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Do you know if your business is performing well? If so, how do you know? Maybe you look at the bottom line and see there is a profit? Maybe you just make sure there is cash in the bank account?

These might be indicators that the business is surviving, but they don’t give you an idea of how well the business is performing. To know how your business is performing, it can be very useful to track some of your businesses key performance indicators (KPI).

Key performance indicators are measurable values that help determine if a business objective is successful. These can be used throughout the organization to measure success. It is important to pick metrics that are important to your business. They should be metrics that you understand and that are meaningful to it.

  • In the rush to understand the changes made by the 2017 federal tax reform law, known as the Tax Cuts and Jobs Act (TCJA), tax-exempt organizations may not yet have had time to consider how the federal changes may affect state taxes. Similarly, state taxing authorities and state tax practitioners may be so wrapped up in the state and local tax (SALT) implications of the TCJA for individuals or regular C corporations (especially changes affecting the 2017 tax year) that they may not yet have had time to consider the SALT implications of tax reform for tax-exempt organizations.

    Significant changes to federal unrelated business income under TCJA
    A tax-exempt organization is generally subject to federal income tax only on unrelated business income (UBI) — generally, income that is unrelated to the organization's tax-exempt purpose. The TCJA made several significant changes to the definition and structure of federal UBI, effective for tax years beginning after Dec. 31, 2017. One such change is the new "siloing" rule, under which a tax-exempt organization must track its income and expenses from each separate unrelated trade or business, and losses derived from one unrelated trade or business may not offset the income from another unrelated trade or business.

  • The chance the IRS will target your business for a federal tax audit is usually low. However, if your tax return for your business includes certain red flags, you boost your odds of being audited. Here are a few of the most common audit triggers that are likely to grab the attention of the IRS.

    Continuous losses. If you report a net loss on a Schedule C in more than two out of the last five years, the IRS may consider your business a hobby. If deemed a hobby, you can deduct expenses only up to the amount of your hobby's total income. Enjoy rebuilding cars? Great. But if you never turn a profit, don't expect the IRS to consider it more than a hobby.

  • Buyers of business vehicles get lots of breaks under the new tax law. The annual depreciation caps for passenger autos have risen sharply. If bonus depreciation is claimed, the first-year ceiling is $18,000 for cars acquired after Sept. 27, 2017, and put into service in 2018. The second- and third-year caps are $16,000 and $9,600. After that…$5,760.  For autos bought before Sept. 28, 2017, but placed in use during 2018, the first-year cap with bonus depreciation is $16,400. If no bonus depreciation is taken, the first-year ceiling drops to $10,000. Note that bonus depreciation now applies to both new and used business vehicles.

  • Dugan & Lopatka welcomes Jennifer Lysaught (left) and Michelle Meyer (right) to the firm's Audit and Review Department.

    Michelle is a 2016 graduate of Olivet Nazarene University where she received her Bachelor of Science in Accounting.  During her college career she served as a supplemental instructor, assisting professors in both financial and managerial accounting courses and guiding students in their coursework.  She was also a four year member of the women’s varsity soccer team.

    Jennifer is a 2016 graduate of the University of Illinois, where she received her masters in accounting science degree.  She also received her bachelor of science in accountancy from U of I.  While a student at U of I, she served as an account reconciler with the University’s Department of Kinesiology and Community Health.  She also worked in Finance Operations at Zurich American Insurance Company in Schaumburg.

    Both will focus their practice on assisting a variety of companies and not-for-profit organizations including religious, educational, and professional associations.

  • Occupational fraud continues to siphon staggering amounts of money from businesses worldwide, with smaller organizations being hit particularly hard.

    That’s one of the trends identified in the 2018 Report to the Nations on Occupational Fraud and Abuse, released Tuesday, April 17, by the Association of Certified Fraud Examiners. The biennial report, which is based on thousands of fraud cases reported by fraud examiners worldwide, provides a detailed look into how fraud is being perpetrated, detected, and combatted in various industries and regions worldwide.

    The median loss of the 2,690 frauds covered in the report was $130,000, but businesses with fewer than 100 employees suffered a median loss of $200,000, nearly double that of the $104,000 median loss reported for companies with 100 or more employees. In the 2016 report, examiners reported a median loss of $150,000 for small and large businesses.

  • Dugan & Lopatka welcomes Eric Thompson to the firm’s Accounting & Consulting Services Department.

    Eric is a graduate of the University of Illinois at Urbana-Champaign, holding both a Bachelor and Master in Accounting Science degree.

    As an associate, Eric’s responsibilities include assisting clients with their monthly, quarterly, and annual accounting work such as conducting reviews and compilations of financial statements and closing the books at the end of a client's accounting cycle.  Eric also prepares tax returns for businesses and their individual owners.

    Eric served as an accounting intern at Dugan & Lopatka and also Luse Holdings, Inc. (The Construction Financial Management Association) prior to joining the firm.

  • Keeping costs under control is crucial in today's challenging business environment. Without a doubt, one of the quickest ways for a business to cut costs is through staff reduction. But cutting jobs is not always the best cost-cutting strategy. Drastic job cuts can lead to a vicious cycle of reduced productivity, followed by even slower growth and decreased profitability. Replacing skilled workers when times improve may be difficult, leaving your company to struggle longer still.

    Take a look at some alternative cost-control strategies:

  • The standard mileage rates you can use to calculate your deductible vehicle expenses during 2016 for business, medical, and moving mileage have decreased from last year. Here's a recap.

  • Knowing whether you can or can't expense a purchase for business purposes can be complicated. That's why there are a few hard and fast rules to help you make the best decisions.

    According to the IRS, business expenses must be ordinary and necessary to be deductible. That means they are common and accepted in your business, as well as helpful and appropriate. You'll need to maintain records (such as journals and ledgers) and supporting documents (e.g., receipts, invoices) to substantiate your deductions. Certain expenses are subject to extra requirements, as described below.

    Travel expenses pertain to business trips and can include transportation to and from: your destination, airports, your hotel and business meeting places. They also generally include lodging, meals, tips and other related incidentals.

    Do:

    •  Maintain trip logs describing your business expenses and the purpose of each. If your trip is mostly for business but includes personal components, separate them in your log. These nondeductible personal items could include extending your stay for a vacation or taking personal side trips.
    •  Deduct travel-related meal costs, but only up to the 50 percent are allowed by the IRS.

    Don't:

    • Rely on estimates to determine the business vs. personal components of your expenses.
    • Deduct any of your travel expenses if your trip is primarily for personal purposes.
    • Deduct any of your meal costs if they could be considered unreasonably "lavish or extravagant."

    Entertainment expenses need to be either directly related to or associated with the conduct of your business. That means that business is the main purpose of the activities and it's highly likely you'll get income or future business benefits. Expenses from entertainment that isn't considered directly related might still be deductible if they are associated with your business and happen right before or after an important business discussion.

    Do:

    • Keep records of entertainment expenses, including clear descriptions of the nature, dates and times of the pertinent business activities or discussions.
    • Deduct only up to 50 percent of entertainment expenses, as allowed by the IRS.

    Don't:

    • Claim the costs of pleasure boat outings or entertainment facilities (e.g., hunting lodges).

    Business use of your personal car is calculated according to your actual business-related expenses, or by multiplying your business mileage by the prescribed IRS rate (53.5 cents per mile in 2017). This is called the standard mileage rate.

    Do:

    • Log odometer readings for each business trip and record your business purpose.
    • Claim actual basis deductions by applying the ratio of your business-to-total mileage.

    Don't:

    • Claim mileage or expenses pertaining to commuting to and from work.

    If you would like more guidance on knowing whether you can or can't expense a purchase for business purposes please feel free to contact a Dugan & Lopatka professional at This email address is being protected from spambots. You need JavaScript enabled to view it. or (630) 665-4440.

  • business tax climate 2016

    The Tax Foundation recently released its 2016 State Business Tax Climate Index and Illinois improves from 31st to 23rd due to the sunset of higher corporate and individual income taxes enacted in 2011.    Each year the Tax Foundation compiles the Index to rank the 50 U.S. states across more than 100 variables in the areas of corporate income tax, individual income tax, sales tax, property tax, and unemployment insurance tax.

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