We believe in creating a strong working relationship with our clients to determine their specific accounting and compliance needs.

Make business valuation experts a forethought, not an afterthought

Too often, business valuation experts are hired months after a case is filed or just before it goes to trial. This limits the documents and procedures they can use to perform their analysis. However, you can save significant money, time and frustration by hiring an expert early in the litigation process and asking for relevant information during discovery.

A preferred list of candidates

Do you have a list of experts who are qualified to value a business? Attorneys who deal with corporate litigation or marital dissolution cases need to have a list of credentialed business valuation candidates on hand, so they can act decisively when the need arises.

Meet with your preferred expert at the start of each case. The initial consultation gives attorneys and clients an opportunity to understand the business valuation process and discuss a timeline. This meeting also helps experts understand the nature of the lawsuit and scope of the engagement.

In turn, hiring an expert early helps attorneys draft discovery requests and allows experts sufficient time to analyze relevant data. Plus, naming a preferred expert upfront prevents the opposing side from hiring him or her.

Relevant documents and procedures

Before experts can value a business interest, they need help gathering relevant information, such as:

  • Three to five years of financial statements,
  • Three to five years of income tax returns,
  • Marketing materials,
  • Employment contracts for key employees,
  • Lease agreements and other major contracts,
  • Fixed asset listings,
  • Shareholder agreements,
  • Organizational charts and job descriptions,
  • Information about related parties, and
  • Prior valuations and narratives describing past stock transactions (for example, shareholder buy-ins or buyouts or offers to purchase the business from third parties).

Proactive attorneys include these items in their written discovery requests, especially in adversarial situations. They also may request that their business valuation experts be granted access to the company’s facilities to conduct a site visit and perform a comprehensive management interview within a reasonable time period.

These are critical steps in the valuation process. To help facilitate these procedures and minimize potential disruptions, some attorneys provide a detailed questionnaire for management to complete prior to site visits.

Think outside the box

The list provided here is just a starting point. Other possibilities exist, including information that’s stored electronically or on social media. Comprehensive discovery ends with one final question: Is there anything else my expert should know that might be relevant to valuing this business? If you hire an expert early, you can brainstorm your discovery checklist together. H&M has a team dedicated to the business valuation needs of our clients. Contact us today for  more information. We would be happy to assist you. 

Prepare to Shop: The Sales Tax Holiday Returns!

By: Molly Pensyl, Marketing & Business Development Manager

It is returning just in time for back to school shopping….the Sales Tax Holiday starts on Friday, August 3, 2018 at 12:00 a.m. and runs until Sunday, August 5, 2018 at 11:59 p.m. 

This means Ohio residents have all weekend to save on a variety of items. Here is the breakdown from the Ohio Department of Taxation so you know what to expect when you set out to shop:

 The following will be exempt from sales and use tax during the holiday: 

·         Clothing priced at $75 per item or less;

·         School supplies priced at $20 per item or less; and

·         School instructional material priced at $20 per item or less

The timing of the holiday is no mistake, paving the way for savings to be had before school resumes. Therefore, items used in a trade or business are not exempt under the sales tax holiday.

We will always remind you of the Sales tax holiday, but is it exciting to note that Sub S.B. 226 provided for the holiday to become a permanent fixture on the first Friday, Saturday and Sunday of August each year.

Please let us know if you have any questions and happy shopping!

Is your company overpaying sales and use tax?

It’s a safe bet that state tax authorities will let you know if your business hasn’t paid enough sales and use taxes. But the lines of communication may not be so open if you’re overpaying. For this reason, many businesses use reverse audits to find overpayments so they can seek reimbursements.

In most states, businesses are exempt from sales tax on equipment used in manufacturing or recycling, and many states don’t require them to pay taxes on the utilities and chemicals used in these processes, either. In some states, custom software and other computer equipment are exempt if used for research and development projects. These are just a few examples of potentially available exemptions.

Many companies have sales and use tax compliance systems to guard against overpaying, but if you haven’t reviewed yours recently, check to make sure it’s functioning properly. Employee turnover, business expansion or downsizing, and simple mistakes all can take their toll.

A formal reverse audit can extend across your business, going back as far as the statute of limitations on state tax reviews. If your state auditors can review all records for the four years preceding the audit, for example, the audit could encompass the same timeframe. To be clear, reverse audits are often time consuming and complex. But a well-executed one can not only reap tax fund rewards now, but also help update your compliance systems going forward. Let Holbrook & Manter help you target the exemptions available to your business and ensure refund claims are properly prepared before submittal. 


Double Duty Giving with Charitable Gift Annuities

If you’re charitably inclined, you may wish to consider a charitable gift annuity. It can combine the benefits of an immediate income tax deduction and a lifetime income stream. Furthermore, it allows you to support a favorite charity and reduce the size of your future taxable estate.

A charitable gift annuity is an arrangement in which you make a gift of cash or other property to a charity in exchange for a guaranteed income annuity for life. This is similar to buying an annuity in the commercial marketplace, except that you potentially can claim an immediate charitable deduction for the excess of the value of the property over the value of the annuity.

The payouts will generally be lower than those of a commercial annuity because a portion of your charitable gift annuity investment benefits charity. For you to claim a charitable deduction, the charity must receive at least 10% of the initial net value of the property transferred.

The annuity may be payable to you over your life, or over the joint lives of you and someone you’ve designated (a joint and survivor annuity). The rate of return is typically set at the time of the gift based in part on your age (and, if it’s a joint and survivor annuity, the age of the other person you’ve designated). A portion of each annuity payment is tax-free, because you’re entitled to recover your original investment over your life expectancy.

Your charitable deduction will be less than the total value of your annuity purchase price because the deduction can be claimed for only the present value of the property that the charity will keep after your death. The present value is based on life expectancy and an IRS-prescribed interest rate at the time of purchase of the annuity.

Additional rules and limits apply to charitable gift annuities. Talk with Holbrook & Manter if you’re charitably inclined and would like to know if a charitable gift annuity is right for your estate plan.

Monitor & Measure Through KPIs

By: Danielle Cottle CPA, CGMA- Manager

In a constantly changing business environment, what works for your business today, may not necessarily work tomorrow. To ensure that your business continues to grow and thrive for years to come, you need to be monitoring and measuring your business in order to manage it.  One way to monitor and measure the health of the business is through Key Performance Indicators (KPIs).

KPIs are financial and non-financial measures of activity outcomes that indicate how a business, or process within a business, is performing. The first step is to determine and develop KPIs that are vital to the growth and success of your business. Depending on your industry, location and departments that you are interested in tracking, there are a number of KPI categories that your business may want to measure. For example, here are some categories of KPIs:

·         Product Sales and Service

·         Financial Metrics

·         Marketing Metrics

·         Supply Chain Metrics

·         Customer Satisfaction

·         eCommerce Metrics

·         Healthcare Metrics

·         Retail Metrics

Within each category, you can identify specific KPIs to help you track and analyze the business. For example, under Financial Metrics you could track various ratios such as

·         Current Ratio – The ability of your business to pay all of your financial obligations within a year

·         Working Capital – Measure your business’s financial health by analyzing readily available assets

·         Return on Equity – Measure profitability by examining your ability generate revenue for each shareholder

After identifying and tracking the actual results of the KPIs, you should compare them against your plan. The monitoring of KPIs will help you to proactively identify emerging problems and opportunities and to ensure that you are getting the most out of your business plan. It is typically recommended that KPIs are monitored monthly, but this exercise can vary depending on the individual KPIs determined for the business. KPIs should to be available to the appropriate individuals within your business who can digest the information and make change within the organization accordingly. They shouldn’t sit on the boss’s desk, but should be seen by the people in charge of the operation the KPIs are reporting on. Besides tracking KPIs for business growth, they can also be used to help with retainage of high-performing individuals on your team by getting their buy-in on decisions in order to help move them in the right direction.

Remember, there is always an opportunity for your business to be better! If you aren’t monitoring your actual results regularly you may miss out on the next big opportunity or you may cease to exist. Holbrook & Manter has been utilizing KPI’s for their clients and also for the firm for almost a century as we look to celebrate our 100 year anniversary next year. Let us know how we can help your business!

Digital Assets & Estate Planning

The Importance of Adding Your Digital Footprint to Your Estate Plan

They may not be tangible possessions, but digital assets are a crucial part of your estate plan – maybe even on-par with material assets. Your family, friends or other representatives may not be able to access these digital assets without legal intervention if you pass away if you do not include them in your estate plan. They may not even know they exist!

What Do Digital Assets Include:

  • Online banking/brokerage/investment accounts
  • Digital photo galleries
  • Video galleries or channels
  • Email accounts
  • Social media accounts
  • Internet shopping accounts (Amazon, eBay, Etsy, etc.)

Documentation in the Digital Age: Keeping Virtual Records Instead of Hard Copies

In the past, family members would spend time, in the wake of a loved one’s passing, searching for personal items, like photo albums, safety deposit box keys and other valuable keepsakes. However, they’re also on the lookout for important financial documents. These include:

  • Tax returns
  • Bank & brokerage account statements,
  • Insurance policies
  • Loan agreements
  • Contacts

However, in the modern age, many of these documents only exist as digital versions. If your estate plan doesn’t address your digital assets, your family will not know where to find them or how to gain access to crucial accounts.

What They Don’t Know Could Hurt Them

Say you opened an online brokerage account and decided to receive all statements electronically (to save the trees, to keep the records together – whatever your rationale may be). In a normal situation, the managing institution will send you an email with your current statement (which may or may not get deleted). You then login to the website, view the statement and go about your day.

If you do not download the document to your computer, would your family or executor know that the account exists? Suppose you’ve been diligent in saving your documentation over time, will your representatives know where to find it? Do they even know the PIN or password to your computer? All of these questions should be answered and each of these hypotheticals should be addressed throughout the estate planning process.

Disclosing All of Your Important Digital Assets & Associated Passwords

The first step in revealing your digital assets is to conduct a comprehensive audit of any computers, devices, phones, servers, websites, social media accounts or other places where your information is stored. However, you should not store your passwords and PINs in your will because a will is a public document. In lieu, you can write an informal letter to the executor of your will or another personal representative that lists all of your accounts, usernames and passwords. The letter can be stored with a trusted advisor or in some other secure place.

You could also create a “master password” that gives a representative complete access to a list of all passwords to important accounts. This can exist on your computer (using an application like Dashlane) or online (using a web-based application like 1Password).

For more information regarding digital assets and their role in estate planning, contact Holbrook & Manter today!

Questions to ask before hiring household help

When you hire someone to work in your home, you may become an employer. Thus, you may have specific tax obligations, such as withholding and paying Social Security and Medicare (FICA) taxes and possibly federal and state unemployment insurance. Here are four questions to ask before you say, “You’re hired.”

1. Who’s considered a household employee?

A household worker is someone you hire to care for your children or other live-in family members, clean your house, cook meals, do yard work or provide similar domestic services. But not everyone who works in your home is an employee.

For example, some workers are classified as independent contractors. These self-employed individuals typically provide their own tools, set their own hours, offer their services to other customers and are responsible for their own taxes. To avoid the risk of misclassifying employees, however, you may want to assume that a worker is an employee unless your tax advisor tells you otherwise.

2. When do I pay employment taxes?

You’re required to fulfill certain state and federal tax obligations for any person you pay $2,100 or more annually (in 2018) to do work in or around your house. (The threshold is adjusted annually for inflation.)

In addition, you’re required to pay the employer’s half of FICA (Social Security and Medicare) taxes (7.65% of cash wages) and to withhold the employee’s half. For employees who earn $1,000 or more in a calendar quarter, you must also pay federal unemployment taxes (FUTA) equal to 6% of the first $7,000 in cash wages. And, depending on your resident state, you may be required to make state unemployment contributions, but you’ll receive a FUTA credit for those contributions, up to 5.4% of wages.

You don’t have to withhold federal (and, in most cases, state) income taxes, unless you and your employees agree to a withholding arrangement. But regardless of whether you withhold income taxes, you’re required to report employees’ wages on Form W-2.

3. Are there exceptions?

Yes. You aren’t required to pay employment taxes on wages you pay to your spouse, your child under age 21, your parent (unless an exception is met) or an employee who is under age 18 at any time during the year, providing that performing household work isn’t the employee’s principal occupation. If the employee is a student, providing household work isn’t considered his or her principal occupation.

4. How do I make tax payments?

You pay any federal employment and withholding taxes by attaching Schedule H to your Form 1040. You may have to pay state taxes separately and more frequently (usually quarterly). Keep in mind that this may increase your own tax liability at filing, though the Schedule H tax isn’t subject to estimated tax penalties.

If you owe FICA or FUTA taxes or if you withhold income tax from your employee’s wages, you need an employer identification number (EIN).

There’s no statute of limitations on the failure to report and remit federal payroll taxes. You can be audited by the IRS at any time and be required to pay back taxes, penalties and interest charges. Holbrook & Manter can help ensure you comply with all the requirements. Reach out to us before hiring anyone to help around your home. 

The BDIT: A Trust with a Twist

The beneficiary defective inheritor’s trust (BDIT) allows you to enjoy the benefits of a traditional trust without giving up control over your property. BDITs can hold a variety of assets, but they’re particularly effective for assets that have significant appreciation potential or that may be entitled to substantial valuation discounts, such as interests in family limited partnerships and limited liability companies (LLCs).

Why it works

The BDIT’s benefits are made possible by one critical principle: Assets transferred by a third party (such as a parent) to a properly structured trust for your benefit enjoy transfer-tax savings and creditor protection, even if you obtain control over those assets.

IRS rules prohibit you from transferring assets to beneficiaries on a tax-advantaged basis if you retain the right to use or control the assets. But those rules don’t apply to assets you receive from others in a beneficiary-controlled trust. The challenge in taking advantage of a BDIT is to place assets you currently own into a third-party trust.

How it works

The classic BDIT strategy works like this: Let’s say Jane owns her home and several other pieces of real estate in an LLC. She’d like to share these properties with her two children on a tax-advantaged basis by transferring LLC interests to trusts for their benefit, but she’s not yet ready to relinquish control. Instead, she arranges for her father to establish two BDITs, each naming Molly as primary beneficiary and trustee and one of Molly’s children as a contingent beneficiary.

To ensure that the BDITs have the economic substance necessary to avoid an IRS challenge, Jane’s father “seeds” the trusts with cash. He also appoints an independent trustee to make decisions that Jane can’t make without jeopardizing the strategy, including decisions regarding discretionary distributions and certain tax and insurance matters.

In addition, in order for each trust to be “beneficiary defective,” the trust documents grant Jane carefully structured lapsing powers to withdraw funds from the trust. This “defect” ensures that Jane is treated as the grantor of each trust for income tax purposes.

After the BDITs are set up, Jane sells a one-third LLC interest to each BDIT at fair market value (which reflects minority interest valuation discounts) in exchange for a promissory note with a market interest rate. When the dust settles, Jane has removed the LLC interests from her taxable estate at a minimal tax cost, placed them in trusts for the benefit of herself and her heirs, and provided some creditor protection for the trust assets.

Unlike a traditional trust strategy, however, this strategy allows Jane to retain the right to manage and use the trust assets, to receive trust income and to withdraw trust principal in an amount needed for her “health, education, maintenance or support.”

Talk with Holbrook & Manter to determine if a BDIT makes sense as part of your estate plan.

Tax Deadlines for Q3 of 2018

Proactive tax planning is a vital exercise for all business owners and individuals. Please note the tax deadlines for the third quarter of 2018 below:

July 16 :

If the monthly deposit rule applies, employers must deposit the tax for
payments in June for Social Security, Medicare, withheld income tax, and nonpayroll

July 31: 

If you have employees, a federal unemployment tax (FUTA) deposit is due if
the FUTA liability through June exceeds $500.The second quarter Form 941 (“Employer’s Quarterly Federal Tax Return”) is also due today. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until August 10 to file the return.

August 15:

If the monthly deposit rule applies, employers must deposit the tax for
payments in July for Social Security, Medicare, withheld income tax, and nonpayroll

September 15:

Third quarter estimated tax payments are due for individuals, trusts,
and calendar-year corporations. If a six-month extension was obtained, partnerships should file their 2017 Form 1065 by this date. If a six-month extension was obtained, calendar-year S corporations should file their 2017 Form 1120S by this date. If the monthly deposit rule applies, employers must deposit the tax for payments in
August for Social Security, Medicare, withheld income tax, and nonpayroll

A SLAT offers estate planning benefits and acts as a financial backup plan

The most effective estate planning strategies often involve the use of irrevocable trusts. But what if you’re uncomfortable placing your assets beyond your control? What happens if your financial fortunes take a turn for the worse after you’ve irrevocably transferred a sizable portion of your wealth?

If your marriage is strong, a spousal lifetime access trust (SLAT) can be a viable strategy to obtain the benefits of an irrevocable trust while creating a financial backup plan.

Indirect access

A SLAT is an irrevocable trust that authorizes the trustee to make distributions to your spouse if a need arises. Like other irrevocable trusts, a SLAT can be designed to benefit your children, grandchildren or future generations. You can use your lifetime gift tax and generation-skipping transfer tax exemptions (currently, $11.18 million each) to shield contributions to the trust, as well as future appreciation, from transfer taxes. And the trust assets also receive some protection against claims by your beneficiaries’ creditors, including any former spouses.

The key benefit of a SLAT is that, by naming your spouse as a lifetime beneficiary, you retain indirect access to the trust assets. You can set up the trust to make distributions based on an “ascertainable standard” — such as your spouse’s health, education, maintenance or support — or you can give the trustee full discretion to distribute income or principal to your spouse.

To keep the trust assets out of your taxable estate, you must not act as trustee. You can appoint your spouse as trustee, but only if distributions are limited to an ascertainable standard. If you desire greater flexibility over distributions to your spouse, appoint an independent trustee. Also, the trust document must prohibit distributions in satisfaction of your legal support obligations.

Another critical requirement is to fund the trust with your separate property. If you use marital or community property, there’s a risk that the trust assets will end up in your spouse’s estate.


There’s a significant risk inherent in the SLAT strategy: If your spouse predeceases you, or if you and your spouse divorce, you’ll lose your indirect access to the trust assets. But there may be ways to mitigate this risk.

If you’re considering using a SLAT, contact us to learn more about the benefits and risks of this type of trust. Your CPA plays a vital role in your trust & estate planning.