The number of businesses for sale rose 4.7% in 2022 from 2021, according to BizBuySell’s Insight Report. This is still about 7% lower than pre-pandemic levels in 2019. However the median sale price dropped by about 3% in 2022, so what can you do to maximize your value, if you’re looking to sell?

Increase Profitability

It’s time to look at those margins—Forbes urges business owners looking to sell to take an honest look at their company and see where they can reduce costs, without damaging the business before a sale.

This can be done in a variety of ways, including looking at business insurance and other contracts, to see where you might be able to reduce costs. Forbes also recommends looking at staffing levels. Could you make cuts? And, finally, work on only buying the inventory you need.

Know Your Assets

Some assets are obvious, while others you might forget to consider. Forbes recommends taking account of any physical assets you have—such as buildings, vehicles, office furniture and servers. You might be surprised at what has value! Your brand, procedures, along with any future revenue streams are all important assets.

Re-Examine Your Prices

Are your current prices reflective of your costs? If not, it might be time to raise your prices! ESOP Partners says you need to be careful about this one—you don’t want customers to leave! But even a small increase could help your margins significantly.

Have A+ Employees

What better way to look like a hot commodity than having great established employees. ESOP Partners says it’s important to keep a strong team on board; you can do that by offering opportunities for growth.

Money isn’t everything

When you’re looking at a business’ sale price, you’re talking about money. But the business value can mean so much more. The Business Transition Academy discusses in its book Cashing Out of Your Business the importance of having a quality and well-run business. Does the business need you to be successful? Are customers coming back year after year? Are you respected in your industry? It is crucial for a prospective buyer to easily see the value a business offers.

You may only get one chance to make an impression on a potential buyer; it’s important to maximize what your business can offer!

We are invested in your success. Contact us today and start maximizing the value of your business!

SOC reports are a type of audit that bolsters a company’s reputation in the eyes of clients and customers. There are many kinds of audits, both internal and external. The acronym SOC stands for “System and Organization Controls.” Therefore a SOC report checks a business’s systems and controls for effectiveness and security. The report will then outline any risks to potential customers and the business itself. 
 
Is your business able to identify threats or oversights related to financial reporting, sensitive medical data, or intellectual property? Is your business able to respond to failures of said controls? These are the questions a SOC report seeks to answer. 
 
SOC reports are beneficial for any business that provides a service to another company. If your company handles another entity’s information systems, a SOC report will be relevant to you. However, there are some industries where a SOC report is mandated by governing bodies. Payroll or medical claims processors, data center companies, loan servicers, and Software as a Service (SaaS) providers that may touch, store, process or impact financials or sensitive data of their user entities are examples of businesses that require a SOC report.
 
A SOC audit can only be performed by an independent CPA (Certified Public Accountant) or accountancy organization. After the audit, the CPA will provide a detailed report outlining: 

• Audit results 
• Areas for improvement
• Whether or not the CPA can sign off on whether controls have been satisfactorily met

 

Types of SOC Reports

 
SOC reports fall into one of four categories: SOC 1, SOC 2, SOC 3, or SOC for Cybersecurity. A qualified CPA consultant can help you determine which type you need.

SOC 1

This category of report focuses on outsourced financial reporting services. It will tell a business owner about the effectiveness of their controls related to the client’s financial data. For example, a payroll company that processes bi-weekly pay stubs (QuickBooks, Gusto, etc.) will need a SOC 1 audit. Debt collectors, accounting firms, and some data centers fall under the purview of the SOC 1 as well. 

SOC 2

The SOC report applies to non-financial outsourced systems. This is the main way it differs from the SOC 1 report, which deals specifically with financial controls. An SOC 2 report will address the security, availability, processing integrity, confidentiality, and privacy of all company systems. Relevant company sectors often include Enterprise IT Outsourcing Services, Managed Security, Customer Support, Healthcare Claims Management & Processing, and FinTech Services.

SOC 3

Previously known as a SysTrust or WebTrust, the SOC 3 report is a less comprehensive SOC 2 report. An SOC 3 report will not contain descriptions of any controls or results of testing. This makes it great for marketing purposes while not as strong for addressing fundamental failures in controls. 

SOC for Cybersecurity 

As the name implies, a SOC for Cybersecurity report focuses on an organization’s enterprise-wide cybersecurity risk management program. This kind of report is becoming more popular as more services move online and the incidence of hacking rises. 

Type 1 & Type 2

SOC reports can fall into two different types. This is most common with SOC 1 and SOC 2 audits. For example, a SOC 1 audit can either be done as Type 1 or Type 2.
Type 1 audits are performed on a specified date. They only test the design of a service organization’s controls, not the operating effectiveness. Some companies use Type 1 reports as stopgaps until they can complete a full Type 2 report. 
Type 2 audits can last multiple months as an auditor observes and tests company controls. This is the most comprehensive type of report. At the end of the audit, your company will receive:

• An opinion letter
• Management assertion
• A detailed description of the system or service
• Details of the selected trust services categories
• Tests of controls and the results of testing
• Optional additional information.

 

Benefits of a SOC Report

A SOC report is beneficial to any company that handles outsourced services and data. In a general sense, it shows clients that you’re proactive about protecting their assets. Potential clients are more likely to work with you when they see your commitment to strong controls and operations. 
 
Here are five reasons why you should consider a SOC report.

1. Add legitimacy to your company by demonstrating a sound operational foundation 
2. Remain compliant with industry SOC requirements (for many companies dealing in financial and medical reporting) 
3. Catch security breaches before they happen and avoid damaging reputation hits 
4. Discover operational inefficiencies and boost profit margins 
5. Display the AICPA logo on your website and marketing materials showing you’ve received an SOC report

 
Perry & Associates is here to guide you through the SOC reporting process. We will consult with you on the best kind of report for your business. Then our professional accountants will conduct the audit thoroughly and efficiently. For more information about your SOC report options, call Perry & Associates at 740.373.0056.

2020 was a historic year. Economies shut down and many of us changed our lifestyles to help protect loved ones. Perhaps you even decided that this was the year to start that community foundation or nonprofit organization. Now that you’ve set up your website and coordinated your services, you’re ready to change the world.

Now it’s been a year and it’s time to pay taxes.

Do nonprofits have to pay taxes? Aren’t they tax-exempt?

Nonprofits – 501(c)(3) – still need to file tax forms. They aren’t taxed like traditional businesses, but they still have to file annual reports to the IRS for regulatory reasons.

The type of form you submit depends on your income and organization classification. This article will provide a brief overview of the nonprofit tax filing process. For other non profit-related tax issues, we recommend this section in this article:Accountants for Nonprofits.

First, Have You Filed for Tax-Exempt Status?

If you are a new nonprofit executive, you might not have registered as a 501(c)(3), the official designation for tax-exempt entities. Simply declaring yourself a nonprofit is not enough. The IRS requires specific forms.
 
You can file as a 501(c)(3) by using the 1023-Series Application. The IRS also requires you to apply for an Employer Identification Number (EIN) even if you don’t have employees. You can learn more about the Internal Revenue Code Section 501 on the IRS website.

File the Correct 990 Form Based on Income

After you’ve been approved to be a 501(c)(3), you need to determine your nonprofit’s annual income. This number will be based on your gross receipts: donations, program fees, merchandise sales, etc. Most nonprofits fall under these two categories.
 
Less than $5000: Not required to file
 
More than $5000 and less than $50,000: File 990-N
 
Greater than $50,000: File 990 or 990-EZ

Exemptions and Exceptions

If your organization meets any of these criteria, you do not need to file a 990 or will need to file a 990 form different from the ones listed above.
 
Private Foundation: 990–PF
 
A private foundation is generally defined as a fund that comes from a single source like a family or corporation. The foundation does not engage the general public for donations or contributions. Check with the IRS or a tax professional to confirm that your entity qualifies as a private foundation.
 
Group Return Organization: Not required to file
 
Is your nonprofit part of a larger, parent organization? If so, the parent organization may file for you. If you’re unsure whether you’re part of a group return, contact the umbrella organization and ask whether or not you need to file tax returns.
 
Religious Organization: Not required to file
 
A religious organization can include churches, religious schools, missions or missionary organizations.
 
Government Programs: Not required to file
 
For a full list of exempt organizations, visit this page on IRS.gov.

When to File the IRS Form 990

For many, tax day is April 15th. This might not be true, however, for your nonprofit. Many nonprofits elect to operate on a fiscal year that’s convenient for them. Depending on the fiscal year you determine, the Form 990 is due on the 15th day of the 5th month after the end of the organization’s taxable year. This means that if your organization follows the calendar year (January 1 – December 31), your Form 990 would be due on May 15th of each year.

Penalties for Failure to File

Filing taxes can be complicated and difficult for many new nonprofit directors. For this reason, it’s important to begin filing early and consult a professional accountant if necessary. If a nonprofit does not file its 990 on time, the IRS will levy fines.
 

• From IRS.gov: “The Internal Revenue Service will impose a penalty of $20 per day for each day the return is late. The maximum penalty is $10,000, or 5 percent of the organization’s gross receipts, whichever is less. The penalty increases to $100 per day, up to a maximum of $50,000, for an organization whose gross receipts exceed $1,000,000.” 
• If an organization fails to submit tax forms for three consecutive years, their tax-exempt status will be revoked. 
• The IRS publishes the list of organizations whose tax-exempt status was automatically revoked because of failure to file a required Form 990, 990-EZ, 990-PF or Form 990-N (e-Postcard) for three consecutive years.

 

Other Questions? Ask a Professional Nonprofit Accountant

 
There are other exemption status types and each has its own annual filing and Form 990 requirements. It’s important to seek help from a tax professional for your nonprofit tax filing. 
 
At Perry and Associates, we help a variety of nonprofit organizations throughout Ohio and West Virginia. We are members of the WV Nonprofit Association and partner with and sponsor various events held by Marietta College’s Nonprofits Lead. 
If you are a new nonprofit director needing tax advice, contact the team at Perry CPAs. We are well-versed in 501(c)(3) compliance issues and can make filing your annual taxes easy and hassle free. Click here to get in touch with one of our associates.

Last year was an uncertain year for everyone as COVID-19 paralyzed the world, including the economy and the pocketbooks of millions of Americans. The government responded with the CARES Act and Paycheck Protection Program (PPP). More recently, the government passed the American Rescue Plan Act of 2021.
 
But the uncertainty doesn’t end with the signing of a new stimulus bill. Headed into the end of tax season, many Americans are wondering what this legislation means for their 2020 filings. Have these new tax laws significantly affected your 2020 filing?

FAQs for Tax Laws for 2020 Filings

 
To assist, we’ve put together a list of common questions taxpayers have related to their 2020 filings. For specific questions, reach out to one of our CPAs. 

1. Will the stimulus check money I received be taxed on my 2020 filing?

No. Technically, all Economic Impact Payments, aka, “stimulus checks,” are considered refundable tax credits. The amounts are not counted toward your gross income, and therefore will not be taxed. 

2. I didn’t qualify for stimulus money based on my 2019 return, but I would qualify now given the current economic situation. Is there a way I can update my info and receive payments?

If your income now qualifies you for stimulus payments, you need to file your 2020 tax return as soon as possible. The IRS will use this information to send you the most recent round of stimulus money ($1400 based on the American Rescue Plan). Once they have your info, the IRS will then send you a direct deposit, check, or debit card.

3. If my business received a Paycheck Protection Program loan, will that be taxed?

PPP loans are also excluded from gross income on your 2020 filing. Forgiven expenses, however, are not deductible. To file for loan forgiveness, contact your lender for the required documentation.

4. I dipped into my 401(k) to cover expenses. How will that money be taxed?

The CARES Act made provisions for a “hardship withdrawal” of up to $100,000 for individuals who tapped their retirement accounts in 2020. Withdrawal penalties are waved up to that $100,000 amount.
This doesn’t mean that money goes entirely tax free. You will still pay income taxes on withdrawals from 401(k)s and IRAs. Pay attention to whether these withdrawals put you into a new tax bracket.

5. Speaking of tax brackets, did those change in 2020?

 
Tax brackets changed slightly to adjust for inflation. Reference the chart below to check your bracket and marginal tax rates for the 2020 tax year.
From the IRS:
 

2020 Marginal Tax Rates	Single Tax Bracket	Married Filing Jointly Tax Bracket	Head of Household Tax Bracket	Married Filing Separately Tax Bracket
10%	$0–9,875	$0–19,750	$0–14,100	$0–9,875
12%	$9,875–40,125	$19,750–80,250	$14,100–53,700	$9,875–40,125
22%	$40,125–85,525	$80,250–171,050	$53,700–85,500	$40,125–85,525
24%	$85,525–163,300	$171,050–326,600	$85,500–163,300	$85,525–163,300
32%	$163,300–207,350	$326,600–414,700	$163,300–207,350	$163,300–207,350
35%	$207,350–518,400	$414,700–622,050	$207,350–518,400	$207,350–311,025
37%	Over $518,400	Over $622,050	Over $518,400	Over $311,025

 

6. What is the Standard Deduction for my 2020 filing?

Like the adjusted tax brackets above, the standard deduction increased to adjust for inflation, not because of an entirely new law. Still, it’s important to be aware of standard deduction rates as you decide how to process charitable giving and other deductions. The changes this year are marginal.
 
From the IRS:
 

Filing Status	2019	2020
Single	$12,200	$12,400
Married Filing Jointly	$24,400	$24,800
Married Filing Separately	$12,200	$12,400
Head of Household	$18,350	$18,650

 

7. I received unemployment benefits last year. How is that income taxed? 

The American Rescue Plan was a new law passed in early 2021. It has large ramifications for unemployment benefits received in 2020. Now, you can exclude the first $10,200 in benefits from federal income tax for households with incomes below $150,000 a year.
That change will either decrease how much you owe the IRS or increase your refund, with the latter being most likely.

8. How much can I contribute to my Health Savings Account (HSA)?

HSA contribution limits were raised  to $3,550 for individuals or $7,100 for families. If you did not meet those limits during the 2020 calendar year, you may add to your HSA before filing day on April 15th. 

9. I donated to charity in 2020. Have any new tax laws changed how I report that giving?

With the relatively new Standard Deduction limits, many Americans opt to take the standard deduction instead of itemizing charitable giving. In this particularly difficult year, however, the CARES Act decided to encourage extra charitable giving. You may deduct up to $300 in charitable donations on top of your Standard Deduction.
Taxes may seem overwhelming this tax season. New tax laws have added a new layer of complexity to an already complex system. To make sure you file correctly, consult with Perry & Associates. Give us a call today.

Yes, it is true that external financial audits are only required for publicly traded companies, but that does not mean that you should skip one for your small business. Below we’ve outlined the ways that we see businesses benefit over and over again from an external audit. 

4 Rewards of External Financial Audits 

 

Unbiased Validation

External audits are required for publicly traded businesses so investors, both current and potential, can make an informed decision based upon real numbers about whether or not to continue or begin investing in the business. Because the audit is performed by an unaffiliated third party, the information can be trusted as impartial, as it truly speaks to the financial health (or lack thereof) of the organization. 
For this very same reason, it is ideal for privately owned businesses to seek an external audit as well. Though a local restaurant, non profit organization, or other small business may not be seeking investors in the traditional sense, it is likely that continued growth may dictate financial support from a bank, sponsor, partner, government, or grant source at some point. 
Having a professionally conducted external financial audit for those entities to review will set you apart from other similar organizations.  In fact, many grantors and lenders have begun requiring an audit as a part of the application process for funding. This provides a trustworthy and unbiased report as opposed to simply internal accounting records.

 

Compliance Check

Especially in today’s ever-changing tax compliance climate, it can never hurt to have a second set of eyes ensuring that your business accounting methods comply with current tax regulations. 
This is also an issue that often surfaces as your organization grows. One avenue may have been acceptable in the past because your company was not netting enough profit to need to report in a certain category, or you may have branched into a new sector of business, or a new state or city. All of these may require different regulation compliance, and it’s important you stay current on these issues.
 

Improving Efficiency

We know that as small business owners, managing your financial reports and bookkeeping can get pushed to the side as other pressing issues demand your immediate attention. Professional CPAs may be able to offer game-changing advice after analyzing your books for how to streamline or automate some of your financial processes. This is guaranteed to make life easier for your operations, your tax-time preparation, and the creation of your financial reports in the future. 
Finding where time and resources are being wasted is invaluable. As part of the external financial audit, the auditor will provide a report of all the necessary changes. An outside perspective and professional opinion can bring much-needed improvements. Business owners are often too far “in the weeds” to see where financial mistakes that are wasting both time and resources are being made.

 

Fraud Prevention

No one likes to dwell on the possibility of fraudulent behavior within your business, especially if your small business is operated by family and close friends. Unfortunately, fraud is a real possibility and can be even more prevalent in small organizations where fraud is unassumed. 
Businesses see great success by scheduling an external financial audit yearly. This not only keeps financial records in good order, but this audit can help to keep potential fraud at bay, simply by employees and partners knowing that it will be happening. 
If you do suspect possible fraud in your organization, an external auditor provides a buffer that makes it look less like you are targeting a specific person’s behavior by having someone look at the overall picture. Even if there is never any fraud in your business, an external auditor’s involvement in your business is invaluable.

Professional External Auditor Near You

At Perry & Associates, our forensic account team is directed by president, Jodey Altier. Our team holds the “Credited in Financial Forensics” (CFF) credential, signifying high expertise and knowledge in forensic accounting. We have had decades of experience in financial fraud investigations, prevention, detection, and deterrence that allow us to quickly and efficiently identify any red flags. Contact us to discuss your company’s external financial audit needs today.