, he said. Similarly, more than 50 percent prefer a fully remote position, while 55 percent are open to hybrid schedules. These perks lead to an increase in morale by almost 60 percent, and greater productivity by more than 30 percent, he said.

“There is a big difference being open to a hybrid environment versus a fully remote environment, especially when you are looking at specialized skillsets,” he said, noting that a hybrid employee limits the candidate pool to those who can commute. A fully remote employee gives employers the option to look nationally to fill that role.

“Generally speaking, public accounting has lagged behind private industry in their willingness to have people work completely remote. I am seeing a lot more of it this season, but, as a trend, they are definitely lagging behind industry at this point,” he explained. 

Accounting professionals have been attempting to provide quality information and services ever since cryptoassets became a mainstream financial instrument and asset class, but this has been an ongoing struggle. Due to the lack of authoritative accounting and audit standards directly connected to blockchain and cryptoassets, accountants have been seeking to provide solutions such as proof-of-reserves, proof-of-solvency practices and other services attempting to bring some much-needed transparency and reportability to the crypto space.

With crypto still a new financial instrument, accounting practitioners need to be aware of delivery and expansion issues, such as the following:   

Information Discovery

The ease with which clients — individual and institutional alike — can now enter the crypto space can lead to extremely complicated tax and accounting requirements. There is also the very real possibility that 1) the client, 2) family members of the client or 3) individuals acting on behalf of the client have gotten exposure to crypto without any overt announcement or strategic shift. Drilling down, practitioners should be sure to ask the following questions:

• Who has access to funds or trading accounts at the client?
• What applications or accounts are connected to these accounts?
• Are records and/or documentation from trading or investing activity available for review?

Expanding the Potential Client Base

It's no secret that as younger generations enter the workplace, move into leadership positions and obtain economic clout, technological and other factors accompany them. Millennials and Gen-Z, representing the largest age cohorts since the Baby Boomers, 1) are rapidly integrating in the workforce, 2) are going to be the recipients of the largest wealth transfer in history and 3) are almost universally positive toward virtual payments and currency options. For accounting firms and virtually any other business, appealing to these potential future customers while improving convenience and options for current customers makes perfect sense. Some specific factors and questions that advisors should bring up include the following:

• What is the current payment mix for customers, and what is the cost profile of maintaining this payment structure?
• Can conversations around the possibility of payments be raised with the current customer mix?
• Would cost savings driven by crypto integration justify the expense of implementation?

Crypto Vendor Management

Crypto has had no shortage of issues, failures and bad actors, and all of these factors came to the front burner in a major way during 2022. From exchanges failing and fraudulent coin offerings to criminal activity leveraging cryptoassets, clients of all kinds are likely to ask significant questions. CPAs are well positioned to provide objective and reasonable advice in this area. Since practitioners are well versed in vetting and reviewing vendors in other areas, there are factors and considerations that can be leveraged into the crypto space as well.

• What is the track of record of the vendor in question, and is there a public listing of existing clients?
• Who is on the management team of the vendor in question, and is there public information regarding their past ventures?
• Is there a way to test how crypto vendors, for payments or otherwise, will interoperate with existing technology tools?

Cryptoassets are here to stay; that much is widely agreed upon by developers, investors and policymakers alike. Firms and practitioners must be up to date on changes in accounting and regulatory treatment to best advise both current and future clients.

Consultative selling is the best method that accounting firms can use to avoid coming off as being too salesy with existing clients. As a tool, it requires accountants to ask clients good questions, actively listen to the response, be empathetic and focus on solutions.  

It is important to follow the 80/20 rule. Listen for 80 percent of the time and provide thoughtful solutions for the remaining 20 percent. The client will tell you everything that you need to know to make a sale if you take the time to listen. 

Here are four recommendations for having successful consultative sales conversations:

1. Discuss problems, needs, and wants. Ask open-ended questions to discover hot buttons, issues, challenges, needs and wants by:
   • Letting your client talk. The longer they talk, the more insight they will provide.
   • Asking open-ended questions to obtain a longer response to questions.
   • Listening intently and repeating back information to acknowledge that you understand and, if appropriate, agree with the client.
   • Talking about the client’s problem — not how wonderful you are.
   • Being prepared. Analyze the client’s key performance indicators (KPIs), historical data, industry trends and other relevant issues before the meeting.
2. Present your solution. Once you have a solid understanding of what your client is looking for or what issue they want to resolve, present your solution(s) by:
   • Explaining how you and your organization can solve their problem or meet their needs.
   • Illustrating your points with anecdotes by telling stories about the solution you provided to a client with similar issues.
   • Focusing on the benefits they will realize by expanding the scope of the engagement. Paint a picture in the client’s mind of how it will be once the solution is in place.
   • Watching your client’s behavior as you speak. Then, ask qualifying questions in response to their body language and comments.
   • Allowing the client to ask you questions or provide feedback.
   • Asking closed-ended questions to gain agreement.
3. Overcome objections. Expect objections and be ready to address them by:
   • Repeating the objection back to the client to ensure you understand them correctly.
   • Empathizing with what they’ve said and giving a thoughtful response.
   • Offering proof that you have the solution by presenting statistics to support your claim, telling a client success story, providing a report, earning designations and awards, etc.
   • Confirming that your answer has overcome their objection by asking the client if they agree.    
4. Close the sale. The client will only buy or expand the scope of the engagement once you have presented a solution to their problem, educated them on the value they will realize and addressed all their objections. Ask yourself:
   • Does the client agree that there is value in your service?
   • Does the client understand the benefits of working with you in this area?
   • Are there objections that still need to be addressed?
   • Have you minimized the risk?
   • Are there other factors that could influence the decision to expand the scope of the engagement?

   You may have to provide several forms of proof that your solution is the best to convince the client to buy the service from you. For example, offer testimonials or references, articles from vetted sources, results of research studies and statistics on other clients' return on investment (ROI).

   If you’re not sure if the client is ready to close, ask the following questions: Would you like me to help you implement (solution)? Should we get started? Can I send you a new engagement letter?

   Selling is about helping a prospect find a solution to a problem. All you need to do is educate your client that you are the best solution provider. Approach the process as a consultant — someone genuinely interested in helping — and you will not come off as salesy. Instead, you will be considered a trusted advisor, or if you are exceptional, the client’s most valuable advisor.

The accounting profession has been plagued with staffing shortages caused by a multitude of retiring professionals, a gradual decline of new entries into the profession, the pandemic and other factors. Many firms are scrambling for qualified staff to fill vacancies and are turning to outsourcing and offshoring.

U.S. Outsourcing

Firms should be mindful of their respective state board rules, IRS rules and other standard-sending bodies’ rules regarding confidentiality if they outsource within the United States.

In most cases, a disclosure of the use of third parties providing tax and accounting services will be required. The following clause can be considered in the firm’s engagement letter:

We may, from time to time and depending on the circumstances, use certain third-party service providers and transmit information to them in serving your account. Such transmissions can include, but are not limited to, tax software providers for electronic filing, technical assistance, automated processing of tax forms, online backup services and file sharing services. We may share confidential information about you with these service providers, but we remain committed to maintaining the confidentiality and security of your information.

Offshoring

Off-shore outsourcing requires strict adherence to IRS Code Section 7216. Tax preparers bound by 7216 should become familiar with the civil penalties outlined in code section 6713(a) and the criminal penalties outlined in code section 7216(a). The disclosure must:

• Outline the purpose of the disclosure
• Indicate the duration of the disclosure
• Be signed
• Be a separate written document

Civil penalties from non-compliance are $250 per disclosure and cannot exceed $10,000 in any one year. Criminal penalties are one year of imprisonment and/or $1,000.

Disclosure Guidance

There is often confusion in the profession regarding when the disclosure is required, whether it has to be a standalone document and whether it can be inserted in the engagement letter. IRS  Revenue Procedure 2008-35 provides these answers and guidance with respect to other areas of concern.

Essentially, the 7216 disclosure is required for individual tax filings. The disclosure must be in a standalone document. While the disclosure can be attached to the firm’s engagement letter, it must be a standalone document. See the Section 7216 Information Center on the IRS website for additional guidance to ensure adherence to the rules governing off-shore tax preparation.

Talent is the foundation and lifeblood of an organization. It is the most essential component for current and future sustainable success and growth. Firms that are successful at attracting talent have figured out the “secret sauce” in their recruiting process. But how do you differentiate yourself during the recruiting process?

Candidate Experience

It begins and ends with the candidate experience. This is all-encompassing and offers the candidate visibility into what he/she should expect if they were to join. This should consist of timely communication and engagement throughout the process, along with the opportunity to meet multiple employees at different levels (both tenured and newer employees) who are willing to share their experiences and offer their insights into your culture and organizational structure. Additionally, a streamlined interview process that minimizes gaps between interviews, is accommodating and yields a timely decision-making process is also key. You have one opportunity to get the candidate experience right. A favorable first impression is often the difference between the candidate selecting your firm or your competitor.    

Understanding what candidates desire in a firm is equally important. Most candidates are motivated by several factors; how they prioritize them may differ. Candidates tend to concentrate on the following:

• Inclusive culture
• Compensation/benefits
• Clear path for ongoing career advancement
• Flexibility
• Work-life balance
• Sense of belonging
• Feeling valued
• Challenging work in a preferred discipline
• Working in a growing, yet stable organization

Organizations must understand what the candidate truly values in a job. The interview process presents an opportunity for both the candidate and the firm to perform due diligence on each other. It is a fact-finding mission that should be an open dialogue, not a Q&A.  Transparency by both parties significantly increases the likelihood of a successful hire.

Retention

The candidate decides to join your firm, so the hard work is done, right? No. The real challenge lies in retaining your talent. How do the best firms retain employees? They deliver on what they advertised and promised during the interview process and more. If they fail to deliver on their promises, employees WILL LEAVE as trust is broken and it fractures any loyalty to the organization.

Accounting firms with the lowest turnover demonstrate all or most of the following characteristics:

• They are focused on successful employee integration. Performing check-ins within the first few months of the employee starting will help to ensure the experience has been favorable.
• Leadership is invested in employees’ success and ongoing development (continued education/training and career mentorship).
• Leadership shares a consistent and clear communication strategy around the firm’s vision.
• Rewards and recognition are a key ingredient for retention.
• There is a correlation between compensation, promotion opportunities and value derived. No employee wants to feel that the firm is squeezing the last bead of sweat out of them to improve margins.
• They provide flexibility and a reasonable work-life balance, which lends itself to positive mental health. Employees value their life outside the office.
• They maintain the optimal number of resources to ensure they are not over-burdening employees.
• They hire the RIGHT talent (high integrity and empathetic people) who align with the firm’s culture; diversity, equity and inclusion (DEI) strategy; and overall core values. Employees notice the firm’s commitment to hiring talent.
• They offer a pleasant environment. Employees want to work with people they like, and it helps with retention.

Recruiting and retention are woven together in a tapestry, and the most successful firms excel at both.    

It is said that accounting firms have commoditized their services. Every firm can do “similar” compliance-type reports — tax returns and bank-required audits, reviews and compilations. But the difference, the unique competitive advantage, is YOU. You are selling yourself — and for you to be granted the ability to provide that commodity or service package to this new prospect depends entirely upon your ability to read and connect with them. And communication is the key to doing just that.

Do you know your style? There are many types of communication tools like Myers-Briggs, Strengths Finder, ELI or DISC, which stands for Dominant, Intuitive, Steady and Conscientious. DISC is one of the leading programs to teach us about our styles of communication and how to recognize the styles of others. When you can recognize how others interpret communication, you can monitor your own behaviors, flex your tones, deliver your words more appropriately and come to decision-making with a better understanding.

Here is an abridged version of how to use DISC with your clients:

• Dominant type.“I before why?” This type is all about how something suits the individual. Dominants are driven by ego. They talk and walk fast and look good doing it. They are big-idea and bottom-line driven. They need to hear answers fast and delivered with confidence. They do not appreciate small talk; they prefer to get down to business. They are loud and proud, to the point, and can be abrupt and direct. They are leader oriented and typically in the roles of CEO or operations. You would recognize this type by how their office looks; a dominant prefers an “ego wall” (filled with accolades, accomplishments and “selfies”). Their biggest fear is being taken advantage of. The best way to sell to this type is to let them explain what they want first. Next, ask them to talk about how they envision the solution. Finally, quickly provide them with what they ask for and congratulate them on the win.
• The Intuitive or team leader. “We before me.” This type wants to know how your solution can help the more significant “us.” They might take a while to stop talking before they are interested in what you are pushing. They generally enjoy getting to know you, and they like to talk about their team a lot. Often dubbed the “chatty Cathy” in the office, you will know them right away by their pictures of family and the way they show their love for people. Their biggest fear is not being heard or included.When you are ready to present to this type, be sure to become part of their team. Aim to be seen as collaborative, not unilateral. Provide them with details on how your solution makes the whole group more efficient. And don’t forget to get to know them first. The biggest sales tip when working with this type is to connect personally with them first. They rarely do business with someone they wouldn’t go to dinner with or bring home to their family.
• The Steady Ready Eddies. These quiet and intelligent types are hard to read. They are most afraid of the loss of security. They want to hear words like guarantee, warranty, timeline, assurance and commitment. They do not like change at all but will change with consistent, constant reliability. They are your true supporter on a team and are notably dependable. You can identify them prominently by their clothes — mainly the firm logo — and their repetitive, systematic approach to completing tasks. Accountants are saturated with steadies; it’s a great profession to align with. It’s important to share the details of your proposal step by step, and then give them time to review and think about your proposition. If they haven’t responded to you, don’t take it personally. They aren’t ignoring you; they are thinking.Give the steady time to ask questions and respond, so schedule a follow-up meeting before leaving the initial discussion. Once they agree to your services, you can bet you’ve got a client for life.
• The Conscientious. Just the facts, Jack! Unless you come with charts, references, guides, etc., you don’t stand a chance of winning this type over. They may not even give you a chance unless they’ve been referred to you by an old friend or a family member. This consummate introvert has difficulty balancing the heart and the brain; therefore, decision-making is tricky since they never want to be wrong. Often dubbed the perfectionist, they are slow to complete tasks, especially if it’s new, because they want to be sure it’s accurate. Fear of being wrong has this type gripped. This buyer, if engaged, already knows about you, your product and your company, so prepare for a quiet meeting of the minds. To be most effective with them, be respectful of their attention to detail and facts. Don’t share your emotions; stick to research and proof, and make sure you have back up. Signing a deal with this type may take several rounds, but if you can earn their trust, they will make you feel like the smartest salesperson alive.

In a perfect world, the you you’re selling is your authentic self. But to be great at selling your services, you have to be better than just yourself — you have to change your behavior and adjust to the needs of your prospect. Half the battle is being heard. 

Let’s say that a New Jersey taxpayer is self-employed, with a net taxable income reported on Schedule C of Form 1040 of $225,000. This person was referred to you because you are a CPA who provides value-added tax planning opportunities, and the current accountant only provides compliance work. Eager to impress and provide tax savings, you suggest that the taxpayer makes a New Jersey Business Alternative Income Tax (BAIT) election.

This seems like a no brainer at first, because the BAIT was put in place by New Jersey to help those taxpayers impacted by the federal $10,000 state and local tax (SALT) deduction limitation. However, before adopting BAIT, an analysis should be provided so the taxpayer can make an informed decision.

By the Numbers

In this example, by reviewing the 2021 tax return, the federal tax rate was 27 percent and the income is expected to be same as last year — or “SALY” for the accounting nerds. Their $225,000 income multiplied by the New Jersey tax rate of 5.68 percent and by the federal tax rate of 27 percent provides a tax savings of $3,450.

The taxpayer is happy, but is that really the savings to the client?

As a CPA, include the following additional costs for year one of this tax strategy:

• Applying for a federal Employer Identification Number (EIN) and forming a taxpayer and spouse LLC in New Jersey: $750
• NJ LLC initial filing fee: $125
• Fee for making the BAIT election: $250
• Preparation fee for the LLC and BAIT tax returns: $1,000

If the taxpayers chose to engage an attorney to draft an operating agreement, this would represent an additional fee. In this case, since the members are married, they decided to pass on an agreement.

This leads to estimated tax savings after additional costs in year one of $1,325.

In year two and going forward, estimated tax savings would be $2,450.

Presenting this sort of breakdown to a client provides a more accurate description of the potential net savings when considering the BAIT election. Based on the facts and circumstances, it could make sense to elect S corporation status and then include the fee for adding the taxpayer to payroll. This includes the filing of federal and state quarterly payroll reports, year-end reports and obtaining workers’ compensation insurance, all of which needs to be factored into the net savings to the taxpayer. If the decision to elect S corporation status is made after the due date (75 days from the beginning of the year), there is relief available at both the federal and New Jersey levels. Then, subtract $100 from the savings analysis for the retroactive, late New Jersey S-election.

Taxpayers who already have an existing partnership or S corporation do not need this analysis since most of these costs either do not apply to them or have been already accounted for.

BAIT Rules Recap

A single-member LLC and a sole proprietorship may not elect to pay the BAIT, as only a pass-through entity, such as an S corporation or a multi-member partnership, are permitted to do so.

As a workaround to the $10,000 SALT deduction cap for individuals that included in the Tax Cuts and Jobs Act (TCJA), many states, including New Jersey, enacted pass-through entity (PTE) taxes as an elective tax. The IRS issued Notice 2020-75, which clarified that partnerships and S corporations may deduct their SALT payments at the federal entity level when computing taxable income or loss.

There are some other considerations to keep in mind: 

• New Jersey requires the BAIT election to be made annually. If the election is made, but later determined that the election should be revoked, file the revocation and claim for refund form, and the entity will receive any estimated tax payments made.
• Quarterly estimated tax payments are needed. Otherwise, underpayment penalties can be assessed.
• BAIT payments reduce the Sec. 199A qualified business income deduction as well as the amount that can be contributed to a SEP-IRA and other retirement plan options. Consider a solo 401(k) over the SEP-IRA since New Jersey permits a deduction for the 401(k) but not the SEP-IRA.

Ultimately, the tax savings are the most important factor when deciding whether electing BAIT makes sense, but they are not the only factor, as there are other costs. The higher the taxable income, the easier this decision becomes. What is the income amount needed? As with determining the reasonable compensation for an S corporation owner, it depends. The CPA plays a vital role in answering those questions.

For CPAs who face the ordeal of losing against time, here is something for you — a quick list of effective time management tactics. Remember, if you fail to govern the clock, you’ll get governed by it - Golda Meir, former Prime Minister of Israel

Has it ever happened to you? You’re making your way through a big project for what seems like minutes, only to realize that it’s already been five hours? Or you’ve been running around all day, shuffling through responsibilities, only to realize that you’ve barely made it through your to-do list? Both are a result of poor time management.

CPAs have numerous duties: updating accounts, analyzing financial reports, managing debts and more. With all of these responsibilities, losing against time is only natural. But there are ways to tackle the issue:

• Track your time. If you bill clients by the hour, time tracking will help you keep a verifiable record of the time you work on their accounts. Even if you’re not billing them by the hour, tracking your time will help you identify your problem areas and create a plan to eliminate or reduce any shortcomings.
• Plan your schedule around your peak hours. Another benefit of tracking your time is that it helps you identify your peak performance hours. There likely are certain times when you’re more productive than others. I had a friend, a CPA (he was also my client) who, in the morning, couldn’t make heads or tails of his duties, but as the afternoon came, he was at his analytic and problem-solving best. You probably also have specific productive hours, and whatever they may be, try to plan your schedule around those times.
• Focus on one task at a time. According to a 2015 joint multi-tasking paper with authors from the Utrecht University, University College London and Lingnan University, IQ scores drop when people try to focus on more than one thing during cognitive tasks. Some of the participants who multitasked had a 15-point drop in IQ, leaving them with the average IQ of an 8-year-old. Imagine an 8-year-old filing taxes — horrifying, isn’t it? So, to avoid losing your IQ, do the critical, complex, urgent and highest-value action items first, and save the easier ones for later.
• Group your minor tasks and save them for later. Sending and replying to emails, filing documents and making phone calls are essential to achieve more significant tasks. However, you’ll fail to achieve the end goal if you spend most of your time and brainpower on minor tasks. So, to avoid getting sidetracked, you can group these tasks and save them for the time when you don’t feel particularly productive.
• Get organized. It may have happened to you a couple of times: you think you had a specific engagement letter saved on your computer, but you forgot in which folder, or you thought you had a client’s contact information but don’t know where it is now. Such circumstances can cause you to lose a significant portion of your time at work. You can start small — take some time at the end of each day to ensure everything is in place — and gradually build up your organizing skills.
• Delegate tasks. Don’t try to do everything. If you’re in a senior position, only handle tasks that demand your skills and expertise. Assign the rest. If you’re a one-person accounting office, you can hire a virtual assistant or a temp to help you during the busy tax season.
• Take a few breaks. You might get the urge to power through your responsibilities in a single sitting. But, experts opine that taking breaks between work has several benefits like improved memory, a boost in energy, less stress and increased productivity.

Time management is one of the fundamental skills that every professional needs to master. Those who do enjoy a significant advantage over others.