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    Hosting Effective Online Meetings

    Video conferencing has quickly become the primary mode of communication used in our day to day lives.

    With the uptick in usage being directly linked to current world events, it is even more so important that we make business meetings using video as engaging and lively as what we are used to when we meet in-person. The best method of keeping people interested in what you are talking about is making sure that they not only hear what you are saying, but also feel connected to it. In fact, one of the main advantages to holding your meetings virtually, is the potential to prevent your audience from tuning out. Hosting an engaging and effective virtual meeting, however, all starts with what is done before the meeting is called.

    In order for employees to use popular teleconferencing platforms like Zoom, Google Hangouts and Microsoft Teams, they need proper training on how to actually operate the software. Although more people are using these online tools than ever before, many are not technologically advanced causing some problems.

    In our experience, these problems can usually be summarized under employees not fully understanding how to efficiently and effectively utilize the platform. Luckily, most video conferencing platforms provide online tutorials on their website and social media that can be easily shared with your team. Alternatively, you can host hands-on mock meetings to give inexperienced members of your team time to learn how to use at least the basic features correctly.

    The basic features each team member should be comfortable with include: the mute button, directing which participants can speak, turning on and off video, the screen layout options, screen sharing, and private and public chat.

    By investing in your team’s technical skills and thus making them feel comfortable with virtual meeting technology, you allow them to focus less on whether or not everyone can hear them and more on their presentation skills and the actual meeting taking place.

    One of the challenges of working from home is ensuring that you maintain the same level of professionalism as you did while working in office and this is an area of hosting online meetings that many people are still concerned about.   We are all trying to adjust to the new normal and with everyone working from home we have to make concessions to the fact that each of us has a different situation at home. As such, don’t be too unyielding about how and from where the video conference will take place and also put out some guidance for them to consider.

    One way you can instantly boost your home environment’s appeal is by carefully selecting what will be in your background, also known as the backdrop, during the video. Backdrops make a big difference – even a blank wall is better than seeing someone’s entire living room or worse behind them. Many of the video conferencing platforms offer virtual backgrounds, which present a viable solution over another in home alternative.

    Many people are also concerned about how they look on camera. To create a picture perfect setting try putting a lamp or other light source in front of you (instead of behind) to illuminate your face while sitting with a wall close behind you. Don’t focus too much on being photogenic, however, as it would be better to just show your humanity -, let’s face it, this is not the time to be absolutely perfect.

    We also encourage everyone to practice video meeting presentation skills by recording yourself presenting on video, most of the platforms offer a recording feature. Use the recording to see what you may want to remedy before the actual meeting takes place.

    We recommend that you follow usual meeting protocols to best undertake virtual meetings. just because your meeting is online doesn’t mean that you should overlook traditional meeting best practices like scheduling and reminder messaging, supplying relevant documents and an agenda beforehand, handling administrative issues such as questions and time limitations early on. The less traditional online meeting issues include things like who is muted, highlighted, and can share their screens.

    Work toward keeping your video meetings lively and think of opportunities to engage attendees. This will lead to success and positive feedback. The more active participation you can include, the more you can keep others from tuning out.

    The video conferencing platforms offer many extra features to make video meetings more dynamic and interactive, including polling (for when you want to quickly gauge views on an issue), breakout rooms (for when you want a video meeting to break into subgroups) and emoji reactions.  Workto familiarize yourself with these and incorporate them when it makes sense.

    Here are a few video presentation skills to train your team on:

    • Looking into the camera when talking.
    • Smiling when talking—and listening—to portray a friendly, engaging image.
    • Using gestures when appropriate, making sure the people on video can actually see them.
    • Moving through presentations quickly, aiming to spend no more than two minutes on each slide.

    As video conferencing takes on a larger role in the business world, you will want to make sure you and your team become pros at it.

    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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    How to Effectively Conduct a Virtual Annual Meeting

    With the stay-at-home orders issued in the tri-state area, we are all adapting to a new reality. As social distancing works to slow the spread of the virus, we are all trying to get back to something that feels normal. For cooperative and condominium boards who are looking at the rapidly approaching annual spring meeting season the decision so far has been to postpone, postpone, postpone. However, we all know this is not a sustainable strategy.

    With an eye on finding a resolution we gave some thought to how a cooperative or condominium can run an effective meeting without owners being physically present to participate. Doing so benefits almost everyone as those most susceptible to the virus should not be in the presence of anyone other than their household members and most everyone else would appreciate the chance to practice social distancing. Board members should not have to risk exposure to fulfill their volunteer duties, building staff have put their lives on the line enough already and the potential risks to outside professionals should be considered as well.

    The Light at the End of the Tunnel

    As we heard Governor Andrew Cuomo mention in one of his briefings, we should try to see this situation in some small positive ways – like how it has nudged us into more fully embracing available technology, which is something we honestly should have already been doing. In fact, the pandemic has made it clear that we should have all had the complete ability to work from home, just as we are finding our children are also able to learn virtually too.

    We suspect that beyond when stay-at-home orders are lifted in New York, Governor Cuomo will extend the portions of New York on PAUSE that suspend specific requirements for annual ownership meetings. The suspended requirements include that prior notice must be given and that the meeting must be held at a physical location. These changes mean your board has the option to conduct a virtual annual ownership meeting. The idea of conducting the meeting virtually should not be something foreign to board members as more people have been using technology to tele-work and home school than ever before. After your first try, we think you will find that the annual meeting is enhanced and more effective in numerous aspects by going virtual.

    Preparing for Your Meeting

    The notice of the meeting, which is usually sent by hard copy, can be sent by e-mail to all necessary owners who have designated an e-mail address to receive notices. The notice should mention that the annual meeting will be held online in accordance with the governor’s executive order and good social distancing practices. Afterwards send virtual invitations containing the required links and related login information by electronic means to ensure everyone has access. These days it is almost expected that all owners and professionals can effectively use technology to join the meeting but be ready to provide assistance to anyone who requires it. You, or your property manager, probably already know who those persons are so do not hesitate to reach out them with offers to help if you think that may be appropriate.

    As for the official and legal requirements of notifying owners of the meeting, boards can use any form of communication (post, e-mail, BuildingLink, or even your building’s Facebook group) to keep owners up to date.

    We have also seen success with clients who have setup a way for owners to submit questions in advance of the meeting thus reducing the amount of back and forth that can sometimes derail it. Virtual meetings should not be run any differently. We recommend providing owners with the topics of board interest and asking them to submit comments and questions up to seven days before the meeting. That way, the comments and answers can be reviewed during the meeting instead of completed during the meeting, ultimately saving time.

    To err on the side of caution, legal counsel should be consulted to ensure the meeting is held in accordance with by-laws and statutory requirements.

    Technology Requirements

    Using software like Zoom, ScreenLeap or Google Hangouts allows you to host your virtual annual meeting with ease. These programs have browser enabled use ensuring you won’t have to download a new program or application, allow for audio only participation via phone call so owners can participate even if they don’t have a smartphone, PC or laptop; and have a highlight feature that shows whoever is speaking. However, an experienced meeting host is the real key to running an effective and efficient meeting.

    The host has control over attendees – they can mute everyone while reports are given, conduct elections, recognize (and un-mute) individual owners during a designated Q&A, exclude a participant who was not invited or is not supposed to be attending, and otherwise ensure the meeting runs as smoothly as possible. The effective use of the mute function is one of the most useful tools at the host’s disposal as it reduces annoying background noise and other interruptions that more unfamiliar users of teleconferencing may run into.

    When choosing the software you want to use for your meeting carefully consider your objectives and whether or not the features offered will best help you meet them. We generally recommend Zoom because it has a lot of great features like the gallery view which allows you to view up to 25 faces on a PC or laptop, the ability to vote and more. If you choose Zoom, be careful to setup the meeting with a password as there have been reports of “Zoombombers” who, when they find a meeting ID posted publicly, join meetings and become disruptive. However, Zoom (and most other meeting platforms) provides additional safeguards, including requiring users to be authenticated so that should not be too much of a problem.

    To allow owners access to the meeting, do not forget to post reminders with the meeting’s web address, including the meeting ID as well as the passwords.

    Host Dress Rehearsal

    Just like a regular annual meeting, board members will want a virtual meeting to run as smoothly as possible. No one wants to have long breaks spent trying to figure out technology issues. Therefore, we recommend that boards have a dry run in advance of the official meeting to test any security settings (passwords, authentication, etc.) and have the designated host practice muting, unmuting, giving another presenter control, and screen sharing; along with properly executing voting through the chat feature.

    Zoom has best practices on their website, so take a look and see what else they recommend.

    Conducting the Virtual Meeting

    On the day of the meeting we suggest initiating the video conference 15 minutes before the scheduled start time. This should be included in the meeting notice and will provide time to iron out any access issues participants may have. Then start the meeting on time – everyone appreciates a well-run meeting and starting on time is important.

    Boards should consider recording the meeting, something easily done with the programs we mentioned above and many others. If the meeting is going to be recorded, this should be mentioned prominently in the meeting notice, again in any reminders and other notices, as well as at the beginning of the meeting and when the recording actually starts. Note that recordings may become part of the legal record of the organization, with all the attendant record keeping and archival requirements.

    Other thoughts to consider while preparing for your virtual annual meeting include

    • Consider using a registration form or other means of taking attendance, such as a roll call or acknowledgement of each participant.
    • Turn off the chat feature except during Q&A and voting. This eliminates cross talk and allows presenters and the host to stay focused on the agenda.
    • The agenda and any other material to be shared during the meeting should be included in a PowerPoint or similar presentation and screen shared by the host and any other presenters.

    Special Considerations for Elections

    While for many annual meetings board elections are a quick formality, this is not true for all. To ensure compliance with board election policies and procedures, attendees must be given an opportunity to put forth nominations “from the floor”. Decide in advance how this is to be done – we recommend allowing chat and audio and including the chosen procedure in the meeting notice. The usual process includes all those on the ballot offering a brief statement of their background, qualifications, and vision for the building. Allowing nominees to take questions, while not an unreasonable approach, can significantly slow the process. The host should remain firmly in control during this part of the meeting and not allow it to get out of hand. When it comes time to vote, attendees should be directed to the chat room which allows them to privately cast their votes.  A great benefit of Zoom is that chat room voting is automatically recorded. Setting the privacy parameters before starting the vote limits the disclosure of individual votes. The votes should also be directed to the designated inspectors of election. Again, ensuring these procedures run smoothly is a primary objective of the practice session(s).

    It’s best to allow each participant to cast their vote privately. For those who will either not be participating via videoconferencing or are uncomfortable voting that way, we suggest enabling voting privately by e-mail to a designated e-mail address during the voting period. This will, of course, be necessary for telephone participants. Texting to a designated cellphone is also an option. Account for any ballots or proxies obtained before the meeting as the inspectors of election tally the results. Normal completion of the certification, and the announcement of results can follow.

    Conducting virtual meetings can be beneficial on multiple levels. Costs of room rentals are eliminated and professionals (attorneys, accountants, engineers, architects, etc.) can easily participate in your meeting without wasting time traveling or waiting around for the relevant portion of the meeting to begin.

    Most importantly, during these difficult times not subjecting staff and at-risk unit owners to a physical meeting helps us all.

    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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     3 Most Effective Strategies for Retaining Good Employees

    In case you haven’t noticed, the job market has become increasingly competitive and for the small business owner this means that if you don’t treat your employees right someone else will take them. However, that doesn’t mean that they will treat them any better. So let’s take a look at the many ways we can be proactive and ensure the most vital and important aspect of small business management – the employee.

    In the past all it took was a strong economy, which created a lot of companies needing assistance, for workers to have more job opportunities.  Nowadays, the average job seeker has numerous opportunities to search for jobs and post their resumes using services like LinkedIn and Indeed which seem to encourage job movement.  As a small business, you will struggle to match the pay or perks offers of bigger companies, which isn’t necessarily a bad thing as you may be able to create an environment which offers significant career development opportunities leading to greater success and higher work satisfaction.

    Also, while the larger companies might offer your employees a raise that doesn’t mean you can’t compete. You will need to be flexible and creative so you can develop the best mix of benefits t you can offer that larger companies may not be willing or able to match.

    Flexible Hours

    How flexible can your employee work schedule be?  Do you require employees to always be on the premises or with clients during working hours?   As a small business, you have the option to not limit your employees to a traditional schedule. Be open to your employees figuring out schedules that meet your needs but give them the hours they want.

    By using this method, you allow your employees to customize their work schedules to their lives. Maybe a worker needs to schedule around a school bus pickup and drop-off, but still works their hours.  Another prefers to work longer days in order to leave early on Friday.  The mix is up to the employees, but it is YOUR flexibility that wins them over. Having work lives that don’t interfere with their personal lives is one of the most important aspects of job satisfaction for younger workers.

    While those are not traditional schedules by any means, there’s no reason for you to worry as long as everyone is happy, and the work gets done.  Your role is to develop systems and utilize technology to best understand how the employee functions and benchmark it to the results that you require to succeed.  To make this even more innovative you can implement technology that lets you supervise your staff without needing to see them.

    Profit-Sharing

    Although you may not be able to commit to salaries that are as big as what larger companies offer, you can’t afford to lose your best employees who more likely than not deserve higher pay within your organization.  By using a profit-sharing strategy, you will be able to offer employees a piece of your profit which then creates the incentive to increase production levels as your key employees will see more dollars if they perform well.  This incentive should be structured so that the best employees always get fairly compensated, but they also have the opportunity to create more and more profit for themselves and you.

    You see, when you give your most-valuable workers a piece of the profits they’ll stop thinking like employees and start acting like owners. This can lead to your small business operating more efficiently because top performers now have an incentive to maximize profits.

    Your ability to cut your important employees in on a piece of the profits does require some transparency on your part. You will need to provide employees with information on the metrics that you are determining their share of the profits on.  There are additional benefits for empowering employees with knowledge about your business. If you intend to grow the business and will need future managers, the profit bench-marking approach teaches them the basic aspects of financially supervising your business.

    Ownership

    In addition to profit sharing you can consider whether your key employees are capable of being part of ownership someday.  As a small business owner you may also want to someday move on and to do so you will need to establish an heir apparent.  By properly training one of your key employees to take this role your small business will be able to function without the existing owner and the new owner can simply pick up as executive over a fully functioning business.

    You can use the long-term goal of a creating a succession plan with one or more of your key employees at the same time to create an environment where they will be less likely to jump ship over a raise.  Start with the worker(s) earning equity based on hitting performance goals and grant that person the right to make the first offer to buy the company when it’s time for you to step away.  While it isn’t a small feat, setting the foundation for someone else to run your company if something happens in your life/ or to you creates business value and increases employee satisfaction.

    How clever and resourceful can you be?  The CEO of a large company can’t talk to every employee and create a strategy just for them, but in a smaller business, you have the luxury of being able to get to know your workers and understand what will help them develop their hopes and dreams.

    It is vital to be proactive; you can’t wait until your employees inform you that they are leaving to make the necessary changes.  They won’t tell you that they are receiving other offers and opening yourself up to lose key employees will definitely keep you up at night.  We suggest that you become aggressive when it comes to creating the most positive workplace culture that makes each and every vital (this may be all) employee at the very least consider long and hard before leaving.

    Whether you are a business, individual, or non-profit, we can outline specific steps you should take to minimize taxes, maximize loan eligibility, and ensure your business’ sustained growth.

    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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    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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    Important Cyber Security Tips – Part 3: The Big 3

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    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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    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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