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Entries by Katie Chrisman

Tax Ramifications for Scam Victims

Navigating the tax implications of scams and theft losses can be complex, especially considering legislative changes that generally limit casualty and theft losses to those associated with a disaster. However, if you’ve fallen victim to a scam, there is still an important tax avenue available for you. Traditionally, under tax law, you could deduct …

Navigating the tax implications of scams and theft losses can be complex, especially considering legislative changes that generally limit casualty and theft losses to those associated with a disaster. However, if you’ve fallen victim to a scam, there is still an important tax avenue available for you.

Traditionally, under tax law, you could deduct theft losses if they weren’t covered by insurance. But while the law changed a few years ago, tightening restrictions and limiting deductions primarily to disaster-related losses, there’s still hope. The tax code recognizes that if you were scammed while engaging in a transaction with a profit motive, you might still be eligible to claim a deduction.

Internal Revenue Code Section 165(c)(2) caters specifically to losses incurred from profit-driven activities. This means if your financial losses from a scam were tied to an endeavor intended to generate profit, you might deduct these losses, without needing a disaster declaration. Understanding this exception can be a crucial lifeline, allowing you to reclaim some financial relief from the losses you’ve endured due to deceitful scams.

Eligibility Criteria for Profit-Driven Casualty Losses: For a theft loss to qualify under the profit-motivated exception, several stringent criteria must be met:

  1. Profit Motive: The primary intention of the transaction must be to achieve economic advantage. The IRS requires clear evidence that the transaction had a bona fide profit expectation. Case law and IRS rulings substantiate the necessity of this objective, often requiring substantial documentation to support the profit intent.
  2. Type of Transaction: Eligible transactions commonly include traditional investment vehicles such as securities, real estate, or other income-generating activities. The lack of a profit motive typically disqualifies social or personal activities from this deduction space.
  3. Nature of Loss: The loss must stem directly from the transaction aimed at profit. This correlation should be clear and demonstrable through financial records and legal documentation. For instance, investment scams or fraudulent financial schemes targeting taxpayer investments often qualify if they meet the profit criteria.

Application of IRS Guidance: The application of the deduction frequently necessitates analyzing IRS memoranda and rulings for clarity on what constitutes a deductible loss. A recent IRS Chief Counsel Memorandum (CCM 202511015)has further elucidated scenarios where such losses are deemed deductible:

  • Investment Scams: These are classic examples where losses, though fraudulent in nature, can be deemed deductible if the initial investment was made with a credible expectation of profit. Taxpayers must validate the transaction’s legitimacy and profit intent using documentation such as communications with the scammer, investment contracts, and proof of monetary transfer.
  • Theft Losses: Profit-driven theft is uniquely scrutinized. The IRS insists that these losses must manifest in a transaction inviting profit, not merely in personal engagements like casual lending between acquaintances.

Some Not So Good Tax Ramifications: Being scammed out of your IRA or tax-deferred pension funds can have significant tax implications, depending on whether the account was a traditional or Roth type.

In the case of a traditional IRA or tax deferred retirement plan, funds withdrawn prematurely due to a scam are generally considered taxable income. This means the entire amount withdrawn is added to your taxable income for the year, potentially bumping you into a higher tax bracket and increasing your tax liability. Additionally, if you are under 59½, these withdrawals might also be subject to a 10% early withdrawal penalty, further compounding the financial stress.

Conversely, a Roth IRA or Roth qualified plan withdrawal is less punitive in terms of immediate tax consequences, as contributions were made with after-tax dollars. Generally, provided your account has met the five-year holding rule, contributions can be withdrawn tax-free and penalty-free. However, if earnings are withdrawn prematurely and not for a qualifying reason, they may be subject to taxes and penalties.

The following examples illustrate when a scam or theft will or will not qualify for a casually loss and the tax consequences. Generally, the stolen funds are transferred overseas and are irretrievable without a reasonable prospect of recovery, one of the qualifications for a personal casually loss.

Example 1: Impersonator Scam – Qualifies as Personal Casualty Loss

Taxpayer 1 fell victim to a sophisticated scam involving an impersonator claiming to be a “fraud specialist.” The scammer falsely informed Taxpayer 1 that their accounts were compromised, inducing Taxpayer 1 to transfer funds from both IRA and non-IRA accounts into what were purportedly new, secure investment accounts. However, these were controlled by the scammer, who funneled the money into an overseas account.

The key to this scenario being deductible lies in the taxpayer’s intent. Taxpayer 1’s motive was to safeguard and reinvest funds, clearly manifesting a profit-oriented intention. Consequently, the scam losses qualify as a theft loss since they were incurred in a transaction entered for financial gain.

Tax Implications: 

a.   If the taxpayer can itemize deductions, the loss is deductible on Schedule A.

b.   However, the taxpayer is taxed on the traditional IRA distributions, and must recognize the gain or loss on the non-IRA account. In addition, if the taxpayer is under age 59.5 the 10% early distribution penalty for traditional IRAs applies, for which there is no specific exception.

c.   If the taxpayer has sufficient resources, other funds can be rolled back into the IRA within 60 days from the date withdrawn, and b. and c. would not apply to the extent of funds rolled into the IRA. 

Example 2: Romance Scam – Non-Qualifying Personal Casualty Loss

Taxpayer 2 became ensnared in a romance scam, believing they were in a genuine relationship with an impersonator. Persuaded by a fabricated story about a relative needing medical help, Taxpayer 2 transferred funds from IRA and non-IRA accounts, into an overseas account controlled by the scammer. The funds were meant to assist another person, rather than seek profit.

The critical distinction here is the absence of a profit motive. The transactions were embarked upon out of personal sentiment and misled compassion, lacking any financial investment intent. Consequently, these losses are classified as personal casualty losses under Section 165(c)(3), which are non-deductible absent a federally declared disaster or qualifying personal casualty gains.

Because the losses do not meet the criteria for profit-driven transactions, the taxpayer’s losses are not deductible.

Tax Implications: 

a.   No casualty loss deduction allowed.                        

b.   However, the taxpayer is taxed on the traditional IRA distributions, and must recognize the gain or loss on the non-IRA account. In addition, if the taxpayer is under age 59.5 there is a 10% early distribution penalty for traditional IRAs for which there is no specific exception.

c.   If the taxpayer has sufficient resources, other funds can be rolled back into the IRA within 60 days, and b. and c. would not apply to the extent of funds rolled into the IRA. 

Example 3: Kidnapping Scam – Non-Qualifying Personal Casualty Loss

Taxpayer 3 was the victim of a kidnapping scam involving an impersonator. The scammer contacted the taxpayer by text and phone and claimed to have kidnapped the taxpayer’s grandson for ransom. The taxpayer demanded to speak to the taxpayer’s grandson and heard his voice over the phone begging for help.

Scammer directed Taxpayer 3 to transfer money to an overseas account and not to contact law enforcement. The taxpayer did not realize that the scammer had used artificial intelligence to clone the grandson’s voice and that no kidnapping had taken place.

Under immense duress, Taxpayer 3 authorized distributions from an IRA account and a non-IRA account, then directed those funds to be deposited in the overseas account provided by the scammer, hoping to ensure the safety of the grandson.

Later Taxpayer 3 was able to contact the grandson and learned that no kidnapping had taken place and immediately contacted law enforcement and their financial institution, but was informed that the distribution to the overseas account could not be undone and there was little to no prospect of recovery.

The taxpayer’s motive was not to invest any of the funds distributed from the IRA and non-IRA accounts but, rather, to voluntarily transfer the funds to the scammer, albeit under false pretenses and duress. Notwithstanding the fraudulent inducement and duress, Taxpayer 3 did not have a profit motive; therefore, the losses were NOT incurred in a transaction entered for profit and therefore not tax deductible.

Tax Implications: Same as example #2.

Implications: These examples emphasize the importance of critical assessment of the intent and transaction nature when determining if a scam-related event is a deductible casualty loss.

  • Documentation and Intent: Individuals should maintain clear intent documentation, prominently in investment contexts, to support future claims of profit motive.
  • Scrutiny and Compliance: Enhanced IRS scrutiny of non-disaster casualty losses necessitates meticulous compliance, with auditors keenly differentiating between qualifying and non-qualifying losses.

It is crucial to consult with De Boer, Baumann & Company if you receive questionable or unsolicited texts, emails, or calls, especially before authorizing any fund transfers or account withdrawals. Our team can provide practical guidance on fraud detection, documentation, and next-step decision-making if you suspect a scam.

It is also important to educate family members, particularly older adults who are frequently targeted, about these risks and common tactics. Encouraging them to reach out early can help prevent losses and provide support if a situation escalates. A proactive approach can protect assets, reduce disruption, and provide peace of mind.

 

What Is Advisory — And Is It Right for You?

Most people think their financial professional focuses on the past: last year’s tax numbers, last quarter’s profit, last month’s expenses. That’s the compliance world. It’s essential, of course. But it’s focused on what has already happened. Advisory is something different.Advisory is about shaping what comes next. It’s a shift from “Here’s your report” to …

Most people think their financial professional focuses on the past: last year’s tax numbers, last quarter’s profit, last month’s expenses. That’s the compliance world. It’s essential, of course. But it’s focused on what has already happened.

Advisory is something different.
Advisory is about shaping what comes next.

It’s a shift from “Here’s your report” to “Here’s how we reach your goals.” From reacting to numbers to intentionally influencing them. And if you’ve ever wished money felt less uncertain — or wished for a clearer path toward the life or business you want — advisory may be the upgrade you didn’t know was available.

Why Compliance Alone Leaves People Stuck

Compliance keeps you accurate. Advisory keeps you moving forward.

Most individuals and business owners only see the backward-facing side of financial work. That’s why they often run into patterns like:

  • Finding out their tax bill when it’s too late to change it
  • Making big business decisions without a roadmap
  • Setting goals without the structure to reach them
  • Reviewing profitability rather than designing profitability
  • Feeling like money is unpredictable rather than manageable

These aren’t failures. They’re symptoms of operating with historical data instead of a future-focused strategy.

So… What Exactly Is Advisory?

Advisory is an ongoing, collaborative process that uses forward-looking insights to help you make smarter financial decisions, reduce stress, and progress toward long-term goals.

There are two main types that many people find the most helpful.

1. Tax Advisory

Tax advisory is proactive tax planning — the strategies, timing, and decision-making that help reduce future tax obligations before a return is ever filed.

It tackles questions like:

  • “What steps can I take this year to lower my tax bill next year?”
  • “Should I consider a different business structure as I grow?”
  • “How do I plan for capital gains, retirement withdrawals, or rental income?”
  • “What tax strategies apply if I start or sell a business?”

Tax advisory shifts the focus from reporting taxes to designing tax outcomes.

2. CFO Advisory

CFO advisory focuses on the financial direction of your business — not just what happened, but what’s possible.

It helps you explore questions such as:

  • “How much cash will I actually have in three or six months?”
  • “Does our pricing support the level of profit we need?”
  • “Are we ready to hire, or should we outsource a little longer?”
  • “What would it take to expand, open a new location, or launch a new service?”
  • “How do we build a budget that reflects our goals instead of just our costs?”

CFO advisory gives you a clearer view of how decisions today shape results tomorrow.

It’s not bookkeeping. It’s strategic guidance.

Compliance vs. Advisory: A Clearer Comparison

Compliance

Advisory

Looks at the past

Plans for the future

Answers “What happened?”

Answers “What should we do next?”

Necessary for accuracy

Essential for growth

Often once a year

Ongoing partnership

Reporting-focused

Goal- and strategy-focused

Reactive

Proactive

The difference isn’t only in services — it’s in mindset. Compliance is about clarity. Advisory is about progress.

Who Benefits the Most From Advisory? Business Owners

Whether you’re just starting or scaling, advisory helps with pricing, cash flow, hiring decisions, profit margins, budgeting, and long-term growth planning.

Individuals With Complex or Growing Financial Lives

Side gigs, rental properties, investments, stock compensation, and multi-source income all benefit from proactive planning.

People Approaching Major Life or Financial Milestones

Retirement, business sales, home purchases, expansions, or college planning often require a long runway to optimize outcomes.

Anyone Who Wants More Control and Less Guesswork

If you want financial clarity instead of surprises, advisory gives you structure and strategy.

The Key Benefits: Why Advisory Pays Off

Advisory often delivers a measurable return on investment because it directly influences taxes, cash flow, and long-term wealth building. The most common benefits include:

1. Better Tax Outcomes Year After Year

Planning ahead opens the door to legal, strategic tax advantages you simply can’t access at filing time.

2. A Clear, Actionable Financial Plan

You’re no longer guessing. You know the steps required to reach your goals — and you have support following them.

3. Improved Profitability and Cash Flow

Businesses often discover hidden profit leaks and inefficiencies that can be corrected quickly.

4. More Confidence in Decisions

You gain clarity on the financial impact of every major move before you make it.

5. Faster Progress Toward Your Milestones

Whether you want to expand your business, retire early, or grow wealth, advisory accelerates the path.

6. A Collaborative Relationship Focused on Your Wins

Instead of one annual meeting, you get a strategic partner committed to helping you move forward throughout the year.

Is Advisory Right for You?

If you want more clarity, more control, more intentional financial planning — and fewer surprises — advisory may be exactly what you need.

It’s not about adding complexity. It’s about replacing uncertainty with direction.
And if you’re ready to explore how proactive planning can improve your financial outcomes, the next step is simple:

If you think advisory might be right for you, reach out to De Boer, Baumann & Company. Let’s talk about your goals and build a plan for where you want to go next. We’ll help you sort through the priorities, put a clear path in place, and stay ahead of the big decisions as the year unfolds.

What To Do When You Get an IRS Notice (And Why You Don’t Need to Panic)

There’s nothing quite like opening the mailbox, seeing an envelope with “Internal Revenue Service” printed on it, and feeling your stomach drop. Even people who are perfectly organized — even people who’ve done everything right — feel the same jolt of panic when they receive an IRS notice. But here’s the truth:Most IRS notices …

There’s nothing quite like opening the mailbox, seeing an envelope with “Internal Revenue Service” printed on it, and feeling your stomach drop. Even people who are perfectly organized — even people who’ve done everything right — feel the same jolt of panic when they receive an IRS notice.

But here’s the truth:
Most IRS notices are not emergencies.
Many are routine.
And almost all can be resolved calmly and cleanly once you know what you’re dealing with.

So, before you lose sleep, take a breath. Then take the next right steps.

Why the IRS Sends Notices in the First Place

The IRS sends millions of notices every year, and most fall into just a few categories:

  • Something didn’t match
    This is the most common scenario. The IRS receives a form (like a 1099 or W-2) that doesn’t match what was on your return. This triggers an automatic letter — not an accusation.
  • They need more information
    Sometimes a number wasn’t clear. A form didn’t show up. A math error correction triggered a follow-up. It’s often small.
  • A payment was short, delayed, or misapplied
    Your payment might have gone to the wrong tax year, posted late, or not matched the number on your return.
  • They’re adjusting something on their end
    This could be a refund recalculation or an update to a credit or deduction.
  • They’re confirming identity
    Identity theft protections are much stronger now, and sometimes the IRS asks you to verify you’re… you.
    In most cases, the notice is informational — not a threat.

The Most Important Thing: Don’t Respond Alone

The biggest mistake people make is replying to the IRS too fast or without guidance.

You may be tempted to:

  • Pay whatever number the letter shows
  • Call the IRS immediately
  • Send documents without context
  • Ignore it and hope it goes away

Those reactions almost always make things harder.

The IRS letter is talking to you — but you should talk to your financial professional first.

They’ll help you understand:

  • Whether the notice is accurate
  • Whether you actually owe anything
  • Whether the IRS made an error
  • Whether this is a simple fix or needs representation
  • What documentation (if any) needs to be provided
  • Whether you should respond at all

You are not meant to navigate this alone.

What Your Notice Actually Means

Every notice has a code (such as CP2000, CP14, or CP75). Those codes help identify the issue quickly.

Here’s a quick guide to the most common ones:

CP2000 — Underreported Income

This is the big one. It means the IRS thinks your income was higher than what you filed. This does not mean you did something wrong. Often, a vendor filed a form late or incorrectly.

CP14 — Balance Due

This shows a balance the IRS thinks you owe. It could be accurate… or it could be the result of a timing issue.

CP75 — Audit Documentation Request

The IRS wants proof related to a credit or deduction. Again, not a panic situation — just a request.

Letter 5071C — Identity Verification

This is part of fraud prevention. It’s not about your return being “wrong.”

Notice of Intent to Levy (LT11/CP504)

This is more serious and requires prompt action — but still not panic. Professionals resolve these daily.

Whatever the code, context matters more. And that’s where guidance helps.

What NOT To Do When You Receive an IRS Notice

A calm, correct response almost always leads to a clean resolution. But these common mistakes make things significantly worse:

Don’t ignore the notice. Deadlines matter.

Don’t call the IRS before reviewing the notice with a professional. You may accidentally agree to something you shouldn’t.

Don’t pay the amount automatically. The number may be wrong — sometimes by a lot.

Don’t send documents without explanation. The IRS reads what you send literally. Context is everything.

Don’t assume this means you’re being audited. Most notices have nothing to do with audits.

 How the Process Usually Goes

Here’s what a calm, correct resolution typically looks like:

  1. You contact your financial professional and share the notice.
  2. They review your return and the IRS data to see what triggered the letter.
  3. They determine whether the IRS is correct or incorrect.
  4. They prepare the appropriate response — or advise that no response is needed.
  5. If money is owed, they ensure the amount is accurate and the payment is sent to the correct tax year.
  6. If the IRS is mistaken, they prepare a clear explanation and supporting documents.

Most cases resolve with a single letter. Some take a few rounds. But almost all are manageable. 

Why Having Professional Support Makes a Huge Difference

IRS notices feel intimidating, but a professional sees these all the time. They know:

  • How to interpret the codes
  • How to match the notice to your return
  • Where IRS errors commonly happen
  • How to fix misapplied payments
  • How to communicate with the IRS clearly and effectively
  • When to escalate an issue
  • When notto respond at all

And most importantly… they know how to keep you calm and protected through the process.

 If You Got a Notice, You Don’t Have to Solve It Alone

If you have received an IRS notice, whether it is confusing, unsettling, or simply unexpected, contact De Boer, Baumann & Company. We will review it with you, explain what it means, and help you respond the right way.

No panic.
No guesswork.

Just clarity, support, and a clean path forward.

Tax Alert: Prepare for the New 1099-DA Crypto Reporting

Form 1099-DA, “Digital Asset Proceeds from Broker Transactions,” is a new Internal Revenue Service (IRS) tax form that certain brokers must use to report digital asset transactions. It is designed to enhance transparency and compliance in the rapidly evolving digital asset space, requiring information on transactions involving cryptocurrencies, non-fungible tokens (NFTs), and other digital …

Form 1099-DA, “Digital Asset Proceeds from Broker Transactions,” is a new Internal Revenue Service (IRS) tax form that certain brokers must use to report digital asset transactions. It is designed to enhance transparency and compliance in the rapidly evolving digital asset space, requiring information on transactions involving cryptocurrencies, non-fungible tokens (NFTs), and other digital assets.

The reporting requirements for Form 1099-DA officially take effect for the 2025 tax year, with brokers sending the forms to taxpayers and the IRS in early 2026. Before this change, reporting digital asset transactions was largely dependent on self-reported data, which often led to inconsistencies and underreporting.

The Purpose and Impact of Form 1099-DA: Form 1099-DA aims to increase tax compliance and improve reporting accuracy in the digital asset space by requiring brokers to report transactions. This standardizes reporting and can simplify tax filing for some investors but also necessitates diligent record-keeping to ensure accurate reporting.

Who Must Issue Form 1099-DA? The reporting obligation for Form 1099-DA falls on “brokers” who facilitate the sale or exchange of digital assets. The IRS’s definition of a broker is broad and includes digital asset trading platforms, payment processors, and hosted wallet providers. However, decentralized finance (DeFi) platforms and non-custodial wallets are not generally required to issue this form.

Who Will Receive Form 1099-DA? U.S. taxpayers who sell, trade, or dispose of digital assets through a qualifying broker should expect to receive a Form 1099-DA in early 2026 (for 2025 transactions). This includes individuals and businesses involved in buying, selling, trading, mining, or staking digital assets. Real estate reporting entities must also report if digital assets are used in real estate transactions.

What Information is Included on Form 1099-DA? Form 1099-DA requires brokers to report detailed information about each digital asset transaction, including:

  • Payer and Recipient Identification.
  • Transaction details like asset name, quantity, date, time, and gross proceeds.
  • Cost basis (mandatory for “covered securities” acquired after January 1, 2026). Broker reporting of basis is voluntary for the 2025 tax year.
  • Holding period.
  • Transaction type.
  • Fair Market Value (FMV).
  • Transaction fees.
  • Wash sales for tokenized securities.

The information reported on Form 1099-DA varies depending on the tax year.

  • 2025 Tax Year (forms sent in early 2026)– For 2025 transactions, brokers are required to report the gross proceeds from the sale, exchange, or other disposition of a digital asset. Reporting of the cost basis is voluntary for brokers in 2025.
  • 2026 Tax Year and beyond (forms sent in early 2027 and later) – Starting with the 2026 tax year, brokers will be required to report more comprehensive information, including gross proceeds, cost basis (for “covered securities”), acquisition and disposition dates, holding period, and transaction details like the type and quantity of the digital asset.

Understanding the Cost Basis Challenge for 2025: A significant point for the 2025 tax year is the voluntary cost basis reporting by brokers. If the cost basis is not reported on Form 1099-DA, the IRS may assume it’s zero, which could lead to tax notices for underreported income. To prevent this, taxpayers must keep detailed personal records of their digital asset transactions, including acquisition dates and costs, fees, disposition dates, and sales proceeds. These records are necessary for accurately completing Forms 8949 and Schedule D.

Special Reporting Rules for Stablecoins and Non-Fungible Token (NFTs): There are specific reporting rules for certain digital asset types.

  • Qualifying Stablecoins: For 2025 and later, brokers can report qualifying stablecoin transactions in aggregate if they exceed $10,000 annually.
  • Specified NFTs: Starting in 2025, if total sales of specified NFTs exceed $600 for the year, brokers must report them, potentially in aggregate.

How Form 1099-DA is Used File Taxes: The information on Form 1099-DA is used when preparing tax returns similar to the way stock transactions reported on Form 1099-B are transferred to Form 8949 and Schedule D. This involves reconciling the 1099-DA with a taxpayer’s records, calculating capital gains or losses, and reporting the final amount on Form 1040.

Best Practices for Crypto Investors: Given these changes, digital asset investors should maintain detailed records of all transactions, consider using crypto tax software for tracking and calculations, and be aware of potential limitations in broker reporting, especially regarding cost basis in 2025. It is also important to remember that transactions not reported on a 1099-DA must still be reported. Staying informed and consulting a tax professional can help navigate this evolving landscape.

Answering the IRS Question about Digital Assets: For the last several years, a “yes”/”no” question on Form 1040 has been: “At any time during [return year], did you: (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?” Now that brokers will be issuing Form 1099-DA for the sale or exchange of digital assets, the IRS will be able to verify how taxpayers answer the question in light of the Form 1099-DA that was filed by the broker. When signing the tax return, the taxpayer signs under penalty of perjury that the information in the return is true, correct and complete. Care needs to be taken to correctly answer the IRS’ question.

If you have questions about Form 1099-DA or need help reconciling broker reporting with your cost-basis records and wallet activity, please contact the De Boer, Baumann & Company team to review your digital asset transactions and ensure they are reported accurately.

Employee Spotlight: Megan Joseph

Since joining De Boer, Baumann & Company in 2023, Megan Joseph has quickly become a trusted figure on our CAAS team. As a CAAS Manager, she brings both technical strength and a calm, steady approach that helps clients feel confident in where they stand financially and where they are headed next. Megan earned her …

Since joining De Boer, Baumann & Company in 2023, Megan Joseph has quickly become a trusted figure on our CAAS team. As a CAAS Manager, she brings both technical strength and a calm, steady approach that helps clients feel confident in where they stand financially and where they are headed next.

Megan earned her Bachelor’s degree in Accounting from Miami University, where she built the foundation for her love of numbers and problem solving. Today, she works closely with clients across a variety of industries, offering thoughtful guidance, clear communication, and reliable support. Whether she is digging into the details or helping clients see the bigger picture, Megan approaches her work with care, consistency, and a genuine commitment to the people she serves.

Family plays a central role in Megan’s life. She has been married for 36 years to her husband, whom she met while working in Chicago, and together they have two daughters, Jennifer and Carleigh. Megan is also a proud grandmother to her 15-month-old grandson, Julian. When asked about her greatest accomplishment, she points without hesitation to being a mother and grandmother, a role that brings her immense pride and joy.

Outside of work and family, Megan appreciates experiences that create lasting memories. One of her fondest memories is her trip to Thailand, where she had the opportunity to step outside of her every day routine and experience a completely different culture. That sense of curiosity and appreciation for perspective shows up in subtle ways, including how she approaches her work and the relationships she builds.

Megan’s influence can be seen throughout the firm, not just in the work she does but in the way she consistently reflects the values we uphold. Her thoughtful presence and commitment to supporting others help create a culture rooted in trust and collaboration. We’re proud to spotlight Megan and the difference she continues to make every day.

Understanding the Percentage-of-Completion Method in Construction Accounting 

Construction projects rarely begin and end within the same accounting period. Work may stretch across months or even years, and costs often do not align neatly with billing or cash receipts. These realities make revenue recognition one of the most important financial decisions a construction company must address. The percentage-of-completion method is widely used …

Construction projects rarely begin and end within the same accounting period. Work may stretch across months or even years, and costs often do not align neatly with billing or cash receipts. These realities make revenue recognition one of the most important financial decisions a construction company must address. The percentage-of-completion method is widely used in the industry because it gives a clearer, more accurate picture of financial performance as work progresses. 

For contractors of all sizes, understanding how this method works can improve project planning, financial forecasting, and long-term decision making. 

What the Percentage-of-Completion Method Measures 

The percentage-of-completion method recognizes revenue and expenses based on the portion of work completed during a specific period. Instead of waiting until a project is finished, income and costs are recorded steadily over time. 

This method benefits contractors because it: 

  • Aligns revenue with the work performed 
  • Reduces large swings in income across reporting periods 
  • Provides more accurate financial information for lenders and bonding agents 

For businesses managing active project pipelines, this steady recognition helps create a more predictable financial picture. 

How Completion Percentage Is Calculated 

There are multiple ways to measure progress, but many contractors use the cost-to-cost approach. This compares actual costs incurred to the project’s total estimated costs. 

For example, if a project is expected to cost 1 million dollars and your team has incurred 400,000 dollars to date, the project is considered 40 percent complete. Forty percent of the contract revenue would then be recognized in the financial statements. 

While straightforward, this approach depends heavily on accurate job costing and consistent cost tracking. 

Why Job Costing Matters 

The percentage-of-completion method is only as reliable as the information that supports it. If labor, materials, equipment, or subcontractor costs are not recorded accurately and timely, the calculated percentage of completion may not reflect the true status of the project. 

Reliable job costing helps contractors: 

  • Identify issues early, such as overruns or delays 
  • Adjust projections based on real-time information 
  • Communicate clearly with lenders, bonding agents, and project partners 

Job costing becomes a foundation for both accurate reporting and better operational decisions. 

How This Method Supports Long-Term Planning 

One of the strengths of the percentage-of-completion method is that it highlights trends. Contractors can see how costs and revenue evolve as the project progresses instead of waiting for the final outcome. This helps owners plan cash flow, adjust staffing, and anticipate material needs with greater confidence. 

It can also reveal whether estimates need to be updated. If costs begin to rise faster than expected, issues can be addressed before they impact the final margins. 

Tax Implications for Contractors 

Some contractors are required to use the percentage-of-completion method for tax reporting, particularly for larger or long-term projects. Others may have the option to choose among different accounting methods depending on their business size and project mix. 

Understanding these rules is important because the method used for tax purposes affects when income is recognized and how taxable profit is calculated. 

A review of your accounting method helps confirm that you are meeting requirements while managing tax liability effectively. 

Challenges Contractors Should Be Aware Of 

While the percentage-of-completion method provides valuable insight, it also demands discipline. Potential challenges include: 

  • Difficulties estimating total project costs early on 
  • Delays in recording job costs or change orders 
  • Overbilling or underbilling that may distort reported results 
  • Project delays that require adjustments to cost forecasts 

These issues highlight the importance of clear processes, consistent reporting, and strong internal communication. 

Creating Clarity in Construction Accounting 

The percentage-of-completion method allows contractors to track performance with greater accuracy and transparency. When supported by reliable job costing and thoughtful project management, it becomes a powerful tool for financial decision making. 

At DBC, we help construction companies evaluate their accounting methods, strengthen job costing systems, and build financial processes that support long-term growth. If you would like guidance on implementing or improving the percentage-of-completion method, our team is ready to help. 

 
 

Tax Strategies for Construction Contractors 

Tax planning plays a critical role in the financial health of any construction business. Contractors face unique challenges, from long project timelines to fluctuating material costs and changing labor needs. These variables create a tax landscape that looks very different from traditional service industries. With thoughtful planning and clear financial processes, contractors can reduce tax liability, …

Tax planning plays a critical role in the financial health of any construction business. Contractors face unique challenges, from long project timelines to fluctuating material costs and changing labor needs. These variables create a tax landscape that looks very different from traditional service industries. With thoughtful planning and clear financial processes, contractors can reduce tax liability, strengthen cash flow, and improve long-term stability. 

Effective tax strategy is not simply about minimizing taxes. It is about creating a financial structure that supports predictable growth, clearer decision making, and stronger project performance. 

Understand Your Accounting Method 

A contractor’s tax position begins with the accounting method they use. Many contractors underestimate how much this decision affects taxable income, cash flow, and financial reporting. The right method depends on the size of the business, project length, and how revenue is earned. 

Contractors commonly use one of the following methods: 

  • Cash method, which recognizes revenue when received and expenses when paid. 
  • Accrual method, which records revenue when earned and expenses when incurred. 
  • Percentage-of-completion method, which recognizes income based on project progress. 
  • Completed contract method, which recognizes income only when a project is finished. 

Choosing the method that aligns with your project mix and financial goals can significantly influence your tax liability. 

Use Job Costing to Your Advantage 

Accurate job costing is essential for both project profitability and tax planning. When material, labor, equipment, and subcontractor costs are tracked consistently, contractors gain a clearer view of which expenses can be deducted and which must be capitalized. 

Better job costing also improves forecasting. When the true cost of a job becomes clearer, contractors can plan ahead for tax obligations tied to project timing and revenue recognition. 

Take Advantage of Depreciation Opportunities 

Construction companies invest heavily in vehicles, tools, heavy equipment, and technology. Many of these purchases qualify for accelerated depreciation. Year-end planning often provides opportunities to: 

  • Review equipment needs for upcoming projects 
  • Identify assets that may qualify for Section 179 or bonus depreciation 
  • Determine whether purchasing or leasing is the more tax-efficient option 

These decisions can reduce taxable income in the current year and support operational needs. 

Review Your Structure for Tax Efficiency 

The business entity you choose influences how income flows, how taxes are calculated, and how future growth is managed. Sole proprietorships, partnerships, LLCs, and S corporations all carry different tax implications. 

Contractors often review their structure when they begin hiring more employees, taking on larger projects, or planning for succession. A periodic evaluation helps ensure the business remains aligned with long-term goals. 

Plan for Subcontractor Compliance 

Subcontractor relationships are central to construction work. They also bring tax responsibilities that require careful oversight. Contractors should confirm that subcontractors: 

  • Provide accurate W-9 forms 
  • Are classified correctly as contractors rather than employees 
  • Receive timely 1099 filings when required 

Accurate documentation protects your business and reduces the risk of penalties. 

Analyze Project Timing for Tax Impact 

Project timing influences when revenue and expenses appear on a tax return. Contractors who understand how timing affects the bottom line can make informed decisions about when to start certain phases, purchase materials, or schedule labor. 

Strategic timing can improve cash flow, reduce taxable income, and support a more predictable financial year. 

Stay Current on Credits and Incentives 

Construction companies may qualify for a variety of federal or state incentives. These can apply to energy-efficient building, equipment purchases, or hiring in certain categories. While these opportunities vary, a yearly review helps ensure nothing is overlooked. 

Build a Year-Round Tax Plan 

The most effective tax strategies come from consistent, year-round planning rather than last-minute decisions. Contractors benefit from reviewing job performance, project backlog, cash flow patterns, equipment needs, and financial forecasts throughout the year. This proactive approach supports both compliance and long-term growth. 

At DBC, we help construction companies build tax strategies that reflect their operational reality. Our team works closely with contractors to strengthen financial processes, review tax opportunities, and create systems that support clear decision making.

If you would like to discuss your tax strategy or explore ways to improve your financial planning, we are here to help. 

Using QuickBooks to Manage Your Not-For-Profit’s Grants and Donations 

For not-for-profit organizations, effectively managing grants and donations is vital to fulfilling the mission and maintaining trust with donors, grantors, and the community. Yet as funding sources diversify and reporting requirements grow more complex, keeping everything organized can quickly become a challenge.  That’s where QuickBooks comes in. With its not-for-profit specific tools and customizable features, QuickBooks …

For not-for-profit organizations, effectively managing grants and donations is vital to fulfilling the mission and maintaining trust with donors, grantors, and the community. Yet as funding sources diversify and reporting requirements grow more complex, keeping everything organized can quickly become a challenge. 

That’s where QuickBooks comes in. With its not-for-profit specific tools and customizable features, QuickBooks can help your organization track revenue, manage expenses, and maintain compliance with funding requirements, all in one place. 

Why Financial Tracking Matters in the Not-For-Profit World 

Not-for-profits have unique financial management needs. Unlike for-profit businesses, their accounting systems must distinguish between restricted and unrestricted funds, track grant spending by purpose, and produce accurate reports for funders and boards alike. 

A strong financial tracking system helps your organization: 

  • Maintain compliance with grant agreements and donor restrictions 
  • Provide accurate, transparent financial statements to stakeholders 
  • Identify funding gaps and opportunities for improvement 
  • Strengthen long-term sustainability and accountability 

When used effectively, QuickBooks can make these tasks simpler, more efficient, and more reliable. 

Setting Up QuickBooks for Not-For-Profit Success 

QuickBooks offers specialized features that can be customized for not-for-profit operations. Setting it up properly from the start ensures smoother day-to-day management and easier reporting down the road. 

1. Use Classes and Locations to Track Grants 

QuickBooks allows you to use Classes or Locations to separate activities by grant, program, or funding source. This enables you to see how each project is performing financially, monitor spending limits, and prepare reports tailored to funder requirements. 

2. Create a Chart of Accounts That Fits Your Mission 

Your Chart of Accounts should reflect the nature of your not-for-profit’s work. Set up income and expense categories specific to grants, fundraising campaigns, or donor programs. This structure makes it easier to analyze results and communicate financial information clearly. 

3. Record Donations Accurately 

Use QuickBooks’ donation tracking features to record contributions by donor, campaign, or type of support (cash, in-kind, pledges). Integrating donor management tools or platforms like DonorPerfect or Kindful can further streamline the process and reduce manual data entry. 

4. Track Restricted and Unrestricted Funds 

Donor-restricted funds must be tracked separately from general operating funds to ensure compliance and proper reporting. QuickBooks allows you to assign restrictions to income accounts or use sub-accounts to maintain clarity around how funds can be used. 

5. Reconcile Regularly and Review Reports 

Monthly reconciliations ensure that all grant and donation transactions are accurate and up to date. Generate reports such as Statement of Activities, Statement of Financial Position, and Budget vs. Actual to monitor performance and provide updates to your board and funders. 

Leveraging QuickBooks for Grant Compliance 

Grant management requires careful documentation of how funds are spent. With QuickBooks, not-for-profits can easily attach receipts, track program expenses, and generate fund-specific reports to meet grantor requirements. 

By using custom reports, your team can: 

  • Compare actual expenses to approved grant budgets 
  • Track spending by category or funding source 
  • Demonstrate compliance in audits or grant closeout reports 

Having this level of visibility not only simplifies compliance but also strengthens relationships with funders who value accountability and transparency. 

Strengthening Donor Relationships Through Reporting 

Donors and sponsors want to see the impact of their contributions. With QuickBooks’ customizable reporting tools, not-for-profits can generate clear, meaningful financial reports that highlight how donations are being used to advance the mission. 

Sharing timely, accurate reports builds trust and encourages continued support. It also equips your development team with data to demonstrate outcomes and apply for new grants more effectively. 

How De Boer, Baumann & Company Can Help 

Not-for-profit organizations often need more than just software to manage grants and donations effectively. They need financial systems that are thoughtfully set up and supported over time. At De Boer, Baumann & Company, our CAAS team works with not-for-profits to implement, optimize, and maintain QuickBooks in a way that fits their programs, funding sources, and reporting responsibilities.

Whether managing multiple grants, navigating compliance requirements, or looking to simplify day-to-day processes, our team provides practical, hands on support. Our goal is provide organizations with clear reporting, reliable data, and financial systems that allow them to stay focused on their mission and long-term impact.

 

How to Prepare for a Not-For-Profit Financial Statement Review 

For not-for-profit organizations, financial transparency is more than a best practice, it’s a responsibility. Donors, board members, and grantors rely on accurate financial reporting to understand how resources are being used and to make informed decisions about future support.  A financial statement review provides an added level of credibility and assurance without the full scope of an audit. …

For not-for-profit organizations, financial transparency is more than a best practice, it’s a responsibility. Donors, board members, and grantors rely on accurate financial reporting to understand how resources are being used and to make informed decisions about future support. 

A financial statement review provides an added level of credibility and assurance without the full scope of an audit. Understanding what to expect and how to prepare can help your organization approach the review process efficiently and confidently. 

What Is a Financial Statement Review? 

A financial statement review is a type of assurance service in which a CPA evaluates your organization’s financial statements to determine whether they are free of material misstatements. Unlike an audit, a review does not involve testing internal controls or verifying transactions, but it does provide limited assurance that the financial statements are presented in accordance with generally accepted accounting principles (GAAP). 

A review is often required by lenders, grantors, or boards of directors when an organization requires an independent level of limited assurance that its financial statements conform to professional standards, without the extensive procedures of a full audit. It serves as a middle ground for growing organizations that have moved beyond a simple compilation but do not yet necessitate a full-scope audit.

Why a Review Matters 

While less extensive than an audit, a financial statement review still offers significant benefits to not-for-profit organizations. It helps: 

  • Increase credibility with funders and donors 
  • Identify inconsistencies or potential issues in financial reporting 
  • Strengthen internal accounting processes 
  • Provide valuable insights into your organization’s financial health 

A review can also serve as a stepping stone toward future audits as your organization grows and financial reporting requirements expand. 

How to Prepare for a Financial Statement Review 

Preparation is key to a smooth and successful review process. Here are several steps your not-for-profit can take to get ready: 

1. Organize Your Financial Records 

Ensure your accounting records are complete and accurate. This includes general ledgers, bank reconciliations, accounts payable and receivable schedules, and payroll documentation. Organized financial data allows your CPA to conduct the review efficiently and minimizes follow-up questions. 

2. Reconcile All Accounts 

Before the review begins, verify that all bank, investment, grant, and liability accounts are reconciled through the end of the reporting period.

3. Review Revenue and Expense Classifications 

Make sure revenues and expenses are properly classified according to your chart of accounts. For not-for-profits, this includes distinguishing between restricted and unrestricted funds and separating program, management, and fundraising expenses. 

4. Prepare Supporting Documentation 

Your CPA will likely request supporting documents for significant transactions, grants, or contributions. Having invoices, contracts, and grant agreements readily available will help the process move quickly. 

5. Evaluate Internal Controls 

Even though a review does not include formal testing of internal controls, it’s a good opportunity to assess your systems for managing cash, approving expenses, and safeguarding assets. Addressing weaknesses ahead of time can strengthen your financial management and reduce future risk. 

6. Communicate with Your CPA 

Schedule a pre-review meeting to discuss timelines, expectations, and any major changes in your organization’s operations or funding sources. Clear communication helps ensure that the review focuses on what’s most important to your organization. 

What to Expect During the Review 

During a financial statement review, your CPA will perform analytical procedures, ask management questions, and review documentation to assess the accuracy of your financial statements. The goal is to confirm that your financials make sense based on your organization’s activities and records. 

At the conclusion of the process, your organization will receive reviewed financial statements accompanied by an Independent Accountant’s Review Report. This report provides limited assurance that the accountant is not aware of any material modifications that should be made to the financial statements for them to be in accordance with GAAP.

Strengthening Financial Confidence 

Completing a financial statement review is more than a compliance exercise, it’s an opportunity to gain a clearer picture of your organization’s financial standing. The insights you receive can guide better decision-making, support future funding requests, and reinforce the trust of your board and community. 

Regular reviews also help not-for-profits build stronger accounting practices and prepare for potential audits down the road. 

How De Boer, Baumann & Company Can Help 

At De Boer, Baumann & Company, we understand the importance of reliable financial reporting in the not-for-profit sector. Our experienced professionals provide tailored review and assurance services designed to meet your organization’s specific needs. 

From preparing your records and guiding you through the review process to offering recommendations for stronger financial practices, our team is here to help you achieve clarity, confidence, and compliance. Let us help you focus on your mission, while we take care of the numbers. 

Navigating Payroll and Benefits Compliance in Not-For-Profits 

Managing payroll and employee benefits is an essential part of running any organization, but for Not-For-Profits, compliance can be particularly complex. Between balancing limited resources, managing multiple funding sources, and navigating specific labor laws, Not-For-Profit leaders often face unique challenges in ensuring payroll accuracy and regulatory compliance.  Understanding the rules and implementing sound systems helps protect your …

Managing payroll and employee benefits is an essential part of running any organization, but for Not-For-Profits, compliance can be particularly complex. Between balancing limited resources, managing multiple funding sources, and navigating specific labor laws, Not-For-Profit leaders often face unique challenges in ensuring payroll accuracy and regulatory compliance. 

Understanding the rules and implementing sound systems helps protect your organization, your employees, and your reputation, allowing you to stay focused on your mission. 

Why Payroll Compliance Matters 

Payroll errors and compliance issues can lead to significant financial penalties, reputational harm, and even loss of grant funding. Not-For-Profits must comply with the same payroll and employment laws as for-profit entities, while also adhering to additional reporting and documentation requirements tied to restricted funds and grants. 

Strong payroll and benefits management practices help your organization: 

  • Maintain compliance with federal and state labor laws 
  • Ensure proper use of grant and donor funds 
  • Improve employee satisfaction and retention 
  • Reduce administrative errors and audit risks 

When compliance is prioritized, your organization can operate with greater efficiency and confidence. 

Key Areas of Payroll Compliance for Not-For-Profits 

1. Proper Employee Classification 

Accurate employee classification is critical. Misclassifying employees as independent contractors or exempt vs. nonexempt can result in fines and back pay obligations. Review each position carefully to ensure it aligns with the Fair Labor Standards Act (FLSA) and state regulations. 

2. Accurate Wage and Hour Tracking 

Not-For-Profits must comply with federal and state minimum wage laws, overtime requirements, and recordkeeping standards. Implementing reliable time-tracking systems ensures that employees are paid correctly and that required records are properly maintained. 

3. Grant and Program Payroll Allocation 

If your Not-For-Profit receives grant funding, payroll costs may need to be allocated across multiple programs or funding sources. Maintain detailed records showing how employee time and compensation are divided to comply with grant reporting requirements and avoid disallowed costs. 

4. Tax Withholding and Reporting 

Even though Not-For-Profits may be tax-exempt, they are still required to withhold and remit payroll taxes for employees. Stay current with federal, state, and local tax filing deadlines, and ensure all forms, such as W-2s and 1099s, are issued accurately and on time. 

5. Benefits Administration and Compliance 

Offering benefits such as health insurance, retirement plans, and paid leave requires compliance with laws like the Affordable Care Act (ACA) and ERISA. Ensure your benefits programs are administered correctly, and review eligibility and contribution rules annually. 

Best Practices for Managing Payroll and Benefits 

To stay compliant and organized, Not-For-Profits should implement proactive payroll and benefits management strategies. 

Establish Clear Policies and Procedures 

Document payroll policies covering timekeeping, overtime, leave accrual, and expense reimbursements. Clearly communicate these policies to employees and ensure consistent application across all departments. 

Leverage Payroll Technology 

Using payroll software or outsourcing to a reputable payroll provider can simplify tax filings, automate reporting, and reduce human error. Many platforms integrate with accounting systems like QuickBooks, helping Not-For-Profits track payroll expenses by fund or program. 

Conduct Regular Reviews 

Perform periodic internal reviews of payroll processes, classifications, and benefits administration to ensure ongoing compliance. Regular reviews can help identify errors early and prepare your organization for external audits or reviews. 

Stay Informed About Changing Regulations 

Labor and tax laws evolve frequently. Designate a staff member or advisor to monitor updates from the Department of Labor, IRS, and state agencies. Partnering with professionals who specialize in Not-For-Profit compliance can help your organization stay ahead of changes. 

Building Confidence in Compliance 

Payroll and benefits compliance may not be the most visible part of your Not-For-Profit’s work, but it’s one of the most critical. Ensuring accuracy, transparency, and accountability in these areas supports your employees, protects your funding, and reinforces the trust your community places in your organization. 

By building strong systems and partnering with experienced advisors, your Not-For-Profit can manage compliance with confidence, allowing your team to focus on what matters most: making a difference. 

How De Boer, Baumann & Company Can Help 

At De Boer, Baumann & Company, our Client Accounting & Advisory Services (CAAS) team works closely with not-for-profit organizations to navigate complex payroll, benefits, and compliance requirements with confidence. We provide practical payroll consulting, internal control support, and ongoing accounting services designed to promote accuracy, consistency, and regulatory compliance.

Whether you’re implementing a new payroll system, managing multiple grants, or reviewing benefits administration, our CAAS professionals help strengthen your processes and reduce risk. With the right systems and support in place, your team can spend less time on compliance concerns and more time advancing your mission.

 

About us

De Boer, Baumann & Company provides professional accounting, tax, and business advisory services to individuals and businesses in West Michigan and the surrounding areas. With expertise in a variety of industries, DBC specializes in comprehensive and innovative solutions to help clients achieve their financial goals.