The CPA Desk

A Thought Leader Production by PKFTexas

Brian Baumler Talks Joint Ventures and JVSA

Russ:  This is the PKF Texas Entrepreneur’s Playbook.  I’m Russ Capper, this week’s guest host, and I’m here with Brian Baumler, a Senior Vice President with Joint Ventures Strategic Advisors and an Audit Director with PKF Texas.  Brian welcome to the Playbook.

Brian:  Thank you very much Russ, really appreciate it.

Russ:  You bet.  So our topic today is Joint Ventures.  PKF has been in that business for quite some time, right?

Brian:  Absolutely.  Being here in Houston, Texas a lot of joint venture activities take place in energy so being in the energy capital of the world you’ve got to have the Joint Ventures Strategic Advisor Services.

Russ:  Okay, and that Joint Venture Strategic Advisor Services is kind of an upgraded version of what you guys have been doing historically, right?

Brian:  You could say that.  We started getting more heavily involved in it just a few years ago and we now have a group of over 30 people that are assisting us with those types of services right now in Houston.

Russ:  So I’m real curious, I see and know, maybe have been in a joint venture or two myself over time, but when you’re coming in as an advisor do you show up and you’re automatically working for both sides?

Brian:  Well that’s an interesting question.  The reality is we’re engaged by one party but we can represent both sides of the joint venture.  If it just so happens that the way we execute upon what we’re doing we’re actually representing both sides because the benefits of whatever comes out of those joint ventures does that in both parts.

Russ:  Real interesting.  So strategic advisors on joint ventures, you’re coming in there and they’re not really merged, they’re just sort of partnering on an initiative.

Brian:  That’s exactly correct; they’re mutually executing under arrangement to pursue an investment interest jointly and hopefully have a good result.

Russ:  Okay, but it seems to me that has more of a chance of going off the track than a real merger; is that right?

Brian:  Well the reality is you want to make sure that whoever the operator is is the partner who’s really responsible for executing under all the activities that they mutually agreed to in the beginning, and at the end of the day you’re just trying to make sure everybody stays honest.

Russ:  Okay, well I want to have you back and talk about this a little more, is that okay with you?

Brian:  Absolutely.

Russ:  All right.  For more about joint ventures services visit  This has been another Thought Leader Production brought to you by PKF Texas Entrepreneur’s Playbook.

Accelerate Property Tax Payment to This Year – Here’s Why

Accelerating deductible expenses, such as property tax on your home, into the current year typically is a good idea. Why? It will defer tax, which usually is beneficial. Prepaying property tax may be especially beneficial this year, because proposed tax legislation might reduce or eliminate the benefit of the property tax deduction beginning in 2018.

Proposed changes

The initial version of the House tax bill would cap the property tax deduction for individuals at $10,000. The initial version of the Senate tax bill would eliminate the property tax deduction for individuals altogether.

In addition, tax rates under both bills would go down for many taxpayers, making deductions less valuable. And because the standard deduction would increase significantly under both bills, some taxpayers might no longer benefit from itemizing deductions.

2017 year-end planning

You can prepay (by December 31) property taxes that relate to 2017 but that are due in 2018 and deduct the payment on your 2017 return. But you generally can’t prepay property tax that relates to 2018 and deduct the payment on your 2017 return.

Prepaying property tax will in most cases be beneficial if the property tax deduction is eliminated beginning in 2018. But even if the property tax deduction is retained, prepaying could still be beneficial. Here’s why:

  • If your property tax bill is very large, prepaying is likely a good idea in case the property tax deduction is capped beginning in 2018.
  • If you could be subject to a lower tax rate in 2018 or won’t have enough itemized deductions overall in 2018 to exceed a higher standard deduction, prepaying is also likely tax-smart because a property tax deduction next year would have less or no benefit.

However, there are a few caveats:

  • If you’re subject to the AMT in 2017, you won’t get any benefit from prepaying your property tax. And if the property tax deduction is retained for 2018, the prepayment could cost you a tax-saving opportunity next year.
  • If your income is high enough that the income-based itemized deduction reduction applies to you, the tax benefit of a prepayment may be reduced.
  • While the initial versions of both the House and Senate bills generally lower tax rates, some taxpayers might still end up being subject to higher tax rates in 2018, either because of tax law changes or simply because their income goes up next year. If you’re among them and the property tax deduction is retained, you may save more tax by holding off on paying property tax until it’s due next year.

It’s still uncertain what the final legislation will contain and whether it will be passed and signed into law this year. We can help you make the best decision based on tax law change developments and your specific situation.

Three Steps to Take When Expanding Your Business

Jen:  This is the PKF Entrepreneur’s Playbook.  I’m Jen Lemanski, this week’s guest host, and I’m back here with Chip Schweiger, one of our audit directors at the firm.  Chip welcome back to the Playbook.

Chip:  Thanks Jen, good to be here.

Jen:  Houston is an international city; we’ve got a lot of businesses coming in, setting up shop here.  What do you recommend somebody do when they get here?

Chip:  I give folks three pieces of advice:

  • One, get a PEO or a payroll function in place right away.  You’ve got to pay your employees and it’s a lot more complicated than just writing a check.  There’s withholding, there’s quarterly filing statements and so it’s important to get a professional involved.
  • Secondly, get a good attorney and help get the articles of incorporation set up and get the organization set up to do business in Houston and in Texas.
  • And three, probably most importantly, get a good accountant to help you out, someone like PKF Texas; we can help you with taxes, we can help you with attest services and really help you get off to a good start with your business.

Jen:  That’s great, in fact we have a whole program called the International Healthy Start Program so we’d love to help out people with that.  Thanks so much for being here.

Chip:  Absolutely.

Jen:  Turn learn more about how we can help your international business visit  And this has been another Thought Leader Production brought to you by the PKF Texas Entrepreneur’s Playbook

Maximize Donor Generosity This Holiday Season

People are naturally inclined to make charitable gifts around the holidays. With the end of the year fast approaching, your not-for-profit should prepare now to take advantage of donors’ generosity. Here are four tips for making the most of the season:

  1. Strike early. Plan events or solicitations for early December or sooner. By being one of the first to appeal to givers’ seasonal generosity, you increase the odds of securing an early commitment and avoiding the donor fatigue that may set in later as solicitations and holiday financial demands mount.
  2. Target qualified prospects. Rather than blitz every prospect in your database, identify the best prospects among current donors. Past donors are more likely to give again and in larger amounts than those who have never donated before. Consider factors such as how often individuals have given in the past, how recently they’ve given, their likely ability to give and their degree of attachment to your organization. You can then write meaningful, personal appeals that encourage a greater commitment.
  3. Make it personal. The more personal a solicitation, the more effective it’s likely to be, with face-to-face appeals being especially powerful. The holiday season is the ideal time for executives and board members to solicit past supporters and promising new ones.
  4. “Missionize” late-year events. Attendees are already inclined to give; it’s just that most need to be inspired to give more. So don’t allow an event to take place without making a brief but carefully crafted pitch for your nonprofit. Make your mission come alive through your remarks or a short video presentation. When telling the audience about the great work you’re doing, mention how much more you could do with their help and talk about specific needs for cash, in-kind goods and services. People are more likely to give when they clearly understand the difference their gifts can make.

The holiday season is an opportune time to raise funds for your nonprofit. All you have to do is ask — but in the right way. Contact us for more fundraising ideas.

Claim This Tax Credit When Your Business Hires a Veteran

With Veterans Day on November 11, it’s an especially good time to think about the sacrifices our veterans have made for us and how we can support them. One way businesses can support veterans is to hire them. The Work Opportunity tax credit (WOTC) can help businesses do just that, but it may not be available for hires made after this year.

As released by the Ways and Means Committee of the U.S. House of Representatives on November 2, the Tax Cuts and Jobs Act would eliminate the WOTC for hires after December 31, 2017. So you may want to consider hiring qualifying veterans before year end.

The WOTC up close

You can claim the WOTC for a portion of wages paid to a new hire from a qualifying target group. Among the target groups are eligible veterans who receive benefits under the Supplemental Nutrition Assistance Program (commonly known as “food stamps”), who have a service-related disability or who have been unemployed for at least four weeks. The maximum credit depends in part on which of these factors apply:

  • Food stamp recipient or short-term unemployed (at least 4 weeks but less than 6 months): $2,400
  • Disabled: $4,800
  • Long-term unemployed (at least 6 months): $5,600
  • Disabled and long-term unemployed: $9,600

The amount of the credit also depends on the wages paid to the veteran and the number of hours the veteran worked during the first year of employment.

You aren’t subject to a limit on the number of eligible veterans you can hire. For example, if you hire 10 disabled long-term-unemployed veterans, the credit can be as much as $96,000.

Other considerations

Before claiming the WOTC, you generally must obtain certification from a “designated local agency” (DLA) that the hired individual is indeed a target group member. You must submit IRS Form 8850, “Pre-Screening Notice and Certification Request for the Work Opportunity Credit,” to the DLA no later than the 28th day after the individual begins work for you.

Also be aware that veterans aren’t the only target groups from which you can hire and claim the WOTC. But in many cases hiring a veteran will provide the biggest credit. Plus, research assembled by the Institute for Veterans and Military Families at Syracuse University suggests that the skills and traits of people with a successful military employment track record make for particularly good civilian employees.

Looking ahead

It’s still uncertain whether the WOTC will be repealed. The House bill likely will be revised as lawmakers negotiate on tax reform, and it’s also possible Congress will be unable to pass tax legislation this year. Under current law, the WOTC is scheduled to be available through 2019.

But if you’re looking to hire this year, hiring veterans is worth considering for both tax and nontax reasons. Contact us for more information on the WOTC or on other year-end tax planning strategies in light of possible tax law changes.

Preparing for an Audit with Your CPA

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, this week’s guest host, and I’m back with Chip Schweiger, one of our Audit Directors here at the firm.  Chip, welcome back to the Playbook.

Chip: Thanks, good to be here, Jen.

Jen: Now, if someone’s looking for an audit, take us through what that discussion would look like.  What types of things would you ask? How would you get that discussion started?

Chip: Sure, yeah. Normally somebody will reach out if they’re thinking about an audit. We’d encourage them to call PKF Texas, and we would come out and talk with them about their business; directionally, where is it going? But one of the most important questions that I ask prospective clients is, what do you want this business to be? Do you want to sell it to your children? Do you want to sell it to somebody else? Would you like to take it public? Or, would you like to get a private equity investor involved? That way, we can help calibrate our compliance services to also meet the needs directionally of where the company is going.

Jen: So, we’re really kind of co-developing a solution with them once we find out what their needs are.

Chip: Yeah. I like how you said that. It’s a great approach, and it really helps our clients, in the long run, get to where they want to be.

Jen: Now is there anything beyond that initial discussion they can expect once they decide, yes, I do need an audit?

Chip: We’re going to talk with them, certainly, about what the effort is involved, and which gets the fees. We’re going to talk with them about the service team, and the types of experts that we’re going to put on that engagement.

Jen: Perfect.  Well, thank you so much. I appreciate you being here.

Chip: Great.  Good to be here again.

Jen: This has been another Thought Leader production brought to you by the PKF Texas Entrepreneur’s Playbook.  Tune in next week for another chapter.

Fundraising Considerations for Nonprofits

Jen:  This is the PKF Texas Entrepreneur’s Playbook.  I’m Jen Lemanski, this week’s guest host, and back again with Nicole Riley, one of our Audit Senior Managers on our Not For Profit team.  Welcome back to the Playbook Nicole.

Nicole:  Thanks, glad to be here.

Jen:  Not for profits do fundraising in a whole variety of ways, what are some common issues you see when they do fund raising activities?

Nicole:  One of the most common things is there are some requirements; they call them quid, pro, quo donations or arrangements.  That’s where if you go to a dinner and the ticket is $100 you actually get a dinner in exchange for that ticket, so the organization is required, if the amount paid is more than $75, to tell the donor how much they received back in exchange for that ticket.

Jen:  I think Annjeanette a few episodes ago talked with us about that.

Nicole:  Yeah, there are definitely some requirements about that.  Another thing we see with nonprofits is when they do raffles, those are not donations.

Jen:  Really?

Nicole:  Really.  For the taxpayer themselves, it’s not a charitable donation.

Jen:  Oh my gosh, well we need to make sure that some of these boards that I’m on know that.  Is there anything else?

Nicole:  One other thing is in fundraising you see a lot of organizations get free things; either free advertising spots, free flowers.

Jen:  Like some in-kind donations?

Nicole:  Right.  They often forget to track those.  Those are required to be recorded as contributions in expenses in the financial statement.  So it’s important to keep track of what you got and how much it’s worth.

Jen:  So as an auditor when you’re looking at those financial statements are those the types of things that you guys are looking at?

Nicole:  It’s always something that we look at.  It’s an area that because it’s a donation and it’s an expense it’s important to have the financials stated properly, so of course we always look at those lists.

Jen:  Sounds good.  Well, we’ll get you back to talk some more about some of the nonprofit activity that we do.

Nicole:  Thanks.

Jen:  To learn more about how we can help your not for profit visit  This has been another Thought Leader production brought to you by PKF Texas The Entrepreneur’s Playbook.

Self Employed? These Retirement Savings Plans are for You.

Did you know that if you’re self-employed you may be able to set up a retirement plan that allows you to contribute much more than you can contribute to an IRA or even an employer-sponsored 401(k)? There’s still time to set up such a plan for 2017, and it generally isn’t hard to do. So whether you’re a “full-time” independent contractor or you’re employed but earn some self-employment income on the side, consider setting up one of the following types of retirement plans this year.

Profit-sharing plan

This is a defined contribution plan that allows discretionary employer contributions and flexibility in plan design. (As a self-employed person, you’re both the employer and the employee.) You can make deductible 2017 contributions as late as the due date of your 2017 tax return, including extensions — provided your plan exists on Dec. 31, 2017.

For 2017, the maximum contribution is 25% of your net earnings from self-employment, up to a $54,000 contribution. If you include a 401(k) arrangement in the plan, you might be able to contribute a higher percentage of your income. If you include such an arrangement and are age 50 or older, you may be able to contribute as much as $60,000.

Simplified Employee Pension (SEP)

This is a defined contribution plan that provides benefits similar to those of a profit-sharing plan. But you can establish a SEP in 2018 and still make deductible 2017 contributions as late as the due date of your 2017 income tax return, including extensions. In addition, a SEP is easy to administer.

For 2017, the maximum SEP contribution is 25% of your net earnings from self-employment, up to a $54,000 contribution.

Defined benefit plan

This plan sets a future pension benefit and then actuarially calculates the contributions needed to attain that benefit. The maximum annual benefit for 2017 is generally $215,000 or 100% of average earned income for the highest three consecutive years, if less.

Because it’s actuarially driven, the contribution needed to attain the projected future annual benefit may exceed the maximum contributions allowed by other plans, depending on your age and the desired benefit. You can make deductible 2017 defined benefit plan contributions until your return due date, provided your plan exists on Dec. 31, 2017.

More to think about

Additional rules and limits apply to these plans, and other types of plans are available. Also, keep in mind that things get more complicated — and more expensive — if you have employees. Why? Generally, they must be allowed to participate in the plan, provided they meet the qualification requirements. To learn more about retirement plans for the self-employed, contact us.

Tax Deductible Contributions in Not-for-Profits

Jen:  This is the PKF Texas Entrepreneur’s Playbook.  I’m Jen Lemanski, this week’s guest host, and I’m back again with Annjeanette Yglesias, one of our tax managers on our not for profit team.  Welcome back to the Playbook Annjeanette.

Annjeanette:  Thanks Jen, it’s nice to be here.

Jen:  So we’ve been talking the past few weeks about not for profits, it’s my understanding that 501C3 charitable organizations can receive tax deductible contributions.  Is that correct?

Annjeanette:  Yes, that’s correct.  501C3 organizations can receive charitable donations that are deductible by the donor.

Jen:  Okay, and do they have to do anything special to document those deductions or how does that work?

Annjeanette:  Yes actually.  When a charity receives a donation from a donor they’re required to provide a written disclosure statement.

Jen:  Does it have to include something special on it?

Annjeanette:  Basically the written disclosure statement has to provide the total amount of the payment that the donor made but also if the donor received any goods or services in connection with that donation the value of the goods and services also has to be stated on the disclosure statement.

Jen:  Now are there different brackets for the amount that someone gave?  Say somebody gave $10.00 versus somebody giving $1 million; are there different levels of documentation that someone has to have?

Annjeanette:  The requirement for the I.R.S. is any contribution over $75.

Jen:  Okay, perfect.  So that goes for both individuals giving donations, they have to make sure that they receive that documentation and then the not for profit has to make sure that they give that documentation.

Annjeannette:  That’s correct and the reason why it’s important for the donor is because the deductible amount of that payment that the donor makes to the organization is limited to the excess of the payment over the fair market value that’s stated on the disclosure.

Jen:  So that’s something they really need to pay attention to, probably gets you in the door to talk to them about.

Annjeanette:  Exactly.

Jen:  Awesome.  Well thank you so much for being here, we really appreciate it and we’ll get you back to talk about some of this stuff again.

Annjeanette:  Great.

Jen:  To learn more about how PKF Texas can help your not for profit visit  This has been anther Thought Leader production brought to you by PKF Texas The Entrepreneur’s Playbook.

Two ACA Taxes Which May Apply to Your Executive Compensation

If you’re an executive or another key employee, you might be rewarded for your contributions to your company’s success with compensation such as restricted stock, stock options or nonqualified deferred compensation (NQDC). Tax planning for these forms of “exec comp,” however, is generally more complicated than for salaries, bonuses and traditional employee benefits.

And planning gets even more complicated if you could potentially be subject to two taxes under the Affordable Care Act (ACA): 1) the additional 0.9% Medicare tax, and 2) the net investment income tax (NIIT). These taxes apply when certain income exceeds the applicable threshold: $250,000 for married filing jointly, $125,000 for married filing separately, and $200,000 for other taxpayers.

Additional Medicare tax 

The following types of exec comp could be subject to the additional 0.9% Medicare tax if your earned income exceeds the applicable threshold:

  • Fair market value (FMV) of restricted stock once the stock is no longer subject to risk of forfeiture or it’s sold,
  • FMV of restricted stock when it’s awarded if you make a Section 83(b) election,
  • Bargain element of nonqualified stock options when exercised, and
  • Nonqualified deferred compensation once the services have been performed and there’s no longer a substantial risk of forfeiture.


The following types of gains from stock acquired through exec comp will be included in net investment income and could be subject to the 3.8% NIIT if your modified adjusted gross income (MAGI) exceeds the applicable threshold:

  • Gain on the sale of restricted stock if you’ve made the Sec. 83(b) election, and
  • Gain on the sale of stock from an incentive stock option exercise if you meet the holding requirements.

Keep in mind that the additional Medicare tax and the NIIT could possibly be eliminated under tax reform or ACA-related legislation. If you’re concerned about how your exec comp will be taxed, please contact us. We can help you assess the potential tax impact and implement strategies to reduce it.