Modernizing New Jersey’s Accountancy Act

On Jan. 8, 2025, Ohio Governor Mike DeWine signed into law a bill that provides more flexibility for obtaining a CPA license in the Buckeye State. Like Ohio, the NJCPA has been working on ways to ease the path to becoming a CPA without lowering the bar for licensure or compromising mobility. 

The shortage of accountants and CPAs is becoming everyone’s responsibility. The problem will continue to grow unless critical changes are made. It has already had a negative impact on all sectors of society that rely on the advice and services provided by accountants: the business community (small businesses in particular), individual taxpayers, governmental entities and the people who rely on CPAs for financial advice. 

What’s the situation in New Jersey? There has been a dramatic drop in the number of New Jerseyans graduating college with a degree in accounting, with a 25% decrease in the past five years. Although this has not received as much media attention as the shortage in other professions (e.g., teachers, nurses), it is just as alarming.

Currently, candidates must earn at least 150 credits (a bachelor’s degree plus 30 extra credits, or a master’s degree), gain one year of experience and pass the CPA Exam. While this option would remain, our proposal would offer an additional pathway, where candidates could replace the extra 30 credits by gaining two years of general work experience instead of one. This was the requirement until 2001 when New Jersey, and eventually all the other states, changed to the 150-hour rule, a well-intentioned but ultimately unnecessary barrier to entering the CPA profession. This is why, to date, 23 state CPA societies have stated their intention to pursue changes to their states’ licensing laws to allow the two-years-of-experience alternative pathway. More are expected to do so over the coming year. 

This change will encourage more accounting and business students to become CPAs by reducing the time and cost associated with obtaining initial licensure, all without compromising standards. Additionally, it could promote greater diversity within the profession. A study by MIT Sloan found that the 150-hour requirement for licensure led to a 14% decline in the number of new CPAs, including a 26% reduction in the number of minority candidates. 

The law affects existing interstate mobility laws by evaluating candidates on their individual professional status rather than what state they are licensed in. It’s important to note that the New Jersey State Board of Accountancy has endorsed the alternative pathway outlined above and has asked the Division of Consumer Affairs for their approval to move it forward. Other states’ accounting boards have done the same.

We are engaging with lawmakers who can help us pass legislation as soon as possible — before this crisis gets any worse.

The legislation will tackle real challenges head-on, paving the way for a stronger, more diverse CPA workforce while safeguarding the high standards that define New Jersey CPAs. 

As always, we’d like to hear from you at feedback@njcpa.org.

Accountants play a pivotal role in guiding businesses through their budgeting processes. A budget is not just a financial tool — it’s a roadmap for operational decision-making for the entire organization. With any size business, accountants can implement best practices that not only enhance accuracy and efficiency but also improve overall financial health.

Following are three key budgeting best practices that every accountant should consider and the risks involved: 

1. Understand the Business’s Goals and Strategy

Before diving into the numbers, it’s essential to understand the business’s objectives. A budget should be aligned with a company’s broader strategy. The best results come from collaboration between executive leadership, the finance team, operational managers and department heads. Each team brings unique insights into expected revenue, operational needs and potential risks. Including the right stakeholders ensures the budget is comprehensive, challenging yet realistic, and aligned with the organization’s activities.

• Risk: If a budget does not align with company strategy, it can result in a misallocation of resources and have a negative impact on both operational and financial performance.
• Best practice: Involve cross-functional teams early in the budgeting process and collaborate closely with key stakeholders throughout the process to ensure the budget supports strategic initiatives. Ensure everyone understands the financial goals and the role they play in achieving them, communication is clear and everyone has a voice in determining resource allocation. This inclusive approach will make it easier to execute the budget and align everyone with the company’s strategic and financial goals.

2. Focus on Cash Flow Management

While creating a detailed budget, it’s important to not only focus on profit and loss but also on cash flow management which requires an understanding of the balance sheet. Accountants are the key to this given their knowledge of how to bridge net income to net cash flow. Profitable companies often find themselves cash strained. Making sure to proactively budget cash flows is a way to get ahead of any potential issues or, in the case of a cash surplus, plan for new investment opportunities.

• Risk: Focusing on profit and loss will not identify whether investments can be funded through allocation of existing resources or will need additional financing.
• Best practice: Start by understanding how to bridge profit to cash flows. Focus on the key balance sheet components and how they may fluctuate based on factors such as customer payment habits, asset expenditures (e.g., building up inventory or investing in property, plant and equipment) or vendor disbursements. Clearly highlight key balance sheet assumptions in the model to help operations understand how different decisions could impact cash flow.

3. Ongoing Monitoring and Forecasting

A budget is not a one-time exercise — it’s a dynamic tool that requires regular review of actual results and updates to the budget known as forecasts. Actual versus budget results analysis is important to gain insights into variances. Forecasts are an effective way to reflect actual results and changes in circumstances that could impact full-year results and decision making.

• Risk: Not understanding variances or not being able to prepare a forecast as circumstances change could result in not mitigating future risks or missing opportunities for further growth.
• Best practice: When building the budget model, make sure it’s built at the same level of detail as actual results are recorded. If it’s not, either adjust processes on how actual results are captured or adjust the budget accordingly. Make sure to have the right resources to close the books timely and with a level of accuracy to make comparison of those results to the budget meaningful. Investigate all material variances whether positive or negative. It’s also important to make sure the budget is built in a way that it can easily be updated as results come in or assumptions need to be adjusted.

For accountants, helping businesses navigate budgeting effectively is not just about balancing numbers — it’s about enabling them to achieve their financial and operational goals and make informed decisions. By understanding the business’s objectives, focusing on cash flow and ongoing monitoring and forecasting, accountants can help business drive success.

Avoiding double taxation is a key item CPAs should be discussing with their clients. New Jersey residents earning income in other states may qualify for a credit on their New Jersey tax return to avoid double taxation. The credit offsets taxes paid to other jurisdictions and is limited to the lesser of the taxes paid to the other state or the New Jersey tax due on the same income.

New Jersey taxes all income its residents earn, regardless of the source. Residents earning income in states like New York or Pennsylvania often face complex multi-state filings. Proper planning, accurate documentation and understanding reciprocal agreements can help reduce tax liabilities and ensure compliance. Filing Schedule NJ-COJ with supporting documents, such as tax returns and proof of payments, is necessary to correctly calculate and claim the credit.

Credit Calculations

To calculate the credit for taxes paid to other jurisdictions, it’s essential to understand the key components of the calculation and how to determine them for each jurisdiction and tax type. Specifically, the following must be determined:

• Income actually taxed by the other jurisdiction
• Income properly taxed by another jurisdiction
• Income actually taxed by both New Jersey and the other jurisdiction
• Income taxed by New Jersey
• Actual tax paid to the other jurisdiction

A jurisdiction is any state in the U.S. other than New Jersey, a political subdivision (e.g., county or municipality) of any state other than New Jersey, or the District of Columbia. A taxpayer cannot claim a credit for taxes paid to the U.S. government, Canada, Puerto Rico or any foreign country or territory.

Income From New York

New Jersey residents who work in New York or earn other taxable income are often taxed on an amount less than their actual New York source income due to the deductions allowed by New York. Only the income actually taxed by New York should be used when calculating a credit for taxes paid to New York.

Taxpayers must file Schedule NJ-COJ and include their New York tax return (Form IT-203) and proof of withholding, such as W-2 forms. While this credit prevents double taxation, it may not eliminate all liabilities since New York’s tax rates are often higher than New Jersey’s.

Income From Pennsylvania

In contrast, income earned in Pennsylvania falls under a reciprocal tax agreement, meaning New Jersey residents working in Pennsylvania only pay New Jersey taxes on their wages. To benefit, residents should submit Form NJ-165 to their Pennsylvania employers and verify correct New Jersey withholding.

Non-wage income, such as rental or business income, remains taxable in Pennsylvania, requiring a non-resident Pennsylvania return and potential credits on the New Jersey return.

The reciprocal agreement does not cover the Philadelphia Wage Tax. New Jersey residents working in Philadelphia must pay this tax but can claim a credit on their New Jersey return by filing Schedule NJ-COJ with documentation, such as W-2 forms.

Proper Planning

Multi-state taxation can significantly affect a taxpayer’s finances, but proactive planning can help minimize its impact. Accurately filing Form NJ-COJ ensures that individuals receive the full credit for taxes paid to other jurisdictions, preventing double taxation. Understanding reciprocal agreements, such as those between New Jersey and Pennsylvania, can simplify filings and avoid unnecessary withholdings.

Individual retirement accounts (IRAs) are powerful tools for building retirement savings while enjoying valuable tax benefits. Whether used as a complement to an employer-sponsored plan, like a 401(k), or as a standalone savings vehicle, IRAs provide flexibility and potential growth to help secure individuals’ financial futures.

However, with several types of IRAs to choose from, deciding which account to fund can feel overwhelming. The two most common types of IRAs are Traditional and Roth, and each offers distinct features and advantages depending on one’s financial goals, tax situation and income level.

Traditional IRAs

A traditional IRA allows individuals to make pre-tax contributions, which may qualify as a tax deduction and reduce taxable income in the contribution year. For 2025, the annual contribution limit is $7,000, or $8,000 for those age 50 or older and eligible for catch-up contributions. These contributions grow tax-deferred, meaning taxes on earnings are postponed until the funds are withdrawn in retirement. Once an individual reaches age 73, they must begin taking required minimum distributions (RMDs), which are taxed as ordinary income. Traditional IRAs can be especially beneficial for individuals who expect to be in a lower tax bracket during retirement, as the deferred taxes could result in overall savings compared to paying taxes at higher rates during their working years.

Roth IRAs

Roth IRAs, on the other hand, are funded with after-tax dollars. While contributions do not reduce taxable income in the year they are made, the advantage lies in the tax-free growth of one’s investments. When funds are withdrawn in retirement, both the contributions and earnings are tax-free, provided that the account has been open for at least five years and the taxpayer is age 59½ or older.

For 2025, Roth IRA contribution limits are the same as those for traditional IRAs: $7,000 or $8,000 for individuals 50 or older. However, Roth IRAs have income limitations, with eligibility to contribute directly phasing out at $146,000 to $161,000 for single filers and $230,000 to $240,000 for married couples filing jointly. Unlike traditional IRAs, Roth IRAs do not require RMDs, making them a more flexible savings option for those who may not need to access their funds during retirement. This flexibility, combined with tax-free growth, also makes Roth IRAs advantageous for estate planning, as the account can continue to grow tax-free for heirs.

For high-income earners who are ineligible to contribute directly to a Roth IRA, the backdoor Roth IRA offers a valuable workaround. This strategy involves contributing to a traditional IRA and then converting the funds to a Roth IRA. To execute a backdoor Roth IRA, one must first make a non-deductible contribution to a traditional IRA using after-tax dollars and then convert the contribution to a Roth IRA, ideally within a few days, to minimize the chance of earning taxable investment gains in the traditional IRA before the conversion. When executed properly, the conversion incurs little to no tax liability. However, it is important to be aware of the pro-rata rule, which requires the IRS to treat all of a taxpayer’s traditional IRA accounts as one. For those who have pre-tax balances in other traditional IRAs, a portion of the conversion will be taxable. Timing also matters when executing a backdoor Roth IRA. While IRA contributions for a given tax year can be made until the tax filing deadline (typically April 15 of the following year), the conversion itself is taxed in the year it is completed. To simplify tax reporting, it is often best to complete the contribution and conversion in the same calendar year.

Weighing the Options

When deciding which IRA to fund, several factors should be considered, including one’s current and expected future tax brackets, income level and retirement goals. A traditional IRA may be the better option for those who expect to be in a lower tax bracket during retirement and want the immediate benefit of a tax deduction. Conversely, those who expect to be in the same or a higher tax bracket in retirement may see greater long-term advantages with a Roth IRA due to its tax-free growth. For high-income earners, the backdoor Roth IRA provides a way to enjoy the benefits of a Roth IRA despite income limitations.

There are some other important factors to consider. For example, Roth IRAs may be particularly appealing to younger individuals with a longer investment horizon, as they have more time to benefit from tax-free growth. Additionally, Roth IRAs are often preferred for estate planning purposes due to the absence of RMDs, which allows the account to grow tax-free for heirs. Market conditions can also play a role in timing Roth conversions, as executing the conversion during a market downturn may help reduce the taxes owed on the conversion amount.

IRA contributions for the 2024 tax year can be made until April 15, 2025. This deadline applies to both traditional and Roth IRAs, allowing individuals to maximize contributions even after the end of the calendar year.

IRAs are essential components of a well-rounded retirement plan, offering tax advantages and opportunities for long-term growth. The decision to choose a traditional IRA, Roth IRA or implement a backdoor Roth strategy depends on each person’s unique financial situation. With proper planning and execution, these accounts can help individuals achieve a comfortable and financially secure retirement.

The COVID-19 pandemic reshaped the nonprofit landscape, exposing vulnerabilities in financial planning while offering valuable lessons in adaptability and resilience. As CFO of Make-A-Wish New Jersey, I witnessed firsthand how strategic planning and financial agility can help navigate uncertainty. Here are five lessons learned from the pandemic that still work:

1. Flexibility in Budgeting is Essential

The pandemic demonstrated the need for dynamic budgeting that prepares nonprofits for uncertainty. Developing best-case, worst-case and most-likely scenarios provides organizations with a roadmap:

• Best-case: Plan to reinvest surplus funds into strategic initiatives like expanding programs or improving infrastructure.
• Worst-case: Identify cost-cutting measures, such as deferring non-essential expenses or reallocating resources.
• Most-likely: Use this as the foundation for routine operations, ensuring alignment with expected revenue and expenses.

This approach reduces reactive decision-making and ensures operational stability, even in a crisis. CPAs can support nonprofits by implementing rolling forecasts and scenario analyses that adapt to evolving conditions, fostering a culture of proactive planning.

2. Diversified Revenue Streams Provide Stability

The pandemic revealed the risks of reliance on a single revenue source. Diversifying income — through grants, individual donations, corporate sponsorships and digital fundraising — helps mitigate vulnerabilities.

CPAs play a crucial role in assessing revenue composition and identifying over-reliance on any single stream. By guiding nonprofits toward more balanced funding strategies, CPAs can ensure financial stability while aligning with organizational capacity and mission. Moreover, diversification strengthens donor engagement by appealing to various funding preferences.

3. Technology Is a Game-Changer

Understanding an organization’s technological capabilities is key to sustaining operations in uncertain times. During the pandemic, technology enabled nonprofits to shift to virtual events, implement online donor systems and deliver programs digitally — all while maintaining donor connections and continuity of services.

Investing in technology doesn’t just improve efficiency; it also positions nonprofits to remain competitive and relevant. CPAs can guide nonprofits in evaluating existing tools, securing funding for upgrades and assessing return on investment to ensure technology is used strategically to achieve mission objectives. A forward-looking technology plan is now essential for resilience in an increasingly digital world.

4. Reserves and Transparency Are Cornerstones of Resilience

Robust reserves and unrestricted investments proved invaluable during the pandemic. Endowments generate steady income to support essential programs, while unrestricted investments provide liquidity to address urgent needs. These financial buffers safeguard an organization’s mission and allow them to adapt to disruptions without compromising long-term goals.

Equally important is transparency with donors. Regular updates on financial health and program outcomes build trust and strengthen relationships. CPAs can assist nonprofits in crafting reserve policies, modeling financial scenarios and developing reporting frameworks that foster donor confidence.

5. CPAs Play a Role in Building Resilience

Nonprofits increasingly look to CPAs for strategic insights beyond compliance. CPAs bring a unique perspective that helps organizations optimize budgets, diversify revenue, leverage technology and strengthen reserves. By working closely with nonprofit leadership, CPAs can identify opportunities for growth and build financial strategies that ensure long-term sustainability.

In a rapidly changing environment, CPAs also play a pivotal role in helping nonprofits interpret financial data, evaluate risks and align resources with mission-critical priorities. Their expertise is instrumental in creating agile, resilient organizations prepared to weather uncertainty and seize opportunities.

The COVID-19 pandemic was a wake-up call for the nonprofit sector, emphasizing the need for flexibility, diversification, technology, reserves and transparency. These elements are not merely responses to past challenges but foundational strategies for building resilience and delivering long-term impact. As trusted advisors, CPAs are essential partners in this journey, helping nonprofits strengthen their financial health and navigate future uncertainties with confidence. By applying these lessons, organizations can ensure their ability to fulfill their missions and remain a vital force for good, no matter the challenges ahead.

In order to avoid paying federal (and often state) income tax on revenue generated by a nonprofit organization, the organization generally must affirmatively apply for tax-exempt status. The type of tax-exempt organization generally controls how much revenue can avoid tax under the federal tax rules. For example, an Internal Revenue Code (IRC) section 501(c)(3) organization may be exempt as a private foundation, which must pay income tax on net investment income, or as a public charity that avoids the net investment income tax. In total, there are 29 different tax-exempt organization types under IRC section 501(a), with 25 different categories found under section 501(c). Each organization type has different levels of tax-exempt status, but all may be subject to the unrelated business income tax (UBIT), which is a tax assessed on income that is generated by an unrelated trade or business.  

What Qualifies 

To fall under the unrelated business income rules, an activity must meet the following three requirements: 

1. Be considered a trade or business: There is no objective definition of what is considered a trade or business. Instead, the IRS looks at multiple factors to determine whether an activity rises to the level of a trade or business. An activity is generally found to be a trade or business if it is carried out in a business-like manner, and there is an expectation that the activity will generate a profit.
2. Be regularly carried on: To determine whether an activity is regularly carried on, the IRS will focus on the type of activity and the regularity required of that activity. For example, if an organization operates a store that is open every day with set hours, it would generally be found to be regularly carried on. In contrast, if an organization put on a one-time sale event at a local store to generate revenue, the “regularly carried on” factor would likely not be met.
3. Be substantially unrelated: When determining whether an activity is related to an organization’s exempt purpose, the organization must analyze the activity being performed — not what is ultimately done with the revenue generated by the activity. This analysis is very fact specific and may be challenging to determine. For example, an organization whose exempt purpose is the furtherance of the arts within a community may argue that putting on an arts festival annually is related to their exempt purpose. However, if an organization whose exempt purpose is to protect wildlife puts on an annual arts festival to raise funds, it becomes harder to link an art festival to the protection of wildlife.

Not all unrelated business activities will fall under the UBIT rules. For example, some income from investment activities — interest, dividends, capital gains and rental income — may be unrelated to the organization’s exempt purpose but are specifically excluded from the definition of unrelated business income for public charities and certain other organizations. In contrast, advertising revenue generated from a publication put out by an organization would generally fall under the UBIT rules due to its commercial nature. 

UBIT Reporting 

Once a charitable organization makes the determination that an activity falls within the unrelated business income rules, the organization must separately account for the revenue and expenses related to that activity. If the gross income from the activity exceeds $1,000, then the organization must file a Form 990-T to report the revenue and expenses and calculate any UBIT that may be owed. Each activity must be separately reported with its own tax calculation. If an organization invests in publicly traded partnerships or makes other investments that report unrelated business income, the income from these investing activities may qualify to be aggregated for reporting and tax calculation purposes. 

Form 990-T is due on the 15th day of the fifth month after the end of the organization’s tax year. An organization that has a year-end of Dec. 31 will need to file Form 990-T by May 15 of the following year. The organization may also apply for a six-month filing extension by submitting a request on Form 8868 on or before the original due date. Note that this extension is separate from an extension to file the organization’s Form 990, 990-EZ, 990-N or 990-PF. In addition, any taxes that may be owed must be paid by the original due date of the return. Payments are made electronically using the Electronic Federal Tax Payment System (EFTPS). Late payment and late filing penalties may apply if the organization misses these deadlines.  

Tax-exempt organizations should be cautious when engaging in activities that may not be substantially related to their exempt purpose. When an organization has a significant amount of revenue from unrelated business activities, the organization may owe a significant amount in tax or may even jeopardize its tax-exempt status.  

“If you want to stop losing money, stop performing.” This was my tongue-in-cheek advice to the artistic director of a nonprofit choral organization. Each concert cost them more than $10,000 over and above the ticket sales they took in.

The same is true for almost every nonprofit. So, stop doing what you exist for and your financial problems will be solved? Obviously, that’s not a great option.

As a CPA advising nonprofit clients, you’ll encounter this fundamental challenge: balancing mission fulfillment with financial sustainability. While “just stop” might technically solve their financial equation, it completely misses the point of why these organizations exist. Instead, here are some strategies to share with your clients for managing their cash flow while continuing to serve their mission.

1. Help Them Master Revenue Planning

Guide your clients to understand their revenue streams. Start by helping them identify their minimum guaranteed receipts — these are the funds they can count on with near certainty. This becomes their baseline for budgeting decisions.

Think of it as building a house: you wouldn’t construct the roof before ensuring the foundation can support it. Similarly, advise your clients not to commit to programming costs until they’ve secured their baseline funding.

2. Recommend Subscription-Based Donations

Show your clients how one-time donations are like catching raindrops in a bucket — unpredictable and inconsistent. Help them understand how subscription-based giving programs transform those sporadic raindrops into a steady stream. Research shows that donors typically give more through recurring donations, providing more-predictable revenue.

Help them develop different “membership” levels with appropriate perks, making it easy for supporters to see the ongoing value of their contribution.

3. Guide Them in Building Strategic Cash Reserves

Teach your clients that smart cash management isn’t about keeping all funds in a checking account. Instead, advise them to:

• Maintain only enough operating cash for one to two weeks of expenses.
• Move excess funds into reserve accounts that earn interest.
• During profitable periods, build an emergency fund.

Think of cash reserves like a squirrel storing nuts for winter — you need enough readily available for immediate needs, but the rest should be safely stored away for leaner times.

4. Implement a 52-Week Rolling Cash Flow Model

Your nonprofit clients often face dramatic seasonal swings in both income and expenses. Show them how a 52-week rolling cash flow model helps:

• Visualize their entire year’s financial patterns.
• Identify potential cash crunches before they occur.
• Plan strategies to smooth out the peaks and valleys.
• Make proactive rather than reactive financial decisions.

5. Optimize Workforce Strategy

Since staff costs often represent the largest expense for nonprofits, help your clients develop a tiered approach to staffing:

• Maintain minimal paid staff for critical roles.
• Build a robust volunteer program for support functions.
• Offer meaningful non-monetary rewards (e.g., exclusive access, recognition).
• Create clear paths for volunteer development.

Remember: volunteers aren’t free labor — they’re mission-driven supporters who deserve investment and appreciation.

6. Provide Additional Cash Flow Best Practices

Coach your clients on these fundamentals:

• Negotiate favorable payment terms with vendors.
• Accelerate receivables collection.
• Time major expenses to align with revenue peaks.
• Maintain strong banking relationships.
• Regularly review pricing structures.
• Explore grant opportunities strategically.

The Bottom Line

By implementing these strategies, you can help your nonprofit clients build financially sustainable organizations while fulfilling their missions. The key is to help your clients understand that financial sustainability isn’t about having the most money, it’s about having the right amount at the right time to do what matters most. With your guidance, your nonprofit clients can continue making a difference while maintaining fiscal health.

Remember: Their mission is why they exist, but strong financial management is what allows them to continue existing.

Here are the lessons I've learned in my first quarter century of working in public accounting — actually, it's been 27 years — but who's counting?

The day I started writing this was a Friday in the summertime. Fridays are much different than they used to be when I first started in this business. Fridays are now a day to catch up on emails, make phone calls, do some billing and do my timesheet. Then, when I am done with that, it's time to help my wife with some household projects, maybe get the dogs to the vet or work as a pool boy at the house. I was inspired to write this piece because of the negative press the accounting industry has recently received. 

The supply and demand dynamics in accounting have been a factor since I started in 1996, but they've worsened in recent years. I'm not sure if it's due to the 150 credit hours required to sit for the CPA Exam — or perhaps the misconception that a career in accounting means sacrificing your personal life. The latter is simply not true; with proper time management, you can achieve a great work-life balance in this field. Meanwhile, the evolution of industries like technology and alternative income streams has led to an inherent shortage of available candidates. Sometimes, I joke that if I were in my 20s today, I might just become a social media influencer. My family teases me because I tend to buy anything that's marketed well on Instagram.

The Early Years

The truth is, this business has afforded me an excellent life. My dad is a CPA, and I used to admire how quickly he could add numbers on an adding machine tape — his fingers seemed to fly! He inspired me to pursue a career as a CPA. I've dedicated a lot to this profession, which has given me so much in return. I started at a small firm making $22,000, then moved on to CohnReznick and EY before joining Wiss in 2002. Each step of my journey was influenced by connections I made along the way; for instance, I served coffee and bagels to the people who later hired me at CohnReznick while working at a deli during high school and college. That experience taught me the true meaning of customer service, and I still make a pretty mean egg sandwich! The deli owner once told me, "If a customer wants a fresh cup of coffee, brew a new pot."

Accounting Landscape

In recent years, that coffee example has been a good reminder about customer service. Firms have made significant investments to meet their clients' evolving needs. While many say that robots are coming, the reality is that this presents an opportunity for us to provide even greater value to our clients. Who has more data than we do? Clients will always need a trusted advisor, especially in today's fast-paced environment. As CPAs, we are their most trusted partners.

This is, has been — and always will be — a relationship business. Although it might feel more transactional today due to reduced time in the field and less face-to-face interaction through tools like Zoom and Teams, the essence of our work remains rooted in relationships. I encourage all of my teams to "walk the halls" of their clients. Even if you arrive with a light agenda, the conversation doesn't always have to focus on work. As we learned during the pandemic, human connection is vital in business. The more trust we build with our clients, the more they will choose to work with us; it's simply a fact. Ask yourself, do you want to be an order taker or a trusted advisor?

As I reflect on my time in this business, there are five pillars of success that come to mind:

1. Build Relationships

• Internal/External Client Service. Internal client service — working effectively with your teams — is even more crucial than external client service. Clients can't receive outstanding service from the firm without a well-oiled, cohesive team. It truly takes a village to serve a client in today's environment. The more team members you introduce to your client, the better their experience will be, leading to a more profitable relationship.
• Networking. Building relationships with your peers at the firm is incredibly powerful and should begin when you first join an organization. To this day, I'm still connected with those in my entry-level class. It doesn't solely involve networking with people outside one’s firm like bankers or lawyers.
• Leadership. It's never too early to start thinking about leadership and management. As a young associate, you may focus on executing tasks, but when you get promoted to manager, you will need to know how to handle relationships. Reading books and listening to podcasts on leadership and management, even at a young age, is a wise investment in your future.

2. Enhance Communication and Business Writing

• Becoming an accountant doesn't mean you can neglect writing and communication skills — quite the opposite. Effective communication and business writing are among the most critical skills for a successful public accounting career.
• Anticipate client needs. Like a skilled quarterback, you must be able to throw to the open receiver. Anticipating where the receiver will be at the end of the route is essential for building strong client relationships.
• Listen more than you talk. Listening is just as important as conveying your message.
• Have a long-term perspective. This business is a marathon, not a sprint. It's not a get-rich-quick scheme; it takes years of cultivating both internal and external relationships to achieve your professional and personal goals.

3. Create a Support System

• Don't bring work problems home. It's crucial to maintain boundaries between work and home life.
• Support your family. I've worked extremely hard during my 27 years in this field, but never missed any of my kids' games, school events or important milestones. With today's technology, it's possible to be flexible, nimble and responsive.
• Embrace flexibility. To be honest, I was practicing a flexible work arrangement long before it became a formal option.
• Seek out a mentor. I was fortunate to have a wonderful mentor at the firm. He was the best listener I've ever met. As I navigated my career, he allowed me to make mistakes while guiding me toward my long-term goals.
• Faith, family and firm. This motto guides my life. Regardless of your faith, having a spiritual presence has been one of the most profound influences on my success.

4. Develop Your GRIT

• Hard work beats talent. Hard work always triumphs when talent doesn't put in the effort.
• Ask for more when you're slow. When you have the capacity, don't hesitate to seek additional responsibilities.
• "Go into the tent." I coach my daughters' sprint track team for ages 13 to 15. At league championships, the tent is where the girls line up before their races. This is the moment when anxiety is at its peak; they all want to perform their best, but the anticipation can be overwhelming. Sound familiar? Once the race is over, they feel proud of their efforts, win or lose, knowing they ran their best. I encourage everyone to "go into the tent" in your own life — make that phone call, send that email or schedule that meeting. You won't regret it.
• Stay consistent. Regular physical fitness is crucial for both physical and mental well-being. Consistency is key to success.
• Prioritize mental health. I see a mental health professional every other week to maintain my mental well-being.

5. Obtain Lifelong Learning and Purpose

• At the beginning of my career, I thought I would do my two years in public accounting and then move on to a controller or CFO role. However, over the past 27 years, I've learned something new every single day. Early on in public accounting, I had the opportunity to interact with business owners and high-level executives, which was invaluable.
• In my 20s, I worked for a large international construction company in Queens, NY. The CFO made it clear that he would only answer questions at 7 a.m. I lived at my wife's mother's house, so I had to be up by 5 a.m. She was a school bus driver and would wake up early to buy me a bagel and coffee before I headed into Queens. It wasn't fun then, but looking back, I realize how that experience sparked something in me. I learned the importance of being on time and delivering results on budget, which instilled a sense of ownership and pride.
• I was an assurance specialist for the first 15 years of my career. Twelve years ago, the firm asked me to take over the real estate practice, which required a solid understanding of tax. At that time, I knew very little about tax, so I quickly sought help and asked many questions of my tax-expert colleagues. Today, public accounting offers numerous opportunities to pivot within the firm, whether in advisory, tax, assurance, or family office services.
• For the last few years, my daughter and I have raised money for a unique charity each year by running a 5K on Thanksgiving morning. Knowing that I am helping others, even if it's just a small contribution to a greater cause, gives me a sense of purpose.

It's especially important for those of us who have found success in this business to share our stories. A career in public accounting has provided me with so much; I've been able to support my family financially and never miss a moment. My son is an accounting major at the University of South Carolina, and I hope this inspires him as well.

I want to give a shout-out to my family, especially my wife of 22 years, Patti Narcise. Thank you for your unwavering love and support throughout this journey. I have three children: Alex (20), Abbey (18) and Avery (12). They are the most important people in my life.

There is still a long way to go in this business, but I am very excited about the future of the CPA profession and all its possibilities.

Fraud schemes targeting older adults and estates have become a growing concern in recent years. The elderly are often targeted because of their financial stability and the perception that they may not be as technologically or cognitively savvy. Estates represent significant wealth repositories and can be easy marks for sophisticated scams. CPAs can inform and educate their elderly clients and estate representatives about the most common types of fraud perpetrated against these groups and essential strategies to protect against them. The common scams/frauds include the following:

• Grandparent scam: This scam preys on the emotions of elderly individuals by exploiting their love and concern for their grandchildren. Scammers call, posing as a distressed grandchild, claiming to need urgent financial help due to an emergency, such as an arrest or accident. The urgency created by these fraudulent calls pressures the elderly victim into sending money without verifying the story.
• Imposter scams: These scams involve fraudsters posing as government officials from agencies like the IRS, Social Security Administration or Medicare. The perpetrators often claim that the victim owes money or is at risk of losing benefits, creating a sense of fear and urgency. This fear is used to manipulate victims into making immediate payments or providing sensitive personal information.
• Tech support scams: In these scams, fraudsters impersonate tech support representatives from reputable companies. They convince the victim that their computer is infected with a virus and offer to fix it. Once they gain remote access, they steal personal information or install malware.
• Romance scams: Scammers create fake profiles on social media or dating websites, building trust with elderly victims over time. Once an emotional bond is formed, they ask for money for fabricated emergencies, such as medical bills or travel expenses. These scams not only result in financial loss but also cause emotional distress.
• Sweepstakes and lottery scams: In these scams, elderly individuals are notified that they have won a prize but must pay a fee to claim it. Fraudsters create a sense of excitement and urgency, persuading victims to pay these fraudulent fees.

Social Engineering Frauds Targeting Estates

Estates are targeted by scammers for their wealth. The fraudsters explore the potential vulnerabilities of the executors or beneficiaries. Common scams in this category include the following:

• Executor impersonation: Scammers pose as executors or other estate representatives, contacting beneficiaries or creditors to obtain personal or financial details. They may claim they need this information to process payments or settle debts, exploiting the trust and lack of familiarity with estate procedures.
• Phishing attacks: Estate representatives or beneficiaries receive phishing emails that appear to come from legitimate sources. These emails or text messages contain malicious links or attachments that, when clicked, can lead to malware infections or theft of sensitive information. Phishing strategy often involves creating a sense of urgency or the promise of a tempting deal.
• Inheritance scams: Fraudsters contact potential beneficiaries, claiming to be the deceased’s relative or trusted representative. They ask for personal information or financial details to facilitate the transfer of an inheritance, often providing seemingly credible details about the deceased to build trust with the target.
• Estate planning fraud: Targeting elderly individuals or those with health concerns, scammers offer fraudulent assistance with estate planning. They may convince victims to sign documents that transfer assets or provide access to financial information.
• Fraudulent probate proceedings: Scammers manipulate or forge probate documents to gain control of an estate’s assets. They might appoint themselves as executors or beneficiaries and divert assets for personal gain.

Steps to Protect Against Fraud

CPAs can review their clients' financial activities for suspicious transactions, which would generally include monitoring for sudden large transfers, unexpected changes in spending patterns, or withdrawals that might indicate a scam. They can also recommend effective internal controls for estates, such as secure communication channels, multi-factor authentication and regular account reconciliations, as well as investigate discrepancies in estate documents. Clients should know the following: 

• Verify information independently. Never provide personal or financial information to someone you don’t know or trust. Always independently verify the identity of anyone contacting you about your finances or estate.
• Be wary of any unsolicited contacts. If you receive a suspicious call, text message, email or letter, verify the sender’s identity before responding. Use trusted and secure communication channels, and avoid clicking on links, scanning bar codes or downloading attachments from unknown sources.
• Secure your digital presence. As cybercrime evolves, securing digital communication is essential, especially regarding sensitive financial documents and confidential personal information. Strong passwords, multi-factor authentication and encrypted communication will help to prevent unauthorized access.
• Consult with professionals. Engaging CPAs, experienced estate attorneys and cybersecurity professionals can help protect against fraudulent scams. These skilled professionals will offer guidance on securing your assets, communications and proper legal procedures.
• Stay informed and educated. Staying informed about the latest scams and understanding how fraudsters operate is crucial. Education on recognizing social engineering tactics can significantly reduce the risk of falling victim to these schemes.

Safeguarding financial assets requires awareness, vigilance and proactive measures. By understanding the various scams and implementing protective strategies, elderly individuals and estate representatives can take steps to protect their assets and financial well-being. 

There are so many “myths” about the accounting field — from the hours worked to the traditional pathways. My real-life story breaks all of them!

• Myth 1- Need to love math. Let me tell you what I love about my career in accounting; it’s not math.
• Myth 2 - Need to be happy with a boring job. Read my story to break this myth.
• Myth 3 - Need to stay in public accounting. I initially had plans to stay but another opportunity came along.
• Myth 4 - Need to work long hours. Perhaps sometimes there are extra hours to put in at times but there are also lots of alternatives to that.

Where it Began

My story began with majoring in accounting at Montclair State University. Upon graduation I worked at Coopers & Lybrand in their audit department. I spent eight years in public accounting as an auditor and loved it. I met so many interesting, friendly people and saw so many different companies. It was an adventure I am so glad I experienced. For example, I had clients that made Band-Aids (it was really neat to watch how these were made); companies that harvested bones for use in the medical field (what an experience I had doing the inventory there!); several colleges as clients (it was so fun to stroll through campus on my way to work). With all of these interactions, I learned a lot about the business world and developed the skills I needed to make the jump to my next job.

Next Steps

My next step was to get a job at a large publishing company as an internal audit manager. I was able to travel across the U.S. meeting the people who ran the operations of these company units and receiving an understanding of how businesses ran outside of the numbers. It was a great way to see the country, too!

Next, I took several years off to have children. I decided to go back into the accounting world part time. To accomplish this, I started cold calling local CPAs and small accounting firms. It did not take long to find work. My first job back was working for a sole practitioner doing accounting and tax returns. He was happy to get the help and was very flexible with my work schedule. Once he retired, I decided to go to a small firm. I have been working part time at small firms for almost 20 years, doing reviews, tax returns and estate work. The firms have been flexible with my work schedule — I have been fully remote now for five years.

Becoming a CPA today opens many doors. It’s up to the individual to enter them and find out what they like to do best.

Do new clients come to you, or do you need to find new clients? In my opinion, it used to be one of the defining characteristics of a “professional” was they did not need to seek out new business. Clients came to them. Accountants, lawyers and physicians fit into this category. I think a turning point came with the arrival of the TV series, “Boston Legal” (2004). When considering an associate for a partnership, they would ask: “How much new business are they bringing into the firm?” Today, finding new business is part of the job description for many fields.

One of the historically effective ways of getting new clients is through referrals. In an ideal world, your client does all the heavy lifting; the phone rings and someone says: “Joe sent me.” How do you get this to happen?

1. Start with an assumption. You need to believe your best clients want you to succeed. They want to help you grow your business. They might not know how. You need to make it as easy as possible for them.
2. Tell current clients you are looking to add more. They might think you are “full up.” This sounds basic, but referring business might not be on their radar until you tell them.
3. Remind them how you helped them. You have done a good job for your client, but they might be so comfortable with you, they do not remember the details. They had an issue or a problem. You addressed it. Who else has a similar problem?
4. Know family comes first. You have heard the expression, “Selling up and selling down.” Your client likely has influence over other family members concerning advice. Who do they know within the family that could benefit from the kind of advice you have been providing for them?
5. Add a sense of urgency. The high quality of service you deliver might be because your clientele is not as large as they think. Do some analysis. How many large relationships similar to theirs might you be able to add without straining your service model?
6. Avoid the word “referrals.” That is an expression within the category of industry jargon. Do they know someone you might be able to help? Is there someone they think you should meet? You might ask: “How well do you know (name)? They are the type of person I may be able to help.”
7. Be specific in your requests. Imagine you sold men’s suits. One person says: “I’m looking for a suit.” Another person says: “I am looking for a single breasted light grey suit in size 42 long. Which do you think the salesperson will find it easiest to address? If you say: “Do you know someone you think I can help,” their mind might go blank. If you ask: “Who else at your company is retiring in the next six months?” names will come to mind.
8. Teach them how to ask. Let us start with how not to ask: “My advisor is looking for new clients. He asked if I knew anyone.” You might suggest they say: “I had this (problem). I found a financial advisor who was able to address it. I am happy with the result. You have the same problem. Would you like to meet them? You can see there are benefits for the prospect.
9. Understand the in-person introduction. When someone is given your name, you don’t know if they will call or not. If you can arrange to meet with your client and their friend over coffee, you have the opportunity for a low-key introduction. This is why the client/prospect dinner strategy has been effective.
10. Avoid awkward moments. The wrong recommendations can put them off ever trying to send a referral again. You want something like: “You mentioned you had a problem. I have an advisor I like and trust. He has helped other people with a similar problem. He might be able to help you too. Would you like to meet him?

Your clients should want to see you succeed. They can act as your ambassadors if they know what to look for and how to bring your name into the conversation. 

Financial planning tools and techniques have evolved over time to meet families' changing needs and align with legislative shifts. Two important tools offer ways to alleviate the financial burden of future commitments, such as purchasing a retirement account or funding a child's college education.

Roth IRAs

A Roth IRA provides qualified distributions, which include:

• Distributions taken at age 59 1/2 or older
• Withdrawals made after the Roth IRA has been open for at least five years and the account holder is at least 59 1/2 years old
• Withdrawals due to total and permanent disability
• Posthumous withdrawals to the beneficiary
• Distributions of up to $10,000 for the purchase of a first home

These distributions are tax- and penalty-free if the original funds are not withdrawn before the age of 59 1/2. Exceptions for the 10% additional tax are outlined in IRS Topic #557, while qualified higher education expenses are detailed here.

Education funding through a Roth IRA offers benefits that are often limited in 529 plans, such as fewer investment options, restrictions on rebalancing and higher investment management fees. For individuals eligible for a Roth IRA, it is a sensible option to consider. Structured settlement

accounting professionals and their clients can utilize structured settlements to achieve financial planning goals. Unlike Roth IRAs, which have contribution limits and income-eligibility criteria, structured settlements do not impose such restrictions. Structured settlements can be funded without limitations and tailored to meet specific needs while growing tax-free or tax-deferred, depending on the circumstances of the case. For individuals whose income exceeds the threshold for Roth IRA eligibility, a structured settlement remains open for investment. How do you decide which option to use? I prefer structured settlements for the following reasons:

• Guaranteed return
• No fees

Unlimited Contributions

Did I mention there are no fees and a guaranteed rate of return?

When a specific need with a known timeframe arises, the optionality of investment is removed. Market volatility often occurs when resources are most needed. Adding financial stress to the emotional departure of a child to college has never seemed appropriate to me.

Once college funding is secured, the financial plan turns to retirement. I often say that there are very few problems a good income stream cannot solve. Accounting professionals and clients who are able to afford structured settlements understand the significance of financial security. Securing the foundation of your financial plan before delving into financial risks is crucial.

IRAs, 401ks and other investments do not guarantee returns. The past 16 years of uninterrupted growth have created a nonchalant attitude towards risk. Educating your clients on these risks will be the most challenging task for financial planning professionals. As a CPA, you can explain guaranteed cash flow and the impact of unlimited income deferral on a taxable basis.

Unlike other retirement assets, structured settlements allow you, as the tax planner, to customize income recognition while establishing a guaranteed retirement income for your client. Knowing which vehicle to use ensures a more comprehensive financial plan. Being well-informed about utilizing tools such as structured settlements can make a significant difference when it matters most.

There it is — that vast white space staring you right in the face. You’re hoping words will fill the page magically, but you have no idea where to start. Drafting a captivating story can be difficult. But with the right tips and tools, a white screen can quickly become an experience that takes readers on a journey.

So, how do you begin? Below are five tips for drafting a captivating story, offering a foundation for creating engaging content for your target audience.

1. Know Your Audience

Effective storytelling begins with understanding your audience. Start by building an audience persona profile so you know exactly who you’re writing for. Here are four common buyer persona segmentations:

• Demographics: Industry, job function, company size, location, age, gender
• Psychographics: Interests, values, lifestyle, business goals
• Media consumption: Where do they get information? What kind of content do they consume?
• Buying behaviors: What are their buying habits? What influences their purchasing decisions? How long is their buying cycle?

Defining this information will empower you to draft a relevant, relatable, captivating story for your target audience.

2. Write Like You Talk

The last thing readers want is content that’s too formal or feels patronizing. Write how you speak.

Writing styles have shifted. Formal writing is a thing of the past, with content exceptions like technical reports, legal documents and academics. Yet, conversational writing continues to trend among audiences of all ages.

Conversational writing gives you more freedom to engage your readers. Formal writing always talks at you, whereas conversational writing talks with you. Invite your readers into your story by using a conversational style with active, direct and engaging language. Writing like a conversation makes your copy more authentic, approachable and easier to understand and digest.

3. Use the KISS Method

Keep your language simple and to the point. As a professor of mine once said — Keep It Super Simple.

A good rule of thumb is to write at an eighth-grade reading level. Keep your sentences short, scannable and easy to digest. Ensure each word in your sentences has meaning for maximum impact. However, depending on where your content lives or its topic, consider adjusting the reading level up or down to better connect with your audience. Published or print work has higher reading levels, while online content is simpler as readers tend to scan.

4. Embrace AI Writing Tools

Artificial intelligence (AI) makes content creation quicker, no question. Some of the best business writers embrace AI as a writing assistant to help draft content and create captivating stories. ChatGPT, Gemini, CoPilot and Claude.ai are just a handful of online AI writing tools to assist with outlines, summaries and competitor research.

AI editing tools like Grammarly, Hemmingway Editor, Wordtune and Microsoft Editor can also strengthen your writing. These tools check for grammar accuracy, offer rewording suggestions to help with delivery and clarity and even check for plagiarism.

5. Make the Reader Take Action

Don’t forget a call to action (CTA). This is often easily missed. When drafting content, convey the action you want your reader to take and be clear. Using urgency or conveying value is also beneficial. Here are five different types of CTAs:

• Lead generation: Capture audience data to build your sales pipeline.
• Sales: Encourage readers to move further down the sales funnel.
• Engagement: Increase interaction and build relationships with your audience.
• Action: Motivate readers to do something specific.
• Consideration: Encourage readers to explore more before making a decision.

Wherever you are in your writing career, it never hurts to go back to the basics. And, above all, make sure your audience leaves knowing what you expect of them through a call to action.

Storytelling is a timeless skill, pivotal not only in our early learning but also in complex fields. The ability to transform abstract numbers into compelling narratives is crucial for an accounting professional. This skill is often underestimated, yet it’s vital for conveying complicated information in an understandable way to both clients and staff.

The Narrative of Numbers

Numbers tell a story. Beyond their quantitative truths, they detail a company's annual highs and lows while also illustrating strategic decisions made throughout the year. For example, a sudden dip in revenue in the third quarter might reveal a need for strategic realignment, while a peak in the first quarter could indicate successful campaign launches. As accountants, by interpreting these patterns, we not only present data but also provide actionable insights, transforming raw numbers into valuable narratives for our clients.

Teaching through Tales

Effective managers transcend basic instruction; they embed lessons within stories drawn from personal experiences and past challenges. Consider a manager using their personal experience to explain tax optimization strategies through a story about navigating a complex tax return. They could share how, by strategically leveraging deductions and credits, they significantly reduced a client's tax liability, demonstrating the direct impact of thoughtful tax planning. This narrative not only educates but also connects emotionally, highlighting the tangible benefits of expert tax management. This approach does more than just instruct, it connects and inspires. By sharing such personal narratives, we can accelerate professional development, making the learning process both more relatable and impactful.

Listening: The Heart of Effective Storytelling

The cornerstone of effective management and storytelling is active listening. This involves more than just hearing words; it's about understanding the underlying emotions and non-verbal cues. Active listening builds a foundation of respect, empathy and trust, which make it easier to convey ideas and necessary feedback in a manner that resonates personally with the audience. For instance, by truly listening to a staff member's feedback on their preferred learning style, a manager can tailor their guidance to better suit that individual's preferences in a way that works for them and, in turn, set them up for success.

At the core of great leadership in accounting is the ability to break down complex concepts into easily digestible narratives. Our effectiveness as leaders and advisors hinges not just on our expertise but on our capacity to convey this knowledge compellingly. Great leaders are not just directors; they are also listeners, learners and storytellers.

Storytelling for Managers

Incorporating storytelling into management isn't just about keeping one’s audience engaged. It’s about being approachable, relatable and translating professional lessons into practical, actionable guidance. This narrative method does not merely make our guidance relatable; it makes it impactful, ensuring that our teams and clients not only understand our advice but are also influenced by it.

In the language of business where numbers are the script, accountants are the best-suited storytellers to bring these numbers to life, aiding in the development of their teams and the success of their clients. By enhancing listening and storytelling skills, we can become more than just trusted advisors; we can become integral narrators of the business world and turn data into stories that inform, persuade and guide. 

As an accounting professional, you’re no stranger to juggling multiple tasks, deadlines and responsibilities. Delegating effectively can be a game-changer, allowing you to focus on strategic initiatives, improve efficiency and empower your team. 

Let’s explore three key principles for successful delegation: 

1. Document your process. Before you delegate any task, take the time to document the process thoroughly. Why is this crucial? Well, consider it your roadmap. When you have a clear, step-by-step guide, it becomes easier to communicate expectations to your team. Here’s how to go about it: 
   • Break it down. Divide the task into smaller components. What are the inputs, processes and desired outputs? Document each stage meticulously. 
   • Include the rationale. Explain why each step matters. Understanding the “why” behind a task motivates your team and helps them see the bigger picture. 
   • Create visual aids: Flowcharts, checklists or process maps can make complex procedures more digestible. Visual aids enhance clarity and reduce ambiguity.  
     
2. Train your people to understand the process. Delegation isn’t just about handing off work; it’s about ensuring your team members grasp the intricacies. Here’s how to train effectively: 

• Conduct one-on-one sessions: Sit down with each team member and walk them through the documented process. Encourage questions and discussion. 
• Role play: Simulate scenarios. Ask your team to demonstrate their understanding by role-playing specific steps. This reinforces learning and builds confidence. 
• Have feedback loops: Regularly check in with your team. Are they encountering roadblocks? Do they need additional resources or clarification? Adjust your training accordingly.

3. Genuinely delegate and empower ownership. Now comes the critical part: delegation itself. Remember, it’s not just about offloading tasks; it’s about empowering your team. Here’s how to do it right: 

• Trust your team: Trust that your team members can handle the responsibility. Micromanagement stifles growth and creativity. 
• Set clear expectations: Be specific about deadlines, quality standards and desired outcomes. Ambiguity leads to frustration and inefficiency. 
• Encourage autonomy: Once you’ve delegated, step back. Allow your team to take ownership. When they succeed, celebrate their achievements. 

Remember, effective delegation isn’t about relinquishing control — it’s about optimizing resources. By documenting processes, training your team and genuinely empowering them, you’ll not only increase capacity but also foster a culture of collaboration and growth. So, go ahead, delegate strategically and watch your accounting team thrive! 

Picture this scenario: A happily married couple strolls into your accounting office with beaming smiles and shared financial goals. As a seasoned accountant, you're accustomed to the rhythm of joint tax filings and the typical benefits that they provide. But hold on, there's a twist. This couple is contemplating the unconventional move of filing their taxes separately. Now, in your world, that might elicit a quizzical look — a furrowed brow, perhaps, as the norm is typically "married filing jointly." However, when student loans enter the scene, the traditional tax-filing status quo takes an intriguing turn. While conventional wisdom often leans towards joint filings, the student loan factor introduces a new dynamic that shouldn't be overlooked.

The Differences

For married individuals grappling with student loan debt, the decision on tax filing status — whether to choose "married filing jointly" (MFJ) or "married filing separately" (MFS)—is a pivotal one. Not only does it impact their tax liability and monthly loan payments, but it also influences eligibility for crucial tax credits and benefits.

To comprehend the nuances, let's first explore the correlation between federal student loans and the tax filing status. Borrowers on income-driven repayment (IDR) plans, such as Pay As You Earn (PAYE) and Income-Based Repayment (IBR), traditionally had the option to file taxes separately, isolating the loan payment calculation to the borrower's earnings only and excluding the spouse's income from the calculation. Not all IDR plans allowed this initially, but with the recent changes and introduction of the innovative Saving on A Valuable Education (SAVE) plan, it now extends to all plans.

You might wonder, “Sure, filing separately may shrink the monthly student loan payments by excluding spousal income, but is it merely a short-term fix?” Not quite. Enter the aforementioned innovations of the SAVE plan, revolutionizing how unpaid interest is handled. Under this plan, any unpaid interest is entirely subsidized. In simpler terms, if the calculated payment based on income falls short of covering the monthly interest, that additional interest doesn't pile up on your loan balance; it simply vanishes.

Nonprofit or Governmental Careers

Furthermore, what if the client has a career in a nonprofit organization or governmental agency? Here's where things get really interesting. By making 120 monthly payments under the Public Service Loan Forgiveness (PSLF) program, the client can qualify for complete tax-free forgiveness. Yes, you read that right — after a decade of dedicated service, the entirety of their outstanding balance evaporates. I've personally advised on this type of forgiveness and have helped 16 clients qualify for a combined $2.6 million of forgiveness. So, it's very real!

Now what if the career path doesn't qualify for PSLF like for-profit ventures or entrepreneurship? Fear not, there's still a path to forgiveness, it will just take a little longer. Depending on the chosen IDR plan and the loan type (undergraduate versus graduate), the loans would become eligible for forgiveness after 20 or 25 years. So, by minimizing payments through strategic tax filings, you're not just reducing out-of-pocket costs now; it's a calculated move towards maximizing forgiveness and securing a brighter financial future.

So, it sounds great, but why would someone not want to file separately? This is where you come in. Couples filing separately often find themselves in higher tax brackets, leading to increased overall tax liabilities. Subsidized healthcare coverage, dependent childcare credits and other deductions can be compromised when couples opt for separate filings. Notably, Marketplace healthcare plans may be impacted, potentially forfeiting premium tax credits and other savings (with exceptions in cases like domestic abuse or abandonment). Couples may face additional taxes ranging from $2,000 to $3,000, coupled with limitations on IRA contributions and eligibility for Roth IRA contributions. Understanding these nuances is vital, and having a competent accountant like yourself advise on these adverse ramifications is critical.

Amending Returns

It's vital to address another significant aspect of tax filing status: the prospect of amending returns. When contemplating the possibility of amending tax returns from MFS to MFJ, it's essential to proceed with caution, especially considering the legal gray area surrounding such actions when it comes to student loan income recertification. While this pathway may hold the potential to recoup missed tax benefits, it's prudent to delay amendments until the tax return no longer influences current student loan payments.

All of these decisions should undergo thorough scrutiny on a case-by-case basis, factoring in individual circumstances and long-term financial objectives. Engaging in discussions with a qualified student loan expert can provide invaluable guidance, ensuring that any action taken adheres to legal and financial best practices.

Are you having sleepless nights worrying about the success of your company or your succession plan because it is dependent on the success of your staff? True leadership can reduce the issues involved in both concerns.

Leadership at a fundamental level involves:

• Identifying talent.
• Fostering the growth of your colleagues through creating an environment of self-belief.
• Limiting your involvement and upstarting your staff’s involvement.

Let me dissuade you from the blind belief that anyone will care more about or work harder in your business than you do. It is your business. However, finding people who comprise most of the characteristics of a “young you” should put you on a good path to determining the future of your company.

How do you identify those individuals? By showing them leadership. Have you given colleagues a reason to care? More importantly, through your leadership, have you given them a reason to believe in you? Cultural leadership starts at the top with you!

Leadership Environment

So how do you lead? Leadership requires multiple environmental factors to thrive. Social, economic and political factors can either foster or destroy a leadership message. A professional work environment involves the following:

• Outlining workflow expectations
• Recognizing strengths
• Constructively identifying weaknesses
• Rewarding the achievement of organizational goals
• Identifying “want to” versus “need to”

In college, we studied the ABCs of leadership. However, the lesson my father stressed when I worked with him stood above them all: “Your word is the one thing you must protect at all costs.” If people do not trust you, they will not work for you or with you.

Just because you understand the path you want to take, or the goals you wish to achieve, assuming others are clear can spell disaster. Remember, actively communicating reduces misunderstandings. This can be accomplished by using the following:

• Face to face dialogue, with equal footing
• Non-recourse expressions
• Positive feedback
• Giving credit for all ideas
• Being gracious

Valued colleagues will share their ideas while also sharing in yours. Achieving through collaboration should be the goal of any great leader. The saying goes, “Many hands make light work.” Several minds tackling a goal or problem in open communication does the same thing.

Open discourse uncovers flaws or exposes a thread of insight you missed on the first examination of the idea. The biggest limiting factor to achieving a proper course of action is any prior thoughts.

Avoid George Orwell’s Groupthink

Groupthink is the practice of thinking or making decisions in a way that discourages creativity or individual responsibility. Non-conformity, however, creates the basis for creativity. Therefore, for good leadership to thrive, individuals should be empowered to make mistakes while in a safe environment.

Finally, teachers are leaders of knowledge. While a lecturer looks for conformity and uses the phrase, “You will,” teachers prefer to use, “You can.” The subtle shift in language reinforces the leadership position as a mentor instead of a task master.

Thus, a one-size-fits-all leadership guide to succession planning does not exist. Each of us must walk our own path. But whichever path we take, it must have trust, communication and respect for the individuals we hope to lead at its core. Remember, the leaders you create will be your legacy.

In the dynamic world of the CPA profession, regulations are evolving and client expectations are on the rise. A CPA firm’s succession plan is paramount to its continuing existence in this environment. By definition, this succession planning refers to the strategic process of preparing for the transition of leadership and ownership within a CPA firm. This process becomes particularly critical as founding partners and seasoned professionals approach retirement age, leaving firms to the challenge of preserving the legacy and adapting to a leadership change.

Let’s delve into the story of the CPA firm, Smolin Lupin & Co., as it illustrates the intricate steps of succession planning and continuation of a CPA firm. Aaron Smolin and Herman Holzer founded the practice in 1947. They were both CPAs and former IRS revenue agents. Years later, Saul Lupin merged in his practice, and the firm was renamed Smolin Lupin & Co. 

Aaron was considered a visionary in the field, and the firm had grown to become a symbol of tax and accounting excellence. As Aaron got older and neared retirement, the firm, made of five partners, faced a crucial question: how could the firm ensure its enduring continuation?

Aaron had been a leader, a mentor, and a source of inspiration to the firm’s partners and staff. He tirelessly served clients and nurtured the careers of many young CPAs. As the years passed, it was clear that the firm needed a strategic plan to continue its legacy and secure its future.

Identifying a Successor

Smolin Lupin partners recognized the importance of addressing the imminent leadership transition. They knew that the first step was to plan for Aaron’s retirement. Aaron was not ready to walk after dedicating his life to the firm, so the partners devised a contractual process that would allow him to continue in a reduced capacity as a senior advisor, sharing his wealth of knowledge and experience with the firm’s staff and clients.

As Aaron’s retirement approached, the firm partners developed additional partners from within. A talented young partner, Ted Dudek, was eventually named a managing partner and became Aaron’s de facto successor. Over several years, Aaron worked closely with Ted and other younger partners, gradually transferring his knowledge and experience.

To ensure the firm’s continued success, the leadership team looked at the various age classes of staff and partners. Recognizing the importance of grooming the next generation, the firm invested heavily in professional development programs and mentorship initiatives. They nurtured emerging leaders and professionals, ensuring the firm’s expertise and management team remained unmatched.

Positive Results

The approach of strategic planning, leadership training and contractual requirements secured the firm’s future and maintained client trust, continuity and retention. Clients appreciated the firm’s dedication to preserving their relationships. Ted Dudek’s commitment and competence ensured a seamless leadership transition. This was evidenced by the most recent leadership change in the firm as two younger partners, Paul Fried and Sal Bursese, took over as CEO and COO.

In the end, Smolin Lupin & Co. successfully developed and navigated the challenges of partner retirement, contractual processes, planning strategies and staff development. The partners embraced management changes while preserving the firm’s legacy and reputation. By allowing Aaron and other retired partners to continue as senior advisors and developing future partners from within, the firm ensured a bright and enduring future for its accounting and tax practice.

This story is an example for other CPA firms, illustrating that a legacy could endure with thoughtful planning and a commitment to best practices. The journey of Smolin partners serves as a compelling reminder to all CPA firms to embrace similar practices, fostering continuity and excellence in our profession. By investing in mentorship, leadership training, planning strategies and a commitment to retaining expertise, we collectively shape a bright and enduring future for the CPA profession.  

Traditionally, succession planning has been about passing the business torch to the next generation of internal managers. However, alternative approaches, such as private equity (PE) investments, have become more prevalent. Private equity investors bring not only capital but also valuable management expertise and industry connections that can be vital for businesses poised for growth or undergoing significant changes. While the benefits of private equity investment abound, such investment also comes with unique challenges.

The Private Equity Advantage

Investment from private equity offers substantial benefits including the following:

• Capital boost and value enhancement: Private equity firms infuse substantial capital into businesses, facilitating technological advancements, market expansion or debt restructuring. For example, a PE firm investing in a growing local restaurant chain could allow the chain to open new locations in high-demand areas. This investment often leads to an increase in business valuation, crucial for owners aiming to maximize returns.  
• Strategic expertise: PE investors often possess deep industry knowledge and experience. This expertise is crucial in navigating a business through transitional phases, ensuring the company’s success and growth post-succession. For example, an automotive parts manufacturer has fallen behind its peers in the industry largely due to not keeping up with technological advancements and processes. A PE investor with deep experience in manufacturing invests in and collaborates with the company to streamline operations and adopt lean manufacturing techniques so it is better positioned in the face of its competitors.
• Expanded networks: Involvement with a PE firm opens doors to broader networks, including potential clients, suppliers and future leaders. This can be pivotal in repositioning the company in its marketplace. For example, a logistics company with PE investors is able to gain access to international suppliers by leveraging the PE firm’s extensive international network of contacts.

Challenges to Consider

PE investment comes with certain challenges that need careful consideration before moving forward with a PE investor.

• Potential loss of control: With PE investment, business owners often face a loss of control over their company. PE firms’ investment comes with the tradeoff of PE gaining significant influence and control in business operations. PE’s control can clash with the original owner’s vision. For example, a family business with a relatively informal hierarchy may bristle at adjusting to corporate management styles with strict chains of command implemented by a PE firm.
• Short-term focus: A common criticism of some PE firms is that they prioritize short-term gains over long-term stability. This often leads to decisions that aren’t in the best interest of the company’s long-term health. For example, a PE firm may push for rapid cost cuts that impact employee morale.: The introduction of a PE firm can lead to significant cultural changes within a company, potentially impacting employee morale and the company’s original ethos. For example, a company that prides itself on a family-type and friendly atmosphere is likely to have difficulties with a PE investor placing new executives within the company that shift the management to a more aggressive competitive culture.
• Cultural shifts: The introduction of a PE firm can lead to significant cultural changes within a company, potentially impacting employee morale and the company’s original ethos. For example, a company that prides itself on a family-type and friendly atmosphere is likely to have difficulties with a PE investor placing new executives within the company that shift the management to a more aggressive competitive culture. 

Weighing the Impact of PE in Succession Planning

Private equity can be a powerful tool in succession planning, offering financial strength and strategic direction. However, it is crucial to navigate this path carefully, considering both the advantages and pitfalls. Understanding the nuances of private equity will help position businesses for a successful transition, ensuring their legacy continues to thrive in the new business era.

You can’t say that we didn’t warn you!

It’s the season for IRS Employee Retention Credit (ERC) audits — yes, right during tax season, when you have nothing better to do. The ERC Voluntary Disclosure Program (VDP) ends on March 22. Additionally, bills are looking to restrict the ERC. But have you or your clients heeded all the warnings and lifelines that the IRS has already provided?

Let’s start by reiterating again CPAs’ responsibility when it comes to the ERC. In March 2023, the IRS Office of Professional Responsibility released Bulletin 2023-02, which highlighted the fact that practitioners were obligated to meet the provisions of Circular 230 in regard to ERC, whether a third party was used for calculation or not. Specifically, Section 10.22(a) requires “Diligence as to Accuracy.” What this means in practice according to 2023-02 is the following:

• Reasonable inquiry to confirm ERC eligibility
• Further inquiry if information from client appears to be incorrect, incomplete or inconsistent
• If practitioner cannot reasonably conclude that the client is eligible, they should not prepare the return
• Inform client of penalties for noncompliance

IRS Office of Professional Responsibility (OPR) Director Sharyn Fisk says her office will evaluate the facts and circumstances of each situation, and there’s not a one-size-fits-all answer to what due diligence looks like. But she was very clear in an interview with TaxNotes: “Not asking questions of a client or the third party who handled the ERC claim isn’t exercising due diligence,” Fisk said, emphasizing the importance of documentation as a way for tax practitioners to protect themselves.

The IRS has already begun to respond to the increasing incidence of fraudulent claims throughout ERC’s lifetime. In October 2023, the IRS issued IR-2023-193, which detailed a special withdrawal process to help those who filed an ERC claim and were concerned about its accuracy. On Dec. 6, 2023, IR-2023-230 announced that the IRS was sending out “an initial round” of more than 20,000 letters to taxpayers notifying them of disallowed ERC claims. From what we have seen, these letters are only for 2020 claims, while 2021 disallowances will assuredly be coming shortly. We suspect round three will then come through an automated system that will flag things like whether a business claimed all available quarters, automatically claimed $26,000 per employee, claimed PPP but did not account for it, or if state and federal wage numbers did not match. On Dec. 21, 2023, IRS Announcement 2024-3 outlined the details of the new ERC VDP program for businesses that claimed and received an ERC refund but were not eligible. This program is only available through March 22, 2024. If you decide to “come clean,” and you meet the other qualifications for this program, the advantages include the following:

• Repaying only 80% of the ERC you received
• The IRS not charging penalties or interest
• Not having to report the 20% of the ERC you get to keep as income
• Not having to amend income tax returns to reduce wage expenses

It is not a guarantee that you will be approved for VDP. You will need to make your case. If you end up dealing with an ERC audit, just be prepared to answer the following six key questions that the IRS will most likely be asking.

Question 1: Did your provider start operating during COVID or have “ERC” in their name?

If yes to either, watch out! The IRS has been explicit that there will be heavier scrutiny on these businesses so expect them to dig in their heels!

Question 2: Has the income tax return been amended to add back payroll expenses pursuant to IRC 280C?

If not, YIKES! ERC mills are not properly advising clients that this is MANDATORY! In fact, we are hearing many stories where such providers do not even realize this is a requirement.

Question 3: Is the taxpayer part of a controlled group?

This is a huge one many providers are missing. You may be asking yourself, “Why does the IRS need this?” Well, for the ERC calculation, you must aggregate all entities that are part of a controlled group. If you didn’t do this, you’d better keep your fingers crossed!

For example, to qualify for ERC in 2020, an eligible small employer must have had fewer than 100 full-time employees (FTEs) on average in 2019. Similarly, when determining whether a business qualifies under the revenue decline test, you measure their 2020/2021 gross receipts against their 2019 gross receipts in the relevant quarter. If an entity is part of a controlled group, you must aggregate all of the gross receipts when performing this analysis.

Question 4: Where is your proof of the government order and full or partial shutdown for each relevant quarter?

The IRS asks for not just the number of the government order, but a copy of the actual order. These typically come from the websites for each state/city/county. It needs to be clear that the order is a mandate and not merely guidance, i.e. does the order say you “shall” do something or that you “should” do something? In addition to retrieving a copy of the order, a detailed explanation of how the orders applied to the taxpayer should be provided, specifying exact dates and other proof of the full shutdown.

For a partial shutdown, there must be a “more than nominal” impact, defined as a more than 10% impact to business operations. The IRS will request detailed information showing how a governmental order resulted in more than a nominal effect to business operations.

Question 5: Is part of your ERC claim due to a supply chain disruption?

The IRS is intensifying its approach towards taxpayers who claimed ERC due to a supply chain disruption. According to Notice 2021-20, taxpayers can claim the ERC if their SUPPLIER’S operations were fully or partially halted due to a governmental order and, as a result, the taxpayer’s business operations were also suspended due to the lack of critical goods.

The IRS has requested various details from these taxpayers including: 1) copies of governmental orders that led to the suspension of the SUPPLIER’s operations during the relevant quarters, 2) evidence that the supplier experienced a full or partial suspension of operations with specific operational data from the supplier, 3) clarification on which goods were delayed and why they were critical and 4) evidence that the inability to source these critical goods had a significant impact on the taxpayer’s business.

Question 6: Did the taxpayer apply for a PPP (Paycheck Protection Program) loan and later have it forgiven?

If the taxpayer applied for a PPP loan and later had it forgiven, they cannot use those same wages to calculate their ERC. That is double dipping that will get you in double trouble.

The IRS will therefore ask to see the following: 1) loan application, 2) loan forgiveness application, 3) documentation submitted with the forgiveness application itemizing payroll and non-payroll expenses and 4) calculations proving that there was no double dipping between PPP and ERC.

In summary, it’s been a wild ride with the ERC. The IRS has gone to great lengths to issue warnings to taxpayers about the marketing scammers pushing businesses to claim the ERC without having the knowledge and expertise to perform the analysis and calculations accurately.