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ILLINOIS CPA SOCIETY
550 W. Jackson Boulevard, Suite 900, Chicago, IL 60661 www.icpas.org
Publisher/President & CEO
Todd Shapiro Editor Derrick Lilly
Assistant Editor
Hilary Collins
Creative Director
Gene Levitan
Copy Editors
Mari Watts | Jennifer Schultz, CPA
Photography Derrick Lilly | iStock
Circulation
John McQuillan
Chairperson
Thomas B. Murtagh, CPA, JD | BKD CPAs & Advisors
Vice Chairperson
Mary K. Fuller, CPA | Shepard Schwartz & Harris LLP
Secretary
Deborah K. Rood, CPA, MST | CNA Insurance
Treasurer
Jonathan W. Hauser, CPA | KPMG LLP
Immediate Past Chairperson
Dorri C. McWhorter, CPA, CGMA, CITP | YMCA Metropolitan Chicago
John C. Bird, CPA | RSM US LLP
Brian J. Blaha, CPA | Wipfli LLP
Jennifer L. Cavanaugh, CPA | Grant Thornton LLP
Pedro A. Diaz De Leon, CPA, CFE | Kemper Corporation
Kimi L. Ellen, CPA | Benford Brown & Associates LLC
Stephen R. Ferrara, CPA | BDO USA LLP
Jennifer L. Goettler, CPA, CFE | Sikich LLP
Scott E. Hurwitz, CPA | Deloitte LLP
Joshua D. Lance, CPA, CGMA | Lance CPA Group
Enrique Lopez, CPA | Lopez & Company CPAs Ltd.
Stella Marie Santos, CPA | Adelfia LLC
Brian B. Stanko, PhD, CPA | Loyola University
Richard C. Tarapchak, CPA | II-VI Inc.
Mark W. Wolfgram, CPA, MST | Bel Brands USA Inc.
Back issues may be available. Articles may be reproduced with permission. Please send requests to lillyd@icpas.org.
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Insight is the magazine of the Illinois CPA Society. Statements or articles of opinion appearing in Insight are not necessarily the views of the Illinois CPA Society. The materials and information contained within Insight are offered as information only and not as practice, financial, accounting, legal or other professional advice. Readers are strongly encouraged to consult with an appropriate professional advisor before acting on the information contained in this publication. It is Insight’s policy not to knowingly accept advertising that discriminates on the basis of race, religion, sex, age or origin. The Illinois CPA Society reserves the right to reject paid advertising that does not meet Insight’s qualifications or that may detract from its professional and ethical standards. The Illinois CPA Society does not necessarily endorse the non-Society resources, services or products that may appear or be referenced within Insight, and makes no representation or warranties about the products or services they may provide or their accuracy or claims. The Illinois CPA Society does not guarantee delivery dates for Insight. The Society disclaims all warranties, express or implied, and assumes no responsibility whatsoever for damages incurred as a result of delays in delivering Insight. Insight (ISSN1053-8542) is published four times a year, in spring, summer, fall, and winter, by the Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA, 312.993.0407. Copyright © 2021. No part of the contents may be reproduced by any means without the written consent of Insight. Send requests to the address above. Periodicals postage paid at Chicago, IL and at additional mailing offices. POSTMASTER: Send address changes to: Insight, Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA.
here’s no arguing that technology is having, and will continue to have, a seismic impact on the accounting and finance profession. As reported in the 2020 Insight Special Feature, “CPA Profession 2027: Racing for Relevance,” in a strategic planning survey of the Illinois CPA Society’s board of directors and executive and leadership staff, 96 percent of respondents agreed that artificial intelligence and robotic process automation will permeate businesses of all types and sizes and be utilized in the performance of every function a CPA performs by the year 2027. However, the COVID-19 pandemic has accelerated the adoption of these technologies.
So, how do we ensure the relevance of CPAs now and into the future? It comes down to people. I believe providing strategic insight to our clients and companies, particularly where technology can’t, will ensure our value and relevance for years to come. I was recently talking with a firm managing partner about the future of the CPA profession who was in complete agreement that helping clients and companies become more profitable would help demonstrate CPAs’ value and relevance. I also believe moving our mindset in this direction will make becoming a CPA more attractive to students and young professionals. Young people increasingly want purpose in their lives and careers and that goes hand in hand with helping Main Street businesses grow and achieve success.
The challenge we face is making sure that our people are prepared to excel in roles that go far beyond traditional accounting, audit, and tax preparation skills—strategic thinking skills will be key to adding new value to the services that CPAs provide in public accounting firms and companies alike. However, strategic thinking is not overtly tested on the CPA exam, hence it’s not necessarily something that we demand our students learn. The CPA Evolution initiative, which aims to launch a new CPA licensure model and CPA exam in 2024, will emphasize a focus on data analytics, but analyzing data is just one component of strategic thinking.
For instance, what if we asked our staffs, as part of any audit or business tax return, to identify one thing that would help our clients become more profitable? When I ask managing partners this question, they almost always say their people wouldn’t know where to begin. We need to fix this and focus more on helping our people develop relevant strategic thinking skills that our clients and companies are increasingly demanding. This fall, your Illinois CPA Society will be launching a new Strategy Academy which will solely focus on developing these crucial competencies.
Another mindset change we need to embrace in the profession is that diversity in thinking can also drive innovative solutions for our clients and companies. Ensuring our organizations reflect gender, racial, and ethnic diversity at all levels of staff and management will result in richer discussions and recommendations. Diversity, equity, and inclusion is no longer optional, it’s a business imperative.
Yes, technology will continue to have a seismic impact on the profession. However, at the end of the day, our value, relevance, and success are still driven by the most important asset of our firms and finance departments—our people. The CPA profession has been and, if it’s to remain relevant, always will be a people business. Are you ensuring your staff has the skills and competencies to win in the race for relevance?
As technology increasingly permeates the CPA profession, we must still focus on the fact that people are our most important asset.
You probably already have life insurance. But do you have enough?
Over the years, your living expenses may have increased. Could your current life insurance benefits:
• Help your family maintain their lifestyle?
• Pay for your kids’ college education?
• Allow your spouse to retire comfortably?
It’s always a struggle to lose someone you love. But your family’s emotional struggles don’t need to be compounded by financial problems.
That’s why the Group 10-Year Level Term Life Insurance Plan is made available to ICPAS members.* This valuable insurance program offers:
• Your choice of benefit amounts up to $250,000.
• Rates that are locked in for 10 full years.
• Benefit amounts remain steady for the 10-year coverage period. There are no age reductions.
See
Two thirds (67 percent) of Americans say the pandemic has been a wake-up call for them to reevaluate their finances.1
As society began pivoting to post-vaccination normalcy, the Illinois General Assembly spent the spring legislative session conducting business in a hybrid manner, with committee hearings being held virtually and legislators meeting in person in the House and Senate chambers for floor action. As they wrapped up the spring session on June 1, 2021—one day after the adjournment deadline— they had addressed many major issues and challenges, while others remained untouched. Here’s my analysis of the big issues.
Early in the spring legislative session, Gov. J.B. Pritzker formally presented his proposed $41.6 billion budget to fund state government operations. There was a $1.3 billion gap in the proposed budget, which Pritzker planned to close by eliminating “corporate tax loopholes.” Also hanging over state finances was the remaining $2 billion balance of the Federal Reserve loan the state received to cover state operating expenses and revenue shortfalls during the height of the COVID-19 pandemic. As budgeters began negotiations, they received the good news that Illinois would receive $8.1 billion in federal stimulus money from the American Rescue Plan Act. The Governor’s Office of Management and Budget also announced that state revenues were on pace to bring in $1.5 billion more than originally projected, with an additional $842 million in the coming fiscal year. With this in mind, the governor, president of the Senate, speaker of the House, and state comptroller agreed that the remaining Federal Reserve debt should be repaid to avoid costly interest payments. State leaders initially planned on using money from the federal stimulus program, but U.S. Treasury rules stipulate that these funds should be used to provide relief to residents—not to satisfy debt burdens or to facilitate tax cuts. State leaders remain committed to repaying the outstanding federal debt, and this commitment essentially impounds money and prevents the creation of new ongoing programs with this one-time large cash influx.
The Illinois Constitution requires that Illinois legislative districts be redrawn to reflect population trends by June 30, 2021. Preliminary general information released by the U.S. Census Bureau indicates that Illinois will lose two congressional seats, but the release of the more detailed census data typically used to draw state legislative maps has been delayed. In order to meet the June 30 deadline for the General Assembly to approve redrawn legislative maps, House and Senate majority leaders determined that the five-year American Community Survey data would be used to redraw the maps. After a great deal of speculation, House and Senate Democratic leaders released proposed maps late in the legislative session. At stake for Illinois voters is representation in Springfield and Washington, as well as majority party control of the Illinois House and Senate. Additionally, the five Illinois Supreme Court judicial districts were redrawn for the first time since 1963, putting the balance of the Illinois Supreme Court in play. Despite ongoing efforts by public interest groups to make Illinois’ redistricting process independent, it remains a political and partisan process where the majority party draws the maps. If the General Assembly is unable to approve redrawn maps by June 30, a bipartisan eight-person panel will be convened to create new maps which five of the eight members must approve. If the panel is unable to approve a proposal, the Illinois Supreme Court will submit the names of two people from each political party and the secretary of state will hold a drawing to see which person will act as the tiebreaking ninth member.
There has been a push for House ethics reform in the wake of a number of high-profile indictments of Chicago aldermen, former aldermen, sitting legislators, and associates of former Speaker of the House Mike Madigan. Proposals included measures to slow the “revolving doors” of legislators becoming paid lobbyists
As the Illinois General Assembly wrapped up its work for the spring legislative session, Illinois faced big questions about the state operating budget, redistricting, and other intricate issues.LEGISLATIVE INSIGHTS FROM MARTY GREEN, ESQ., ICPAS VP OF GOVERNMENT RELATIONS @GreenMarty
throughout government; enhanced oversight of legislators through improvements to the Legislative Ethics Commission and the Legislative Inspector General’s Office; greater financial disclosure and greater transparency, including disclosure of statements of economic interest; and expanded authority of the statewide grand jury allowing it to investigate public corruption.
Illinois lawmakers and energy stakeholders hoped to pass an energy overhaul in the spring legislative session and several clean energy proposals were introduced, including Pritzker’s Climate First Act. The goal of these proposals is to transition Illinois to carbonfree energy, including nuclear power. Other proposals include the Clean Energy Jobs Act, which would create energy investments in wind turbines and solar power and electrify the transportation sector. Overcoming the scrutiny and stigma of the flawed 2016 clean energy law that provided subsidies to nuclear power plants in Illinois is central to successful energy overhaul. The exposure of pay-to-play politics and Commonwealth Edison’s deferred prosecution agreement with federal prosecutors further escalated support for utility accountability and ethics provisions.
Aside from the overriding issues outlined above, I would like to touch upon two other pieces of legislation in the General Assembly. First, both the House and Senate unanimously passed Illinois CPA Society-sponsored legislation (SB 1723) to amend the Illinois Public Accounting Act, changing the 150-hour requirement to sit for the CPA exam in Illinois to 120 credit hours with 150 credit hours still being required for licensure. Second, the General Assembly also
passed legislation (HB 1443) to dislodge the stalled issuance of cannabis dispensary licenses. Two lotteries prioritizing Black, Hispanic, and other minority Illinoisans will award 110 new licenses and a separate lottery will award the 75 licenses authorized to be awarded by May 2020.
There were two significant long-term issues left unresolved. The first is that no substantive legislation for meaningful public pension reform was introduced. Illinois public pensions continue to consume evergreater portions of the state operating budget, and the governor and members of the General Assembly have avoided addressing this monster. Second, in response to the COVID-19 pandemic, state and federal officials assisted unemployed workers with enhanced unemployment insurance benefits. Currently, the Unemployment Insurance Trust Fund has an estimated deficit of $5 billion. The viability of this fund is maintained through employer taxes. Legislative leaders and the governor have allocated $100 million from the $8.1 billion the state received from the American Rescue Plan to this fund, and the business community continues to negotiate with the Pritzker administration on ways to replenish the fund.
Overall, the spring session of the 102nd General Assembly was very busy with a large volume of far-reaching bills passed by the House and Senate. Here, our legislative goals were to help pass SB 1723, support legislation that positively impacts the accounting profession, support collaborative work with our stakeholder partners to advance good tax policy, and mitigate mandates on businesses and employers. As with any legislative session, we had both victories and losses, and we remain as committed as ever to serving CPAs and the accounting profession as Illinois moves forward.
EMPLOYEE
In 2021, access to health care is more critical than ever. Here’s your guide to what’s changed since President Biden took office, other changes that are underway, and one unique money-saving strategy.
BY NATALIE ROONEYn the immediate aftermath of a global pandemic, it makes sense that health care is a hot topic. A new presidential administration is making short work of Trump-era health care rollbacks, while at the state level Illinois is seeing a push to make health care more equitable. There are also new pandemic-specific policies for employers and employees to navigate, changes to how health care is being offered, and overlooked strategies that people could be utilizing.
It can be hard to keep up with all the health care changes already enacted or underway, so here are the five biggest things CPAs should know now to best advise their clients—and make choices themselves.
President Joe Biden began his term with a flurry of executive orders, many of which were revisions to Trump’s Affordable Care Act (ACA) rollbacks. So far, the Biden administration has restored funding for navigators and ACA marketplace enrollment outreach to consumers and established an ACA special enrollment period for uninsured and under-insured Americans to seek coverage.
The Biden administration hopes to overturn more Trump-era health care policies that shortened marketplace open enrollment from three months to just six weeks, allowed states to loosen requirements for the essential health benefits required by plans sold on the ACA marketplaces, and loosened rules for Section 1332 waivers, which allowed states to experiment with different coverage options. They also hope to roll back changes to the formula for indexing increases in ACA plan premiums, broaden LGBTQ+ civil rights protections in the ACA, and restore funding for marketplace operations.
While CPAs should keep abreast of all this activity, there are no real changes to health insurance, employee benefits, or tax implications, says Marcus Newman, RHU, CBC, vice president of benefits consulting for GCG Financial in Chicago. “President Biden hasn’t done much more than open the ACA back up so far,” he says.
Changes are also underway at the state level in Illinois. On April 27, Gov. J.B. Pritzker signed HB 158 into law, a bill that focuses on health care equity for minority and low-income populations by,
among other things, enhancing mental health services, requiring bias training for doctors, and creating a community health worker program that improves oversight and transparency.
“The bill is about equity and accessibility,” says Chris Manson, vice president of government relations for OSF HealthCare, headquartered in Peoria, Ill. “We’re supportive of any efforts to help address long-term health care disparities and inequities in marginalized communities. It’s more of a matter of how we go about accomplishing that.”
Newman says the issues surrounding health care and health insurance come down to three basic factors: accessibility, affordability, and delivery/education. That final component is especially tricky now.
“We used to put everyone in the same room and explain their health insurance options. In the COVID-19 era, we can’t do that anymore,” he explains. “Now how do we educate people and help them make the best possible decisions about their insurance and care? If I don’t know that my wellness visit is 100 percent covered by the preventative care element of the ACA, I don’t get a checkup. That education component is critical.”
Illinois CPA Society member Michelle Carrothers, CPA, vice president of strategic reimbursement at OSF HealthCare, says the pandemic not only demonstrated how vital it is that health care be accessible to everyone—it also made it clear that innovative ways to access health care will remain a common feature moving forward.
OSF HealthCare was already seeking new ways for patients to contact providers prior to the pandemic, but COVID-19 put those efforts into high gear. The results? A dedicated COVID-19 hotline and innovation center. “We worked with the state and clinicians to get these programs up and running to screen people for COVID19 and get them to the right health care provider,” Carrothers says.
At the same time, health care providers had to continue caring for individuals who had health issues completely unrelated to COVID19. “We’ve tried to meet patients where they are,” Manson says. “Telehealth is one avenue that allowed us to continue to address the needs of the community so chronic health care issues don’t go untreated, while at the same time minimizing the spread.”
While the pandemic was and remains an enormous drain on health care providers, Carrothers hopes that it will recede into the distance while the new methods providers implemented to make health care more accessible will stay. “We’ll see the benefits down the road as we’re trying to serve our communities and help them become healthier,” she says.
The American Rescue Plan signed into law in March 2021 contains a health care provision that has raised quite a few challenges. In an effort to support Americans who lost their jobs and help them maintain access to health care, the federal government will pay 100 percent of COBRA insurance premiums for eligible employees and their covered relatives through September 2021, allowing them to stay on their company-sponsored health plan.
The subsidy has proven difficult to navigate for some small businesses. Ultimately, these subsidies will be funded by refundable quarterly payroll tax credits, but employers must first come up with the funds to pay the state continuation premiums. “Some employers have laid off 50 percent of their staff because they didn’t have any revenue,” Newman says. “There’s no payroll tax to cover the COBRA premiums of those individuals, so what are
they supposed to do?” In addition, the onus is on small employers to notify employees of their eligibility. “Employers shouldn’t be in that situation,” he says. “It’s not within the financial reality of small businesses.”
And for former employees still on unemployment, the question is whether to take the COBRA subsidy or not.
Kelley Long, CPA/PFS, CFP, offers financial coaching for do-ityourself financial planners and investors via her independent firm in Chicago, Financial Bliss With Kelley Long, and has a unique passion for helping clients use their health care options strategically. She notes that the COBRA provision presents CPAs with the opportunity to discuss an under-utilized provision that has the potential to help but can also be difficult to claim. “The COBRA subsidy could be a huge headache for folks who are still unemployed,” she says. “Even if people who lost their jobs prior to the pandemic could get at least one month subsidized by the federal government, they have to look back and decide if it’s worth the trouble to claim it. This is a great opportunity for CPAs to help.”
Long, an Illinois CPA Society member who will be presenting on health care strategies at ICPAS SUMMIT21, says, post-pandemic, people are more in need of savvy financial advice surrounding health care than ever before—and that is an often overlooked advising opportunity for CPAs. “The biggest mistake people make is spending all their HSA money,” she says. “They reimburse themselves for smaller expenses like bandages, vitamins, PPE, and menstrual products, but you can—and should—let that money build up if you can afford to.”
Long says that savers should allow their HSAs to build up and invest the funds, treating it more like a supplemental 401(k) plan or an IRA where the growth can be invested for future use, such as Medicare premiums or long-term care in retirement. An HSA can even be used to save for the future children you might have with someone you haven’t even met yet. “For people who think about it early enough, you can build up a sizable amount,” Long says. “Health care is the biggest wild card of retirement and an HSA can help mitigate that.”
Being well-versed in the nuances of HSAs can help CPAs stand out with clients who need help making difficult decisions about benefit plans. “As the trusted advisor, you should know if an HSA plan would fit a client’s finances,” Long says. “The higher the income and more emergency funds someone has, the more an HSA-eligible plan makes sense. You’re helping them save taxes and also fund retirement—you’ll sound like a genius.”
Overall, understanding the rapidly changing health care space is an important insight CPAs can offer to their clients. “We have to understand where you can cut costs, eliminate waste, and get people the right solution for them,” Carrothers says. “There’s an opportunity in understanding government reimbursements and add-ons, Medicaid complexities, and forecasting for bond financing. Hopefully, we CPAs are also benefitting by serving our communities in a more effective manner. Getting patients into the right setting, whether that’s telehealth or outpatient, and being more proactive with preventative care and screenings so we save costs and don’t have health problems down the road is better for the patients—and better for all of us.”
Employees and employers alike must reckon with the tax implications of remote work policies.
BY JEFF STIMPSON
uch has been written about the rise of remote work over the past year. When COVID-19 struck, organizations sent their employees home with laptops and varying degrees of preparedness. While employers that did not have work-from-home policies and infrastructures in place may have been at a disadvantage initially, it seems many organizations have warmed to the idea: A 2021 survey from Buffer found that 45 percent of employees continue to work from home a year after the pandemic’s first wave and about the same number say their company plans to make remote work a permanent policy.
Now that remote work is here to stay, it’s likely that employees will take advantage of their newfound freedom of movement and employers will take advantage of the larger candidate pool that comes with a greater geographic range. But once employers and employees find themselves in different states, a new question emerges: How does working remotely impact taxes for both organizations and their team members?
As employees and employers seek to understand how their tax obligations might shift when they’re in different states, the answers require a detailed look at the tax laws of each state. The first step for employers is knowing where their employees are.
“The migration of workers from the workplace to working from home, then from a primary home to a secondary home, has made keeping up with tax obligations difficult,” notes Jessica L. Macklin, senior manager for tax at Wipfli LLP in Lincolnshire, Ill.
Employers will need to create a process to gather and maintain records on where employees are actually working, perhaps with a quick survey or by simply asking their employees to keep them in the loop. “A few of my clients have started a list of states in which they have approved people to move or work based on their current tax obligations and the minimal impact hiring people in those states would have on their filings,” Macklin says.
Shawn Kane, partner and leader of the state and local tax services group at Crowe LLP in Oakbrook Terrace, Ill., says that some of his clients are exploring the use of software on company laptops or handheld devices to track the physical location of employees, but notes that this tactic can trigger privacy concerns. However they choose to do it, employers have to start by getting a clear picture of exactly where their employees are—then dive into what that means.
“Generally, a state sees an employee who works in their state as having taxable compensation in their state—although there are exceptions, including reciprocal agreements and the length of time the worker spends in the state,” says Angie Vaughn, a manager in the accounting services group of Sikich in Peoria, Ill.
Illinois has reciprocal agreements with Iowa, Kentucky, Michigan, and Washington that can simplify tax processes if employers and employees find themselves split between any of those states. Under these agreements, if an Illinois resident works in any of those states, tax on their compensation is paid to Illinois. The same goes for a resident of Iowa, Kentucky, Michigan, or Washington who comes to work in Illinois—their payroll taxes go to their state of residence.
But outside of the agreement, things get more complicated. Factors like how each state defines “residency” come into play. For example, Illinois defines a “resident” as someone who was domiciled in the state for the entire year. Meanwhile, Wisconsin defines a “resident” as a person who maintains his or her domicile in Wisconsin, whether or not that person is physically present in Wisconsin or not. In other states, where someone lives can be determined by other factors such as where they vote, register their vehicle, or own or rent property.
But a worker doesn’t have to be a technical resident of a state to be taxed—each state has a different threshold. For example, Illinois law states that nonresidents must pay taxes to Illinois if they work in the state for more than 30 days.
“In a number of states, a nonresident employee is subject to withholding on the first day of travel into the states. Other states have a threshold like Illinois—New York’s is 14 days, for example,” Kane says. “Many states also provide an exemption for nonresidents performing services in a state during a declared disaster, such as the pandemic.”
Whether a state or city can continue to tax wages of a nonresident employee if the employee no longer is present in the state continues to be litigated in various courts, including in Massachusetts and New Hampshire, where legal wrangling over taxing remote workers recently involved the Supreme Court and the U.S. solicitor general. This new tax world will continue to evolve as governmental bodies and regulators try to figure out who they can and can’t tax, wherever those taxpayers happen to be.
Companies’ work-anywhere policies—not new but popularized by the pandemic—can present sticky tax issues. “It’s not just about payroll taxes,” explains Eric Fader, managing director for BDO in Chicago. “Businesses may also be subject to new tax filings, including state income or franchise taxes and sales and use taxes. They may also need to answer non-tax questions, such as whether the business is required to qualify with the secretary of state in the secondary location.”
The tax issues that arise from a dispersed workforce shine a spotlight on nexus, the connection between a taxing state and a business. Some states have offered nexus relief in light of the pandemic and consequent remote work boom, but that varies by
location, with some states limiting relief to corporate income and franchise tax. Then there are states like Kentucky, which considers nexus relief on a case-by-case basis. Much like the growth of online commerce forced a legal reckoning on sales tax, the boom in remote work may very well force a reexamination of payroll taxes and more at the federal level.
Alabama, the District of Columbia, Georgia, Illinois, Indiana, Iowa, Massachusetts, Minnesota, Mississippi, New Jersey, North Dakota, Pennsylvania, Rhode Island, and South Carolina have all provided explicit guidance for the nexus challenges arising from a remote workforce. Employers should certainly read the guidance, but they may still need the specialized expertise of a CPA licensed in the relevant state to understand all the implications of state and local tax law.
Employees will have to consider most of the above questions, but their tax issues are likely to be a little simpler as they’ll probably have only two states’ laws to navigate. However, those laws can extend beyond having to simply file tax returns in multiple states to include higher withholding for county, school district, state disability taxes, and more.
Employees should also clearly communicate both their current locations and how long their planned stays might be to their employers. Though this may seem intrusive, it helps ensure that both parties can do as much as possible to meet their tax obligations.
“Communicate with HR,” Macklin says. “Make sure your employer knows if your location changes from temporary to permanent. Some states have offered relief from their typical withholding rules for individuals located on a temporary basis in the state but that same relief doesn’t extend to individuals who have taken a temporary situation and made it permanent.”
States’ residency audits so far largely target taxpayers who have actually moved to lower-tax states and telecommute, but there’s reason to wonder if more states will try this tactic against all remote workers as COVID-19 continues to hammer tax coffers.
According to moveBuddha.com, a national moving company, Illinois has seen a 6.1 percent rise in the number of residents leaving the state from March to September of 2020. Already financially strapped and saddled with a relatively large out-of-state commuter population, Illinois could very well change or more harshly enforce their tax structures as more companies announce fully remote work policies.
As it is, states are clarifying their tax positions on remote work during the pandemic slowly and piecemeal—California and Massachusetts recently became two of the latest to issue or update guidance on unemployment insurance and other employment taxes—but legislation at the federal level would help create uniformity with the various states, Kane says.
“This kind of legislation has been introduced frequently in past years, with the most recent being the Mobile Workforce State Income Tax Simplification Act. While that proposal did not get enough support, the pandemic has highlighted this issue for employers and employees,” he says. “Perhaps in the future a similar bill will make its way into law.”
Jeff Stimpson is a writer based in New York. He has covered tax concerns for more than 20 years for various industry publications, including Accounting Today and Financial Advisor.
COVID-19 is forcing women out of the workforce in record numbers. What do we lose when women leave the workplace, and how can we make it possible for them to stay?
BY ANNIE MUELLER
Early in 2020, Sandra Adam became one of the 2.3 million women that would lose their jobs over the course of the COVID-19 pandemic. During the following job hunt, she questioned her path forward. “I was looking for a leadership role, but the only available positions were lower-level,” says Adam, who is a CPA with more than 20 years of experience in forensic accounting and consulting. “It really made me question if I wanted to stay in public accounting because of how difficult it had been to build my career as a woman and how quickly it ended.”
Adam’s layoff happened early in the pandemic, when the numbers were still accumulating and the effects still unclear. But by December 2020, the COVID-19 economy’s effect on women in the workforce was clear—and disturbing: Of the 140,000 jobs cut that month, every single one belonged to a woman. In fact, that month women lost 156,000 jobs—while men gained 16,000. According to analysis of U.S. Bureau of Labor Statistics data, throughout the course of the pandemic, women have lost 5.4 million jobs, 1 million more jobs than men. And according to Oxfam International, women lost $800 billion in income in 2020 alone.
“This loss absolutely sets us back from a number of perspectives, including participation, lost innovation, and economic impact,” says Dorri McWhorter, CPA, CEO and president of the YMCA of Metropolitan Chicago and immediate past board chair of the Illinois CPA Society. “From a company’s perspective, it’s devastating. Organizations need to prioritize retaining women in the workforce as they look toward their own recovery.”
While many women lost their jobs to pandemic-related layoffs or furloughs, a new crisis for working women is looming. A recent study from McKinsey found that one in four women are considering stepping back from their careers or leaving the workforce altogether, compared to one in five men. This is a dramatic shift: Pre-pandemic research has never shown women voluntarily leaving the workforce at higher rates than men.
“Early on, I remember two fairly prominent CFOs—women who had been in that role for a long time—saying, ‘I need to help my employer find my successor because I’m leaving the workforce to care for my family right now,’” says JoAnna Simek, CPA, MST, partner at BKD CPAs & Advisors and an Illinois CPA Society 2021 Women to Watch award winner. “These are executives, and they feel like they can’t stay on.”
McKinsey’s research also showed that women in senior management positions, Black women, and working mothers face the biggest challenges in maintaining their career tracks or keeping their jobs. What makes it possible for some women to continue working, and even move forward in their careers, while others are laid off or forced to opt out? The same factors that have kept women from the workforce or caused them to leave in the past. Consider the outcomes of pay inequity during the pandemic: If one spouse makes significantly more than the other, whose career will be sacrificed to stay home and care for children or aging parents? It may make financial sense in that moment to keep the bigger paycheck, but it hurts everyone in the long run.
“Study after study shows that achieving gender parity across a number of factors will yield trillions of dollars. Pick a GDP, pick a country—it always improves, period,” McWhorter says.
For women in the early stages of their careers, remote work has made gaining key skills and experiences more difficult. “It’s challenging for people who are newer, as so much learning
and growth comes from observing the senior people in the organization,” says Hollis Hanson-Pollock, CPA, audit senior manager at Crowe and Illinois CPA Society 2020 Women to Watch award winner. “Observation is a huge part of learning how to communicate and interact in a business environment.”
Remote work offers another unique challenge for workers at any stage of their career, with or without families: the always-on dilemma. “In the CPA world, we’ve adapted well to working remotely, but it leads to a sense of always having to be available,” Simek says. “You can’t leave the office, close the door, and not think about work. Your laptop is always there on the kitchen table. It creates a lot of stress for people.”
The long-term effects of pandemic stress, or post-COVID-19 stress disorder, are still unknown, but they are apparent and far-reaching. Here, too, Henry J. Kaiser Family Foundation research reports that there’s a gender gap, with 53 percent of women reporting a negative impact on their mental health compared to 37 percent of men. That gap is even wider in mothers versus fathers. The same report found that 49 percent of women versus 40 percent of men say their lives have been majorly disrupted by the pandemic. “COVID-19 amplified everything, and it’s not just limited to women with families.” Simek says. “All of those gender issues that were already in play pre-pandemic just became magnified.”
Over the last 50 years, much work has gone into bridging the gaps between working men and women, but COVID-19 showed exactly how fragile that bridge was. As parental responsibilities increased when schools closed, the burden on women increased significantly more than the burden on men: An October 2020 Pew Research Center survey found that among employed parents who were working from home, mothers were more likely than fathers to say they had to juggle a lot of child-care responsibilities while working,
and working mothers with children younger than 12 at home were more likely than fathers to say it had been difficult for them to handle child care during the coronavirus outbreak. The result? Burnout, unfeasible choices, and women leaving the workforce.
“The burnout happens because women are not getting any separation from home duties while being at work, because now they’re at home, working. It’s impossible,” McWhorter explains.
While working mothers have been hit hard, unmarried or childless women face obstacles as well: The glass ceiling of advancement becomes that much thicker when women in senior management leave the workforce. Women are still underrepresented as senior leaders and partners in the accounting profession, and without their presence as mentors and advocates, women just beginning their careers face a dearth of role models.
“Having mentors is not just an important part of your development and training, it’s also a big part of your job satisfaction,” HansonPollock says. “It’s a big problem when your organization loses female leaders. When you’re thinking about your own career path, it’s helpful to see people you can identify with at the top.”
“There’s a real uneasiness about what the future holds and what that means for your own career progression,” says Lauren Bruce, CPA, CIA, director of internal controls at Abbvie and an Illinois CPA Society 2020 Women to Watch award winner. “In March of 2020, when we went into lockdown, I was about six months pregnant and had a four-year-old at home with me. Fortunately, when I got pregnant my mentors didn’t automatically say, ‘Well, I assume you’re in a career slowdown now.’ They said, ‘Let’s communicate and keep going.’ There wasn’t an assumption that I stopped wanting to grow and advance because I have two kids in a pandemic. I had my second daughter in June of 2020, took a nice maternity leave, and have been back at work—remotely—since September.”
There’s a bigger picture to look at beyond the individual impact of pandemic-induced career absence among women. “The talent loss is enormous,” Simek says. “That is the biggest problem: the loss of highly trained, highly technical, really smart people in the industry.”
With loss of talent comes loss of innovation. “Without the perspectives of women in the workforce due to this significant loss, we will absolutely lose out on innovation and ideas that help advance society,” McWhorter says. “There are also long-term impacts from an economic perspective: earning losses, less spending, and less retirement savings, all of which have a ripple effect.”
The accounting profession and individual organizations can respond in ways that exacerbate the issues, or finally help solve them. “Leadership embracing flexibility and understanding what it means to be a working mother makes a huge difference,” Bruce says. McWhorter also notes the importance of calls for flexibility from the top: “We’ve been extremely mindful of how we schedule meetings and have been asking our people to work with their leaders to accommodate their needs because we know there’s zero wiggle room now,” she says.
The flexibility offered must come without stigma, or the positive effects will be short-lived. “When my daughter was young, flexibility was an option, but came with potential repercussions,” Adam admits. The problem is an outdated model. “What we’ve done in the past is slightly tweak things,” McWhorter says. “I don’t think it’s fair to tweak the margins anymore. We must reimagine the world we’re now placed in—what makes sense and what doesn’t.”
To reimagine and recreate the structure of work—including mental health support, flexibility in scheduling and workspace, and modernized practical benefits—requires organizational openness and originality. “Visible relatable leadership is so important to show people many different paths to become successful,” Simek says. “People think it’s option A or option B. I’m in my job 110 percent, or I’m totally out. They need visible examples of people who have successfully gone with option C or option D.”
The pandemic has created a scenario of forced change, which can be funneled into forward momentum if organizations will listen to what women are telling them. “We need women articulating what they need, because they have a lived experience no one else has,” McWhorter says. Bruce agrees: “It requires being honest with those around you about what you need as well as knowing that what you need can change on any given day.”
There’s a risk in such honesty, just as there’s risk in organizational change. But a quick cost-benefit analysis is clear: Losing women in the workforce hurts the industry, the economy, and the women themselves. The pandemic has exposed the fragility of the gender equity work that has been done, but also created the potential for a massive shift. The future of work is wide open, and organizations have been offered the perfect opportunity to put an end to the impossible situation women have inherited and improve the workforce for everyone.
“Throughout my career, I’ve helped women get through all of it as much as I could. Because how do you choose between your family and your career? That’s the ridiculous choice we often have to make,” Adam says. After several months of uncertainty, she began working independently in real estate forensic accounting and consulting. “Why does a woman have to make this choice?” she asks. “That’s the heart of the problem.”
Annie Mueller is an experienced Puerto Rico-based financial writer. She is a frequent contributor to various industry publications.
You might need convincing, but it’s true: Narrowing your focus can actually expand your client base and help your firm flourish.
BY KASIA WHITE
ften you start your career as a generalist. But to grow, you have to find your niche—the unique corner of the world where you can become an expert. No matter the size of your firm, finding and embracing a niche industry is key to growth.
But where do you start? We checked in with four CPAs who serve different markets, including craft beer, tech startups, cannabis, and cryptocurrency/blockchain. Here’s how they each found their niche and some actionable insights on how you too can become a strategic business advisor to niche clients.
“We’re able to help our clients pivot and come up with ideas to provide new services or change how they sell to their clients,” he says. “We also helped them with their Paycheck Protection Program applications and their employer retention credits to where even though their businesses suffered, we were probably the last expense they would ever cut because we were providing so much value.”
That value comes from having deep industry knowledge gained from industry events, which Lance says are crucial to attend.
“We’re not necessarily looking to get new clients there. We sit in on sessions about brewing techniques, wastewater treatment, things that are not accounting topics but allow us to learn so much more about the industry,” Lance explains.
Lance also encourages fellow CPAs to network with some of the other professionals serving that niche industry, like lawyers, insurance agents, and bankers. “You learn a lot from making those kinds of connections—and they’re good resources,” he says.
If you’re unsure of what industry to niche into, Lance suggests looking at the clients you already have and enjoy working with.
“General accounting isn’t going to cut it anymore, and it’s not what clients want. They want experts in their industries; they want someone to do more than just tax work,” says Joshua Lance, CPA, Illinois CPA Society board member and managing director of the Lance CPA Group, a boutique virtual firm in Chicago.
That’s why when Lance started the firm in 2013, he knew he wanted to focus primarily on serving craft breweries from coast to coast.
“When you focus on a niche, specifically one industry, you’re able to provide a lot more service and a lot more value to those clients than a general accountant who serves a bunch of different industries,” explains Lance, who himself has a personal interest in home brewing. “We’ve been able to help breweries that are small and just getting off the ground as well as breweries that distribute in 30 states and have big operations. Through this, we’re going deeper into the industry and becoming better strategic advisors to our clients.”
In addition to standard bookkeeping and tax preparation services, Lance and his team put together an extensive benchmarking study each year, which provides their clients with insights into how they compare to their competition, how they can improve, and 12 key performance indicators to track.
“That shows our expertise in the industry because we can specifically pinpoint what items need to change for them and what they need to improve,” Lance says. “We also provide other advisory services, like forecasts, KPI analysis, and cash flow analysis.” To date, craft breweries account for about 40 percent of the firm’s portfolio, and Lance is cautiously optimistic about the industry’s growth.
“It’s been growing rapidly over the last 10 years or so,” he says. “The pandemic has had a bit of a negative impact on that. It’s still expected to grow, just not as fast as it did in the past.”
May 2021 research published by the Brewers Association shows that the retail dollar sales of craft beer decreased by 22 percent to $22.2 billion, and now account for just under 24 percent of the $94 billion U.S. beer market (previously $116 billion). The craft beer industry was hit hard by the COVID-19 pandemic as breweries were forced to close their taprooms, a main source of revenue. Despite this, Lance’s firm grew its brewery niche by 30 percent in 2020.
“You already work with those clients, so you already know something about their industry. Use that as a launching pad,” he says. “Dig into their industry, join their associations, and read their newsletters. Become a sponge to what’s going on in that industry, and then combine it with your accounting knowledge to focus on ways you can better serve and advise them.”
Illinois CPA Society member Michael Carney, CPA, president and founder of MWC Accounting in Chicago, understands the value of making industry connections.
“I’m really involved with the Founders Institute here in Chicago. It’s been a great referral source for me,” he acknowledges. “I will sponsor events there, get up and talk myself, and work with a lot of the Founders Institute alumni. It’s awesome because you start out with these clients from the very beginning. It allows you to help them grow and develop a healthy business every step of the way.”
Since 2009, Carney has focused on serving tech startups. Today, more than 50 percent of the firm’s client base has a heavy tech focus.
“We do everything from accounting, consulting, and tax returns to tax preparation,” Carney says. “We’ll handle outsourced CFO work and help them develop models, budgets, and financing rounds— whatever they need. We run the whole gamut.”
Carney’s words of advice for CPAs looking to enter a niche are simple: “Find something you enjoy. I’ve always enjoyed technology, so taking my accounting knowledge and applying it to that industry is fun—I might not be able to program an app to save my soul, but I could understand what they were trying to accomplish and speak their language.”
Carney believes that connecting to the niche on a personal, passionate level is the most important thing.
“If you have a passion for farming, go talk to farmers,” he says. “It’s really about getting out there and talking to people in the industry that you enjoy. I think that passion will come across to your clients and they’ll refer you to other people in that niche. You get to combine two things you enjoy—the industry you’re helping and the work you’re doing.”
Like Lance and Carney, fellow Illinois CPA Society member Curt Mastio, CPA, owner of Founder’s CPA in Chicago, believes that sharing a passion and language with your clients is critical when it comes to niche accounting. Hence, Mastio and his team of nine experts are fluent in the languages of cryptocurrency and blockchain.
Walt McGrail, CPA, managing director with Chicago-based Cendrowski Corporate Advisors, says the cannabis niche found him.
“I worked with a young attorney in Chicago who saw an opportunity to launch himself into a newly legalized industry back in 2015,” McGrail recalls. “He was willing to oversee my learning curve to make sure that I could provide him with the right expertise in this area. It was serendipity.”
Since then, McGrail has helped cannabis businesses and dispensaries with tax planning and business organizational structuring. The cannabis niche roughly translates to about 6 percent of the company’s top line. And while the cannabis space is the latest industry the firm is serving, McGrail says going niche isn’t anything new for Cendrowski Corporate Advisors.
“We made that decision 20 years ago,” McGrail says. “Very early on, we decided that the traditional green-visor accounting services shouldn’t be the entire scope of our practice. We branched out into things like valuation, expert testimony, and forensic accounting. So, when something new—like cannabis—came along, we weren’t afraid to jump in with both feet and take a stab at it.”
McGrail strongly advises other CPAs to consider the cannabis industry. “In my lifetime, the federal government will remove the undue tax burden on cannabis—even if they don’t somehow adopt it as a legalized substance—and that will create opportunities for folks like me,” he says.
In Illinois, dispensaries are on track to sell more than $1.5 billion worth of cannabis in 2021, according to data from the Illinois Department of Financial and Professional Regulation.
“I think cannabis as an industry will continue to grow,” McGrail says. “The weight of evidence is just insurmountable that the industry is here to stay. The best thing I can tell you is you probably have clients that are interested in the space—and they’re going to go somewhere else where they’ve got the expertise.”
But even if cannabis isn’t right for your firm, McGrail’s parting words of wisdom apply to all CPAs seeking their niche: “If you want to add an expertise or a new venture to your professional practice, you have to learn as much as you can about that industry or that particular aspect. You can’t go into it blind. You need to go out and educate yourself—whatever it takes so that you can provide expert advice to your clients.”
“I can’t count the amount of times I’ve talked to a high-net-worth individual who bought Bitcoin back in 2016 and told me they’ve talked to five accountants who said they did cryptocurrency tax returns but they didn’t really know anything about it,” he says. “You have to immerse yourself in that niche, in that industry, and really focus on it, and be able to speak the same language that your clients speak.”
When asked how he and his employees gained this specialized knowledge needed to serve the cryptocurrency and blockchain niche, Mastio answered simply: “Honestly, most of it just came from becoming personally involved in the space. We just started trading and then applying the accounting principles and tax knowledge that we already have. There are some good resources from a professional development standpoint, but it’s still a new industry that’s lacking in that regard. The best way that we found to learn is just to actively engage in that ecosystem.”
Even so, the team runs into hurdles. Mastio points out that one major challenge they face is the lack of guidance from the IRS or the AICPA when handling new types of transactions or topics in the cryptocurrency space, especially in decentralized finance. “We have to make judgment calls and look at what the transaction is most like in the universe of what we already know and advise clients to the best of our ability. I wish I could say we have this one resource with all the answers, but the space isn’t at that point just yet,” Mastio explains.
Currently, cryptocurrency and blockchain clients make up more than 25 percent of the firm’s book of business, and Mastio says he believes that interest in digital assets will continue to skyrocket.
“It hasn’t slowed down since we started getting involved with clients in that space,” Mastio enthuses. “You see a lot of institutional money starting to move into cryptocurrencies. You see companies like Tesla buying and holding it on their balance sheet. The younger generations of investors are more interested in holding something like Bitcoin than gold, and a big wealth transfer from the Boomers to the younger generations is expected over the next few years.”
Mastio and his small, yet nimble, team are ready to provide accounting, tax, and CFO services to those clients.
“The more you focus your attention on a particular customer profile and their particular needs, the easier it becomes to deliver on that and do so in a scalable and repeatable manner,” Mastio says. “The more you try to be a generalist and just take anybody who’s willing to give you a dollar for your services, the more you hold yourself back over time if one of your primary goals is to grow and scale.”
Kasia White is a freelance writer who specializes in profiling small businesses and leaders of global companies.
As the Asian American community experiences increasing violence, now is the time to offer understanding and support to the largest ethnic minority population in the accounting and finance profession.
BY CAROLYN TANG KMET2020 was a year of palpable angst here in the United States. A pandemic unprecedented in our lifetimes ran riot, and underneath the drumbeat of COVID-19 deaths and economic impacts we could hear the constant hum of racial tension. And while the ongoing protests over the deaths of Black Americans in police custody hit a fever pitch after the killing of George Floyd, communities already struggling with job losses and the deaths of loved ones found a scapegoat in Asian Americans.
According to analysis of police data compiled by the Center for the Study of Hate and Extremism at California State University, San Bernardino, anti-Asian hate crime increased by 146 percent across 26 of America’s largest jurisdictions in 2020. This increase in antiAsian sentiment correlated with the rise of COVID-19, often called by such stigmatizing terms as “Kung Flu,” “China Virus,” or “Wuhan Flu.” This trend in anti-Asian violence sustained through the first quarter of 2021, where police data from the 16 most populous cities in the country showed a 164 percent increase in anti-Asian attacks. In the first 89 days of this year, there were at least 95 incidents of reported anti-Asian hate crimes.
While this should concern all Americans, it hits especially hard in the finance and accounting profession. According to Data USA—a visualization engine developed by Deloitte and based on U.S. Census data—as of 2019, Asians make up 12.2 percent of accountants and auditors in the United States. This makes them the largest ethnic minority in the profession—and it makes the challenge to support our Asian American colleagues and fight the trend of anti-Asian sentiment all the more pressing.
For Asian Americans in the accounting industry, struggling with stereotypes and different expectations is part of the job. “We can’t change perceptions, but we can disprove them,” says Anna Gomez, CPA, a first-generation Filipina and Illinois CPA Society member.
Gomez holds a degree in economics from one of the top universities in Asia, and before coming to the United States in the early 1990s, she owned and operated two restaurants. But once she arrived in the States, it was a struggle to break into the professional workforce.
She took the first job she was offered as a “copy girl” for a law firm in Chicago, churning out copies eight hours a day.
“I found out pretty quickly that no one wanted to hire someone without a U.S. education or U.S. experience. It was a tough realization for me, a 24-year-old mother who thought she had everything figured out,” Gomez recollects.
The solution came from an unlikely source: A group of people on her daily train commute from Indiana to Chicago advised her to sit for the CPA exam. She didn’t pass on her first try. Or her second try. “But I kept on and I’m glad I did. The CPA certification made me a credible candidate for all my future jobs,” Gomez says.
Today, Gomez is the global chief accounting officer and international chief financial officer for IRI Worldwide and a published author of multicultural women’s literature. Throughout her career, she has championed diversity and inclusion and battled ageism, believing that the ideas, innovation, and progress that make businesses successful are the combined effort of diverse minds. She cautions against equating diversity with inclusion, noting that retaining and promoting diverse employees to leadership positions remains a challenge in many organizations.
“Diverse employees often don’t feel like they belong, or that they have the ability to progress in an organization that has no diverse role models at the top,” Gomez observes. “Inclusion means advocating for diverse talent in ways that will allow them to stay, grow, and succeed—and that means celebrating every single life story.”
Illinois CPA Society member Roxanne Chow, CPA, a secondgeneration Chinese American and senior manager in EY’s financial accounting advisory services practice, was shaken by the recent increase in attacks against the Asian community.
“What impacted me most was seeing the videos of Asian elders being punched or slashed. It felt like I was seeing my grandma, my cousin, my aunts or uncles being attacked,” Chow recalls. “Even though I felt personally safe in the very diverse, liberal bubble of Chicago, I was still terrified for my family.”
As a child, Chow remembers being embarrassed by her parents’ Chinese accent. She recalls wanting so badly to fit in, which to her meant being white. This feeling of being an outsider and struggling to fit in is an experience shared by many second-generation immigrants. But as an adult, she is proud and deeply grateful that her parents immigrated to the United States.
“They were incredibly courageous and brave to come to the United States and to communicate and interact in a language that was not their mother tongue,” Chow says.
Chow counts herself lucky that EY walks the talk when it comes to diversity and inclusion, treating them as business imperatives. Following the recent rash of race-motivated attacks, Chow was able to draw strength and support from her coworkers, noting that she was only able to have these very open conversations with her team members because organizational leadership had been very vocal in their support of the fight for equality and justice.
“Be visible and lead by example,” Chow says. “I always go back to, ‘What are the things I can change? What are the things that I can do personally?’”
Chow suggests donating time and money to organizations that fight back against hate crimes, as well as voting at the local, state, and national level. Chow herself volunteers for Ladder Up, a non-profit organization that provides free financial consulting to the underserved, helping with taxes, college financial aid, and financial literacy. “Donating money is important, but sometimes donating your time is much more powerful,” she says. “Become an advocate for rejecting aggression and hate and building awareness. Talk to anyone who will listen and share your perspective.”
Stella Marie Santos, CPA, a first-generation Filipina, has accounting in her blood: Her father was an accountant with the Philippine Commission on Audit and both of her sisters are CPAs. In 2011, Santos founded Adelfia LLC in Chicago with her sisters, and she currently sits on the Illinois CPA Society Board of Directors.
“We named the firm not after our own names as is typical of CPA firms, but with a name that every employee can take ownership and have pride in,” Santos explains. “Adelfia means brotherhood, sisterhood. We want Adelfia’s success to belong to the entire team. This foundational principle drives a feeling of equality among our team members.”
Santos’ warmth and smile are contagious, but sometimes those aren’t the first qualities people notice: Santos has been in situations where people make assumptions about her technical knowledge or ability because of her accent. “On multiple occasions, I felt some irritation from the person I was talking to because of my diction, and have sometimes felt dismissed,” Santos relates.
Santos suspects that today’s racial tension is partially a result of lagging economic conditions. “Many Caucasian Americans have been displaced in their work, and I think sometimes they think their jobs and opportunities were taken from them by a minority. I think that idea was encouraged by the previous presidential administration, and society has become really divided,” Santos says.
Of course, not all tension is born of anger—some arises from a simple lack of cultural understanding. During a regional audit, a client mentioned their surprise at Adelfia’s diverse team’s command of English. “We explained to them that in the Philippines, from elementary school until college, our medium of instruction is English,” Santos laughs.
Santos’ approach in fraught situations is to recognize that it is common for people to have a reaction to someone different from themselves. “When you feel as though your skills or abilities are being underestimated because of your heritage, try not to let those reactions make you feel like less of a person. Prove them wrong by communicating what you know and getting the job done. The quality of your work will speak for itself,” Santos advises.
More importantly, Santos advises approaching these situations openly and with empathy. “Sometimes their reactions or comments are due to a lack of awareness. Let them know how they made you feel, but in an empathetic tone. Share with them stories of where you came from, how you were educated, and the experience you have gained. When you share your story, your human spirit comes out,” Santos says.
Santos is conscious that sometimes she also makes assumptions about others, relating an instance where she approached a client because she felt their tone was undermining her work. “She assured me that’s not at all how she meant it. That moment opened my mind, because I realized I was reading too much into what she had said,” Santos shares.
During that discussion, both the client and Santos realized how much their preconceptions of each other impacted their communication. Today, they are very good friends.
“The lesson I learned is that we have to understand each other. I think the reason we’re having these problems is because one side or the other tends to be closed-minded. When there is closedmindedness, how can we have reconciliation?” Santos says.
Faye Zhang, CPA, is an audit manager at Crowe LLP and an Illinois CPA Society member and while accounting came naturally to her, math did not. “Because I’m Chinese American, people assume I’m good at math. In group projects in college, they would try to hand me the math-heavy portion of the work, and I’m like, ‘I don’t know how to do this,’ Zhang laughs.
She advises her fellow minority accountants to own their abilities and to be proud of them. In too many cases, she says, younger interns and new hires are hesitant to share their accomplishments.
“I do a lot of interviews for my firm. Some people come in with this really amazing resume and when I ask them questions about it, they’re super shy about the work they did. You have to bring it out of them, and prompt them with, ‘Oh, what did you do there?’” Zhang says.
She encourages her fellow young minorities to understand their worth and be more assertive. “Don’t sell yourself short. Go fight for the same opportunities—you’re worth it,” she says.
As Asian Americans in accounting and finance take steps to own their worth and push forward, the rest of us must also step up and do our parts to make the profession more welcoming by embracing the unique stories and perspectives within our organizations, putting aside preconceptions, and pushing back against hateful attitudes and actions within society as a whole.
“I do think this country is great. I do think there are so many amazing people out there. If we can all do our part, even if it’s a just a little one, we can make this world a better place,” Chow says.
Carolyn Tang Kmet, MBA is a senior lecturer at the Quinlan School of Business at Loyola University Chicago and the director of affiliate marketing for Groupon.
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As stay-at-home and similar restrictions are being lightened or lifted across the country, you are likely wondering what going back to the of昀ce will look like for your 昀rm, your staff, and your clients as you adapt to this “new normal.” In this post, we’re digging into some things that accounting professionals will want to keep top of mind as they consider re-opening and start getting back to business as usual, with the strong caveat that “usual” is going to be a relative term in the coming months.
When thinking about returning to the of昀ce, safety is the thing that most people are concerned about, and so it needs to be your primary focus. What does that look like practically in your office, though? Here are a few tangible examples of what you can do to alleviate fears and make your workspace safer for everyone.
Most people have been conditioned recently to maintain at least 6 feet of separation between themselves and someone else, to help limit the spread of germs. Many of your staff will feel most comfortable maintaining this same separation in your office. If you can, move workspaces or stagger your staff, so that people can remain 6 feet apart while working.
Make sure that you are well-stocked with cleaning supplies throughout your of昀ce. In addition to providing antibacterial hand soap in the restrooms and hand sanitizer throughout the of昀ce, you’ll want to disinfect surfaces with products that meet the EPA criteria for use against SARS-COV-2. You might also want to consider a professional cleaning crew who can come and give your of昀ce a thorough cleaning at intervals of your choosing. Also have a plan ready for how you are going to restock your cleaning supplies.
Don’t wait for chaos to come to you—be proactive in how you will deal with a potential breach in your safety protocols. The moments and days after something bad happens probably isn’t the best time to start thinking about what the right course of action is. What happens if someone who is working in the of昀ce tests positive for COVID-19? What if someone’s immediate family member tests positive? Your team is likely to have all of these questions and more, so prepare in advance and make sure you have plans and backup plans for a variety of healthcrisis scenarios. How you respond to these variables will likely depend on the size of your of昀ce and your staff’s 昀exibility to work from home and the of昀ce. Much grace will need to be given over the coming months as we all adapt to the 昀uctuations that accompany COVID-19.
Once you’ve made the decision to re-open your of昀ce and you have all necessary cleaning supplies and plans/procedures in place, you’re ready to start thinking about opening the doors and letting people come back to the of昀ce. However, you’re not simply 昀ipping a switch, throwing open the doors, and returning to the way things were in early 2020. Here are a few things to keep in mind when sending out the signal for folks to come back to the of昀ce.
In order to maintain proper social distancing, consider staggering your staff’s return to the of昀ce so that people have plenty of room to do their job while still staying a safe distance apart. There are a few ways you can do this; one option is to kick off a voluntary return to the of昀ce. This way, people who are more productive and successful in the of昀ce can put their names down 昀rst, while those who are successfully working from home or who have mitigating circumstances can continue to work remotely. A voluntary return also gives your staff more personal autonomy to make a choice with which they are comfortable.
If you have more people who volunteer to return than you can accommodate whilst maintaining social distancing, consider a rotating schedule so that a set max number of people can enjoy working in the of昀ce each day. Keep in mind, you will likely have a “hybrid setup,” where some, but not all, of your team is present in the of昀ce. Expect to have this hybrid system for a few weeks to months while situations progress and slowly normalize.
Some members of your team are going to have a harder time returning to the of昀ce than others. This could be parents whose child care is no longer available, those caring for elderly or immunocompromised relatives, or those with health concerns themselves. It’s important to be as accommodating as you can for these individuals. While the rest of your staff might be eager to be back in the of昀ce, be understanding of the very real dangers and hardships these individuals are dealing with and how that could in昀uence their decision to come back to the of昀ce or continue working remotely. In addition, liability for employers in relation to COVID-19 is still up in the air, and great care should be taken if you are considering a blanket “everyone returns to the of昀ce” mandate.
At this time, it’s not just the needs of your colleagues you need to consider, but also the needs of your clients. While much, if not almost all, of your work has likely been done face to face in recent years, the last few months have shown that providing exceptional client support and superior services are possible, even in remote working scenarios. With this in mind, know that one of the most impactful things you can do to impress your existing clients and bring in new clients is to be accommodating.
All the circumstances we mentioned above regarding your colleagues will likely apply to your clients, and prospective clients, as well. Some will have limited to no child care. Some will be caring for sick family members, or dealing with illness themselves. The more you can be 昀exible and accommodate their preferred communication, meeting, and payment preferences, the better.
Let your clients set the tone for how you interact, and give them multiple options. Let them call in for a meeting in lieu of an in-person conference, or set up a Zoom call if you want to be able to video chat. Allow clients to pay for your services online through an accounting-specific payment solution like CPACharge so that paying is fast, simple, and convenient. You’d be hard-pressed to find someone who wants to pay with cash at this point in the pandemic.
The more accommodating you can be with your clients now, and in the months and years to come, the more likely they will be to come back to you and recommend your services to others. Doing everything you can to delight your clients now and exceed their expectations will set you up for future success in the post-COVID-19 world to come. The challenges aren’t going away any time soon, but it is still possible for your 昀rm to rise to the occasion and thrive, even in uncertain times.
If you’re interested in learning how CPACharge can bene昀t your 昀rm, visit cpacharge.com/icpas or call 866-526-7320. ICPAS members get their monthly program fee waived for three months.
The pandemic has highlighted the importance of mental health, physical health, and healthy boundaries— here’s what organizations can do to promote wellness in the workplace.
At the beginning of the pandemic, we all had high hopes: We would work out more, start meditating, or spend more time with our families. But as it became clear that the pandemic was more of a marathon than a sprint, we began to face obstacles: unhealthy work boundaries, anxiety and depression, feelings of burnout, and some of us may have even worked out less.
This makes the pending return to normal the perfect time for organizations to take a long look at workplace wellness and see what changes they can make to foster health in body, mind, and workplace culture. Here are four things I learned over this past year that have enhanced my personal wellness and allowed me to make my workplace a healthier place for everyone.
In a recent class, the facilitator made a provocative statement: “Your staff does not show up as their authentic selves.” The problem is that organizations go out of their way to promote and encourage work-life balance—a largely outdated concept that may no longer exist in a post-pandemic world. When we tell our employees about our commitment to work-life balance, we are inadvertently telling them they must separate their work from their “real” lives and try to balance both in a way that is essentially no longer possible. Because of this, my organization is making the switch from work-life balance to work-life integration.
What’s the difference? Work-life integration means realizing the defined workday is outdated. It means that leaders recognize that there will be times during the workday that employees will need to take personal calls, meet the plumber, or run errands. It also means there will be times when employees may have to work longer hours to meet important deadlines. One way in which organizations can embrace this shift is emphasizing project or task completion rather than hours logged. The payoff for this shift is meaningful: Employees will be better able to integrate their real lives into the workplace. And 2020 research by the University of Arkansas shows that employees are more productive when they can be their whole, authentic selves.
There is no question that the pandemic exposed issues that, as a society, we had gotten pretty good at ignoring. Mental illness is one of those issues that was forced into the spotlight in a new way as both hard numbers and anecdotal evidence showed us that mental challenges like anxiety and depression have risen precipitously since the lockdowns began. Organizations have begun to walk the talk when it comes to prioritizing mental wellness as part of broader workplace wellness efforts. The most important place to start is by removing the stigma of mental illness in the workplace. A first step would be to invest in training to help organizational leaders recognize the signs of distress and to equip them
with tools to support employees. Again, this has real payoffs for both the organization and the employees themselves: A 2009 Australian study found that employees are more productive when mental health challenges are treated.
The workplace burnout phenomenon was on the rise pre-pandemic, with the World Health Organization recognizing it as a syndrome in 2019. The pandemic has only exacerbated the issue, with an August 2020 survey by FlexJobs finding that 75 percent of respondents have experienced burnout at work—and 40 percent have experienced burnout specifically during the pandemic. Michael Leiter and Christina Maslach’s 1999 research identified six causes of workplace burnout: workload, perceived lack of control, insufficient rewards, lack of community support, lack of fairness, and mismatched values. Because each of these six root causes is intertwined with the others, I believe making modifications in just one or two of these areas can yield benefits to an organization and their employees.
If, for example, we tackled workload and perceived lack of control together, how could we move the needle? There will be times when the workload is heavy and there’s not much an organization or employee can do to change that. However, organizations should consider taking steps to ensure workloads are manageable and equitable. Even if workloads can’t be immediately reduced, organizations can put workload control into their employees’ hands. This past year my organization implemented what we call “firm focus time”: dedicated hours each week in which no internal meetings are scheduled, and no internal emails are sent. In these few hours each week, employees have complete agency over their workloads and workflows. This is just one example of how organizations can push back against burnout and foster workplace wellness.
Workplace connectedness is essential to wellness. A 2017 Totaljobs survey found that 60 percent of employees enjoy their work more because of their workplace friendships, while 90 percent of employers believe that strong working relationships between coworkers improve productivity in their organization. However, this is yet another aspect of workplace wellness the pandemic has made more challenging. One way that organizations can continue to foster workplace connectedness when everyone is working from their homes is by creating virtual workplace communities, like Slack channels for shared hobbies, Zoom office happy hours, or online social networks like Yammer. Leaders should recognize workplace chatter and friendships are not a waste of working hours but actually make employees more satisfied and more efficient.
An average of 30 percent of the human life is spent at work. When our careers take up such a significant portion of our lives, it makes sense that we can’t compartmentalize them away from the other equally important aspects: our sleep, our mental and physical health, or our social connections and family relationships. All these facets of our lives make us who we are and are inextricably tied together. The more that organizations and their employees can find ways to healthily integrate these spheres, the more successful and happier we will be. As leaders, we have a responsibility to make that possible for our employees. As individuals, we have a responsibility to set boundaries and goals to pursue our passions and purpose—and for that, we all need workplace wellness.
The World Health Organization’s declaration of the global COVID-19 pandemic in March of 2020 triggered a sudden and involuntary shift to remote work. As often happens in a crisis, this inspired a can-do spirit. Employers and employees alike adapted to the disruptive changes to their work environments—but now that the pandemic is subsiding it’s time to prepare for a long-anticipated but more gradual shift to the workplace of the future.
According to Prudential’s April 2021 Pulse of the American Worker survey, about 26 percent of full-time workers plan to look for new jobs as the threat of the pandemic subsides. This potential for high turnover seems to be driven to a large degree by the desire to continue working remotely—the same survey found that 42 percent of current remote workers will look for a new job if their company does not continue to allow them to work remotely at least part-time.
The high risk of turnover makes it crucial to get your transition back to the new normal right. Here are five considerations for your return-to-work plan that can help you keep valued workers on board.
Provide your team with a vision of your new workplace model and clearly define what the new model entails. Will the team, whether as a whole or just some members, work remotely, in-office, or in a hybrid format? Consider branding this new model with a catchy name. For instance, Ford Motor Co. unveiled its “flexible hybrid work model” for office employees this spring, while GM CEO Mary Barra introduced their new “work appropriately” approach for non-factory workers. If some workers will be able to work remotely while others won’t, consider creating archetypes with names as well. It might seem a little kitschy, but it can show you put a lot of thought into the new workplace and make your team members feel like they have a clear roadmap.
Try to remove as much ambiguity as possible, especially if you’re creating a hybrid work program where workers will split their time between home and the office. For hybrid workers, define the split between days working remotely versus days working in the office and whether there are set days for each place. Also address whether individuals who work entirely remotely or in-person have the flexibility to swap locations on occasion, or whether fully remote workers will be required to come into the office periodically for team meetings and other company functions.
Using empathy, clear communication, and careful planning is key to retaining star employees when reopening the office.
And don’t forget to account for changes to your physical environment as you build your model. Many employers have reduced their office footprints, reconfigured their spaces, or plan to do so before transitioning workers back to their offices. You may have to balance space limitations as you coordinate with your own team or with other departments, and if your organization is large, you may need to consider bringing teams back to the office in stages.
The word that keeps getting bandied about when describing the new workplace is “flexibility.” Most employees crave it from their employers, especially when it comes to remote work: An April 2021 Robert Half survey reported that 75 percent of workers would prefer to work remotely, either full or part-time. Not all corporate leaders are on board, however. Like JP Morgan CEO Jamie Dimon, some leaders want most of their workers back on-site, citing concerns about the effect of remote work on their corporate culture. Don’t promise flexibility if you’re not prepared to provide it.
Be very clear about who has discretion and decision-making authority over your new work arrangements. How much leeway do employees have in determining their new work environment—or is that decision made at the management level? What will be mandated from the top by company policy?
Remember, the more input people have on decisions, the more buy-in you’ll get from them—but when personal choice isn’t on the table, be sure to clearly state what’s nonnegotiable. When you can’t provide what your team members want, prepare to explain why. This shows that you’re taking their feedback to heart while trying to balance their personal concerns with the needs of your business.
No matter how hard you try, your new workplace model will not be perfect. This is just a fact of life—every choice has pros and cons. Recognize these trade-offs, make your team aware of them, then leverage them to your advantage.
Working from home can be advantageous for projects that require undistracted, focused attention, especially now that most kids have returned to school. It’s also great to skip the commute. The office environment is typically more suitable for collaboration and teamwork and offers more visibility and internal networking opportunities—important for career advancement. It also keeps workers close to the grapevine, which often beats formal communication channels in spreading the word about new initiatives, company events, and other news.
If you’re in a hybrid environment, build your team’s schedule with these trade-offs in mind and coach your team members to embrace this new flexibility as they manage their work.
Before you begin the transition to your next workplace model, connect with each of your team members individually. The shift to the new normal will feel like change on steroids. Workers are concerned about returning to the office, whether for health reasons, social anxiety, or changes during the pandemic. Many of them will return to a different physical layout, perhaps even losing a private office or dedicated workplace.
I suggest scheduling one-on-one check-ins to discuss the transition process and hear their concerns. Listen with empathy. Show your team members that you have their best interests in mind and have
approached this process thoughtfully, even if you cannot answer their questions immediately or grant all their requests.
These upcoming changes are new territory. No one in the workplace today has experience in leading through the end of a pandemic, so recognize that the shift to your new workplace model will be an iterative process. Fine-tune your power of observation, stay engaged with your team, regularly assess your progress as you implement the transition plan, and prepare to flex as you learn what works and what doesn’t.
The challenge of retaining top talent will only continue to increase as the economy reopens—don’t give your star employees a reason to look for a fresh start somewhere else. Collaborate and engage with them to ensure a successful transition to your new normal, whichever workplace model you choose.
Leadership Fellow, National Association of Corporate Directors kppaskvan10@gmail.com
As the economy reopens, boards and management teams will need to focus on four major trends reshaping the way we hire and train workers.
Talent is a top priority for boards and management teams, and succession isn’t the only focus—companies need a robust and diverse intellectual pipeline in the coming years as demographic and societal trends transform hiring patterns. These trends include changes in the delivery of education, geographic migration, an acceleration of hybrid work environments, and the speed of digital transformation. Succession should be viewed as more than filling a limited number of senior level positions, expanded to include nurturing a vibrant talent pipeline within an organization and ensuring that the next generation of leaders has both an innovation mindset as well as the problem-solving capability needed to take the organization successfully into the future. Here are four major trends that leaders should be aware of as they head into the brave new post-pandemic world.
According to the most recent AICPA Trends Report published in 2019, the number of CPA candidates declined by 7 percent in 2018, hitting a 10-year low. This follows an overall decline in both undergraduate and graduate accounting degree program matriculations of 4 and 6 percent respectively since 2016, paired with a decline in U.S. CPA firms hiring new accounting graduates. This change is driven in part by the rapid increase in technological advancement at all firms, necessitating a shift to hiring more non-accounting or combined-degree candidates. As we’ve all seen, the pandemic has accelerated digital transformation as clients and customers now expect seamless digital interactions and instantly available, up-to-themoment information. In response to the demand for tech-savvy job candidates, many accounting students are acquiring dual degrees, adding data analytics or information systems as a second major. Quoting the AICPA, “We believe that for CPAs to continue to serve the marketplace, they must incorporate new and different skill sets and that it is incumbent upon the profession to take steps to cultivate these rapidly changing skills in accounting graduates and newly licensed CPAs.” I believe this holds true for many professions outside of accounting—I can’t think of an organization that wouldn’t be enhanced by a multidimensional candidate that is capable of changing roles as the business grows.
During the pandemic, as workers realized they no longer needed to be tied to a geographic location near their office, many migrated not only out of cities but out of state. Some of the fastest-growing states (even before the pandemic) are Arizona, Idaho, Utah, and Nevada. Going forward, many workers expect remote work to become part of the norm, and
increasingly want a say in how and where they work. Surveys from the Society of Human Resource Management indicate that most employees (52 percent) are seeking new jobs. This may seem surprising in a time of economic uncertainty, but it shows just how important regular interaction and feedback are for employers trying to keep a pulse on employee satisfaction. “Out of sight, out of mind” works both ways. If you aren’t hearing from your employees, they may be considering other options. One of those growing options has been an increased gig and freelance workforce: According to Forbes and Upwork, the gig economy is expanding three times faster than the U.S. workforce as a whole. Going forward, managers and coaches will no longer be focused on individual workers but rather emphasize the importance of diverse teams and networks as the definition of “workforce” expands.
Boards and senior management should also note that the future talent pipeline across all disciplines will be affected by the decline in birth rates, which was significant during the last economic recession starting in 2008 and is worse now. According to data from the Center for Disease Control, the birth rate in 2020 fell to a 36-year low, indicating organizations could face a lasting future talent shortage. Additionally, children born during the previous recession show skepticism about attending college—at the same time that companies have a growing need for technologically skilled employees that can work in an automated environment next to machines that have fully developed AI capabilities.
How can educational institutions and employers work together in the future? How can organizations adjust their hiring and talent development processes to ensure they can hire who they need now, while developing the necessary capabilities for a technologically advanced and diverse workforce? Organizations must start by realizing that a four-year college degree may no longer be a prerequisite for positions that have traditionally required one. Higher learning institutions are already adjusting by creating shorter degree programs and certificate plans. I think the time may come when a student can take a variety of shorter certificate courses to master specific skill sets and then stack those certificates to achieve a broader degree. Experiential learning through company projects has also gained momentum.
While these changes will create many challenges for organizations, they also create a unique opportunity to change how we approach talent development. At the same time that birth rates are declining, older workers are staying in the workforce longer—AARP notes that the age 65 and older population is a growing segment of the workforce—and McKinsey research estimates that there are upwards of 40 million adults that will require additional technology training. It will become important for organizations to create upskilling opportunities for workers at all stages of their careers. Virtual classes and online degrees make this easier than ever. Andrew Allen, the director of experiential learning at the University of Illinois Gies College of Business, says, “Workers will be able to on-ramp and off-ramp educational opportunities as needed throughout their careers to maintain expertise with technology, social, and other skill sets needed to continue working.”
Of course, there are aspects of in-person instruction and real-world experience that provide socialization, problem-solving, and collaboration skills that don’t translate well to virtual learning. As
organizations move away from requiring traditional four-year degrees, they’ll need to consider how to replicate or teach these desirable attributes. Incorporating significant education into each employee’s development plan will be critical, curated based on position, company needs, and individual goals. Education—and its costs—will be more broadly utilized as a value-add employee benefit, similar to health care or wellness.
As these four trends change the workforce, boards and their management teams will need to educate themselves on the changes coming and implement new strategic initiatives. Organizations with innovative talent acquisition and development plans will find themselves with a robust and truly diverse talent pipeline, full of workers who are more than able to take the reins when their time comes.
Thought leadership done right can establish you as an expert in your field and effortlessly draw clients to your accounting or advisory firm.
How are impressions of someone’s knowledge and expertise on a topic formed? From listening to what they say. Socially, you can tune into someone’s conversations. In a business setting, you can listen to what they say at meetings. In the digital world, you can follow what they share on their LinkedIn page. The point I am making here is that if you aspire to be known for your expertise on a topic, you have to start talking and writing about it. Speaking and writing are the foundation of thought leadership, and great thought leadership draws in an audience like a strong magnet. Before long you will have attracted a pool of prospective clients that are interested in your unique expertise.
But where do you start? Here are my three steps to becoming a magnetic thought leader.
First, you have to find your specialization. A good way to zero in on the right focus for you is to think about your dream client: Is there a specific industry, type of business, or service line specialty that just calls your name? The more you can define and delve into your focus, the easier it will be to find topics that your audience cares about because you will be hyperaware of their needs, wants, pain points, and challenges. Part of becoming an expert is moving away from being a generalist. For example, when I aspired to be a consultant to accounting firms on growth and business development, I began by narrowing my focus to marketing leaders in accounting firms. Because I narrowed my vision to a very concentrated group, I was able to build content and thought leadership to specifically appeal to them and answer their burning questions.
Any thought leader can tell you this is often the most difficult part. Trying to find a topic that is popular yet not already highly covered, that appeals to your niche without being too specific, can be a huge challenge. To make this decision, put yourself in the shoes of your audience: What do they want to hear about? Think about what problems they are facing, what challenges they are having, and what issues are keeping them up at night right now. These are the topics that will draw them in and have them calling or emailing you for your help! If you’ve chosen your focus correctly, your knowledge and experiences will align with the pain points being experienced by your audience, allowing you to be the solution to their challenges. However, you can’t stop learning. You will need to continue to stretch your knowledge base to dial in more effectively to what your audience and prospective clients are worrying about. That continuing education will also allow you to continue to expand the topics related to your area of expertise, which will help you create a scope of content that you can speak on with authority, engaging your audience by offering them valuable, relevant information.
In my case, with marketing leaders in accounting being my target audience, I began to formulate my thought leadership around hot-button issues that they were facing, including building effective marketing plans and creating client feedback programs. While I had a wealth of knowledge about these topics, I did find that it took practice before my writing and speaking skills matched my knowledge base. Once you start building your thought leadership catalog, you should also seek out resources that help you grow as a writer and speaker.
To really establish yourself as a thought leader and draw in prospective clients, you’ll need to find the right channel and frequency for sharing your content. Is YouTube or LinkedIn right for you? A blog? Industry publications or events? How frequently should you post or make appearances? Generally, I recommend a minimum of 12 thought leadership touches of original content a year, though ideally more. You want to hit the sweet spot between people getting tired of you and people forgetting you exist. But your channel and frequency will largely depend on the focus and topics you choose. Do your research within your specific niche to find what channels your potential clients congregate on and how often they like to tune in. A speaking engagement can turn into a great piece of content for a monthly newsletter, blog, LinkedIn page, podcast, and/or webinar, which are all safe bets for those hoping to establish themselves as thought leaders in the accounting and finance space. So, don’t forget to parlay your efforts by sharing your new and excellent piece of thought leadership across multiple channels to maximize your audience reach!
It took several years of consistent outreach before I had created a community of prospective clients that valued my thoughts and had confidence in my expertise. Now my consistent efforts in writing, speaking, and blogging continue to draw opportunities to me. Be patient and wait to see the results. Your current clients value your knowledge, and your prospective clients will too if you can effectively communicate it. Make sure you know who you are targeting, zero in on the things they care about, and be consistent in getting your thought leadership out there. Before long, you will have built your own strong magnet to effortlessly attract great clients to your firm.
Consider why ethics and sexual harassment prevention training matter before crossing them off your license renewal to-do list.
You are likely already aware that this year is a reporting year and that all CPAs licensed in Illinois must log 120 CPE hours within the three-year renewal period ending Sept. 30, 2021. These CPE hours must include one annual hour of sexual harassment prevention training and four hours of ethics training. However, these trainings should be more than an item to check off your renewal to-do list.
Treating people with respect and making ethical decisions are moral imperatives and the foundation of your personal and professional reputation. Failing in either of these areas puts your and your organization’s good names at risk and makes you and your organization susceptible to financial consequences. In order to maintain a healthy professional culture and build an excellent reputation, take these training requirements seriously and think through the implications of your workplace policies and personal actions regarding sexual harassment prevention and ethical decision-making.
Sexual harassment is a corrosive element in an organization’s culture and takes an emotional toll on victims and bystanders. To prevent sexual harassment, you should ensure you and your team are taking sexual harassment prevention training seriously and promoting a positive and communicative workplace culture with mechanisms for people to report issues anonymously and without fear of retaliation. Sexual harassment in the workplace can cause people to leave an organization, either driven out by direct harassment or dismayed by a company culture that allows it. The Society for Human Resources Management estimates that the cost of an employee leaving is roughly a third of their annual earnings, with most of the cost stemming from the loss in productivity and knowledge, the resources needed to provide temporary labor, and the time needed to recruit and train a replacement. Preventing sexual harassment is the right thing to do, and it can pay off with higher retention rates, saved expenses, and a more positive workplace environment.
Ethical lapses have similar costs, both in cultural deterioration and the loss of staff. Much like sexual harassment prevention, you should ensure that employees have ways to report potential fraud anonymously and without fear of retaliation. The Association of Certified Fraud Examiners (ACFE) reports that a typical fraud case lasts 14 months before detection and costs an organization an average of $8,300 per month. Research shows that effective fraud reporting mechanisms are a key indicator of organizations being able to identify and stop fraud quickly.
Sexual harassment and fraud have long existed within the profession and the numbers prove that they happen more often than we might think. In 2018, Accounting Today reported on research showing that sexual harassment in particular is more common in professional workplaces than we would like to believe. In fact, 34 percent of the women in accounting surveyed said they had faced sexual harassment themselves, and 39 percent said they were aware that someone else had been harassed. On the fraud front, the ACFE continually reports on instances of fraud, showing both how frequent they are and the circumstances surrounding fraudulent behavior.
The unique circumstances created by COVID-19 have likely increased instances of both sexual harassment and fraud. Though most interactions are now digital, they are also more likely to be one-on-one, and perpetrators may feel their harassment will go undetected without witnesses. Fraud has risen during the pandemic, especially cybercrimes and COVID-19 scams, and employees often feel increased financial pressure and heightened pressure to perform.
The goals of both sexual harassment prevention training and ethics training should not be to simply check those items off your list. These training sessions should help define what fraud and sexual harassment look like, highlight the importance of an organizational culture that cares about people and making ethical choices, and reduce the instances of sexual harassment and unethical behavior.
You can find many providers of both sexual harassment prevention training and ethics courses, but make sure that the sessions you choose qualify for continuing professional education as approved by the Illinois Department of Financial and Professional Regulation. The Illinois CPA Society offers on-demand courses for both the sexual harassment training and ethics requirements at www.icpas.org/ education/programs/ondemand.
Be a part of the solution by inspiring and encouraging appropriate and ethical behavior within your organization and within the profession as a whole. We are a profession built on public trust, and we need to continue to sustain and improve our reputation by showing integrity in our work and interpersonal interactions. By understanding why these training sessions matter, you can help hold yourself, your organization, and the profession to a higher standard.
Bitcoin and other cryptocurrencies have posted stratospheric returns but also exhibit immense volatility— should savvy investors add them to their portfolios?
Years from now, when financial professionals review the performance of the investment marketplace during the pandemic and try to explain why the markets rose and fell the way they did, one important story will be the popularity of cryptocurrencies—specifically Bitcoin—as an investment asset. It seems we can’t go anywhere without hearing about Bitcoin. Whether it’s a story about a professional athlete taking their salary in Bitcoin, or a high-profile CEO sounding off on Twitter about the virtues of Bitcoin, or a publicly traded company’s stock price getting slammed when analysts realize that a good chunk of its quarterly earnings came from well-timed sales of Bitcoin, the once-common perception that Bitcoin isn’t mainstream is no longer true. With so many competing narratives surrounding cryptocurrencies, what’s an investor to do?
To start, Bitcoin is the most recognizable cryptocurrency—a digital currency that exists only in virtual form—and is often used as shorthand for all cryptocurrencies in general by the uninitiated. Cryptocurrencies are created, tracked, and traded via decentralized digital ledgers that, through the power of blockchain technology, are continuously open to all owners and users of the currency. In fact, when Bitcoin launched in 2009 its creators envisioned it as an efficient payment mechanism that would allow a buyer and seller to transact business free of government or central bank regulation. Since its introduction, about 89 percent of all Bitcoin has been “mined” and entered circulation. However, according to SoFi, as of April 2021 there are as many as 10,000 different cryptocurrencies in existence today, so the supply of these payment vehicles is far from limited.
Since Bitcoin’s creation, investors have been intrigued by its characteristics as an investment vehicle. It can be purchased and held on a stand-alone basis, like a stock or bond, in brokerage accounts. It can also be purchased in a fund, which can be either diversified (holding Bitcoin and other cryptocurrencies) or non-diversified (holding Bitcoin alone). Several indexes akin to the Dow Jones Industrial Average or S&P 500 have been developed to track the performance and other metrics of cryptocurrencies—and that performance has been breathtaking and volatile. In 2017, Bitcoin was up 1,331 percent, then down 73 percent in 2018, up 95 percent in 2019, and up 301 percent in 2020—and the bull and bear swings throughout 2021 have been equally volatile to date. Naturally, returns like these have generated attention in the investment community.
How should we view Bitcoin and other cryptocurrencies in the investing marketplace? I think one important factor is determining if cryptocurrencies are better suited to be trading vehicles, meant to be held for only short periods of time rather than investment vehicles or stores of value, designed to be held for the intermediate or long term. As a trading vehicle, I think Bitcoin in particular is superb. Trading volumes are robust, price volatility is high, and
there are multiple exchanges and trading platforms available to retail and institutional investors alike.
Let’s look at the case for cryptocurrency as an investment vehicle and store of value. In a 2018 study, Yukun Liu and Aleh Tsyvinski concluded that investors should hold 6 percent, 4 percent, or 1 percent of their portfolios in cryptocurrencies, depending on whether they believed that future performance would be at least as strong as, half as strong as, or worse than past performance respectively. More recently, in early 2021, the global market value of stocks and bonds was estimated at $200 trillion while the global cryptocurrency market cap stands at about $1.75 trillion. Because of this, some might argue that all portfolios should contain at least 0.5 percent holdings in Bitcoin and other cryptocurrencies to properly reflect the diverse investment landscape and the growing demand—and expanding market caps—for cryptocurrencies.
When we consider Bitcoin as an investment, we have to look at it differently than how we look at other common investments like stocks and bonds. Stocks, of course, are an ownership interest in a company that has assets and presumably generates cash flow for its owners. Investors have different opinions of the value of that cash flow generation capacity, which creates price moves, but ultimately there is an economic basis for determining a company’s value. The same cannot be said for Bitcoin, for example. Bitcoin is likened to digital gold. Like gold and other commodities, Bitcoin generates no cash flow, and its value is essentially driven by its limited supply and growing demand and whatever investors collectively determine its value to be. Therefore, its price volatility is much greater than the stock market’s. So far, traders and investors have largely been rewarded for taking on the greater risk of investing in Bitcoin.
As you know, traders and investors are notoriously fickle when it comes to determining asset prices. During times of panic, the ability of a company to generate future cash flow serves to limit how low its stock price may go. There’s no similar mechanism in place to slow a downward spiral in the case of gold and other commodities, nor in the case of cryptocurrencies like Bitcoin. These issues might be overlooked if investors were confident that adding Bitcoin to their investment portfolios provided real diversification benefits. For example, gold is often held in portfolios on the basis of longstanding evidence that gold is a hedge against inflation and is often likely to rise when stocks fall in value, and vice versa. So far, we haven’t seen sustained evidence of similar performance from Bitcoin in a declining stock market to fully justify its diversification or hedging potential.
I am reluctant to crown Bitcoin and other cryptocurrencies the “next big thing” in modern diversified portfolio management. Perhaps there needs to be wider spread acceptance among a broad array of investors for these investment vehicles to mature and develop into a true investment asset class. Perhaps we need a longer time horizon, and at least a few more investment cycles, for us to learn cryptocurrencies’ characteristics during bull and bear markets and boom and bust times in our global economy to reveal the real value of adding them to well-diversified portfolios. Until then, I believe the buying and selling of Bitcoin and other cryptocurrencies is likely to remain a speculative trade, rather than a prudent long-term investing and financial planning strategy. It’s up to you to determine if the risk is worth the reward.
The most widely used interest rate benchmark in the world, the London Interbank Offered Rate (LIBOR), will be replaced by the end of 2021. This benchmark is instrumental in global contracts representing hundreds of trillions of dollars. Are we ready for this transition?
LIBOR’s discontinuation poses risks and challenges for organizations worldwide because so many financial instruments are linked to it. As most market participants never anticipated LIBOR’s discontinuation, many financial transactions provide no contractual fallbacks or contain provisions that may not effectively cover this particular scenario. Given these gaps and the risks to the financial system, the State of New York and the European Union have both recently adopted measures to migrate certain contracts to their respective regulators’ recommended replacement benchmark in an effort to reduce the uncertainty surrounding LIBOR’s cessation.
In addition to ongoing legislative work, the Financial Accounting Standards Board (FASB) has begun to clarify accounting guidance to facilitate the transition of corporate floatingrate transactions from the LIBOR reference rate in Topic 848, “Reference Rate Reform.” The new topic incudes Accounting Standards Update (ASU) 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” and ASU 2021-01, “Reference Rate Reform: Scope,” which clarifies some scope issues related to hedge accounting.
LIBOR is not just an issue for commercial banks. References to LIBOR occur in many longterm contracts with a financing element, including contracts with customers and suppliers, operating and financing leases, and hedging arrangements. For example, the transition provisions in ASC 842, “Leases,” specified that many of the practical expedients could only be applied as long as the lease is not modified. Modifications to replace LIBOR with another reference rate could have triggered a significant change in lease accounting. Fortunately, the FASB has provided an optional expedient for lease modifications so that the LIBOR transition can be addressed without needing to reassess lease classification and the discount rate, remeasure lease payments, or perform other reevaluations. The change in the reference rate will continue to be accounted for as variable rent. However, one cannot pick and choose: The optional expedient must be applied to all eligible leases.
The impact of the transition on derivatives will largely focus on interest rate hedges for loans with a variable interest rate tied to LIBOR. There are two major requirements for hedge accounting: documentation and effectiveness assessment. The requirements for
As the financial community plans its transition from the most commonly used interest rate benchmark, contracts and financial instruments of all kinds stand to be affected.
documentation are very specific and are listed at the inception of the hedge relationship, including documenting the nature of the hedged risk, identifying the hedging instrument, defining the hedged item, and stating how effectiveness assessment requirements will be met. For interest rate hedge designations, the underlying interest rate is key to all these documentation requirements and to performing the associated effectiveness assessment testing.
Many existing hedges will simply continue as they had been accounted for historically under the finalized ASC 848, as there are meaningful reliefs from the strict criteria for using the “critical terms matched” and “shortcut” methods for hedge accounting. Hedgers will be able to hedge benchmark rates where long-haul effectiveness testing is used. With the flexibility currently built into the guidance, current LIBOR hedgers will be able to adjust documentation at the time the relief is applied. This period of relief will end in 2022.
As for a LIBOR alternative, the FASB has added the Secured Overnight Financing Rate (SOFR) to the list of eligible benchmark rates. However, transitioning from the term structure of LIBOR, a forward-looking rate with an embedded credit component, to SOFR, an overnight risk-free rate, requires operational changes by market participants. End-users are accustomed to calculating LIBOR-based cash flows well in advance of payment due to LIBOR’s term structure. There is insufficient liquidity in futures and over-the-counter derivatives markets to facilitate the development of meaningful SOFR-based forward curves as SOFR still remains an overnight rate. End-users will need to negotiate SOFR-based financial instruments and adopt systems and processes that mitigate the risks of SOFR’s daily volatility.
The impact of the LIBOR discontinuation and transition to alternative reference rates can hardly be overstated. There are still many moving parts and significant uncertainty as to the passage of legislative solutions. Those who do their homework and act decisively are likely to gain a strategic advantage and significant financial rewards—while those who choose to ignore the impending change are likely to face grave consequences.
This column was co-authored with John Hepp, Ph.D., clinical assistant professor of accountancy in the University of Illinois Gies College of Business.
Tax increment financing (TIF) is a seemingly simple economic development tool that has become anything but—and now it’s somewhat controversial in its means to promote improvements in certain city areas, too. Proponents contend that TIF provides requisite funding for redevelopment to municipalities. Opponents contend that TIF can starve taxing bodies of much-needed funds, while being ineffective at truly spurring redevelopment. Let’s decode TIF in this very high-level overview.
TIF is not unique to Illinois. In fact, TIF districts are found in all 50 states, and Illinois adopted its Tax Increment Allocation Redevelopment Act, aka the TIF Act, in 1977. The act is a portion of the Municipal Code, and Section 11-74.42 sets forth the legislative findings and the General Assembly’s intentions when passing the act.
The act provides that the basic purpose of TIF and the designation of TIF districts is to eliminate blighted areas, institute conservation measures, and to undertake redevelopment of such areas. The legislature found that successfully removing and alleviating adverse conditions in these areas requires actions that encourage private investment, which further restores and enhances the tax base of the taxing districts through development or redevelopment of the project areas.
As such, municipalities have the legal authority to designate TIF districts. A municipality is required to demonstrate that the proposed TIF area is either blighted or a “conservation area.” To determine if an area is blighted, the municipality must show a combination of five or more of the factors in the statutory definition of “blighted area,” which includes factors like dilapidation, obsolescence, deterioration, structures below code, excessive vacancies, and inadequate utilities. There’s even a different set of factors for determining blight if the redevelopment project area is vacant.
On the other hand, a “conservation area” is likely not what you might think—it has nothing to do with conserving natural resources. Instead, a “conservation area” is an improved area within the boundaries of a redevelopment project in which 50 percent or more of the structures in the area are aged 35 years or more. The area is not yet a blighted area, but because of a combination of three or more statutory factors, the area is detrimental to the public’s safety, health, morals, or welfare and may become a blighted area if action isn’t taken. Among these factors are dilapidation, obsolescence, deterioration, and the presence
Tax increment financing is an economic development tool that has become increasingly complicated— and controversial.
of structures below code. So, many of the same characteristics of a blighted area apply to a conservation area, except the area is not yet deemed to be blighted.
To be designated as a TIF district, the municipality must demonstrate the existence of the statutory factors and that “but for” the establishment of the TIF district, the conditions in the district will not be addressed. In other words, without the TIF, development or redevelopment would not occur.
Once a TIF district is established, property taxes in the district aren’t frozen. Instead, the equalized assessed value (EAV) of the properties in the TIF district are determined at the time the TIF is established. This sets the base level EAV for the TIF district and taxes on this base level are distributed to the taxing bodies for the duration of the TIF district designation. The increase in the EAV over the base is the “increment.” The property tax system continues under a TIF—taxing bodies set levies, and taxes continue to be assessed on fair cash value. However, taxes collected on the increment are diverted into a fund used to pay for public and private TIF-related projects in the TIF district.
By law, these increment funds can only be spent on “redevelopment project costs.” These costs include such things as the cost of the redevelopment planning, rehabilitation, reconstruction, repair, remodeling, public works, and job training or retraining.
TIF district designation lasts 23 years and can be extended for an additional 12 years providing there’s agreement between the affected taxing bodies and General Assembly, who must pass legislation to extend the TIF designation.
The General Assembly’s Property Tax Task Force from a couple of years ago had a subcommittee that reviewed TIF districts. As you may recall, the task force held a series of meetings but never issued a final report. And even though the task force never issued a final report, the TIF subcommittee reached several conclusions and issued recommendations which were turned into legislation issued just this year.
The TIF subcommittee identified several problems associated with TIF districts, including that TIF districts reduce funds to their taxing bodies because of the diversion of the increment; some TIF designations have been in place for so long they continue beyond the point where they are needed to pay for the initial economic development projects and, in such situations, the TIF district may be hoarding money for little or no public purpose that would otherwise go to local government.
The TIF subcommittee made three recommendations:
1) Shorten the timeframe for TIF districts from 23 years to 10-15 years. This recommendation was based on data submitted to the subcommittee that the benefits of a well-structured TIF district is typically realized with 10 years of creation.
2) Tighten the definition of “blighted” to incorporate objective standards, rather than an open interpretation of the “but for” requirement. The subcommittee found that the term “blighted” is used too expansively and that the “but for” standard is used too loosely.
3) Increase transparency around TIF district impacts on property tax collection processes in other taxing bodies. The subcommittee recommended that the impact of a TIF district on other taxing bodies should be an ongoing process of documentation made public to taxpayers.
The recommendations have been introduced into legislation as HB 571 and SB 2298. HB 571 expands the required information to be included in reporting to the Illinois comptroller and taxing districts. The bill was opposed by the Illinois Municipal League, but the bill passed the House despite the opposition. The bill was unanimously voted out of the Senate Revenue Committee and appears poised for passage at the time of publishing this article.
The proposals in SB 2298 include shortening the life of TIF districts from 23 years to 10 years and modifying the definition of blighted areas. The Illinois Municipal League also opposed this legislation. The bill’s sponsor, Sen. Ann Gillespie (D-Arlington Heights), agreed not to move the bill forward but plans to establish a working group to examine and prepare possible changes to the TIF Act.
TIF districts have proponents and opponents, and positives and negatives, but as legislation proposed this year demonstrates, they’re deemed important to economic development in Illinois. With TIF districts unlikely to go away, there are features of the law that can be modified to ensure that the primary goals of remediation of blighted areas and stopping other areas from slipping into blight can be realized—if we can navigate the complication and controversy.
Sometimes I can’t believe how much has happened in my life within such a short amount of time. In four short years, I received my master’s degree in accounting, passed the CPA exam and obtained my license, and most recently became an Illinois CPA Society Young Professionals Leadership Award winner. These successes have been the result of hard work, determination and, last but not least, the unwavering support, encouragement, and mentorship of so many people in my life.
It was actually my dad’s suggestion that led me to study accounting in college. Before that, I thought I wanted to be a high school English teacher. However, as I took more classes and began discussing majors with my parents, I realized that career path was not right for me. My dad, with his business background, began to tell me about other potential career options in his field that might be a better match for my personality. After a lot of discussion and research, I decided on accounting. I am truly grateful that he encouraged me to explore all my career options, as I have fallen in love with the work I do each and every day.
As the oldest of five children, I embraced the responsibility of setting a good example for my siblings and have always seen myself as a leader. I was the first to start school, the first to learn to drive, and the first to graduate from college and begin my career. At the time, each of these experiences was new and foreign, and although I always had my family’s support, I undertook each of these challenges alone. Seeing myself as a leader and a trailblazer within my family taught me how to adapt to new situations and become comfortable with feeling uncomfortable—valuable skills for my current role and for life in general.
As I grow, my support network does as well. My professional career started with a tax season internship that allowed me to form close relationships with my colleagues at all levels of the organization. Through the help and encouragement of my peers, managers, and partners, I fell in love with the world of public accounting—and achieved my goal of receiving a full-time offer! Five years later, I am still with the same great company. I was promoted to my current role within a relatively short timeframe, and I continue to develop and grow as both an accountant and a leader. I am grateful to continue strengthening the relationships I started five years ago with my coworkers and leaders who advocate for my success on a daily basis.
I still have so many great opportunities ahead of me both personally and professionally. I look at the broad network of individuals who helped me get to where I am today and cannot help but feel incredibly blessed. Leadership is not something that comes easy—it involves plenty of hard work, self-compassion, and determination. With a great support system of family, friends, mentors, and colleagues, I know I can accomplish anything the future brings— and I bet you can, too.
My relationships with family, friends, and mentors have allowed me to accomplish more than I ever dreamed and have given me the confidence to take on whatever the future brings.
CPALauren Smaga is a senior staff accountant at Shepard, Schwartz & Harris LLP in Chicago and a recipient of the 2021 Illinois CPA Society Young Professionals Leadership Award.
Crandall & Brackett, Ltd. 630.344.2355 | robert@crandall-brackett.com www.crandall-brackett.com
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The Illinois CPA Society’s 2021 Lifetime Achievement Award winner and immediate past president of the CPA Endowment Fund of Illinois discusses her unique career path and what continues to inspire her to give back.
BY HILARY COLLINS
Sara Mikuta has done it all. In the four decades since she earned her CPA license and joined the Illinois CPA Society, she has worked for public and private companies, in public practice and in industry, as a consultant and as an auditor, part-time and full-time. She has served as the chairperson of the CPA Endowment Fund of Illinois, the Illinois Board of Examiners, and the Illinois CPA Society, and has raised two sons—both CPAs.
The CPA profession has the 1970s recession to thank for pushing Mikuta into business school: She originally dreamed of being a journalist. “Because of the recession, I really started thinking about my future,” she says. “It was really practical considerations that led me to major in accounting—I saw it as something with a lot of options from which I could choose.”
While the decision may have been practical, Mikuta found that she had a talent for financial details and truly enjoyed deciphering the stories numbers told. After graduating, she worked for several years as an audit manager at Arthur Andersen, eventually leaving for a job with more flexible hours after the birth of her first son. She would spend the next two decades working for financial institutions—including Pinnacle Bank and the Leaders Bank—discovering new things that intrigued her in the world of accounting and finance.
“That work always held my interest because when something happens in the economy, the banks are the first businesses to be affected. You have to be very nimble,” Mikuta explains. “Then I learned the deeper truths of banking: how important it is to a community, to the small business world. It’s the provider of capital that really keeps most of this country running.”
Mikuta eventually returned to the accounting and consulting world, spending nine years as a senior manager and then partner at Wipfli LLP until retiring recently. But Mikuta will tell you that the latter half of her 42-year career is defined by her volunteer work, a passion she has no intention of giving up. She has spent—and continues to spend—time volunteering with various boards, including the CPA Endowment Fund of Illinois, the Illinois Board of Examiners, and the Illinois CPA Society, and serving as a committee member for both the National Association of State Boards of Accountancy and the AICPA. In these continuing roles, she looks forward to being part of the evolution of the CPA Exam.
In fact, looking back on all she has accomplished, Mikuta says her work with the CPA Endowment Fund of Illinois is one of the things she’s most proud of.
Mikuta was involved from almost the very beginning, helping the small fund founded in 1998 with a mission of paving the way for future CPAs—but with only fuzzy ideas of how to achieve that—grow into its current iteration, an impactful organization that annually awards more than $235,000 in scholarships and training programs to hundreds of diverse and deserving accounting students across Illinois.
“I’m really very proud of the ways the Endowment Fund has supported future CPAs, particularly the kids who show potential to be great CPAs and great businesspeople but were being held back by financial, cultural, or racial barriers. I’ve seen people blossom,” Mikuta says. “I’m hoping that somebody out there is going to have an amazing career like I did just because I was there to help spur them on.”
