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    Why You Should Take a Closer Look at Your Financials During COVID-19

    Prospective purchasers and lenders to cooperatives and condominiums utilize both the annual budget and financial statements as the basis for their perception of your property’s financial health.

    In the era of COVID-19 the seasonal publication of those documents creates a situation where the ability to rely on them is quite different now. You see, these documents will now need to chronicle how things have changed, which is why you should take a closer look at your financials during COVID-19.

    With the stay at home order and the reboot of the usual time frame to publish an annual financial statement many properties have just now, or will soon, published their 2019 financial statements. This means that the shortest interval for annually updated documents will be nine months if we return to the usual timing of publication. We suggest that boards prepare certain information about their property’s COVID-19 effects to be at the ready for those who will inquire. However, the annual operating budget is a document that can be more easily updated to demonstrate the effects of COVID-19 to those needing financial information.

    Effects on Your Operating Budget

    On the financial statement side of the COVID effect on finances is the amount of property reserves. In the past, reserve funds were generally viewed from a distance with a range of ideas on the topics from accepting what is there to structured plans for future capital costs that are planned to be needed. While there have always been questions as to what the reserve fund balance is, now during the period between financial statements these will be more common and will have urgency added. The concerns include how much was required to be utilized to get through the crisis to pay bills; were the added costs of COVID-19 dealt with in the budget; how the shutdown impacted commercial tenants’ ability to pay rent; and what was the mix of the population of unit owners who suffered severe enough personal financial issues that they can’t pay their monthly charges.

    Any updated operating budget information will demonstrate plans to solve the latter two questions, but only potentially painful financial actions by the board can offset the funds used for the crisis and the added COVID costs. Your board needs to consider the aspects of the reserve fund that are not only important in the near term, but also for the future.  Only by having complete knowledge of what has occurred can you expect to keep your reserve funds appropriately replenished and be ready to present a viable financial recuperation plan from this event. The need to take a closer look at the finances of your property during the COVID-19 pandemic and work with your auditor on how the finances will look when the next financial statements are published is paramount.

    Extra Working Capital Versus Restricted Cash

    Cash on a cooperative or condominium financial statement has always been king, but now this is more important than ever. While cash always had a positive association of being available for emergencies there now needs to be an enhanced level of amounts, not just for that but also for the usual reserve fund for future capital projects that everyone looks for.  The better option is to have two funds, one for major repairs and replacements and a “working capital” excess fund for emergencies. The amounts sought will tend need to be roughly twice the amounts in the past, we are now suggesting $4,000 per unit and a bare minimum amount of $200,000. If your accounts have been depleted planning now to attempt to recover lost ground can be vital to creating the best possible post COVID financial statement.

    Using Restricted Cash to Fund Operations

    We mentioned having cash for emergencies earlier and another aspect of this is determining how much was been needed during the Spring and potentially how much will be needed in the second wave of shutdowns. This leads us to ask how much the deficit (maybe deficits if there are multiple waves) was, how much cash was utilized, and might it have been cash restricted for capital projects. You will need to know if the cash was designated in order to avoid income tax consequences to unit owners, and if so that use needs to be accounted for as a ’loan’ from reserves and a plan needs to be adopted to return those funds to the restricted fund. Appropriate planning for the inevitable questions and tracing the funds that might have previously been designated for capital projects is of utmost importance.

    How to Make Your Financial Statement Presentation Picture Perfect!

    Working together with property management and the auditor can help you create the best possible financial documents. We urge you to get started with the 2021 operating budget process NOW. Many of the operating budget models utilized by property managers include a current year projection as well as the future operating budget. Having that information available can be quite helpful to quell concerns in the off-season of financial documents your property produces.

    By starting this summer as opposed to the usual timing in late Fall you can have the financial information ready for those who need it. You also can communicate any future substantial increases to unit owners well in advance or if working capital is needed, implement a COVID increase or assessment in a proactive as opposed to reactive manner.

    Obviously no one wants to pay more, and many simply are not able to, but in this situation, knowledge is power, and people need to know. Only by fully understanding how funds were needed can you ever hope to best window dress the reserves that your next financial statement will present. Covering both financial aspects before their usual timing allows you to enhance the financial situation of your property.

    The Czar Beer team is dedicated to providing timely, accurate information on all aspects of COVID-10 that affect our clients. However, as this is all developing quickly we are here to offer support in any way we can. You can email us at info@czarbeer.com or call 212 397 2970 with any questions you may have.

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    Capital Contributions

    Not a piggy bank for everyday funds

    Making sure your building’s finances present well can be challenging in the best of times. But doing so in the COVID-19 era adds a layer of complexity. Here are areas that need special attention:

    FINANCIAL STATEMENTS
    A lot of boards don’t like to look at the financial statement because they think it’s complex. Financial statements can be challenging to look at, but we try to make sure that they are clear and explainable to the shareholder or unit-owner.

    RESTRICTED CASH
    Money comes into the buildings, and the biggest question is: “Where is it being spent?” Coops and condos have an operating account, which is used to pay bills. It’s the reserve account where there’s a lot of scrutiny. What are those funds for, and are they being used correctly?

    One of the things that gets put into the reserve fund are assessments. And a lot of times those assessments are done either for specific projects or to build up reserves for future projects. When we perform an audit, we make sure that if a board is collecting money for a specific purpose, that it’s set aside for that purpose.

    Many times we’ll find when we’re doing a year-end audit, or even an interim, a board will say, “Oh, we needed some money to pay utility bills or legal bills that came up.” But the money was set aside as a capital contribution, and apartment owners can add this capital contribution to their basis when they sell their apartment. Plus, the association probably did not pick up the capital contribution as revenue for tax purposes. So using restricted cash for operating purposes is a problem.

    BUDGET CHALLENGES
    This is something that is pertinent not only with the pandemic going on but also in general. Most budgets assume everyone’s going to pay their maintenance or their common charges.

    But now let’s say that in June you have a couple of units where owners lost their jobs or the owners passed away, and you’re not collecting monthly fees. In a bigger building, it might have less of an effect because you’re dividing that among 350 units. But in a smaller building, that could be a significant amount of revenue that the building’s relying upon.

    Now you get into the fall, and you’re doing your budget. If the same owners are still not paying, that’s six months of nonpayment. And now you have a continuous issue that’s going into 2021 that you need to take into account. On the financial statements and in your monthly management reports, that’ll be reflected as a receivable. But you’re going to have to find a way to deal with this shortfall.

    Because most budgets are prepared to break even, if you’re not getting an anticipated $20,000 in revenue, either you hope and pray that you have an expense category that’s down $20,000 – which does happen – or you take money out of reserves. Or you don’t pay the bills, which is another option. The other option, which is not my favorite, is to tap into a line of credit. Lines of credit usually are set aside for emergency capital projects. But if buildings don’t have the operational revenue, or if the unit-owners or the shareholders can’t afford to pay an assessment, the board might tap into the line of credit to pay bills.

    DEFERRED PAYMENTS AND ASSESSMENTS
    A lot of boards might defer payments for other expenses because the revenue is not coming in. If you’re behind on your bills because people aren’t paying maintenance because of the situation with COVID-19, a special assessment would not be the wrong thing to do.

    Especially if you’re telling shareholders that they don’t have to pay their maintenance. So that’s something to look into when you’re doing your current budget.

    PLAN NOW FOR NEXT YEAR
    I always tell boards to look at their budgets throughout the year. You’re getting updates every month in your management reports. See how you’re doing. If things are not going in the right direction, you need to act now. Otherwise, it’ll get to be October, November, and you’re not going to be able to pay real estate taxes or your utility bills. You want to look at it in time. We look at the audit a couple of times a year, in different stages, then call our clients and say, “Do you realize you’re over budget in this category?

    What are you doing about it?”

    This article was originally published in Habitat Magazine’s ‘June’ issue, which was free to access for everyone in the co-op/condo community. Click here to read the original version.

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    Good Cyber Security Practices to Protect Your Financial Data

    We’re all aware of the horror stories – data being held hostage by ransomware, workstations and laptops locked up and stolen user IDs and passwords, along with actual funds stolen from bank accounts and credit cards. The media is full of data breach and identity theft headlines. This leads us to the obvious question – how to best protect oneself?

    Before we get started, let’s make sure we’re talking about the right problem. A majority of what is now called identity theft used to be known as garden variety credit card fraud or bank fraud. With the almost universal use of credit cards, debit cards, and electronic funds transfers (EFT, also known as ACH), if you are active in the world (not even necessarily online), your information is already out there. Just the act of writing someone a check puts your bank, bank account number, and routing number into many people’s hands – and if your name and address are printed on the check, then potential scammers have all the information they need to possibly access your bank account.

    This knowledge can help us set out a few good practices to help prevent becoming a victim of cyber scammers. First, develop and practice the habit of paying attention to your financial information. This means reviewing your bank accounts, credit card accounts, credit score, mortgage accounts, brokerage accounts, and vendor accounts (telephone, gas, electric, etc.) on a regular basis. This means at least monthly for most accounts, perhaps more frequently for bank and brokerage accounts. A regular review will give you a sense of what should be happening in each account and make you aware of any unusual activity right away. Then make sure you take action immediately on anything out of the ordinary that shows up.

    Second – Your experiences when dealing with issues when they occur will undoubtedly lead straight to our second point – choose your vendors and institutions wisely. Doing business with entities that have more to lose from a data breach than you do can provide a significant backdrop to your good cyber health practices. Most major banks and credit card providers make it easy to initiate a claim for fraudulent activity through their web site. If you encounter difficulties resolving an issue, it may be time to look for another institution.

    Third – practice good internet hygiene. This means never clicking on a popup, never clicking a link in an email from someone you don’t know – even if it looks like it came from your bank or credit card company, and verify, verify, verify. If you do click on a link, check the address in your browser’s address bar. Banks, credit card companies, and reputable vendors, typically use an address that begins with ‘https:’ instead of ‘http:’. Note the added ‘s’. If the address isn’t familiar and/or does not begin with ‘https:’, leave that page and close your browser immediately.

    Finally, at least for this post, be cognizant of where you connect to WiFi. We’ve written extensively elsewhere about setting up your home and/or office with appropriate firewalls and installing antivirus protection on your laptops and workstations. The attraction of sitting in a coffee shop and connecting to your bank can be pretty enticing, but be careful. Public WiFi, without the added security of a good VPN, can be a bit too public and will most likely be operating without any firewalls or other protection. So our recommendation would be to save interactions requiring the exchange of personal information for locations where you are more assured of appropriate safeguards.

    One last word – most viral warnings, such as the one we all saw in early 2020 regarding writing out all 4 digits of the year to avoid various types of unscrupulous behavior, are not meaningful. You can easily check on whether you need to pay attention by doing a bit of research – don’t fall for what is sometimes called ‘security theatre’ – the appearance of doing something to keep your information safe, but doesn’t really help and distracts you from the real threats you need to address.

    Whether you are a business, individual, or non-profit, the Czar Beer team can outline specific steps you should take to minimize fraud and secure your business’ from. Contact us at info@czarbeer.com to share your comments on this article and more.

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    The Truth About Withdrawing From Your IRA

    On the Czarnowski & Beer blog we’ve been sharing a lot of helpful tips and information for cooperatives and condominiums to use in an effort to reduce the harmful effects caused by COVID-19, but our wealth of knowledge doesn’t end there.

    One of the personal  forms of assistance available as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to Americans who are struggling with financial hardship due to the coronavirus pandemic is that they can withdraw money from their retirement accounts without the usual penalty, with the option to pay any tax owed over three years. The Act also relaxes rules on taking out loans against a 401(k) savings plan.

    The fallout from the crisis has left people scrambling to pay their bills after being furloughed, getting laid off, or having hours reduced. We know that withdrawing from your IRA is a controversial topic, but if you need the money and it’s the only money you have, you may have little choice. Realize though, if you are younger than age 59 you are only being afforded a savings of 10% of the amount you withdraw – meaning you will still owe income tax on the amount withdrawn. On the other hand, no matter your age you have up to three years to pay any tax due on the withdrawal.

    All things considered, it may be more attractive to borrow money from your 401(k), assuming your plan has a loan option available. The Act increases the loan amount available from the lesser of $50,000 or 50% of your account balance to the lesser of $100,000 or 100% of your account balance. Note that your employer must adopt these changes to the plan to enable you to take advantage of them.

    If you are unfortunately out of work for a long period you will most likely find that you pay a lower income tax rate as well, but we typically advise against taking withdrawals from your retirement accounts prematurely. You should access these funds as a last resort – these days, it takes a lifetime to accumulate retirement savings.

    Ultimately, although the options exist we advise you to do your best to evaluate all of your options including family, friends, selling off personal items, etc., before considering whether to withdraw money from such funds. Think long and hard about ANY other sources of savings to access first and leave withdrawing money from retirement funds as a last resort.

    The Czar Beer team is dedicated to providing timely, accurate information on all aspects of the CARES Act and the current economic crisis that affect our clients. However, as this is all developing quickly we are here to offer support in any way we can. You can email us at info@czarbeer.com or call 212 397 2970 with any questions you may have.

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    Preparing for Disruptions to Your Property’s Cash Flow

    The cooperative and condominium industry is entering unfamiliar territory as a result of the effects caused by the novel coronavirus, COVID-19. With all non-essential businesses shutting down and the added sense that we have no idea how long this will continue, tensions are high and people are getting worried.

    Adding to the uncertainty, many unit owners were already living from paycheck to paycheck and are now finding themselves temporarily furloughed or laid off. It is expected that unemployment benefits will only cover basic living costs, so monthly carrying charges are way down the list. The simple fact is that whether the resident experiences a temporary or permanent work disruption, the impact on their ability to pay monthly charges will fall on the board of the property to work through. In times like these we should treat our financially challenged neighbors the way we would want to be treated.

    Let’s face it, in addition to managing unit owners who are behind on their maintenance charges, we also need to plan for commercial tenants not being able to pay their rent anytime soon. Lately we are mostly receiving queries from properties with commercial tenants, as a business needs to be operating in order to pay its rent for retail space, in addition to properties in moderate income neighborhoods where unit owners are already seeking relief. The Czarnowski & Beer team wants to support our clients in any way we can which is why we created this list detailing options for board members to manage cash flow and handle bulging budget deficits.

    The scenarios playing out in our present-day reality are so daunting they create an extremely challenging situation for cooperative and condominium boards who are required to operate on a balanced budget. Any significant interruption of any source of income will force a budget into a deficit, but fear not, we have identified a few action steps available to you:

    Reach out to residents and commercial tenants to gain a better understanding of their specific needs. Reaching out to these valued members of your community about their situation fosters a sense of good will, allows you to have better knowledge of the magnitude of the board’s situation, and affords you the opportunity to plan. Accumulate information on the anticipated income disruption and, where possible, gain data on its likely duration. Continued communication allows for budgets to be adjusted sooner rather than later.

    Draw on the available balances of lines of credit line. Make sure to update cash flow projections for the added cost of interest and required amortization, where necessary. Do your best to document a plan to pay back the line over time. We recommend this step as during past financial crises, lenders have often capped lines of credit at existing draw levels or terminated unused lines. Better to draw funds now and not need them than to need the funds later and line not be available.

    Refinance (or for condominiums obtain a loan). With current historically low interest rates, paying an early prepayment penalty might make sense. Consider a new credit line or a second mortgage.  Depending upon the magnitude of any prepayment penalty, consider a simultaneous credit line borrowing. If a building has a mortgage with a relatively high interest rate, even just borrowing the same principal amount can result in significant savings in debt service. Some condominiums might consider placing a mortgage on the resident superintendent’s apartment. Keep in mind these actions have an up to a 90-day period of lost time up to closing.

    Loan money from your property’s reserves to put towards operations. Maintain appropriate documentation of these occurrences in your board meetings minutes and include a clear plan to replenish the reserves when possible.

    Postpone capital improvement projects wherever possible.

    Resist covering a deficit by either increasing monthly charges or imposing an additional assessment. These options will likely increase the financial stress already placed on residents, thus making a bad situation worse

    Defer payments wherever possible by entering /forbearance agreements. Debtors are aware that it is best to establish and have both parties agree to revised payment arrangements as, when someone signs an agreement, they are far more likely to honor the terms of a deal. Only where there is extreme financial hardship should you contact existing lenders and try to arrange for some forbearance in payment obligations. However, do not unilaterally stop making mortgage or escrow payments as some lenders might quickly place the mortgage into foreclosure mode. The bank that loaned you the money may quickly package and sell the loan to institutional investors that might not be as accommodating as one would hope.

    Converse with your vendors and contractors. You and your managing agent have influence over these relationships and arrangements will need to be accomplished.

    Resist your commercial tenant’s request to apply some or all of their security deposit against current rent.  If the tenant does not survive you have lost money that could cover the building while trying to find a replacement tenant. Additionally, where you have a guaranty of any type applying security gratuitously reduces the liability of the guarantor.

    Avoid the courts at all cost. Neighbors who for years may have dutifully paid their monthly charges deserve better. Let us all see ourselves as in this together and act with compassion.

    While it is recommended that you consult an accountant to help you navigate your way forward, the points outlined here can show you how to prepare for disruptions to your property’s cash flow and significantly help you manage your property’s financial during these uncertain times.

    The Czarnowski & Beer team is dedicated to providing timely, accurate information on all aspects of the CARES Act and the current economic crisis that affect our clients. If you’re interested in reading our full summary of the provisions outlined for coops and condos in the Act, download our guide here.

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    How to Fraud-Proof Your Business

    We all wish we lived in a world where others think like us and have the same morals we do, but we need to forewarn you that there are people out there in the job market who don’t share your vision.  They are the small percentage of job seekers who hide important information about their job history so that you will feel comfortable enough to offer them a position.

    The problem when you encounter these types of situations is that small businesses normally don’t  take the time to prosecute employees they know or think committed fraud. These employees understand this so they tend to ride the high employment wave into jobs that no one else is available to take. With unemployment less than 4% we want to remind you how important it is that fraud prevention be part of your company’s culture, particularly during the hiring process.

    While we all attempt to avoid hiring such types, it is better to be safe than sorry in this high employment environment.  What helps most to protect against this risk is the amount of attention that a business owner devotes to fraud. Dedicating time to fraud prevention sends a powerful message to employees about its importance and empowers honest employees to help sniff out the not so honest ones.

    At Czar Beer we suggest that you structure your work and day-to-day responsibilities with an eye toward fraud prevention so that it can be stopped in its tracks. To do so we recommend several business routines that will help  minimize loss. They will also improve employee performance and security, and positively affect your overall business prosperity.

    We’ll say it again, these business routines will guard against fraud, make things better and allow you to better prosper.  Who’s listening now?

    Simple precautions can save you from future fraud trouble:

    • Research who you hire – Conduct due diligence with thorough interviews, references checks and past employer calls. Don’t skip formal background checks: they’re required to build a trustworthy team.
    • Separate duties – Don’t give any single employee too much authority. Structured separation of duties with financial checks and balances helps you avoid concentrating too much power in one person and gives you and your employees the confidence that business finances are being handled correctly.
    • Educate employees – Set up training sessions to teach employees how they can help prevent fraud with due diligence and adherence to operational guidelines, roles and responsibilities.
    • Prepare your business for fraud strikes – These strikes are most likely created internally.  That’s right, we watch the bank and credit card statements for items incorrectly posted from outsiders and the risk from inside is about two thirds as much.  Research shows that 37% of fraud is initiated by internal sources.

    By expanding precautions, you can add more security:

    • Conduct frequent account reconciliation– Only half of small business owners review bank statements, credit card charges and accounting books. Frequent reconciliation identifies financial red flags early. Online banking services provide transaction, balance and utilization reporting for easier reconciliation.
    • Fraud audits – Regular fraud audits signal your commitment to reduce fraud and keep your business secure. Reduce risk and uncover weaknesses with audits and reviews by your Certified Public Accountant.

    Whether you are a business, individual, or non-profit, the Czar Beer team can outline specific steps you should take to minimize fraud and secure your business’ sustained growth.

    For more information, contact us at info@czarbeer.com or (212) 397-2970.

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    Is “Handyman” Work Traded for Rent Bartering?

    Did you know that “handyman” work traded for rent is bartering? For some co-op and condo unit owners this sounds a lot like the superintendent or resident manager who performs a number of roles and lives on premises, but that is not the case.  In 2018 the tax court once again determined that handyman services in exchange for rent is considered bartering and therefore taxable. In the ruling a handyman traded work for the rent he owed his landlord and was required to pay tax on the value of the work performed that was applied to his rent. So why would it be different for your superintendent or resident manager?

    This is because your superintendent or resident manager falls under the convenience-of-the-employer exclusion. This rule means that an employee may exclude from gross income the value of lodging provided free by an employer if the employer does so for a substantial non-compensatory business reason.   It must occur on the business premises and since New York City requires either an on-site person or one in close proximity to the property this shows  that the housing is for the employer’s rather than the employee’s convenience and the employer must require the employee to accept the housing as a condition of employment. Thus, in order to satisfy local and federal taxation laws, the employee must live in the lodging to be able to perform the duties of their employment.  This allows for your board to provide a wonderful quality of life to your unit owners at a lower cost.

    With over 35 years of experience serving co-ops and condos, the Czar Beer team can outline specific steps you should take to minimize taxes, maximize loan eligibility, and enhance the value of your property.

    For more information, contact us at info@czarbeer.com or (212) 397-2970.

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    Teaching Financial Statement Basics

    As part of our commitment to providing superior service and ensuring that our clients receive representation that will protect them from unit owner scrutiny, the Czarnowski & Beer team recently hosted an informative presentation on financial statement knowledge at The Andrews Organization (TAO).

    On December 17, a group of over 50 engaged property managers packed the conference rooms at TAO for two sessions of interactive discussion on how to read a financial statement; how to compare financials; how to compare actual expenses to the budget report; ways to make audits easy; and new items in the industry.

    The event’s speaker, and Partner at Czarnowski & Beer, Avi Zanjirian offered his insights and experience as well as trends and actionable solutions on the most important aspects of a co-op or condos financials including innovative ways to make the audit process easier and how to make “annoying people” (auditors!) go away.

    “It was such a pleasure to work with TAO to organize this event and we are happy to be able to offer the group such useful information,” he said. “For this year’s presentation our goal was to leave property managers with a better understanding of what needs to be done to keep their property’s financials in order and I definitely think we achieved that.”

    The crowd was double the size of the previous year’s presentation, and filled with dynamic professionals who listened attentively and asked numerous questions.

    “I was very impressed with the presentation,” said TAO Financial Analyst, Roma Licas. “Format, content, visual aid, all outstanding. It was very informative.”

    To learn more about the training and educational resources we offer at Czarnowski & Beer, contact us at info@czarbeer.com.

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    The No.1 Tip to Successfully Completing Your IRS Audit

    Many people dread the mere thought of an Internal Revenue Service (IRS) audit.  However, these days, you’re most likely to receive a “desk” audit whereby a missing income item or proper documentation for a deduction is requested. Sometimes this happens because the taxpayer doesn’t receive or misplaces a source of income and they don’t have an alternative source of knowledge about that income, so an adjustment is necessary.  In cases like this, the matter is then easily resolved through a payment by the taxpayer, while the IRS is successful in finding money for the government.

    At Czar Beer, we sometimes work with some clients who reveal that while they have deductions, the record keeping burdens can create a situation where the deduction amount is correct but adequate documentation is not readily available.

    We are not suggesting that everyone should drop everything else that goes on in their lives to invest a huge amount of time into meeting the IRS requirements, but we would like to take this opportunity to remind you that taxpayers are required to maintain adequate documentation for certain deductions on certain forms.   Additionally, be mindful of the fact that several tax court cases came down to negative conclusions not only for the tax due but also for not maintaining adequate records and the court upheld the accuracy-related penalties assessed by the IRS.

    To avoid this you should discuss contemporaneous record requirements with your tax professional to assure that you only spend required time, but still have the documentation needed to meet the IRS’ minimum requirements.

    Whether you are a business, individual, or non-profit, we can outline specific steps that you should take to minimize taxes, maintain appropriate records and successfully defend your deductions if you are audited.

    For more information, contact us at info@czarbeer.com or (212) 397-2970.

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    Protecting Yourself From Fraud

    We often read in the news about various large corporations, and sometimes small businesses, experiencing privacy breaches and  vulnerability.  We thought that every one of our clients could benefit from knowing what they can do to protect their money, credit and identity.

    Our first suggestion is that you keep in touch with your financial institutions and  make it easy for them to keep in touch with you. This starts with you keeping your contact information up-to-date.  This is especially true of your mobile number since some people change numbers frequently.  You want them to be able to reach you so that their systems can best protect your accounts and information.  As much as some us want to limit the number of applications we put on our mobile devices, if your financial institutions have a mobile information or banking app, then download it! But don’t stop there, make sure to turn on the mobile app alerts that apply to you. Then when their systems detect unusual activity, they can easily notify you.

    The app will also allow you to review your account activity regularly and report suspicious activity promptly. That’s right, in order to protect yourself in this way, you have some work cut out for yourself! Be prepared to have bank representatives  respond quickly to your suspicions and for you to respond just as quickly to any of their security and/or fraud alerts. That way when you or they reach out to one another, they can take immediate action on your behalf and put up a protective wall immediately. This can happen at any time and you can be anywhere. Also, avoid attempting to access your financial accounts through email inquiries as you will also need to stay alert to many online threats. This includes avoiding clicking on suspicious links or responding to emails or texts urging you to act quickly. Do not provide personal information like your account numbers, PIN or Social Security number. If ever in doubt about anything, initiate a separate communication either through the app, by dialing the number on your monthly statement or credit card, or by visiting a branch.

    Create strong, unique passwords for each of your online accounts and take advantage of any additional security features when available from the institution.  All passwords should include upper- and lower-case letters and special characters.  Try mixing them up and adding special characters which tend to be added at the beginning and end of passwords.

    Go further and protect your devices by installing antivirus software and keeping your operating systems, applications and web browser up to date on your mobile phone, tablet and computer.  Don’t simply buy it and use it- embrace the technology!

    You should also know how to identify and avoid scam attempts.  If you provide your information or send money to a scammer, there is often little that can be done to help get your money back. Never, ever trust caller ID: Always validate a person’s organization by calling them back through an official phone number like the one found on your bank statement or back of your credit card.  Scammers may also pose as government officials, law enforcement or even institutional employees in order to steal your personal information, so always be on the alert.

    Here is a list of red flags that might point towards a scam. It is important that you can identify them.  These are many, BUT NOT ALL, of the most common types of scams.

    You may be:

    ◾Pressured to send money

    ◾Threatened with law enforcement action

    ◾Told to purchase gift cards and provide codes as a form of payment

    ◾Asked to cash a check for a stranger

    ◾Instructed to make a cash deposit for sweepstakes

    ◾Offered more than you are asking for something with a request to send the over payment elsewhere

    Let’s make our own personal security a top priority! Therefore, please take these steps in order to help yourself to fight prevalent frauds.

    Whether you are a business, individual, or non-profit, we can outline specific steps that you should take to minimize taxes, maximize loan eligibility, and enhance the value of your property.

    For more information, contact us at info@czarbeer.com or (212) 397-2970.

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    Why Choosing A Good Accountant Should Be Your Top Priority

    One of the most important decisions that you will make as a small business owner is choosing an accountant and tax advisor. In addition to being important, is can also be one of the most intimidating because this is a relationship that extends beyond just bookkeeping and will provide guidance and advice as your business grows.

    You should acquire an accountant as soon as you start your business in order to set up the proper legal structure. An incorrect legal structure can wind up costing you a lot in taxes and legal fees to correct. If you are buying a franchise or other small business, an accountant’s evaluation of the financial records is absolutely necessary.

     

    Don’t make the mistake of delaying to involve an accountant until tax time. Working with an accountant to set up the proper procedures for record keeping and financial projections can help you to avoid costly tax problems.

    Research and Interview

    Your relationship with your accountant is a relationship that deserves your time and attention. Even solo entrepreneurs will benefit from establishing a solid relationship with an accountant who can aid in setting up the business correctly and assist with questions as you grow.

    As a small business owner, you should interview small accounting firms that can provide you with the personal time and attention that you will need. Beware solo accountants who may not be able to spend time answering many of your questions because of their own workload. Regardless of whomever you choose, you need to make sure that you feel comfortable as you will be dealing with sensitive personal financial information.

    Some strategies that will help you choose an accountant or firm that best suits your needs are:

    Marshall Persky, a SCORE mentor and former chairman advises “…to build a shortlist of accountants that you would consider ‘partnering’ with because that is exactly what you are doing by hiring a business accountant.”

    • Interview in person so you can gauge your level of comfort.
    • See if they have experience with your specific industry. Accounting metrics can vary substantially by industry so you’ll want to hire a firm that has substantial experience in your are. It is also imperative that the accountant or firm has experience handling small businesses.
    • Verify credentials. A CPA (Certified Public Accountant) designation is preferable and they should have access to current tax information. The AICPA (Association of International Certified Public Accountants) maintains a directory of accounting companies that you can choose from or try to get a referral from another local small business that you trust.  The SBA (Small Business Association) suggests inquiring with your local Chamber of Commerce for networking events. Your business bank may also be able to aid you with suggestions.

    In addition to assisting you in legally structuring your business, an accountant can also be very helpful in dealing with your bank’s loan officer and the bank’s requirements for particular financial reports.  When choosing your accountant ensure that they are always available to answer your questions with clear explanations – no technical jargon.  It is imperative that you understand what you are doing financially and why you are doing it.

    Make sure you keep yourself updated.  The accountant should be accessible during the year to guide your financial decisions in growing your business and understanding your cash flow.

    Define Your Needs

    Be honest about how much time you can devote to preparing, updating and maintaining your financial records. Can you maintain your own accounting software? If not, you will need to keep organized records –  and no that doesn’t mean shoeboxes of receipts. See if your accountant can provide some training for you.

    Remember that your main responsibility is to run your business so don’t take on more than you are capable of handling. If necessary, Make a list of requirements that you would want the accountant to handle because records that are not maintained correctly can be costly.

    If you are handling the daily accounting, allow your accountant access to your cloud payroll and accounting services. This will enable the accountant to keep updated and will reduce the costs physical meetings and printing reports.

    Make Sure You Are Covered For Taxes

    Tax season is particularly hectic for both the small business owner and the accountant.

    Avoid the last minute tax crunch. Schedule a meeting with your accountant at the start of the year and supply all the relevant files and documents as early as possible.

    Find out how your accountant handles a government audit. These can be very costly in time, money and stress. In the event you would need one, it is essential that you have a good accountant to assist you.

    Use your accountant to aid in tax planning so you can avoid unexpected tax bills.

    What Are the Costs?

    The costs associated with hiring an accountant or accounting firm are very important to discuss, especially for the small business owner. Very often, you may not be able to afford a retainer structure. Even if that is the case, you will hopefully be able to develop a relationship with the accountant or accounting firm you choose that will allow you to utilize their services strategically as you grow. Efficiency with your record keeping and timely updates will help toward keeping  costs down. The expense is still worth your time as good accounting is needed to run your business effectively and avoid costly financial errors.

    Taking the time to establish a solid business relationship with an accountant who you are comfortable working with will pay off in time and money. Now that you’ve bought into the need for an accountant, stay tuned for more tax tips and tricks as tax season approaches!

    Whether you are a business, individual, or non-profit, we can outline specific steps you should take to minimize taxes, maximize loan eligibility, and enhance the value of your property.

    For more information, contact us at info@czarbeer.com or (212) 397-2970.

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    Easy to Miss Tax Deductions, Part 3

    child tax credit

    Along with the loss of certain tax deductions and expansion of the standard deduction in last year’s tax act, it’s a good time to remind everyone with school age children about benefits that are easy to miss.

    The child tax credit, which was bumped up to $2,000 per child, is intended to offset the many expenses of raising children and it is refundable generally up to $1,400.    The maximum amount of adjusted gross income that you can have and still qualify for the credit was increase dramatically as well. Unfortunately, if your son or daughter is over 16 years old, you can’t use this credit to trim your tax bill.

    However, the new tax law added a separate $500 (unfortunately this one is non-refundable) credit for dependents who don’t qualify for the child tax credit. So, your older children can still save you some money at tax time – even if they’re in college. You can also claim the credit for older relatives that you’re caring for at home. The credit will help fill some of the void left by the new tax law’s elimination of personal exemption deductions, but then need to be a your dependent,

    Note, though, that the combined total of both the child credit and the credit for other dependents is phased out if your adjusted gross income is more than $200,000 ($400,000 for married couples filing jointly).

    A credit is so much better than a deduction; it reduces your tax bill dollar for dollar. So missing one is even more painful than missing a deduction that simply reduces the amount of income that’s subject to tax. In the 24% bracket, each dollar of deductions is worth 24 cents; each dollar of credits is worth a whole dollar.

    Let’s turn now to student-loan interest paid by mom and dad.  Generally, you can deduct interest only if you are legally required to repay the debt. But if parents pay back a child’s student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt. So, as long as the child is no longer claimed as a dependent, he or she can deduct up to $2,500 of student-loan interest paid by mom and dad each year. There is no need to itemize so it’s not affected by the higher standard deduction.

    With the costs of raising our children, each and every tax savings dollar helps.  While, with the paying student loan interest situation, because they are not liable for the debt, mom and dad can’t claim the interest deduction even though they actually foot the bill, there is still a tax benefit.  Hopefully your child will share their tax refund.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Easy to Miss Tax Deductions, Part 2

    irs tax forms

    This installment involves deductions that are easily overlooked.

    It’s hard to overlook the big charitable gifts that you made during the year, by check or your payroll deduction (if you do that, check your pay stub in December). After all you get letters from the institutions that detail it all.  However, the little things add up too. Remember that you can write off out-of-pocket costs incurred while volunteering for a charity. For example, ingredients for dishes you prepare for a nonprofit organization’s soup kitchen and stamps you buy for a school’s fund-raising mailing count as charitable contributions.  If you drove your car for charity in 2018, remember to deduct 14 cents per mile, plus parking and tolls paid, for your philanthropic journeys. The rate will be 14 cents per mile in 2019 as well.

    Let’s not forget the property we contributed as well. Whether is a drop off of dated style clothes, although with lots of life left, or furniture it was easier to have the charity pick up then arrange for a special trash pick up or your old “Kar” or boat that you gave to the “Kids”, it is all part of the charitable deduction.  Now with a higher percentage of income allowance, lets use our charitable work for something else for ourselves.

    Oh, and a reminder, keep those receipts.  You’ll need an acknowledgement from the charity documenting the support that you provided if your contribution totals more than $250.

    Hey gambling winners, those of you who get Form W-2G, don’t rush and file without looking at what gambling losses you might have also incurred.  So, if you took a trip to Las Vegas but didn’t do so well, you can deduct your gambling losses. This deduction is only available if you itemize, but it is limited. In addition to losses suffered at a casino or racetrack, deductible gambling losses also include the cost of non-winning bingo, lottery and raffle tickets.

    Go back as soon as you feasibly can and build a diary of gambling activity that includes the date and type of wagering, name and location of gambling establishments, names of people with you when you gamble, and amounts that you won or lost.   You can take deductions up to the amount of your gambling winnings, those amounts that you report as taxable income.

    When we find ourselves working to meet the deadline for our personal tax filing, it is easy to miss those things that are not readily available in the file the we keep our tax papers in.  Take the time to sit back and elaborate on all you do, all year long, and not just mention on your return what jumps into your mind during in those short sessions.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Easy to Miss Tax Deductions

    irs tax forms

    We routinely remind investors about these deductions arising from investments and along with certain basis additions that tend to be missing from the piles of tax information they provide us.  It’s important to take a step back and ensure we maximize benefits to our clients.  We thought sharing them here would be appreciated.

    If you purchased a taxable bond for more than its face value—as you might have to capture a yield higher than current market rates, you get to deduct that premium. That’s only fair, otherwise, the IRS would get to tax that extra interest that the higher yield produces, which you supplemented with your upfront investment.

    You have two choices about how to handle the premium. First, you can amortize it over the life of the bond by taking each year’s share of the premium and subtracting it from the amount of taxable interest from the bond you report on your tax return. Each year, you also reduce your tax basis for the bond by the amount of that year’s amortization.  This is the more time consuming and generally money saving choice.

    The other is that you can ignore the premium until you sell or redeem the bond. At that time, the full premium will be included in your tax basis, so it will reduce the taxable gain or increase the taxable loss dollar for dollar.  But any loss may not be fully deductible so it may be deferred.

    The amortization route may be a pain because it’s up to you to both figure each year’s share and keep track of the declining basis. But it tends to be more valuable because the interest you don’t report will avoid being taxed in your top tax bracket for the year—as high as 40.8%, while the capital gain (assuming you have a gain) you reduce by waiting until you sell or redeem the bond would only be taxed at 0%, 15% or 20%.

    By the way, if you buy a tax-free municipal bond at a premium, you must use the amortization method and reduce your basis each year, however you don’t get to deduct the amount amortized. This is because the interest is nontaxable.  Then the amortized basis is used when you sell, so that premium isn’t deductible then either.

    While reinvested dividends are not a tax deduction, they can ultimately be an important subtraction.  If, like many investors, you have your mutual fund dividends automatically reinvested to buy more shares, remember that each and every new purchase increases your tax basis in that fund. That, in turn, reduces the potential taxable capital gain or increases the loss when you redeem the shares. It is easy to forget to include reinvested dividends in your basis, which results in double taxation of the dividends – once in the year when they were paid out to you and immediately reinvested out of your pocket, and then later as those shares are included in the proceeds of the sale.

    If you might not be sure what your basis is, ask the fund for help. Many funds report to investors the tax basis of shares redeemed during the year since 2012. So it’s the reinvested dividends before that date which are the most likely to have been missed.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Income Statement Basics

    income statement

    There are several components of a financial statement for a Condominium or a Cooperative.  Through a series of articles, we wish to offer a basic understanding and, where helpful, benchmarks for you to consider versus your specific property.  These articles are in no way intended to provide a comprehensive analysis, rather, more of a resource to provide a basic understanding of the component, and answer certain questions that you may have about specific line items in order to expand the value of the document that you receive from your Board.

    These components include

    • Report letter which details the extent of procedures that were applied, any limitations on those procedures and conclusions reached by the accounting professional.
    • Balance Sheet which presents a snapshot of the financial position of the property
    • Income State which presents the revenues and expenses for the period
    • Cash Flows which presents the sources and uses of cash for the period
    • Notes which presents required and requested disclosures

    Each of the five common exhibits will be presented as separate articles which will also attempt to explain when and where another exhibit may interact or affect the component being showcased.  The articles will have a summary or explanations of the most basic components as well as a discussion of more details for each broad component.   The article on required disclosures that are included as notes to the financial statements, will attempt to offer insight into the most common disclosures for these properties and unfortunately may not include each financial statement note that is included in your property’s annual report.  As certain supplementary information is often included with these financial statements, the most common sections are all showcased together into one article.  We urge you to evaluate all of the articles to fully understand every important aspect of the finances of your property’s financial statements.  We also make ourselves available to attempt to assist with specific questions that you may have that are not covered by the articles by emailing us at info@czarbeer.com.

    The income statement transverses the entire year.  In the most basic terms, its attempting to show how much net profit there is for the year.  However, for these entities a result not close to breakeven is generally not a good thing.   That is, lenders don’t want to see recurring losses and prospective buyers might believe that monthly charges are inadequate to cover costs.  Worse, a net profit can be interpreted by owners saying that they were over charged in their monthly charges as expenses are less than what they were charged.  Always best to see a roughly breakeven as the bottom line, except…..

    Generally Accepted Accounting principles for Coop accounting makes this almost impossible because assessments for capital are considered revenue. However, where the money is spent is not an expense, its an asset for improving the real property owned by the Cooperative.  Thus, capital assessments for cooperatives seem to create a lot of income, which for you as property manager or shareholder is gone, without a deduction for an expense.  Further, a totally unimportant amount to the operation of a cooperative, Depreciation is recorded as an expense. But since the Board didn’t wish to bill shareholders (monthly maintenance) for anything more than what is needed to fund expenses, nothing is budgeted for depreciation.  We can tell you back out this and add that, but the best solution is when the accountant includes a “supplemental schedule” of financial results to the operating budget.  If they haven’t been, our guess is you would more easily review a cooperative financial statement if it was.

    Returning to the income statement, Condominiums can prepare this statement on the fund accounting approach, which is somewhat different from more general Corporation or business accounting, and not allowed for Cooperatives.  This fund style approach, though, does bode well in our presentation here as it breaks up the revenue and expenses into three categories: operating, other and capital or designated fund.  Thus, capital assessments are revenue and capital projects, improvements to common property, owned by the unit owners individually, are the offsetting expenses.  Thus, when an assessment is made to fund a project, these revenues and expense net out on a Condominium Financial Statement.  There are caveats concerning how assessments are reflected as revenue for generally accepted accounting principles.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    The Financial Statement Balance Sheet

    financial statement

    There are several components of a financial statement for a Condominium or a Cooperative.  Through a series of articles, we wish to offer a basic understanding and, where helpful, benchmarks for you to consider versus your specific property.  These articles are in no way intended to provide a comprehensive analysis, rather, more of a resource to provide a basic understanding of the component, and answer certain questions that you may have about specific line items in order to expand the value of the document that you receive from your Board.

    These components include:

    • Report letter which details the extent of procedures that were applied, any limitations on those procedures and conclusions reached by the accounting professional.
    • Balance Sheet which presents a snapshot of the financial position of the property
    • Income State which presents the revenues and expenses for the period
    • Cash Flows which presents the sources and uses of cash for the period
    • Notes which presents required and requested disclosures

    Each of the five common exhibits will be presented as separate articles which will also attempt to explain when and where another exhibit may interact or affect the component being showcased.  The articles will have a summary or explanations of the most basic components as well as a discussion of more details for each broad component.   The article on required disclosures that are included as notes to the financial statements, will attempt to offer insight into the most common disclosures for these properties and unfortunately may not include each financial statement note that is included in your property’s annual report.  As certain supplementary information is often included with these financial statements, the most common sections are all showcased together into one article.  We urge you to evaluate all of the articles to fully understand every important aspect of the finances of your property’s financial statements.  We also make ourselves available to attempt to assist with specific questions that you may have that are not covered by the articles by emailing us at info@czarbeer.com.

    The balance sheet is a snapshot of assets and liabilities at the end of the fiscal year.  In the most basic terms, assets are what we have and liabilities are what we owe.  After presenting the broad component of asset and liability, there is a net difference section referred to as “stockholders’ equity” (for Cooperatives) and “fund” or “members’ equity” (for Condominiums).  Fund accounting is somewhat different from more general Corporation or business accounting, so we will discuss that in a separate article on the fund balance method used for Condominiums (but not allowed for Cooperatives).

    Returning to the broad component of stockholders’ equity, it is the cash and assets contributed to the business plus the net accumulation of profits and losses since inception, less any dividends.  Being the net of what we have and have not (amounts we owe), stockholder’s equity acknowledges the net amount provided to start the business, plus the closing of the net income or loss each year since inception.  It further includes additions of capital that might be made, less any profit distributions made to shareholders. However, it is easiest considered as the total assets offset by liabilities.

    Assets and liabilities are further classified into components which vary depending on their characteristics as well as the amount of time it is expected to take for each to be converted to cash or satisfied. Generally, assets and liabilities which are expected to or can be realized or paid within one year are considered “current”.  Thus, current assets and liabilities are items either available for use “currently” (less than one year) or items needed to be paid back “currently”. Examples of current assets include cash in the bank, accounts receivable, etc., while current liabilities typically include accounts payable (bills not paid), accrued expenses (items where the bill was not received until after the end of the year), and any part of longer term debt (typically mortgages) that is expected to be paid the next year.  Longer term balance sheet components within assets and liabilities are grouped into differing categories for assets versus liabilities.

    First, let us take a look into the orphan component for assets and liabilities, “other”.  Other assets and liabilities tend to be items which may or may not provide benefit or need to be settled for more than a year to come but do have aspects which require that they not be classified as fixed assets and non-long term.  Other assets often include restricted cash, investments in mortgagee (lending institution), stock and funds that the mortgagee requires being set aside and used solely for specific purposes or as security for a loan to be the most common.  Other liabilities tend to be reflections of accounting standards that match revenue and expenses in the same period as well as items that are not expected to be resolved within the next year, but are not long-term financing.

    This category includes assets such as accrued revenues and deferred charges. Accrued revenues being assessments and similar income which has not been billed or collected but is recorded as an asset to properly match it against a related expense or expenditure.  Deferred charges are expenses which are not booked when paid or incurred in order to record the expense in a later (proper) period.

    Liabilities include deferred revenue which represents assessment or other income received but not yet recognized as income in order to match it against specific expenses or expenditures which have not yet been incurred. It may also include upfront commercial lease payments or signing bonuses which, under accounting standards, are recognized as revenue in equal amounts over the term of the lease or agreement. Accordingly, amounts received but not yet recognized as income are reflected in the balance sheet as “other liabilities”.

    Returning to the most common alternative to the current designation (expected to be converted to/from cash within the next year), are longer term assets and liabilities.  These include fixed assets, which are the property itself as well as investments which are expected to last or provide benefit to the property for more than a year.  On the liability side, long-term debt which is financing needed to be repaid over periods longer than a year.  Long-term debt may be offset by an accounting reflection of upfront costs incurred to obtain the financing, referred to as financing costs.  These are expensed over the term of the debt rather than in the period paid and thus are reflected as a reduction of the debt, although they do not reduce the payments, and thus need to be added back to truly understand the full amount of future payments.

    While specific benchmarks for a property are limited, we did want to touch upon aspects of the balance sheet you should look for.

    1. Total assets should exceed total liabilities. It is always best to have more than you owe! However, this may not be true for Cooperatives due to the fact that fixed assets are recorded at costs, generally incurred years and years ago, and then depreciated, or written off over the “accounting life” of the property, while  real estate typically increases in value over time, and available financing is based upon the increased value of that real estate and the cooperative’s ability to fund debt.  Therefore, for Cooperatives, this metric is most applicable for current assets and current liabilities.
    2. Current assets should exceed current liabilities. Cash will need to be utilized if assets don’t get realized into cash as current liabilities need to be repaid.
    3. Other assets and liabilities are not stale. Evaluate each of these and verify whether there is a chance that they will come due and produce cash or be required to be repaid.
    4. Accumulated depreciation shouldn’t exceed accumulate deficit for Cooperatives since, with intended breakeven operating budgets each year, the net amount of accumulated deficit should equal the accumulated depreciation. If it’s more, that means there have been funded net operating deficits. The question is: “Will that behavior be repeated and will you need to fund your share of operating deficits?”.
    5. There should not be net accumulated deficiency of operations by Condominiums since, with intended breakeven operating budgets each year, any deficit should net out over time. If there is a net negative amount of equity, that means there have been funded net operating deficits. The question here is: “Will that behavior be repeated and will you need to fund your share of operating deficits?”.
    6. Stockholders’ equity for Cooperatives should have a net positive accumulation of initial contributions, profits and losses since inception if the operating and capital budgeted items have been fully net breakeven. If there is a net negative amount of equity, that means there have been funded net operating deficits. Finally, the question is: “Will that behavior be repeated and will you need to fund your share of operating deficits?”.

    We wanted to loop back to another pronounced difference between Cooperatives, which have been showcased so far for fixed assets, mortgages as opposed to loans payable, and stockholders’ equity, and Condominiums, which use fund balance accounting.  This section replaces the references to stockholders’ equity above for any owner of a condominium utilizing this resource.   Condominiums utilize an equity section which reflects fund accounting in order to detail the apportionment of funds for specific uses such as operations and capital repairs.  Generally, the former is general revenue and expenses and the latter represents those funds collected for major repairs and replacements less amounts paid toward such major items.  The designation is comparable to the condominium holding funds on behalf of each unit owner to make major repairs, as needed.  However, these funds are not recorded applicable to each unit owner, but the unit owners in total, and no amount is refundable to a unit owner should they wish their funds back.  Thus, the designated fund for major repairs and replacements of a condominium is the net accumulation of initial reserve funds and capital assessments less capital projects since inception for capital budgeted items.  That really reflects what is left or available for capital projects in the future, while the undesignated Fund Equity for Condominiums offers less important financial information of the net accumulation of initial contributions, and profits and losses since inception for operating budgeted items.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Itemize Your Tax Deduction

    tax-tips-and-credits

    All the talk is that the new Tax Law made such huge changes to itemized deductions that many will simply not look to take many past popular write-offs, and simply use the hugely expanded standard deduction.  But for some, following this strategy blindly may miss expanded deduction opportunities. Let’s take some time to review what still can be itemized.

    Medical expenses are still deductible and limited to the excess over 7.5% of adjusted gross income.  Here is the list that the IRS has in the draft of the instructions for 2018:

    • Prescription medicines or insulin.
    • Acupuncturists, chiropractors, dentists, eye doctors, medical doctors, occupational therapists, osteopathic doctors, physical therapists, podiatrists, psychiatrists, psychoanalysts (medical care only), and psychologists.
    • Medical examinations, X-ray and laboratory services, insulin treatment, and whirlpool baths your doctor ordered.
    • Diagnostic tests, such as a full-body scan, pregnancy test, or blood sugar test kit.
    • Nursing help (including your share of the employment taxes paid). If you paid someone to do both nursing and housework, you can deduct only the cost of the nursing help.
    • Hospital care (including meals and lodging), clinic costs, and lab fees.
    • Qualified long-term care services (see Pub. 502).
    • The supplemental part of Medicare insurance (Medicare B).
    • The premiums you pay for Medi-care Part D insurance.
    • A program to stop smoking and for prescription medicines to alleviate nicotine withdrawal.
    • A weight-loss program as treatment for a specific disease (including obesity) diagnosed by a doctor.
    • Medical treatment at a center for drug or alcohol addiction.
    • Medical aids such as eyeglasses, contact lenses, hearing aids, braces, crutches, wheelchairs, and guide dogs, including the cost of maintaining them.
    • Surgery to improve defective vision, such as laser eye surgery or radial keratotomy.
    • Lodging expenses (but not meals) while away from home to receive medical care provided by a physician in a hospital or a medical care facility related to a hospital, provided there was no significant element of personal pleasure, recreation, or vacation in the travel.
    • Ambulance service and other travel costs to get medical care. If you used your own car, you can claim what you spent for gas and oil to go to and from the place you received the care; or you can claim 18 cents a mile. Add parking and tolls to the amount you claim under either method.
    • Cost of breast pumps and supplies that assist lactation.
    • Medical and dental insurance premiums

     

    So add it all up and remember to reduce by any reimbursements from insurance you received and estimate your adjusted gross income threshold.

    $10,000 of deductions are still $10,000 of deductions! So, for those in high real estate or income tax states, that’s a significant percentage of a standard deduction, a long way toward the determination that standard deduction might not be enough.

    Remember, the rules for deducting interest vary, depending on whether the loan proceeds were used for business, personal, or investment activities. Also, the limits on loans have important milestone dates based on whether the date the debt was taken out either on or before December 15, 2017 or after that date. But if you haven’t refinanced since that date, the rules didn’t change. So consider using your 2017 amount for this determination.

    Generous ones, add all of those letters and notices of the deductible amount that you were sent. Don’t forget your travel to events you volunteered for charity.  Property you contributed is also still deductible.

    One of the lost deductions are casualties which are not part of federally declared disasters.  Only add the qualifying ones.  The infamous other deductions are mostly gone.  Look at the instructions if you have something specific but for these purposes, ignore it.

    Add all of this up and if it is more than $12,000 for a single, or $24,000 for a married couple, you are one of the 30% that the IRS seems to neglect to talk about, when they say most everyone will simply take the standard deduction.

    Let’s work together to make your 2018 return a money-saving masterpiece and work to cut your tax bill to the bone by claiming all of the tax write-offs that you deserve.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Leadership Concepts

    leadership and teamwork

    Leadership tips for those who are data-driven without losing sight of the customer, we all want to make a place where our patrons enjoy spending!  We all learn from those we have worked for and wish to offer our experience as decision-makers for what it takes to be a good manager.  We also need to work to sell to our supervisors funding into our department budgets to implement each.

    Many of us have trouble remembering the chapter in the University management course textbook on how important it is to hear.  But that chapter should have been drilled and drilled as it is most important and a foundation of being a good manager.  Listen to everyone, not just your bosses, but also listening to customers and employees. Talk! They offer you insights, therefore, simply have the humility to ask…or just listen!  The manager who has the patience to manage by walking around and listening.  This makes you both visible, as well as accessible, which truly does make leading easier.

    It’s easy to get caught up in the details, but we are here to remind you it’s the overall experience as much of what we do these days that is the commodity. Make it an experience as opposed to competing on price. Competing on price might offer short-term rewards but why would we want to lead to the bottom? Put your emphasis on each aspect of the presentation of product and staff interactions in order to provide a better overall experience that would effectively differentiate you from competitors.

    There is never a time to not be innovative.  Staying on top means watching for and detecting changes in tastes and habits, embracing new technology, creating a culture of detection of ideas and work towards improvement.  This doesn’t mean simply managing the product. It also means innovative in managing the procedures and the sequences of how they are executed throughout our day-to-day operations.  As our department budgets seem to not grow and with adding the pressures, we experience to grow revenues, you need to excel at doing more with less. Good managers get by, great ones innovate.

    Can you be a servant leader? The days of just telling other people what to do are long gone.  If we want to retain our best staff, we should always be asking where they want to go, observing what they want to do, and help them grow. It builds support, camaraderie, and a team. Finding out how your team works helps you determine talent and helps employees loosen up to you and share the hidden talents that you have no other way of knowing about. Seeking to understand before seeking to direct is an essential skill.

    We want you to be open.  You just plain must be available to change.  Let us stop attempting to experience in the world and preach. Truly exceptional managers transcend stress to be warm personally and open to new ideas. Instead of hunkering down behind mathematical models and their own preconceptions, they make themselves open to trying new things.  Find your ability to engage, to demonstrate your brightness by always being friendly, and thus being the one open to new ideas.

    We want to close with something that truly demonstrates managers who succeed. They turn negatives into positives! Work to transform negative experiences, into at the least, a partially positive one.  This can be achieved through experience, consideration and thought.  By not accepting the negative as the final experience, you are well ahead of those who accept that negatives happen and that the implications are unavoidable.  Move to the level of finding the positive and make your employee and customer experience to be a Yes!

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    The Tax Law and 401k Plans

    happy retired couples

    So, are you one of those who dreams of a comfortable retirement, but struggle to maximize your contribution to your company’s retirement plan and the amount you can save just isn’t large enough for you to retire comfortably?

    The good news is that the new Tax Law may be coming to the rescue. While certain high-profile companies provided employees with bonuses last year after the tax overhaul law sharply lowered the corporate tax rates, some are instead increasing their contributions to employee 401(k) retirement plans.  Thus, the company’s contributions are added to what we all struggle to sock away each year and the increments can be substantial.  What goes around, comes around as companies moved from footing the bill for retirement and now its the executives who aren’t vested into huge employer contributions, and the tide begins to turn.  By returning overall compensation to other than salaries and bonuses, some are taking a longer-term view and working to motivate a company’s most important asset, their employees.

    Let’s review.  An individual 401(k) account is generally a worker’s retirement savings vehicle, as we have all heard what to expect from social security as the baby boomers retire. Presently, you can contribute up to $18,500 a year in 2018 into your company’s 401(k) plan, while those 50 and older can put in up to $24,500 a year. These investments grow tax-free until they are withdrawn, and employers typically match with a percentage, essentially providing workers with tax deferred compensation.  The more of the latter, the less of the former is what is needed.

    It’s always surprised us that many employees don’t take the full advantage of company-sponsored 401(k) plans by maximizing the matches.  We are seeing trends where it is hard to see how many will have enough to retire comfortably.

    So, let us all get on the “add to your worker’s retirement savings” mentality and all suggest to everyone that we know that the additional compensation that companies should provide from their post-tax reform profits be returned to employees in this manner.  Let us stress the goodwill of “making the employee in America considered great again”.  Send the message on to all you know and become part of the movement.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Moving Out of State to Avoid High Taxes? Think Carefully

    union square in new york

    After 2017’s end-of-December decision regarding whether to prepay taxes is set, the limitation of deductibility of state and local taxes seemed to drop off the radar. However, it seems to be coming back into the limelight as the first milestone of its effect rears its head this spring.  For the wealthy tri-state area set, there’s more buzz than ever about fleeing south to Florida, the land of mild winters and, more importantly, zero state personal income tax.

    We have known for years that the tax collectors in states like New York make it really hard to leave. Those who hope to maintain a home in a high tax state are realizing that, after they hear about the scrupulous records that they would have to keep showing they’ve really uprooted their lives and severed ties with their former states. Their other realization is that it’s not as easy as just spending a few more days a month in a Florida vacation home, it’s easier to just stay put!

    New York’s Department of Taxation and Finance will go to great lengths to keep wealthy residents on their tax lists. The states’ methods can be aggressive: issuing subpoenas to pour through credit card statements, bank transactions or phone records to track a taxpayer’s location; and even sending auditors to interview the building doormen.

    Before you take this plunge, be sure that you understand how you have to change your life circumstances to qualify as a Florida resident. What’s involved is a truly huge life change and we are observing that less than 10 percent of clients who express an interest in moving are actually going through with it. As we have always suggested, except for the ultra-rich, it’s rare to find a situation where it’s worth uprooting just for tax reasons.  We stress family considerations and community ties over a few dollars.

    For those of us who choose to stay, more than 10 percent of New Jersey residents will see a tax hike this year.  In New York, it’s 8.3 percent who will see higher levies.  As the politicians expected, life comes first and many of us will just absorb these additional costs to maintain the lives we have chosen.  But please be prepared for what might seem to be a different tax situation this April than you have been used to over the past few years and contact your tax professional before deciding to move to a lower tax state.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    High Income Filing and Avoiding the IRS Audit

    irs tax forms

    We all know that the IRS looks at less than 1% of returns filed. The good news is that they are short on personnel and funding and a vast majority of those audited simply get a letter that they have to pay.  The likelihood of the dreaded, and it should be, tax audit escalates depending on various factors: income level; types of deductions/tax breaks that you claim; the business that you are engaged in; and whether you own foreign assets.

    So, the number one way to get their attention is to do something we all try to do, year after year: make lots of money!  But we are talking about those that make “real” money, so, report $1 million or more of income and there is a 1-in-23 chance that your return will be audited.

    Then, your deductions should be statistically proportionate with your income. Your accountant can comment on whether you are stretching things and where, we believe, if you have a valid deduction and reason for claiming it, to stand tall.  Many deduction investigations can be cleared with discussion between us and the IRS.  There is rarely a reason to pay the IRS more tax than you owe.  But what we do advise is to make sure you consider higher-than-average deductions with knowledge and thought.

    While we wish to remind you that if your charitable deductions are disproportionately large compared with your income, it raises the audit risk flag, we know that we all do our fair share of charitable assistance, whether in the form of contributions or our volunteer work.  It’s hard to overlook the big charitable gifts you made during the year, but the little things add up too. For those of us who volunteer, we can easily miss the write-off of out-of-pocket costs incurred while doing work for a charity. Just a reminder, if you drove your car for charity in 2018, remember to deduct 14 cents per mile, plus parking and tolls paid.  Ways to support these possibly questioned deductions are by keeping journals and when your contributions total more than $250, protect yourself by obtaining an acknowledgement from the charity documenting that support that you provide.  This potential audit is quite easy for us to close as it’s hard to question well documented generosity.

    Many of us run a business in order to make our above average incomes, however, the IRS believes that self-employed people may sometimes claim excessive deductions and may not report all their income.  So, higher-grossing sole proprietorships, those reporting at least $100,000 of gross receipts on a Schedule C, and business owners who report a substantial loss can expect a greater  chance of having to go through one of these audits. But still, some self-employed taxpayers get a big break under the new law, and Schedule C is a treasure trove of tax deductions for self-employed people.

    Agents are on the lookout for personal meals or claims that don’t satisfy the strict substantiation rules. Remember, in order to qualify for meal deductions, you must keep detailed records for that document for each expense: the amount; place; people attending; business purpose; and nature of the discussion or meeting.  Also, it is best to keep receipts for expenditures over $75 for lodging or any other expense while traveling away from home. The new tax law eliminated the deduction for entertainment expenses, so business owners need to be careful when deducting entertainment expenses such as golf fees or sports tickets for a client outing.

    Cash-intensive businesses will get special scrutiny and now also those who freelance service through the sharing economy. Pass-through firms such as S-Corporations, partnerships and limited liability companies face less audit risk. When you depreciate a car, you have to list on Form 4562 the percentage of its use during the year that was for business. Claiming 100% business use of an automobile raises a flag on an individual’s because it is rare for someone to actually use a vehicle 100% of the time for business.  The best way to protect yourself from this audit risk is to have another vehicle available for your personal use.

    We all love our heavy SUVs and large trucks, and of course, use them for business. As these are eligible for more favorable depreciation and expensing write-offs, we love to buy them late in the year.  These are areas where we are seeing increased IRS inquiry, so be sure that you keep detailed mileage logs and precise calendar entries for the purpose of every road trip. Exceptional record-keeping is your best defense with these deductions.

    Many in the real estate industry are attracted to the exception for those who spend more than 50% of their working hours and over 750 hours each year materially participating in real estate as developers, brokers, landlords, or the like to circumvent the passive loss rules and take deductions for investments in real estate. Others like to fanaticize that they actively participate in the renting of their property, so that they can deduct up to $25,000 of loss against other income. WARNING: The IRS actively scrutinizes rental real estate losses, especially those written off by taxpayers claiming to be real estate pros. It will question those who claim that they are real estate professionals and whose W-2 forms or other non-real estate Schedule C businesses show lots of income. Without documentation of working the necessary hours, especially in cases of landlords whose day jobs are not in the real estate business, the Tax Examination will be painful.

    Most of this article is to clue you in on the high-risk areas but if you don’t want to hear from the IRS then be sure to report all of your taxable income.  Remember, the IRS gets copies of all the 1099s and W-2s that you receive, so at a minimum, be sure that you report all required income on your return.  Like sales slips we get at retail stores, these little slivers seem to not all find their way to us from our clients.  The IRS computers are pretty good at matching these up.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Benchmarking Your Property’s Performance

    benchmarking property's performance

    In the interest of education, we wanted to put together a list of benchmarks that you can apply to your property’s performance.  Many have requested that we share what we see within our work in order to allow Board members and unit owners the opportunity to compare themselves against others.  For those interested in best practices of the Board monitoring function of internal controls, this also serves as the chance to highlight an aspect of finances that might be out of whack, thus indicating areas for improvement and those with higher risk that theft or fraud might be occurring. Just a reminder, the Board should serve as more than the ultimate decision maker but also as monitor of operations.  We suggest all Board members establish a periodic comparison as an important internal control.

    Minimum cash/reserves per unit

    So we are wondering what you heard should be in the reserve fund?  Comments of three to six month carrying charges tend to be the reply.  Our premise is that you can’t truly know the appropriate amount unless you have a physical needs assessment accomplished.  With this, an independent engineer predicts which systems will need extensive renovation or replacement and estimates the expected costs. Only with that information can the Board truly understand the amount they need to maintain or should have.

    We understand that is an involved and costly process, so we took a look at what our clientele maintained. So, you have a reserve fund, but is it reasonable?  We determined that a per unit comparison level was the best metric and that there is a usual range. Does your property maintain a minimum reserve fund of $2,000 or $100,000? That appears to be what buyers and lenders are looking for as they shop for a unit to invest in.  In order to have a well-dressed annual Financial Statement your reserve fund needs to be at least these minimums.  That means that your Board cannot spend any of a reserve fund at that level or lose the minimum needed to meet prospective buyers’ requirements

    Annual monthly carrying charge increases

    Nobody likes to pay more, but costs do continue to rise in markets like New York.  If you didn’t get an increase this year, be thankful.  Our properties are seeing in general, increases of 1% to 3%.  If yours was higher, we suggest you learn the reason.  It may be appropriate but at least your Board should understand the issue, which lately in New York has been real estate taxes, when this metric is exceeded.

    Debt per unit

    The amount of debt per unit tends to translate into how high maintenance charges are compared to other properties.  Generally, you should look for debt per unit to be $40,000 to $60,000 in strong New York City markets, somewhat lower in the outer Boroughs. If a building’s debt per unit is out of the $40,000 to $60,000 range, it’s a sign that there might be an issue.  Further investigation on your part is needed to see how what you are paying compares to other properties.  It could be that the property can carry the additional debt and it’s not be an issue.  It could also indicate higher monthly carrying charges as that debt carries higher service costs than lower debt levels.  With rising interest rates there is substantial risk that when a loan obtained during the last decade comes up for refinancing that those costs will skyrocket due to a higher interest rate.

    Long term funding method

    Reserve funds are the wallets the property has available for future major repairs, so what’s being added to your wallet?   Let’s face it, properties need long term repairs.   Where do those funds come from?   Well, we are getting to the point that additional borrowing might not be practical.  So, your property needs a long-term funding vehicle. Consider a transfer fee or an allocation of monthly carrying charges.  A transfer fee can be imposed on departing owners. Such fees are now becoming expected in the market.  Another option is an annual allocation of monthly carrying charges to capital. Thereby, funds are set aside from what as unit owners pay each month. Either way it’s important that such a long-term program be in place.

    Unit owner receivables

    Life happens and sometimes people can’t always just pay right now. We want your Board to consider having an operating budget that reflects the potential of late payers, say 1% of revenue each year is set aside as potentially uncollectible.  But wait a minute, what’s with that, all my neighbors aren’t current in their payments?  Unfortunately, late payments do happen, what we don’t see happening is a cushion to absorb the tardy payments. Your property needs to be prepared for a potential shortfall for non-payers, and as we mentioned, 1% for annual charges usually suffices.   But if arrearages start to grow above that level, it’s best to spend the time to better understand the situation and what’s being done to collect what’s due. Make sure your Board collects everything its due.

    Minimum working capital levels

    Even if you timely collect expected revenue, figure that you need minimum working capital to run a business of about 1/2 month’s revenue.  So, if monthly revenue is on average $10,000 per month, you need as a minimum to keep 1/2 that amount or $5,000.  Let’s face it, business operation requires working capital.  Putting aside seasonality of a business, most can get by on 1/2 month’s average revenue.  So, if your business is doing $1.2 Million in annual revenue, you need at least $50,000 of working capital.  That doesn’t mean there won’t be calls for capital; it’s just a rough guideline for the bare minimum.  It is best to leave management in a place where they have available at least minimum resources to operate.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Build Fraud Resistance Into Your Business, Pt 2

    fraud-proof your business

    We all hear about fraud here and there.  We take solace that if our credit card is lost or stolen that we are not responsible for more than $50 and that the bank will resolve any issues we detect when reconciling our bank accounts. However, fraud in small business is so much more. The scary part is that it happens so much more than these basic personal risks.

    It gets complicated for business because it just plain happens. The familiar pattern is once it occurs and goes undetected or unconfronted it grows and can become huge.

    Let’s understand the philosophy of fraud, commonly referred to as the ‘fraud triangle’.  Certain conditions seem to create an atmosphere that promotes it and it’s important that the small business owner understand these conditions. It all starts with opportunity.  Let us face it, no matter how secure internal controls are, opportunity is constantly created or can be devised by those seeking to develop such opportunity.  There are a certain percentage of employees that will act solely on opportunity. For the purposes of this article, we will assume that the employee approval process, complete with background checks will minimize the risk of your business hiring these folks. You do perform background and credit checks on all prospective employees, right?  Well, if not, you run the risk of relying on interview policies and skills to do more than most businesses have learned to expect.  So then, please, commence the credit and background check process on all new hires to identify those who will likely steal solely when afforded the opportunity to do so.

    Another side of the triangle is pressure, generally financially related. The pressures can range from spending beyond means, to unexpected (like health of a loved one) bills, to compulsive behaviors.  Suffice it to say, that its pressure that greases the wheels for the normally honest employee to succumb to the temptation of opportunity.  Once the slide is greased, and should fraud theft not be detected or confronted, nor the principal’s culture be one that the employees believes that they will be caught, pressure will allow the temptation to grow. It grows like a cancer and there is nothing left to stop it once the last side of the triangle occurs.

    Rationalization is when the perpetrator develops a perception that they are entitled to commit fraud.  We see it in our current political environment, that the wealthy make too much, and the common folk are left to suffer. Other rationalizations include just rewards when passed over for a promotion.

    What matters is that the level of attention a business owner or principal devotes to fraud sends a powerful signal to employees about its importance and prevention.  So, is fraud prevention part of your company’s culture? We operate in an environment in which employment surveys note that up to 5% of job applicants have a fraud history. Now this damaging information won’t appear on their resumes as small businesses rarely prosecutes the fraud perpetrator. For you as small business principal, it all starts with observation of how much or well things are watched over.  Therefore, it’s all about management, and how well you or your structure manages and supervises is incredibly HUGE.

    Several business routines will minimize loss, improve employee performance and when you work to prevent fraud from inside your organization, you win. You see, 37% of fraud is initiated by internal sources.  You need to prepare for fraud strikes from inside your organization, it’s all about your management culture! Structuring work and carrying out day-to-day responsibilities with an eye toward fraud prevention can best work to stop fraud from happening.  Home-grown security, and your hard work to support a culture of control and accountability, will positively affect your overall business prosperity. Unfortunately, it is the simplest of fraud prevention actions that are the least likely to be taken by small business owners.

    Let’s start with the simplest precautions that you can use to save yourself from future fraud trouble.   Research who you hire because it has been determined that 5% of workforce has some level of dishonesty or has previously been involved in fraud.  With hiring levels reaching near capacity of the workforce, it is not unreasonable to expect that a greater percentage of present job applicants have previously dirty hands.  You see, small businesses does not have the resolve nor resources to prosecute guilty parties, but as small business owners we need to change that.

    It is vital to use due diligence with thorough interviews, to obtain valid independent references and make calls to past employer.   The excuse that we don’t have enough time for formal background checks just doesn’t cut it, so under no circumstances can they be skipped as they are required to build a trustworthy team. Don’t find out after a breach that the warning flag was waving and you looked away.

    As accountants, we are constantly asked about appropriate segregation of duties. Yes, we understand that they have a cost, but the risk adjusted cost of a loss is higher.  No more cost-effective strategy has been developed.  Building a company culture of honesty starts with Executives.  Think of employees as a family and realize that, like children, employees see and understand everything.  Don’t give any single employee too much authority.  Structuring appropriate separation of duties with financial checks and balances avoids the concentration of too much power in one person.

    Large companies expend huge resources to train employees and it just seems, due to limited resources, small business seems to not follow this lead.  But it is important to give you and your employees the confidence that business finances are being handled correctly.  Set up training sessions to teach employees how they can help prevent fraud with diligence.  Taking the time to annually remind employees of the values and expectation that fraud will not be tolerated is the only method to build a culture that can stand the test of time and excel at profitability. Build into the daily operations of your business that adherence to operational guidelines, roles and responsibilities is the ONLY option. Automation of financial transactions removes the human involvement and thus minimizes the risk of fraud.  Online banking services provide transaction, balance and utilization reporting for easier reconciliation. Realize though, that the reconciliation is quite important as online access to bank accounts is available without a check or authorized signature.  It is believed that only half of small business owners review bank statements, credit card charges and accounting books. Frequent reconciliation identifies financial red flags early.  Adjust your individual thought process to put on your fraud hat! You need to think like a thief, can you do that? Take improvement culture to a new level, by establishing an avenue for employees to annually report areas of improvement.  Make sure that you act on important suggestions, and, even if it is deemed to be too costly to protect against, consider buying insurance! Showcase and reward the employees that report and suggest!  Listen to them, they are in the trenches of your business warfare.

    Another option for reducing the risk of fraud and to better uncover weaknesses is internal audits and reviews. Utilize your CPA for more than meeting filing requirements and maybe saving taxes.  Coordinate on vulnerable areas and realize they are a tremendous resource of what is being accomplished at other small businesses when you encounter a specific threat. Regular fraud audits signal your commitment to reduce fraud and keep your business secure.

    Yes, this can all be quite costly. Yet, we haven’t yet found the alternative solution to this potentially business closing risk. As we mentioned earlier, the loss costs of fraud can be huge and those re not simply in the form of dollars, but also in reputation and lost revenue.  Please take away that you have no choice but to invest!   Please share with us your ideas so that we can all do it better!

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Build Fraud Resistance Into Your Business

    fraud resistance

    We all wish to live think that others think like us and have the same morals we do   You are proud or each and every quality employee within your organization and rightly, you should be. We need to forewarn you that there are bottom dwellers out there in the job market.  They do not share our morals nor believe that they have to work for a living.  They are the 5% of job seekers who hide a checkered past.  Their resume will mostly likely be black and white.  The jobs they list will be the ones that they can afford to let you know about, the missing ones will be the ones you want to know the most about.  And when asked about that gap, be ready for the explanation that you’ll say to yourself no one could make up.  You’ll feel comfortable enough to hire.

    You see small business doesn’t take the time to prosecute employees they know or think committed fraud or defalcation, and these employees know it.  So they tend to swim the high employment tide into jobs that no one else is available to take.  The better ones accumulate enough to hold themselves over to the next instance.  So, with unemployment less than 5% we remind you how important it is that fraud prevention be part of your company’s culture.

    While we all attempt to avoid hiring such types, we think you better be prepared for it in this high employment environment.  What helps most to protect against this risk is the amount of attention that a business owner devotes to fraud. That sends a powerful signal to employees about its importance and prevention.   Then, the honest ones help sniff out the cave dwellers.

    We want to suggest that you structure your work and the carrying out of day-to-day responsibilities with an eye toward fraud prevention so that this can be stopped in its tracks and then fraud is less likely to happen. We are going to suggest several business routines that will help to minimize such loss., They will also improve employee performance and security, and positively affect your overall business prosperity.  We’ll say it again, they will guard against fraud, make things better and allow you to better prosper.  Who’s listening now?

    We want you to take the time and resources to prepare your organization for fraud strikes.  These strikes are most likely to come from inside your organization.  That’s right, we watch the bank and credit card statements for items incorrectly posted from outsiders and the risk from inside is about two-thirds as much.  Surveys have shown that 37% of fraud is initiated by internal sources.

    Simple precautions can save you from future fraud trouble:

    • Research who you hire – Conduct due diligence with thorough interviews, references checks and past employer calls. Don’t skip formal background checks: they’re required to build a trustworthy team.
    • Separate duties – Don’t give any single employee too much authority. Structured separation of duties with financial checks and balances avoids concentrating too much power in one person and gives you and your employees the confidence that business finances are being handled correctly.
    • Educate employees – Set up training sessions to teach employees how they can help prevent fraud with diligence and adherence to operational guidelines, roles and responsibilities.

    By expanding precautions, you can add more security:

    • Conduct frequent reconciliation of accounts – Only half of small business owners review bank statements, credit card charges and accounting books. Frequent reconciliation identifies financial red flags early.
    • Online banking services provide transaction, balance and utilization reporting for easier reconciliation.
    • Fraud audits – Regular fraud audits signal your commitment to reduce fraud and keep your business secure. Reduce risk and uncover weaknesses with audits and reviews by your CPA.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Improving Your LinkedIn Profile

    linkedin profile

    Many savvy professionals maintain their LinkedIn account for years but tend to leave it dormant in a vain effort to attract job offers or enhance their business, but then only the most dedicated “surfers” tend to find them.  Facebook and Instagram seem to draw more of our attention to supply content.  But even then, as time and life move on, so can our attention to our presentation.  Let’s take a journey into simple and effective ways for you to enhance your profile to its fullest potential.  We are hoping to show you that there is so much more you can do with your LinkedIn profile than you might have realized.

    It just seems that a lot of people create a LinkedIn profile at the beginning of their career and might go in and update it when they get a new job and such, or every now and again.  If that’s you, we are not here to tell you that you’ve been using LinkedIn wrong this whole time, but LinkedIn is so much more than an online resume to get a new job, it is truly a professional platform to showcase your work in your industry and a central place to build your brand.  We see brand building everywhere we turn in media marketing outlets.  Concepts range from giving people what they want, to drawing attention using out of the ordinary antics which then loop home to a large company’s brand.  There are concepts that use common sense and professional presentation to leave YOU as the brand to those who connect to reach you in searches.  Understanding the way LinkedIn uses analytics for searches and relying on their advice as to what works for others can set your brand on fire.  At the very least, considering that there are more than 450 million LinkedIn members worldwide, it’s more important than ever to get away from the stale resume rehash and find ways to make your profile stand out from the crowd. Ready to make your LinkedIn profile come to life?

    Newsflash: your headline is your most prime real estate on the platform, let’s face it, it’s the first thing people see in a search result and when you comment on others’ status updates and posts.  If you only have your job title and name of company, that won’t help differentiate you from the pack, no brand building there.  If you really want to stand out, skip this dull approach and instead play around with your headline to make it more interesting.

    No hiring managers or recruiters’ type in a company name when searching for candidates!   They use keywords like ‘process improvement’ or ‘lead generation,’ along with job titles, to find someone with a set of skills.

    So, when writing your headline, enter your job role (it doesn’t have to be exactly what’s on your business card), plus industry keywords to help you come up in search results, plus a branding statement that reflects how you provide value to an employer.  For instance, change “Category & Channel Manager at Office Depot” to “Award Winning Category & Channel Manager | Multi-Channel Marketing | Invigorates Brands, Sets Retail Strategy for Growth”.

    While the words you use on your profile will certainly have an impact on people, you should also choose a head shot with care.  There is no better way to make a lasting first impression.  Whether you like it or not, people will make a quick judgment on you based on your picture!  You are looking to add a clear, clean, striking head shot. While it doesn’t have to be professionally done, this is one place not to skimp, remember, you need to see your photo as the visual manifestation of your personal brand on LinkedIn.

    LinkedIn offers an option to add a background photo, and career pros say you should take advantage of this often-overlooked feature.   The background image affords you the additional opportunity to make your profile stand out to visitors. This new feature on your personal profile homepage should not be ignored because it is underutilized by most users and affords you an additional opportunity to brand yourself.   Take the time to consider what type of impression you want to make when choosing a background image—just be sure that whatever image you choose isn’t distracting and that you have permission to use it.

    Let’s not regurgitate our resume but instead work it socially.   Try to make it a conversation describing yourself and your accomplishments.  This personal approach moves you away from a profile of a chronology of places worked.  Tell your story, use the space before your work history to tag those search concepts.  People want to hear from you authentically as you tell the story of who you are and what you have accomplished.  Remember, we are more relatable when we write in the first person.  They truly want to know what YOU do and what YOU care about. This helps people see you as more real and approachable

    What’s the point of having a LinkedIn account if nobody can find you? Use the keywords recruiters will be searching for by incorporating such keywords throughout your profile, including in your headline, summary and work experience sections. This can increase the likelihood of coming up in search results and showing up on the first page of results for whatever keywords you choose if you have enough of those keywords in your profile. Recruiters are likely to contact those candidates whose profiles show up first in a keyword search. Drive traffic to your profile by adding those keywords that recruiters will search for, such as, if you are an IT specialist, Palmer suggests using keywords such as “user support,” “issue resolution,” “troubleshooting,” “configuration of laptops and PCs,” “IT conversions” and “installations.”

    LinkedIn allows you to add images, sound bites, video, PDFs and PowerPoint presentations to your profile to add context and color to your words. Instead of simply telling people why you’re great at what you do, consider showing them what you’ve accomplished by adding multimedia to your profile.  These can be a powerful way to reinforce the skills and experience you describe.  But only use good quality images, and don’t flood your profile with masses of content because generally less is more. If you’re adding videos, make them short and snappy. Your audience is unlikely to have the patience for more than a 3-minute video. So, if you do decide to use multimedia, just be sure to keep these concepts in mind.

    Seek out recommendations! These go a long way, so it is important to be sure that your LinkedIn profile contains at least a few glowing reviews from people you have worked with who can vouch for your skills, leadership style, professionalism and character.  These clearly demonstrate your credibility and allows you to stand out among your peers.  Those you work closely with can be asked if they would be willing to write a recommendation for you.  Offer those you work closely with, such as a manager, colleague or group member, to exchange recommendations.  Don’t forget your volunteer experiences, co-curricular activities and projects.  Build on that brand!  Supply recommendations to all of those in your network and see how many come back as returns.

    We are coaching you to avoid creating your profile then just walking away.  Take the time to engage in your community and share content.  It’s vital to realize that static content alone, no matter how well written, isn’t enough to get you noticed, however, engaging regularly with your network will increase your profile views. Take the time and trouble to ‘Like’ other people’s posts, share your status updates and industry information and help connections when you can by sharing resources or job leads. That simple step alone puts you well ahead of the many people who take a ‘set it and forget it’ approach to LinkedIn.

    Expand your presence by joining LinkedIn groups related to your industry to get to know people in your field.   Go further than simply joining groups, try to work at this to engage them on a weekly or monthly basis.  One basic method is to comment on an article a recruiter has published or shared with the group. This is a way to demonstrate thought leadership, display engagement and create a more natural relationship should a recruiter reach out to you.

    It is important to prioritize the information on your page.  You can manipulate the experience section to avoid following the Summary directly.  Consider moving sections up—like Projects, Publications or Volunteer—if the information there will better highlight your expertise and accomplishments.  Work to order the information strategically with the goal to strengthen your career story and personal brand to create an even stronger first impression. To reorder a section of your profile, go to “Edit Profile,” then hover your mouse over the section you want to move. Next, click and drag the vertical arrows in the top-right corner of the section, dropping the section at the place on your page where you’d like it to appear.

    LinkedIn automatically assigns profiles a URL that consists of a series of random numbers and letters. To make your profile more personalized, take advantage of the feature that allows you to create your own URL.   This is one of the easiest things anyone can do, but so many people don’t even think about it. Your LinkedIn profile URL does need to have your first and last name, not a jumble of code, to brand you properly and show that you take your online presence seriously. To change your LinkedIn URL, select “Edit Profile,” then underneath your profile picture, click the “settings” icon next to your current URL. You’ll then be taken to your public profile. On the top right of the page, click the “edit” icon next to your URL, then customize the last part of your URL (after www.linkedin.com/in/) so that it contains your name.   Once you’ve created your personalized URL, consider including it on your resume so that it’s easier for hiring managers to find you on LinkedIn.

    Assure your contact information is entered and current.  This sounds like a no-brainer, but many people make the mistake of leaving out their contact information on their LinkedIn profile. If I can only reach you through LinkedIn and we’re not connected, that limits my ability to reach out and I like people who make it easy to connect. Be sure to include the contact information that you are truly comfortable sharing.

    Ultimately LinkedIn, like all social media, is about starting a conversation, so include profile elements that encourage that.  So, take the time to work toward the goals highlighted here and improve the chance of success in your new ventures!

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Retirement Planning Investment Strategies

    Whats Your Plan for Retirement?

    When interest rates were bare bottom some of us felt that moving funds around to bank accounts earning more wasn’t worth our time.  Now that interest rates have moved up we wanted to loop around to remind everyone that periodic review of the returns on retirement funds is vital to any retirement plan. Money is flowing from bonds due to a perceived rise to higher interest rates, so a rotation seems to be under way.

    For those who seek to have their cash readily available, now is the time to research better return money market accounts than your standard bank or money market account.  If you are dedicated to maintaining your funds under one investment company umbrella, so everything is in one place and on one periodic statement, we suggest you call to inquire about additional options.  Be sure to question availability of funds without penalty and risk of loss of capital if you are staying with these readily available investment fund types.  Query regarding minimum balances and limits/cost of transactions, such as withdrawals.

    Online savings accounts can be a new product for some long-term investors.  What you give up in a brick and mortar bank or brokerage office, you more than make up for with higher yields.  Well-known names such as American Express, Barclays and Goldman Sachs offer these as well as internet-based only investment companies.  Again, for those concerned with availability and not locking up funds, these savings vehicles offer many aspects you are used to and interested in, yet with yields ten times what you are receiving now.  If you are leery, start small by opening an account with a minimal balance and see how the process works and your ability to verify your balances online.

    With rising interest rates a certificate of deposit or CD might not seem like a good option as you take on interest rate risk or become subject to a penalty should you need your funds.  Essentially, you deposit a sum of money for the bank to hold for a fixed term of anywhere from one to five years. You typically can’t access this money before the end of the term without incurring a penalty. But during its time sitting in the bank, your money can gain twice as much interest every year than if you’d put it in a high-interest savings account.  CDs are considerably lower risk than investing in stocks or mutual funds and are ideally suited for shorter-term savings goals. A CD is an accelerated savings account and by using a laddering strategy you can spread out maturities and have the peace of mind that a certain amount of funds will be available periodically.  An example is with $500,000 to invest and having access to $50,000 every six months. You can start the ladder using $50,000 CDs at 6 month intervals, thus one at 6 month maturity, then a year, then a year and one-half, etc.  You will end up with ten $50,000 CDs with varying rates, the longer term higher than the shorter periods.  The trick is to renew each at a five-year maturity in order to get the higher yield. The work is that you have to remind yourself to reset the term every 6 months upon renewal.

    For those concerned about the FDIC insurance levels of $250,000 per bank, many large investment houses will allow you to invest in CDs of different banks all under their account umbrella.  You receive the FDIC insurance on a larger than $250,000 balance and yet maintain the convenience of everything in one place and one periodic statement as well.

    Just to loop you back to an important thought, despite running the risk of losing your money, successfully investing in stocks has proven to work as the best long-term strategy. The best options are growth stocks and income stocks, or mutual funds or exchange-traded funds that pay regular, increasing dividends over time.  It’s coming on ten years of gangbusters returns in the stock market so we remind you that we might be at a time where there will be a pause in stock price appreciation, maybe even a longer term correction so rotating some of your positions to less riskier products discussed above might make sense. Just a reminder, you may need to pay capital gains taxes if you sell positions.

    The flip side of risky investing is not investing at all because you’re afraid of the risk. The result is that you’ll shortchange yourself and make far less money than you need. An above-average rate of return is vital to a long-term retirement investment strategy, but for those approaching retirement (within ten years) pulling some chips from the table and letting the banks hold it for you makes very good sense.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Retire on Time

    Whats Your Plan for Retirement?

    Let’s face it most everyone makes that first step toward retirement by choosing the age when you WANT to stop working. But unfortunately, that becomes their last step, while it’s only the beginning when it comes to their retirement planning.  We are here to remind you what more is required in order to achieve that dream, that dream of the age you wish to retire.

    This dream is going to require a plan and when it comes to finances, plan is a four-letter word to most people.  If you’re in your 40s or 50s and you haven’t started thinking about how you will actually achieve your retirement and what you’ll do when you stop working, let’s look at the five most common mistakes so you can decide if it’s time to get serious.

    The five major reasons why people are forced to keep working far longer than they expected:

    1.     Underestimating how much money you’ll need

    While it’s hard to guess how much money you need to save to retire comfortably, it’s probably more than you realize. Generally, you’ll want to cover 70% to 90% of your working income with a combination of your savings and Social Security. If that’s more than you thought, it gets worse. The Economic Policy Institute has found that the median retirement savings for Americans between ages 56 and 61 is just $17,000. Further, more than 40% of baby boomers approaching retirement don’t have any savings at all.

    2.     High living expenses

    Many people have difficulty saving for their retirement because their cost of living is too high and they don’t have much left over for retirement savings after paying bills. Some dream of getting by with a smaller amount because they plan on transitioning to a thrifty lifestyle once they retire. Unfortunately, this assumption has two flaws:

    First, not putting money aside now is just postponing the fact that you must put money aside. If you don’t do it now, you’ll have to do more later. That will almost certainly mean having to work past your projected retirement age.

    Second, it’s harder to give up an expensive lifestyle with a big house and nice car than you might imagine. The longer you have it the harder it is to part with. If you reach retirement age and realize you want to keep these luxuries, you’ll have to keep working to save extra for a more comfortable retirement.

    3.     Overspending on housing

    Apartment living is very common in Europe and other parts of the world, but it doesn’t really jibe with the white-picket-fenced American Dream. If you’re living in the United States and you own a house, there’s a good chance it’s bigger and more expensive than you need. A report from the Joint Center for Housing Studies at Harvard found the number of Americans who can’t afford their homes jumped 146% from 2001 to 2017. The problem begins during house shopping, when people fall in love with a house and then start pulling strings to see how they can pay for it. Unfortunately, this results in mortgage and maintenance costs that leave little money for retirement savings or investing.

    4.     Investing too aggressively or not at all

    The search for bigger returns leads many people to invest heavily in stocks, which yield higher returns than savings but are riskier thanks to market volatility.  It’s coming on 10 years of superior market gains.

    5.     Not having a plan

    Many people choose an age that seems best to retire and leave their “retirement plan” at that.

    However, if you don’t create a solid plan for your retirement, you may find yourself a year or two away from it and you won’t be ready. You may not have enough saved or you might not have thought about what you’ll be doing with all your free time!

    Read on to see how you can fix these issues and increase your chances of retiring on time:

    1.     Accelerate your savings

    If you’re behind on your savings, you should still be able to retire on time if you increase how much you’re saving during your last 10 years of work. You can accomplish this without entirely devastating your current plans and lifestyle. How?

    2.    Cut your lifestyle spending

    So, what’s the solution? Simple: begin to gradually decrease your lifestyle spending ahead of time. Look at how much you make a month. Driving the newest car can be expensive, and so are cable TV, premium mobile phone plans, and eating dinner out several times a week. If you begin to cut down on your monthly spending, you’ll have more money left over to put into your saving account, a CD, or another investment that will get you to your savings goal faster.

    3.     Downsize

    If having a bigger house than you need is making it impossible to save for retirement, then consider downsizing in the years before you stop working. This will allow you to put more of your income toward your retirement and increase the chances that you will be able to retire on time. Downsizing earlier will also make your transition to budget-friendly retirement living easier.

    Finally, keep in mind that the city where you choose to retire can make a big difference in the quality of life you can achieve with your savings and Social Security.

    4.     Get higher returns on your money

    Putting your money in a certificate of deposit is a good middle ground that gets you higher returns than regular or high-interest savings accounts while avoiding most of the risk that comes with investing. When you lock your money down for one to five years in a CD, you’re locking into a particular interest rate. The risk is that if interest rates go up, the interest on your money won’t — because you’ve locked in. To reduce this risk, you can consider putting your money in a one-year certificate of deposit that will lock in the interest rate but won’t force you to stick to it for too long if interest rates do go up. The next year you could simply put your money in another one-year CD and reap the benefits of higher interest all over again.

    5.     Create a retirement plan

    A retirement plan should begin with how much money you think you’ll need each month to cover housing, food, and other monthly costs that will ensure a comfortable lifestyle. Cross-check this with your sources of income, including your Social Security, savings, and perhaps part-time work. If there is a gap between needs and how much money you’ll have each month, then you’ll need to fill it by padding out your retirement savings and possibly working a few years longer than you originally planned. It won’t be the end of the world if you have to work a few extra years before you retire, and it’s best to make the most of it. The less time you have until retirement, the more important it is to gain the highest returns possible on your money, including from CDs.

     

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Important Cyber Security Tips – Part 5

    cyber security

    Essential Tips for Better Network Security, Part 2

    Train Employees

    It’s always a good idea to have clear and concise policies in place when it comes to the security of your computer networks. However, if you want to ensure that employees behave appropriately, it’s best to implement mandatory training so that they know exactly what the rules are, how to behave when using company resources, and what consequences they’ll face for breaking rules and putting the company at risk of a breach in the process.

    Often, breaches occur not because of inadequate protections, but because of employees visiting dangerous sites, clicking harmful links, or downloading files that contain malware. These actions allow hackers to walk right in the front door, so to speak. By providing every employee with training on how to spot and avoid such issues, you have a much better chance of staving off a breach.

    Double-check Downloads

    Even with proper antivirus/anti-spyware/anti-malware software in place, you can’t necessarily prevent employees from engaging in dangerous activities like clicking links and downloading harmful files. Often, they don’t even realize what they’re doing.

    You should set up a backup system that requires any downloads to be checked by another party (your IT support staff) before they are allowed into the system. This could improve your network security by accounting for potential employee error.

    Phishing 

    Business email compromise (BEC) scams, also known as phishing emails, continue to cause major losses; more than U.S. $5 billion dollars have been stolen domestically and internationally in the past three years. Approximately 7,700 organizations are hit by a BEC scam every month.

    Phishing occurs when a cybercriminal tries to trick an email recipient into opening a malicious attachment or clicking a link to a malware-laden website that could download ransomware. This method has remained popular over the years, which perhaps indicates that the person behind the computer keyboard can be the weak link in a company’s security.

    Drive-by downloads

    In the case of a drive-by download, a malicious website will attempt to install software on your computer without asking for permission first. This could happen if proper security systems are not in place or if the operating system is outdated.

    Unfortunately, none of this education and training will help secure your business unless you create a culture of cybersecurity awareness around the office. So how do you encourage your employees to protect your company’s information?

    • Compliance programs: Make changing passwords a regular task, like getting an oil change in your car. Ensure everyone is doing what they need to do to keep their passwords secure.
    • Rewards programs: Offer rewards for employees who find ways to improve cybersecurity around the office, such as by reporting phishing emails.

    Accountability programs: Encouraging your employees to gently hold one another accountable will help ensure compliance with best practices. You can also try appointing cybersecurity culture advocates to help keep employees trained and motivated.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Important Cyber Security Tips – Part 4

    cyber security

    3 Essential Tips for Better Network Security

    If you listen to people in the know, it’s not a matter of if your company will be the victim of a data breach, but when. Not only are most businesses (both large and small) woefully under-protected when it comes to system security, but hackers are finding more and more sophisticated ways to break in all the time.

    Of course, there are steps you can take to protect yourself from an attack, such as hiring a network administrator or computer security specialist to build appropriate security infrastructure and manage your system. You might also hire an IT firm to support and protect your technology environment.

    Even with the right equipment, software, and professional help in place, however, there are still a few things you can do to improve your network security over time. Here are some essential tips for any business interested in better network security.

    1. Update Regularly

    If you know anything about technology, you probably know that it’s constantly improving. Once a piece of hardware or software has been released, the company that created it continues to support it. This means problems are addressed with downloadable patches, or updates, that fix known issues.

    In some cases, you can simply opt in to receive automatic updates as they become available, or you can choose to be notified so that you can at least decide whether or not you want to download them. However, it’s not a bad idea to regularly check for software and firmware updates you may have missed. When your computer and network components are up-to-date, you have the best chance to secure your system.

    2. Upgrade as Needed

    How do you know when it’s time to upgrade to new and improved hardware and software? With technology advancing at an alarming rate, it seems like you’ve barely implemented new solutions when something better hits the market.

    Most businesses can’t afford to upgrade even annually. In truth, if you choose the right components, you needn’t upgrade often. Reputable consulting firms can assess your current system and give you options for upgrades that will serve you now and over the course of several years, most likely.

    Or you could turn to your technical support team to help you figure out when to start looking for something new. A good rule of thumb is when manufacturers no longer support hardware or software, you shouldn’t wait any longer. Many firms purchase hardware with extended warranties and automatically replace the hardware when that extended warranty expires.

    One vulnerability commonly seen in smaller enterprises is staying on an older version of software because the new version requires updated hardware. This approach can prove to be penny wise and pound foolish, as the older hardware and software significantly increase the exposure to security risks.

    3. Deal with Password Issues

    This is a big one. Hackers frequently use passwords as a way to break into networks. The best way to avoid this is with proper password protection.

    This begins with requiring employees to create strong passwords of 8-12 characters, containing upper and lowercase letters, numbers, and symbols. The passwords should not contain personal information (names, birth dates, etc.) and you should prompt employees to change passwords frequently.

    Don’t forget training. You need to have clear policies in place outlining rules about protecting passwords, even from coworkers.

    If you found this post to be helpful, and whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions. Thank you!

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    Laughable Tax Positions

    laughable tax position

    One enjoyment we have in following Tax Court cases is getting the chance to chuckle now and again.  We thought that we’d share some of the amusing 2017 Tax Court cases.

    In Ohde v. Comm’r,  T.C. Memo. 2017-137, the Tax Court held that a couple was not entitled to a $145,000 charitable contribution deduction for the alleged donation of more than 20,000 items to Goodwill. The court found the couple’s allegations that they made such contributions implausible. We wonder how many pages the required list of the items was and how much that return must have weighed. That Preparer Practitioner should have been asked to be paid by the pound.

    In  TC Memo 2017-79 (Bulakites) the Tax Court held that an insurance consultant wasn’t entitled to alimony deductions that exceeded the amount in his separation agreement and sustained the IRS’s disallowance of his unsubstantiated deductions for interest and other expenses; the court sustained accuracy-related penalties, rejecting his attempt to blame Turbo Tax for his mistakes.  Interestingly, had he used a Tax Preparing professional he probably wouldn’t have had to pay the accuracy penalty.

    In TC Memo 2017-65 (Penley) the Tax Court held that a couple can’t deduct losses from their real estate activities because the husband wasn’t a real estate professional, finding that the couple didn’t sufficiently substantiate their claim that the husband worked more hours in his real estate activities than in his full-time employment. Penley claimed he worked 10-12 hours every Saturday & Sunday, and 4-6 hours every week day on a rental property, in addition to a regular full-time job in another field.  Even having a hand-written calendar supporting these hours, the court found it not only unreliable, as his total work hours were 13 hours daily according to the calendar every single day for 365 days. We have trouble understanding why the court did not believe him!

    In TC Summ. Op. 2017-2 (SAS) the taxpayer attempted to deduct legal fees related to suing a former employer as “Negative Other Income”. The court determined that the expenses were employment related 2% miscellaneous itemized deductions that should be deducted as itemized deductions, subject to various limitations.

    We hope you enjoyed our review of cases from 2017! Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Important Cyber Security Tips – Part 3: The Big 3

    cyber security

    Three most important security topics

    Let’s face it, the information and the physical world are merging, threats exist to all cyber-physical systems such as cars, power plants, medical devices, even your IoT fridge. Similarly, the trends toward cloud computing, bring your own device (BYOD) policies in the workplace, and the burgeoning internet of things (IoT) create new challenges. Defending the enterprise’s systems has never been more important. We hope that your company is working to develop best practices for protection from cyber threats, so you need to be armed with what as a minimum should be established on a firm wide basis.  If you are not experiencing the role of student, then maybe you should become assertive and step into the role of teacher. If you are not seeing a solid cybersecurity plan being implemented, take the lead.  This is quite important stuff and no one can be left behind.

    Education and training are the take away from the business continuity and disaster recovery planning accomplished by the higher ups.  Guidance needs to move vertically within your organization and thus from your position you should be aware of your firm’s security plans, policies and procedures.  That being said here are the top three issue you should be paying attention to:

    1. Software updates 

    Hackers work outdated apps with known vulnerabilities in order to enter the company computer network. Training on how, the importance of, and how often to install software updates and patches for applications and operating systems.  We are all busy, it can be easier to postpone the downtime and yet these need to be accomplished as soon as they’re available. Given the advanced state of most modern software, automatic operating system updates should be enabled and performed each time they become available. The same is true for application software updates, including Microsoft Office. If your line of business systems are not updated regularly (at least annually), you should discuss this with your vendor and consider moving to better maintained platform.

    2. Passwords

    Is knowledge about password security something to be learned on the streets?  Secure password policy and enforcement is vital.  Teach your employees that the best password is a secure password. Is use of a reputable password management application policy?  These store passwords in one place, allowing people to generate strong, complex and random passwords that they don’t need to memorize. They only need to remember one password to unlock the app itself.  Alternatively, is use of passwords that contain at least 10 characters plus include numbers, symbols, and upper and lowercase letters mandatory? Use of written down passwords forbidden?  Are there policies to deal with the sharing of passwords, even with coworkers?

    3. Virtual Private Networks

    These are vital in order to secure information. They encrypt all traffic leaving and entering your devices. The product of a hacker’s hard work to intercept your information is gibberish.

    Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Like Kind Exchanges and the New Tax Law

    real-estate-sale

    Like Kind Exchange provisions survive in the new tax law, but only for real estate investors.

    One important tax deferral advantage is still available for real estate used in business. This postponement of capital gains tax is one of the best real estate investor vehicles for preserving and building real estate wealth. This provision of the Internal Revenue Code allows property owners to exchange their property for other like-kind property without recognition of capital gains. It makes it possible to transfer the financial gain that is realized from the sale of a property into another property without federal capital gains tax at the time of the sale.

    Saving those taxes can be a vital opportunity to parlay profits for further profits. Simply trading one real property for another real property doesn’t automatically constitute a like-kind exchange. Executing an improper exchange may result in substantial tax liabilities and potential legal action from investors. The provisions to utilize a middleman remain intact. Sad to remind you that a personal residence doesn’t qualify for this tax deferral.

    Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Adequate Documentation for an IRS Audit

    irs audit

    Adequate documentation is key when defending against an IRS audit.

    Many dread the concept of an IRS audit. These days, the most likely type is a “desk” audit, whereby a missing item of income or adequate documentation of a deduction is requested.   Sometimes, the client just doesn’t receive, or misplaces, a source of income and doesn’t necessarily have an alternative source of documentation for that income, thus an adjustment is assessed. The matter is then easily closed, through a payment by the taxpayer. The IRS achieves success in finding money for the government.

    We work with some clients who indicate that they have deductions, but recordkeeping burdens can create a situation where, although the deduction amount is correct, adequate documentation is not readily available.  We are not suggesting that everyone drop everything else that goes on in life to invest the huge amount of time the IRS estimates is required to maintain adequate documentation for certain deductions. However, we need to take this opportunity to remind you that, like every year, several tax court cases came down to negative conclusions not only for the tax due but, without maintaining adequate records, the court upheld the accuracy-related penalties assessed by the IRS. Discuss contemptuous records requirements with your tax professional to assure that you only spend the time necessary and yet have the documentation that meets minimum requirements.

    Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Important Cyber Security Tips – Part 2: Get Some Help

    cyber security

    So, you pay an IT professional and outsource some, if not all, of your IT support. Even with all of that technical support staff in place though, your employees can inadvertently cause breaches. Your staff should participate in your small business security plan. It is imperative to make sure that employees understand how to use company resources. In addition, consequences should be in place and communicated to employees for failing to follow security protocols; this is of the utmost importance.

    We suggest you work with an experienced IT consultant on your plan for data breach. Because such attacks are so prevalent, it’s best to prepare for the worst. What is your backup plan to get your business back up and running in the event of data loss? How will you handle the impact of exposing personal identifying information of employees, customers, and vendors?

    Consider hacking yourself to identify vulnerabilities by hiring appropriate consulting firms or IT specialists to audit your present system in search of weaknesses. Only then can you begin to make changes that will better protect your business, your network, and your clientele.

    As you develop best practices to protect your small business from cyber threats, do some research. The National Cybersecurity and Communications Integration Center’s (NCCIC) website can help you create a solid cyber security plan for your business. You may want to establish guidelines around the following three security topics as you teach your employees how to make digital safety a daily habit.

    Stay tuned for Part III in this series, where I talk about software updates, passwords, and VPNs, coming in about a week.

    Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Tax Credit Awareness

    tax-tips-and-credits

    The Internal Revenue Service (IRS) seems to be using new tools to audit interesting situations whereby a taxpayer achieves a substantial tax credit.

    A tax credit can be so much more valuable than a tax deduction, as a deduction reduces income and then a tax rate is applied. Therefore, the marginal savings a deduction provides is only a portion of the amount incurred. Where a tax credit can offer a benefit up to 100% of the value of the amount spent.  That benefit seems to have received focus by the IRS as we see a couple of recent tax court decisions seemingly to have discovered situations which were costing the Government money without providing the intended benefits to the economy.

    In TC Summ. Op. 2016-81 (Berry) the taxpayer claimed $5,800 of self-employment income from the one-time sale of tools and machinery, self-employment income is reserved for those in their own recurring business intended to make a profit.  By reporting this capital gain income as another type of income,  Berry, then, “conveniently” qualified for a nice earned income credit. The court moved the income to Line 21 of Form 1040 (capital gains), removed the self-employment tax (and earned income credit) rightly stating that a one-time sale of tools is not considered an activity entered into for profit “with continuity and regularity.”

    In the Federal Court of Claims case Foxx v. U.S., 2017 PTC 46 (Fed. Cl. 2017) a $2,500 preparer penalty was assessed because the preparer artificially reported additional income in order to claim a larger earned income credit for a client.

    Rightly, there are limits to what can be accomplished with tax planning.

    Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Tax Issues After a Trade-In

    sales tax

    Trading in property, such as a car, used to be more than about the savings of the sale tax.  When it came time to handle the income tax aspects, things were quite easy. The amount paid was used for the depreciation of the new equipment and no time was wasted dealing with the sale of the traded-in item. It was assumed to be sold for its un-depreciated remaining balance with no gain or loss.

    Those hopeful of tax simplification will find more to deal with in 2018, as these transactions are in essence more complicated. So now, when you trade in a piece of equipment for another piece of equipment, both used for business, let’s get on with the busy work.

    The new part is that the trade-in value given for the old equipment is now part of the sales price, therefore depreciation may need to be recaptured (income realized), should that amount be more than the remaining depreciated value.  Recording all this in the accounting system will take some thought and work as most systems simply post the amount paid.

    The full purchase price needs to be determined by “grossing up” or “adding back” the trade in value, that total amount, not what was paid will be used for depreciation of the new asset. The good news is that higher amount qualifies for bonus and Section 179 depreciation, both designed to stimulate the economy by providing Tax benefit upfront to businesses spending on equipment by giving the Tax benefit up-front to the business. All that benefit may or may not provide ultimate net benefit to the business, as Tax planning can be quite intricate.  Consult your tax advisor!

    Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Important Cyber Security Tips – Part 1

    cyber security

    Cyber Security. Let’s just jump to it, with some things to consider:

    Do you think your small business is at risk of being hacked? An overwhelming 87% of small business owners don’t think so. But, your business might be at risk more than you realize. About half of small businesses experience a cyber attack.

    Small businesses are appealing to hackers. Small businesses typically have a moderate amount of data with minimal security. Hackers can use the stolen information to steal from many others.

    Your business is at risk when you are unprepared for a cyber attack. Hackers can steal money, employee details, customer data, and vendor information. A data breach can damage your relationships with employees, customers, and vendors. And, approximately half of small businesses that have a cyber attack go out of business within six months.

    Building up your small business cybersecurity is imperative. By using cybersecurity basics, you can prepare your business for cyber attacks.

    Simple things matter – recent research shows too many of us still use easily hacked passwords, including ABCD, 1234, WXYZ, and the perennial favorite ‘password’.

    Don’t take comfort from headlines that often highlight major data breaches in large corporations and government agencies. The REAL truth is that the vast majority of businesses being hacked are smaller.  We are too busy running our businesses and providing services to our customers to allocate the time. While we can’t afford the same level of protection as a big company, adequate computer security is not beyond reach. Hopefully, your IT provider has you generally protected.  We still wanted to spend some time offering you a list of the basics that your business needs to address in order to survive.

    Start with developing a security plan for your business. By taking the time to develop a plan, you will be forced to consider all the aspects of security as they relate your devices, your network, and your data. The plan should designate who is responsible for security issues, plainly indicate compliance requirements with specific policies and procedures, and be made part of the required policies and procedures in accordance with the employee handbook (your company has one of those, right?).

    Your cybersecurity policy for your business should contain the cybersecurity best practices that you expect your employees to follow. It should also contain protocols that employees need to follow in case there is a data breach. Assure that you include procedures for keeping employee, vendor, and customer information safe. Finally, your security plan should include a policy and procedure to be updated annually and distributed to all employees, along with a security update briefing.

    Password protection of your computer network is pretty much a given at this point. As step 1, let’s just review this concept as it is important to observe stringent standards.  Strong passwords are a must, as is the use of prompts to update passwords regularly.  Are password management apps or stringent requirements for passwords that contain at least 10 characters and include numbers, symbols, and upper and lowercase letters mandatory? Use of written down passwords forbidden? Are there policies to deal with the sharing of passwords, even with coworkers?

    Layered security to limit access can help to keep the most sensitive data as safe as possible should your system suffer a breach. This means limiting access to certain types of information by role and responsibility while adding levels of protection with additional passwords and encryption.

    Do your employees use personal devices to access company data, sometimes known as Bring Your Own Device (BYOD)?  Let’s face it, as a small business, we doubt you have the capital available to provide devices like laptops, tablets, and smartphones for employees to use. That being the case, you need to create policies that allow your network administrator to install monitoring software, push automatic security updates, or call for regular password changes. You don’t necessarily need to encroach on personal privacy but you must protect your business and prevent employees from putting your network and data at risk while using their personal devices. There is a balance that must be struck between enhanced productivity, invasiveness of required software installs, and security.

    Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    The Annual Budget Process – Ideas for Improvement

    annual budget process

    We see it all the time. The annual budget process becomes the rush budget process. It goes something like this:

    • Draft is prepared by the managing agent

    • Distributed before a meeting

    • Decision is expected at that meeting

    September starts this annual season whereby the Financial Analysts at property management firms are incredibly busy.  Beyond their usual responsibilities now comes the need to accomplish a complicated and potentially detailed project.  You may see it by a change in the swiftness with which they respond to your emails and other usual requests.  Many work overtime in order to meet the needs of their property load.  While we understand the pressures on the staff this time of year, as auditors, we work for your Board. We wish to express gratitude to those financial analysts whom we work with for their hard work and ask their forgiveness if our recommendations expand their work load through the Holiday season. That being said, this project is for your Boards! Our service is to you, so here are the recommendations.

    Our experience is that the ones who attach detailed calculations to back up the budgeted amounts tend to be the most accurate.  While a board may not hear during the year of their success in the budgeting process, they will see, hear and deal with shortcomings.  Potentially spinning their wheels when more imperative issues are facing the Board. We suggest you take a look at this process now and establish Board guidelines to make it better.  So, let’s look at how the process can be improved.

    1. More lead time before the meeting that the draft is presented

    “Just in time” is good for operating businesses to save on costs, but for budget distribution purposes, it tends to leave people who volunteer and also have too many other things in life to deal with the risk of insufficient time in order to prepare. The default position for many is silence and acceptance.  That is not where a true leader of your community should be.  Resist any temptation to taking this path. Stand and say we need to slow the process down, as necessary.

    1. Expectation that meetings more often than monthly might need to occur this time of year

    Sorry, but you would need the best financial analysts in the industry to accomplish this with the process that we seeing going on everywhere.  Slow down and discuss more, several meetings might be required.  That is OK, the goal is the correct product which benefits the board in many ways, including.  Time saved from focusing on why there is not enough money to pay bills and how to fix things later.  An A well prepared budget is an enhanced tool to utilize in monitoring the property finances all year long.

    1. Assurance that all properties professionals were used as resources

    You pay them all year long, each has an aspect to offer better information and savings than the perception of someone without their expertise.  Have the insurance broker provide information on the insurance renewal, fuel oil company on the trend of pricing and whether the premium for entering into a set price contract makes sense. (The later allows for less risk of deviance from budget for heating costs.)  The auditor for Corporation taxes and annual fees.

    1. Assurance each and every board member’s question or concern was properly vetted

    We tend to discuss someone else’s agenda at a Board meeting. We can lose our own perspective if we attempt to follow others thinking.  Silencing board member concerns can be costly, so let’s get conversation flowing.  If you wish endeavor on other value offering conversation, take the time to look into those contracts that seem to be renewed year to year.

    Document the renewal dates and establish a list of your properties’ vendors.  Periodic consideration of each vendors performance and cost tend to improve satisfaction and minimize cost.  Industry’s shift and there maybe another vendor who does a better job for a lower cost.  You won’t know unless you evaluate, and budget time is the best time to understand and review vendor services.  There is no rush to accomplish this all now, establishing the list and rationally moving through it over time is the goal.  But let’s start now while we are looking at all this detail.

    Some of us spend less time reviewing the budget than researching for our next vacation plans.  Assure that there is careful documentation of the changes and important aspects to each draft version so that everyone is on the same page.

    1. Appropriate communication is developed to inform the unit owners of the need for the increase

    Unit owner expectation is going to be what they want, unless they understand the reality.  With just some simple distributing of information on important aspects of the budget, unit owner concerns are  alleviated and questions diminished.  It can be as simple as an email or two to unit owners during the process.  This also sets the stage for the unit owners to see the hard work by board members.  Yes, they elect you, but as a volunteer you work for all unit owners.  The most frequent issue unit owners have with boards is lack of sufficient communication!

    If you are reading this early enough in the season, accept this as a call to action.  Evaluate the existing process and work toward improvement now, before the draft arrives just in time.  Prepare your fellow board members for an expanded process, use the guise that you want to limit any potential increase. We want you come out of this process as a budget champion, understanding more than you may have ever cared to before.  Not only have the research performed, but assure your questions are all answered and that you fully understand the reasons and needs for any monthly charge increase.

     

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Getting on Board with the Inevitable Budget Increase

    condo and co-op board meeting

    Getting on “Board” with the Inevitable Budget Increase

    The beginning of Fall – and corresponding beauty of the changing leaves – generally kicks off the budget process. Our observation is that usually a draft is presented before a Board meeting, at which time a Board decision is expected swiftly, impacting the financial situation of each and every unit owner for the next year. The budget seems to arrive a few days before this decision-making meeting, giving you little time to review it.  You find yourself sitting at the Board meeting with next year’s budget and an expectation of approval, and then you turn from informed leader to politician.

    Let’s face it, this is the most important unit owner project because it determines how much more people need to pay. Money is tight, aspects of the population that live within the building may or may not be better suited to deal with an increase, plus no one wishes to pay more. You took on the role of leader when you submitted your name for nomination, and we want to assist you in properly serving on the board.

    Let’s put aside any personal preferences and focus on reality here. As a Board member, you have a fiduciary duty to do what is right. If you need more time, you need more time. Try not to be driven by the process or making decisions without a full understanding of the costs, changes and expected revenues.  We understand that you are a volunteer, but your neighbors are counting on you and asked you to serve. The budget is a most important tool for you as a Board member for numerous financial matters. These include long term planning and monitoring; not only costs but also the financial records the managing agent maintains, and a platform to see how you did on costs as a board after the year is out. In a separate blog we offer insight into that aspect of Board performance.

    Come on, we all know that for unit owners, they are most interested each year in what that monthly charge increase is going to be.  And for many, it comes down to their (the unit owners’) evaluation, to their own expectation, without knowledge or appropriate information.  How can the uninformed make reasonable decisions?  So, which is more important to you as Board member, unit owner endorsement or reality?

    Thorough understanding of the budget and the changes from year to year are key to appropriate Board review.  Contrary to the standard, “the budget shows this” and then the answer is, “we can’t increase charges that much” response, along with a negotiated increase someplace between hopefulness and realty, do something different. Avoid making the decision on pre-conceived levels or expectations as we see so many people who tend to shoot from the hip on this one. Let’s face it, other than certain non-recurring changes in costs (i.e. loan refinancing or something like the recent global energy producer rebalance due to America becoming great again in energy production), this year’s costs should be higher than the last budget should always be expected.

    As much as we’d like to be more than we can be, inflation is outside the control of the Board and your property manager. By all means, watch each and every dollar you can, pay the best possible price for superior service and the best contractors, but don’t let yourself be swayed by political considerations within the building. Even when there is a large faction in your community who say “no” to paying more, your role is to explain reality and do the right thing.  Be sure that you thoroughly understand the changes from year to year and endeavor to have confidence in your final decision, regardless of the opinions of others.

    The reality in America is that over time, costs do rise. This has been a built-in plan by politicians and the Federal Reserve Board long before any of us evolved into leaders. We ask you to stand tall against the waves of politics, annual increases have been averaging 3-5% over time. Due to the global reposition of the energy marketplace with America becoming an exporter of resources, the last few years have ranged from 1-3%. We ask you to be reminded that your role is to set monthly charges at what is needed for this property, not anywhere else! In the interest of your community, it is vital that we all be adults and understand that there should be an expected increase each and every year.  Otherwise, the result of not making necessary increases tends to create the need for a future Board to increase monthly charges much more than they should or put through an assessment to clear up the inevitable drain on financial resources.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Tax Planning Is Vital This Year to Those Who Make a Living in The Tri-State Area

    tax planning

    The tax law passed late last year included numerous changes that we have written about in our blogs that will have wide impacts across the Country. Specifically, there is a likely jump in the numbers of Americans who’ll owe taxes when they file 2018 returns, so it may be time to re-think your tax planning. Going back to last Christmas, we received the gift of the new tax law and most commentary revolved around whether to prepay real estate taxes before 12/31/17.  We think it is important to loop back around and remind everyone of the tax law’s limitation and/or elimination of many itemized deductions.  If you itemized in the past, this year is a year that you might want to prepare a projection of your tax liability in anticipation of year end.

    We don’t recall ever before that the Government Accountability Office (GAO) issued a report warning that more than 4.5 million taxpayers will likely come up short next April, unless they act now to adjust their withholding amounts.   So, if you are one of those roughly 28 million who are expected to have changes in the amounts you claim, you are at risk.  If you have thousands lying around in the bank to pay those taxes then you don’t need to be concerned, we worry about those who don’t.  In a perfect world, it probably should not be this way, that is that the withholding taxes were adjusted in 2018 for the new tax law and yet the GOA coming out and saying a mistake might have been made.

    There are a few areas that have the most potential to contribute to this aspect.  These are: the new limits on state and local tax deductions (the SALT deductions), a restriction on the amount you can deduct for home mortgage interest and to some extent the elimination of the deduction for job-related expenses.

    The GAO looked most closely at those who itemize deductions and provided more clarity as to who is at risk. They seem to be specifically warning married taxpayers who itemize deductions, with two children under age 17, income exceeding $180,000 from one or more jobs and who have $20,000 or more in non-wage income (dividends, interest or capital gains) as the ones most likely to have to pay additional tax when they file in April.

    The recommendation is to plan now to minimize the check writing later.  One helpful tax planning tool is the IRS’s Withholding Calculator (which is on the IRS website) which can be utilized to do your “checkup” and it should only take a few minutes.  The calculator will ask for your estimated values for your income in 2018, (use 2017 adjusted for any changes that you know of such as raises), your number of dependents, as well as estimated itemized deductions (remember to update for the new Tax law limits) plus the amount of federal tax withheld on your last paycheck.

    If your get results that indicate you’ll owe tax when you file, realize that estimates were used, the limits may work out differently and it’s not over until the Tax return is prepared. If you see a large balance due, the first step is to start putting aside more Tax money now.  You can use your bank or allow Uncle Sam to hold your money by increasing the amount of tax withheld from your pay for the rest of this year by revising your W-4 form. You’ll need to figure the number of additional allowances you need, which can be tough with only months to go. As a rule, when you reduce the number of allowances you claim, your employer will withhold more federal income tax.  The question may be whether changes made now will need to be revised in 2019.

    Get off the list of those who will owe taxes (without money to pay them) by knowing what your tax situation is now.  This is important because having too little money withheld could result in an unexpected tax bill or even a penalty when you file your 2018 return. By making tax planning adjustments now, you’ll still have some time to make any necessary adjustments.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

     

     

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    Planning for the Required Minimum Distribution Date

    social security couple

    If you born June 30, 1958 or before, and have retirement accounts, you deserve to be congratulated. What, you never heard that being 59 or older meant something with your retirement account?  But you probably have heard about the required minimum distribution date whereby in the year you turn 70-1/2 years old, you’d better take something from your retirement accounts otherwise the IRS imposes stiff penalties.

    The congratulations reflect that you can start distributions from your IRA and 401(K) accounts without penalty.  Yes, we understand that you will have to pay tax on them, but we are only going to suggest that you do if you need to pay living expenses.  That means you were able to retire early (be sure you have health insurance covered until Medicare starts) or have had some difficulties with employment.  But, you do need to live and it’s important for you to look at your entire retirement planning picture in order to avoid the most common of social security mistakes retirees make.  That is not planning for when you start social security benefits.

    If you need to, you can take a 20% discount and start at age 62.  There are some changes coming to the age at which benefits start or these milestones occur, so please do your research, since the dates are being extended for some baby boomers and later retires.  If you need the money or are of poor health, start as soon as you are entitled.  But we are here to propose you do the analysis and consider using your IRA and 401(K) accounts for living expenses should you be retired and can wait until age 70 to start taking social security.

    Unfortunately, by following the press and other advisors, many people focus on the required minimum distribution date.  This maximizes money to heirs.  For us, the decision to start Social Security before age 70 and delay withdrawing money from a traditional IRA until age 70-1/2, when required minimum distributions (RMDs) begin, is completely backward.  We have already mentioned that you are giving up a higher Social Security benefit.  Once you reach your full retirement age, your monthly Social Security check gets 8% larger for every year you delay taking benefits through age 70 (technically, it’s 2/3% per month). If you really care, the “crossover point” that you need to live through is 12 years.

    For example, suppose at full retirement age (which is 67 if you were born in 1960 or later) your Social Security check is $2,000 per month (or $24,000 per year). At age 70, that check would be $2,480 per month ($29,760 per year). By waiting until age 70 to start taking benefits, by the time you reach age 83 you would have been paid a total of $386,880, compared with the $384,000 you would have gotten if you had started at age 67, even though you got income for three extra years. The average life expectancy of a 67-year-old is at least 85, and growing, so any year you or your spouse live past age 83 is money in your pocket.

    Taxes will be paid on your tax-deferred accounts no matter what, as they are taxable to you or your heirs, and at some point, it will be fully liquidated to you or to your heirs. Let us take this part out of consideration then.

    As always, it’s not how much money you make that counts, but how much you keep.

    Social Security income is never more than 85% taxable, but it might not be taxable. The taxed amount is determined by an 18-step calculation in the return instructions for Form 1040. Essentially, the process tells you to take half of your Social Security benefit, add that to all your “other income” and then perform a series of calculations to determine how much of your Social Security (between 0% and 85%) is taxable.  In other words, the bigger your Social Security check and the less “other income” you have (for the same total income), the less your adjusted gross income and the less tax you will pay.

    Many advisors like to dazzle with expanded calculations on what is best for you, at C & B we believe that the realization is if you plan to retire before age 70, consider delaying your Social Security until age 70 and living off your retirement accounts from your retirement date until then.

    The value of delaying Social Security until age 70 is far more than just getting “more money per month.” There are tax advantages, surviving spouse advantages, even inheritance advantages when the entire portfolio and estate are considered as a whole. However, there are times and circumstances when this advice is not suitable, and this is the reason for seeking professional financial guidance before implementing decisions about when to start Social Security and when to start withdrawing from your IRA, 401(k), etc.  Please be sure to consult your Tax Advisor for your specific situation.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

     

     

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    Maximizing Social Security

    maximizing social security

    We have all been programed that when we reach age 65, we need to head to the Social Security office and declare ourselves as eligible.  This is vital to accepting the benefits of Medicare as our out-of-pocket (when including health insurance premiums) tend to drop. Even our health insurance premium will tend to drop once we qualify for this valuable program.  The starting dates for certain future retirees have a deferral of retirement commencement ages so please realize that certain milestones mentioned in the article need to be updated for your personal situation.

    However, many of us make the most common error in social security benefits by starting our benefits then as well.  Unless you are in poor health, you can earn a substantial premium on your social security checks by waiting until age 70 to start. We are all too familiar with the low interest rates these days, of several percentage points.  Your monthly check from social security will be substantially higher if you can wait these years. That means that if you had a savings account with an annual social security benefit of $20,000, you will earn and additional $1,600, or 8% each year.  Lots of found money.

    So, bypass the desire to hold onto your IRA or 401(K) and start tapping in at age 65. But that’s the opposite of what most should do, because waiting until 70 to take benefits can pay off in more ways than one.

    Many think they just can’t stand working past age 65 (or 66 or 67).  Assuming you have worked steadily for many years, just a minimal amount of “consulting” is necessary.  Doesn’t your company really need you to consult?  It makes no sense to let all that experience leave at once. The other fear is that they may not live long enough to recapture the lower monthly payments from 65 to 70.  Hate to tell you the basic facts, you are dead when you are dead.  There is no judgement of whether you did it right or wrong, we are afraid of outliving our retirement money more than leaving it to our loved ones. So that extra 8% goes a long way to supporting us until the inevitable.

    In addition, people also see that putting off taking Social Security by funding their living expenses with withdrawals from their IRAs or 401(k)s with disdain, because those accounts are 100% taxable upon receipt and they hate “giving money to Uncle Sam.”  For certain taxpayers, social security is 85% taxable.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

     

     

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