Tax Department Heroes: Cash Saving Opportunities

It’s official; the U.S. economy, if not the world economy, is in a recession.

As usually happens during economic downturns, companies turn to the Tax Department for cash. No, it’s not because we are hoarding cash in barrels out back. Often, it’s because the newly enacted stimulus law involves taxes. Plus, savvy companies know Tax Departments can be a source of strategic opportunities to recover and save cash. In this article, we provide a list of places to explore as you’re turning over stones to help save cash for your company.

We have indicated the stones to look under by name or high-level description only. They might not apply to all companies and situations. Additional research or consultation with your advisors should be performed to confirm your company qualifies.

Recent stimulus:

  • EIDL (Economic Injury Disaster Loan Program) grants and loans (CARES Act)
  • PPPL (Paycheck Protection Program loans) (CARES Act)
  • Other business loan programs under the CARES Act
  • Deferral of payments on pre-existing SBA loans (CARES Act)
  • Delayed tax filings and payments (IRS)
  • Delayed payroll tax payments (CARES Act)
  • COVID-19 related sick leave (FFCRA)
  • NOL carrybacks (CARES Act)
  • AMT credit (CARES Act)
  • Increase in the cap on IRC Sec. 163(j) interest deductions (CARES Act)
  • Qualified improvement property (e.g. subject to 15 years depreciation) (CARES Act)
  • Payroll tax credits on retained employees (exclusion applies with the PPPL) (CARES Act)
  • Increase in the cap on charitable contribution deductions (CARES Act)

Preexisting laws:

  • Accounting methods
  • Capitalization policies
  • Treatment of customized or internally developed software
  • Enhanced charitable deductions for food donations
  • Research and development – have conversations with heads of different teams to learn about new activities
  • Tips credit for restaurants and other industries with tipped staff
  • Tax incentives such as work opportunity credits
  • Legal entity structure
  • Revenue recognition – take another look at large contracts and accounting’s policies
  • Analyze entries in select GL accounts
  • Evaluate fixed assets for:
    • Items that can be re-categorized or split into shorter-lived assets
    • Items that can be written off or down
    • Items that can be expensed
    • Items that can begin depreciating
  • Acquisitions:
    • Payroll taxes
    • Workers compensation rates
    • Goodwill – basis and release
    • Basis in liabilities (some liabilities do not follow GAAP, such as deferred revenue, which is based on anticipated cost of generating revenue)
  • Federal and state items subject to carryforward limitations to ensure proper treatment – if the rules are unclear, do not make assumptions, there may be resources to help you determine proper treatment such as Congressional intent, jurisdiction manuals, and instructions for returns from the year the law went into effect
    • NOLs
    • AMT credits
    • R&D credits
    • Excess charitable contribution deductions
    • Nonrefundable incentives
  • Foreign taxes, direct and indirect
  • Evaluate sales tax for:
    • Machinery and equipment used in manufacturing
    • Rate adjustments if you use a blended sales tax rate based on “to go” sales
    • Exempt or zero-rated items
  • Property tax:
    • Assessed values
    • Special rules and rates for specific assets, such as machinery and equipment
    • Property no longer in the company’s possession
    • Payment deferrals
  • Excise taxes – state and federal
  • Unclaimed property
  • Timing of tax prepayments – penalties and interest may be outweighed by the company’s need for or return on/cost of cash

G&A driven:

  • Renegotiate rates with external service providers
  • Opportunities for automation
  • Reevaluate the in house to outsourced work mix
  • Seek experts working on contingency to find opportunities to recover cash or capture future savings, such as through credits
  • Reevaluate capital spending plans
  • Reevaluate tools and the department’s use of them
  • Reassess priorities
  • Implement KPIs for performance optimization and ROIs to control costs and focus efforts
  • Implement project management processes and tools
  • Implement policies, procedures, and protocols to standardize processes and increase efficiency

Let us know how it goes. You can share your recommendations with us by sending an email to Info@TaxForward.org.

Happy hunting!


Ashby Walters is Executive Director and cofounder of TaxForward and Future Tax Leaders. She has served as head of tax for Peet’s Coffee, Inc. and its subsidiaries, Quizno’s, and other companies. Over her 20-plus year career, Ashby has helped organizations from Fortune 200 companies to start-ups save more than $200 million in cash taxes, millions in G&A, and thousands of production hours collectively.

The Wisdom of Greg Anton, Accounting Cultural Icon

Greg Anton, a CEO with a long list of accomplishments, has been influencing accounting culture for decades. While Greg may make success look easy, it was achieved through innovation, grit, and by embracing what he loves. We’ve captured some of the insights on building success he’ll share at TaxForward’s 2020 conference on October 25 through 27th here.

Before launching ACM LLP, a regional powerhouse CPA firm with 26 partners and four offices across two states, with two colleagues in 2002, Greg was a Partner at BDO. In 1999, he began six years of service on the Board of Directors for Colorado Society of Certified Public Accountants (COCPA), one of those years as its Chair. His influence expanded to the American Institute of Certified Public Accountants (AICPA), when he joined its Board of Directors, serving as its Chair, a liaison to Congress, and on several technical committees. In 2015, AICPA recognized Greg’s contributions by bestowing its highest honor, the Gold Medal Award for Distinguished Service, on him.

How does Greg cultivate success? By doing things that are generally within all our capacities to do.

He Integrates What He Loves with His Work

Greg says he has had only two careers his whole life: camp counselor and accountant. As a camp counselor, Greg learned the value of integrating what one loves – then, being a camper – into one’s work. According to Greg, focusing on the things he enjoys and does well helps him set his compass and decide where to invest his time, freeing him to do more of what he loves. He attributes communicating what he’s passionate about to helping people identify opportunities to partner with or learn from him. Acknowledging what he doesn’t do well enables Greg to find people with complementary skills.

Unable to think of ways in which to integrate what you love with work? Bringing to mind Mary Poppins teaching Jane and Michael Banks to find the “element of fun” in a job (turning chores into a game in the movie named after the titular character), Greg recommends looking at other ways to integrate your passions and work, such as exercising during breaks.

He Differentiates Himself and His Company

Differentiation sets us apart from our peers and competitors, making it easier for our target audience to select us. Sharing and pursuing what he enjoys doing is a way Greg differentiates himself from his peers.

He has done the same with ACM. When launching ACM, Greg wasn’t creating something new; as he points out, the tools and laws are the same, it’s the people that are different. His goal was “building a better mouse trap” by delivering a superior experience and product than other firms. Today, ACM is renowned for quality.

He Sets the Tone

As a camp counselor, Greg had the advantage in size and strength over the younger campers in races to the swimming hole. Yet, he purposefully led the races from behind rather than in front. This gave Greg better line of sight to coach campers on how to improve and enabled campers to learn from their decisions and experiences. It was an opportunity for him to learn from the campers, as well. “My way isn’t the best way,” Greg says, “it is a way.”

To build a professional and highly competent team at ACM, Greg created an environment that fosters growth and opportunity, where others can lead and contribute. “People want to be around opportunities to succeed, grow, and advance,” he says. He’s eliminated common barriers to growth by cultivating a culture that rewards teaming with people having complementary skills and encourages its professionals to welcome questions and opportunities to collaborate.

He is Continuously Learning

When Greg entered college, he knew he wanted to be an entrepreneur – but he didn’t know how to become one. He pursued accounting in part for the job security associated with the field. Now, he draws on what he learned as an accountant to be a successful entrepreneur.

He is Comfortable with Change

Having to innovate to overcome the hurdles of severe dyslexia, Greg learned early in life a person could have “major failures” but still be successful. A lifetime of seeking tools and techniques to succeed has put Greg in the forefront of adapting to the evolution undergoing the accounting field. For example, he uses dictation software, which can transcribe words three times faster than the average person, freeing up time.

Greg is excited about the technological changes occurring in his field. He believes artificial intelligence and virtual robots will assume unexciting work, enabling accountants to operate at a higher level and pursue more enjoyable consultative, observational, and value-added work.

Greg adds, doing what one enjoys will differentiate companies and individuals as technology displaces human capital.

He is Involved

Greg actively participates in what he calls the “enrichment cycle” – he is engaged in organizations within his field, which enriches his knowledge of the field, improving his ability to serve his company, employees, and clients, which creates opportunities for him, his team, and his company.

Lastly, He Tries

Greg says willingness to try and risk failure provides opportunities to succeed. Failing contributes to success by providing opportunities to learn and grow.

Learn more at this year’s conference, October 25 through 27. Register HERE.


Ashby Walters is Executive Director and cofounder of TaxForward and Future Tax Leaders. She has served as head of tax for Peet’s Coffee, Inc. and its subsidiaries, Quizno’s, and other companies. Over her 20-plus year career, Ashby has helped organizations from Fortune 200 companies to start-ups save more than $200 million in cash taxes, millions in G&A, and thousands of production hours collectively.

Doing the Math on Unemployment Benefits

With nearly 10 million people registering for unemployment in a two-week period, we decided to look at unemployment benefits and how much they’ll cover in the upcoming weeks.

Unemployment benefits vary by state. Generally, they are a percentage of a person’s wages and limited to a certain number of weeks – usually 26 – and do not start until seven days after a person files for benefits. Once a recipient’s allotted benefits run out (i.e. are paid out over the maximum number of weeks), they might not be eligible to receive unemployment benefits for a while.

Excluding expanded benefits under the stimulus package, Massachusetts offers the highest weekly unemployment benefits at $823 for up to 30 weeks; Mississippi offers the lowest weekly benefits at $235 for up to 26 weeks – not enough to keep a single adult over the U.S. poverty guideline of $12,490 ($25,750 for a family of four according to the U.S. Department of Health & Human Services). Georgia offers the shortest benefit period at 20 weeks.

Using, as an example, Colorado, whose weekly maximum unemployment benefit of $561 exceeds even California’s weekly maximum, unemployment pays no more than 60% of a recipient’s earnings. A person must earn $4,000 monthly, or $48,000 annually, to receive an average monthly benefit of $2,431 – the maximum benefit in Colorado – a $1,569 hole. (We’re comparing gross numbers because both amounts are subject to income tax.) Add on the monthly cost of COBRA – which averaged $610 per month for individual plans in 2019 according to the Kaiser Family Foundation ($1,749 for families, both figures include 2% administrative fees) – and, in a state where half the population earned more than $68,811 in 2018, $5,734 monthly, according to the U.S. Census Bureau, an additional $1,200 might not be sufficient to keep the unemployed in their homes if this continues over a protracted period.

Increasing weekly unemployment benefits by $600 will raise the maximum monthly benefit to $5,031. Anyone earning less than $60,000 annually – less than half Colorado’s working population in 2018 – will receive more in benefits through July 31, 2020, than they had been earning monthly. All others will receive less than they earned.


Ashby Walters is Executive Director and cofounder of TaxForward and Future Tax Leaders. She has served as head of tax for Peet’s Coffee, Inc. and its subsidiaries, Quizno’s, and other companies. Over her 20-plus year career, Ashby has helped organizations from Fortune 200 companies to start-ups save more than $200 million in cash taxes, millions in G&A, and thousands of production hours collectively.

Pro Bono Help for Companies

A message from Lew Visscher of Lew’s List:

All,

COVID-19 has changed everything.

In the business world – professionals everywhere – bankers, lawyers, accountants are publishing volumes of information on how to adjust to these changes.

Lew’s List is taking this to the next level by partnering with High Plains Advisors to assemble a group of CFO’s – Controllers and other senior Finance professionals to actually dig in and help businesses execute on the various stimulus programs, incentives and changes. 

One immediate need we see is to help companies apply for the PPP (Paycheck Protection Program) loans.  In addition, we will focus on the immediate assessment and execution of short and mid-term strategies to extend/improve businesses cash flows  which may include navigating possible execution of The CARES Act, the Families First Act and others.  We can also assist with human capital and tax planning issues and design and implement other business strategies where needed.   

The above assistance could be as simple as helping companies fill out the right forms or help you gather the necessary information to complete the forms.  It might be helping them  find a loan source to bridge the time between now and receiving certain stimulus funds, if applicable.  We are ready to roll up our sleeves and dig in.

These services will be provided pro bono – our commitment is helping businesses in our communities stay in our communities.

If you are a business that could use this type of assistance or know of some companies that can – please reach out to me or have them do it at lew@lewslist.com

We are here to help!

Lew

Time to Lead

We, as tax professionals, must not only respond to protect ourselves personally, but to lead in rebuilding and then strengthening the infrastructure of our businesses and, through them, our economy.

TaxForward.org

COVID-19 has significantly altered our lives – including stay at home rules that, in some states, extend into June. The view of our altered landscape extends far into the future. 9/11 permanently moved us to remote servers, cloud computing, and advanced physical and virtual security. The Great Depression changed the way people viewed and used money and their relationship with government.

Our new normal will be shaped by this virus, even when we are allowed out of our homes and back to recognizable routines. Seemingly invincible titans and industries may fall; new hegemons and industries will rise. Our expectations of and the way we interact with the government, the ways in which we do business, and how we engage socially have all been impacted. Due to the size of the financial impact, it is predicted our government will need to invest many trillions of dollars to bring us out of this financial crisis. Our interactions with foreign governments (markets for both selling and purchasing) will change. Something as simple as how we look at shopping has already changed.

Every crisis we have ever suffered has had the benefit of educating us and helping us to become better at our response and our practices. Wars (as this current crisis has been referred to time and again) bring us medical advancements and prove to us we can martial our resources and people to accomplish great things. Natural disasters (as COVID-19 is) make us aware of our shortcomings in planning and preparedness. Financial disasters make us realize what we lack in skills and security and we adjust. Well, we’re in the penultimate of learning experiences now – financial and natural disasters coming together in a war that we must win.

We, as tax professionals, must not only respond to protect ourselves personally, but to lead in rebuilding and then strengthening the infrastructure of our businesses and, through them, our economy. This crisis has forced us to ask a lot of questions about safety nets, preparedness, leadership and how we want to build our future. It is not a matter of getting back to normal. Normal is gone. We need to build our new normal and what that is…is up to us. In a way that is exciting, just as it is daunting. You will notice we’re exploring subjects that are not clearly connected to tax. Our goal in exploring these subjects is to provide you with information that will help you navigate uncharted waters that are changing at a rapid clip.

Solutions to COVID-19 tax and financial concerns

COVID-19 related tax news

Relief from COVID-19


Ashby Walters is Executive Director and cofounder of TaxForward and Future Tax Leaders. She has served as head of tax for Peet’s Coffee, Inc. and its subsidiaries, Quizno’s, and other companies. Over her 20-plus year career, Ashby has helped organizations from Fortune 200 companies to start-ups save more than $200 million in cash taxes, millions in G&A, and thousands of production hours collectively.

Managing Cash Flow and Transactions During a Pandemic

Following are key takeaways from Part 2 of our Business Health During a Pandemic webinar series. Watch the video here.

  • Stay healthy, take the advice of health experts seriously
  • Remain calm but act now – don’t wait
  • Key is just surviving and weathering the storm – ideal is to thrive
  • Learn as quickly as you can
  • Partner with:
    • Advisers
    • Suppliers and lenders
    • Existing and potential sources for referrals
    • Donate use of space and/or materials
    • Sources for new products and markets – such as alcohol distillers partnering with soap and perfume manufacturers to make hand sanitizers
  • Opportunities:
    • Strengthen relationships with clients
    • Focus on what your business does best
    • Competitors withdrawing from market
    • Businesses can redefine themselves – look into new markets, tools, ways to deliver products (e.g. online events)
    • Automate, reduce people
    • Data mining and analytics
    • Urgency resulting in relaxation of rules and regulation – faster to market, expanded options
    • As an independent consultant, this is your opportunity to show people the way
  • Innovation:
    • E-commerce as a revenue stream – Larissa Rapoport recommends on focusing on this first, expects them to see a spike in sales
      • Amazon – highest recommendation
      • Facebook
      • eBay
      • Etsy
      • WooCommerce
    • Ease cash collection (if not using the services above)
      • Square
      • Stripe
      • PayPal
    • Online communication tool for engaging internal and external customers
    • Help other companies innovate or take advantage of opportunities
    • Go out of way to add value to what offering or delivering to client, even if delivered for free, in order to build relationships and good faith
  • Strategic approach to cash:
    • Protect receivables / money coming in – call clients now to negotiate terms
    • Try to reduce A/R (convert to cash) and boost A/P (reserve cash)
    • Cut dividends
    • Private companies, do capital calls with owners to get money in
    • Borrow – go to secondary markets (higher interest rates) if don’t have a line of credit
    • Spend on producing revenue and keeping employees
    • Focus on social media promotion as a lot of people are spending time at home/in place on social media
    • Eye towards long term survival because we don’t know how long this will last
    • Prepare for a long winter and prioritize expenditures accordingly
    • Be first in line to negotiate with vendors, before companies no longer have wiggle room
    • Consider alternatives to cash, including bartering services
    • Insurance (business interruption, if plan has a civil authority clause)
      • Track your losses to take advantage of any government relief programs
      • Document all direct and indirect costs – cancelled orders, delayed orders, monetary time on managing business interruption, etc.
      • Appoint one person whose sole responsibility is dealing with business interruption, produce cash flow projections at least weekly, looking at fixed costs and negotiating them, rethinking how business is run, reviewing variable costs and how they can be reduced, only necessary costs (don’t take on unnecessary costs), get as much cash as you can, SBA loans if necessary, look for tax incentives, significant tax benefits available from advanced industry accelerator grant.
  • Evaluate financials for risk factors:
    • look at largest clients and source of cash, communicate with them frequently so that they remain a source of cash
    • Reduce cash outflows, start with big numbers first
    • Payroll, contractors, and consultants
    • Partner with companies that have provided good and steady insight in the past or companies with expertise in helping companies optimize business outcomes
    • Challenge every category in the financials for room for improvement
    • Get buy-ins from every team in your organization
    • Create proforma financials you can use as a roadmap for credible lenders and track success of workout plan
    • The two biggest reasons businesses fail or turnaround is because you never made a product someone wanted, or your business model doesn’t work. The longer you deny reality that your target has moved, environment has changed, and/or what you’re doing no longer works, you’ll go out of business or end up in a turnaround situation
  • If you were in the midst of a transaction (M&A, IPO), leaders recommend forestalling if you can rather than letting fall apart – be transparent, set expectations, a lot of communication – actions during a time like this could backfire; on buyside, trying to get a steal could result in “disastrous” integration that doesn’t supply the ROI you were seeking
  • The future (changes we might see):
    • Potential changes to healthcare: process automation, tele-medicine, machine learning, population health management, bio-banking, symptom checkers, remote care
    • A lot of things we don’t need will be eliminated

Business Strategies for Surviving a Pandemic

Following are key takeaways from Part 1 of our Business Health During a Pandemic webinar series. Watch the video here.

  • Set priorities – our guests recommend cash first, communication second, and control third
    • Cash: they recommend projecting cash runway and how long it will last – see Part 2 for more
      • Negotiate
      • Consider (accepting or offering) cash alternatives, such as equity
      • Take grace periods
    • Communications:
      • Communication, and planning, are key! Be transparent with employees, investors, and customers
      • To employees, clients, vendors, this needs to be done quickly and clearly, ideally it should be coordinated and consistent
      • Communicate to customers and vendors now rather than when the bad news hits, prepare them
      • Communicate that you have a plan and are in control
      • Stay connected with team and colleagues, such as with virtual lunch, in order to keep morale up
      • Remind employees of EAP program
    • Control: Rapidly assess what you can control and immediately assert control over those items – stop spending, review budget and forecast, and use tools available to gain control (e.g. policies and procedures on expense report, staff, purchasing, etc.)
  • Opportunity – to transform
    • Improve practices
      • This is forcing companies to move to paperless and test remote working situations
      • Improve customer service
      • Adapt to tools and technologies that represent best practices now
    • Differentiate – differentiate customer service by calling clients and seeing how you can help them get through this
    • Test new products and methods
    • Approach new customers
    • Explore new supply chains and distribution channels
    • Test new ways to use current resources (e.g. manufacturing line, human capital, distribution)
    • Leverage financially troubled areas, like Appalachia, manufacturing that has ground to a halt, local resources (e.g. for materials such as paper)
    • If your company has transitioned to a virtual work environment, consider the possibility of keeping it that way after this is over to reduce costs/open up your talent pool
    • 3D printing presents substantial opportunities
    • Focus on marketing
      • Evaluate your business model and approach to marketing for weaknesses and new opportunities
      • Ask – Is there another way you can deliver your product? Is there another product you can deliver? Is there another market for your product?
    • This could lead to cheaper prices for supplies, human capital, and overhead
    • Now may be a good time to acquire a company you think would be a good fit
    • Review contracts for clauses exempting payment obligations due to disaster
    • If you don’t already have it, consider Business interruption insurances for future situations such as these
    • Now is the time to negotiate – with customers and vendors (payables) – on cash and alternatives to cash
    • Slow things down to gain greater control
  • Innovation – will be critical to succeed! (See more tips on our website.)
    • Be strategic about staffing – e.g. furloughs in lieu of layoff
    • Seek out new partnerships (e.g. distillers now working with soap or cologne manufacturers)
    • What services can you deliver differently, such as online or through someone else’s distribution system?
    • Reduce constraints and become more flexible
    • Develop or enhance your online communication tools, or come up with a new product, or target audience.
  • Evaluate books and practices
    • Evaluate your books for risks and weaknesses and take action
    • Is this part of an ongoing system problem or something new?
    • Opportunity to clean up financials to apply for loans or show shareholders you will be okay
  • Leverage your network – consult with your advisors, service providers, and others for solutions
  • Track COVID-19 driven expenses and data, including sick vs. COVID-19 related leave, as completely and accurately as possible for:
    • A variety of potential tax credits
    • To tie sales losses to the period
  • Companies best positioned to succeed:
    • Innovate
    • Can help other companies innovate efficiently and cost effectively (e.g. delivery services, apps)
  • Uncertainty
    • There’s a lot of it, and this is unlike anything anyone currently alive has experienced
    • Mitigate by planning, such as around staffing if mandatory social distancing continues several months
  • Takeaways for the future (changes we might see):
    • Wise companies will anticipate what the recovery will look like and capitalize on that strategically
    • More contract and temp work as companies are reluctant to hire initially which will favor companies that provide solutions for contract and temp work
    • Diversify your supply chain
    • Moving to working remotely may open companies up to a new pool of clients and candidates
    • Use of apps, such as whiteboard apps and Zoom, for work will increase