EisnerAmper Blog

Private Business Services Blog - An Accounting & Advisory Resource

The Importance of Properly Classifying Independent Contractors

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September 14, 2016

By Jessica Rivera  

Many businesses use independent contractors—such as salespeople, writers, accountants and others—to more effectively carry out the company’s mission. The benefits of using an independent contractor vs. hiring an employee include less overall cost, more flexibility and less liability exposure. 

However, there are significant consequences if the government discovers you are erroneously treating an employee as an independent contractor. You will need to (1) reimburse the employee for wages you should have paid, including overtime and minimum wage; (2) pay back taxes and penalties for income taxes, Social Security, Medicare and unemployment; (3) pay an injured employee workers' compensation; and (4) provide benefits, including health insurance and retirement.  
So how do you know if you are properly classifying a worker as an employee vs. an independent contractor? Many groups—including the IRS, the Department of Labor (who issued the Fair Labor Standards Act in 2009), and the Supreme Court—have weighed in on the definition. For tax purposes, the IRS applies a 3-part test to the working relationship that covers behavior, finances and type of relationship. While there’s no singular standard for what differentiates an employee from an independent contractor, employers should ask themselves these questions: 

  • Does the worker set his/her own hours?
  • Does the worker use his/her own tools?
  • Does the worker have his/her own office or workspace at the company?
  • Can the person work for other employers?
  • Who makes the rules for how and where the work will be done?
  • How permanent is the relationship?
  • To what degree does the worker assume profit and loss?    

After answering these questions, if you are still uncertain as to a worker’s status, the IRS recommends filing Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. The IRS will then review and make a determination.

Valuing Your Small Business

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August 15, 2016

By Michael A. Aversa

The needs for getting a business valued are many: bankruptcy, divorce, retirement, raising capital, death. And, seemingly, there are even more methods to value a business—with some using rather sophisticated models.  

The key for a small business is to select a method that suits its particular needs and industry. Getting help from a professional, such as someone accredited in business valuation (ABV), can mean the difference between leaving money on the table and realizing a business’s full worth. Part of that person’s expertise is turning the value of the business from something subjective to something objective.   

Below are a few of the more common business valuation methods. Keep in mind that the reality of the situation may call for a combination of methods: 


An asset-based valuation looks at the total value of the company's tangible and intangible assets. Valuation includes inventory, equipment, intellectual property, staff, customers, and goodwill. However, you can’t look at assets without taking into account any liabilities. One drawback here is that earnings potential is not considered.  


Here, you can come up with a future earnings value based on expected earnings that are discounted to arrive at their net present value. Or, you can arrive at excess earnings by totaling the company’s earnings before interest, taxes, depreciation and amortization and then multiplying that by some reasonable factor specific to your industry. 


This is the supply-and-demand price for a business at any given time. You would examine the fair market value and sales of comparable businesses in your area.  

Also, look at ways to enhance the business’s value prior to sale. This can include documenting sales and profits, upgrading technology, or cleaning up the physical plant. Finally, give some thought to the terms of the sale. Will it be an all cash deal? Will you provide financing?

Millennial Grocery Shopping Trends: 3 Things to Know

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July 14, 2016

By Richard Colloca, CPA  

There’s little doubt that Millennials are changing the rules when it comes to grocery shopping. But just how is this group of 83 million people affecting the playing field? Here are 3 significant things to keep in mind: 

  1. Where they shop – Rather than the one, large weekly shopping trip, millennials tend to make several smaller trips. Within a week, they may visit supermarkets, the corner grocery store, and big-box retailers like Target. Shopping is seen as a social experience with peers, where transparency and locally grown—as well as exotic—foods are very desirable. Sustainability is important to this demographic; Whole Foods and Trader Joes have excelled at making this connection.
  2. How they shop – Approximately 70% of millennials use their phones while shopping. As such, they prefer brands with a high mobile profile that offer a unique shopping experience before, during and after the purchase. In a world of online reviews and likes, it’s no wonder Millennials often turn to their friends and family for advice while shopping. They also tend to be heavily influenced by visuals, rather than words, when shopping.
  3. What they shop for – Millennials tend to be less brand loyal; it doesn’t take much for them to switch from a name brand to a private-label brand. Budget conscious, they tend to shop based on recipes—probably on their Pintrest profiles—rather than stocking up on groceries. 

Millennials have more than $1.3 trillion in purchasing power annually. Due to the evolving grocery shopping landscape, it’s imperative that the supply chain understands the buying trends of this influential demographic. 


A Dozen Great Apps for Small Businesses

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June 24, 2016

By Aaron Berson

With a dizzying array of mobile apps available, how are small business owners to choose which ones are the best for them? While we don’t have the room or the time to go through every app, here are 12 popular apps* for small business owners:  

  1. Desk – Send notifications on customer service issues, and view and reply to customer inquiries. Create notes and assign cases to staff.
  2. Docusign – Fill out and sign documents; send documents for others to sign; store, manage and access documents remotely.
  3. Dropbox – Store and back up photos, docs, videos and other files. Access files from your devices. Send large files. Create and edit Microsoft Office files and share links.
  4. Expensify – Capture and scan receipts, track time or mileage, and create expense reports. Convert currency, and display trip itineraries. 
  5. HootSuite – Share and schedule posts from your Twitter, Facebook, Instagram, and LinkedIn accounts. Track click-through stats.
  6. Invoice2go – Create professional invoices from 20-plus templates, accept payments, archive invoices, and track sales via geography.
  7. Xero –Put all your accounts, credit cards and investments into one place to track your spending and income, create budgets, send invoices, and communicate with your accountant.
  8. Nutshell Camera – Take three photos. Add your own text. Nutshell automatically creates a mini promotional video you can share via social media. 
  9. On Shelf – Track inventory levels and movement, scan barcodes, view customer history, send and print reports.
  10. Uberconference – Video/audio conference from your device, share files, record meetings, and capture attendee lists. 
  11. Wunderlust – Set up to-do lists and task managers. Share and collaborate on lists, save web pages and articles, and set reminders.
  12. Zoho – Track prospects, schedule events and activities, and collaborate with Salesforce.  
*EisnerAmper LLP does not endorse these apps or warrant that these apps are appropriate for any particular business.



12 Types of Insurance to Consider for Your Small Business

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June 15, 2016

By Charles Saydek

Insurance can be costly. But it can be even more so when you need it and don’t have it. And there are certain policies you can buy that meet certain needs you may not have considered yet. These policies cover small business owners in the event of:  

  1. Bad Debt (aka Trade Credit Insurance) – Accounts receivable losses due to a customer’s insolvency or default.
  2. Business Interruption – Income loss when a business suffers disaster and during the subsequent rebuilding. 
  3. Data Breach (aka Cyber Insurance) – Client or employee data was lost via a company’s computer network. Covers costs associated with the notification, liability, monitoring, and protection for victims.
  4. Directors & Officers – Legal actions and damages against the activities of board members and officers of a company.
  5. General Liability – Property damages or bodily injury to a third party due to a business’ products or services.
  6. Home-Based Business – Damage to products and equipment related to the business that may not be covered under a homeowner’s policy.
  7. Product Liability – Third-party claims of personal injury or property damage due to the manufacture and sale of a company’s products.
  8. Professional Liability (aka Errors and Omissions Insurance) – Covers against a negligence claim by the client who receives the advice and counsel of a professional services firm.
  9. Property – Damages or loss to company’s facility and its contents due to such events as theft and natural disaster.
  10. Commercial Auto – Damages or injuries involving the business’ vehicles, or employees driving their personal vehicles for company use.
  11. Workers’ Compensation – Wage replacement and medical benefits to employees injured on the job.
  12. Key Person (aka Keyman Insurance) – Compensates the business for financial losses that would arise from the death or extended incapacity of an important member of the business. 

Interviewing the IRS?

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May 17, 2016

By Dan Gibson CPA, EA


Often, the Internal Revenue Service conducts interviews that I affectionately refer to as the ‘meet and greet conference’ prior to the start of an audit. This is where the IRS asks a number of questions to the representative, accounting personnel and owner. Depending on the revenue agent, this meeting could last anywhere from 30 minutes to 2 hours. The line of questioning usually sets the tone for the audit by asking questions regarding the business, accounting procedures, banking practices, etc.


Have you ever considered turning the table and asking your own questions to set your tone for the upcoming audit? Here are a few things you might want to inquire about:


Ask to see the agent’s identification. Not just their business card, but their badge. Check their name and identification number. You’ll also want to make sure that the agent is in fact a revenue agent, not an agent from the IRS’ criminal investigation division. This is especially true if you are seated across the table from 2 or more agents. If you find that the agents are from the criminal investigation division, note their contact information, promptly end the meeting and then contact a criminal tax attorney.


If the agent is a revenue agent, ask if they have had any contact with the criminal investigation division regarding the case or have spoken to a technical fraud advisor. If the answer is yes, as with the above situation, exit the meeting promptly and contact a criminal tax counsel.


Another area of concern should be third party contacts. Ask the agent if any third parties have been or will be contacted.  First of all, this may provide insight into what areas the IRS is focusing on. Another reason is that these contacts or future contacts by the IRS may have a devastating effect on the business of the taxpayer.  By knowing who has been contacted, the representative can alert the taxpayer who can then reach out and save a potential disruption with a valued customer, vendor or lending source. For any third parties that the IRS wants to contact but has not yet done so, the representative can seek other options that may satisfy the IRS needs.


Everyone has a boss. So the representative should always make sure they have contact information for an agent’s supervisor. One, the representative is putting the agent on notice that if the audit goes south, a call to the agent’s supervisor is not far behind. Second, in the heat of an audit, the agent may not be so willing to give out that information. There are alternative ways of getting this information, but they can take time.


Now that you know who the boss is, it makes sense to find out what involvement the agent’s supervisor has had on the case. Revenue agents don’t just pick up a return and start auditing. Normally, returns are pulled from a pool of returns based on a variety of criteria. Once pulled, a surveyor provides the human touch and identifies issues on the return.  These returns end up in office with an audit group. The IRS’ practice is that an audit planning meeting be conducted between the revenue agent and his or her supervisor. This meeting outlines issues and timing for the audit. The taxpayer representative will want to know what the issues are and the audit timing. This will assist the representative in keeping the agent within the scope of the planned audit and help prevent them from swaying into other areas.


In addition to the questions above, the representative should be providing the agent with direction on how they should be conducting their audit.


First, as the representative that has power of attorney, the agent should be instructed to speak to no one at the client location without approval from the taxpayer representative.


Second, the agent should be instructed to make no copies of documents themselves. If there is a need to make copies, the representative will arrange for copies to be made.


Third, if additional documents are needed, the request for those documents should be submitted by way of an individual document request to the representative.


Lastly, the representative should request that the agent provide a progress report at the end of every day and identify any issues that are developing.


Everyone has a job to do, including IRS revenue agents. However, taxpayer representatives have a job to do as well, which is to zealously represent their clients. This includes monitoring the agents assigned to their clients to insure that the audit is conducted in the most effective and efficient manner.


Don’t forget to sign up for our June 15 presentation on “Dealing with the IRS Audit Division, Part 2”. You can register here.


The Cost Benefit of the FDA’s Menu Labeling Rule

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May 16, 2016

By David Capodanno, CPA

Consumers are currently taking in approximately one-third of their calories away from their own home. 

As health awareness continues to increase, the FDA’s final rule for nutrition labeling will enable consumers to have transparent information regarding nutritional facts.  This will enable consumers to make informed dietary choices for themselves and their families.


Originally expected to take effect in December 2015, the U.S. Food and Drug Administration’s (FDA’s) menu labeling requirements are now slated to begin December 1, 2016. The requirements, which date back to the 2010 Affordable Care Act, are the first significant federal regulations on nutrition labeling since the 1990 Labeling and Education Act.

What’s Covered

These regulations apply to restaurants and retailers with 20-plus locations that sell prepared food (such as convenience stores, movie theaters and supermarkets) requiring them to display nutrition and calorie information on menus. The law also applies to vending machines companies that have 20 or more machines. There are some exceptions to the regulation; for instance, the law also does not apply to food served by establishments without a fixed location, such as airplanes, food trucks, or trains.


The FDA estimates that approximately 300,000 establishments, includ¬ing non-restaurants such as grocery stores, will be impacted. The FDA further estimates it will cost chain restaurants, grocery stores, and vending machine companies from $111 million to $118 million to comply. The supermarket industry determined a much higher compliance amount, upwards of billion dollars. Conversely, the Center for Science in the Public Interest figures a grocery store chain’s average cost would only amount to $22,500. Costs will come from lab testing, printing, employee training and record keeping. The FDA believes that the costs involved will be offset by $3.7 billion to $10.4 billion in benefits over the next 20 years.

In February 2016, the House passed the “Common Sense Nutrition Disclosure Act,” designed to give more flexibility to those impacted by the FDA’s menu labeling requirements. The bill still needs to pass in the Senate. 

EisnerAmper is an independent member of Allinial Global.
EisnerAmper is an independent member of EisnerAmper Global.