Are You Using the Right KPIs for Your Brewery?

Are You Using the Right KPIs for Your Brewery?

How do you know if your brewery is performing well, where there may be opportunities for improvement or fixes required, and whether it’s positioned to survive these financially uncertain times? Tracking the right Key Performance Indicators or KPIs can help keep growth and performance on track.

Perhaps one of the biggest challenges is deciding which KPIs will prove most valuable to your business.  There are KPIs that can apply to all businesses and industries; to the food and beverage industry; to specific brewing processes like fermentation; and to breweries in general.

Selecting KPIs that give you insights into big picture performance as a business along with KPIs specific to breweries may provide you the most valuable insights to help you track progress, analyze performance, and make decisions in today’s uncertain economic environment.

Financial KPIs to consider:

  • Cash flow reveals how much cash your business generates and how much money is flowing through your business. It’s calculated by subtracting cash outflow (i.e., taxes, rent, supplier payments, etc.) from cash inflow from customer payments.
  • EBITDA per unit measures profitability over longer periods of time like a month, quarter, or year (rather than a day or week). EBITDA stands for earnings before interest, taxes, depreciation, and amortization. In addition to cost of goods sold (COGS), which reflects the cost of raw materials and packaging, it accounts for all operating expenses (i.e., rent, marketing, salary, benefits, etc.).
  • Gross margin per unit helps measure profitability by determining the percentage margin of a single unit after subtracting total COGS.
  • Break-even point gives insight to profitability, by helping you understand the minimum number of units you need to sell in a time period to be profitable.
  • Days inventory reveals the number of days inventory is in stock before it is transformed and sold as a finished product, which provides insight into your working capital. A significant decrease may point to pending cash flow issues.

Production KPIs to consider:

  • Utilization rate is your brewery’s total production capacity measured as a percentage. When it decreases, production system issues or low orders may be to blame. It can also inform your decisions about scaling production.
  • Cycle time is the average amount of time it takes to produce your product, from start until it is shipped. This KPI gives insight into how efficiently your machines are operating by showing how many days it takes to produce your product from start to finish.
  • Throughput is the average number of units produced within a defined time period (i.e., day, week, month, etc.). This KPI gives insight into your production line’s efficiency. When it decreases, evaluate why and make needed adjustments.

Sales KPIs to consider:

  • Average order value reveals how much each customer typically spends per order, which helps with sales projections, production plans and run rate. If you notice this KPI decreasing, evaluate whether there are improvement opportunities within your sales process.
  • Fill rate measures how quickly total orders are filled and reach a customer’s destination. It provides insight into working capital efficiency and customer satisfaction, while also helping to identify the need for improvements.

For more insights, contact RBT CPAs’ advisory services team. As always, we’re also here to partner on all your tax, audit, and accounting needs so you’re freed up to focus on your business success. Give us a call today.

Clear The Air: New Carbon Monoxide Alarm/Detector Requirements Are in Effect

Clear The Air: New Carbon Monoxide Alarm/Detector Requirements Are in Effect

A few years ago, following the deaths of housing residents due to Carbon Monoxide (CO), the U.S. Department of Housing and Urban Development (HUD) began working on federal legislation to ensure it would never happen again. Under the Appropriations Act of 2021, new federal rules for CO alarms and detectors took effect December 27, 2022. Here’s what you need to know…

CO is a toxic gas that has no smell or color. When it builds up, it can be deadly to people and pets in just a matter of minutes. It can also leave those who inhale it with permanent brain damage, cardiac issues, cause miscarriages, and numerous other short- and long-term health issues. When fuel burning in stoves, grills, fireplaces, gas ranges, furnaces, lanterns, small engines, cars, trucks, and more doesn’t completely combust, CO is generated. Still, it doesn’t have to go undetected thanks to modern-day CO alarms and detectors that can save lives and protect health.

As reported by the National Low Income Housing Coalition, the new requirements apply to all authorities that provide Public Housing, Housing Choice Voucher (HCV), Project-Based Voucher (PBV), Project-Based Rental Assistance (PBRA), Section 202 Supportive Housing for the Elderly, and Section 811 Supportive Housing for Persons with Disabilities programs. Housing Opportunities for Persons with AIDS or HOPWA-assisted housing is also covered.

Overall, the new rules require CO alarms or detectors meet or exceed standards in 2018 International Fire Code Chapters Nine and Eleven, and be installed in covered units and buildings that have fuel-burning appliances and/or an attached garage. (When state or local laws regarding CO are more stringent than the federal requirements, the state or local laws govern.)

The notices issued by HUD also stress the importance of and guidance on preventing CO from entering buildings and units in the first place, with properly installed and maintained appliances and proper ventilation. If you own/run housing that receives federal rental assistance, consider having maintenance staff proactively visit and inspect all units for compliance. Also check the unit’s/building’s ventilation and fuel-burning appliances’ hookups. Then, at least twice a year, make sure alarms/detectors are operational and running correctly.

Finally, consider educating residents about the risks of CO and why the alarms and detectors are so important. The federal rules indicate HUD will make available educational materials on its website that can be used for educational purposes.

For more information, refer to these resources:

Earlier this month, HUD introduced two funding opportunities to improve public housing health; one of the opportunities includes Public Housing Authority (PHA) funding for “evaluating and mitigating threats to public housing residents, such as lead-based paint, carbon monoxide, mold, radon, fire, and asbestos.”

As stated in the press release, “PHAs have until April 13, 2023, to apply for the $165 million HRHLBP NOFO through Grants.gov. HUD encourages eligible applicants to apply and has made this funding available earlier in the fiscal year with more time for applicants to apply in order to facilitate a diverse set of applications.”

Of course, if you need assistance figuring out how to expense the alarms/detectors – or anything related to accounting, taxes, audit, or advisory services – please contact us at RBT CPAs. We’re a leading accounting firm in the Hudson Valley and beyond, with extensive experience supporting HUD agencies and owners.

Navigating Health Care in 2023 and Beyond: What Is the Path Forward?

The return to normal following COVID is not going to happen. Instead, economic, environmental, societal, geopolitical, and technology factors are reshaping healthcare globally and in the U.S. Understanding the forces at play can provide important insights for charting a course for 2023 and the decade ahead. The recently released World Economic Forum’s Global Risks Report 2023 identifies five newly emerging/ rapidly accelerating risks that could become a crisis by 2033 if immediate action isn’t taken – human health is one of them. It says growing financial pressure, budget cuts, revenue losses, higher costs of goods and labor, and the predicted global shortfall of 15 million health workers by 2030 are driving productivity declines and safety issues. What’s more, with medical inflation continuing to outpace GDP growth and the predicted government/insurer/employer response of limiting coverage, shifting costs, and reducing healthcare access and affordability, we may find ourselves with a “deeply entrenched” two-tier healthcare system for the haves and have nots. The report goes onto say changing this trajectory will involve public health policy and interventions; collaboration and coordination among public health agencies, healthcare providers and funders; stronger national and global health institutions and systems; and innovative care delivery, staffing and funding to prevent disease, promote early detection, and provide cost-effective care to the chronically ill. Also, opportunities exist for increasing capacity, combining virtual and in-person care, and reducing costs via technology and digital transformation. Concurrent with the risk report, the World Economic Forum completed a Global Health and Healthcare Strategic Outlook with the goal of uniting stakeholders behind a shared healthcare vision and actions to drive systemic long-term change. The vision has four strategic pillars: • “Equitable access and outcomes: Equilibrating access to determinants of health, ensuring health data is representative of the population and people with equal needs achieve equal health outcomes. • Healthcare system transformation: Structuring resilient healthcare systems to provide high-quality care under both expected and unexpected circumstances. • Technology and innovation: Cultivating an environment that supports funding, use and implementation of innovation in science and medicine. • Environmental sustainability: Reducing the healthcare industry’s environmental impact, preparing for and addressing climate change for better health and wellness.” When it comes to the U.S. healthcare, McKinsey & Company outlined challenges and opportunities that lay ahead in its Gathering Storm series. An Opportunity to Reorder the Healthcare Industry reports, “This gathering storm has the potential to reorder the healthcare industry and put nearly half of the profit pools at risk. Those who thrive will tap into the $1 trillion of known improvement opportunities by redesigning their organizations for speed, accelerating productivity improvements, reshaping their portfolio, innovating new business models to refashion care, and reallocating constrained resources.” As noted in the series’ introductory article, How Leaders Can Respond and Thrive: “Healthcare leaders, especially those in the private sector, have an opportunity to step up and invest in innovation for the betterment of healthcare. Indeed, implementing a well-known set of interventions—in care delivery transformation, administrative simplification, clinical productivity, and technology enablement—could generate a collective opportunity of more than $1 trillion and potentially up to $1.5 trillion through 2027, according to McKinsey analysis. However, to move fast enough to capture this opportunity, healthcare leaders need to rethink how they approach organizational growth and transformation. Those who act now could set themselves apart in leading transformative improvements of healthcare and accrue a sustainable competitive advantage for their organizations.” Whether you’re at the initial stages of understanding the new global and U.S. landscape for healthcare or embarking on an already formed strategic plan, remember, RBT CPAs can help. You can trust our accounting, tax, audit, and advisory services professionals to take on these responsibilities so you can reallocate resources to what’s really important – shaping the future of healthcare and your organization. Interested in learning what we can do for you? Give us a call. RBT CPAs is a leading accounting firm serving Hudson Valley businesses for over 50 years. We believe we succeed when we help you succeed. Give us a call today.

The return to normal following COVID is not going to happen. Instead, economic, environmental, societal, geopolitical, and technology factors are reshaping healthcare globally and in the U.S.  Understanding the forces at play can provide important insights for charting a course for 2023 and the decade ahead.

The recently released World Economic Forum’s Global Risks Report 2023 identifies five newly emerging/ rapidly accelerating risks that could become a crisis by 2033 if immediate action isn’t taken – human health is one of them. It says growing financial pressure, budget cuts, revenue losses, higher costs of goods and labor, and the predicted global shortfall of 15 million health workers by 2030 are driving productivity declines and safety issues. What’s more, with medical inflation continuing to outpace GDP growth and the predicted government/insurer/employer response of limiting coverage, shifting costs, and reducing healthcare access and affordability, we may find ourselves with a “deeply entrenched” two-tier healthcare system for the haves and have nots.

The report goes onto say changing this trajectory will involve public health policy and interventions; collaboration and coordination among public health agencies, healthcare providers and funders; stronger national and global health institutions and systems; and innovative care delivery, staffing and funding to prevent disease, promote early detection, and provide cost-effective care to the chronically ill. Also, opportunities exist for increasing capacity, combining virtual and in-person care, and reducing costs via technology and digital transformation.

Concurrent with the risk report, the World Economic Forum completed a Global Health and Healthcare Strategic Outlook with the goal of uniting stakeholders behind a shared healthcare vision and actions to drive systemic long-term change. The vision has four strategic pillars:

  • Equitable access and outcomes: Equilibrating access to determinants of health, ensuring health data is representative of the population and people with equal needs achieve equal health outcomes.
  • Healthcare system transformation: Structuring resilient healthcare systems to provide high-quality care under both expected and unexpected circumstances.
  • Technology and innovation: Cultivating an environment that supports funding, use and implementation of innovation in science and medicine.
  • Environmental sustainability: Reducing the healthcare industry’s environmental impact, preparing for and addressing climate change for better health and wellness.

When it comes to the U.S. healthcare, McKinsey & Company outlined challenges and opportunities that lay ahead in its Gathering Storm series. An Opportunity to Reorder the Healthcare Industry reports, “This gathering storm has the potential to reorder the healthcare industry and put nearly half of the profit pools at risk. Those who thrive will tap into the $1 trillion of known improvement opportunities by redesigning their organizations for speed, accelerating productivity improvements, reshaping their portfolio, innovating new business models to refashion care, and reallocating constrained resources.”

As noted in the series’ introductory article, How Leaders Can Respond and Thrive: “Healthcare leaders, especially those in the private sector, have an opportunity to step up and invest in innovation for the betterment of healthcare. Indeed, implementing a well-known set of interventions—in care delivery transformation, administrative simplification, clinical productivity, and technology enablement—could generate a collective opportunity of more than $1 trillion and potentially up to $1.5 trillion through 2027, according to McKinsey analysis. However, to move fast enough to capture this opportunity, healthcare leaders need to rethink how they approach organizational growth and transformation. Those who act now could set themselves apart in leading transformative improvements of healthcare and accrue a sustainable competitive advantage for their organizations.”

Whether you’re at the initial stages of understanding the new global and U.S. landscape for healthcare or embarking on an already formed strategic plan, remember, RBT CPAs can help. You can trust our accounting, tax, audit, and advisory services professionals to take on these responsibilities so you can reallocate resources to what’s really important – shaping the future of healthcare and your organization. Interested in learning what we can do for you? Give us a call.

RBT CPAs is a leading accounting firm serving Hudson Valley businesses for over 50 years. We believe we succeed when we help you succeed. Give us a call today.

GASB 96 Kicks Off in 2023: What to Know & Do

GASB 96 Kicks Off in 2023: What to Know & Do

Along with the new year comes the start date of a new accounting and reporting requirement – namely, GASB 96, which arose as a result of migration from legacy IT systems (requiring the purchase of a license or title) to cloud-based solutions (requiring subscriptions).

If your fiscal year started July 1, 2022 or later, your financial statement must reflect GASB 96.

Who is subject to GASB 96? All state and local government entities. This includes general purpose governments, public benefit corporations and authorities, public employee retirement systems, public utilities, hospitals and other healthcare providers, and colleges and universities.

What does it cover? Subscription-based information technology arrangements (SBITAs). A SBITA is “a contract that conveys control of the right to use another party’s (a SBITA vendor’s) information technology (IT) software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction.” (Source: GASB Summary of Statement No. 96)  Examples include office, calendar and email tools; online conferencing or payment tools; cloud computing arrangements; cloud-based Enterprise Resource Planning systems; and more.

In addition to subscription payments, costs can be accounted for based on whether they were part of a preliminary project, initial implementation, or operational and additional implementation stage. (Training costs should be expensed when they’re incurred, regardless of stage.)

Short-term SBITAs – defined as having a maximum possible term, including options to extend – to 12 months or less are excluded from GASB 96.

What needs to be disclosed? Information including the amount of the subscription asset, accumulated amortization, other payments not included in the measurement of a subscription liability, principal and interest requirements for the subscription liability, and more.

When do we need to get started? If you haven’t already, get started now – it’s especially important if your fiscal year end is June 30, 2023 or September 30, 2023. As was the case for GASB 87 Lease Standards, you need time to gather and analyze all SBITA-related contracts to not only determine which ones fall under GASB 96, but also their components. If a contract has multiple components, each component should be accounted for as a separate SBITA or non-subscription component, with contract prices allocated accordingly (unless a best estimate price allocation can’t be determined; then, it can be treated as one SBITA).

Why did the Government Accounting Standards Board adopt GASB 96? The Board adopts standards when the costs incurred “are justified when compared to the overall public benefit.” In this case, perceived benefits include more consistent accounting and reporting and more comparable information about SBITAs. In addition, certain aspects of GASB 96 provide cost relief, like the exclusion of “contracts with stand-alone tangible capital assets and contracts with a combination of a tangible capital asset and an insignificant software component”; the ability to “report a multi-component contract as a single SBITA when determining that a best estimate to allocate the contract price to multiple components is not practicable; and permitting but not requiring “governments to include capitalizable outlays associated with the initial implementation stage and the operation and additional implementation stage in the measurement of the subscription asset recognized at transition.” (Source: GASB Summary of Statement No. 96)

For additional information, refer to these Federal and New York State resources:

You may also want to consider vetting and possibly using a GASB 96 platform or software service as a resource.

2023 is going to be a big year in terms of GASB changes and compliance. Get peace of mind that your municipality complies by partnering with an accounting, tax, audit, and advisory firm you can trust. RBT CPAs has been serving municipal clients in the Hudson Valley and beyond for over 50 years. Give us a call and let’s see what we can do for you.

Wrapping Up 2022 with an Eye Toward Succeeding in 2023 and Beyond

Wrapping Up 2022 with an Eye Toward Succeeding in 2023 and Beyond

In construction, year-end closing is a misnomer. That’s because the actions you take not only impact your 2022 books, business results, taxes, and financial statements. They can also inform your business strategy for the year ahead, while putting you in the best position for year-end close 2023 and beyond. What should you do to maximize the benefits your company can reap from year-end closing? Consider these seven factors:

  1. Percentage of completion. Construction contractors’ financial statements should be prepared on a percentage of completion basis of accounting to comply with Generally Accepted Accounting Principles (GAAP). This requires contractors to list what jobs are open, the contract values of those jobs, and estimated total costs to determine estimated gross profit per job. This will be compared to total actual costs and billings at the balance sheet date, and income will be adjusted for any over and/or under billings.
  2. Estimates for work in progress. Are there any open jobs where you are estimating you will lose money? What is driving those results? By analyzing what’s happening on a monthly basis, you and your project managers may be able to make course corrections to have a positive impact on 2023 income and future financial statements. If this is the result of low bidding or an estimate mistake, reviewing on a regular basis may help to pinpoint where additional costs were incurred and can be used to help avoid future profit swings and contract losses.
  3. Profit fade. Reviewing project estimates and financials with project managers on a monthly basis can also be useful in that you are seeing profit fades or additional estimated income in real time. This allows any potential issues to be identified and addressed in a timely manner.
  4. Bonding and insurance. The work you perform may require you to be bonded. Work with your insurance broker to find a surety for bonding purposes. Once your books are clean, look at your balance sheet to determine working capital (current assets minus current liabilities). A general rule of thumb is that 10x this number is your potential bonding capacity. Other factors to consider are business equity, profitability, and any outstanding loans between owners and/or affiliated companies and your construction entity.
  5. Labor burden/workers’ compensation. Round up all insurance information from the year, including monthly invoices, policy premiums, audits, etc. to calculate actual insurance expense. Since labor burden is allocated to jobs, this number would have an effect on your over/under billings. Be sure to look at what is pre-paid versus payable, so you expense the right amount.
  6. Break-even point. Do you know how much you need to sell to break-even? Calculate your break-even point using an average of your overhead for the year and an estimated total gross profit on jobs. Know how much in sales you must do to make money before the year even starts.
  7. Backlog. By evaluating your open jobs at the end of the year, you can also determine how much profit is left that you’re going to realize for each job in 2023. Utilize this measure for the whole portfolio of your jobs to pre-determine an estimated gross profit for the coming year. You can use this to help figure out your breakeven, and any additional jobs may just be icing on the cake or backlog for 2024.

RBT CPAs has been a leading accounting, tax, audit, and business advisory firm serving construction companies in the Hudson Valley and beyond for over 50 years. If you’re already a client, you can trust your RBT CPA team will be addressing all the considerations previously mentioned when we meet with you for year-end closing. If you’re not currently a client but interested in learning how our CPAs specializing in the construction industry can support your 2022 year-end closing with a keen eye toward maximizing financials in 2023 and beyond, give us a call today.

Are Increasing Interest Rates Impeding Growth Plans? Consider this Lower-Interest Financing Option

Are Increasing Interest Rates Impeding Growth Plans? Consider this Lower-Interest Financing Option

With the Federal Reserve Board increasing interest rates seven times in 2022 and another hike likely next month, you may be hesitant about taking out loans to move forward with growth plans and investments in new products, technology, and equipment. What if we told you (or reminded you) there is a funding program available to eligible manufacturers in New York State that can save you 2% to 3% in interest, while supporting business growth?

The Empire State Development Linked Deposit Program (LDP) helps existing businesses in the state secure reduced-rate financing to improve productivity, performance, and competitiveness. Loans are available for 2% or 3% lower than the fixed interest rate a lender would normally charge (depending on factors like where your business is located; whether it is minority or woman owned; if it’s for a defense industry diversification project; the lending institution’s 4-year CD rate; and more). With the LDP, you may qualify for higher levels of funding and funding may be available even if you have less than stellar credit.

This is made possible by New York State, which makes a linked deposit of funds to induce a lender to charge the borrower a lower rate for the first four years of the loan. The lender pays the state a reduced rate of interest on its 4-year deposit (in the form of a CD) and it reduces the interest rate charged on the borrower’s loan by a like amount. Translation: You pay 2% to 3% less than the lender’s going interest rate on the loan.

Who’s eligible? If your manufacturing firm has 500 or less full-time employees based in New York State, you may qualify.

What can an LDP loan be used for? Prepare strategic plans to improve productivity and competitiveness; introduce modern equipment and/or purchase or expand facilities as part of a modernization plan; improve production processes and operations; introduce computerized information, reporting and control systems; reorganize or improve work systems; adopt total quality and employee participation programs; develop and introduce new products; identify and develop new markets; buy out viable companies; and obtain working capital for modernization activities to improve competitiveness and productivity, while creating or retaining jobs.

How much can I get? There are no loan minimums. The maximum for each linked deposit is $500,000 and the lifetime limit is $2 million. You can have up to three LDP loans for up to $1 million at any given time.

How much can I save? 2% to 3% on loans for a four-year term. So, if you’re approved for a 3% reduction on a $500,000 loan and the lender’s interest rate is 7% on the loan, your rate will be 4%. So, you stand to save $60,000 over the life of the loan.

EXAMPLE OF 3% REDUCTION:Without LDPWith LDP
Loan Amount$500,000$500,000
State’s Deposit– 0 –$500,000
Lender’s Interest Rate on Business Loan7%4% (with 3% reduction)
Lender’s Interest Rate on C/D3%0% (with 3% reduction)
Estimated Savings to Borrower (4 yr. term)$60,000

While the uncertain economic environment increases the temptation to curb spending as much as possible, as reported in Forbes, “Some experts say that economic downturns can present the best opportunities for growing a business while others are retreating.” If you agree with the later and are interested in learning more about the LDP, visit the Empire State Development Link Deposit Program for more information, including frequently asked questions, a list of lenders, an application, and more.

For additional insights, including how this may affect your accounting and taxes, give RBT CPAs a call. We’re a leading accounting, tax, and audit firm serving the Hudson Valley and beyond for over 50 years and we believe we succeed when we help you succeed.

What’s Happening with Enrollment in New York Public Schools?

What’s Happening with Enrollment in New York Public Schools?

Welcome to 2023 and the annual budget planning season. In addition to a myriad of factors that may play into budget discussions – from inflation and staff shortages to COVID, learning losses, mental health, and more – you may want to be prepared to speak about what’s going on with public school enrollment nationally, regionally, statewide, and in your district.

As reported in The New York Times, “School funding is tied directly to enrollment numbers in most states, and while federal pandemic aid has buffered school budgets so far, the Biden administration has made it clear that the relief is finite. Some districts are already bracing for budget shortfalls.”

It all starts with the biggest picture – U.S. population growth. On December 22, the U.S. Census Bureau provided an update.  After 2020-2021 showed historically low population growth in the U.S., 2022 started to show a rebound with .4% population growth due largely to international immigration (more people moving to the U.S. than leaving) and natural causes (more births than deaths).

However, the Northeast region of the country experienced a decline, largely due to negative net domestic migration (more people moving out of the region than into it). New York state showed the biggest decline in the country. While New York was one of 26 states with the highest natural increase (about 35,000 more births than deaths), it wasn’t enough to offset the huge losses due to net domestic migration (almost 300,000 more people moving out of the state than into it).

New York’s declining population is impacting the state’s public school enrollment. As reported by the Office of the New York State Comptroller, “Statewide, public school enrollment fell by a full 3 percent in the 2020-21 school year and a further 2 percent in the 2021-22 school year. This is significant, as student enrollment is a key factor in determining how much education aid districts receive from the State.”

The New York Empire Center reinforces these findings and reports a decline of over 5% since 2020 (it also has maps where you can see 2021 to 2022 enrollment numbers and percent change by district, county, and more).

New York is not alone. According to Return2LearnTracker.net, between Spring of 2020 and 2022, U.S. public school enrollment shrunk by nearly 1.3 million students. Five states saw net gains from 2020 to 2022, while 19 experienced a 3% decline or more. In terms of demographics, it appears the youngest students – a.k.a. kindergarten – experienced the largest decrease. (Remember, however, these youngsters were also among the last approved to receive COVID vaccines.)

No doubt, COVID impacted these numbers and resulted in more students being homeschooled, as well as increases in private and parochial school enrollments. (That doesn’t even get into the number of students who relocated to other parts of the country thanks to new flexibilities afforded to families via the option to work remotely.) However, New York’s declining public school enrollment started long before COVID.

According to the National Center for Education Statistics, from 2006 to 2011, New York State enrollment in public elementary and secondary schools dropped by 3.7% and the downward slide continued between 2011 and 2023 with another decrease of 1.9%.

What about the future? As reported by districtadministration.com, “Enrollment is projected to fall further, by about 4%, through 2030 as the school-aged population is expected to keep shrinking. Whereas half of U.S. states actually saw increases from 2009 to 2020, the future declines will be far more widespread, the analysis found. Enrollment in pre-K through grade 8 is projected to decrease by 5% with high school enrollment falling by 2%.” It’s projected New York will be the 10th state for largest declines at 8%. (Learn more in the National Center for Education Statistics 2022 Report on the Condition of Education.)

However, not all New York public school districts are in the same situation. As reported by SiLive.com, “The state Board of Regents outlined its budget and legislative priorities, which include proposals like universal pre-K, universal access to Career and Technical Education (CTE), expanding opportunities for services and programs, supporting districts with rapid enrollment growth, and expanding access to school meals.”

If enrollment change is a growing concern in your district, you may want to consider conducting a  demographic study and forecast to help inform your budget process and community stakeholders.  While that’s outside RBT CPAs’ wheelhouse, our experts are available to help your district with accounting, taxes, audits, and more. To learn what RBT CPAs – a leading accounting firm in the Hudson Valley for over 50 years – can do for you, give us a call.

IRS Delays 1099-K $600 Threshold for a Year

IRS Delays 1099-K $600 Threshold for a Year

If you were worried about your business being inundated with 1099-K Forms this upcoming tax filing season, take note!

On December 23, the IRS announced third-party settlement organizations (TPSOs) “will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or the payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021.”

Instead, the existing 1099-K reporting threshold of $20,000 in payments from over 200 transactions will remain in effect for 2022. This will give taxpayers and tax professionals additional time to understand the new reporting requirements and help ensure a smooth transition. The new threshold of $600 – regardless of the number of transactions – will apply to business transactions that occur January 1, 2023 or later.

So, if you accepted a business-related payment from a TPSO like eBay, PayPal, Venmo or Etsy in 2022, you will not receive a 1099-K from that TPSO for this upcoming tax season, unless aggregate payments were $20,000 or more from over 200 transactions. For 2023, you will receive a 1099-K from a TPSO totaling $600 or more; then, you will need to include it as part of your tax filings.

More information, with additional details – like what you should do if you already received a 1099-K based on the lower $600 threshold – should be forthcoming from the IRS soon. We will share that information as it becomes available. In the meantime, if you have any questions, please refer to the Q&As that follow or give RBT CPAs a call.

Q&As

What Is a 1099-K Form?  The form, technically known as Form 1099-K Payment Card and Third-Party Network Transactions, is used to report payments your business receives from third-party settlement organizations (TPSOs) – like eBay, PayPal, Venmo, or Etsy – if those payments exceed certain thresholds. Any 1099-K you receive becomes part of your annual tax filings and considered taxable income.

What Changed? As part of the American Rescue Plan Act, the threshold for issuing 1099-Ks changed. Before 2022, a 1099-K was issued if over 200 transactions totaled more than $20,000. Starting in 2022, that threshold was reduced to $600, regardless of the total number of transactions. However, the IRS’ recent decision to delay the adoption of the $600 threshold until 2023 will give payees, accounting firms, and the IRS another year to prepare.

Who Is Impacted? In 2023, companies like PayPal, Venmo, Square, and Stripe will be sending you a 1099-K if you receive more than $600 in annual payments for goods or services rendered. As a result, if you sell small amounts of merchandise on selling platforms like eBay or Etsy, for example, you may find yourself responsible for increased taxes. Small or midsized business owners who receive most of their customer payments from credit cards, cash, or checks will most likely be unaffected.

What About Personal Transactions? The reporting requirements are limited to goods and services, so it won’t affect funds you receive for splitting that vacation rental or dinner with family or friends. Just be sure to keep accurate records when you are paying for personal items, so it isn’t incorrectly reported to the IRS.

What’s RBT’s Advice to You?

Start planning now: If you receive payments for goods or services through third-party networks, you may end up receiving a tax form for the first time for 2023. This is going to be an administrative burden and likely complicate your tax situation. It is best to be prepared and plan for any potential tax consequences by adopting strategies to minimize your tax bill early in the year.

Keep detailed records of income/expenses related to sales activity: If you sell goods or services and get paid through a third-party network, you may be eligible to deduct expenses related to that activity. Learn more by speaking with an RBT CPA professional.

 

It’s always good practice to consult your tax advisor to determine how best to use the information on your Form 1099-K when filing your income tax return. As always, our team of professionals at RBT CPA’s is happy to help you navigate this and other IRS updates. Give us a call.

Secure 2.0: Kicking Off 2023 with Thoughts of Retirement

Secure 2.0: Kicking Off 2023 with Thoughts of Retirement

While most of us were putting the final bows on holiday presents, on December 23 Congress passed the Secure 2.0 Act, with promises of adding tens of billions of dollars to retirement savings and offering new retirement plan features over the next decade. On December 29, President Biden signed the Act into law.

With nearly 100 different provisions potentially phasing in between 2023 and 2033, the new law will give employees and employers new tools and opportunities to build retirement (and emergency) savings. From plan rules and administration to tax credits and startup costs, Secure 2.0 will result in a broad swath of changes for a variety of plans – including 529 plans, IRAs, 401(k)s, 403(b)s, 457(b)s, SIMPLE plans, pension plans, employee stock ownership plans, and more.

In general, small employers, non-profit organizations and government agencies will have the opportunity to participate in plans previously available to large for-profit employers only. In fact, employers with 50 or fewer employees can get a tax credit for 100% of the cost of implementing a new retirement plan.

A number of penalties will be relaxed for certain eligible populations, while contribution and saving opportunities will increase (including catch-up contributions for participants over age 60). There are special provisions for private sector firefighters, part-time employees, seasonal employees, military spouses, survivors of domestic abuse, adoptive parents, first responders, domestic employees, and others. Administration of certain plan features will ease.

Here are highlights of just a few of Secure 2.0’s most notable features:

  • Retirement plan minimum required distribution age increases to 73 (and later to 75).
  • Lost and Found The Department of Labor must create a national, online, and searchable database enabling savers who may have lost track of vested retirement plan assets to search for plan administrator contact information.
  • Employer matching based on student loan payments Under a 401(k), 403(b) or SIMPLE IRA, an employer may make matching contributions based on “qualified student loan payments.” (The same holds true for government employers in a 457(b) or similar plan.)
  • Penalty-free early withdrawals for emergency expenses Unforeseeable or immediate financial needs relating to personal or family emergency expenses will be an exception to the 10% early withdrawal tax from tax-preferred retirement accounts.
  • New emergency savings account linked to retirement plans Non-highly-compensated employees can be automatically enrolled for up to 3% in contributions (with a $2,500 cap).
  • 529 Rollover to Roth IRA Under certain conditions, tax- and penalty-free rollovers from 529 accounts to Roth IRAs will be allowed. 529 college savings account beneficiaries will be able to rollover up to $35,000 over the course of their lifetime from any 529 account in their name to their Roth IRA, subject to Roth IRA annual contribution limits and if the 529 account was open for more than 15 years.
  • Automatic 401(k) and 403(b) enrollment for new plans Employers must automatically enroll employees at a 3% minimum contribution but no more than 10%. Employees can opt out. Employers with less than 10 employees or in business for less than three years are exempt. (Stay tuned about how this may interact with NY regulations requiring private employers to automatically enroll employees in New York State’s Secure Choice Savings Plan.)
  • Starter 401(k) Employers without a plan can offer a starter 401(k), with deferrals only, capped at $6,000.

As mentioned earlier, Secure 2.0 provisions will phase in over the next decade. You can view a complete copy here and a summary here.

RBT CPAs – and its affiliates – are available to help you understand what the new Act will mean to you, your business, and employees:

  • Our Spectrum Pension and Compensation professionals specialize in serving the retirement needs of diverse companies, especially in the Hudson Valley and all major Northeastern urban centers. As a third-party administrator for clients ranging from sole proprietors to corporate plans, Spectrum professionals can help your organization with plan design; actuarial and recordkeeping; compliance services; and participant education.
  • Our Visions Human Resources Services professionals support the entire employee life cycle and all related HR services, including benefit analysis, compliance audits, and more.
  • Your RBT CPAs contact can help you understand potential accounting, tax, and audit implications.

As is the case with any legislation, we strongly recommend you consult the appropriate legal counsel. Watch for more information and updates in the days and weeks to come.