New State and Local Tax Video

State and Local Tax Director Mark Loftis explains how SALT services can help you and your company, including areas such as credits and incentives, incoming franchise tax, sales and use tax, business tax, and property tax.  Check out the new video at this link.  

Erica Saeger Named Employee of the Year by NBJ

Congratulations to our own Erica Saeger, who has been selected as a winner of the Nashville Business Journal‘s inaugural Employee of the Year awards in the Company Culture Category.  Hooray!  We are SO proud of Erica.  We’ve always known how fabulous she is and now others will, too!  She is constantly a champion for our company and its culture.

Here is a link to the NBJ article.  Way to go, Erica!

Don’t Ignore Tennessee’s Expanding Business Tax

By Mark Loftis, Director of State and Local Tax, Crosslin

Most taxpayers doing business in Tennessee are very familiar with the state’s sales/use tax and franchise/excise taxes.    The state’s lesser known “business tax”, which has grown over the years from being purely a “local tax” to a now broadly defined state “gross receipts” tax, is many times overlooked by taxpayers until faced with an audit by the state which produces an assessment.

Over the past few years, the state has made it clear that expansion of the business tax is a priority along with compliance to its requirements.   This is evidenced by increased audit of the business tax by the Department of Revenue.

The business tax can now apply to taxpayers with no “physical presence” in Tennessee

As of Jan. 1, 2016, as part of the Revenue Modernization Act (RMA) that was passed and signed into law, the state adopted an “Economic Nexus” or “Substantial Nexus” standard in regard to the application of the business tax.   The RMA also adopted an “Economic Nexus” standard in regard to the corporate income and franchise taxes as well.

Prior to Jan. 1, 2016 the law was unclear on exactly what the nexus standard should be regarding the application of the business tax, although it was generally applied that a company must have a “physical presence” within the state in order for the tax to apply.   So the prior general rule of thumb was that the nexus standard for Tennessee to impose the business tax required actual “physical presence” in Tennessee.   As of Jan. 1, 2016, the RMA clarified that and imposed “Economic Nexus” standards in order for the tax to apply.  Economic Nexus standards go well beyond having physical presence and sets the standard that mere economic activity (over certain limits) allows Tennessee to impose the business tax on otherwise “out of state” taxpayers.

As is indicated on the Tennessee Department of Revenue’s business tax website, the state views the application of the business tax very broadly and states “with few exceptions, all businesses that sell goods or services (within the state) must pay the state business tax”.

Economic Nexus Standard Effective Jan. 1, 2016 provides that if any of the following applies to a taxpayer then the taxpayer has nexus and is subject to the business tax:

  • Taxpayer commercially domiciled in the state.
  • Taxpayer owns or uses capital in the state.
  • Taxpayer has systematic and continuous business activity in the state (that produces gross receipts).
  • Taxpayer has a bright line presence – Tennessee annual:
    • Receipts greater than $500,000 (or 25 percent of total receipts)
    • Property greater than $50,000 (or 25 percent of total property)
    • Payroll greater than $50,000 (or 25 percent of total payroll)

Overview of the Tennessee business tax

The state declares a taxable privilege on gross receipts and defines it as “any vocation, occupation, business, or business activity listed in Tenn. Code Ann. 67-4-708 (1) – (5) is a taxable privilege subject to the state business tax.   There are 5 classifications of business defined in the code.

The business tax is administered by the State Department of Revenue.  The county and municipalities administered the business tax locally up until several years ago when that was shifted to the state to administer.    There are two components to the business tax, a state (county) business tax and a municipal business tax requiring two returns for each location generally.    For the new “out of state” taxpayers the department has developed an “out of state” return.

Rates of tax:  The rates of tax vary by business classification and ranges from .001 to .003 for retailers and .00025 to .000375 for wholesalers.

Due date of the returns: The business tax is reported and remitted on annual returns generally due April 15 of the following tax year.

Exempt entities/exemptions: There are various entities and business activities exempt from the Business Tax (but not limited to):

  • Sales of less than $10,000 within a county/municipality.
  • Sales in qualified enterprise zones.
  • Religious, charitable, legal, educational, domestic, accounting services, architecture, engineering, surveying, and veterinary entities.
  • Nonprofit entities.
  • Medical and health services.
  • Farm exemptions.

Deductions available:  There are various deductions available including (but not limited to):

  • Sales of services in other states.
  • Returned merchandise/cash discounts/repossessions.
  • Sales in interstate commerce.
  • Trade in allowances.
  • Bad debts written off.

As this expanding Tennessee gross receipts tax is more strongly enforced by the state, taxpayers need to be aware of these new reporting requirements and be prepared for the audit which will likely come.

Read more about state and local tax here

Crosslin Adds Team Members in Several Departments

Crosslin has added team members to several departments within the company, experiencing a surge of growth in all service lines.  As Crosslin celebrates its 30th year in business, the company continues to broaden its offerings and expand its team.

The entrepreneurial business services (EBS) department welcomes Steve Flora as senior accountant and Susan Lindeman as an EBS team member.  Before joining Crosslin, Flora worked as an accountant for Conserv Business Services.  He received a bachelor’s degree in business administration from Belmont University and a bachelor’s degree in accounting from Tennessee Tech University.  Prior to Crosslin, Lindeman served as assistant treasurer for the Tennessee Conference of the United Methodist Church.  She has also served as vice-president of finance for the Boys & Girls Club of Middle Tennessee.

Hunter Pons comes on board as an audit team member.  Pons previously served as an audit intern for Crosslin.  He received both his masters of accountancy and bachelor’s degree in business administration from the University of Tennessee at Knoxville.

Stuart Cooksey and Chelsea Moser have joined the tax department as team members.

Prior to Crosslin, Cooksey worked as a staff accountant for Enderle Besten Dieruf, PLLC in Lexington, Ky.  He received his bachelor’s degree in business and economics from the University of Kentucky.  Before joining Crosslin, Moser completed an internship at Brady, Martz & Associates in Grand Forks, North Dakota.  She graduated from the University of North Dakota with a bachelor’s degree in accountancy.

8 Actions That Could Trigger a State and Local Tax Audit

 

By Mark Loftis, Director of State and Local Tax, Crosslin

1. Rapid expansion of operations into a new state(s).

Businesses will sometimes expand into a new state with rapid growth in plant, equipment or inventory all for good business reasons, but they don’t fully realize the tax implications of doing business in new state and local jurisdictions.   Physical presence in any state will require registration and adherence to that state’s tax laws.

2. Employees or non-employee agents of your company entering into new states doing business.

When sending employees, or your agents, into other state and local jurisdictions (even with no other physical presence in that state) to do business, there is a great likelihood that taxes in those states will now apply to your company.   Some states are even moving to more aggressive definitions of when their taxes apply – where by a mere sales dollar amount, the company is being asked to pay their tax.

3. Failure to self-assess use tax on purchases made where the appropriate sales tax was not charged by a vendor.

Most times when a state audits a business they will find unknown tax liabilities on items the business purchased from vendors who are either not registered or not required to charge your home state and local sales tax.  When this happens, each taxpayer is required to self-assess a “use tax” (same as if the sales tax was charged) and report and pay that tax to your home state.

4. Failure to charge the correct sales tax rate on taxable sales.

In the U.S. there are now just fewer than 10,000 different state and local tax jurisdictions, all with different tax rates which change constantly.    It is therefore easy to see how a company that makes sales in multiple jurisdictions can lose track of the appropriate sales tax rates it should be charging its customers.   The taxpayer is held liable for any of these under or over charges of tax.

5. Failure to obtain the correct or properly dated exemption certificates on exempt items you sell.

When under audit by a taxing jurisdiction, the auditor will review your customer exemption certificate file, which is your proof and documentation that you are required to have on hand to exempt your customers from collection of sales tax.    If you do not have the proper documentation on file the state and local jurisdiction can assess you that tax plus any penalty and interest.

6. Acquiring a business with unknown back state tax liabilities that you are now responsible for.

When purchasing a company that operates in multiple states the acquiring company should always do its due diligence in seeing if that company has any state and local tax liabilities that will only be found in future audits by state and local jurisdictions.

7. Making sales into new states via the internet or through Amazon (FBA – Fulfillment by Amazon).

Selling product over the internet into states where a company may not have thought it had physical presence may lead to potential state and local tax liabilities.    For example, participating in Amazon’s Fulfillment by Amazon program allows Amazon to warehouse product the company still owns in its distributions warehouse facilities across the U.S. and to transfer this product between its facilities as needed.   Therefore, a company using this service may unknowingly have nexus in states that it did not realize creating an obligation to collect that states sales tax for example.  It could also lead to having other taxes apply depending on the state and the circumstances.

8. Taking items out of inventory for your own use.

When companies that buy items it incorporates into the product it sells, it can in most cases buy that item exempt from sales tax as an item it will resale.   However, if that company decides to subsequently take such items out of inventory for its own use and, will not in fact be reselling the item, then the company must self-assess use tax on the items it removes from inventory for its own use.  This is therefore easy to overlook until the state audits the company’s records.

If you are in any of these situations, have a state and local tax professional review your situation prior to you being contacted by a state or local tax jurisdiction so you are prepared for a state audit that is likely to come.

Mark Loftis serves as the director of state and local tax with Crosslin, bringing nearly 35 years of state and local tax experience to the firm. Contact him at mark.loftis@crosslinpc.com or call 615-320-5500 x 472.

 

 

 

Tax Tips September 2017

This month’s Tax Tips address the details of the President’s recently-suggested tax overhaul plan. Please keep in mind the following information is part of a proposed plan and none of these changes have been passed by Congress.  Tax team members Jamie Templer and Stuart Cooksey discuss the major changes in the tax framework and how they may affect taxpayers.  Click here to view.

Full Script:

Yesterday, President Trump unveiled the details of his administration’s tax overhaul plan. We are going to take a few minutes to discuss the major changes in the tax framework and how they may affect you. Please keep in mind the following information is part of a proposed plan and none of these changes have been passed by Congress.

First, we will discuss the proposed changes to corporate tax structure. The biggest change will be the lowering of the corporate tax rate from 35% to 20%. There will also be a new tax on passthrough income that is limited to 25%.

The plan is doing away with corporate Alternative minimum tax. The Domestic Production deduction is being cut. Meanwhile, certain credits are kept in place- including R&D credits and low income housing credits.

President Trump is also encouraging businesses to bring foreign investments back into the United States. The plan exempts foreign earned profits when brought back into the US. (Including Accumulated earnings) and 100% exemption for dividends from foreign subsidiaries.

There are a lot of proposed changes to personal taxes as well. Previously, individuals have been taxed in seven brackets- ranging from 10% to 39.6%. Under the new plan, there will be three tax brackets

  • 12%
  • 25%
  • And 35% as the top tier
  • The plan also gives congress an option to add a bracket higher than 35% if necessary

The new standard deduction will be almost doubled. Previously, the standard deduction was $6,350 for an individual. It would now be $12,000 for individuals and $24,000 for married couples filing a joint return. Personal exemptions would be eliminated.

Some itemized deductions would be eliminated. The most significant of these would be the elimination of state and local taxes as an itemized deduction. Deductions for mortgage interest and charitable giving would stay in place.

If you have any questions or need assistance planning for future changes, we here at Crosslin are happy to help you out. Please give us a call.

Rare Tax Amnesty Program Available in 20+ States for Online Marketplace Retailers

How often do states forgive taxpayers back tax liabilities or, for that matter, agree on anything?  It’s probably about as rare as the recent total solar eclipse.   But, as of August 17, 2017, for a two-month period ending October 17, 2017, over 20 states have come together through the Multistate Tax Commission to offer online marketplace retailers a unique and robust tax amnesty program.  If the taxpayer is approved, this program generally allows a taxpayer’s back taxes to be forgiven in exchange for agreeing to register, file, and pay state taxes going forward.

Background:  Over recent years, many small- to medium-sized online retailers have had a tremendous opportunity to expand their online markets and obtain efficiencies in the fulfillment/shipping of its goods to customers.  This opportunity has come through innovative third party companies like Amazon, EBay and others.  Amazon’s program is called “Fulfillment by Amazon” (FBA).

The way these programs work is that the online FBA retailer through this service is allowed to utilize Amazon’s distribution facilities and essentially outsource the entire fulfillment process.   Amazon, for example, has warehouse distribution centers all over the U.S. and will inventory and position the online retailer’s product strategically in their distribution center network. This ensures the efficient and timely delivery of the seller’s specific product purchased online to the end user customer.   Therefore, once the taxpayer starts participating in the FBA, the online retailer may have product inventory located in many states where it otherwise would not have a connection or nexus.

Undiscovered Back Tax Liabilities:  Most states deem inventory located within their state alone as sufficient connection so that the state’s taxes will generally apply to that taxpayer.  Many online retailers have struggled with these requirements, especially for sales tax purposes.    Because of the inventory located in a state, they should (most likely) be charging, collecting and remitting that state’s state/local sales tax on sales in that state.   As a result, there are many of these retailers who likely have several years of back tax liabilities that are just waiting to be discovered if (or when) a state decides to audit them.

Participating States:   Alabama, Arkansas, Colorado, Connecticut, DC, Florida, Idaho, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota, Missouri, Nebraska, New Jersey, North Carolina, Oklahoma, South Dakota, Tennessee, Texas, Utah, Vermont, and Wisconsin.

What are the requirements for participating?

The Taxpayer must:

  • Be an online marketplace retailer
  • Not already be registered with the state
  • Have had no contact with the state regarding the back tax liability
  • Timely apply for approval through the MTC (Aug. 17 through Oct. 17, 2017)
  • Include in the application a “good faith” estimate of the back tax liability (all applicable taxes)
  • Agree to register, file and report applicable taxes going forward.

Items to think about if you participate:

  • Peace of mind created knowing you are compliant going forward and have no back tax liabilities
  • Some competitive advantage may be lost going forward with other online retailers who are not complying and collecting the sales tax for example.
  • You will have an ongoing tax return filing and tax payment obligation (probably a monthly filing obligation in each state). You will have to register and begin collecting and filing tax returns in the states where you have inventory and into which you are selling product.
  • Other taxes like income taxes may also apply.

How do I apply?

  • Determine the states where you have potential tax liability
  • Estimate your tax liability by state
  • Consult with your state and local tax advisor to verify your eligibility and to discuss the pros and cons of participation in the program
  • Your state and local tax advisor can also assist you in the anonymous MTC application process
  • File with the Multistate Tax Commission under the MTC Multistate Voluntary Disclosure Program

The State and Local Tax group at Crosslin stands ready to assist you with this or any state and local tax need you may have.   If you have questions, or if we can be of service, please contact Mark Loftis, Director of State and Local Tax, mark.loftis@crosslinpc.com or 615.320.5500 ext. 472.

 

 

Crosslin Releases Summer Nonprofit Newsletter

Crosslin has released its summer nonprofit newsletter, which contains helpful articles and thought content for its nonprofit customers.  Articles include:

  • Three Critical Privacy Issues Every Nonprofit Entity Should Consider
  • IRS Focus on Charitable Donation Substantiation Compliance
  • Aligning Your People Strategy With Your Organization = Results
  • What the White House Tax Plan Means for Charitable Giving

Click here to read the full newsletter and please let us know if you’d like a paper copy.  As always, Crosslin appreciates your business.  If we can be of service, please do not hesitate to call.

Crosslin Announces Promotions

 

Crosslin has promoted several team members within the company’s tax and audit departments.

Dan Warren has been promoted to tax director. Warren has exemplified strong leadership skills in the tax department and a commitment to excellence in serving his customers. He also continually demonstrates a positive, can-do attitude, which has fostered a cohesive and successful team environment.

Damien Wynn has been promoted to audit manager. Wynn has demonstrated strong leadership abilities, excellent customer service, and a clear talent for mentoring young professionals. His enthusiasm for his career and his fellow team members continually builds positive and productive relationships.

David Middlebrook and Jamie Templer have been promoted to tax supervisor. Their dedication to producing quality work and developing strong customer relationships while taking on additional leadership responsibilities continues to be a strong asset to both the tax department and the company.

Lindsey Ellis has been promoted to audit supervisor. Lindsey displays a clear commitment to customer service and self-development. Her willingness to always “go the extra mile” has proven extremely beneficial to both her customers and her fellow team members.

Aarika Williams has been promoted to tax senior. Williams has consistently demonstrated a strong commitment to improving her skills and increasing her responsibilities. She also is a dependable team player, working continuously to help her fellow team members succeed.

Congratulations to our amazing team members!

Crosslin Technologies Named to Inc. 500

Crosslin Technologies is excited to announce that we have been included in this year’s prestigious Inc. 500 list.  This exclusive list ranks the fastest-growing private companies in America and to be part of this group is an incredible honor.   Crosslin Technologies ranked 455 on the list, having grown 963.7 percent over the last three years.  We are extremely proud of our amazing team and leadership, whose hard work has made this growth and accolade possible.  We are also thankful for our fabulous roster of customers and their support of our company.  Crosslin Technologies is proud of this accomplishment and looks forward to the growth yet to come.

You can read the full coverage at https://www.inc.com/inc5000 and Crosslin Technologies will be in this month’s issue of Inc. magazine.

Sales Tax Holiday This Weekend

This weekend in Tennessee is the sales tax holiday.  Get your shopping lists ready!

During this weekend, certain goods may be purchased sales tax-free. The tax-free holiday weekend begins at 12:01 a.m. on Friday, July 28 and ends Sunday, July 30 at 11:59 p.m.  To see the full list of what items are considered tax-free, please visit http://www.tn.gov/revenue/article/sales-tax-holiday.

As always, please feel free to call the tax department at Crosslin with any of your tax-related questions.  We appreciate your business!

Crosslin Technologies Ranked Among Top 501 Managed Service Providers by MSPmentor

Crosslin Technologies ranks among the world’s most progressive 501 Managed Service Providers (MSPs), according to MSPmentor’s 10th-annual MSP 501 Worldwide Company Rankings. The top MSP 501 companies ranked this year include organizations from around the world and from diverse technology and business backgrounds. Collectively, they amassed $14.48 billion in total revenue (based on 2016 results), up more than 15 percent from a year earlier.  Crosslin Technologies registered No. 343 on the list.

“Crosslin Technologies is extremely proud to be recognized as one of the top managed service companies in the world,” said Co-Managing Principal Bryan White. “Our team works extremely hard to deliver exceptional products while providing superior customer service.  We have an incredible team and this prestigious honor is a testament to their talent and unwavering commitment to our customers.”

Founded in 2011, Crosslin Technologies leverages its internal technical and security experience to manage a variety of computing, networking, and security-related technologies ensuring that customers stay current and compliant in today’s information-rich business environments.  Customers enjoy the assurance of predictable IT investment and IT management overhead costs, while receiving a high level of personal service and attention.

“On behalf of MSPmentor, I would like to congratulate Crosslin Technologies for its recognition as an MSP 501 honoree,” said Aldrin Brown, Editor in Chief, MSPmentor. “The managed service provider market is evolving at a rapid pace and the companies showcased on the 2017 MSP 501 list represent the most agile, flexible and innovative organizations in the industry.”

The complete 2017 MSP 501 list is available at MSPmentor.net.  The 2017 MSP 501 list is based on data collected by MSPmentor and its partner, Clarity Channel Advisors. Data was collected online from Feb. 16 through May 15, 2017. The MSP 501 list recognizes top managed service providers based on metrics including recurring revenue, growth and other factors.

Interview with Ashley Coots, Summer Audit Intern

Crosslin is fortunate to have a fabulous audit intern this summer, so we thought it would be fun to get her thoughts on internships, career choices, etc.  Thanks, Ashley Coots, for a fabulous interview.  We are glad you are part of the Crosslin team!

Where are you in school and what are you studying? 

I am going into my senior year at The University of Tennessee at Martin getting a BSBA in Accounting and Finance.

Why did you apply for an internship at Crosslin?

I applied to several accounting and finance firms looking for an internship.  I chose Crosslin because of many reasons; however, I will just name the top two. The first one being they were going to give me a full summer internship, and even asked me when I wanted to start and wanted to end, working hands-on within the audit department.  With Crosslin, I would be able to go to clients and be a part of a full audit from start to finish. The second, which was a very close second might I add, was the atmosphere Crosslin brings to its employees. If you ask any employee who works at Crosslin what there favorite thing about their job is they will most likely say “the people I work with,” or “the friendliness of the upper management.” It is very important to me to work in an environment where you are happy to be and can be yourself around everyone, and Crosslin brings that atmosphere.

What do you hope to learn during your internship?

During my internship, I hope to learn what an auditor does from day in and day out, some of the struggles a person in this position may face, where you can go with being an auditor, the extra education you must obtain in order to succeed at this job, and if I take interest in this type of work.

What have you done during the first few weeks of your internship?

The first week of my internship I worked on online courses that explain all of the different steps in each type of audit. I worked mainly on the basic audits such as auditing cash, inventory, property plant and equipment, and payroll.  My second and third week here I was actually able to go to a client with three other auditors and work on-site. I was able to see how an audit worked from the beginning, and was able to apply what I have been studying to real life situations. This was an amazing experience because this was one of the first times I was able to actually see and understand how a business works, and was able to look at data and prove why the amounts were what they are and why they are there. I did something in a matter of a week into my internship that some interns have to wait until the end of their internship to do.     

What are you goals once you graduate?

Once I graduate in May 2018, I hope to obtain a full time job at a local company here in Nashville. During the fall of 2018, I will take online courses to finish up my hours needed towards the required 150 hours for the exam, and then I will start on the process of being a Certified Public Accountant (CPA). Being a CPA and/or CMA is something every accountant should try to obtain because it shows employers you are dedicated and are not afraid to take on a challenge.      

Would you recommend other college students participate in internship programs in their field?  If yes, why? 

I would absolutely recommend an internship for any college student, especially going into senior year, in their field. I would recommend it because nobody knows exactly what they like until they actually try it. A career is something you will stick with your whole life, so why not be completely certain this is the career path you want to go down when you graduate. Learning it and actually doing it are two completely different things.

Four Crosslin Principals Named Power Leaders in Finance

Crosslin is extremely proud to have FOUR honorees in this year’s Power Leaders of Finance, sponsored by the Nashville Business Journal.  Congratulations to Dell Crosslin, John Crosslin, Justin Crosslin, and David Hunt.  We know they are power leaders and we are glad to see that others agree.  Way to go, guys!

See the full slideshow here.

EBS Tips: Useful Information

You are the best at what you do!  You know more about your business than anyone else.   You are the master of your product and service, and you know best why your customers want or need what you provide.

Since you are the expert in your field, your products and services are awesome.  You likely know how your product beats your competitors.  You likely also know how your services are easily differentiated from similar providers.  You have what it takes to be successful!

What if there was information that would enable you to fully understand the benefits of reducing the cost of your product or improving the efficiency of your service delivery model? What if you had information that gives you the opportunity to increase your revenue or create cost savings within your business?  How useful that information would be to improve your profitability.

So what are forms of useful information?

  • Profitability of your business in total.
  • Profitability of each product or service provided to customers.
  • Status of cash at a given point in time.
  • Revenue by month compared to previous months.
  • The costs and expenses of one period compared to previous periods.
  • The amount you owe your creditors.
  • The quantity of products that need to be sold to breakeven or make a targeted amount of profit.
  • The cost of providing services compared to the prices you charge.
  • Your cash needs over the coming months or year.
  • A summary of the financial position of the business at a given point in time that is frequently requested by lending institutions.

When the Entrepreneurial Business Services of Crosslin assists with your accounting needs, useful information outlined above plus much more becomes readily available without you being distracted from what you do best.   You are better equipped to make more informed decisions regarding how to increase your revenue, reduce your expenses, and increase your profitability.  You will also be better able to determine how you might modify your pricing structure to create more profit.  Perhaps you will also see that certain products and services generate more profit, so you may then modify your business strategy to best achieve your goals.

With useful information, you are better positioned to achieve the success you deserve!

Fraud Risk Within Non-Profit Audits

Recently, John Crosslin, Co-Managing Principal, presented to the Tennessee Society of CPAs about audit issues and deficiencies in the non-profit sector.  He brought up a very important issue that can taint a non-profit’s reputation and cause other very substantial issues:  fraud risk.

Fraud in non-profits can reveal itself in a variety of different ways.  Such examples include a college employee in the financial aid office signing up false students, an employee using a credit card for personal uses, or creating fake credit card statements for reimbursements.  Significant control by the founder or executive director, difficultly in verifying certain revenue streams, lack of management oversight, unusual disbursements or reliance of volunteer boards can cause red flags.  Ultimately, many of these types of occurrences point to fraud within the non-profit.

How can an auditor detect fraud?   Establishing a system that requires all employees to submit expense reports that include original support for all expenses, identifying where/when the expenses occurred is vital. These expense reports must be carefully reviewed and all expenses will need approval by the designated person.  It is also important to always limit employee credit cards.  Additionally, assigning identification numbers to approved vendors while using pre-numbered purchase orders will also decrease the opportunity for fraud.  Fraud can also appear through financial reporting.  Failing to disclose significant related party transactions, misclassifying restricted donations to mislead readers, overstating program expenses, and incorrectly valuing donated assets are some examples where auditors encounter fraud.

It is important to formulate procedures to reduce fraud risk exposure.  You can do so by periodically testing management fraud expenses, journal entry testing for odd items at odd times (SAS 99),  test their 800 hotline, look for abnormalities in budget to actual reports, and review accrued vacation to ensure employees are taking regular vacation.

What are the effects of fraud?  Non-profit organizations that experience fraud can be faced with financial damage, loss of support from donors; auditors will suffer and can lose relationships with their customers.  The most extreme result can be that the organization will dissolve.

Remember that when something seems fishy while performing an audit, always trust your gut and use professional skepticism.

Getting Customer Service Right

Customer service seems like such a simple concept, but yet so many businesses get it wrong. I personally believe the reasoning behind this is every customer and every business has a diverse set of expectations of what they consider excellent customer service to be.

After attending the Crosslin customer service seminar and reading the Huffington Post article “6 Ways to Create Experiences That Customers Crave,” it seems clear to me that the best way to succeed in customer service is to know your customer and build a relationship with your customer.

No two customers are the same. One customer may want to only communicate via email and never meet the accountant that prepares their taxes. Another customer may want to only communicate face-to-face and want to tell their accountant about their family and their latest vacation.  The only way to know how customers like to do business is by building a relationship with them. It is the foundation. In today’s world, a customer has so many options for services and products. If you build a relationship with them and know their likes and needs, they are less likely to turn their back on you and leave your company for a competitor.

An important piece of the puzzle when building this relationship with a customer is the company’s employees.  Some companies believe that they need to spend an extreme amount of money to fix their customer service and please their customers.  But, it really lies in the attitude and willingness of the company’s employees.  If a company gives an employee the opportunity to build that relationship with a customer, and praises them for achieving results with customers, then the employee will most likely want to continue doing so.

At the end of the day, we need to remember that each and every one of our customers are not just a tax return, or an audit, they are actual people. They expect personalized service to stay loyal. If we give them each a personalized customer service experience, they will keep coming back.

Kellie Tucker, Operations Team (Tax)

 

 

Your Very Own Financial Executive

Your very own financial executive can be an expensive proposition.  However, ‘what if’ the accessibility of your own CFO was more economical?  Consider the following:

  • Have you had situations where access to relevant and timely financial information was critical to making the best decision?
  • When have you wished for sound financial data and advice from a seasoned expert inside your shop?
  • Have you ever had one of those complicated issues for which you needed the expertise of a Certified Public Accountant?
  • Are you receiving timely financial statements each month which have been reviewed by a seasoned financial executive?
  • Do you have the one-two punch of timely transactional bookkeeping as well as the expertise of a CFO on a routine basis?
  • Have business decisions been challenging because you did not have the information that would monetize the financial impact of your options?
  • What if you have consistent access to your very own financial executive as a member of your team without paying for an additional full-time senior executive of your management team?
  • Do you find the budgeting and financial planning processes of your firm so overwhelming that it distracts you from doing what you do best?
  • Have you considered the great value to the operations of your business if your cash flow was under the management of a CFO?
  • Are you sometimes puzzled by potential financial and operational outcomes of certain significant business decisions, wishing you had seasoned expertise at your fingertips?

The Entrepreneurial Business Services of Crosslin, PLLC include solutions to all of these situations.  When an owner or management team of a business wishes to focus on what they do best such as sales, production, or operations, the burden of accounting expertise and services can be placed in the hands of your own external accounting and CFO professionals.  The blend of fundamental bookkeeping services and the trusted advisory oversight of a financial executive provide economical solutions and timely financial expertise, which enable you to make better business decisions and improve your profitability.

So what does it mean to have your very own financial executive as an outside resource?

  • The financial expertise to make the most profitable business decisions.
  • Accurate and timely financial reporting that enables reliable operating decisions.
  • A trusted advisor that provides relevant financial tools that best fit your business.
  • A sustainable economical solution to your needs for seasoned financial expertise.
  • The comfort of knowing you have a financial executive on your team.

When you wish you had your very own financial executive, an outside service provider is a smart solution.  Contact the entrepreneurial business services (EBS) team at Crosslin today!

What You Need to Know About the WannaCry Ransomware Program

Just days after President Trump signed a much-anticipated executive order on cybersecurity, a massive cyberattack—potentially the largest the world has ever seen, with more than 75,000 ransomware attacks in 153 countries—stole headlines.

The “WannaCry” ransomware program hit organizations around the world on Friday, May 12, encrypting computer files and demanding roughly the equivalent of $300 in Bitcoin (increasing over time) to restore user access.

Russia, Ukraine, India and Taiwan were reportedly the most affected countries, but organizations across Europe, Asia and North America—with an estimated 3,300 infections in the U.S. alone—were also attacked. Notable targets included, among others, the Russian Interior Ministry, logistics carrier FedEx, automakers Renault and Nissan, a number of Chinese universities and secondary schools, as well as Britain’s National Health System (NHS). Forty-seven of the 248 NHS trusts were attacked by the ransomware program, and as of May 15, seven trusts had yet to regain control of their computer systems.

The rapid spread of WannaCry is slowing, for two primary reasons: 1) Microsoft took the rare step of issuing patches for outdated versions of Windows operating systems it no longer supports, going back as far as 14 years; and 2) the accidental discovery of a “kill switch” by a security researcher in Britain, which spared much of the U.S. However, neither “fix” helps systems that are already infected, and hackers could easily create a new strain of WannaCry that bypasses or negates the kill switch.

In response to the threat, the FBI issued a FLASH (FBI Liaison Alert System) report with confirmed threat indicators and recommended steps for prevention, remediation, and defending against ransomware generally.


What is ransomware?

Ransomware is a type of malware that targets critical data and information systems for purposes of extortion, preventing users from accessing their data files until a ransom is paid. The software frequently infects computers through spear-phishing—a targeted attack via a malicious link or email attachment. Ransom demands are most often made in the difficult-to-trace virtual currency Bitcoin.


What’s different about WannaCry?

In April, an elusive cyber group called the “Shadow Brokers” leaked a cache of powerful NSA hacking tools, including highly sophisticated (and expensive) software exploits. WannaCry is purportedly based on one or more of these exploits, taking advantage of a zero-day vulnerability in Microsoft Windows that enables it to spread itself laterally.  Microsoft issued a security update to address this bug in March, but users that didn’t make the update remain vulnerable.

WannaCry is the first cyber program to make use of the leaked NSA tools—but likely not the last.


Why were healthcare organizations the hardest hit?

The healthcare sector remains uniquely at risk to cyber incidents due to a variety of factors, including a lack of resources devoted to cybersecurity, the complexity of networks, and the vast array of internet-connected devices. Because many hospitals still maintain and rely on end-of-life technologies, and may prioritize immediate access to data over data security, cybercriminals have found their systems relatively easy to penetrate.

The healthcare sector is also one of the most targeted sectors by cybercriminals and nation states because it is the only sector which combines highly valuable and sought-after bulk data sets of personal health information, personally identifiable information, payment information, medical research and intellectual property.

Hospitals also don’t have the luxury of time: A ransomware infection that blocks access to critical medical data endangers patients’ health. Ahead of a scenario where patients’ lives are at risk, organizations should ensure they have preventive measures in place.


Is your organization safe?

The FBI recommends the following preventative measures:

  • Apply the Microsoft patch for the MS17-010 SMB vulnerability dated March 14, 2017.  (Organizations using unsupported Windows operating systems including Windows XP, Windows 8 and Windows Server 2003 should follow customer guidance from Microsoft.)
  • Enable strong spam filters to prevent phishing e-mails from reaching end users and authenticate in-bound e-mail using technologies like Sender Policy Framework, Domain Message Authentication Reporting and Conformance, and DomainKeys Identified Mail.
  • Scan all incoming and outgoing e-mails to detect threats and filter executable files from reaching the end users.
  • Ensure anti-virus and anti-malware solutions are set to automatically conduct regular scans.
  • Manage the use of privileged accounts, assigning administrative access only when absolutely needed.
  • Configure access controls including file, directory, and network share permissions with least privilege in mind.
  • Disable macro scripts from Microsoft Office files transmitted via e-mail. Consider using Office Viewer software to open Microsoft Office files transmitted via e-mail instead of full Office suite applications. Develop, institute and practice employee education programs for identifying scams, malicious links and attempted social engineering.
  • Have regular penetration tests run against the network, no less than once a year, and ideally, as often as possible/practical.
  • Test your backups to ensure they work correctly upon use.

Crosslin offers these additional recommendations:

  • Don’t forget the human element. The WannaCry attack was entirely preventable. It succeeded at infecting computers because users failed to install a months-old patch—in other words, because of human negligence and a lack of awareness. Change user behavior by introducing a training program based on employees’ organizational roles, implementing cyber hygiene best practices (i.e., not opening suspicious emails or attachments) and regularly testing the program’s effectiveness.
  • Implement a risk-based, threat-driven patch management program. Patch management should be a dynamic, risk-based process rather than a check-the-box compliance approach. Organizations must be able to identify system vulnerabilities and relevant patches in a timely manner, understand the degree of risk the vulnerability presents, and work with asset owners to deploy the update.
  • Monitor, monitor, monitor. To be cyber resilient, organizations need to have threat monitoring and analytics tools to detect an attack, as well as the investigative and digital forensics capabilities to understand what went wrong and the scope of the damage. The sooner a cyberattack is detected, the sooner incident response and mitigation strategies can be put into effect. When it comes to ransomware, early detection can make all the difference in salvaging critical data and information systems.

 

What should you do when preventative measures fall short?

  • Isolate the issue. Buy more time to respond to the attack by removing infected systems from the network and cutting off access to the parts of the network that are not corrupted. Change the passwords to those isolated segments, if possible.
  • Secure backup data or systems by taking them offline. Make sure your backups are clean.
  • Contact your local FBI field office’s Cyber Task Force immediately. The FBI is there to help; its role is not to find fault or lay regulatory blame on a victim organization, but rather to conduct the investigation in cooperation with the victim organization and determine who perpetrated the attack.
  • Implement your incident response plan. Ensure all stakeholders have been notified and understand their respective responsibilities.
  • Change all passwords. Once your networks are back up and running, change all online account and network passwords.

2017 Tennessee Reappraisal of Real Estate Valuations

     2017 is a critical year for minimizing your real property tax bills for the next four to six years for real property held in 22 Tennessee counties that are undergoing reappraisal.   Tennessee’s largest counties (including Davidson) are all undergoing reappraisal this year.   The purpose of the reappraisal, which occurs every four to six years, is to restore equity and hopefully ensure taxpayers are being treated fairly by updating all appraisals to “current market value.” 
     As you can imagine this is a huge task for each county assessor and, by necessity, the counties must utilize various mass appraisal techniques in order to reappraise all real property in a timely fashion.  These mass appraisal techniques will actually, for some taxpayers, cause inequity and lead to a higher than market value being placed on property.  Obviously when that occurs, the inequity causes a higher property tax bill than is fair to the taxpayer potentially for the entire four to six year period of the cycle. 
     During April or May, owners of real estate in these counties will be receiving the 2017 assessment notices by mail.  These assessment notices will advise taxpayers of the new reappraised valuation as of January 1, 2017.  For taxpayers who hold significant real estate in the counties listed below, we strongly recommend that your 2017 assessment notices and new appraisal values be evaluated for potential appeal opportunity.  Unfortunately, the time frame to appeal valuations is fairly short after it is received and, depending on the county, is generally prior to June 1, 2017. 
     Crosslin’s state and local tax group can evaluate your 2017 real estate appraisal for potential appeal.  We will do the initial evaluation and consultation at no charge to you and will make a recommendation on whether an appeal is warranted.   If, based on that recommendation, you authorize Crosslin to pursue an appeal; our fee would be based on a percentage of the first year’s actual tax savings.  There is no further fee for the other three to five years that you will enjoy the tax savings.   If the appeal is unsuccessful and there is no tax savings, there would be no fee charged. 
     We are limiting this opportunity to only those individual (or collective) properties with valuations over $750,000 as of January 1, 2017.  All we need to do this evaluation is to review the county assessment notices that will be mailed to each taxpayer.
     Counties undergoing this process include Bledsoe, Bradley, Claiborne, Clay, Cumberland, Davidson, Fayette, Franklin, Giles, Hamilton, Hancock, Henderson, Humphreys, Knox, Louden, Marshall, Sequatchie, Shelby, Smith, Sullican, Unicoi, and Union.  
     If you have property in one of these counties and would like to discuss your reappraisal, please contact Mark Loftis at 615-320-5500 ext. 472 ormark.loftis@crosslinpc.com

Crosslin Technologies Named Best Places to Work Winner

Crosslin Technologies came in 3rd place overall across all categories and was named a winner in the 2017 Best Places to Work Awards today, sponsored by the Nashville Business Journal. Companies are selected for displaying a strong commitment to creating a positive work environment which fosters respect, comfort, and engagement of its employees.

We are honored to be part of such a prestigious group. Crosslin Technologies is proud of its team and our workplace!

Crosslin Named Finalist in Best in Business

Crosslin was today named a finalist in the 2017 Best in Business Awards, sponsored by the Nashville Business Journal.  Companies are judged on service, growth, innovation, and strategy.  We are honored to be part of such a prestigious group.  Way to go, Team Crosslin!

Crosslin Technologies Named One of 2017 Best Places to Work

Congratulations to Crosslin Technologies! We are so thrilled to announce that CT was named one of the 2017 finalists in the Small Business Category by the Nashville Business Journal. We are so proud of our team and honored that we have been chosen as a finalist in this group. Thanks to CT for all of your continuous hard-work, dedication and everything you do to make CT a best place to work!

Click here to read the full article!

 

Other Upcoming Tax Filings

Other than my income tax return, are there other upcoming filings of which I should be aware? Tax team members Mark Loftis and Katie Almond answer that question and more in this week’s Tax Tips.  Check out the video here.

Other than my income tax return, are there other upcoming filings of which I should be aware?

Besides the corporate, partnership and individual filings due March 15 and April 15, there are several other filings for which you should be aware.

That’s right, for example, if your business owns personal property used in the business such as furniture, equipment and computers, you should file a Property Tax Schedule B by March 1 with your county.

It’s important to note that this is just an informational filing at this time and the actual assessment and tax bill will come later in the year.  If you are still in the process of filing your business return, you can file a provisional return now and amend it as soon as you have final fixed asset numbers.

The next upcoming filing will be your entity Annual Reports, due April 1.

These reports are filed online with the Secretary of State and merely report certain informational items related to your corporate or LLC structure.  There are payments due with these reports and the amounts depend on the type of structure.

Following these reports are city and county business license tax returns.  These are due April 15 and must be filed online with the state of Tennessee.

The tax on these returns is computed based on gross sales, before expenses, taxable in Tennessee.  Therefore, you can exclude out of state sales from the tax base.  Also, the rate of tax is based on your business status, whether a wholesaler or a retailer.

We here at Crosslin are happy to help you with all of your tax compliance and planning needs.  Please feel free to contact us anytime.

Upcoming Financial Reporting Changes for Not-for-Profit Organizations

The Financial Accounting Standards Board (“FASB”) has issued FASB Accounting Standards Update (“ASU”) No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, which is an accounting standard that will impact several aspects of a not-for-profit organization’s financial statements. The provisions in the new standard represent some of the most significant changes to a not-for-profit organization’s financial statements since the FASB issued Statement No. 117 in June of 1993.

This new standard changes how a not-for-profit organization classifies its net assets, as well as the information it presents in financial statements and notes about its liquidity, financial performance, and cash flows. A summary of the main provisions of ASU 2016-14 is as follows:

  • The standard changes the number of net asset classes from three classes (unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets) to two classes (net assets without donor restrictions and net assets with donor restrictions).
  • Currently, not-for profits organizations present, on the face of the statement of cash flows, the net amount for operating cash flows using either the direct or indirect method. It the direct method is used, then a reconciliation with the indirect method is required. The new standard no longer requires this reconciliation if using the direct method.
  • Not-for-profit organizations will be required to provide enhanced disclosures about how the organization manages its liquid resources available to meet cash needs for general expenditures within one year of the balance sheet date as the availability of a financial asset may be affected by (1) its nature, (2) external limits imposed by donors, grantors, laws, and contracts with others, and (3) internal limits imposed by governing board decisions.
  • Currently, only voluntary health and welfare organizations are required to present expenses by their natural and functional classification. Going forward, all not-for-profit organizations will be required to present their expenses by both their natural and functional classification. This information may be provided in one location, which could be on the face of the statement of activities, as a separate statement, or in notes to financial statements.
  • Not-for-profit organizations with endowment funds that are underwater will now classify their deficit in the endowment fund as part of net assets with donor restrictions. Currently, these deficits are presented as a reduction in unrestricted net assets.
  • The standard will now allow a not-for-profit organization to report its investment return net of external and direct internal investment expenses and no longer require disclosure of those netted expenses. The goal is to provide a more comparable measure of investment returns across all not-for-profits, regardless of whether their investment activities (1) are managed by internal staff, outside investment managers, volunteers, or a combination or (2) employ the use of mutual funds, hedge funds, or other vehicles for which management fees are embedded in the investment return of the vehicle.

The new standard is effective for annual financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018. The changes in this new standard should be applied on a retrospective basis in the year that the new standard is first applied.

Please contact Crosslin with any questions about how this new standard may impact your not-for-profit organization.