You may have noticed that the IRS has been asking taxpayers if they had any transactions related to cryptocurrency, or virtual currency in recent years. On the first page of the 2020 IRS Form 1040, the IRS specifically asks “[a]t anytime during 2020, did you receive, sell, send, exchange, or otherwise acquire financial interest in any virtual currency?” Regardless of how you feel about whether this is an unwarranted intrusion into your private financial matters, the fact is that they want to know. To take it a step further, according to CNBC, they may already know as the IRS has issued summons to cryptocurrency exchange operators like Kraken, Circle and Coinbase to find out who has been engaged in cryptocurrency transactions.
It is important to know how the IRS views cryptocurrency. From their prospective, they view it as property that would be treated like purchasing a security. If you understand that purchasing or selling units of Bitcoin in the IRS’ view is much like purchasing or selling shares of Microsoft, Ford, or JPMorgan Chase, you have a basic understanding of the reporting they expect on your tax returns.… Continue reading
Slowly but surely, we are seeing business owners return to entertaining clients and important contacts. With the return of sharing meals and outings, comes the need to be aware of the tax guidelines that come along with it. Let’s look at the most recent guidance.
The IRS released Notice 2021-25 on April 8, which provides guidance on the temporary increase in the business-meal deduction from 50% to 100% for expenses paid or incurred after Dec. 31, 2020, and before Jan. 1, 2023.
Prior to Dec. 31, 2020, all business meals were 50% deductible if they were not considered lavish or extravagant and the taxpayer or an employee of the taxpayer were present. The notice released in April provides a temporary exception to the 50% limitation, indicating business meals can now be deducted at 100% if the food or beverage was provided by a restaurant. In this context, a restaurant is any business that prepares and sells food or beverages to retail customers for immediate consumption.… Continue reading
QuickBooks continues to be a very popular accounting software choice for many agribusiness owners. Don’t get me wrong, those of you that work in this industry have many software choices at your disposal. In fact, my team and I are always learning about new ag-specific software to hit the market. However, QuickBooks remains an industry leader. Our team is often asked about time savings tricks that can be used within the software. I recently asked some of the top users of the software are our firm to share some of tricks with me for this article. I hope you find their tips to be useful.
Utilizing the bank feed option in QuickBooks Online is a great tool for maintaining up to date information and reduce data-entry. Frequently matching transactions will help with month end reconciling. This will save you time if an item needs to be researched, you catch it early and don’t put yourself in a time crunch later on.… Continue reading
When it comes to keeping track of the revenue coming into your agribusiness, and the expenses you take on during day-to-day operations, you essentially have two different types of accounting methods to choose from. Cash accounting and accrual accounting. It is important to understand the difference between the two before deciding what is best for your agribusiness.
Cash accounting looks at the revenue and expenses as they come in and as they are paid out. Think of this as a wheel that is constantly turning as money flows into your operation. Not considered while using this method is money that is expected to come in. Here we are talking about all real cash, all the time. Those who enjoy a real time look of the cash coming in and out of their business should select this method.
Accrual accounting brings accounts payables and receivables into the fold, monitoring the money brought into the agribusiness and the funds and services the operation owes to outside vendors and companies.… Continue reading
When it comes to what business structure is right for your new or next business venture, you have several options to choose from. Making the right decision can help you with everything from being profitable and poised for growth to staying tax compliant. This month, I will break down some of the most popular business structures for you. These aren’t the end all be all when it comes to paths you can take, but these ones tend to lead the pack.
Sole proprietorship
This is the option you will see many single workers select. Think of freelancers or those who consult with many different entities. It takes little set up effort to become a sole proprietor, but this is truly a one-man-band type of situation. Whatever the business owes, falls solely to you.
Limited liability company
Also known as an LLC, this structure option has really been having its day in the sun in recent years.… Continue reading
It can be challenging for farmers to not micromanage their employees, whether they are members of the family or not. But there comes a time when overmanaging can become a detriment to the employees, the family and the farm. If this is happening to you, it is better to evaluate it now instead of waiting for the situation to improve on its own.
It can be hard to know if your employees truly feel micromanaged. Often times, they won’t speak up about it. So, it is up to you to look for trends that may bring their feelings to light. Do you find yourself needing to be involved in every issue that goes into your operation? Do you feel the need to have your employees run everything by you? Does every small detail need your approval? Do you find your employees to be buried in addressing those smaller matters, keeping them from working on larger revenue driving exercises?… Continue reading
In this installment I will talk about petty cash and the best practices for having and using it. Petty cash is defined as a small amount of discretionary cash funds used for expenditures where it is not sensible to write a check because of convenience and the cost of writing, signing, and cashing the check. So, while petty cash is usually not a large amount of money, it can be stolen, abused, and used in a careless manner. To avoid this, it is best to have some rules for handling it.
Set a reasonable amount for petty cash. Estimate how much you would need to cover small office expenses for about a month. You want the amount to be as small as possible, without having to replenish too often.
Have a set of rules on how petty cash can be spent. Put the policy in writing and give some good examples of what petty cash can be used for — making change, small office supplies, postage, etc.
I am pretty sure I have mentioned before that I have a farming background. A handful of the team members I work with at Holbrook & Manter do as well. From growing up on farms, to managing them to this day, we truly understand the challenges those working in agribusiness face. For this article, I asked a few of my colleagues to share their thoughts on top accounting services those in farming and agribusiness should seek out, and why. First, I will share my thoughts just below, then read on for their thoughts we well.
The top agribusiness accounting service needs I see are the following:
Estate/retirement/ transition planning: Farmers approach this topic differently over other retirees. Retirement planning for farmers can look very different from retirement planning for others that have worked in just an employee setting. Typically, retiring farmers rely on a combination of income from farm assets, savings, and social security.
By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs
I usually stay clear of highly charged political topics, but I believe this one is worth mentioning. What I am about to explain has not been introduced to Congress (and timetable is uncertain), but the topic is part of President Biden’s tax plan.
Up to this point and with changes made back in 2017 tax legislation, very few people end up paying estate taxes, or even having to worry about it at all. With President Biden’s tax plan, however, a potential and massive change in how estate taxes are calculated could be on the horizon.
Biden’s plan could leave you paying higher income taxes after death by repealing present law’s step-up in basis that increases the tax basis for inherited assets to their full fair market value upon death. This proposed rule — which “carries over” an asset’s tax basis to the heir — likely would entail a significantly greater overall tax burden with respect to transferred assets than would the decreased exemption.… Continue reading
By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs
We see it often — business owners using Excel to track the finances related to their operation. While it’s true that Excel is very sophisticated and most users know enough to be dangerous while maneuvering through the software, you simply can’t erase the chance for human error. Spreadsheets are just prone to them due to the amount of manual data entry that is required. A formula can be set up in correctly, the copy and paste feature may not pull through the correct cells and if one cell is modified, it can throw off the entire spreadsheet. When these things happen, it causes unnecessary headaches for the business owner, which we hate to see happen.
We encourage the business owners we work with to make the switch to accounting software such as QuickBooks (but there are many options out there).… Continue reading
By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs
Possibly selling your business is not the only reason to have a business valuation performed. There are several scenarios that call for a thorough review of your business’ worth. I have been performing this service for clients for many years, for many different reasons. Yes, if you are preparing to sell your business, a valuation will provide you with the numbers you need to a secure a deal that benefits both you and the new owner. But that is just one reason.
You will need to know the fair-market value of your operation in the event that you consider merging with another entity. Or you will need to be armed with the right numbers if you plan to add a new owner to the business so you can set the buy-in amount for him/her. The same goes for owners and other shareholders that will be exiting the business.… Continue reading
In a virtual remote, Dale is joined by Brian Ravencraft of Holbrook & Manter to discuss agribusinessaccounting.com, the firm’s newest “microsite.”… Continue reading
By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs
Does the approaching new year have you thinking of starting a new business? New businesses with impressive, innovative ideas and products enter the marketplace all the time, but they are often short-lived and end up closing their physical or digital doors. According to the SBA (The U. S. Small Business Administration), almost 80% of new businesses started will survive their first year. That sounds wonderful until you research further and find that only about half of new businesses survive for 5 years, and only about one-third last 10 years or more. Those numbers can seem daunting when considering whether or not to start a new business.
There are several reasons why new businesses fail — failure to research the market, business plan problems, not enough capital, etc. To lessen the risk of closing prematurely, there are several steps that a potential new business owner can take.… Continue reading
By Dusty Sonnenberg, CCA, Ohio Field Leader: a project of the Ohio Soybean Council and soybean checkoff.
Agricultural Financial Conditions and an Outlook for 2021 were the topics of Day one of the 2020 Agricultural Policy and Outlook Conference sponsored and hosted by The Ohio State University Department of Agricultural, Environmental and Development Economics.
Dr. Ani Katchova, Associate Professor and Farm Income Enhancement Chair began the program by discussing overriding themes in current farm income and the finance outlook.
“U.S. net farm income and net cash income are forecast to increase for 2020, which is a fourth consecutive year,” said Katchova. “This growth in farm income is mainly driven by higher government payments, while livestock receipts are expected to be lower as we close out 2020.”
Farm income in Ohio has been 2.4 – 2.5% of U.S. farm income but with higher volatility over the last decade.
“U.S. net cash income is forecast to increase by 4.5% and U.S.… Continue reading
By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs
As the accounting partner for businesses of all sizes, Holbrook & Manter is helping our clients navigate this pandemic. We are witnessing their great perseverance and new strategies for success along the way. For this month’s article, I asked some of our team members to weigh in on the following prompt:
It goes without saying that the COVID-19 pandemic has presented a number of challenges to businesses of all sizes, across many industries. However, many of these businesses have pivoted and are finding new ways to be successful. Many businesses are finding ways to bounce back as we continue to battle the virus. Please share what you are seeing from business owners when it comes to staying the course and meeting their challenges head on.
Read on for our team member answers.
We have seen employers reprioritize their energy and focus extensively on their online presence in a variety of ways through the challenges of COVID-19.… Continue reading
By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs
Good financial practices are key to the success of your business, but too many businesses fail to implement them. Most business owners know that poor financial management is a major cause of poor business performance and growth, but still fail to carry out the financial tasks that are necessary to keep things running smoothly and successfully. Here are some ways to help implement these practices.
Begin by creating a month end close process with your accountant. This is done to prevent lost revenue, poor tax planning and missed financial opportunities. Beware: waiting until the end of the year to close out everything is often an overwhelming process. Trying to evaluate an entire year’s worth of transactions is a tedious process and often it is too late to do anything about any events that happened earlier in the year.
By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs
It can happen for a number of reasons, a business owner mixes the funds for their business with their personal finances. Especially during these trying times, it can be easy to let those funds intermingle. But the can of worms this can open is usually not worth the short-term fix this practice can offer. I asked some of the members of our Business Services & Solutions Team at Holbrook & Manter to weigh in on the following prompt: Explain the dangers a business owner faces by mixing personal funds with the funds for their business.
Read their responses and tips below.
When a small business owner comingles their personal funds and their business funds, accounting for the business can be difficult and sloppy. This often leads to business financials incorporating personal expenses or excluding business expenses, which then portrays an inaccurate financial position of the company.… Continue reading
By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs
Tax planning and tax compliance are going to be more important than ever for any business owner continuing to weather the COVID-19 storm. Those that received a PPP loan may need to step extra lightly.
The PPP loan program presented an attractive option to business owners at a volatile time, allowing them access the needed funds to cover everything from payroll costs to mortgage interest. Hundreds of billions of dollars were loaned out. However, we learned early in the loan process that the use of these funds may cancel out other benefits afforded to the business owner.
As it stands now, loan recipients will not be able to deduct the expenses if they used PPP loan dollars, that will be forgiven, to cover those expenses. Under Section 1106(b) of the CARES Act, a recipient of a covered loan can receive forgiveness of debt on the loan in the amount equal to the sum of payments made for expenses during an 8-week period beginning on the covered loan’s origination date.… Continue reading
By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs
Farmers are no strangers to challenging times. From volatile markets and weather extremes to rising costs of inputs, it takes a lot of grit and determination to run a successful farming business. Part of being successful is managing your cash flow. Below are tips from our team members at Holbrook and Manter who were asked to address this very issue and share one or two things that business owners do that has a negative impact on their cash flow.
Some of our team members give very simple answers while others go into great detail. As you read through you will see themes of the things we see often. Read through the answers here and begin correcting the behavior that kills cash flow. Here are their responses:
They blend company funds with personal — deposit company funds into their personal checking account or pay personal expenses with a company credit card — fully meaning to separate it all out properly, eventually.… Continue reading
By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs
So, you have applied for and received a loan under the Paycheck Protection Program (PPP Loan). What should you do next to ensure that you are tracking and using the funds on eligible expenses to qualify for loan forgiveness?
Loan forgiveness
The borrower is eligible for full forgiveness of the loan principal if the funds are used on payroll costs, interest payments on mortgages, payments of rent on any lease and utility payments. Due to high demand for the PPP loans, 75% of the forgiven amount must be used for payroll costs.
Forgiveness is based on the employer maintaining or rehiring employees and maintaining wage levels by June 30, 2020. The amount forgiven will be reduced if you decrease your full-time employee count compared to the prior year and/or by the reduction in pay of any employee beyond 25% of their prior year compensation.… Continue reading
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