Stone & Company LLC - News and Insights

OBBBA is Now Law – What You Need to Know

Wed, 09 Jul 2025 21:06:57 GMT

The One, Big, Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. At almost 900 pages, this bill has some important tax legislation that will affect a broad range of taxpayers. Certain provisions of the tax legislation enacted during President Trump’s first term, the Tax Cuts and Jobs Act (TCJA), have been extended and some have been made permanent. OBBBA also incorporates several of President Trump’s campaign pledges, some of which include rollbacks of certain credits related to clean energy. Below is a summary of some of the major elements of the new law.

Major changes that affect individual taxpayers

Increased State and Local Tax (SALT) Deduction Cap: The previous $10,000 SALT cap is raised to $40,000 for certain taxpayers, but this is a temporary measure set to expire after 2029 and revert back to $10,000. The increased cap phases out for higher earners.
Tip income of up to $25,000 in certain industries is now an “above the line” deduction for 2025 through 2028, with income-based phaseouts (payroll taxes still apply).
The bill provides a temporary above-the-line deduction of up to $12,500 ($25,000 in the case of a joint return) for qualified overtime compensation, with income based phaseouts.
Taxpayers who do not itemize are now allowed a permanent deduction for charitable contributions beginning in 2026 ($2,000 for joint filers and $1,000 for taxpayers filing single).
The federal gift and estate tax exemption amount is now permanently increased to $15 million for individuals and $30 million for married couples beginning in 2026. The exemption will be adjusted annually.
The 20% qualified business income (QBI) deduction for owners of sole proprietorships and pass-through entities is now permanent.
The bill increases the amount of nonrefundable child tax credit to $2,200 per child beginning in 2025 and indexes the credit amount for inflation. The bill also makes permanent the $1,400 refundable tax credit adjusted for inflation.
Beginning generally after 2025, taxpayers lose several clean energy tax credits. These include the clean vehicle, energy-efficient home improvement and residential clean energy credits.
The standard deduction is now almost doubled, a permanent change.
Personal exemptions are now permanently eliminated, however a temporary $6,000 deduction is allowed for taxpayers who are age 65 or older, with income phaseouts, this will be in effect for the years 2025 through 2028.
The mortgage debt limit for the home mortgage interest deduction is now permanently limited to $750,000 ($375,000 for separate filers) but now includes mortgage insurance premiums as deductible interest. The interest deduction on home equity debt is now permanently eliminated.
Miscellaneous itemized deductions are now permanently eliminated, except for unreimbursed educator expenses.
The individual tax rates under the TCJA are now permanent.

Impact on Businesses

Research-and-development expenses: The bill allows taxpayers to immediately deduct domestic research or experimental expenditures paid or incurred in tax years beginning after Dec. 31, 2024.
The bill permanently extends the Sec. 168 additional first year (bonus) depreciation deduction. The allowance is increased to 100% for property acquired and placed in service on or after Jan. 19, 2025.
The bill increases the maximum amount a taxpayer may expense under Sec. 179 to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million.
The employer credit for paid family and medical leave is now permanent, with certain modifications.
The exclusion for employer payments of student loans is now permanent, with annual inflation adjustment.
The bill reverts to the prior rule for Form 1099-K reporting, under which a third-party settlement organization is not required to report, unless the aggregate value of third-party network transactions with respect to a participating payee for the year exceeds $20,000 and the aggregate number of such transactions with respect to a participating payee exceeds 200.

The above summary is only a portion of key provisions within the new law. There will be a variety of new regulations to follow in order to implement to law. Detailed guidelines, including caps, floors, phaseouts and other limits are embedded within this sweeping new legislation. Your Stone & Company tax advisory team will be monitoring developments as we work with our family of clients to navigate the new law, maximizing tax savings and minimizing tax liability within the new rules.

Diane West is a tax advisory CPA at Stone & Company, a CPA firm based in Lexington, Massachusetts www.stonecpas.com

ALWAYS PASSIONATE ABOUT DRIVING GROWTH

Managing Partner of Stone & Company selected among best CPAs statewide in Forbes list

Wed, 23 Apr 2025 16:52:39 GMT

FinCEN Extends the Deadline for BOI Reporting and Pauses All Enforcement

Sat, 01 Mar 2025 20:15:10 GMT

The current deadline of March 21, 2025, for reporting beneficial ownership information (BOI) has been extended by the Financial Crimes Enforcement Network (FinCEN), and all enforcement actions have been suspended. FinCEN has stated that it will develop new regulations that will reduce "regulatory burden" on entities required to report.

According to FinCEN, the goal is to prioritize "reporting of BOI for those entities that pose the most significant law enforcement and national security risks", and the agency indicated that a new reporting deadline will be announced by March 21.

As small business owners and investors may recall, the Corporate Transparency Act (CTA), an anti-money-laundering initiative, became law in 2021, requiring certain companies to disclose the identity and information about beneficial owners of the entities. Certain new entities were also required to disclose the identity of "company applicants". Since most filings were originally due by January 1, 2025, the burden for some business owners and managers was significant, with potentially serious consequences for willful violations, including punishments of up to $10,000 and two years in prison. Court challenges caused the date to be pushed back to January 13, with a further extension of the deadline to March 21, 2025.

The announcement to extend the deadline and pause all enforcement action, released on February 28, represents welcome news to a variety of business owners and investors, because the agency has said that no fines or penalties are to be issued as a result of failure to file by current deadlines. The bottom line is that the March 21, 2025 deadline is no longer in effect.

The Stone tax advisory team will continue to monitor this area to share any important updates that might affect our clients and their businesses.

Stone & Company, LLC is a CPA firm based in Lexington Massachusetts.

ALWAYS PASSIONATE ABOUT DRIVING GROWTH

Key Strategies to Optimize Your 2024 Taxes

Thu, 19 Dec 2024 14:37:48 GMT

With less than two weeks left in the year, many taxpayers may not realize that there is still time to take a closer look at their tax situation and make adjustments to minimize the tax burden come April. Here are some ideas for year-end tax planning that can help you stay on top of your finances and make the most of available opportunities.

In Part-1 of this two-part series, we shared several tax saving strategies as we entered the second half of the year. Those tax savings included reviewing year-to-date paystubs, evaluating investment and capital gains, understanding required minimum distributions, charitable contributions tips, maximizing retirement contributions and making certain tax-free gifts before year-end. Below are some additional ideas for year-end tax planning to help you maximize your options and avoid leaving money on the table.

Make gifts to loved ones

For gifts to loved ones, follow the same tax-smart strategies that apply to gifts to charities. That is, give away investments with accumulated gains directly to your loved ones. If you give away investments with long-term capital gains, the gift recipient will likely pay a lower tax rate than you would have paid if you sold the shares. Sell underperforming investments, collect the resulting tax-saving capital losses and give the sales proceeds to your loved ones.

Explore Qualified Charitable Distributions (QCDs)

For those aged 70½ or older, Qualified Charitable Distributions (QCDs) can be a tax-efficient way to make charitable contributions. QCDs allow you to direct up to $100,000 from your IRA directly to a charity without the distribution being included in your taxable income. This can help you satisfy your RMD requirements while potentially lowering your adjusted gross income.

Seniors should also ensure they ask their tax advisor about RMDs

As part of your tax planning, if you're an older adult or retiree, don't forget about required minimum distributions (RMDs). There are new RMD rules thanks to the SECURE Act 2.0 Act. The age for taking your first RMD changed to 73.

Timing your charitable contributions

Consider making bigger donations before year end to IRS-approved charities. You can compensate by making smaller donations next year, if you wish. Bigger donations this year could cause your total itemizable expenses to exceed your standard deduction and lower this year’s federal income tax bill.

Incorporate certain investment transactions with your charitable giving strategy

If you itemize and want to make gifts to your favorite charities before year-end, you can make them while also adjusting your taxable investment portfolio. Consider making charitable contributions with these tax-smart principles:

Donate appreciated investments instead of giving away cash. For itemizers, donations of publicly traded shares owned over a year result in charitable deductions equal to the full current market value of the shares at the time of the gift. Plus, if you donate shares that are worth more than you paid for them, you can avoid capital gains taxes that would result from a sale.

Sell investments that are worth less than you paid for them and collect the resulting tax-saving capital losses. You can then give the sale proceeds to favored charities and, if you itemize, you can claim the resulting tax-saving charitable contribution deductions.

Evaluate medical expenses and the timing of deductible payments
The threshold for deducting medical expenses is 10% of AGI. You can deduct only expenses that exceed that floor. Certain taxpayers with health events may have unpaid expenses above the threshold and, to the extent such expenses can be settled before year-end, those payments may represent additional deductions for the current year.

Deductible expenses may include health insurance premiums (if not deducted from your wages pretax); long-term care insurance premiums (age-based limits apply); medical and dental services and prescription drugs (if not reimbursable by insurance or paid through a tax-advantaged account); and mileage driven for health care purposes (21 cents per mile driven in 2024). You may be able to control the timing of some of these expenses so you can bunch them into every other year and exceed the applicable floor.

Consider whether elective medical procedures can be scheduled and paid. Appointment calendars can be surprisingly open during the Holiday season. Consider accelerating into this year elective medical procedures such as dental work and vision care.

Don’t Delay

With the election now behind us, the federal tax rules may change as we look ahead. However, existing rules currently remain in place and each of the tax strategies mentioned should be carefully considered to the extent applicable for your financial and personal tax situation.

These are just some ideas to lower your tax obligation as you close out year. There may be other opportunities that could apply to your situation, including education-related breaks, tax-favored treatment for health savings accounts, and credits for energy-efficient home improvements and vehicles. Contact your tax advisor as soon as possible to implement the right strategies for your set of circumstances.

Diane West is a tax director at Stone & Company and oversees tax and advisory services at the firm. Stone & Company, LLC is a CPA firm based in Lexington, Massachusetts. www.stonecpas.com

New Legislation Eases the Burden for Many Massachusetts Non-Profits

rmiller@rsmillercpa.com (Rob Miller) — Tue, 10 Dec 2024 22:02:26 GMT

As we move towards closing out the year, non-profits across the Commonwealth are learning that new legislation recently signed into law by Governor Maura Healy now brings them significant relief from filing requirements that previously existed. The new law raises the thresholds for requiring a financial statement review or audit as part of the annual filing of a non-profit’s Form PC with the Massachusetts Attorney General’s Office.

Under the new law, with regard to combined gross annual receipts:

• The threshold for a financial statement review has increased from $200,000 to $500,000.

• The threshold for a financial statement audit has increased from $500,000 to $1,000,000.

Previous to the new legislation, many smaller non-profit organizations, already struggling for resources, were burdened with the time and cost of undergoing a financial statement review, or an audit. This was especially true for some non-profit organizations with gross annual receipts that were barely over the old thresholds. The new law provides some welcome relief for such non-profit organizations, and especially those with limited resources.

Many non-profits who have gross receipts that are over $500,000 but below the new $1,000,000 threshold can now qualify for a review and will no longer need an audit, which is generally more time-consuming and costly. Similarly, smaller non-profits that previously were required to have a financial statement review under the old law will now get relief from both an audit and a review if their combined gross receipts are under $500,000.

The effect of the new law is immediate for all non-profits across Massachusetts, because Governor Healy has signed an emergency preamble. This means that the thresholds apply for any filings that have not yet been made.

Additional information about the new law can be found here:

Going forward, it will be important for each organization to closely monitor receipts from all sources to determine filing requirements and the level of assurance services required from their independent CPA firm. Similarly, it will be important that senior management and non-profit boards maintain a strong internal control environment that includes an appropriate level of monitoring and oversight at their organizations.

Please contact your Stone team member if you have additional questions about these important reporting changes.

Stone & Company, LLC is a CPA firm based in Lexington Massachusetts.

ALWAYS PASSIONATE ABOUT DRIVING GROWTH

Mid-Year Tax Planning: Key Strategies to Optimize Your 2024 Taxes – Part 1

Wed, 21 Aug 2024 12:12:18 GMT

As we are now past mid-year and into the second half of 2024, it’s the perfect time to take a closer look at your tax situation and make adjustments to minimize your tax burden come April. Here are some ideas for mid-year tax planning that can help you stay on top of your finances and make the most of available opportunities.

Review Your Year-to-Date Paystub: Earnings and Withholdings

Start by examining your most recent paystub to ensure your earnings and withholdings are on track. Verify that your tax withholdings are aligned with your expected annual tax liability. If you’ve had a significant change in income or your financial situation, you might need to adjust your withholding to avoid underpayment penalties or overpaying taxes.

Evaluate Investment Income and Capital Gains

Take a moment to review your investment portfolio. Consider the impact of any realized capital gains or losses and how they might affect your tax liability. If you have significant capital gains, you might want to explore strategies such as tax-loss harvesting, where you sell investments at a loss to offset gains. Additionally, if you're close to the threshold for higher capital gains taxes, you might adjust your investment strategy to minimize the impact.

Understand Required Minimum Distributions (RMDs)

If you’re age 73 or older or will turn 73 by the end of the year, remember to plan for Required Minimum Distributions (RMDs) from your retirement accounts. Ensure you’ve met your RMD requirements to avoid hefty penalties. Keep in mind that if you’ve reached age 70½ and are still working, you might be able to delay your RMDs from your current employer’s retirement plan.

Consider Charitable Contributions

Charitable contributions can be a smart way to reduce your taxable income while supporting causes you care about. If you’re considering making charitable donations, think about whether it makes sense to donate appreciated assets instead of cash. Donating appreciated stock can provide you with a charitable deduction and allow you to avoid paying capital gains taxes on the appreciation.

Maximize Retirement Contributions

Evaluate your retirement contributions to ensure you’re on track to meet the annual contribution limits for tax-advantaged accounts like 401(k)s and IRAs. Increasing your contributions can reduce your taxable income and help you build a more secure financial future. For 2024, the contribution limits are $23,000 for 401(k)s (with an additional $7,500 catch-up contribution if you’re 50 or older) and $7,000 for IRAs (with a $1,000 catch-up contribution for those 50 or older).

Plan for Making Tax-Free Gifts before Year-end

If you’re looking to reduce your taxable estate, consider making gifts to family members or others. For 2024, the annual gift tax exclusion is $18,000 per recipient. Gifts within this limit are not subject to gift tax and can help you shift wealth to your heirs while reducing your estate tax liability.

The tax regulations can be complex, and many taxpayers are often unaware of opportunities that may be applicable, depending on each taxpayer’s specific situation. Contact your tax advisory CPA at Stone for a tax advisory consultation.

Watch for more tax saving tips in Part 2 of this series, Mid-Year Tax Planning - Key Strategies to Optimize Your 2024 Taxes

Diane West is a tax director at Stone & Company and oversees tax and advisory services at the firm. Stone & Company, LLC is a CPA firm based in Lexington Massachusetts. www.stonecpas.com

Managing partner of Stone & Company talks about what accounting firms can do to help fix the talent shortage

Fri, 19 Apr 2024 21:51:28 GMT

Corporate Transparency Act Creates New Federal Reporting Requirements for Business Owners

Wed, 27 Dec 2023 17:14:10 GMT

Under the newly enacted Corporate Transparency Act (CTA), effective January 1, 2024, many companies registered in the United States as well as some foreign companies doing business in the US will be required to report certain beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN).

While publicly traded companies, non-profits and certain other organizations are exempt from this reporting, other business entities who are required to report must do so by their reporting deadline. These deadlines vary, depending on when a business entity was formed. For existing companies the reporting deadline is January 1, 2025, but could be as early as April 2024 for certain newly formed business entities. While there has been activity by some lawmakers to delay the effective dates, the deadlines through January 1, 2025 remain as current law. BOI filings must be completed electronically via FinCEN’s website: www.fincen.gov/boi

FinCEN has provided a useful guide for business owners and managers that provides clear guidance, including filing deadlines and who should file. Link to guide here . The guide is user-friendly and online reporting is not expected to be time consuming, however, business owners and managers with additional questions after reviewing the guide, are encouraged to consult with competent legal counsel regarding the CTA and FinCEN reporting.

Diane West, CPA, Tax Director, contributed to this article.

Stone & Company, LLC, Lexington, Massachusetts - www.stonecpas.com

Massachusetts Lawmakers Unveil $1B Tax Relief Package

Wed, 27 Sep 2023 17:20:24 GMT

Significant Changes will Impact Certain Taxpayers

Massachusetts lawmakers unveiled a sweeping new tax package yesterday. The compromise tax reform package, expected to win House and Senate approval this week, combines relief for Massachusetts seniors, renters, caregivers and low-income families. Some of the proposed changes include:

Increases child tax credit from $180 to $310 in fiscal year 2023, then again to $440 in fiscal years 2024 and beyond.

Increases the Earned Income Tax Credit from 30% to 40% of the federal credit, double the seniors’ tax credits from $1,200 to $2,400 and increase the cap on rental deduction from $3,000 to $4,000.

Provides a uniform estate tax credit of $99,600, which would effectively double the threshold at which the levy kicks in from $1 million to $2 million.

The accord would also slash the tax rate on short-term capital gains, which stem from the sale of assets held for a year or less, from 12 percent to 8.5 percent.

Another change aimed at businesses would overhaul how Massachusetts calculates taxes owed by multistate companies. Currently, the apportionment system factors in property, payroll and sales, and the bill would replace that with a simplified version that uses only a company's sales.

The conference committee accord would change Chapter 62F, the 1986 initiative petition law that caps the amount of tax revenue state government can collect each year and requires taxpayers to be reimbursed for any overage. The bill would replace the proportional system with an equal payment for every single taxpayer if Chapter 62F were triggered again, regardless of how much they paid in taxes that year.

The bill would also require married taxpayers who file a joint return with the federal government to file a joint return at the state level as well.

Your Stone team will continue to monitor developments as they occur. Please contact us for more information on these important tax law changes.

Diane West is a tax director at Stone & Company and oversees tax and advisory services at the firm. Stone & Company, LLC is a CPA firm based in Lexington Massachusetts.

ALWAYS PASSIONATE ABOUT DRIVING GROWTH

The Basics of the New Lease Standard for Organizations with Fiscal Years Ending in 2023 that Have Not Implemented

Fri, 07 Jul 2023 11:14:33 GMT

While the new lease accounting standard has been with us for several years, ASC 842, Leases, became effective for non-public reporting entities with years ending after December 15, 2022. This means that all organizations required to issue financial statements in accordance with accounting standards generally accepted in the United States (GAAP) with years ending December 31, 2022 and all months in 2023 through 12/15/23, must now present their financial statements in compliance with ASC 842.

We have seen that many smaller organizations with fiscal years ending in 2023 did not proactively analyze and implement the standard. For example, many non-profits have a June 30 ^th year-end and with June 30, 2023 now behind us, some organizations are now realizing that the new lease accounting standard must be implemented for their FY23 financial statements to be in accordance with GAAP. As a result, many are seeking immediate outside help before their deadline to issue audited financial statements.

Most lessees understand that all long-term leases must now be on the balance sheet or statement of financial position, and most are aware of the new Right-of-Use (ROU) Asset and corresponding lease liability that must now be calculated and presented. However, how do we get these amounts and what about the ongoing accounting throughout the lease term? Our audit and assurance team continues to receive a steady stream of prospective clients who are seeking help to get the new standard implemented. While many of the specifics within the standard are quite detailed and have some complexity, based on the most common questions and inquiries, the Stone accounting team decided to present a plain-English version of the accounting requirements under ASC 842 and their impact on the financial statements for those who want a basic overview of the now effective accounting requirements for leases under GAAP.

What are the basic steps to get to the correct accounting under ASC 842?

There are essentially four steps for accounting for leases under ASC 842.

1. Find the present value of the lease payments

2. Calculate the interest and principal payments

3. Determine if the lease is an Operating or Finance lease

4. Account for your lease (Record your initial and ongoing journal entries)

What’s my initial entry to bring the lease onto the books and record this new ROU asset?

The ROU Asset will be the same as the present value of the lease payments, except that this amount must be increased by any initial direct costs paid by the lessee, and increased by any prepaid lease payments. This ROU asset will also be reduced by any lease incentives received. As such the initial journal entry may be summarized as follows:

Dr. ROU Asset: PV of lease payments

+ initial direct costs

+ prepaid lease payments

- lease incentives received

Cr. Lease Liability: PV of lease payments

Cr. Cash: Cash paid in connection with lease

The new lease standard has new terms that seem to have different meanings from the previous terms “capital” versus “operating” leases under the old standard. Under the new standard, what do these terms, Operating versus Finance, mean?

Under ASC 842, all long-term leases must now be treated as Operating leases, except for when the following condition exists, in which case, the lease must be accounted for as a Finance lease: “When the terms of the lease effectively transfer control of the underlying asset”.

So how does one determine whether the terms of the lease effectively transfer control of the underlying asset?

If any one of the following five conditions exist, the lease must be accounted for as a Finance lease”

1. The lease transfers ownership at the end of lease

2. An option to purchase is reasonably certain

3. The lease term is a major part of the leased asset’s useful life

4. The present value of the lease payments plus any lessee residual value guarantee equals
substantially all of the fair value of the leased asset

5. The leased asset is specialized, with no alternative use to the lessor

Conditions 3 and 4 mention some terms that seem vague. What do we mean by “major part” of the
economic life and “substantially all” of the fair value?

A lease term is a “major part” of the economic life when it is 75% or more of the remaining economic life of the underlying asset. A commencement date that falls at or near the end of the asset’s economic useful life would be considered to be within the last 25% of the total economic life.

The present value of lease payments is “substantially all” of the fair value of the underlying asset when it is 90% or more of the fair value of that underlying asset.

Why is there so much concern about the new lease standard and how does it affect the financial statements?

All long term leases must now be presented on the balance sheet and the type of lease (Operating versus Finance) affects the accounting and financial reporting in very different ways. Whether a lease is categorized as operating or finance (a) affects how the ROU asset is expensed, (b) affects the presentation on the statement of cash flows, and (c) impacts the ROU asset balance throughout the lease term. Additionally, operating leases can negatively impact financial debt covenants. Ratios such as current ratio, quick ratio and return of assets might now be in violation of loan covenants, since the liability will have a current position but not the ROU asset, in addition to the increase in an organization’s overall liability and increase in its total assets.

Your Stone & Company audit and assurance team will remain a key resource for our non-profit community as organizations navigate these new presentation and disclosure requirements. Contact us for additional information and assistance or to further discuss how the new standard might impact your organization.

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Bob Page, CPA, contributed to this article. - Stone & Company, LLC, Lexington, Massachusetts - www.stonecpas.com

Stone & Company Grows through Acquisition of Wellesley Firm

Fri, 16 Dec 2022 15:10:18 GMT

Lexington, Mass — Dec. 16, 2022 — Stone & Company LLC, a leading regional accounting firm based in Lexington, Mass., announced today that it has acquired Cree, Alessandri & Strauss, LLC (CAS), based in Wellesley Hills, Mass. The combined firm will retain the Stone & Company name and be led by Stone & Company’s Managing Partner, Rob Miller.

“We’re thrilled by the opportunities and professional depth this merger will bring,” said Miller. “The partners at Cree, Alessandri & Strauss — Mike Cree, Lou Wystup, Bob Strauss, Mike Alessandri and their associates — are highly talented and experienced and will remain accessible as part of the larger team. This merger represents an important step in the evolution of Stone’s professional practice as we continue to grow and offer more capabilities to our clients.”

Miller added: “Stone & Company shares the same values that CAS has always had, and all team members are excited to continue the tradition we have for excellent service, deep expertise, and an environment our clients and associates want to be a part of.”

“We’re confident this merger will bring even better service to our clients,” said Michael Cree. “We decided to seek to expand our practice through this transaction, with Stone & Company acquiring ownership interest in CAS, because we believe that adding to the capabilities we now have will allow us to provide a wider array of services and more depth.”

Stone & Company will now operate out of two offices, Lexington and also the Wellesley Hills office where Cree, Alessandri & Strauss has been located. Clients of CAS have been assured that the principals, contacts and services they are used to having will remain in place.

Stone & Company was founded in 1986. When the firm merged with RS Miller & Associates in mid-2019, Rob Miller took over as Stone & Company’s Managing Partner. After 25 years serving clients at virtually every stage, from start-ups to growth stage through more mature middle-market companies and non-profit organizations, Miller, through his leadership, has expanded Stone & Company client base and service capacities. The firm, now one of the fastest growing accounting firms in the greater Boston area, is values-driven, taking pride in being part of the larger community by contributing to civic causes and charities that help the Boston area be a better place.

The New Lease Accounting Standard is Already Here - Are You Ready?

Tue, 23 Aug 2022 19:05:33 GMT

Stone & Company Accounting and Auditing Update - August 22, 2022

Non-public companies that are required to issue financial statements in accordance with accounting principles generally accepted in the United States (GAAP) received some temporary relief when the financial accounting standards board (FASB) decided to delay the effective date of the new lease accounting standard (ASC 842) until years beginning after December 15, 2021. However, except for a few organizations with fiscal years in the latter part of 2022, most non-public reporting entities are now in the year that will require implementation and presentation of financial statements that meet the requirements under the new standard.

So what has changed and why?

The new lease standard is intended to include all leases in the financial statements, reflecting all lease obligations on the balance sheet, rather than excluding operating leases, as has been the practice in the past. All long-term operating leases now have to be capitalized. The FASB’s intent in issuing this new standard is to ensure that each organization’s true financial situation, including its obligations under leases, is reflected as accurately as possibly in the financial statements.

Under the new standard, all leases in excess of one year will be presented on the balance sheet as a right-of-use asset and a corresponding lease liability.

This is a principles-based standard and proper accounting involves important judgments, which will affect the amounts that get recorded.

Not all arrangements qualify as leases under ASC 842. The first step involves determining if the criteria are met for classification as a lease. The item leased must be a physical asset. The lessee must have the right to control or use the asset. The asset must be explicitly or implicitly defined in the arrangement. Accordingly, certain arrangements typically considered leases might not be within the scope of the new standard. Software subscriptions, leases for intangible assets, leases for exploration or use of non-renewable resources and leases of inventory or assets under construction would generally not meet the criteria for accounting under the new standard. However, office space, copies, computers and servers, equipment, vehicles and equipment are all within the scope of the new lease standard.

To implement the new standard, other important judgments will need to be made based on the specific terms within each lease arrangement. Payments to be made in renewal option periods must be “reasonably certain”. Variable payments can only be included if they depend on an index or rate. “Finance Leases” under the new standard will need to be identified and defined, because the accounting is different from “Operating Leases”, even though both will go on the balance sheet.

Other important areas of the standard with which the accounting and reporting must comply include the treatment of subleases and options to purchase the leased asset.

The disclosure requirements under the new standard are more extensive, with the objective of enabling financial statement users to better assess the amount, timing and uncertainty of cash flows related to leases. For example, for lessees, the new disclosure requirements, both quantitative and qualitative, include, among other requirements:

· a description of leases

· information about any terms or options to extend or terminate the lease

· descriptions of options recognized in calculating right-of-use assets and lease liabilities

· terms and conditions of any residual value guarantees provided by lessees

· information about leases that have not yet commenced but create significant rights and obligations
for the lessee

· information about significant assumptions and judgments made, including the discount rate for the
lease

· Total lease costs and related components

In summary, implementation of ASC 842 involves a significant effort for entities with multi-year leases and a requirement to issue financial statements that are in accordance with GAAP. Entities should ensure they engage in active discussion with their auditors as they implement the new lease standard.

For additional questions related to the new lease standard, contact your Stone & Company audit and assurance team.

Bob Page, CPA, senior audit manager, contributed to this article. - Stone & Company, LLC, Lexington, Massachusetts - www.stonecpas.com

The New Requirements are Now in Effect for Financial Statement Reviews

Mon, 20 Jun 2022 16:16:30 GMT

Many smaller private companies and non-profit entities conduct their financial statement review engagements during the early summer months and some important reminders about the new rules can be useful.

Statement on Standards for Accounting and Review Services (SSARS) No. 25, Materiality in a Review of Financial Statements and Adverse Conclusions was issued in February 2020, and brings significant new changes for financial statement review engagements and CPAs who perform such engagements. SSARS 25 amends number of areas throughout the standards that apply to financial statement review and compilation engagements. SSARS 25 also more closely aligns the U.S. standards with international standards.

There is now an explicit requirement to determine materiality

Accountants are now explicitly required to determine materiality for the financial statements as a whole. They also must apply this materiality when designing the procedures and evaluating the results obtained from those procedures. When performing procedures, accountants must now design and perform their analytical procedures and inquires to address all material items in the financial statements, including disclosures. While this concept existed previously, it is now an explicit requirement under the new standard.

Accountants can now issue an adverse review conclusion if they determine that the financial statements are materially and pervasively misstated

Before SSARS 25, accountants were prohibited from modifying the standard report to include a statement that the financial statements are not in accordance with the applicable financial reporting framework (that is, an adverse conclusion). No longer the case under the new SSARS 25, this change in the allowable reporting could be significant for some entities and provides more transparency for users of the financial statements.

Accountants must now make an explicit statement in their accountant’s review report regarding their independence and their duty to meet their applicable ethical standards

This is a brand new requirement that begins for calendar year 2021 reporting entities. All accountants performing financial statement review engagements must now state that they are required to be independent and to meet their ethical requirements and responsibilities.

When is the new standard effective

SSARS 25 is effective for engagements performed in accordance with SSARSs for periods ending on or after December 15, 2021 and all fiscal year-ends during 2022. Early implementation is permitted.

For additional information regarding the new requirements for financial statement review engagements, contact your Stone engagement team members.

Bob Page rpage@stonecpas.com and Rob Miller rmiller@stonecpas.com contributed to this article.

New Standard will Affect How Non-profits Account for Donations of Nonfinancial Assets

Mon, 07 Feb 2022 16:54:29 GMT

Stone & Company Non-profit Financial Reporting Update

In September 2020, the Financial Accounting Standards Board (FASB) issued a new standard that will enhance the presentation and disclosure requirements for non-profit organizations that receive donations other than cash and other financial assets. Accounting Standards Update (ASU) 2020-07 will affect all non-profits that receive contributed nonfinancial assets.

What are nonfinancial assets and when is the new standard effective?

Contributed nonfinancial assets include donations of equipment, supplies, buildings and land, food, clothing, and other goods. They also include use of facilities, free utilities, certain intangible assets, and services. Contributed securities and other financial assets are not within the scope of this new standard because these types of assets are generally monetized shortly after being donated to a non-profit.

The financial statements of all non-profits organizations that receive these nonfinancial assets, if they prepare financial statements in accordance with accounting principles generally accepted in the United States (GAAP), will be affected by the new standard, which becomes effective for annual periods that begin after June 15, 2021 (early adoption permitted).

Why did the FASB issue the new standard and how does it affect non-profits?

The FASB issued this new standard to provide more transparency into the nature and amounts of contributed nonfinancial assets received and utilized by non-profits. ASU 2020-07 was also issued to provide consistency in the presentation and disclosure among non-profits for contributed nonfinancial assets. The financial reporting rules that were in effect through ASU 2020-07 only required certain disclosures for contributed services.

Under the new standard, non-profit organizations will now be required to present contributed nonfinancial assets as a separate line on the statement of activities, segregated from contributions of cash and other financial assets. There is also a requirement to disclose within the notes to the financial statements a disaggregation of the amount of nonfinancial assets reported on the statement of activities. Other disclosure requirements include:

· Information about whether the nonfinancial asset was sold versus retained and used in programs,

· The organization’s policy regarding monetizing versus retaining and using, disclosures about restrictions, and

· A description of valuation techniques to determine fair value, as well as the market used to determine that fair
value measurement.

What should non-profits do to prepare for adoption?

To prepare for adoption, a non-profit organization should ensure they have systems in place to provide their auditors with the disaggregated information related to all contributed nonfinancial assets.

Non-profit boards and senior management should discuss and implement a formal policy regarding whether the organization sells (monetizes) or utilize contributed nonfinancial assets. The organization also needs to have systems in place to track and report whether contributed nonfinancial assets were either sold or utilized in accordance with the organization’s policy.

Additionally, non-profits should ensure systems are in place to determine and track any donor-imposed restrictions on contributed nonfinancial assets so that the related disclosure requirements can be met.

Another important consideration is the policy, approach, and process for determining the fair value of contributed nonfinancial assets, since there are also disclosure requirements related to determining fair value.

While the effective date for adopting ASU 2020-07 is for years that begin after June 15, 2021, the ASU must be applied retrospectively. This means that non-profits that issue comparative financial statements should ensure they are ready to also provide the required disclosures for the fiscal years that begin as early as after June 15, 2020. Certain transition disclosures are also required in the period of adoption.

Your Stone & Company team will remain a key resource for our non-profit community as organizations navigate these new presentation and disclosure requirements. Contact us for additional information and assistance or to further discuss how the new standard might impact your organization.

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Bob Page, CPA, contributed to this article. - Stone & Company, LLC, Lexington, Massachusetts - www.stonecpas.com

Stone & Company Fourth Quarter Check-in: Legislative Updates

Mon, 29 Nov 2021 19:23:33 GMT

State and Local Tax (SALT) Deduction Limits Workarounds for Pass Through Entities (PTE)

On September 30, 2021, the Massachusetts legislature enacted an elective pass-through entity (PTE) tax that is intended to be a workaround for the State and Local Tax (SALT) $10K deduction limit enacted by the 2017 Tax Cut and Jobs Act (TCJA). By doing so, Massachusetts joined a growing list of States that are taking advantage of favorable IRS guidance under Notice 2020-75 approving the passthrough taxes that would provide a deduction above the $10K SALT limit at the Federal level and create federal tax savings.

Under the provision, eligible passthrough entities (S-Corporations, Partnerships, LLCs taxed as passthrough entities and certain trusts) would elect to pay a 5% state tax on distributive income at the entity level. This tax is deductible on the entity’s tax return and would reduce the taxable income allocable to the shareholder. In addition, the eligible electing owners can claim a refundable credit of the taxes paid at the entity level against their Massachusetts personal income tax. The available credit would be limited to 90% of allocable entity level tax paid.

The PTE tax election would be available for tax years beginning on or after January 1, 2021, and the election and payment must be made by the filing due date of the entity original return. The election must be made on an annual basis and once made, it is irrevocable for that tax year and binding on all qualified PTE members. The election is only available for the tax years during which the federal SALT deduction limit is in effect.

Other states that have adopted the PTE tax workaround include Arizona, California, Colorado, Minnesota, New York, and Oregon.

Other Recent Legislative Developments

Employee Retention Tax Credit
The Employee Retention Tax Credit (ERTC) applies to wages paid by most eligible employers before October 1, 2021. Only recovery startup businesses are eligible to claim the credit in the fourth quarter of 2021. Other eligible employers cannot claim the ERTC after September 30, 2021.

Taxpayers Affected by Disasters

There will be a mandatory and automatic 60-day deadline extension for qualified taxpayers who are impacted by federally declared disasters.

Digital Assets (Virtual Currency)

Various informational reporting requirements will be in effect for brokers with regard to digital asset transactions. Brokers will be required to furnish statements with certain information when the new rules take effect. This new law will be effective for returns required to be filed after December 31, 2023.

Your Stone and Company tax team will continue to monitor developments and guidance at the federal level, as well as from the various states, as we analyze each client’s tax situation and optimize tax strategy.

Caroline Waweru, CPA and Don Zidik, CPA, contributed to this Update. Stone & Company, LLC is a CPA firm based in Lexington, Massachusetts – Always passionate about driving growth. Contact us at info@stonecpas.com

Stone & Company Non-profit Guidance Series - How to account for your ERC

Thu, 23 Sep 2021 18:37:40 GMT

How the Employee Retention Tax Credit (ERC) should be reported in your financial statements

Since the passage of the American Rescue Plan Act in March 2021 (the Act), which significantly expands and extends the ERC, a refundable credit against the employer portion of social security tax, many more organizations have successfully qualified and received the ERC. The ERC brought some much needed and welcome relief for many non-profit and other organizations. However, entities that are required to issue GAAP financial statements must now determine how to account for the credit and the question is becoming increasingly frequent across our non-profit clients.

For non-profit organizations, the first step is to determine what guidance to follow. After considering the guidance within the codified accounting standards, we determined that the appropriate and applicable guidance for non-profits would be ASU Subtopic 958-605 Contributions Received and Contributions Made. The ERC has barriers of eligibility and thus would meet the criteria for a conditional grant, since the organization only receives the credit if it overcomes these barriers.

Under Accounting Standards Codification (ASC)-958-605-25, which discusses accounting for contributions for non-profit entities, contributions are “recognized when the condition or conditions on which they depend are substantially met”. The ERC comes with several explicit conditions that must be met.

Once an organization determines that the conditions for receiving the ERC have been substantially met during a reporting period, the organization can recognize ERC income in that reporting period.

Since many organizations ask whether they can net the credit against payroll expenses, it is important to emphasize that ASC-958-605 contains explicit presentation and disclosure requirements, which generally discourage netting of income and expenses. ERC credits awarded should be reported gross, as (generally grant) income, with the corresponding payroll-related expenses also reported. Reporting entities should also ensure appropriate note disclosures are made, in accordance with the guidance within ASC-958-605.

The question of the timing of recognition is also important. There are basically two ways to qualify and claim the credit, either a significant decline in gross receipts (from the reference quarter in 2019) or a full of partial suspension of service, as defined in the Act. The timing of recognition will depend on when the barriers under each of the two qualifying pathways the organization takes are met.

Generally, under the suspension of services test, the timing of recognition would be over time, during the qualifying time period when services were suspended, as the organization incurs the payroll expense for the applicable wages.

Under the gross-receipts approach for the credit, the condition (or barrier) would not be met until the end of the quarter, since the test typically involves comparing that quarter’s revenue to the applicable reference quarter in 2019. Thus the revenue would be recognized at the end of the quarter that experienced the decline, or when that condition is met at the end of the quarter after the organization knows the revenue for that quarter.

Once the conditions have been met, it would be appropriate to record revenue, including a receivable for any portion of the credit that has not been received. For organizations that receive advance ERC payments, the appropriate accounting would be to record the cash and a corresponding liability, until such time that all conditions for recognition are met.

For further questions on ERC and similar accounting issues, please feel free to contact your accounting team at Stone. We will continue to monitor developments related to the ERC and related topics as part of our commitment to supporting our clients and the business community.

Stone & Company LLC is a CPA firm in Lexington, Massachusetts – Inspired by our values and focused on service. Contact us at info@stonecpas.com

Stone & Company Managing Partner Featured in the Sum News

Wed, 14 Jul 2021 15:00:55 GMT

As new board chair of the Massachusetts Society of CPAs, Rob Miller shares plans to continue to enhance member value in an evolving profession.

Stone & Company Managing Partner Featured in the Boston Business Journal

Fri, 30 Apr 2021 17:55:52 GMT

The incoming board chair of the Mass. Society of CPAs wants to expand resources to small CPA firms, helping them with HR, training, retention, and recruiting from a more diverse talent pool.

Unemployment Relief and a Tax Benefit for PPP Loans Forgiven

Fri, 02 Apr 2021 21:45:26 GMT

Massachusetts finally signs COVID-19 relief bill into law

An Act Financing a Program for Improvements to the Unemployment Insurance Trust Fund and Providing Relief to Employers and Workers in the Commonwealth (the Act) was signed into law on April 1, 2021 by Governor Baker.

Here are some of the key elements that we have been waiting for.

The Act now treats PPP loan forgiveness for personal income taxpayers as nontaxable which conforms to the federal treatment. The personal income taxpayers include Schedule C sole proprietors and single member LLC’s, individual partners in a partnership and S corporation shareholders.

Business expenses paid with PPP loan proceeds remain deductible on Massachusetts returns, consistent with federal treatment.

The Act also treats Economic Injury Disaster Loan (EIDL) grants as nontaxable. Business expenses paid with EIDL grant proceeds are deductible.

The Act also allows taxpayers to deduct up to $10,200 of unemployment benefits if their household income is not more than 200% of the federal poverty level. This threshold is different than the federal threshold.

Your team at Stone will continue to monitor any developments as they occur. Please contact us for more information on these important changes.

Stone & Company is a CPA firm based in Lexington, Massachusetts

“Always passionate about driving growth”

Tax Day for Individuals Extended to May 17

Sun, 21 Mar 2021 13:29:24 GMT

Stone & Company Update - March 17, 2021

After months of calls to extend the tax season, the IRS has now extended the April 15 tax deadline to May 17. The decision was due to the status of the ongoing pandemic and it’s lingering effect on businesses and taxpayers as well as changes that are included in the recently signed American Rescue Plan Act, which was signed into law on March 11. Included in that legislation was a retroactive exemption for a portion of unemployment compensation for some taxpayers in addition to the third round of stimulus payments. Part of the effort involved a group of bipartisan lawmakers, who, on behalf of taxpayers who have been anxious about the looming April 15 tax deadline, sent a letter to the IRS urging an extension of the deadline.

Federal income tax payments for the 2020 tax year that are due from individual taxpayers on or before April 15, 2021 can now be deferred to the extended May 17 deadline without penalties and interest, regardless of the amount owed. First quarter estimated tax payments are still due April 15.

Taxpayers should be aware however that penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021.

The one-month extension is expected to give taxpayers more time to get their finances in order and pay any taxes owed in connection with their 2020 tax returns. The move will also provide some relief for the IRS, where resources have had to be diverted to the processing of millions of stimulus checks under the American Rescue Plan.

Massachusetts and other states could also extend their deadlines but no announcement has yet been made. State filing and payment deadlines vary across different states and may not necessarily follow the federal filing deadline. Your team at Stone will continue to monitor developments as they occur.

Stone & Company is a CPA firm based in Lexington, Massachusetts.

“Always passionate about driving growth”

CARES Part 2 is Finally Here

Tue, 29 Dec 2020 19:38:08 GMT

The “Consolidated Appropriations Act, 2021” has now been signed into law. One key feature within this Act relates to the Paycheck Protection Program (PPP), which has now been revived with a $284 billion allocation so that especially hard-hit businesses that received PPP funds as part of the original CARES Act would now be eligible for a second round.

The new law now allows eligible businesses that previously received a PPP loan under the original CARES Act and which meet certain criteria to receive a second draw of PPP funds. Businesses employing fewer than 300 people that have used up all their original PPP funds and can demonstrate a reduction of at least 25% in gross receipts in any quarter in 2020 relative to the same quarter in 2019 are eligible for a second round of PPP funds.

The new Act also has funds targeted to specific groups who have been affected by the pandemic, including colleges and schools, a sector that will have $82 billion allocated to cover HVAC repair and replacement.

This is a comprehensive Act with many tax provisions. Key tax-related elements of the new Act include:

· A refundable tax credit in the amount of $600 per eligible family member. The credit phases out
starting at $75,000 single and $150,000 married filing jointly.

· Clarification of tax treatment of covered loan forgiveness which states that expenses paid with
PPP loan proceeds are allowed as deductions, and that the tax basis and attributes will not be
reduced as a result of the loan forgiveness.

· CARES Act emergency financial aid grants are now excluded from the gross income of college and
university students. The Act also holds students harmless for purposes of determining their
eligibility for the American Opportunity and Lifetime Learning Credits.

· The 50% limit on the business meal deduction is suspended for meals provided by restaurants in
2021 and 2022.

The Act also included the following tax extenders:

· The itemized medical deduction threshold of 7.5% of adjusted gross income is now permanent

at 7.5%.

· The Act extends the Work Opportunity Credit through 2025.

· The Act extends mortgage insurance premiums as qualified residence interest through 2021.

Please feel free to contact us for more information on how the new act could affect your tax situation.

Stone & Company is a CPA firm based in Lexington, Massachusetts.

“Always passionate about driving growth”

IRS Issues Guidance on Treatment and Deductibility of PPP Expenses

Mon, 23 Nov 2020 17:27:16 GMT

The Treasury Department and the IRS issued guidance on November 18, 2020 regarding the deductibility of expenses related to the Paycheck Protection Program (PPP) and provides safe harbors for deducting expenses if the PPP loan is not forgiven.

Under Revenue Ruling 2020-27, a taxpayer who received a covered loan guaranteed under the PPP, and paid or incurred certain otherwise deductible expenses may not deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such tax year, the taxpayer reasonably expects to receive forgiveness of the covered loan on the basis of the expenses it paid or accrued, even if the taxpayer has not submitted an application for forgiveness of the covered loan by the end of the year.

Under Revenue Procedure 2020-51, two safe harbors are provided for allowing a deduction in 2020 if they meet certain requirements.

The first safe harbor requires that three criteria are met:

1. The taxpayer paid or incurred eligible expenses in 2020 for which no deduction is permitted because at the end of
the 2020 tax year the taxpayer reasonably expects to receive forgiveness on the loan; and

2. The taxpayer submitted before the end of the 2020 tax year, or as of the end of the 2020 taxable year intends to
submit in a subsequent tax year, an application for covered loan forgiveness to the lender; and

3. In a subsequent tax year, the lender notifies the taxpayer that forgiveness of all or part of the covered loan is
denied.

A second safe harbor is allowed if:

1. The taxpayer meets the requirement of (1) and (2) above; and

2. In a subsequent tax year, the taxpayer irrevocably decides not to seek forgiveness for some or all the covered loan.

Congress may consider legislation on this issue and we will continue to monitor for any additional guidance that may be issued.

Donald J. Zidik is a partner at Stone & Company and oversees tax advisory services at the firm

Stone Mid-Year Tax Check-In

Tue, 11 Aug 2020 16:47:50 GMT

The Coronavirus Aid, Relief and Economic Security (CARES) Act created some favorable tax provisions for eligible individuals who are in need due to the ongoing Coronavirus pandemic. We wanted to take this opportunity to remind you of some options that may be available to you.

1. Suspension of Required Minimum Distributions (RMDs) for 2020: RMDs from all retirement accounts except defined contribution plans are optional for 2020. If you had already taken your RMDs for 2020 and wish to reverse that action, you can recontribute the distribution to your retirement account if done by August 31, 2020. This applies to accounts such as IRAs, 401 (k) plans, inherited IRAs and Roth IRAs.

2. Favorable tax treatment for withdrawals from workplace retirement plans including 401(k) plans, 403(b) plans,
profit sharing plans and IRAs. Under this provision:

a. Eligible individuals can withdraw up to $100,000 from their plans for COVID-19 related relief. The funds must be withdrawn by December 31, 2020.

b. Since the income in (a) above is includable in taxable income, taxpayers can either report it ratably over three

years (1/3 in 2020, 1/3 in 2021 and 1/3 in 2022) or report it as a lump sum in 2020.

c. 10% early withdrawal penalty for individuals under the age of 59 ½ is waived.

d. The money can be repaid to your retirement plan within three years, in which case you can amend your tax return to claim any taxes previously paid on the withdrawal.

e. The withdrawals are not subject to mandatory withholdings.

3. Expanded loan options:

a. Some workplace plans provide the ability for participants to borrow up to $100,000 in COVID-19 related relief. This option is only available until September 22, 2020.

b. If you already had an outstanding loan from your workplace retirement plan on or after March 27, 2020, you may be able to suspend repayment for up to a year under the CARES Act.

4. Expanded Unemployment Benefits: The CARES Act expanded unemployment benefits eligibility to cover worker who would otherwise not be eligible for unemployment benefits including self-employed individuals an independent contractors. Unemployment benefits are subject to federal taxes and in most states including MA they are also subject to state income taxes.

It is i mportant to note that in order to qualify for the provisions 2 & 3 above, you must have been directly affected by COVID-19 in one of the following ways:

a) You were diagnosed with the virus

b) Your spouse or your dependent was diagnosed with the virus

c) Your finances were adversely affected as a result of the ongoing pandemic

We encourage you to contact your employer or plan administrator to determine if your plan has been modified to accommodate the distribution and loan rules provided under Section 2202 of the CARES act.

Our experienced team of tax professionals is available to assist you with you tax planning needs to help reduce the likelihood of a surprise tax bill during the filing season. For additional information, please contact us at: info@stonecpas.com

Contributors: Caroline Waweru, CPA, MSA, MBA and Donald J. Zidik Jr, CPA, PFS

Caroline Waweru Awarded MSCPA’s 2020 Women to Watch Award

Sun, 02 Aug 2020 01:41:21 GMT

The Stone Team is proud that senior tax manager, Caroline Waweru , was selected as one of the recipients of the MSCPA’s 2020 Women to Watch Awards.

The MSCPA, in partnership with the AICPA’s Women’s Initiatives Executive Committee, is pleased to announce the seven recipients of the 2020 Women to Watch Awards . The awards recognize outstanding women in the accounting profession and are given in two categories: Emerging Leaders (fewer than 15 years in the profession) and Experienced Leaders (15 or more years in the profession).

The winners will be honored at the MSCPA’s 2020 Women’s Leadership Virtual Summit on October 28. Congratulations Caroline!

Stone & Company Update - How to account for your PPP loan

Wed, 10 Jun 2020 23:57:56 GMT

How PPP funds should be reported in your financial statements

Now that many small businesses have secured a Paycheck Protection Program (PPP) loan, much of the discussion has shifted to understanding the forgiveness process. This means properly tracking expenses to demonstrate that the funds were spent on the types of expenses allowed under the program, and within the required limitations (no more than 40% on non-payroll expenses) over the covered period (now up to 24 weeks).

For entities that prepare financial statements, there is another question: How do we account for PPP funds received? Is it a loan? Is it a grant? If it’s a loan, how do we handle this below market interest rate? Is it income if it is forgiven or does it offset payroll expense?

We have received numerous inquiries from small business and non-profit clients, as well as other PPP stakeholders, over the past few weeks. Today we finally received some guidance from the American Institute of Certified Public Accountants (AICPA), which supports the guidance and feedback we have been generally providing to our clients.

We have summarized the answers to the most common accounting questions below:

Q. We are confident that the funds we received will be forgiven. How should we record the cash?

Record the initial cash received at funding as a financial liability and accrue interest on the debt in accordance with the interest method.

Q. Since the interest, at 1%, is well below market, should we impute additional interest as we typically would for US GAAP financial reporting?

You should not impute interest at a market rate.

Q. If we record the proceeds received as a liability and we know we meet the requirements for forgiveness, when can we remove the debt from the books?

Continue to record the proceeds from the loan as a liability until one of two conditions are met: Either (a) the loan is partly or wholly forgiven, and the borrower is legally released from the obligation, or (b) the borrower pays of the loan.

Q. How do we record forgiveness?

Reduce the liability by the amount forgiven and record a gain on extinguishment once the loan is partly or wholly forgiven and legal release is received.

Based on the guidance from the AICPA, there may also be instances where a for-profit business entity expects to meet the PPP’s eligibility criteria for forgiveness and concludes that the PPP loan is, in substance, a grant that is expected to be forgiven. An entity in such a situation would not be able to recognize the government assistance until there reasonable assurance that the applicable conditions will be met. The earnings impact would then be recorded on a systematic basis over the periods in which the entity recognizes as expenses the related costs that the grants are intended to cover.

The AICPA’s guidance also discusses situations where a non-profit that expects to meet the criteria for forgiveness might account for the funds as a conditional contribution.

We will continue to monitor developments related to the PPP as part of our commitment to supporting our clients and the business community.

Stone & Company LLC is a CPA firm in Lexington, Massachusetts – Inspired by our values and focused on service. Contact us at info@stonecpas.com

Major Changes to the Paycheck Protection Program - New Flexibility Act Becomes Law

Fri, 05 Jun 2020 00:53:22 GMT

Stone & Company Update - Businesses get welcome relief with new PPP provisions

N ew rules for the Paycheck Protection Program (PPP) are now law. On June 3rd, Congress passed the Paycheck Protection Program Flexibility Act of 2020, offering enhancements to the previously passed PPP. Today, on June 5th, it was signed into law by the President. The most significant change is that the 8-week Covered Period has now been extended to a 24 -week Covered Period, which now gives businesses more time to spend the PPP funds they received on costs eligible for forgiveness.

In addition, the Act also brings some additional changes that remove a number of more stringent provisions that were in place. Major changes to the PPP are summarized below.:

• New extended 24-week Covered Period, increased from 8 weeks

• Non-payroll costs increased from 25% to 40%

• FTE rehire safe harbor period moved out from June 30 to December 31, 2020

• Additional FTE safe harbor provisions for FTE calculations

• Businesses can defer employer payroll taxes

• Borrowers may now apply for and use PPP funds through December 31, 2020

• Loan duration, previously 2 years, now a minimum term of 5 years for new loans, with modification allowed for
existing loans

• Six-month deferral to begin loan payments has been extended

• Some unanswered questions remain

By far, the most material change that was made is extending the 8-week covered period to 24 weeks. This gives businesses more time to spend the PPP funds received on qualified expenses. Previous to the new law, many businesses that received PPP funds quickly realized that the calculation for the loan was based on 10 weeks of payroll but they only had 8 weeks to spend the funds. Expending the funds on qualified expenses within 8 weeks and in order to apply for full forgiveness presented a challenge for many businesses, especially those with minimal non-payroll costs.

While the new Act does not change the Qualified Expenses (payroll and related benefits, mortgage interest, rent and utilities), it provides a longer time to incur and pay these expenses with the funds. This significantly increases the chances of obtaining full forgiveness for PPP funds received.

Additionally, the extended 24-week Covered Period will allow for a much easier forgiveness process, since the longer 24-week Covered Period means the entire loan amount (10 weeks of payroll) can be spent on payroll and payroll-related costs, essentially eliminating the need to even consider the non-payroll costs.

The 24-week extension period is optional. This means that businesses that were operating under the original rules and met the requirements for full forgiveness over the 8 weeks do not have to wait to apply for forgiveness.

Other provisions provide relief for businesses in the areas highlighted above. Only 60% of the PPP funds needs to be spent on payroll and related costs. Employers who laid off employees now have more time to bring employees back to work (deadline moved from June 30 to December 31, 2020), eliminating some of those headcount limitations on forgiveness under the original provisions. The duration of the loan was moved from 2 years to 5 years, which should help businesses who don’t receive full forgiveness.

Unanswered questions remain. With respect to the new safe harbor provisions related to FTEs, how should businesses “demonstrate the inability to rehire similarly qualified employees” or “the inability to return to previous levels of business activity”? Will the “cliff” related to the 60% requirement remain in place (i.e. the original interpretation assumed partial forgiveness if less than 75% was spent on payroll costs. If the new 60% threshold is not met, will there be any situations where a borrower may still get partial forgiveness)? Will the formula for the cap per employee remain the same? Will further SBA/Treasury regulations or Congressional legislation affect forgiveness? When will the SBA application for forgiveness be updated for the new rules? How will forgiveness applications still open with no decision as of year-end impact taxes? More guidance including a Q&A document from the SBA and the Treasury is expected soon.

One of the key takeaways from our perspective is how the new rules will be implemented as guidance comes out to clarify the open questions. In particular, we are urging our clients and business owners to keep an eye out for any potential pitfalls in the area of FTE reductions and any final rules that might affect he application of those formulas. Additionally, because the SBA can ultimately review any loan, including those under $2 million, we are reminding our clients to ensure that they maintain adequate documentation of the financial health of the business at the time of application, as well as sufficient appropriate documentation to track how loan proceeds were expended.

The bottom line: The PPP Flexibility Act is good news for small businesses, easing the burden for many, however, we can certainly expect additional regulations as stakeholders digest the new rules and seek to get key questions clarified.

Stone & Company LLC is a CPA firm in Lexington, Massachusetts – Inspired by our values and focused on service. Contact us at info@stonecpas.com

Relief for Non-public Entities that Issue GAAP Financial Statements

Thu, 21 May 2020 19:22:48 GMT

Stone & Company Financial Reporting Update

On Wednesday, May 20, 2020, the Financial Accounting Standards Board (FASB) voted to extend the effective date of the new revenue recognition standard (ASC 606) Revenue from Contracts with Customers. See JofA article here . This is welcome news for audit and attest clients that prepare financial statements in accordance with accounting principles generally accepted in the United States (GAAP) and, frankly, also provides some welcome relief for some accounting firms who provide audit and attestation services for those entities.

The new revenue recognition standard, originally effective for private companies with year-ends beginning after December 15, 2018, has presented challenges for many reporting entities because revenues reported under the new standard could be different from the legacy revenue guidance under GAAP. As such, implementation involves a robust analysis to determine the effect of the new model on revenue recognition and, in some cases, could require changes to systems that track and report revenue.

The decision essentially eliminates, albeit temporarily, some extra work and related documentation that would have been required for audits and reviews of GAAP financial statements not yet started for entities with a December 31, 2019 year-end. Welcome relief during these unprecedented times as businesses and other reporting entities manage their way through the COVID-19 pandemic.

Robert S. Miller, CPA, CFE, is a partner at Stone & Company LLC, Lexington, MA

rmiller@stonecpas.com

SBA Releases Updated Guidance for Loan Forgiveness

Mon, 18 May 2020 15:17:06 GMT

On Friday, May 15, 2020, the SBA released updated guidance for the Payroll Protection Program (PPP) that directly addresses several questions that many applicants have had for the past several weeks. Prior to this updated guidance, which includes an application, along with detailed instructions for completion, the earlier guidance was either silent or unclear about how certain areas should be handled. Many PPP applicants had questions related to how to treat costs incurred prior to but paid after the funds were disbursed. How should one handle costs incurred but not paid until after the eight-week period (Covered Period) ends? What exactly are the eligible nonpayroll costs? How exactly should Average FTEs be calculated, are there any exceptions or exemptions for rehires or attempts to rehire employees, and how should those events be incorporated into to calculation?

The guidance is new, and we expect additional guidance, consistent with the regular updates that have been issued over the past few weeks. Nevertheless, this information is quite valuable since it directly answers some of the most common questions. Below are some highlights from the new guidance:

• Gives borrowers an option to use an “Alternative Payroll Covered Period” that might align more closely with the regular payroll cycle. Specifically, a borrower may elect to calculate eligible payroll costs using the eight-week period that begins on the first day of their first pay period following their PPP disbursement date.

• Payroll costs incurred but not paid during the borrower’s last pay period of the Covered Period (or the Alternative Covered Period described above) are eligible for forgiveness if they are paid on or before the next regular payroll pay date.

• Defines Eligible Nonpayroll costs that are eligible for forgiveness, providing more specific information about those costs, which will fall into one of three categories: (1) Mortgage interest (does not include principal on any business mortgage obligation on real or personal property, (2) business rent or lease payment obligations pursuant to lease agreement for real or personal property in force before February 15, 2020, and (3) covered utility payments for a service for the distribution of electricity, gas, water, business transportation, telephone, or internet access, for which service began before February 15, 2020 (“business utility payments”)

• Provides explicit guidance for the calculation of Average FTE, and allows exceptions for (a) making a good faith, written offer to rehire an employee during the covered period, (b) employees who were fired for cause or voluntarily resigned or requested and received a reduction in their hours during the Covered Period.

• Provides a Safe Harbor exemption (from loan forgiveness reduction) for employers who (a) had reduced FTE levels between February 15, 2020 and April 26, 2020, AND the employer (PPP borrower) then restored FTE levels before June 30, 2020 back to its February 15, 2020 level.

The clarifications summarized above are welcome because they provide answers to some common questions in several key areas.

The newly released SBA application for forgiveness is a comprehensive 11-page document and it will be critical to ensure the document is carefully prepared. Equally important, will be the need to ensure that supporting documentation is on file for any information presented within the PPP application for loan forgiveness. Supporting invoices, evidence or payment such as check stubs, bank statements, agreements/contracts, and applicable payroll reports may need to be produced based on what each lender requires to be submitted. In all cases, we recommend paying close attention to what your lender requires and providing as complete a package as possible to minimize the likelihood of excessive questions and increase the chances of an expedited process and a maximum amount forgiven.

DISCLAIMER – This article is not intended to provide tax or legal advice. This information is provided for general information and educational purposes and may change at any time. Please contact Stone & Company, LLC for additional information

Don Zidik Joins the Stone & Company Team

Mon, 11 May 2020 17:10:52 GMT

Lexington, Mass. — May 11 — Stone & Company, LLC of Lexington has hired Donald J. Zidik , CPA as a tax partner , expanding the scope and depth of its services. As one of the fastest growing accounting firms in the region, and among the largest minority owned accounting firms in Massachusetts, Stone & Company continues on a strong growth trajectory.

Zidik brings extensive tax expertise on the local and national level to Stone & Company, having served as Tax Director at a national firm. Zidik’s experience also includes servicing clients at the Big Four, as well as the national and local firm level.

“Don brings a wealth of tax knowledge to our team, giving us valuable depth for our clients,” said Rob Miller, the Managing Partner at Stone & Company. “Don is joining our team because his heart has always been at the local firm level working closely with clients — he truly enjoys serving individuals and small businesses. He sees how we value being responsive and accessible to our clients — even in this challenging environment. Don was also impressed with how seamlessly we’ve transitioned to this new virtual work mode and he is excited about the idea of helping the Stone team to service a family of clients who truly value our services.”

As the tax partner for Stone & Company, LLC, Zidik will work with various types of businesses and their closely-held owners, individuals, non-profits, as well as trustees and executors with tax compliance and planning services. He is experienced with providing tax compliance and planning with corporate, partnership, individual, fiduciary and nonprofit entities. Zidik also provides individual tax planning, retirement and estate planning to individuals and other small business clients.

Zidik has also taught as an adjunct professor at Suffolk University in the Masters of Taxation program and has presented at various American Institute of Certified Public Accountants' conferences and webcasts. He has co-authored various articles on taxation in professional journals and has been quoted in the Wall Street Journal, New York Times, Washington Post and other media. Zidik also is the past chair of the AICPA Individual and Self-Employed Tax Panel.

Zidik’s civic involvement includes serving as Treasurer and Board Member at the Crispus Attucks Children's Center and the Children's Dyslexia Center Boston North.

SBA Releases Guidance for Participating Lenders as the Paycheck Protection Program Begins

Fri, 03 Apr 2020 18:22:20 GMT

An Update from Your Stone Team

Information was released by the SBA to banks at 8pm on April 2, 2020. Participating lenders now have what they need and are moving quickly to get their processes and procedures for the Paycheck Protection Program (PPP), including their respective online applications, in place. Many expect to be live by the end of the day on April 3rd.

This formal document from the SBA outlines the details of the program. For a look at the document released by the SBA click here . We wanted to share this with our clients and friends to facilitate direct access to the newly released information that provides details about the program. We also wanted to share the SBA application that will be required to apply under the PPP. Most lenders participating will likely want borrowers to attach the completed

SBA application .

In addition to the online application and the attached SBA application, applicants will need to provide verification of their payroll expense for 2019. One of the best ways to do this is to get a payroll report from your payroll processor (such as ADP or Paychex or any of a number of others). If you are not able to provide this report then most participating lenders will likely allow applicants to use a QuickBooks report or other method to verify the expense.

In order to expedite your application, we encourage our clients and other small business owners who intend to participate in the PPP to have these items ready before they begin the application so they can get into the queue as soon as possible.

As always, we are ready to support our clients and friends on any level we can.

-Your Stone Team

COVID-19 Update

Thu, 02 Apr 2020 15:24:55 GMT

US Treasury Department Update

Important new guidance has been issued by the U.S. Department of the Treasury for small businesses that want to apply under the Paycheck Protection Program (PPP). For access to the Borrower Guide, click here . A sample Borrower Application can be found here ,

Important Reminders:

• Payroll costs are capped at $100,000 for each employee

• Loan Payments will be deferred for at least six months

• Small businesses can apply for funds under the PPP starting on April 3, 2020

• Applicants can apply through several institutions, including existing SBA lenders, any FDIC insured institution, any federally insured credit union, among others

• All businesses, including non-profits, can apply

• In addition to the application, you will need to provide payroll information

• The amount you can borrow is based on a multiple of average monthly payroll costs

• Payroll costs include employee benefit costs and payroll taxes

• PPP loans are eligible for forgiveness as long as certain conditions are met, including maintaining certain staffing and compensation levels over the stipulated timeframes

Stone & Company continues to monitor developments in this area as we strive to support our clients through these challenging times. Feel free to contact us if we can serve as a resource.

-The Stone Team

The CARES Act – Economic Relief for Businesses and Individuals

Sun, 29 Mar 2020 16:18:09 GMT

A summary for our clients and friends

On Friday, March 27, 2020, the president signed into law the largest ever economic stimulus package. The Coronavirus Aid, Relief and Economic Security (CARES) Act (the Act) provides relief to both individual and business taxpayers who have been affected by the novel coronavirus (COVID-19). Your Stone team has summarized some of the most relevant areas within the Act. Below are some key provisions of the new law as it may affect both individuals and businesses. A link is provided here for you to access the full text of the bill.

Many individuals will receive a cash payment in 2020

Certain taxpayers who qualify will receive a refund of $1,200 ($2,400 for joint filers) plus an additional $500 per qualifying child. This refund begins to phase out when a taxpayer’s adjusted gross income (AGI) reaches $75,000 for single filers, $112,500 for Head of Household filers and $150,000 for married taxpayers who file a joint return. The credit is not available to taxpayers whose AGI is greater than $99,000 for single filers, $136,500 for Head of Household filers and $198,000 for joint filers.

To qualify for the credit, taxpayers and any qualifying child(ren) must have a valid social security number. Nonresident aliens, individuals who may be claimed on another person’s return, estates and trusts are not eligible for this credit.

The refund is an advance credit that is based on a taxpayer’s 2019 filed income tax return or 2018 filed tax return if 2019 has not yet been filed. For taxpayers who have not filed a tax return for these two years, the IRS may use information from their 2019 Social Security benefits to determine their refund.

Taxpayer’s who receive less than the $1,200 credit due to the AGI limits above may be eligible for an additional tax credit on their 2020 taxes based on their 2020 adjusted gross income. Taxpayers who file a joint return in 2019 but file separate returns in 2020 will be deemed to have received half of the credit on each separate return.

Per the CAREs Act, the Secretary of Treasury will disburse refunds payable as soon as possible but no later than December 31, 2020. Refunds may be issued electronically for accounts authorized by taxpayers on or after January 1, 2018 or by mail.

Once the refund if disbursed, taxpayers will receive a notice no later than 15 days sent to their last known address notifying them of the following:

• Method by which payment was made

• Refund amount

• IRS contact where they can report any failure to receive payment

The Act now allows individuals to take an above-the-line charitable contribution deduction and modifies limitations on cash contributions

Taxpayers who do not itemize deductions will be eligible for an above the line deduction of up to $300 deduction for cash donations made to a qualified charitable organization. The Act also temporarily suspends certain limitations on Charitable Contributions during 2020. Notably, the Act suspends the 60% limit on Cash contributions which means that depending on a taxpayer’s contribution base, up to 100% deduction could be permitted.

The 10% early withdrawal penalty for withdrawals from retirement plans will be waived for affected individuals.

Individual taxpayers affected by the coronavirus pandemic may now take distributions from vested amounts during 2020 and be exempt from the 10% early withdrawal penalty up to $100,000. These funds also do not have to be included in income immediately. The Act instead allows inclusion in income to be spread over three years. The CARES Act also includes provisions that make it easier to borrow from 401k and similar plans, raising the limit from $50,000 to $100,000, with certain limitations on the borrowing timeframe and extension of the repayment period.

Businesses gain relief in the areas of payroll taxes, compensation and benefits for their employees

Businesses that are concerned about labor costs, one of the largest expense items for many, will now receive assistance. Employers affected by the COVID-19 pandemic who retain employees on their payroll during the pandemic will have access to streamlined SBA loans. A portion of the loans may be eligible for forgiveness if certain criteria are met, including keeping employee headcount at certain levels. Certain employers who retain employees in accordance with the provisions of the Act may also receive a 50% credit against payroll taxes related to eligible employees’ wages for the remainder of 2020, subject to certain limitations.

The CARES act also provides relief for businesses in the utilization of business losses, modifying the complex limitation rules related to Section 461(l). Additionally, the Act amends Section 163(j), allowing certain entities to deduct business interest expense for 2019 and 2020 up to 50%, an increase from the previous level of 30% of adjusted taxable income, with provisions that allow for certain elections to be made. Other business tax areas affected by the CARES Act include carryback of net operating losses, alternative minimum tax credit refunds and qualified improvement property.

Additional relief for small businesses is now available in the form of new loan programs

One of the most important areas of the CARES Act is the area of loans that will now be available for businesses that meet certain criteria.

Economic Injury Disaster Loan Program – These loans, build on the existing SBA Disaster loan program and are intended to cover economic injury such as loss of revenue in a declared disaster zone as a result of the disaster (note – all 50 states, and certain territories have been declared disaster areas for purposes of this program). These loans define a small business as one with up to 500 employees and are intended to cover losses that are due to the declared disaster, not due to a downturn in the economy or other reasons. Applicants will be expected to complete an SBA loan application and provide certain other tax and financial information.

Paycheck Protection Loan Program – The Paycheck Protection Program allows for loans up to $10 million based on a specified formula and is available to existing small businesses up to 500 employees. These loans are intended to cover business costs, including payroll costs, based on a maximum employee salary limit. The funds can also be used cover employee benefits, mortgage interest payments, rent, utilities and other costs. Paycheck protection loans have a maximum interest rate of four percent and payments can be deferred for no less than six months and up to one year. Borrowers can expect to have to make certain good faith representations that they have been impacted by COVID-19 as well as use of the funds.

Certain provisions that relate to the same borrower applying for both loans should be reviewed and assessed before applying.

Taxpayers should consider and understand key aspects of the new law and how it might affect them

Taxpayers are encouraged to consult with their advisor as they assess how the new law may impact their situation. Our tax team at Stone is reviewing and interpreting provisions of the Act to assess its impact on our clients and business contacts. Please contact us with your individual and business questions and/or concerns. You can count on us as your trusted advisors to draw on our experience and expertise to help guide you through these unprecedented times.

COVID-19 UPDATES THAT MAY IMPACT YOU AND YOUR TAXES

Wed, 25 Mar 2020 13:54:46 GMT

Updates for Stone & Company Clients

At Stone, we continue to monitor the Covid-19 situation as it evolves and are committed to keeping you updated on how the developments affect you from a tax perspective. Below, please find a summary of some recent developments from the Internal Revenue Service (IRS):

• Due Dates : 2019 Tax returns that were originally due April 15, 2020 have been automatically extended to July 15, 2020. This extension applies to both filing and paying your 2019 tax liability.

• Eligibility : The above extension applies to all individual tax payers (Form 1040 series), C-Corporations (Form 1120 Series) , Fiduciary (Form 1041 series), Net Investment Income Tax (Form 8960), Base Erosion minimum tax (Form 8991) and any unincorporated business with an original tax due date of April 15, 2020.

• Returns & Payments Ineligible for above extension : Any return not originally due April 15th, Estate and Gift Taxes (Forms 706 and 709), Payroll and Excise taxes, filings and/or payments for taxable year 2016 including claim for a refund. If claiming a refund for 2016, the claim must be filed by April 15, 2020.

• Estimated Payments : Estimated tax payments that were due April 15, 2020 have also been extended to July 15, 2020. However, none of the other quarterly estimates due dates have changed. For example, the second quarter estimates due June 15, 2020 for Individuals are still due June 15th.

• Extensions : If you are unable to file your tax return by the July 15th deadline, you can apply for a 3-month automatic extension by July 15th and your return will be due October 15th. Please note that you will need to pay any liability due by July 15th even with an extension to avoid any potential interest and penalties.

• Already scheduled a payment for 4/15? : You can proactively modify/cancel this payment and reschedule it to 7/15. Please contact Stone & Company, LLC if you need help with this.

• States : This relief does not automatically apply to States. Some States have aligned with the new Federal due date and some States are keeping the original due dates. Please reach out to Stone & Company, LLC if you have a question on a specific state or check with the respective state agency. More information is available at

State Tax Agencies .

• Health Savings Accounts (HSA) & Individual Retirement Accounts (IRA) Contributions : You can still make a 2019 contribution to your HSA and IRA until July 15th if you are eligible and have not already maxed out your 2019 limit. Please contact Stone & Company, LLC for more information.

• Excessive 2019 elective deferral to workplace-based retirement plans : In order to exclude these distributions from income, you must take out the excessive deferrals and income by April 15th, 2020.

The information above was derived from

Notice 2020-18 Relief for Taxpayers Affected by Ongoing Coronavirus Disease Pandemic and IRS Filing and Payment Deadlines FAQs . We remain accessible to you as your trusted advisors during these uncertain times. Please reach out to us with any questions or concerns you may have.

Covid-19 Impact

Fri, 20 Mar 2020 17:20:54 GMT

Updates for Stone & Company Clients

The current situation as a result of this global COVID-19 pandemic is truly unprecedented, affecting our home life, our businesses and our communities. Our hearts go out to anyone who’s been impacted by the virus, either directly or indirectly. Especially to those who are sick we extend our wishes for a fast and full recovery.

During this time, I wanted to reach out and update you on how we’re approaching the situation at Stone and how we’re balancing the safety and health of our colleagues, clients and other stakeholders, while preserving business continuity and the quality of technical expertise, advice, and service that defines our firm. The following are some important steps we are taking, as well as some important updates that may affect you and impact this year’s tax filings that are still in progress:

• We are taking advantage of our capabilities to work remotely, utilizing remote access and our secure Sharefile document exchange portal. Our software systems and online tools allow us to collaborate and provide tax services without interruption, even while working remotely. We are connected and communicating daily.

• We are asking our team members to work with our clients through digital channels as much as possible. Please contact us if you need assistance at i nfo@stonecpas.com

For clients who do visit our offices, we have implemented an approach that recognizes social distancing and greetings without touching. We are pleased to have seen that clients understand that this is out of an abundance of caution and for everyone’s safety.

• We are monitoring developments closely, including following recommendations from the World Health Organization (WHO), the Centers for Disease Control and Prevention (CDC), as well as other local, regional and global health authorities.

Also, below, please find a summary of key dates and updates related to taxes and Covid Relief :

• Filing Due Date : The filing deadline for income tax returns, as well as any payments that were due on April 15th, has now been extended to July 15th . This provides some much needed relief in these times. However, while no payments or filings are due before July 15th, it is likely that we will still be able to complete a significant number of returns as planned and well before the new deadline, though some returns will be completed after April 15th.

• The key take away is that clients do not have to worry about interest and penalties if they don’t file or extend by April 15th. We are committed to getting work completed as soon as possible.

• Updates as we know them will be posted on our website.

Stone is doing all it can to help our business community through this challenging time. It is my sincere hope that you and your families are safe and doing well under these circumstances. While all our businesses are in uncharted territory, our relentless commitment to your success is stronger than ever. Our company was founded almost 35 years ago on certain core values: trust, integrity, collaboration, and commitment to our staff and clients’ success, and those values continue to guide us in everything we do.

In summary, we are open for business. Even when circumstances create challenges, our commitment and dedication to you remains the same. We have a truly amazing team here at Stone and I know I speak for all of us when I say we are here for you. Thank you for your business. We stand ready as your partners to assist and support you now, and persevering together in all the days and years ahead.

All the Best,

Rob Miller,

Managing Partner

Stone & Company Continues to Expand with a New Senior Tax Manager

info@bostonwebpartners.com (Jonathan Eilberg) — Sat, 26 Oct 2019 23:18:15 GMT

Lexington, Mass. – October 25 — Stone & Company, a fast-growing Boston-area accounting firm, is expanding its team with the addition of its new senior tax manager.

Rob Miller, the managing partner of Stone & Company, announced the addition to the team:

Caroline Waweru, CPA, MSA, MBA, brings years of industry experience along with master’s degrees in Accounting and Business, both from Northeastern University. Waweru has provided tax consulting services to a variety of clients throughout the New England area. In addition, she has worked for accounting firms at both the local and national firm levels.

“Caroline brings a passion for working with smaller firms”, Miller said. “I’m thrilled to have a professional with her background and credentials as part of our team,” Miller added. “She brings the kind of experience, expertise and dedication to service that get results for clients.”

Miller also announced the firm is reorganizing its team to keep pace with its expanding client base as he anticipates additional growth.

About Stone & Company, LLC: Stone & Company, LLC is the go-to firm for businesses and non-profits looking for big-accounting firm experience with a small-firm touch. Rob Miller, the firm's managing partner, brings 25 years of experience assisting companies throughout New England with complex accounting related issues, and was recently elected to serve the board of directors as the vice chairman of the finance committee at the Massachusetts Society of CPAs for 2019-2020 fiscal year. The Stone team consists of talented professionals, who each bring a deep level of accounting expertise for small and mid-size businesses as well as non-profit entities.

New IRS Partnership Rules

Wed, 23 Oct 2019 21:55:41 GMT

Don’t Ignore Important “New” IRS Partnership Rules

By Michael Tracy, Senior Tax Consultant, Stone & Company

In 2018, new rules generated by the Bipartisan Budget Act of 2015 took effect that have significant ramifications for A/E firms taxed as partnerships. The new rules expedite the audit process and collect tax more easily and quickly as the IRS moves to significantly expand the volume of partnership audits.

The new rules affect all partners and partnerships each year. Some items must be addressed annually and prior to an audit. Decisions, definitions and partners’ responsibilities are some items that should be memorialized in partnership agreements now.

The rules are complex and require action. There are important choices to be made with the filing of every partnership tax return including choice of rules (old or new) and designating a “partnership representative.”

The biggest change is the choice of rules. There are 3 options: New rules, Elect Out, or Push Out.

Choice of rules: New rules affect when tax is assessed and who pays and defends an audit. The implications affect existing, new and old partners. They affect buy outs, terminations, sales of partnership interests, etc.

Under the old rules, audits were at the individual level including the defense and assessments. A 2018 audit completed in 2020 was assessed to 2018 partners.

The new rules audit, assess, collect tax and is defended by the partnership. The same 2018 audit completed in 2020 yields tax to the partnership: effectively its partners in 2020, not the 2018 partners.

Firms can avoid new rules by using an “Elect Out” option. There are strict, unforgiving criteria that must met to make the election:

• Each partner must be registered as an individual, a domestic C corporation, a foreign entity taxable as a C corporation, an estate of a deceased partner, or an S corporation (most trusts will disqualify the election)

• The firm must have 100 or fewer Schedule K-1s (atypical potential pitfalls will surprise)

• Tax returns must be filed in a timely manner (on or before the due date)

• The Elect Out option must be made annually.

A third option for firms to avoid the new rules is the “Push Out” election. It essentially adopts the old rules. This is made following the adjustment, but it must be made timely without exception. This option brings an additional interest cost of 2 percent.

Given the complexity of the new rules, we advise A/E firms to update their partnership agreements without delay. Partners should be held responsible for required information to avoid pitfalls and inadvertent disqualification from Elect Out.

Partnership Representative: Prior to 2018, partnerships could designate a “tax matters partner.” That is eliminated. It’s replaced with a “partnership representative.” This carries new responsibilities, operates differently, and is a designation made each tax year.

Consult your professional advisors about these important changes. This is not something to ignore or try to sweep under the rug until an actual audit takes place. Firms should act now. Implications are real.

Reprinted with permission of PSMJ Resources

Stone & Company Non-profit Guidance Series - Statement of Functional Expenses

Sun, 20 Oct 2019 21:44:31 GMT

Your Statement of Functional Expenses is now required – How should it be prepared and what’s the best approach?

Accounting Standard Update (ASU) 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, became effective for fiscal years beginning after December 15, 2017. It affects all non-profit entities that issue financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) and, among other enhanced and new disclosure requirements, now requires presentation of a statement of functional expenses. Many non-profit entities are still grappling with the best approach to efficiently and effectively prepare a statement of functional expenses, which is especially critical for those that undergo an annual financial statement audit.

A statement of functional expenses is simply a statement that presents each expense, as naturally classified (e.g. salaries, rent, office expenses, etc.), but also separated by functional classification, generally three broad categories:

• Program – Activities that relate to the non-profit organization’s mission of purpose, these may be a single program or spread across several programs

• Management and general – Activities that are necessary to run the organization but are not directly identifiable with a single program. Such expenses include accounting and overall management of the organization

• Fundraising – Any activity related to inducing donor contributions, or raising funds, including maintaining donor lists, events, and grant writing

Because some expenses are such that it’s often unclear what portion of the total relates to each program or supporting service, non-profit entities need to think carefully about how they approach preparation of their statement functional expenses.

In general, all of an organization’s naturally classified expenses will be presented in the statement of functional expenses via one of the following four allocation approaches:

• Direct Costs – Certain costs relate directly to one or more programs. These may include a consultant hired solely to work in a program. Any such costs can be charged directly to that program.

• Square Footage – This is a very common approach utilized by the vast majority of non-profit reporting entities for certain expenses because those costs, such as rent, depreciation, utilities and similar costs are highly correlated with the physical spaces occupied by each department.

• Headcount – This approach may work for certain costs in organizations that are structured such that the functions share virtually no overhead or other costs. Personnel costs are one such category. An example would be an entity where 7 people work in one function and there are 10 employees in total, resulting in 70% of the organization’s total costs being allocated to the program and 30% towards supporting that function.

• Time Studies – Many organizations will ask their employees to summarize actual time spent over a specified time frame as a basis for future allocations, whether it be related to program, management and general, or fundraising. Allocation of personnel costs can be supported by such a time study, but can also be supported by more detailed records such as actual time sheets and job descriptions.

Regardless of the allocation method used, two important considerations are worth noting: (a) the methodology should be reasonable, based on the type of expense and (b) the methodology must be documented. A written cost allocation plan has a number of benefits. It not only helps an organization apply a consistent methodology on an ongoing basis, it also facilitates a more efficient audit and, for those non-profit entities that receive government funds or are parties to contracts that require such documentation, it is required record keeping. The need to document the cost allocation methodology and basis for utilizing that methodology cannot be overemphasized, especially for those entities that are subject to a financial statement audit or inspection by an outside entity.

A Few Tips for Well-prepared, Properly-presented

Statement of Functional Expenses

Draw from the reporting that is already required in your Form 990. Functional reporting is already required in this annual non-profit tax return and there may be some benefit in using that as a model when preparing GAAP financial statements, grouping and summarizing line items as appropriate.

Don’t forget to review methodologies and the allocation approach for each expense category. Things change. More space may be rented, departments may be reorganized, staffing levels and mix may change. A review should be done annually to ensure that costs are being allocated in a manner that truly reflects how resources are being consumed by each program or supporting service.

Ensure significant expenses are not being included within “Miscellaneous Expenses.” If the cost is material it probably belongs in a more appropriate category or requires a more appropriate name.

Don’t forget about any expenses that are netted against a revenue source on the statement of activities . Such expenses may cause a reconciling item and can be shown as such on the statement of functional expenses to ensure the subtotal number ties back to the statement of activities.

Remember to allocate interest expenses to the programs that benefit. Some organizations erroneously report all interest expense in the general and administrative category. However, since debt is usually issued for the construction or purchase of a building, a reasonable allocation method could be based on square feet occupied, including space occupied by programs. Interest costs that cannot be allocated should be reported under management and general expenses.

Insurance expense is not always a general and administrative expense. Certain types of insurance, such as property and casualty insurance covering the space occupied, includes coverage for space occupied by programs. As such, a portion of those insurance costs should be allocated to the programs that benefit.

If contributions are significant, it is likely that there should be some fundraising expenses presented. Even if there is no dedicated fundraising person or department, it’s likely that at least one person dedicated some portion of their time developing and securing those contributions. Generally, there was some activity that resulted in those contributions to the organization.

Non-profit entities that prepare GAAP financial statements should talk to their CPA. This is especially important for those entities that undergo an annual financial statement audit. Your auditor will typically have worked with a variety of non-profits that prepare statements of functional expenses, be familiar with best practices, and will almost always be a great resource.

We have found that our non-profit clients who stay engaged with us tend to experience greater efficiencies when preparing their statement of functional expenses and their financial statements as a whole.

The statement of functional expenses is now a required part of your financial statements prepared in accordance with GAAP. Familiarity with best practices and generally acceptable approaches can go a long way towards saving valuable time and making the best use of resources.

Robert S. Miller, CPA, CFE, is the managing partner and leads the assurance services practice at Stone & Company, Lexington, MA. rmiller@stonecpas.com

For additional information about non-profit reporting and other information about how our team can help, please contact us at https://www.stonecpas.com/contact

Accounting Firm Merger

Sun, 29 Sep 2019 14:53:02 GMT

Merger of accounting firms creates a bigger, stronger Stone

Lexington, Mass. – Oct. 1 — Two successful regional accounting firms have merged to form a single firm with enhanced capabilities and expertise. Stone & Company, LLC of Lexington and RS Miller & Associates, LLC of Dedham have combined forces and will retain the Stone & Company name. Rob Miller, the founder of RS Miller, will lead the newly expanded Stone & Company as its managing partner.

“This is an exciting merger of two outstanding firms that perfectly complement each other. It’s a match made in heaven,” said Miller. “We have united a talented team servicing a varied and impressive roster of clients. And there’s even greater potential to grow from here.”

Stone, a full-service, 33-year-old firm, has deep roots in Eastern Massachusetts. Founded by brothers Phil and Matt Stone, the firm has steadily expanded, building a large and loyal roster of clients, with a specialty in educational institutions and other nonprofits. Both Phil and Matt will remain active in new, combined firm.

Miller brings almost 25 years of experience assisting companies throughout New England with complex accounting issues, as well as SOC reporting, due diligence related to mergers and acquisitions, internal control reviews, forensic accounting and litigation support. He recently was elected to serve the board of directors as the vice chairman of the finance committee at the Massachusetts Society of CPAs for 2019-2020 fiscal year.

“One of our key differentiators will be our deep audit and attest background – it’s extremely strong, especially for a firm our size,” said Miller. “That, along with our expanded tax expertise, makes us an excellent solution for private entities and non-profits throughout the New England market.”

The New Financial Reporting Standard for Non-profit Entities is Now in Effect – What changed

Fri, 17 May 2019 23:22:59 GMT

Issued by the Financial Accounting Standards Board (FASB) in August 2016, Accounting Standards Update (ASU) 2016-14 Presentation of Financial Statements for Not-for-profit Entities has significantly changed the way non-profit organizations present their financial statements. The FASB’s stated purpose was to improve financial reporting for NFPs and this ASU is arguably the most significant change in almost 25 years. Financial statement users should ensure they are aware of the changes that were made. Among other provisions, ASU 2016-14 reduces the number of classes of net assets from three to two, requires the presentation of expenses in both natural and functional classifications, and eliminates the requirement to prepare a reconciliation in the statement of cash flows when applying the direct method. All NFP entities are affected. The new standard became effective for fiscal years beginning after December 15, 2017 and calendar year NFPs have now begun to issue their annual financial statements for the year ended December 31, 2018 under the new reporting standard. So what changed? The discussion below outlines the key changes under the new standard.

Will the numbers be different?

ASU 2016-14 is essentially a disclosure standard. However, there are two provisions that could give rise to adjustments:

1. Classification of the underwater portion of endowment funds – the underwater component, if any, will now be classified as donor-restricted net assets.

2. Requirement to use the placed-in-service approach for long-lived assets – if an entity has long-lived assets that have been placed in service classified as donor-restricted net assets, they should be reclassified as without donor restriction.

Net Asset Classifications

Non-profit entities issuing financial statements in accordance with generally accepted accounting principles (GAAP) are now required to present two classifications of net assets, replacing the three that have been presented for almost 25 years. Net assets will be classified as one of two categories: without donor restrictions or with donor restrictions. This change essentially merges “temporarily restricted” and “permanently restricted” into one net asset class. NFPs are also required to provide information about any additional limitations that have been placed on net assets without donor restrictions, for example, board-designated funds.

Placed-in-service Approach for Long-lived Assets

Although not the most common accounting treatment, existing GAAP allowed entities to continue to carry long-lived assets or gifts to purchase long-lived assets as temporarily restricted (now part of “with donor restrictions”) even after the assets were placed in service. Amounts equal to the depreciation on the asset were released from restriction each period. This election is no longer available with the implementation of ASU 2016-14. An adjustment will be required where the election was previously used to release the remaining net asset balance of long-lived assets (or cash to purchase them) placed in service to net assets without donor restriction.

Endowment Funds

Certain non-profit entities with underwater endowment funds have, to date, classified the portion of the loss that causes the individual endowment to fall below the original gift in the unrestricted net asset class (now “without donor restrictions”). When implemented, entities with underwater endowment funds will reclassify the underwater portion of the endowment fund from “without donor restrictions” to “with donor restrictions”.

The new standard also now requires certain other disclosures for any underwater endowment funds, while eliminating the requirement under the old standard to present the components of investment returns separately.

Statement of Cash Flows

Non-profit entities that use the direct method will no longer have to present the reconciliation of cash provided/used in operating activities. Those that use the indirect method for preparing the statement of cash flows may continue to do so.

Investment Returns

The new standard requires entities to now include both external and direct internal investment expenses in the amount netted from investment return. Direct internal expenses include personnel costs that develop, execute and monitor the investment strategy. Direct internal expenses do not include accounting expense including making endowment fund allocations. This should improve comparability because some NFPs manage investments in-house while others outsource this function.

Liquidity and Availability

NFPs will be required to provide qualitative as well as quantitative information on the way they manage their liquidity and availability of funds. Required disclosures include quantitative information about the availability of financial assets to meet general expenditures within one year of the financial statement date. Those assets that are unavailable due to donor restrictions or other limitations should not presented as liquid financial assets.

Functional and Natural Expense Classification

Previous GAAP required all NFPs to present information by function. ASU 2016-14 requires that all NFPs present expense information by both natural and functional classification. This information may be presented in a statement, a note disclosure or on the face of the Statement of Activities. All investments, with the exception of investment expenses, must be shown in one place. This means that entities that presently include the direct donor benefits for special events in the revenue section will now need to include the amounts related to direct donor benefits in the functional expense presentation, even if it results in a reconciliation to the statement of activities. NFPs are also now required to disclose their allocation methodologies in some detail.

The new standard is likely to have a significant impact on the financial statements of many non-profit entities. As such, preparers, users and other stakeholders may want to make use of the various resources that are available through the FASB and AICPA to aid in implementation. The ASC provides examples of disclosures. The AICPA has also provided sample financial statements. The AICPA has also written white papers that cover functional expenses, investment return and liquidity presentation, which can all be found on the AICPA website. Additionally, there is a publicly available document from the AICPA covering Frequently Missed Disclosures. This is yet another great tool for NFPs to assess their financial statement presentation. Non-profit entities who rely on funding from parties who may review their financial statements should ensure they partner with an accounting firm that is well versed in the changes now in effect under the new standard.

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Tax Cuts and Jobs Act: A Post-Tax-Season Look at the Impact on Individuals

Fri, 26 Apr 2019 23:21:05 GMT

The Tax Cuts and Jobs Act (TCJA) became effective for most taxpayers for the year ended December 31, 2018. The TCJA fundamentally changed the individual and business tax landscape and its provisions are generally effective for tax years 2018 through 2025. Individual taxpayers who filed their tax returns by the April 2019 deadline were finally able to see and feel the effects of the changes.

New tax rates for individuals

Many taxpayers saw an impact as a result of the lower tax rates. Most of the seven existing marginal income tax brackets (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%) were replaced with new corresponding lower rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The legislation also established new marginal income tax brackets for estates and trusts, and replaces existing “kiddie tax” provisions (under which a child’s unearned income, over certain thresholds, is taxed at his or her parents’ tax rate) by effectively taxing a child’s unearned income using the estate and trust rates.

Standard deduction and personal exemptions
Existing standard deduction amounts were roughly doubled, but personal exemptions were repealed by the new legislation. New standard deduction amounts are now as high as $24,000 for married couples. Additional standard deduction amounts allowed for the elderly and the blind are not affected by the legislation and remain available for those who qualify. Higher standard deduction amounts generally meant that fewer taxpayers itemized deductions.

Itemized deductions

Many taxpayers were surprised at the fact that certain deductions with which they had become familiar over the years were either limited or no longer available. Additionally, the overall limit on itemized deductions that applied to higher-income taxpayers (commonly known as the “Pease limitation”) was repealed. Much of the time and effort spent to track and accumulate traditionally deductible itemized deductions ultimately resulted in no benefit for many taxpayers. The following changes were made to individual deductions:

• State and local taxes — Individuals are only able to claim an itemized deduction of up to $10,000 ($5,000 if married filing a separate return) for state and local property taxes and state and local income taxes (or sales taxes in lieu of income).

• Home mortgage interest deduction — Individuals can deduct mortgage interest on no more than $750,000 ($375,000 for married individuals filing separately) of qualifying mortgage debt. For mortgage debt incurred prior to December 16, 2017, the first $1 million limit, used to acquire or substantially improve your home, continues to apply. A deduction is no longer allowed for interest on home equity indebtedness and cannot be grandfathered in.

• Medical expenses — The adjusted gross income (AGI) threshold for deducting unreimbursed medical expenses is retroactively reduced from 10% to 7.5% for tax years 2017 and 2018, after which it returns to 10%. The 7.5% AGI threshold applies for purposes of calculating the alternative minimum tax (AMT) for the two years as well.

• Charitable contributions — The top adjusted gross income (AGI) limitation percentage that applies to deducting certain cash gifts is increased from 50% to 60%. Deductions for non-cash contributions will retain the 50% limitation.

• Casualty and theft losses — The deduction for personal casualty and theft losses is eliminated, except for casualty losses suffered in a federal disaster area.

• Miscellaneous itemized deductions — Miscellaneous itemized deductions that would be subject to the 2% AGI threshold, including tax-preparation expenses, investment fees and unreimbursed employee business expenses, are no longer deductible.

Child tax credit

The child tax credit was doubled from $1,000 to $2,000 for each qualifying child under the age of 17. The maximum amount of the credit that may be refunded is $1,400 per qualifying child, and the earned income threshold for refundability falls from $3,000 to $2,500 (allowing those with lower earned incomes to receive more of the refundable credit). The income level at which the credit begins to phase out is significantly increased to $400,000 for married couples filing jointly and $200,000 for all other filers. The credit will not be allowed unless a Social Security number is provided for each qualifying child.

A new $500 nonrefundable credit is available for qualifying dependents who are not qualifying children under age 17.

Alternative minimum tax (AMT)

The AMT is essentially a separate, parallel federal income tax system with its own rates and rules — for example, the AMT effectively disallows a number of itemized deductions, as well as the standard deduction. The legislation significantly narrows the application of the AMT by increasing AMT exemption amounts and dramatically increasing the income threshold at which the exemptions begin to phase out.

Other changes worth noting

• The Affordable Care Act individual responsibility payment (the penalty for failing to have adequate health insurance coverage) is permanently repealed starting in 2019.

• Application of the federal estate and gift tax is narrowed by doubling the estate and gift tax exemption amount to about $11.2 million in 2018, with inflation adjustments in following years.

• In a permanent change that starts in 2018, Roth conversions cannot be reversed by re-characterizing the conversion as a traditional IRA contribution by the return due date.

• For divorce or separation agreements executed after December 31, 2018 (or modified after that date to specifically apply this provision), alimony and separate maintenance payments are not deductible by the paying spouse, and are not included in the income of the recipient. This is also a permanent change.

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DISCLAIMER – This article is not intended to provide tax or legal advice. The information presented is not specific to any individual’s personal circumstances. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. This information is provided for general information and educational purposes and may change at any time. Please contact RS Miller & Associates LLC for additional information.