Tax pros advise biz clients on going virtual

Accounting

Reopenings begin with masks, conference rooms have gone Zoom, and businesses face a load of new questions — but for many, the future comes down to one: “How am I going to survive?”

“It really depends on the business. It’s hard to tell a spa client to go virtual,” said Lawrence Pon, a CPA at Pon & Associates in Redwood City, California. “Virtual does not replace face-to-face.

“The shutdown has really hurt my small-business clients,” he added. “They were working on thin margins already. Many clients aren’t spending as much. I hope this will help with their financial goals.”

Some tax professionals report little change in clients’ questions. “Most of my clients are individuals or sole proprietors, so I’ve done little direct business advising other than helping them understand the free and low-cost virtual communications tools available,” said Phyllis Jo Kubey, an Enrolled Agent in New York.

For others, a new world is beginning.

Ramping up

A recent Gallup poll found that 62 percent of employed Americans worked from home during the coronavirus crisis — a number that had doubled in just a few weeks. As the poll noted, the pandemic may not be an issue forever, but remote work will be.

“The No. 1 thing we’re advising clients about going virtual is to ramp up security measures,” said Bruce Primeau, a CPA and president with Summit Wealth Advocates, in Prior Lake, Minnesota. “For our company, we have a separate IT company that installs extra security as we bring on each team member to ensure that no client information is compromised. I’d guess that hackers are having a field day in gaining access to sensitive company information with so many folks working from home with what I imagine is much less security.”

Taxes pose a special challenge in a seismic shift to work from home.

“If they’re employees, they’d better coordinate with the employers for reimbursement. The unreimbursed employee expenses are a thing of the past and hopefully will not be revived,” said Morris Armstrong, an EA and registered investment advisor at Armstrong Financial Strategies in Cheshire, Connecticut.

“Folks are going to be able to get some expenses that would otherwise be personal — like internet, cell phone, snacks, supplies and so on — turned into company-reimbursable expenses,” Primeau said.

Clients taking their companies virtual “must be careful that they’re charging sales tax properly,” said EA Terri Ryman of Southwest Tax & Accounting, in Elkhart, Kansas. “Every state is different, and since I’ve been caught up in several of the state audits — Texas, most notably — for new clients, I explain what a long, tedious process it is to gather the information that the states require during an audit.”

“On 2020 returns, I’m expecting to see a drop in business mileage. I also expect to see a drop in travel costs and meals,” Pon said. “I’ll be very skeptical when a client tells me their business mileage is higher. I know this is certainly the case for me. I haven’t purchased gas for my car since February.”

Armstrong adds longstanding advice for the self-employed, “the normal rules [of] exclusive use,” he said. “Your bedroom never qualifies as the office, but a small area of the home could.”

According to Gallup, more workers report that their employer is offering flextime or remote work options. Some say this business upheaval is a chance for accounting firms to finally drive previously reluctant clients to paperless, virtual processes such as electronic signatures and delivery. Clients, in short, may suddenly have no choice.

Dispel and adapt

Regarding general business advisory services, a recent Thomson Reuters white paper on running a remote accounting practice says that companies must foster a positive work-from-home culture by dispelling commonly held misconceptions on working remotely, such as that working from home makes staffers less productive or focused.

According to Robert Half’s “How to Hire Remote Workers, Remotely,” good questions for hiring candidates for remote companies include:

  • What is your history of working remotely?
  • How do you stay engaged and motivated over long periods without in-person interaction with co-workers?
  • What do you do to minimize miscommunication in emails and instant messages?
  • What is your approach to work-life balance when your job is remote?

“The biggest issue with going virtual is planning for real estate,” Pon said. “Many businesses are wondering if they really need to lease so much space if staff can work off-site.”

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