Client Advisor July 2022

TAX ALERT: Rare Mid-Year Mileage Rate Increase

The last mid-year IRS adjustment was in 2011

With summer underway, rising temperatures along with high gas prices have many hot under-the-collar. To offer a small respite, the IRS has announced a special adjustment that will increase the standard business mileage rate for the remainder of 2022.

Effective July 1, the increase will bring us to 62.5 cents per mile for business travel. For travel from January 1 through June 30, 2022, taxpayers should use 58.5 cents per mile.

Simply put, when a vehicle is used to go between two different places of work, the mileage reimbursement is applicable. This would include travel to an off-site business meeting, post office, bank, office supply purchases, etc. Commuting to and from home to your work would not apply.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by many businesses to reimburse their employees for mileage.

Smith Dickson is here to assist you with all of your tax needs. Please contact Austin Ray, CPA, CFE , or any of our staff with your questions.

Client Advisor January 2022

The last mid-year IRS adjustment was in 2011

With summer underway, rising temperatures along with high gas prices have many hot under-the-collar. To offer a small respite, the IRS has announced a special adjustment that will increase the standard business mileage rate for the remainder of 2022.

Effective July 1, the increase will bring us to 62.5 cents per mile for business travel. For travel from January 1 through June 30, 2022, taxpayers should use 58.5 cents per mile.

Simply put, when a vehicle is used to go between two different places of work, the mileage reimbursement is applicable. This would include travel to an off-site business meeting, post office, bank, office supply purchases, etc. Commuting to and from home to your work would not apply.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by many businesses to reimburse their employees for mileage.

Smith Dickson is here to assist you with all of your tax needs. Please contact Austin Ray, CPA, CFE , or any of our staff with your questions.

Client Advisor November 2021

Fraud Investigations: Key Steps and Mistakes to Avoid

by Ryan Nguyen, CPA, CFE and Austin Ray, CPA, CFE

We live in a world where fraud and embezzlement are rather common; in fact, the Association of Certified Fraud Examiners reports that private companies and small businesses experience fraud more frequently than large corporations, with a frequency rate of 28%!

Knowing what steps to take to address suspected fraud is critical, as these set the course for criminal or civil actions, form a basis for termination proceedings, and provide evidence for insurance claims.

Hire a Team of Fraud Experts

Before launching an internal investigation, hire outside professionals to help guide your efforts. An attorney will help ensure that the proper legal steps are taken to protect your company and establish a case for potential prosecution against the perpetrator. A forensic CPA who is trained as a fraud examination specialist can investigate the fraud scheme, calculate damages, then act as an expert in legal proceedings.

Investigate and Preserve Evidence

At the outset, it is critical to obtain and preserve evidence. Avoid removal of key records by suspects through creating backups of all financial data and correspondence, ensuring that this information remains unaltered. As evidence is collected, always be sure to document the origins of the information and maintain the chain of custody. Again, work carefully with your fraud experts to guide this process.

Identify Suspects and Determine Course of Action

Remember, no one should be above suspicion. Consider collusion between multiple parties and minimize any disclosure of suspicions of fraud. Finally, create a hypothesis of what occurred based on the known facts. Your fraud experts will help you test this hypothesis by thoroughly analyzing all records, conducting interviews, and evaluating the next steps.

{Editor's note: Ryan Nguyen, CPA, CFE, Partner -- Forensics and Audit , and Austin Ray, CPA, CFE, Supervisor -- Forensics and Audit, recently published this article in the Orange County Business Journal. }

Client Advisor September 2021

The Best Defense is a Good Offense: Trust Accounting

{Editor's note: Gina Lara, Senior Manager, Tax and Forensics, recently published an article in the Orange County Business Journal discussing key trust accounting items about which estate planning/probate attorneys and trustees need to be aware of. Below is an excerpt.}

Trustees who are not presently seeking court approval have flexibility in the format of their trust accounting, but they still must meet certain substance requirements. Accounting in the probate code format is the best way to ensure these requirements are met and adequate disclosure has been made to all beneficiaries …

The cost of an accounting prepared in probate code format is an administrative expense of the trust. It is immaterial in comparison to the cost of defending oneself in court for failure to adequately deliver timely accountings of trust money to beneficiaries. When it comes to trust accounting, the best defense is a good offense by filing proper fiduciary accountings each year.

Please read the article , then contact Smith Dickson if you have any questions.

Client Advisor August 2021

Employee Retention Credit: Can You Qualify for Big Money?

The Employee Retention Tax Credit (ERTC) is a fully refundable tax credit for employers, recently extended through the end of 2021.

Richard Warner, tax partner, has prepared a brief summary highlighting key facts of the ERTC:

Please read the summary , then contact Smith Dickson if you have any questions.

Client Advisor December 2020

Avoiding Tax Surprises on Settlements/Judgments and Forms 1099:

How Are Your Firm and Clients Impacted?

{Editor's note: Richard Warner, CPA and Deborah Dickson, CPA, CFF, MAFF recently published this article in "Orange County Lawyer" magazine, the official publication of the Orange County Bar Association," excerpt below.}



Scenario: You successfully negotiated a settlement for your individual plaintiff client in the amount of $1,000,000 due to claims of emotional distress from non-physical injuries at work. This total includes attorney fees of $400,000. You call it a "win" and are certain that your client will be happy with the $600,000 net result - until you receive a phone call from the client, complaining that her CPA has informed her that she has to pay taxes on the entire $1,000,000 of proceeds, including your $400,000 fees, so her net after tax result is only $200,000! Your client goes away unhappy and you wonder what went wrong.

Client Advisor October 2020

The Role of the Forensic Accountant in Dispute Resolution

by Deborah Dickson, CPA, CFF, MAFF, Managing Partner, Smith Dickson,

Certified Public Accountants, LLP

For decades, plaintiffs and defendants alike have been motivated by having their day in court. This innate desire of human beings to prove themselves “right” has powered our justice system and made the legal profession one of the most demanding and rewarding. This has worked well until the Covid-19 pandemic hit and courtrooms across the nation began to close their doors. At first, many professionals in litigation support thought, “It’s only a few weeks.” Then, “It’s only a few months.” Now, along with attorneys, we must pivot and embark on a journey to the new normal.

As courts begin to re-open, many are backlogged, and matters are being re-prioritized to ensure what the court considers critical cases are addressed. Trial resolution for “non-critical” matters has become a daunting uncertainty. As a result, for many litigators the new normal involves a greater focus on other forms of dispute resolution. Those attorneys who are skilled in negotiation and mediation can benefit from understanding the powerful role a forensic CPA can play in the

resolution process.

The role of a forensic accountant is to transform complex financial data into

calculations and a narrative that non-accountants can understand. Unlike lawyers,

however, the rules governing the professional conduct of forensic CPAs forbid

advocacy. Financial damages experts provide independent objective analysis,

perform calculations, and report findings. This objectivity-based perspective allows

the forensic accounting expert to offer impartial findings which enable both parties to more effectively resolve their differences and arrive at a resolution, often avoiding litigation in a courtroom setting. It is this independence, and the ability to clearly communicate damage calculations, that can make the forensic accountant a key player in dispute resolution.

Deborah Dickson, CPA, CFF, MAFF, Managing Partner, Smith Dickson, Certified

Public Accountants, LLP (www.smithdickson.com) based in Irvine. The firm’s

Litigation Support Services include forensic accounting, expert testimony, intellectual property, fraud and embezzlement, real estate, trust and estate beneficiary disputes, employment law, and family law. Ph. (949) 553-1020.

Client Advisor July 2020

Taxation Aspects of Stimulus Programs

{Editor's note: Debbie Dickson was featured in the recent Orange County Business Journal "Accounting Firms Special Report," excerpted from the article below.}

Three months ago, at the inception of the stay-at-home orders, we heard from clients who ceased operations overnight: international rock concert/sporting events producers; owners of a downtown Los Angeles parking tower management company; many lawyers due to court closures; and well-known touring rock bands. To help each of these businesses and many others to survive, we worked with them to secure PPP loans. The allure at the inception of these loans was eligibility for loan forgiveness if the proceeds were used on qualified business expenses, and the loan forgiveness amount was marketed as non-taxable.

A month after the PPP program was implemented, the IRS issued Notice 2020-32 which prohibited a tax deduction for expenses incurred and ultimately forgiven. The IRS ruling effectively made the forgivable part of the loan taxable which did not appear to be Congressional intent in the CARES Act. The American Institute of Certified Public Accountants immediately challenged the surprise ruling. Congress has not yet passed legislation to override this decision.

Subsequent to this IRS news, some positive changes were legislated. As of this date, to apply for loan forgiveness, 60 percent (down from 75 percent) of PPP proceeds must be used to cover payroll or specific benefits, including 401-K employer contributions and health insurance. The remainder of the business costs must include rent, mortgage interest, or utilities. These costs may be incurred any time within 24 weeks of the loan origination date. This is exciting news for many clients who are hoping to bring back their employees and jumpstart operations when the economy stabilizes.

In addition to PPP loans, there are many other ways to qualify for government funds or loans. These include the employee retention credit up to $5,000 per employee for companies that did not receive PPP funds. These are for wages paid between March 27 and December 31, 2020 if there is a significant decline of gross receipts of 50 percent or more due to adherence to government orders. Another example is the deferral of the employer portion of Social Security taxes at 50 percent to December 31, 2021 and 50 percent to December 31, 2022. Net operating loss carrybacks are now available for losses earned in tax years ending 2018, 2019, and 2020.

Regardless of the taxation aspects of these programs, many companies are grateful for government assistance received to carry them through these unprecedented times.

Congratulations To Our New Partners!

Deborah Dickson, Managing Partner of Smith Dickson, is pleased to welcome Richard Warner, CPA and Ryan Nguyen, CPA to our partnership!

Richard Warner provides innovative tax planning strategies, specialized advisory services, bank negotiations, and merger and acquisition structuring. He oversees tax strategy and compliance work for individuals, partnerships, and corporations.

Ryan Nguyen is a leader in the forensic CPA arena with extensive experience in financial analysis, fraud investigations, Rule 26 and other report preparation, litigation consulting, and expert witness testifying. He also leads his team in performing assurance services.

Richard and Ryan have each been with Smith Dickson for over 10 years. Congratulations from all of your colleagues!”

National Association of Women Business Owners

Orange County selects Debbie Dickson to receive “Lifetime Achievement Award”

NAWBO-OC presented Debbie Dickson with the organization’s Remarkable Women Lifetime Achievement Award. The award was presented at NAWBO’s “20th Annual Remarkable Women Awards Event & Dinner” on May 19, 2016.

Per NAWBO-OC: “Accomplished and respected CEO, mentor, and generous volunteer to numerous professional and community organizations for decades, Debbie Dickson is well deserving of NAWBO-OC’s Lifetime Achievement Award. Debbie is founder and president of Smith Dickson, an Irvine-based CPA firm specializing in litigation support services, accounting, taxation, and business consulting. She has earned a reputation as a formidable forensic accounting expert witness and is considered a dynamic leader in her field.

“When she began her career as a CPA, Debbie was one of the few women in the profession. In the 1980s, after many years with Big 8 firms, she started Smith Dickson, an Accountancy Corporation. Taking care of her 12 employees is of the utmost importance to her, not only for the success of Smith Dickson but for the well-being of each employee’s personal concerns. For example, she shares her business sense and leadership skills as a mentor to those just starting their careers. Through her efforts, dozens of accountants have earned CPA certifications. Debbie regularly volunteers for boards and as president of groups such as the Forensic Expert Witness Association, Orange County Management Association, J. Reuben Clark Law Society, and Orange County Performing Arts Corporate Council. She also speaks before business organizations and women’s groups, and for three years ran a program that counseled teenage girls to develop their abilities. She’s a talented concert organist and pianist, donating her performances as a service to the arts.

“Perhaps if you asked her about her greatest accomplishment, Debbie would say that being a wife and Mom to her six children is at the top of the list.”

If you weren’t able to attend, see the video of Debbie’s acceptance speech below. Congresswoman Mimi Walters presented Debbie with her award. Or click here for a written transcript. For a news release, click here.

Debbie received the “Lifetime Achievement Award” …

Approximately 400 business leaders attended the gala …

Debbie’s speech capped the night …

Most of the Smith Dickson team was on-hand to enjoy the festivities …

Debbie with her husband, Guy, and children Kristin, Courtney, Michael, Ashlee, Heather and Brooke …

Debbie Dickson profiled in OCBJ’s “OC Style File”

Debbie Dickson was profiled in the “OC Style File,” in the Orange County Business Journal (October 2, 2017). The column showcases fashion and clothing styles of leading OC executives.

Says Debbie “It was quite a nice compliment to be chosen for this column. I do feel that style is very important for my role in the courtroom and business community. It was fun doing this profile, although I must say it wasn’t easy posing for the photo – but now I have a greater appreciation for models!”

Special Segerstrom Concert Hall Performance

The Dickson family’s achievements in performing arts have reached new heights! Debbie Dickson and daughter Brooke Dickson were invited in 2017 and again in 2019 by the Segerstrom Center for the Performing Arts to give full concerts to classical music enthusiasts. Debbie played the massive Gillespie organ (4,322 pipes, 30 tons), and Brooke performed as the soprano soloist.

If you would like to see one of the performances, see the link below:

or “Ave Maria” (Brooke’s solo)

Smith Dickson sponsors – and wins – Bocce Invitational charity event!

Smith Dickson was proud to sponsor the recent 6th Annual Bocce Invitational to benefit the Crohn’s & Colitis Foundation. The event, held at IL Fornaio restaurant in Irvine, was attended by approximately 175 Orange County business leaders and raised thousands of dollars for the organization.

Most of our Smith Dickson team was able to attend and support the event, with many even playing a few games of Bocce! To our surprise, we won! It was great fun, and we enjoyed supporting such a worthwhile cause.

Debbie Dickson nominated for OCBJ “2020 Women in Business” awards

Smith Dickson president Debbie Dickson has been nominated for the OCBJ “2017 Women in Business” awards. These awards recognize exceptional business and professional OC women. The special OCBJ issue of April 17th features profiles and photos of this year’s nominees.

Smith Dickson sponsors the Annual “General Counsel Awards”

As part of our commitment to the Southern California legal community, Smith Dickson is pleased to have been a Silver Sponsor of the “10th Annual General Counsel Awards,” presented by the Orange County Business Journal.

These awards recognize the significant role in-house counsels play in the success of Orange County businesses.

The Bocce trophy awaits inscription of our 2018 champions!

Debbie Dickson earns Master Analyst in Financial Forensics (MAFF) designation

May 9, 2012 — Deborah Dickson, CPA, CFF, MAFF, President of Smith Dickson, has successfully completed the rigourous certification process to earn the designation of Master Analyst in Financial Forensics (MAFF) with the prestigious National Association of Certified Valuation Analysts (NACVA®).

The MAFF credential is granted exclusively to CPAs who demonstrate considerable expertise in forensic accounting through their knowledge, skills, and experience. The MAFF encompasses fundamental and specialized forensic accounting skills that CPA practitioners apply in a variety of service areas, including bankruptcy and insolvency; computer forensic analysis; family law; valuations; fraud prevention, detection, and response; financial statement misrepresentation; and economic damages calculations.

Ms. Dickson is an experienced CPA and expert witness, with over 25 years in the accounting profession including 15 years in the litigation services area. She began her career as an auditor for Deloitte Touche (formerly Touche Ross) and subsequently accepted an opportunity to run the Entrepreneurial Services Division at PricewaterhouseCoopers (formerly Coopers & Lybrand). She has been President of Smith Dickson, an Accountancy Corporation, since 1982.

Press Release: Deborah Dickson, CPA, President of Smith Dickson earns prestigious MAFF designation

Debbie Dickson interviewed on radio show about “Tax Code Changes”

Debbie Dickson was interviewed June 6, 2013 on the “Critical Mass for Business” radio show. She discussed the impact of the tax code changes on small businesses. Deborah also shares with our audience some mitigating positive effects of changes in depreciation and other areas in the new tax code. The radio show’s audience demographic is 90%+ CEOs, business executives and owners.

Client Advisor January 2020

REMINDER: FORMS 1099 ARE DUE JANUARY 31ST!

1099 Forms are due at the end of the month. This due date pertains not only to the independent contractor copy but also to the IRS copy for any 1099 Forms issued related to non-employee compensation in Box 7.

Here are some general guidelines to follow:

Per IRS regulation, 1099s are due for each non-corporate vendor to whom you have paid during the year:

We are available to prepare your Forms 1099. For each independent contractor (individual, partnership, LLP, LLC, or attorney) to whom you paid $600 or more during the 2019 calendar year, please provide the following information:

1. Formal name/business name

2. Address

3. Social Security Number or Taxpayer ID Number

4. Amount paid in 2019

If you have any questions, please contact Karen Reed (karen.reed@smithdickson.com) or Elaine Kazzi (elaine.kazzi@smithdickson.com) and we will be happy to assist you. You can also reach us by phone at (949) 553-1020.

Client Advisor December 2019

YEAR-END TAX PLANNING 2019 - HOW TO MINIMIZE TAXES NOW

Every year, as we approach year-end, Smith Dickson professionals receive many questions about year-end moves to minimize personal and business taxes. For 2019, there are several last-minute tax moves that you could consider.

Below are a few to evaluate – please note that these are very concise descriptions and do not apply to all situations, so contact Smith Dickson to discuss tailoring the application to your personal situation.

Individuals:

Postpone income until 2020 and accelerate deductions into 2019. This time-tested technique can still apply. Delaying income (such as a bonus paid by your employer) may be desirable for those taxpayers who anticipate being in a lower tax bracket next year.

Businesses:

The Tax Cuts and Jobs Act (TCJA) included numerous business-related provisions, most of which took effect last year. The TCJA's complexities are requiring businesses to adjust their tax strategies accordingly.

Some of the changes that took place in 2018 included reducing the corporate tax rate to 21%, eliminating corporate AMT, limiting business interest deductions, new expensing and depreciation rules, and a special deduction for non-corporate taxpayers with qualified business income from pass-through entities. Year-end strategies for 2019 to consider include:

Postpone income until 2020 and accelerate deductions into 2019. This time-tested technique can still apply. Delaying income (such as a bonus paid by your employer) may be desirable for those taxpayers who anticipate being in a lower tax bracket next year.

This is not an exhaustive list, but it is a good starting point for discussions with your tax accountant. Since tax planning strategies for businesses can be complex and application depends on numerous factors, it is essential to discuss your business tax planning with your CPA.

Tax Outlook:

Looking toward 2020, Senior Tax Manager, Richard Warner, CPA has updated his annual "Tax Outlook" – please take a look and let us know if you have any questions.

SPONSOR OF THE ANNUAL "GENERAL COUNSEL AWARDS"

As part of our commitment to the Southern California legal community, Smith Dickson is pleased to have been a Silver Sponsor of the "10th Annual General Counsel Awards," presented by the Orange County Business Journal.

These awards recognize the significant role in-house counsels play in the success of Orange County businesses.

Client Advisor November 2019

EMBEZZLEMENT: THE ROLE OF CPAS IN FORENSIC INVESTIGATION

Embezzlement can be defined as the act of theft or misappropriation of funds belonging to an employer which have been placed in the trust of an employee (typically someone in a company's financial department). Embezzlement is a type of financial fraud and usually is a premeditated crime, performed methodically and cautiously to conceal the theft. When successful, embezzlements may continue for many years without detection.

How can your business detect fraud?

It is important to identify potential financial fraud as quickly as possible in order to limit damages. Understanding how it happened to others can help. To read about Ryan's work in a recent case that made headlines, Click Here

Forensic Accounting Support

At Smith Dickson, our forensic accounting specialists have logged thousands of hours of forensic accounting, deposition and trial experience, both as expert witnesses and consultants in matters ranging from economic damages to fraud and embezzlement.

SPONSOR OF THE ANNUAL "GENERAL COUNSEL AWARDS"

As part of our commitment to the Southern California legal community, Smith Dickson is pleased to have been a Silver Sponsor of the "10th Annual General Counsel Awards," presented by the Orange County Business Journal.

These awards recognize the significant role in-house counsels play in the success of Orange County businesses.

CONGRATULATIONS TO AUSTIN RAY, CPA

Austin Ray, CPA, senior accountant, recently earned his Certified Public Accountant (CPA) designation and has been issued his license by the California State Board of Accountancy. In California, to earn the prestige associated with the CPA license, individuals are required to demonstrate their knowledge and competence by passing the Uniform CPA Exam, meeting high educational standards and completing a specified amount of general accounting experience.

Congratulations, Austin!

Client Advisor October 2019

FRAUD IN THE WORKPLACE

As printed in the Orange County Business Journal, "General Counsel Awards" special supplement, October 14, 2019.

Most employers never would expect that a trusted employee might commit fraud, yet every year numerous businesses are forced into bankruptcy due to fraud. Even when it isn't that extreme, the Association of Certified Fraud Examiners' (ACFE) 2018 Global Fraud Study revealed that the typical organization loses a median of 5% of revenues each year due to fraud.

The Fraud Triangle

Employers can utilize the "fraud triangle" to monitor and identify factors in the lives of key personnel that can lead to fraud. The fraud triangle is a model for explaining the factors that cause someone to commit occupational fraud. It consists of three components which, together, lead to fraudulent behavior: pressure, perceived opportunity and rationalization.

Pressure originates from a financial problem (personal or professional) that the individual is unable to solve through legitimate means, so he may consider stealing cash or falsifying a financial statement. Next comes opportunity, using a position of trust to solve the financial problem with a low risk of getting caught. It is worth noting that many white collar crimes are committed to maintain social status and pay for lavish lifestyles. The final step is rationalization — fraudsters typically do not see themselves as criminals, instead feeling that they are caught in a bad set of circumstances. They may even justify it by thinking that the employer underpaid them or is dishonest and deserved it.

Forensic Accounting Support

Forensic accounting engagements can be specifically tailored to discover fraud and sometimes even to prevent it. Attorneys engage forensic accountants to determine whether fraud occurred, estimate the extent of monetary loss, and uncover who committed the fraud. When litigation is selected as a means to recover losses, forensic accountants prepare reports on the damages and render expert testimony. At Smith Dickson, our forensic accounting specialists have logged thousands of hours of forensic accounting, deposition and trial experience, both as expert witnesses and consultants in matters ranging from economic damages to fraud and embezzlement. Smith Dickson's forensic accounting specialists will support your case with the highest level of expertise available.

Deborah Dickson, CPA, CFF, MAFF is President of Smith Dickson, An Accountancy Corporation (www.smithdickson.com) based in Irvine. The firm's Litigation Support Services include: damage calculations; lost profits; forensic accounting; expert testimony; intellectual property; fraud & embezzlement; real estate; trust & estate beneficiary disputes, tax controversy; business dissolution. Ph. 949.553.1020.

SPONSOR OF THE ANNUAL "GENERAL COUNSEL AWARDS"

As part of our commitment to the Southern California legal community, Smith Dickson is pleased to be a Silver Sponsor of the "10thAnnual General Counsel Awards," presented by the Orange County Business Journal. These awards recognize the significant role in-house counsels play in the success of Orange County businesses.

General Counsel Awards are presented in the following categories:

  • General Counsel of Public Company
  • General Counsel of Privately Held Company
  • Specialty Counsel (attorney who focuses in a certain area of law for an organization)
  • Rising Star Award (senior-level in-house counsel and recently named GCs)
  • In-House Legal Team

The awards program will be held November 13th, 5:00-8:30 p.m. at the Hotel Irvine. Click here for ticket information.

Client Advisor June 2019

HAPPY FATHER'S DAY!

Smith Dickson would like to congratulate and thank all fathers and grandfathers! You help to guide and provide for all generations!

One of the key areas that dads typically help is in the financial realm. Along these lines, we thought it would be interesting to read some survey results.

The Best Financial Advice from Dad

A recent survey by GOBankingRates was done to uncover the best financial advice respondents learned from their dads growing up. The survey asked: What's the best money advice you learned from your dad?

The responses — in order of most selected — were:

  • Don't spend money you don't have. (34.4 percent)
  • Pay your bills on time. (20.1 percent)
  • Save for a rainy day. (18.5 percent)
  • Don't quit your job before you have another. (17.7 percent)
  • No risk, no reward. Invest! (9.3 percent)

This study could shed light on how major financial crises in the fathers' generations affected the way their children approach money management. Here are some excerpts from the survey analysis, focusing on Generations Y and Z (read the full survey results for analysis of other generations):

Generation Y

Studies have shown Gen Y is the best generation when it comes to saving money; the survey found that millennials also heeded their fathers' advice about spending money. Gen Y participants were more likely than any other age bracket to select "don't spend money you don't have" as their fathers' best money advice, at 32.2 percent.

Why? Millennials are the children of baby boomers — and, like their grandparents, weathered hard financial times in formative years. As Gen Y graduated college and entered the job market, the Great Recession was in full force; it's no wonder millennials have learned to live within their means.

Generation Z

Generation Z is composed of young children, adolescents and teens on the cusp of entering adulthood. Many in this bracket are still counting on their parents' financial support and have years ahead to map out their finances.

It comes as no surprise that more of these financially adventurous (yet parent-reliant) 18- to 24-year-old people have taken to heart their fathers' money advice of, "No risk, no reward. Invest!," at 14.8 percent, versus just 3.5 percent of respondents age 65 and older.

After all, as the youngest generation polled, members of Gen Z have the most time to take risks before starting to think seriously about retirement.

THE VALUE OF LITIGATION SUPPORT IN INTELLECTUAL PROPERTY DISPUTES

Editor's note: Ryan Nguyen, CPA, Forensic Auditing Manager, and Gina Lara, MBA, CFP ®, Forensic Accounting Analyst, recently wrote an article for the Orange County Business Journal in the "Intellectual Property" special supplement. Excerpt from the article:

In litigation support, win or lose isn't as important as by how much. This point is becoming especially significant in intellectual property disputes, where the median damages award in patent litigation increased more than 65% over prior year to $10.2 million in 2017. Here are some examples of what we have seen.

Trademark Infringement

Recently, we were engaged by Defendant's counsel to provide calculations related to a company that imported and sold purportedly "knock-off" designer apparel. Plaintiff sued the company in Federal Court alleging copyright, trademark, and trade dress infringement. Defendant was found liable for damages arising from three years of sales activity. Since the company maintained poor accounting records, Smith Dickson's work involved reconstructing records from handwritten notes, testing the accuracy of the information, identifying sales data and deductible incremental costs, and determining the unjust enrichment of Defendant. Read Article

Client Advisor May 2019

OUR DEDICATION TO MOTHER'S DAY!

Smith Dickson would like to congratulate and thank all the great moms around California — and beyond — on Mother's Day! There should be more than one day each year to thank moms for all that they do! May your day be filled with happiness, beauty and love.

Twenty One Pilots and Smith Dickson?

Our founder, Debbie Dickson, is a proud mom of six great children. Did you know she is a "rocker mom" when not working?

Some of our clients may know that one of Debbie's daughters, Brooke Dickson, works at Smith Dickson when she is not on tour. What you may not know is that Brooke is a member of LA-based punk rock band The Regrettes. The Regrettes recently joined the band Twenty One Pilots, one of the hottest bands in the world, for their "Bandito" UK and European tour.

Twenty One Pilots received a Grammy Award for Best Pop Duo/Group Performance at the 59th Annual Grammy Awards.The Regrettes played with Twenty One Pilots from February 2nd to March 17th, joining the tour in Finland, then proceeded with stops in Sweden, Norway, Denmark, Germany, Poland, Czech Republic, Austria, Italy, Switzerland, England, Ireland, Northern Ireland, Scotland, France, Netherlands, Belgium, Spain and Portugal. Whew, what a whirlwind experience!

Debbie was able to join Brooke for one of the concerts at London's famous Wembley Arena. Said Debbie as she left, "I'm just about ready to board a plane to London to go see Brooke perform three nights to sold out audiences at Wembley. Can't wait to see Brooke, I'm so happy for her!"

Brooke later posted on Instagram with a special note to her mom on "International Women's Day" (see above).

Another interesting aspect of Brooke's musical side of life is her love of classical music. Brooke attended opera school in Rome and was further trained at the Opera Conservatory at Chapman University. Brooke and Debbie recently performed at a special donors-only concert at Segerstrom Concert Hall. Watch a video of their previous performance at Segerstrom in 2017.

Tiger Rider

Debbie has another rocker daughter, Heather Dickson, who will graduate soon from business school at the University of Washington. Her band, Tiger Rider, plays extensively at clubs and festivals in the Pacific Northwest. Heather also earns side-money with a casino band playing "cover songs" on weekends, earning money for college — dressing in sparkly clothes and playing the part of a '70s rocker.

Congratulations, Brooke and Heather! All of us at the Smith Dickson family are very proud of you! Maybe you can play a set for us at the office at lunch sometime?

Client Advisor February 2019

LITIGATION SUPPORT FOR REAL ESTATE DISPUTES

Editor's note: Debbie Dickson recently wrote an article in the Orange County Business Journal's "Real Estate Law" special supplement. The article is reprinted below, which we think will be of use to our clients and business contacts. Please let us know of your feedback!

Real estate disputes are more common that you think! Smith Dickson, CPAs has provided litigation support on real estate matters since 1995. These engagements are as diverse as they are complex. Here are a few recent examples:

Misappropriation of Funds / Fraud - Co-ownership of properties can often result in disputes. One of our clients had an ownership interest in multiple apartment LLCs which were managed by the other member - who also separately owned additional complexes. The managing party was accused of commingling all of his property and family expenses with the apartments owned jointly with our client. Smith Dickson was hired to provide forensic analysis of expenditures, disbursements, and supporting invoices, resulting in the identification of millions of dollars that were siphoned out over several decades. Another client who managed properties for overseas relatives was accused of over $3 million in misuse of funds; after our testimony, the jury reduced the damage award to $1 million.

Creditors' Rights - Loan defaults aren't always straightforward, especially when millions of dollars are at stake in commercial properties. When our bank client foreclosed on $15 million in loans for buildings, the borrower claimed that the loans were not technically in default due to the manner in which penalties and interest were applied. Our work involved damage calculations and expert testimony.

Probate/Trust Beneficiary Disputes - Those who inherit properties often contest use of trust money for personal gain and ownership percentages, such as our client who was involved in litigation over beachfront properties with siblings. Smith Dickson reconciled the beneficiary proceeds in this matter.

Development and Contractor Disputes - These matters involve all facets of development and construction. A recent case involved a multi-phase project in which multiple owners funded different phases. Ownership percentages and land boundaries were disputed, and contractors sued over payment. Our work in this complex case involved tracing of capital and debt transactions as well as construction disbursements.

Escrow and Title - Mistakes in these matters can involve millions of dollars in damages. A recent case involved title disputes on over 100 properties owned by an LLC with numerous members located in multiple states. The underwritten title company issued clear title reports when there were actually liens. Our damage calculations proved instrumental in educating the jury to provide a resolution in this Federal criminal case.

High-Stakes Marital Dissolution Matters - One of our largest matters involved multiple real estate brokerages and properties owned throughout southern California. Litigation between the ex-spouses ensued for many years. Our work involved asset tracing, valuations, and asset equalization.

About the author: Deborah Dickson, CPA, CFF, MAFF is President of Smith Dickson, An Accountancy Corporation (www.smithdickson.com) based in Irvine. Ph. 949.553.1020

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Client Advisor January 2019

REMINDER: FORMS 1099 ARE DUE JANUARY 31ST!

1099 Forms are due at the end of the month. This due date pertains not only to the independent contractor copy but also to the IRS copy for any 1099 Forms issued related to non-employee compensation in Box 7.

The classification of your workers as "employees" or "independent contractors" remains a "hot topic" with both the IRS and the State of California. Please see the recent Orange County Business Journal article written by our Senior Tax Manager, Richard Warner (below).

Here are some general guidelines to follow:

• Per IRS regulation, 1099s are due for each non-corporate vendor to whom you have paid during the year:

          • At least $10 in royalties or broker payments in lieu of dividends or tax-exempt income

          • At least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments

          • Gross proceeds of $600 or more paid to an attorney (even if they are incorporated)

We are available to prepare your Forms 1099. For each independent contractor (individual, partnership, LLP, LLC, or attorney) to whom you paid $600 or more during the 2018 calendar year, please provide the following information:

1. Formal name/business name

2. Address

3. Social Security Number or Taxpayer ID Number

4. Amount paid in 2018If you have any questions, please contact Karen Reed (karen.reed@smithdickson.com) or Elaine Kazzi (elaine.kazzi@smithdickson.com) and we will be happy to assist you. You can also reach us by phone at (949) 553-1020.

NEW RULING ON INDEPENDENT CONTRACTORS IMPACTS MANY EMPLOYERS

Richard Warner, Senior Tax Manager, recently wrote an article for the Orange County Business Journal in the "General Counsel Awards" special supplement. Excerpt from the article "New Ruling on Independent Contractors Impacts Many Employers":

Determining whether a California worker is an independent contractor or an employee has always been difficult. However, for many years the laws have been interpreted to mean that the key to distinguishing between employees and independent contractors was whether the company had the right to control the manner and means by which the worker accomplished the desired result. Recently, a ruling by the California Supreme Court changed that understanding.

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TAX CALENDAR

Reference the AICPA's Federal tax return due dates chart for use in complying with common federal tax return due dates for individuals, businesses (of all types), employers, and estates/fiduciaries.

Some of the important upcoming due dates:

• Jan. 31: Businesses — Forms 1099 — Provide annual information statements (Forms 1099) to recipients of certain payments you made during the previous year.

• Jan. 31: Employers — W2s & W3s — Provide employees their copies of Form W-2 for previous year.

• Jan. 31: Employers — Forms 940 and 941 — For Social Security, Medicare, and withheld income tax, file Form 941 for the fourth quarter of previous year. For federal unemployment tax, file Form 940 (or 940-EZ) for previous year.

Be sure to contact us to discuss your tax questions and needs.

Client Advisor November 2018

YEAR-END TAX PLANNING AND THE TAX CUTS & JOBS ACT

As we approach year-end, Smith Dickson professionals are meeting with many of our clients to implement strategies to minimize taxation for 2018, as well as plan for 2019.

The Tax Cuts & Jobs Act (TCJA) has made a significant impact to federal and state tax planning. Senior tax manager Richard Warner, CPA prepared a short review of the TCJA last year as the law was enacted; now may be a good time for you to once again read our "Tax Outlook" and let us know if you have any questions.

SMITH DICKSON REPEATS AS CHAMPS AT 7TH ANNUAL BOCCE INVITATIONAL CHARITY EVENT

Smith Dickson was proud to sponsor the recent "7th Annual Bocce Invitational" to benefit the Crohn's & Colitis Foundation. The event, held at IL Fornaio restaurant in Irvine, was attended by Orange County business leaders and raised thousands of dollars for the organization.

An exciting highlight for our Smith Dickson team was repeating as champions of the Bocce tournament (we also won in 2017)! The event was fun for all involved and we enjoyed supporting such a worthwhile cause.


12 RED FLAGS THAT CAN TRIGGER AN IRS AUDIT


The number of tax returns examined by the IRS drops every year, to the point where the agency now audits just 0.5 percent of all returns - but that still amounts to over a million squirming taxpayers.

With that in mind, here are a round dozen red flags that will draw the IRS's attention to a return.

  1. Misreporting or not reporting income: Making sure that the income from W-2s and 1099s matches the income reported on the return is critical. Among other things, it's easier than ever for the IRS to access and compare the amounts reported — making it harder and harder to get away with discrepancies, which then stand out like sore thumbs.
  2. Earning more than $200,000: In Fiscal Year 2017 (the most recent year for which data is available), the IRS audited just 0.2 percent of most returns of taxpayers with under $200,000 in income — but it was four times as likely to audit those with between $200,000 and $1 million in income, looking at 0.8 percent of those returns. But the real red flag is earning of $1 million — the IRS audited 4.4 percent of those returns in 2017.
  3. Big changes in income: Whether it's a scary drop or a significant increase, major changes in income catch the IRS's eye.
  4. Unusually high charitable deductions:The IRS has been implementing stricter rules for documenting charitable giving for some time, as well as paying attention to claims for deductions than are higher than average for the taxpayer's income. The raising of the standard deduction in the Tax Cuts and Jobs Act is expected to significantly decrease the number of people who itemize their charitable deductions — which could have the unexpected side effect of making unusual claims stand out even more.
  5. Unusually low salaries: The IRS takes a close look at S corporation compensation practices, particularly if the salary paid to a principal owner looks suspiciously low.
  6. The wrong Social Security number: Between concerns about ID theft and underreporting of income, returns with inaccurate Social Security numbers or discrepancies between the numbers on source documents and the return itself, will often draw added scrutiny, and possible rejection.
  7. Hobby losses: The IRS has some very specific rules and guidelines for what qualifies as a business and what's just a hobby that happens to cost a lot of money. Some of those hobbies, like horse racing and horse breeding, will often generate increased attention.
  8. Inconsistent alimony reporting: Since those who aim to deduct alimony need to report the Social Security number of the ex-spouse to whom they're paying it, it's easy for the IRS to detect if the claim matches what was actually paid. Note that alimony for divorce settlements made after Dec. 31, 2018, will no longer be deductible.
  9. Home offices: It's perfectly legitimate to claim a home office — but it has to meet the strictures of the Tax Code and the IRS's guidance. With too many taxpayers attempting to claim their living room because they sometimes answer work-related e-mails in it, this is a red flag for auditors.
  10. Overly rounded numbers: A procession of suspiciously even figures draws the eye. A certain amount of rounding is acceptable, but experts generally suggest going for the nearest dollar, rather than the nearest ten or hundred — it stretches the imagination to suggest that all of a taxpayer's expenses are either $50 or $100. That said, in these days of electronic receipts and computers that do all the calculations, if an exact figure is available, that's the best bet.
  11. Entertainment and meal expenses: The TCJA eliminated the deduction for expenses related to entertainment, amusement, or recreational activities. However, the ability to generally deduct 50% of business meals has been retained (note: See our February 2018 newsletter for more details).
    12 Owning a cash business: It's much easier for a business that deals in cash — think restaurants, bars, convenience stores and the like — to hide or misreport income, so the IRS is more likely to examine the return of an individual who owns one.

Source: "Accounting Today"

Client Advisor May 2018

OCBJ ARTICLE: THE CRITICAL ROLE OF A CPA FIRM IN BANK FINANCING


Debbie Dickson recently wrote an article in the Orange County Business Journal in the "Banking & Finance" special supplement. Here is an excerpt from the article:

A proactive, knowledgeable and well connected CPA firm can make a major impact on the ability of a company to obtain bank financing. Recently a $30 million company was declined a renewal of its working capital line of credit and term loan due to failure to meet its required ratio covenants. Management had tried to find replacement financing through a loan broker but had been unsuccessful. Smith Dickson CPAs were called upon to make introductions and to arrange this critical financing.
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FIRM NEWS -- A MUSICAL GEM

Debbie Dickson's love of music, especially playing the organ, is well-known among most of her friends and clients. In a recent article in the "Old Towne Orange Plaza Review," Debbie and her daughter Brooke Dickson were noted in an interesting article about a 1938 pipe organ at a local mortuary. Shannon Family Mortuary is a client of Smith Dickson and several months ago while visiting Debbie learned about the organ, hidden away upstairs and unused. Debbie encouraged the owners to restore the instrument, as they have also been doing restoration on the 102 year old building and its contents.


TAX CALENDAR


Smith Dickson is pleased to provide our year-round "Tax Calendar" available on our website. Reference it for key dates for individuals, businesses (of all types), employers, and estates/fiduciaries.

Some of the important upcoming due dates: