Todd J. Koch Archives

States Respond to Supreme Court Sales Tax Decision

July 19, 2018 By JAK + CO.

By Todd J. Koch, CPA, MBT, CFP®

Since the decision in the South Dakota v. Wayfair case, states are continuing to determine their position. Many states already had economic laws in place and others introduced hard to understand requirements which includes noncompliance penalties. There are several different factors states are considering and it is important that a business understands individual states’ standards.

For South Dakota v. Wayfair, South Dakota’s economic nexus law comes into play for out-of-state sellers making more than $100,000 in sales or services or engaging in 200 plus separate sales of goods or services delivered to South Dakota.

States will continue to respond one by one upon review of the Wayfair decision and will provide guidance to affected sellers.

Here are some answers to some of the questions you may have:

Does this mean I have to collect sales tax from every state?
There are exceptions for small sellers. The definition of small is not consistent between states.

Are there consistent rules for what is taxable between states?
You have to follow each state’s rules.

Are the laws retroactive?
Most states are looking at this prospectively. Some from the date of the decision and others on a specific date – for example Wisconsin is beginning October 1, 2018.

Have all the states decided what they will do?
Guidance is coming out weekly from different states. Some have called special sessions to deal with this issue.

We are monitoring this issue and will let you know more as information becomes available.

If you have any questions, please let us know.

Will a Nigerian Prince be Your Next Client?

February 28, 2018 By JAK + CO.

By Todd Koch, CPA, MBT, CFP®

Introduction

Many clients are looking for a new CPA, so receiving email requests for proposals is getting more common. Recently, I received an email request from a Nigerian prince offering me a million dollars to review his tax return. He conveniently attached his return to the email. So, all I needed to do was open his email attachment, and we were in business, right?

Now, while I have not had any phishing emails this obvious before, I have received several similar requests in the last 90 days. These are security threats and are a real danger to our clients’ data. We all have heard the warnings that CPA’s are prime targets for identity thieves. For years, cybersecurity criminals have been infiltrating the IRS to steal taxpayer information, but they’ve realized it is a lot easier to get that information from us.

A reputation, once lost, is gone forever

We have a legal duty under the Gramm-Leach Bliley Act to have a plan to deal with our clients’ private information. But I worry about client security for another reason. I am a CPA.

As a CPA, one of my primary business assets is my reputation, and it’s vital that I protect this. It has taken me too long to earn my reputation, and it only takes one mistake to lose a good name. I do not want to be part of a news story that begins “Security breach at…”

Constant vigilance and rigorous cybersecurity policies can help protect your firm’s data. The AICPA Tax Section has some best practices for keeping client data secure. Below are a few of my practical considerations that you should be doing (if you are not doing them already).

Secure emails

Emails are a leading entry point for security breaches. At our firm, we receive about 2.2 million emails a year. A cloud spam filter stops 90-95% of these emails from reaching our server. This is a good first step.

Get your staff into the mindset of never opening email attachments from new client solicitations. Be sure to create a policy that includes how all new client communications must first be addressed by a phone call to the potential client to determine if this is a new legitimate business proposal.

A cooperative between staff and IT

To reduce the possibility of becoming a victim of data breaches, our IT consultants routinely train and remind our staff to be vigilant. Staff should forward questionable emails to your IT department to evaluate and quarantine.

Also, have your IT department send out phishing emails disguised as real client emails. Test your staff to see if they will take the bait by clicking on an email attachment. This is a great way to assess whether your training is working.

Your trash is someone else’s treasure

There is a goldmine of client data on phones, tablets, or laptops. Staff should let their IT department know before they plan to sell or trade in their electronic devices and equipment. The IT department can then wipe all data from the phone before it changes hands.

Also, lost electronic devices and equipment should be immediately reported to your IT department so they can help mitigate some of the damage. They can reset your accounts and possibly disable your stolen devices so thieves cannot steal your firm’s data.

Get your clients on the bandwagon

Clients need to be aware of the issues of data security. Educate them on the potential risks and get them to embrace your policies for safeguarding their information.

The days of sending PDF attachments via regular email are over. We encourage our clients to use client portals to share their files. A client portal makes it easy to access, manage, and share data securely.

For those clients who do not use secure client portals, we send attachments to them using a secure email service that encrypts our emails in addition to other security measures. This ensures we have private communication channels with our clients.

Also, we are mindful of the packages we mail out. Not only do they have our clients’ names, addresses, birthdates, banking and investment information, but we put all this information in one convenient package with no means to lock or password protect it. Thus, we make it easy for anyone with motive to easily steal that information.

Make it a standard practice for clients to come and pick up their income tax returns. Very few of our clients come and pick up their returns now, but we are encouraging them to pick up their packages or have their returns couriered to them.

Lockdown those assets

Low-tech considerations, although obvious and simple, should not be overlooked. For years now, we have had a shredding company come to the office regularly to get rid of our paper documents securely. They must have a security card to even gain entry to our office.

One thing we implemented this year was asking the vendor who handles our firm’s janitorial duties to come during the work day. It may be a little inconvenient for both parties, but it helps eliminate any potential security concerns that come from documents ending up in the hands of non-staff.

Closing thoughts

A fully secure environment is not possible. As one human can do, another can undo. We need to continue to keep security at the forefront of our everyday life. Otherwise, we may inadvertently allow the Nigerian prince into our doorway.

Now is the Time to Start the Transition Planning Process

November 30, 2017 By JAK + CO.

By Todd J. Koch, CPA, MBT, CFP®

For business owners, the prospect of handing over the reins can be difficult at best, painful at worst. For this reason, many business owners avoid even thinking about it. But leaving transition planning on the back burner could leave your business in a perilous spot. Here are a few tips about when and how to start the transition planning process.

Recognize that planning for a transition is, in fact, a process.

There’s a lot more to taking a step back from your business than setting a retirement date. This is true whether you plan to sell to an outside party, a close family member, or a key employee.

Put the right people in place.

Who will fill your shoes? If you have been the only face of the business, you’ll need to introduce your successor to the nuances of your job—and to your customers or clients. This applies even if you want to leave and still own; someone needs to have your skill set for the business to continue. And if you’re planning to sell to an outside party, remember: a strong staff is one of your biggest assets.

Present financial results in a way that shows others what they could do with your business.

Now is the time to think about how someone else might run your business. Start by identifying and removing perks. And be honest with yourself. For instance, do those Vikings season tickets really deliver a financial benefit, or are you just a die-hard fan?

Next, take a look at your bonus programs. Do you have a set formula for these? If not, consider instituting one. It’s easier to explain a formal program to a prospective buyer, and it’s also better for your staff to have a goal to work toward.

Thinking of your financial results in more than a tax manner can help you better position your business—and staff—for the transition.

Get started while you’re in control of timing.

There are a myriad of events, both positive and negative, that can cause you to lose control of timing. For example, if a buyer comes to you out of the blue with an offer you can’t refuse, it may be cause for celebration, but timing will likely be out of your control. On the other hand, an illness or death may force the transition to happen immediately.

Ideally, you should start planning for the transition three to five years before you want it to happen, as this is how long it takes for someone to learn your job. This should also give you enough time to make any necessary changes to your financial reporting.

Talk to someone who’s been in your shoes.

We’ve been through quite a few transitions of our own in the last 90 years, so we understand the process. We also understand that it has to be your idea—no one can talk you into it. Knowing you’re ready to take action is the first step. And the more time you allow yourself to complete the process, the more seamless it will be. When you’re ready, we can help you evaluate financial results and structure compensation programs, as well as simply answer any questions you may have.