5 Gems — Uncovered — at Cohen & Company’s CPE 360– November 25, 2019 by Beth Reho

We were fortunate to have so many great speakers at Cohen & Company’s CPE 360 event this year, which we host annually for our private company clients. Below are just a few of the interesting highlights I walked away with that I think are worth sharing.
                                                          
1. Your email is the doorway for cybersecurity hackers. The most important piece of digital property you own is your email account. Once someone has your email, they have everything they need. They can reset passwords for your bank accounts, investment funds and find other pertinent information about you to help them in their scheme. Protecting both your personal and work emails should be your top security priority.
 
Rick Florence, supervisory special agent of criminal computer intrusion for the FBI, educated us on how the process works. Today’s cyber hackers are smart, business-minded people looking at companies and certain individuals as potential revenue streams. Hackers operate in teams and do their homework, starting with social media, to find out who may be a high-net-worth individual and who within their circles may have the ability to move that wealth. They find the most vulnerable place to penetrate and then execute a complex sequence of events to financially drain their victims. That weakest point is often email. 
 
The best way to stop them is to make your security “good enough” so you don’t look like an easy target. Don’t conduct any business via email, whether it’s information on a real estate transaction or making changes to your payroll direct deposit. Pick up the phone. Have rules and processes in place for your business regarding key areas such as wire transfers and changes in banks for direct deposit. Use double and even triple authentication processes when possible for these types of transactions. And remember, it all starts with protecting your email account. Use dual-factor authentication to show cyber hackers your account won’t be an easy mark.
 
2. Great tax planning opportunities are still available through the end of 2019. Scott Swain, Kim Palmer, Tony Bakale and Robert Venables laid out an array of tax planning gems still on the table for taxpayers to consider. Opportunities for individuals include:

  • Bunching charitable contributions into a donor advised fund to allow itemizing in one year and taking the standard deduction in following years
  • Planning for deferrals
  • Considering pre-tax 401(k) vs Roth IRAs, and HSAs and 529 plan funding
  • Reviewing your estate planning; while estate tax planning is not as relevant in the TCJA era, there is planning to do, such as maximizing step up in basis upon a second death for a married couple
  • Considering investment in the Opportunity Zone program, which offers individuals an avenue for deferring gains
  • For partnerships, evaluating new rules related to carried interest, partnership audits and partnership debt allocations
  • For corporations, evaluating challenges and opportunities related to interest expense limitations, bonus depreciation, loss limitations and more

The bottom line is, the Tax Cuts and Jobs Act has changed the playing field, and it’s time to revisit the status quo for your personal and business finances.
 
>> Read “9 Tips for Your Company’s Year-End Tax Planning” and “9 Ways Individual Taxpayers Can Maximize Year-End Tax Savings"
 
3. You can capture value during a recession. Yes, recessions can offer value. That was a key part of Leon LaBrecque’s message. If you know a recession is imminent, you can seize the opportunities within it. He suggested reviewing your finances to identify potential risk and trim where you can; line up business loans now before credit tightens; look for deals and discounts on companies or assets during the downturn; and watch your competition for key employees you may want on your team. Somebody will survive the recession; it may as well be you!
 
>> Read more in Leon’s blog: “A Checklist of 8 Steps Your Business Can Take to Help Turn a Recession into an Opportunity”
 
4. Culture is king during M&A. Panelists Justin Thomas, Matthew Friedman, Dennis Gach and Joe Manory discussed some areas that often don’t receive the attention they deserve during the acquisition process. While focusing on the financial numbers upfront is obviously critical, the panel stressed that ignoring the culture of the incoming organization is a potentially fatal mistake. Getting to know the organization’s business processes, sales and engineering, IT systems and employees — beyond executive management — is crucial to the success of a deal. Getting the culture “right” means understanding the target’s culture inside and out and having a plan to integrate it with the existing business. They recommended taking a collaborative approach and building processes together, taking the best from both organizations. Cultural integration will lead to efficiencies and overall buy in. The valuation has to be right up front, but people will drive your success.
 
5. State and local taxes — know your risk. The landmark Wayfair decision has changed everything. To begin understanding your risk, Sara Britt recommends first understanding exactly where you do business. Business owners must know their nexus footprint. Almost all states with sales tax have implemented rules surrounding Wayfair. If you haven’t started evaluating your obligations, now is the time. There are options, such as voluntary disclosure programs, following notice and reporting requirements in states that have those (although it’s often more of a hassle than it’s worth), and collecting exemption certificates from clients who don’t have to pay tax. One of the biggest mistakes you can make? Don’t collect sales tax if you can’t/don’t have the resources in place to remit it to the state.
 
There are additional risks and complications involved if you are buying or selling a company. Buyers must understand the target company’s footprint and if they’re compliant with their sales tax obligations. Sales tax liabilities can be attached to the assets you are buying. Find out when was the last time the target company conducted a nexus study. If one hasn’t been done since the Wayfair decision, proceed with caution and vet this thoroughly through your tax advisors. If you’re selling your company, don’t wait until the due diligence phase of the deal to address your state and local tax issues. Be proactive and conduct your own nexus study beforehand to determine what needs remediated. If your clients don’t owe tax, great. But verify that with them by getting a copy of their exemption certificates before due diligence begins. Being proactive before the sale will let you control the process, timing and the narrative for future buyers.
 
Thank you again to all of our participants and attendees at this year’s CPE 360!
 
Contact Beth Reho at breho@cohencpa.com or a member of your service team to discuss any of these topics further.


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Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.