Category: Get Balanced: Bookkeeping Made Easier

Estate Planning for Those Under 40

The earlier you start planning, the more choices you’ll have

Get started on estate planning while you're young saves hassles laterWe all live as if we have decades ahead of us, dealing with the present — we can’t know the future. And that’s why now is a great time to get a jump on estate planning.

Do your family and loved ones know what accounts you have, where your financial information is and what your wishes are? Now is the time to tell them. If you start now, your plan will help keep your loved ones from becoming stressed if you suddenly become disabled or pass away.

Learning about estate planning

You can begin to educate yourself about estate planning. For instance, what should you be looking for in an estate planning attorney? You can interview several to see whom you feel most comfortable with. You can also explore estate planning strategies: Some organizations have free small-group events to share an understanding of the basics of estate planning.

You can start formulating how you’d want to be memorialized — how about creating a recording to share with your loved ones to help them by making the tough decisions in advance?

Getting started on your plan

Estate planning isn’t just for wealthy people — you don’t have to wait until you build up more savings. You may have a child or spouse who is financially dependent on you, so you don’t want to ignore your estate plan. Take these steps to be proactive:

  • Designate beneficiaries.
  • Designate a health care proxy to make medical decisions for you if you can’t.
  • Review asset titling — titling assets jointly with rights of survivorship is an easy way to ensure that your property passes to your heirs without delay.
  • Consider establishing a trust — in many ways these can be even more effective tools than wills.
  • Do some tax planning — although the federal estate tax affects only the wealthiest people, there are other tax issues, including state estate taxes.
  • Select guardians to care for minor children.
  • Plan ahead — an accident can result in an inability to make legal decisions; a durable power of attorney will name someone to act in your place if you are incapacitated.

Documents for your plan

Among the documents that are part of an estate plan, consider a will, life insurance, and a power of attorney. You can think of a will as a road map outlining how your property will be distributed if you’re disabled or die. Meet with an attorney and tell her or him what your assets are, who you want to leave them to, and that you want it all to be simple.

In crafting a will, name a trusted friend or family member as the executor to help shepherd your estate through any court-supervised process, such as probate. You may want to consider life insurance, particularly because you haven’t accumulated lots of money yet. You’d want your family to have assets to live on. You can choose a less expensive option such as a term policy for a set number of years.

We’ve got your back on estate planning

It’s never too early to start thinking about estate planning. KRS CPAs offers unbiased financial and tax guidance to help you realize your specific goals and vision. Contact KRS managing partner Maria Rollins at [email protected] or 201.655.7411 to discuss your situation.

IRAs to Charity: A Useful Estate Planning Technique

Make your favorite charity a beneficiary of your IRAsSave taxes with this smart estate planning strategy

If you’re like many people, you have a great deal of your wealth tied up in traditional IRA accounts. Why? The tax-free benefits have motivated you. But there’s going to come a time when you—or your heirs—will have to pay taxes on this money. Instead of worrying about what you’re going to do about that, you can follow a tax-saving strategy that considers designating your favorite charity or charities as beneficiaries of all or a portion of your IRAs. Then you can leave other assets to family members and other heirs.

IRAs and estate taxes

Your IRAs are considered part of your estate when you die, which means they are subject to estate taxes. Although very few people are subject to the federal estate tax, some states have lower thresholds for estate taxes. Also, your heirs will have to eventually withdraw the funds, and typically will pay income tax. This could be substantial, if your heirs are already in a high bracket.

Fortunately, there’s a tax-smart solution: leave some or all of your IRA to charitable beneficiaries while leaving other assets to heirs of your choice. Leaving money directly to charities by designating them as account beneficiaries is very tax-efficient. First, it avoids estate tax, since the IRA is removed from your estate. Second, there’s no federal income tax due on IRA money. (You may get a state tax break too.) No income taxes are due when your favorite tax-exempt charities make withdrawals from the IRAs.

This strategy allows you to leave more to your favorite charities and more to your loved ones while keeping as much as possible from the IRS.

Leave Roth IRAs to your loved ones

One final word, however. This strategy generally applies to traditional IRAs. Naming a charity as the beneficiary of your Roth IRA is generally inadvisable. Leave Roth balances to your loved ones by designating them as account beneficiaries. Why? As long as your Roth IRA has been open for more than five years before withdrawals are taken, all withdrawals will be federal income tax-free since the money went in after taxes. But if you leave Roth IRA money to charity, this tax break is wasted. (Roth IRA inheritance rules differ from the rules for traditional IRAs in several key ways.)

Looking at the Big Picture

Of course, this is just part of your estate plan, and there are lots of complexities. A giving strategy that makes sense for one family may not be appropriate for another. Also, the new tax law has changed the scenario for many.  Finally, there are various limits and provisions you should be aware of before you proceed.

The bottom line? Talk to a qualified financial professional about your charitable goals and any traditional or Roth IRAs you have in order to take care of both your family and your designated nonprofits in as efficient a way as possible.

We’ve got your back on estate planning

It’s never too early to start thinking about estate planning. KRS CPAs offers unbiased financial and tax guidance to help you realize your specific goals and vision. Contact KRS managing partner Maria Rollins at [email protected] or 201.655.7411 to discuss your situation.

What Is Tax-Efficient Investing?

Keep taxes in mind when investing

Tax Efficient InvestingAvoiding taxation should not be the only goal, or even the main goal, of your investment strategy.

Still, you always have to keep taxes in mind to make sure you’re not unnecessarily sending too much of your money to the government.

Managing Your Investments

Keep on top of your tax losses. No one likes to see their investments fail, but there are hidden tax savings there. Tax-harvesting strategies take advantage of losses for tax benefits when you rebalance your portfolio if you comply with IRS rules on the tax treatment of gains and losses.

Note that losses can offset up to $3,000 in taxable income in realized investment gains annually. If losses exceed deduction limits in the year they occur, you may be able to carry them forward to offset gains in future years.

Also watch out for capital gains. Securities held for more than 12 months and sold at a profit are taxed as long-term gains, with a top federal rate of 23.8%. For short-term gains, the tax rate can hit 40.8%. Timing can be everything.

Consider tax-exempt securities. Municipal bonds typically are exempt from federal taxes and may receive preferential state tax treatment. However, choose carefully before jumping into them. If you have a low tax rate in retirement, for example, it may not be necessary or even wise to concentrate so heavily on avoiding taxes.

Managing Your Taxes

Sometimes it’s better to pay taxes later rather than now. For example, 401(k)s, 403(b)s, IRAs, and tax-deferred annuities let you postpone your taxes until you are retired and thus likely in a lower bracket. Contributions you make may reduce your taxable income if you meet income eligibility requirements, and typically, investment growth is tax-deferred.

On the other side of the coin are Roth IRAs, which don’t give you an immediate tax break, since you use after-tax dollars. But this can help you later. For example, you may be in a low tax bracket now, so you put money into a Roth IRA. Investment gains are tax-deferred. When you withdraw the money, you don’t have to pay taxes at what could be a higher rate.

Reduce Taxes through Charity

If you itemize, you can deduct the value of your charitable gift from taxable income, but be aware that limits apply. Consider contributing appreciated stock, which may help you avoid capital gains taxes. Also try a donor-advised fund in a high-income year. These funds let you make a donation, take an immediate deduction and spread the giving over a period of time.

Of course, this is just an introduction to a complex topic — there are limits and exceptions to these strategies. Tax law is detailed, especially when it comes to investments, and a slight miscalculation on your end can lead to an unexpected tax bill down the line.

We’ve got your back on tax efficient investing

Taxes are a key part, but not the only part, of an investment strategy and you need to work with tax and financial professionals to make sure your strategies are aligned with your goals.Contact KRS managing partner Maria Rollins at [email protected] or 201.655.7411 to discuss your situation.

The Final Responsibility: Being an Executor

An executor of a will carries out the last wishes of someone close who has died.

The executor ensures that the rules that govern the administration of a probate estate are followed.

Here are three things you need to know about this important job.

The Final Responsibility: Being an ExecutorExecutors can get help

A lot of responsibility is involved in being an executor. Gathering paperwork tops the list. You’ll need to find all the assets of the estate. You have to report to the probate court with jurisdiction. There will be complex technical and legal language to decipher, as well as finding ways to communicate with grief-stricken family members at a time when they’re least able to rationalize. You’ll need to spend many hours where the deceased person lived, even if that means a lot of travel.

Fortunately, you can get professionals to help you. You can hire lawyers, accountants and other professional advisors on behalf of the estate to assist with tasks like preparing the final income and estate tax returns, and ensuring that the financial assets are invested properly during the probate process. As executor, you’re not expected to know everything about the process, but you should know when you need help.

Be aware of all accounts, even those you don’t control

You never need to exercise control for accounts that have beneficiaries, like retirement accounts and insurance policies. And property held in joint tenancy with rights of survivorship pass directly to the survivor. However, you still need to be aware of these assets and potentially account for them. The estate might owe taxes on these proceeds — you as executor have to collect a prorated share of any taxes due from those who inherit the policy benefit. Being aware of all this is crucial to doing a complete and thorough job.

Dealing with family battles

If the deceased person specifically wanted unequal amounts of property to go to different people, resentment bubbles up. You may find yourself in the epicenter of such a contentious debate. But the role of executor is separate — you treat family members fairly and defend the rights of heirs. It’s a hard line to walk, so professionals can help in dealing with any turmoil to keep you out of trouble.

Being the executor of a will is an important job and needs to be done well. Keeping this in mind, you’ll do your best to make sure that your loved one’s wishes are met and that the person’s heirs receive what the decedent intended.

We’ve got your back with an estate executor’s checklist

Being an executor of a will can be challenging. KRS CPAs can help. Visit our estate planning and administration page and download our helpful executor’s checklist. Then contact us for assistance.

Pay off Your Student Loans

Pay off Your Student LoansIt is payday and you see your paycheck hit your bank account just in time to pay your student loans.  How depressing.

Paying your student loans may seem like it will last forever, but there are ways improve your repayment plan and pay off your loans faster.

Pay more than the minimum payment

This is one of the fastest ways to relieve your student loan debt.  These days, most payments are done online. You can simply go online each month and pay your minimum payment, plus an additional payment.  This additional payment can be whatever amount you feel comfortable paying at that time. Some months you may want to make a larger additional payment than other months.  For instance, in a month where you get a bonus or a money gift, you may want to put this “found money” towards your student loans.

It is important to ensure that all extra payments are applied to principal and not the next month’s minimum payment.  Some lenders may require a written letter specifying that any additional payments made are applied to principal of the loan.  Other lenders may have an option online when a payment is made to categorize the extra payment towards principal. By doing this, you can reduce the interest on your loans.  Keep in mind that most lenders reduce your interest rate by setting up automatic payments. You should also always pay towards your highest interest loans first as interest accrues faster on these loans.

Consolidate and refinance your loans

Interest rates on student loans can vary from 4% to 9%.  If you’re like the average graduate, with three to six different loans with differing interest rates, and you are a good candidate refinancing at a lower interest rate. By consolidating, you also free yourself of the burden of making multiple monthly payments.  Your consolidated loan will have one monthly payment.

This approach is not for everyone.  You would only want to refinance if you can reduce your interest rates.  Right now, refinancing rates on student loans are as low as 3%. Banks that offer student loan refinancing and relief include NerdWallet, Sofi, and Citizens Bank.  Each bank and lender offer different programs and individualized rates, which are usually based on credit history and annual income.

Student loan interest deduction

Don’t wait to pay your student loans.  If you are in loan deferment, a grace period, or in school, make payments sooner.  During these periods where you are not paying your loans, interest is accruing which increases your overall loan obligation.

Some good news: the IRS offers a student loan interest deduction of up to $2,500 per year.  Keep in mind that you may not be able to deduct the full $2,500, as this deduction phases out between $65,000 and $80,000 for a single taxpayer, and $130,000 and $160,000 for a married filing jointly taxpayer.

When filing your taxes, there is no need to look through your loan statements to calculate the interest paid.  Your lender will provide you with Form 1098-E, which will show the total student loan interest paid in the current year.  You will receive one form for each loan.  If you are married, you can also deduct student loan interest paid by your spouse if you file a joint tax return.  The only requirement is that you must be legally obligated to repay the loan.  This means that you or your spouse must be the responsible party for the loan.

We’ve got your back

It is important to tackle student loans early in your career.  By doing so, you will improve your credit, become student loan debt-free, and start saving for your future.

Lance Aligo, CPA, MSA, is a senior accountant at KRS CPAs, LLC, located in Paramus, NJ.  You can reach him at [email protected] or 201-655-7411.

What Changes With the New Taxpayer First Act?

The Taxpayer First Act of 2019 is redesigning how the IRS works with taxpayers, even though it may take a while for many of the provisions to take effect.What Changes With the New Taxpayer First Act?

Some experts have highlighted the following aspects of the bill as especially important:

An independent appeals process. Taxpayers and small businesses will be able to challenge the IRS’ position without undertaking the cost and expenses of court. IRS Appeals will be an independent unit that grants taxpayers access to case files. Taxpayers will be able to protest if denied an appeal.

Innocent spouse treatment. The new law requires the U.S. Tax Court to take a fresh look at innocent spouse cases without taking previous decisions into account.

Modification of procedures for issuance of third-party summons. This is an important protection for taxpayers, especially small-business owners. It discourages the IRS from bypassing the taxpayer and contacting third parties — such as financial institutions — instead for information. The IRS should give taxpayers a meaningful opportunity to provide the information it is seeking prior to its contacting third parties. In practice, the IRS should provide the taxpayer with an understanding of what the issue is, what information is being requested and how the requested information relates to the issue.

Office of the National Taxpayer Advocate. The Taxpayer First Act has taken a strong approach with the Advocate’s issuance of Taxpayer Advocate Directives, which focus on systemic problems taxpayers deal with. Once they are issued by the Advocate, the IRS should comply within 90 days. The Advocate Annual Report will identify any TAD that is not honored by the IRS.

Credit card payments. The IRS is now allowed to directly accept credit and debit card payments for taxes; the taxpayer must pay any processing fees. The Act also requires the IRS to try to minimize processing fees when entering into contracts with the credit card companies.

Whistle blower reforms. The Act provides protections from retaliation and allows for better communication with whistle blowers about the status of their claims.

Cyber-security and identity protection. The IRS will now have to let taxpayers know whether it suspects there is evidence of identity theft. The Agency will explain to taxpayers how to file a report with police and how to protect themselves against additional harm resulting from the identity theft.

Taxpayer Act levels the playing field

Rep. Kevin Brady, R-Texas, ranking member of the Ways and Means Committee, was quoted as saying the Act “levels the playing field to ensure taxpayers have the same information as the agency, better protects our taxpayers’ information, and reins in past IRS abuses to guarantee families and local businesses never have to fear having their accounts and property seized without fair and due process.”

As with many new laws, it will take some time to see what specifically the effects are. The legal provisions are complex and will require interpretation over time. We’ll be keeping an eye on the developments.

We’ve got your back

The new tax code is complex and every taxpayer’s situation is different – so don’t go it alone! Contact KRS managing partner Maria Rollins at [email protected] or 201.655.7411 to discuss your situation.

Home Office Expense Deduction for a Self-Employed Taxpayer

Home office expense deduction for a self-employed taxpayerDoes your home office qualify for a tax deduction?

If you’re self-employed and work out of an office in your home and you satisfy certain strict rules, you will be entitled to favorable “home office” deductions. These deductions against your business income include the following:

  • Direct expenses of the home office – for example, the costs of painting or repairing the home office, depreciation deductions for furniture and fixtures used in the home office, etc.; and
  • Indirect expenses of maintaining the office – for example, the properly allocable share of utility costs, depreciation, insurance, etc., for your home, as well as an allocable share of mortgage interest and real estate taxes.

In addition, if this office is your “principal place of business” under the rules discussed below, the costs of traveling between it and other work locations in your business are deductible transportation expenses, rather than nondeductible commuting costs.

Tests to determine home office deductibility

You may deduct your home office expenses if you meet any of the three tests described below: (1) the principal place of business test, (2) the place for meeting patients, clients, or customers test, or (3) the separate structure test. You may also deduct the expenses of certain storage space if you qualify under the rules described further below.

  1. Principal place of business

You’re entitled to home office deductions if you use your home office, exclusively and on a regular basis, as your principal place of business. Your home office is your principal place of business if it satisfies either a “management or administrative activities” test, or a “relative importance” test. You satisfy the management or administrative activities test if you use your home office for administrative or management activities of your business, and if you meet certain other requirements. You meet the relative importance test if your home office is the most important place where you conduct your business, in comparison with all the other locations where you conduct that business.

  1. Home office used for meeting patients, clients, or customers

You’re entitled to home office deductions if you use this office, exclusively and on a regular basis, to meet or deal with patients, clients, or customers. The patients, clients or customers must be physically present in the office.

  1. Separate structures

You’re entitled to deductions for a home office, used exclusively and on a regular basis for business, if it is located in a separate unattached structure on the same property as your home – for instance, an unattached garage, artist’s studio, workshop, or office building.

Space for storing inventory or product samples

If you’re in the business of selling products at retail or wholesale, and if your home is your sole fixed business location, you can deduct home expenses allocable to space that you use regularly (but not necessarily exclusively) to store inventory or product samples.

How much can you deduct?

The amount of your home office deduction is based on the amount of square footage allocated to your office space. There are two methods to choose from; Simplified Method and Regular Method.

Simplified Method

The simplified method for determining this deduction is straightforward: You receive a deduction of $5 per square foot, up to 300 square feet (the deduction can’t exceed $1,500).

Regular Method

You determine the deduction by figuring out the percentage of your home used for business. Then apply the resulting percentage to the total direct & indirect expenses discussed above.

To demonstrate, if your home is 2,000 square feet and your home office is 500 square feet, you use 25% of your home for business. You’re allowed to deduct 25% of the above-mentioned expenses against your income. The remaining 75% of qualified expenses carry over to Schedule A, if you itemize. These costs include property taxes and mortgage interest.

Someone with a larger office and higher expenses might benefit from the regular method of determining the home office deduction compared to the standard method.

We’ve got your back

At KRS, our CPAs can help you utilize the home office deduction to maximize potential tax savings. Give us a call at 201.655.7411 or email me at [email protected]

What You Need to Know to Deduct Medical Expenses

What You Need to Know to Deduct Medical ExpensesDeducting expenses for medical and dental care is easier when you know the rules

If you itemize your deductions for a taxable year on Form 1040, Schedule A Itemized Deductions, you may be able to deduct unreimbursed expenses you paid that year for medical and dental care for yourself, your spouse, and your dependents. You may deduct only the amount of your total medical expenses that exceed 7.5% of your adjusted gross income in 2018 and 10% beginning in 2019.

What qualifies as a medical expense?

Qualifying costs, which include many items other than hospital and doctor bills, often amount to much larger figures than expected. Below are some items you should take into account in determining your medical expenses:

Health insurance premiums

The cost of health insurance is a medical expense. This item, by itself, can total thousands of dollars a year. Even if your employer provides you with health coverage, you can deduct the portion of the premiums that you pay. Long-term care insurance premiums are also included in medical expenses, subject to specific dollar limits based on age. However, pre-tax insurance premiums paid by an individual are not deductible medical expenses.

Transportation

The cost of getting to and from medical treatment is a deductible medical expense. This includes taxi fares, public transportation, or the cost of using your own car. Car costs can be calculated at 20¢ a mile for miles driven in 2019 (18¢ a mile for miles driven in 2018), plus tolls and parking. Alternatively, you can deduct your actual costs, such as for gas and oil (but not your general costs such as insurance, depreciation, or maintenance).

Therapists, nurses, etc.

The services of individuals other than doctors can qualify as long as the services relate to a medical condition and aren’t for general health. For example, costs of physical therapy after knee surgery would qualify, but not costs of a fitness counselor to tone you up. Amounts paid for certain long-term care services required by a chronically ill individual also qualify as deductible medical expenses.

Eyeglasses, hearing aids, dental work, psychotherapy, prescription drugs

Deductible medical expenses include the cost of glasses, hearing aids, dental work, psychiatric counseling, and other ongoing expenses in connection with medical needs. Purely cosmetic expenses (e.g., a “nose job”) don’t qualify. Prescription drugs (including insulin) qualify, but over the counter items such as aspirin and vitamins don’t. Neither do amounts paid for operations or treatments that are illegal under federal law (such as marijuana), even if state or local law permits the procedure or drug.

Smoking-cessation programs

Amounts paid for participation in a smoking-cessation program and for prescribed drugs designed to alleviate nicotine withdrawal are deductible medical expenses. However, non-prescription nicotine gum and certain nicotine patches aren’t deductible.

Weight-loss programs

A weight-loss program is a deductible medical expense if undertaken as treatment for a disease diagnosed by a physician. The disease can be obesity itself or another disease, such as hypertension or heart disease, for which the doctor directs you to lose weight. It’s a good idea to get a written diagnosis before starting the program. Deductible expenses include fees paid to join the program and to attend periodic meetings. However, the cost of low-calorie food that you eat in place of your regular diet isn’t deductible.

Dependents and others

You can deduct the medical costs paid on behalf of dependents, such as your children. Additionally, you may be able to deduct medical costs you pay for an individual, such as an elderly parent or grandparent, who would qualify as your dependent except that he has too much gross income or files jointly. In most cases, the medical costs of a child of divorced parents can be claimed by the parent who pays them, regardless of who gets the dependency exemption.

We’ve got your back

At KRS, our CPAs can help you identify deductible medical expenses to maximize potential tax savings. Give us a call at 201.655.7411 or email me at [email protected]

Capital Gains and Losses: How Do They Work?

Selling a capital asset results in a gain or loss and impacts your income taxes.

How do capital gains and losses work?A capital gain is a profit made when you as an individual or business sell a capital asset — investments or real estate, for instance — for a higher cost than its purchase price. A capital loss is incurred when there’s a decrease in the capital asset value compared with its purchase price. Almost everything you own and use for personal or investment purposes is a capital asset: a home, personal-use items like furnishings, and collectibles.

A capital gain may be short term (one year or less) or long term (more than a year). The capital gain must be claimed on income taxes. While capital gains are generally associated with stocks and mutual funds due to their volatility, a capital gain can occur on any security sold for a higher price than the price that was paid for it. Unrealized gains and losses, sometimes referred to as paper gains and losses, reflect an increase or decrease in an investment’s value but haven’t yet triggered a taxable event.

The profit you realize when you sell a capital asset at a profit is your gain over basis paid. Basis is often defined as the original price plus any related transaction costs; basis also may refer to capital improvements and cost of sale. Capital losses are used to offset capital gains of the same type: short-term losses are deducted against short-term gains, for example.

Capital gains and losses for businesses

A business may gain or lose money in two ways: It can make a profit on its sales activities or lose money by spending more than it brings in from sales. And, of course, it can gain or lose money based on its investments or sales of assets — items of value that the business owns.

Each type is taxed differently. Profits are taxed as ordinary income and at regular business or personal tax rates. Gains or losses on investments or the sale of assets are taxed as capital gains or losses, but it can depend on the type of business. When expensive equipment is involved, businesses have to consider depreciation, which takes into account the equipment’s declining value over its useful lifetime.

Capital gains and losses can come into play when a business writes off an asset, taking it off its balance sheet. That might be the case with accounts receivable when a debt is owed to the business but is unlikely ever to be paid.

Individual shareholders or business owners who sell their capital shares or owner’s equity in a business also incur capital gains or losses from those sales. Note the following distinction: Operating profits and losses result from the ongoing operations of the business; sometimes called net operating losses for tax purposes, they result from day-to-day operations.

We’ve got your back

Whether you’re buying or selling as an individual or as a business, be sure to keep track of your sales and discuss them with a qualified financial professional. The experts at KRS can help you determine whether you have a gain on loss and its tax implications. Contact managing partner Maria Rollins at [email protected] or 201.655.7411 for a complimentary initial consultation.

Audits, Reviews and Compilations: A Summary

Which financial statement overview you need from your CPA depends on your business and financing needs

Audits, Reviews and Compilations: A SummaryYou will want to prepare your financial statements in accordance with an accounting framework that’s appropriate for your business. Most of the time, you’ll opt for a CPA to produce your financial statements. Getting an accountant’s blessing is especially useful when you are applying for more credit from a bank.

Financial statements are intended to give you current information on your business’s financial standing so you can make more informed decisions. There are three levels of overview you can choose to take — compilation, review or audit — and what you select will have a lot to do with what your objective is.

The Compilation

According to guidance from the American Institute of CPAs, a compilation is suitable for use by lenders and other outside parties who may appreciate the business’s association with a CPA. There is no assurance here, but the CPA will read the financial statements in light of the financial reporting framework being used and consider whether the financial statements appear appropriate in form and are free from obvious material misstatements.

It may be appropriate when a company is seeking only relatively minor levels of financing and may have significant collateral.

The Review

The next level is a review. According to the AICPA, the review is designed to provide lenders and other outside parties with a basic level of assurance on the accuracy of financial statements. The CPA performs analytical procedures, inquiries and other procedures to obtain limited assurance on the financial statements to provide a user with a level of comfort on their accuracy.

A review might be the right move for companies seeking larger levels of financing and have more complex credit needs.

The Audit

The highest level of assurance is an audit. The CPA performs procedures to obtain “reasonable assurance” (defined as a high but not absolute level of assurance) about whether the financial statements are free from material misstatement, according to the AICPA. The CPA is required to obtain an understanding of your business’s internal control and to assess fraud risk. Your CPA is also required to corroborate the amounts and disclosures included in your financial statements by obtaining audit evidence through inquiry, physical inspection, observation, third-party confirmations, examination, analytical procedures and other procedures.

An audit is an annual requirement for publicly held companies and may be advisable for other companies seeking high levels of finance and opening themselves to outside investors.

Required Frequency

How often will you want your CPA to peruse your finances? Overviews can be done in any frequency that is useful to you and your business — monthly, quarterly or annually. Some folks say that your financial statements are more than snapshots of your business but can be seen as resources to tell you where your risks and opportunities are. Financial statements can help you identify and solve potential problems before they compromise the health of your business.

We’ve got your back

Rather than guessing at audit, reviews and compilations, why not let the experts at KRS CPAs help? Learn more about our accounting and assurance services, then contact managing partner Maria Rollins at [email protected] or 201.655.7411 for a complimentary initial consultation.