CPAs Share Insights About Their Clients’ Concerns

YOUNGSTOWN, Ohio — Three of small-business owners’ biggest concerns are complying with the regulations of the Affordable Care Act, uncertainty about whether Congress will once again will make bonus depreciation retroactive, and uncertainty about the stock markets.

That was the takeaway from interviews with both larger and smaller public accounting firms in the Mahoning Valley: HBK CPAs & Consultants; Packer Thomas; Schroedel, Scullin & Bestic LLC; and Elias & Ricciardi CPAs LLC, all in Canfield; HD Davis CPAs LLC in Liberty; and Byler, Wolfe, Lutsch & Kampfer CPAs Inc. in Salem.

Other trends the CPAs remarked upon are the growing number of women in the profession, the optimism they have about the near-term outlook for their own firms, the solid but unspectacular profitability at most of their clients, and helping their clients with succession planning.

ACA Reporting Requirements

The reporting requirements of the Affordable Care Act are time consuming and thus, to some degree, unproductive and frustrating, the CPAs agree, but only one accountant mentioned he has clients who have chosen to pay the penalty instead of continuing to provide their employees with health insurance.

The biggest frustration among businesses with more than 50 employees face in complying with the Affordable Care Act, says Melissa Crowley, a principal at HBK, is “They can’t find all the information in one place” and they would rather fulfill the reporting requirements in-house than outsource the work.

“They feel they’re in uncharted territory,” says Packer Thomas principal William J. Vennetti. “The rules are changing daily,” resulting in growing concerns among his firm’s clients.

The concerns are such, he says, that “We have a handful willing to pay the penalty” rather than continue to provide health care insurance for their employees. “They’re going that route. It’s an emotional decision.”

With the Affordable Care Act having taken effect, “There are more forms to fill out,” says Thomas A. O’Neil, managing partner at SSB, “and we’re helping them comply.” In addition, firms face rate increases of 25% to 35% “and a lot of people are taking a new look at offering health insurance.”

A company with 50 or more employees that drops coverage, he points out, faces “severe penalties. Some clients are looking at self-insurance. You can still be insured and avoid government processing costs [filling out the ACA forms]. Each business must look at the options, all of them. One is being self-insured.”

Says Richard Lutsch, principal at BWLK in Salem, “Health care: You have to look at it like any other business decision. Most [employers] want to have it and offer the benefit.”

Only a minority of his firm’s clients has 50 or more employees, but he takes satisfaction in working with that segment. “It’s been fun for us to keep up with [the changes in ACA],” Lutsch says.

Helping clients develop policies so they can track such information and comply with ACA has provided HD Davis with ample work, says Tim Petrey, managing partner.

HD Davis is developing a Web-based system for the benefits sections of human resources departments that would make it easier to comply with ACA as well as track employees’ vacation time and eligibility to participate in 401(k) plans.

There’s a new document, IRS Form 1095, that employers with a workforce of more than 1,000 must file with their W2s, Petrey notes, on which they list the names of their employees covered by their health insurance and how long each employee has been covered. Certain industries, such as restaurant chains, offer only a limited number health insurance because so many employees are part-time.

Bonus Depreciation

To help businesses rebound from the Great Recession, in 2009 Congress passed the American Recovery and Reinvestment Act in which Section 179 was amended to allow more accelerated depreciation of equipment.

The Small Business Jobs and Credit Act of 2010 increased to $500,000 from $250,000 the write-off or expensing of qualifying equipment and software placed in service by the end of that year. It expired Dec. 31, 2010.

It proved so popular that it has been renewed each succeeding year, albeit retroactively late in 2013 and 2014.

At present, the cap again stands at $25,000 but small-business owners and the CPAs interviewed pretty much expect Congress will again act late in the year to allow up to $500,000 to be claimed on business tax returns.

Lutsch thinks the political calendar will persuade Congress to restore the $500,000 cap and make it retroactive one last time.

“This would be the last year to extend it that would allow small-business owners to get the [political] benefits,” he explains, and members of Congress the support of the affected owners. Extending it late next year, after the federal elections, would be too late to capture or retain owners’ votes.

“I would hope [Congress] will renew it again,” says Jerry Ricciardi, principal at Elias & Ricciardi. “I have a radiologist who needs to upgrade his equipment.”

“The idea [behind bonus depreciation] is to encourage business owners to buy the things they need,” says HD Davis’ Petrey.

“The maximum is $25,000,” says SSB’s O’Neil. “Last year Congress took it back to $500,000. That’s the hope this year. [The uncertainty] puts a lot of businesses in a holding pattern.”

“You want to take advantage of the tax law,” O’Neil advises his clients, “but buy based on need, regardless of the tax [consequences].”

BWLK’s Lutsch is a bit more forceful, “I tell my clients: Never do it [buy equipment] just for the tax benefits.”

Stock Market Concerns

With the economy in its sixth year of a less than stellar recovery, the small-business owners who survived the Great Recession have regained their financial footing but still wait for the other shoe to drop.

Because many organizations – both companies and charitable foundations – have invested in the stock markets, they watch them closely.

When markets fall precipitously, as happened in August, owners and executive directors get the jitters because markets are one indicator of the health of the economy. They worry about their revenue streams, become hesitant about financing business growth and reconsider the scope of their support because the value of their investments has fallen.

“At the end of the third quarter, a lot of people saw losses,” Crowley says, referring to private companies, charitable foundations and nonprofits. “I do a lot of work with nonprofits. The nonprofits are asking, ‘Do we pull our money out?’ They’re contacting us to ask what we think.”

Says John F. Elias of Elias & Ricciardi, “They look at the stock market [because] they’re concerned about the economy. They’re always concerned about how it will affect sales. I tell them if you have a solid business plan, you shouldn’t have to worry.”

Adds his partner, Ricciardi, “We’re business owners, so we have the same concern.”

Business Performance

Except for companies that engage in oil and gas exploration or extraction and the vendors who supply them, enterprises in the region are doing well, the CPAs relate.

“Car dealerships are doing well,” says Packer Thomas’ Vennetti. “So are [manufacturers who are] exporters, niche wholesalers, food manufacturers and transportation,” that is companies that build vehicles and truckers. “Our clients are mixed, from doing extremely well to not so well.”

The customers of the CPAS’ clients tend to remit payment in 30 to 45 days. And the CPAs in turn are receiving more timely payments. “Most clients pay within 30 days,” says Lutsch. “The stragglers always straggle regardless.”

Companies routinely meet payroll, the accountants agree. “They’re paying off debt they incurred during the [Great] Recession,” Lutsch says. “Some are buying equipment.”

Banks have it easier to qualify for credit, he continues. “More banks are calling on them, offering new products and lower rates,” Lutsch adds.

“Some not-for-profits, some charities, are benefiting from the [improved financial climate],” Lutsch says. “People have more money and are more generous.”

“The Ohio tax cuts have helped significantly,” says HBK’s Crowley.

More Women in Accounting

The number of women in public accounting is on pace to outnumber men, the CPAs say.

“I see a lot more females,” says Crowley. In the last group of interns HBK took on, eight of the nine were women, she relates. “Usually it’s 50/50.”

Petrey at HD Davis has also seen an influx of women in the profession. More men than women are CPAs, he says, but thinks that will reverse. “There’s tremendous opportunity” now that technology – laptop computers and wireless connections – allow anyone to work outside the office.

“There’s a lot of flexibility. You can work from home,” he points out.

Of the 60 employed at Packer Thomas, 45% are women, he says. He notes that the men at his firm are playing a larger role in getting their kids off to school in the morning.

Elias & Ricciardi just hired another female CPA in August, Christine Graygo, and has another woman, Alexis Rafoth, studying to take the CPA exam. Other women are part-time bookkeepers.

SSB has four principals who are women, O’Neil, says. “Seventy-five percent of the professionals in our office are women.” Of the four female principals, two reared their children before becoming partners.

The public accounting profession prides itself on the flexibility its employees have to determine the number of hours they work and scheduling those hours. This has made it much easier for women have both family and career.

“It’s a win-win situation,” Vennetti says. “It’s become less male-female and more a culture where both parents spend more time with their kids.”

Copyright 2022 The Business Journal, Youngstown, Ohio.