Month: November 2025

Now that External Audits Are Over, Time to Focus on Internal Audits

With the October 15^th deadline for external audits behind us, it’s time for school districts to start thinking about internal audits. This article provides a broad overview of internal audits and their role within school districts.

As of 2006, all school districts and BOCES in New York State are required to establish and maintain an internal audit function and to conduct internal audits at least annually. The only districts exempt from this requirement are districts that employ fewer than eight teachers, those with general fund expenditures totaling less than $5 million in the previous school year, and districts with enrollment of less than 1,500 students in the previous school year. Exempt districts must certify their exemption annually. A school district may hire an independent contractor or utilize a district employee to conduct an internal audit. In either case, the internal auditor must be independent of district business operations and also meet certain professional auditing standards.

The purpose of an internal audit is to review the district’s financial operations, identify risks, and assess the district’s system of internal controls. In conjunction with external audits, internal audits help to safeguard your district’s assets, prevent waste and abuse, and maintain your district’s compliance with applicable policies and laws. It is the responsibility of the board to take corrective actions based on the findings of the internal audit. The audit committee is required to assist in the oversight of the internal audit function, review the findings of the internal auditor, and monitor the implementation of the internal auditor’s recommendations by management.

The internal auditor is responsible for the following:

Developing a risk assessment of district operations that reviews the district’s financial policies, procedures, and internal controls (i.e., segregation of duties, authorization processes, recordkeeping, reconciliations).
Annually reviewing and updating this risk assessment.
Periodically testing one or more areas of the district’s operations.
Preparing reports (at least annually) stating risk assessment findings and recommended changes, with timeframes for implementation.

The New York State Office of the State Comptroller highlights some of the questions that internal audits aim to answer. These include:

Efficiency of operations: Are the district’s resources being used in the most efficient manner possible?
Effectiveness of operations: Is a particular program or operation successfully achieving its intended results?
Compliance: Is a particular area of operations being conducted in compliance with the relevant laws, regulations, agreements, policies, and procedures?

Financial operations that may be evaluated include, but are not limited to:

Payroll and personnel
Cash receipts and revenue
Accounts payable
Cash disbursements
Travel and conference expenses
Extra-classroom activity funds

Internal audits can extend beyond risk assessments of financial operations. Some other operational areas that internal auditors can assess include, but are not limited to:

School security
Bus routes
Insurance coverage
Performance evaluations
Energy conservation programs
Portable inventory items
Fuel facilities

Conclusion

Internal audits represent a critical function that, in conjunction with annual external audits, help school districts monitor and maintain their financial health. For additional guidance regarding the internal audit process, please do not hesitate to reach out to our experts at RBT CPAs. RBT is here to support your district’s accounting, tax, audit, and advisory needs. Give us a call today to learn more.

Gearing up for Innovation and Product Development in 2026

With the holiday season now upon us, maybe you’ve been experimenting with new seasonal brews or flavors. Or maybe you’re mulling over new product ideas for the coming new year. Let’s talk about some opportunities for innovation and product development—and the tax savings that come along with them—as we head into 2026.

New Flavors

Flavor development is a significant form of product innovation for alcoholic beverage producers. Current and predicted trending flavors include savory and spicy flavors (think pickles and jalapeño peppers), pistachio, botanicals (like rose, lavender, and elderflower), exotic fruits like yuzu, and tropical fruits like pineapple and passionfruit. Consumers today are drawn towards layered and intentionally crafted flavor profiles, as well as compelling origin stories and flavors that trigger a sense of nostalgia.

Unique Ingredients

Distinctive, memorable ingredients are also taking a front seat in the alcoholic beverage space. Some emerging standout ingredients across various global regions include tahini, roselle hibiscus, Valencia orange, olives, white pepper, and finger lime. The incorporation of other unique ingredients into alcoholic beverages, such as chiles, miso, and herbal teas, is also reportedly on the rise.

Health-conscious Options

As health and wellness take priority among today’s consumers, alcoholic beverage producers are seeking ways to appeal to a more health-conscious audience. “Gut-friendly” beverages, whole-wheat beers, low-calorie drinks, and low-carb options appeal to health-conscious drinkers and people with dietary restrictions.

“NoLo” Beverages

With the “sober-curious” movement gaining traction, especially amongst younger generations, low-alcohol and no-alcohol options are growing in popularity. Many large beer, wine, and spirit makers have jumped on the “NoLo” (no- and low-alcohol) train in response to increased consumer demand. In addition, more consumers are seeking products with functional benefits as well as great taste. Functional ingredients—such as mushrooms, herbs, antioxidants, probiotics, and adaptogens—offer potential health benefits that may attract certain mindful consumers. These trends present an opportunity for brewers and distillers to experiment with low-ABV, no-ABV, and alternative options in order to appeal to a wider audience.

Innovative Technologies

Emerging technologies open many doors when it comes to new product development. Innovations in production such as genetic engineering, the use of new enzyme variants, and advanced fermentation and distillation techniques help brewers and distillers develop one-of-a-kind products. Furthermore, AI and machine learning technologies offer businesses the opportunity to streamline new product development and optimize product marketing and design.

…So, how does this relate to your taxes?

Changes to R&D Treatment Under the OBBBA

In general, activities like developing new recipes and experimenting with new production methods fall under the category of “research and development.” Thanks to the One Big Beautiful Bill Act (OBBBA), U.S. research and development expenditures, previously required to be amortized over five years, can now be deducted in the year paid. This represents a win for brewers and distilleries planning to innovate and develop new products in 2026. For many U.S. businesses, the restoration of immediate R&D expensing will reduce taxable income, improve cash flow, and free up capital for further investment and improvements.

For more detailed information regarding this important tax law change, call to speak with one of our experts today. Our team at RBT can help you make the most of R&D deductions and other tax-saving opportunities. Partner with us and find out how we can be Remarkably Better Together.

New NYS Minimum Wage and Tip Reporting Requirements for 2026

Hospitality employers in New York State—as we approach the end of the year, keep in mind these important changes taking place in 2026.

New NYS Minimum Wage Rates

Beginning on January 1, 2026, the general minimum wage in New York will increase by $0.50 to the following amounts:
- For New York City, Long Island, and Westchester County: $17.00 per hour
- For the rest of New York State: $16.00 per hour
The minimum wage for tipped service employees in New York will increase to the following amounts in 2026:
For New York City, Long Island, and Westchester County: $14.15 per hour (tip credit of $2.85 per hour)
For the rest of New York State: $13.30 per hour (tip credit of $2.70 per hour)
The minimum wage for tipped food service workers in New York will increase to the following amounts in 2026:
For New York City, Long Island, and Westchester County: $11.35 per hour (tip credit of $5.65 per hour)
For the rest of New York State: $10.70 per hour (tip credit of $5.30 per hour)

As of January 1, 2026, hospitality employers will be required to increase wages for hourly employees accordingly and to post the updated official NYS minimum wage poster in a visible location within the workplace.

New Tax Deduction and Reporting Requirements for Tips

The One Big Beautiful Bill Act (OBBBA), passed in July of this year, creates new rules regarding the taxation and reporting of tips. Here are some highlights of the new “No Tax on Tips” law.

For tax years 2025 through 2028, the OBBBA creates a temporary income tax deduction of up to $25,000 per year for qualified tips received by individuals in occupations where tipping is regular and customary.
The deduction begins to phase out when the taxpayer’s modified adjusted gross income (MAGI) exceeds $150,000 ($300,000 for joint filers).
The deduction is limited to tips voluntarily paid by customers (not mandatory service charges), including tips shared through pooling arrangements.
In September 2025, the IRS issued proposed regulations identifying qualified tipped occupations. A list of qualifying occupations can be found here.
Under the new law, employers are required to separately report qualified tips for employees on Forms W-2 and 1099.

2025 Tip Reporting Guidance and Penalty Relief

The OBBBA requires separate reporting of tips and occupation codes. However, the IRS has announced penalty relief for the 2025 tax year—meaning employers will not be penalized for failing to separately report tip income for 2025. The IRS has also announced that Forms W-2 and 1099 for 2025 will not be updated to account for the changes under the OBBBA. Tax year 2025 will therefore be treated as a transition period, allowing businesses time to update their reporting systems before IRS enforcement begins. However, the IRS encourages employers to provide tipped employees with occupation codes and separate accountings of cash tips for the 2025 tax year, so that workers can claim the deduction for 2025.

Trust RBT CPAs as Your Accounting Partner

RBT CPAs’ hospitality accounting team is here to support you as you update your systems to comply with the new minimum wage rates and tip reporting requirements. Give us a call today with any additional questions and to find out how we can be Remarkably Better Together.

Grant Funding Opportunities for Municipalities to Replace Lead Service Lines

Over the last several years, New York has launched multiple initiatives to address the issue of lead-contaminated drinking water. Among these are state-funded programs supporting the replacement of lead service lines. Read on for more information about the New York State Lead Service Line Replacement Plan, as well as other related opportunities for state funding.

Lead in NYS Drinking Water

Lead in drinking water has long been a public health issue in New York State. Lead service lines were constructed and used to deliver water to buildings and residences beginning in the 1800s. However, it was later discovered that lead can enter drinking water when pipes containing lead corrode, exposing residents to serious health risks. Although New York City banned the installation of new lead service lines in 1961, followed by a ban on the use of lead solder in household plumbing systems in 1987, many New York residences are still at risk of contaminated drinking water. Homes built before 1986 are more likely to have lead pipes, though the plumbing in homes built after that point can still contain trace amounts of lead.

The NYS Lead Service Line Replacement Program

New York State’s Lead Service Line Replacement Program (LSLRP), created under the Clean Water Infrastructure Act of 2017, is aimed at reducing lead in drinking water. The program provides grants to municipalities to replace lead water service lines. The funds from these grants are used to replace the entire length of residential lead service lines, from the municipal water main to the residence. Municipalities do not need to apply to the program, as eligibility has been pre-determined by the NYS Department of Health. Eligibility is based on the number of children with elevated blood lead levels in the municipality, the median household income, and the number of houses built before 1939. Funds can be used to replace lead service lines for buildings other than residential structures, but priority should be given to residential properties. Each municipality selected for the program is responsible for contacting homeowners to confirm the presence of lead service lines.

How much funding is available?

$20 million was allocated to the LSLRP by the 2017 New York State budget. The program offers at least $500,000 to at least two municipalities per region (there are 10 Regional Economic Development Council regions in NYS)—except for the New York City region, which only has one municipality.

What does the funding cover?

Service line replacement and construction costs
Site/property restoration costs
Engineering costs
Legal costs
Administrative costs

What other opportunities for funding are there?

If your municipality is not selected for the LSLRP, or if you need additional funds, two other funding programs for lead service line replacement are available.

The Drinking Water State Revolving Fund: provides low-interest financing for drinking water projects.
State Water Grants: The Water Infrastructure Improvement (WIIA) program and the Intermunicipal Water Infrastructure Grants (IMG) program are two more state-funded programs available to municipalities for drinking water and wastewater projects.

Trust RBT CPAs With Your Municipality’s Accounting

While you manage state funding for projects in your municipality, let RBT CPAs support your accounting, tax, audit, and advisory needs. Contact our government accounting team and find out how we can be Remarkably Better Together.

Preventing Fraud and Embezzlement: Actions You Can Take to Safeguard Your Union

As with many other nonprofit organizations, unions are particularly susceptible to fraud, corruption, and theft. This vulnerability often stems from inadequate internal financial controls and the fact that unions tend to manage large sums of money. In March of 2024, the House Committee on Education and the Workforce sent letters to 12 separate unions citing multiple examples of corruption in recent years. These instances of fraud—perpetrated primarily by union officials—include misuse of pension funds, embezzlement, wire fraud, money laundering, bribery, health insurance fraud, labor racketeering, converting funds, and more. To prevent such incidents and the financial and reputational damage they incur, unions must establish strong systems of internal financial controls.

Below is a list of preventative measures that union leaders can take to minimize the risk of fraud and corruption, recommended by the House Committee on Education and the Workforce and the Office of Labor-Management Standards.

Fraud Prevention Measures

Engage a third-party auditor to independently assess your union’s financial statements and compliance with regulations.
Provide appropriate training and education to union employees to reinforce proper accounting standards.
Establish internal reporting mechanisms, such as a hotline for reporting fraud.
Create clear disciplinary policies for fraudulent activity.
Require multiple layers of approval for purchases, such as double signatures on checks and other payments.
Enforce segregation of duties to ensure no single person has too much control over a given financial process.
Issue receipts for member dues and maintain records of dues payment status for each member.
Maintain receipts and disbursement journals to record all cash received and spent by the union.
Deposit dues and other funds regularly to the union’s bank account, identifying each deposit with a set of receipts in the union’s receipts journal.
Establish a clear understanding of the salaries, allowances, and expenses to which union officers are entitled.
Require prior authorization for large or unusual transactions.
Require full financial reports from the financial officer at each membership or executive board meeting.
Form an internal audit committee (union trustees) to conduct regular reviews of the union’s financial records. These periodic internal audits should include bank reconciliations, reconciliations of receipts with deposits, examinations of canceled checks, confirmation of documentation (invoices, bills, etc.) for all expenditures, and other measures.
Regularly review internal controls for effectiveness and update these procedures if necessary.

Partner With RBT CPAs to Prevent Fraud in Your Union

Don’t let your union fall victim to fraud or embezzlement. Our team at RBT CPAs is here to provide reliable outsourced accounting services for your union, conduct third-party audits, and offer additional guidance to help you prevent fraud within your organization. Give us a call today to find out how we can help you safeguard your union’s funds and reputation.

1031 Like-Kind Exchanges as a Valuable Tax Strategy and Long-term Planning Tool

When it comes to building wealth through real estate, tax efficiency is often just as important as strong investment selection. When a taxpayer sells an investment property, they are typically required to pay taxes on the gain at the time of the sale. However, under Section 1031 of the Internal Revenue Code, real estate investors can defer paying these taxes if they reinvest the sale proceeds in similar—or “like-kind”—property. This is known as a “like-kind exchange.” There are several rules governing like-kind exchanges, including criteria dictating who and what kinds of properties qualify for Section 1031 treatment.

While many investors are familiar with the basic concept, few fully appreciate how 1031 exchanges can be used as a strategic long-term planning mechanism—not just a tax deferral tactic. Below are some key points regarding 1031 like-kind exchanges.

Section 1031 Highlights

Tax Deferral: A like-kind exchange allows a real estate investor to defer capital gains taxes that would typically be due upon the sale of a property. Note that a 1031 exchange does not eliminate taxes on gains, but delays them. This deferral preserves capital that would otherwise be lost to taxes, enabling investors to leverage more equity into new properties, enhancing cash flow, appreciation potential, and portfolio diversification.
Qualified taxpayers: Owners of investment and business property—including individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts, and other taxpaying entities—may qualify for a Section 1031 deferral.
Qualifying properties: Both properties in the exchange (the relinquished property and the replacement property) must be held for use in a trade or business or for investment. Properties used primarily for personal use do not qualify. In addition, both properties must be similar enough to be considered “like-kind”—meaning they are of the same nature, character, or class. Most real estate is considered like-kind to other real estate. However, property within the United States is not considered like-kind to property outside of the U.S. Furthermore, real property (land and anything attached to it, such as buildings and natural resources) can never be like-kind to personal property (movable non-fixed possessions, such as vehicles, furniture, and jewelry). Certain types of property are completely excluded from treatment under Section 1031, including:

- Inventory or stock in trade
- Stocks, bonds, or notes
- Other securities or debt
- Partnership interests
- Certificates of trust

Use of an Exchange Facilitator: To maintain eligibility, sale proceeds must be held by a qualified intermediary (QI) or other exchange facilitator until the exchange is complete. The seller may not receive the proceeds directly. The QI manages the exchange process, prepares required documentation, and ensures compliance with IRS regulations. In certain situations, the QI may hold temporary title of a property until the exchange is completed.
Strict Timelines: The seller has 45 calendar days from the sale of the original property to identify a replacement property or properties (up to three), and must complete the purchase of the replacement property within 180 days. These timelines are firm and may not be extended.
Equal or Greater Value: For full tax deferral, the replacement property must be of equal or greater value, and the taxpayer must reinvest all net proceeds and replace or exceed the amount of debt on the relinquished property. Any “boot” (remaining cash or debt reduction) will trigger capital gains taxation.
Reporting Requirements: Like-kind exchanges must be reported on IRS Form 8824 with the seller’s tax return for the year in which the exchange occurred.

Other Considerations

Construction or Improvement Exchange: A taxpayer intending to purchase replacement property requiring improvements or new construction to be part of the 1031 exchange will need to plan in advance to structure accordingly as a Construction or Improvement Exchange. In this scenario, a QI who acts as an Exchange Accommodation Titleholder (EAT) is immediately assigned temporary title to the replacement property while the improvements are made. This structuring allows the proceeds from the replacement property to be included in the value of the replacement property.
Reverse Exchange: This process is when the replacement property is purchased before the relinquished property is sold. This requires extra careful planning and the title to the replacement property must be immediately assigned to the QI in order for the exchange to qualify.

Strategic Uses of 1031 Exchanges

While the immediate tax deferral benefit is well-known, sophisticated investors and advisors use 1031 exchanges to pursue a variety of broader financial and operational objectives:

Portfolio Optimization: Shift from management-intensive assets (like multi-family buildings) to passive investments (such as triple-net lease properties).
Geographic Diversification: Reallocate capital from one market to another to balance exposure and risk.
Wealth Transfer Planning: Utilize exchanges in conjunction with estate planning strategies. Heirs who inherit 1031-held property receive a step-up in basis, effectively eliminating deferred gains.
Depreciation Reset: Investors can exchange into properties with new depreciation schedules, maximizing current deductions.
Consolidation or Fractionalization: Move from multiple small assets into one larger property—or vice versa—to better align with cash flow or liquidity goals.

These strategic applications require thoughtful coordination between tax professionals, legal advisors, and financial planners to optimize both short- and long-term benefits.

Meet with Our Experts

Due to the complex nature of 1031 exchanges, it is highly recommended that you work with a team of trusted advisors, including a CPA, when taking advantage of this tax deferral strategy. Our real estate accounting team at RBT CPAs is here to answer your questions regarding like-kind exchanges and to guide you through the exchange process. Give us a call today and find out how we can be Remarkably Better Together.