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Episode 6: Accounting Insights from Kathleen Alexander, Partner at Sax LLP

What You Will Learn:

  • How the IRS is handling our traditional tax due date
  • Tax savings tips
  • Strengthening profit and loss statements
  • How to manage cash flows
  • Keeping better accounting records to apply for grants and credits

About Kathleen Alexander

Kathleen joined Sax in 1988 and is a Partner with the firm providing accounting, tax planning and business advisory solutions to clients across a wide range of industries. Kathleen is a hands-on professional and her clients rely on her strong knowledge of account controls and best practices. She focuses on establishing good tax strategies to maximize business and personal taxes which provides increased cash flow. Kathleen is the Partner-in-Charge of the firm’s expanding Food and Beverage Practice while also remaining heavily active in the firm’s Manufacturing and Distribution Practice. In addition, Kathleen is Director of Technical Training and Continuing Professional Education at the firm, and a Co-Chair of the Women’s Initiative Committee. Kathleen is a Certified Public Accountant in New Jersey and is Named an Ovation Award winner by the NJCPA in the category of IMPACT, 2020. Kathleen is also named one of NJBIZ’s Best Fifty Women in Business, 2013 and was awarded “Top Big Apple Entrepreneur of 2016” by Manhattan Magazine. In 2015 Kathleen was awarded Top 10 Public Accounting Professionals by the Academy of Public Accounting Professionals.

Resources:

Intro (00:00):
Being proactive, not reactive gives every business owner the opportunity to think through and make the best decisions for their business. With our world as busy and confusing as it currently is, even the strongest, most seasoned business owners might find themselves reacting to issues that they didn't see coming. With his 30 plus years of experience, helping business owners make the right decisions, your host, Stan Hladik.

Stan (00:28):
Welcome everyone to Secret Sauce 365, the podcast where we answer questions that business owners have on their minds every day and Secret Sauce 365 provides those answers. We're so lucky to have as today's guest, with our topic being accounting and how accounting affects all businesses. We're so lucky to have Kathleen Alexander, a partner at Sax one of the largest accounting firms in the tri-state area close to 200 people employed these days, and Kathleen, welcome this morning.

Kathleen (01:07):
Thank you Stan. Nice to be here today.

Stan (01:11):
Nice to be with you. I've known you for a long time now, and I want to congratulate you first and foremost on your 32nd anniversary with Sax. That's a nice number and deserves some accolades.

Kathleen (01:28):
Thank you. I feel like I just blinked and here we are 32 years later. I still feel very young, but with a little bit more knowledge

Stan (01:39):
You are. I am. And let's do another 32, right. Kathleen works out of the new corporate offices, which are in Parsippany and I would love for you just to maybe give us a little feel for how you got into accounting to begin with.

Kathleen (01:59):
Yeah, it's probably hard to imagine that as a junior in high school, I had an accounting professor, teacher that taught me a little bit about accounting and it just grabbed me. I'm like, this is something that I want to do for the rest of my life. And then soon after that my uncle who is also an accountant and then went back to law school, he worked for a big accounting firm and he taught me a little bit about what he does. And I said, that's what I want to do. I want to be an accountant and I want to be a partner in an accounting firm.

Stan (02:38):
All the way back to high school?

Kathleen (02:39):
Yes.

Stan (02:41):
Okay. Wow. Awesome.

Kathleen (02:42):
So, you know, it just was something that felt right to me and I set my path to accomplish that. And so it's hard to think about a young 18 year old making a decision and it being so straight because that's certainly not how most careers are created.

Stan (03:04):
No, it's not, but it's great to know what you want to do believe what you want to do it, and you know, what it's even greater to accomplish that, and you certainly have.

Kathleen (03:14):
Yes. I mean, there's a lot of people along the way I have to thank for helping me stay on my path, but definitely a lot of hard work, dedication and focus. And here we are.

Stan (03:26):
So Kathleen brings a wealth of experience in the accounting sector. And today our listeners will learn the following, they'll learn how the IRS is handling our traditional April 15th tax due date. Our listeners are going to learn how tax savings tips, every business owner needs to be aware of. We'll also learn how to strengthen your profit and loss statement as well as managing cash flows. And we'll also hear about keeping your accounting records up to date to apply for grants and credit. So why don't we start out, Kathleen with something that we're all concerned about at the time this original podcast will air. We have a looming tax date of April 15th. And what do you know about that?

Kathleen (04:21):
So it seems like a long time ago, but last March 16th was when we all went into shutdown mode, we needed to flatten the curve. We thought it was just going to be for a couple of weeks and little did we know it was going to be a little bit longer. So the IRS and then the states followed all agreed that the April 15th tax deadline was really not practical if we were all going to be shuttered at home. So they extended the April 15th tax date until July 15th and gave everybody a little bit more time to be prepared for the pandemic, take care of themselves, and then eventually file their tax returns. That was a very difficult time. We needed the extra time to file the returns and July 15th came, we got our returns filed and everybody kind of got back on track, but here we are coming back to the beginning of our next tax season and we're still all at home. We're all working virtually and our taxes are due again. And so it's natural that the IRS and the states are saying, wait a minute, do we need to extend the tax deadline for this year? Does the April 15th tax deadline need to move out further to give everybody more time? As you'll see, there'll be a lot of discussions going back and forth on that. And we're not really sure where we're going end up, but we have to pay attention because it's possible that we may need to extend the deadline again, beyond April 15th, 2021.

Stan (06:06):
Yeah. A lot of businesses are hurting out there. So that's really good to hear. So our listeners will be aware. It does sound like there might be some movement on that tax date, similar to the filing date back in April of 2020. And that would be welcome news to business owners who are inundated every day with just trying to keep their businesses open and keeping people employed. And that kind of leads us into a topic I'd love to hear your opinion on, as I know that we're in another round of Paycheck Protection Program, PPP funding for business owners. Can you talk a little bit about that for our listeners?

Kathleen (06:46):
Sure, sure. So let's just go back, last year, once we were all sent home to work from home and the businesses were required to shut down in order to keep the people employed, they came out with the Paycheck Protection Program, which was basically money given to businesses to keep their employees on the payroll and not lay them off and send them to the unemployment lines. I think a lot of people think it was a good program. It got rolled out really quick and it served its purpose. And people use that money to pay their employees, even though they weren't working, or if they're on reduced schedule and kept them off the unemployment lines. So little did we think that we were still going to be locked down and now we're going through a second round of Paycheck Protection Program where this time, if your revenues for any one quarter in 2020 are 25% less than they were in '19, you may be eligible for more funding from the federal government. That program just rolled out in January. And that program will continue to operate until March 31st of 2021. This is for businesses that qualify and did have a reduction in their revenue.

Stan (08:07):
You made a very important point where I want to reiterate that for our listeners. I believe you said that any business who had a quarter in 2020, that was 25% less now compared to 2019. Right? So if we compare our second quarter to a second quarter or third quarter to a third quarter, that's the trigger where they may be eligible?

Kathleen (08:33):
Yes. And in addition to that, if your total gross sales for 2019, compared to your total annual sales for 2020 are down by 25%, you may be eligible also.

Stan (08:52):
Right. So, certainly if your total is off by that benchmark or above, but maybe someone's only off by let's say 18 or 19%, but they could have certainly had a disaster second quarter, you know, in 2020 they might still be eligible. Is that correct?

Kathleen (09:10):
That is correct. And you can apply through March 31st, 2021.

Stan (09:16):
That's great news for our listeners. So you know, I really want to thank you for that. And hopefully, you know, we can get through this and get on to running our businesses rather than just, you know, trying to keep people employed. I want to talk a little bit about, and this could be a good segue as you need to apply for these grants or loans is what does a business owner need to do to keep their accounting records up to date, you know, to apply for these grants or more importantly credit?

Kathleen (09:52):
Yes, yes. This has been a challenge because normally business owners complete their accounting records after year end. And that's probably the last thing they normally do because they're the only ones that are looking at the records. They don't need to share them with anybody, unfortunately at the federal level and the state level to apply for some of the programs and grants that are available, somebody else is looking at your books and records. It's either the state or the federal government or your bank or another lender. So it's really important during these times to keep your accounting records up to date that you're reviewing them and you understand them that you're making sure all your quarterly tax returns, whether it's payroll sales tax are paid on a regular basis, you keep all that documentation available. You make sure that you're up-to-date with your payroll company on the payroll taxes that are required, the deferrals of taxed plans that are available to you. The credits you can't wait until the year passes a quarter passes, go on extension, and then go back and do all your books and records. Those days are gone. We need to do our accounting on a regular basis that needs to be on the forefront of the business owners responsibilities rather than on the tail end. And I know that's a big burden sometimes, but in order to be eligible for these programs that are coming up, you're going to have to give them accounting information on a very timely manner, which we're not used to. But if you can do that, you will avail yourself to some of these grant programs that are coming out and you'll be ready for them rather than trying to catch up to them.

Stan (11:46):
Yeah. I know in talking to a lot of my network that sometimes it's such a daunting task, they know that things are available to them, but to qualify for that, I have to put all these records and get all this together and do that. And you make it sound so simple, but if you just took time out of every week, just to document the week or at certainly once a month, then it's not such a daunting task, correct?

Kathleen (12:15):
That's correct. And for the first round of PPP funding, you didn't really have to supply current accounting records, but going forward, I see that that's going to be a requirement. And it certainly is for the second round of PPP and any programs that are going to come out from the state of New Jersey and New York in the upcoming months. So I think it needs to be a change in our mindset as business owners. The accounting needs to be first because that'll help avail us and give us opportunities in the future. We manage them as we go along rather than looking at them after the fact.

Stan (12:54):
Yeah, I think that makes a ton of sense and great advice for our listeners. Thank you, Kathy. We'll segue into a topic that, you know, maybe can explain how there are tools out there to help business owners with accumulating all this accounting data, how is technology affecting your business and the accounting sector?

Kathleen (13:18):
I think that in the past, from the year 2000, when we had the technology window where everybody was concerned that all our computers were going to crash, because it didn't have four digits for the year. From that point until probably last year, it's been a push for our business owners to invest in technology. If you read all the articles that kept saying technology needs to be a bigger piece of your budget, some companies did it and some companies didn't, I think now you have no choice. You need to be automating every process of your business. You need to be able to allow your employees to work remotely. I understand that can't happen for most professions, but they need to be able to do it at least sometimes. I mean, this snowstorm we just had was an example. If we weren't working remotely, I think that a lot of businesses in the state would be shut down for two days because the pandemic prepared us and we've upgraded our technology for the office environment and our home environments. We're not going to miss a beat. We have virtual homes all across the state. So I think that technology connection is important. And then I think businesses need to look at their accounting software and make sure that what they're doing can be accessed not only from the business location, but from the employee's homes. And I don't think that's being done right now. And that's why some of the accounting records are not kept up on a regular basis. So I think that'll be an evolution. I think business owners will see that it's important to maybe change what they're doing or automate what they're doing. And it'll be very important for them to team up with a technology resources to help walk them through that.

Stan (15:14):
It seems to be a reoccurring thing as I bring different guests on, you know, whether it be from marketing or business startups or legal, you know, a lot of people have the same comments is, have to invest in our business infrastructures. And technology is one of those critical components that we can't leave behind. And if we get the right tools in place, the right software, the right as you said ability to automate whatever we can within our businesses will just be leaner and meaner and more efficient. And we have to spend a dime to make that dollar.

Kathleen (15:54):
And I think that it doesn't have to be a lot of money at first. I think if businesses will look at their processes, they can like pick little sections that they're comfortable with automating and just go throughout their organization. You know, I have a client that's in the tech field. She does accounting software. And one of the things she told me that was very important was count how many Excel spreadsheets you generate on a monthly basis. If you're generating more than three or four Excel spreadsheets to close your books, then there's got to be a better way. So I think sometimes with technology, it's a big black hole, and I think that kind of breaks it down to something very simple. If you're doing too many Excel spreadsheets or summarizations, then there's gotta be a program out there that can simplify that for you. And maybe that's your first step.

Stan (16:48):
Great. And it sounds like Sax you know, can help its clients with that, like where do we start? Right. And you have the tools and the knowledge and the people, you know, to get them going. Correct?

Kathleen (17:02):
Absolutely. And that's part of the discussions we have with our business owners every day, we have different sized clients, so you have to right-size the conversation. But I think one thing I'm proud of with our clients is we try to help them make themselves better every day. We try to make them come up with their own solutions and just guide them in the direction we want to leave them better than they were when we started with them. And technology right now is a space where we can certainly help them move to a better processing program. So they have updated accounting information. Sometimes it's more efficient, requires less people, or maybe it just connects the team better when they're remotely, you've got to figure out what's right for each business.

Stan (17:52):
Right. And one of the things you said struck me, and I just need to mention it you know, full disclosure, I've known Kathleen for about 25 years now. And the one thing that I admire about her and I've taken into practice in my insurance business is how much she cares about her clients and how much it becomes important to, you know, from the little things to the big things, just have that empathy to help them through the daily grind. And that's kudos to you, Kathleen. And I try and do that here at The Secret for our clients as well. And just to bring everybody up to date, you know, we're talking to Kathleen Alexander on Secret Sauce, 365 here. She is a partner at Sax located in Parsippany, New Jersey one of the largest firms in the tri-state area. And she's just filled us in on a wealth of information. We're going to have some more for you, but you know, one of the things we just covered is it's not a daunting task to start to improve, you know look at the low hanging fruit and some of the simple things you could start with and tackle those. And then it's not such a daunting task, but it certainly makes sense to involve professionals to really make sure your records are up to date and that you can really operate lean and mean and efficiently kind of brings us into one of the topics that I know is one of your strong points and something I'd really like to hear your take on, is how can a business owner like myself strengthen, you know, my P&L and manage my cash flows. Can you shed some light on that for us?

Kathleen (19:35):
Sure, there's a lot of things that you can do. I'm just going to give you a couple. So if we're looking at a balance sheet of a company, whether it's cash accounts, receivables, fixed assets, or accounts payable, or officer's loans, you want to make sure you have good records to support the numbers, and you want to make sure you're looking at them on a regular basis. So when I go into a client, sometimes I'll say, let me see your accounts receivable. And I just look at the aging and I see some numbers that are opposite they're negatives when they should be positives, or I see old items on the list. I mean, what an outsider looks at you're aging, and you have items on there that look out of line that makes it look like you're unhealthy. So to strengthen your balance sheet, you got to strengthen the numbers and then the details. And in most cases, it's very simple to make sure your accounts receivable is clean and it makes sense, and that you don't have a lot of old items on there. And then the same thing with the accounts payable, generally, these are things you owe, and if the numbers are going the wrong way, or the numbers are really old, it tells you something about the company's health. So I would challenge all my owners to look at the receivables and payables and make sure they're clean and get rid of any old stuff that's lingering that you know is not due or not collectible.

Stan (21:07):
So just to expand on that, looking at things that maybe, you know, hit the 90 or 120 days, they really should be a focus to be cleaned up one way or the other so that they don't spill into the next year and just linger.

Kathleen (21:24):
Yes. So that's one easy thing that business owners can do on their own. Just take a critical look at it. And I tell most of my clients to look at it at least on a monthly basis, because there's things as a business owner that you know, that maybe your staff doesn't, and it's important to have those conversations as you go along, rather than waiting until the end of the year, when the accountant comes in and then try to clean everything up. So let's say you have clean receivables, clean payables. Let's look at your fixed assets. What do you have on the books? Are they relevant? Are they still in operation? If you have items on their computers from 2000 on there, obviously you're not using them anymore. We need to clean that up. So make sure your fixed assets that you are recording and all the details represent what you have and are currently using now. And it doesn't have a lot of lingering stuff that you've got rid of previously.

Stan (22:22):
I think it's twofold. One, it gives you the right look at your true financial picture. And another one is, like you said, it's almost a representation to the third party looking at it, whether it's a bank or it could be a perspective buyer, right. That you really have your act together. And I think it goes back to the things you said earlier in this podcast, if you clean it up monthly or no later than quarterly, then you don't really run into those issues when someone asks for it.

Kathleen (22:54):
Yes. So one thing the bank looks at when they look at your balance sheet are your inter-company loans, their expectation that you're only going to have a loan with a bank or vendors, and that would be what they would expect, but if they see shareholder loans or intercompany loans, sometimes that makes them a little nervous. So it's important that you try to clean them up. I know that's not always so easy, especially when you have a separate real estate entity from an operating entity and there's rent being transferred back and forth or money's to pay expenses. But it's very important that you try to minimize that and reduce it because you really want each entity to stand on their own.

Stan (23:37):
Yeah, of course, because even if the bank has the leverage of the real estate as collateral or other things, they want to see the health of the business, that it has the revenue coming versus the operating expenses that it doesn't need to lean on other entities or have that bridge loan. It just creates complications in my mind. That's great advice. You know, I think business owners tend to do that at times, just because of the cashflow crunch when there is disruption you know, in tough times, it just, in some businesses don't have a steady cash flows, they could be seasonal and in other areas.

Kathleen (24:17):
With inter-company loans and cash flow, sometimes you need to loan money to your company or take money out for some reason. And that's fine, but just make sure that you should have the proper documentation. You should have a loan agreement, you should state the interest rate and just make sure that you record it properly. And then usually the bank will accept that in addition to loaning money to the company, or taking money out from a cashflow perspective, it's important for you, especially in these times, because I think our business platforms have completely changed under the pandemic that you review your expenses and evaluate where your money is going. I know in our organization a number of our expenses have completely gone away. I think that at the last meeting, they said annually, we spend a lot of money on soda. We provide soda to all our employees. We think that it makes them happier. And so we have a soda bill that's very large, well, guess what? There's not many people in the office. We're only allowed to have 25%. So our soda bill has completely gone down. So we'd like to serve it, but for now that expense has been reduced and we understand that, and that helps our cash flow. So I think you really need to look at each income statement item, evaluate how you're spending your money, whether it's necessary, and then also look for ways that you can cut costs in these times.

Stan (25:59):
Great advice. Thank you. So let's move on to another topic that, you know, everybody would like to hear, and it kind of relates to the P&L and expenses is really ways that a business owner can actually save on their taxes. You know, what are some expenses that maybe we're not aware of that still qualify these days? And we could focus on to avoid giving all of our profit to Uncle Sam.

Kathleen (26:29):
Well, I spent a lot of time doing that. I went back to get my master's in taxation because most of my clients were asking me just that question. How do I save on taxes? I want to keep more in my pocket. So it's an area that I love, in looking at a business operations, you're always looking for expenses that give you the most deduction or that you don't mind spending on because they give your employees some benefit. So a couple of things that we're doing differently now is we are certainly looking at payroll. Our payroll costs, generally people don't save enough. So a lot of my clients are looking to set up 401k or profit sharing plans for their employees. And instead of giving them additional salary as bonuses, they're actually contributing more to their retirement accounts. And I know you may say the employees want the cash upfront and they don't want it in their retirement account, but by doing that simple move, it'll save the employer on payroll taxes. It'll keep their workers' comp down because their salaries will not be increasing. And the money that my employers put in the plan for the 401k for their employees is not taxable to the employees. So they're not paying tax on it. So they're getting a benefit, somebody is investing in their future, and there's a number of tax saving incentives that go along with it.

Stan (28:03):
I just want to recap that idea for our listeners. So, you know, traditionally when you're doing your reviews and you're looking at certain employees and you're like, hey, let's give them a bonus or additional salary. It's going to hit you in the pocket book in two ways, Kathleen, you mentioned the payroll tax, but then there's the workers' comp component. So that same benefit you want to give to the employee. You could do through a deferred benefit. Or as you mentioned, a 401k plan where they're getting that value added they love working for their employer and you're eliminating those other expenses, but still getting the write off for the bulk of the money.

Kathleen (28:41):
Absolutely. And it does matter with some of your employees because that extra bonus may put them in a different tax bracket personally, and then they're going to owe more personal taxes. So employers can help reduce the employee's income tax burden by taking just a piece of their bonus and put it in a retirement plan step. So it's a win-win for everybody.

Stan (29:04):
Yes. I've always said that the way when you look at really being a maximum efficiency is to take investments that give you an ROI or value added and eliminate ones that are just a pass through to a third party and give your business no gain or your employees no gain.

Kathleen (29:25):
There's only a couple of things that you can do to maximize on that. The other thing that's important is if you're having a good year and now this has not been the time for this, but generally if I'm coming to the end of the year and I've got profits, I need to decide whether I'm going to end the year with the profits or I'm going to reinvest in my company. So hopefully before year end, everybody did that and said, okay, I've got some profits. I have some old equipment. Let me go out and buy that new equipment before year end and reinvest in my company and the IRS and the state of New Jersey give you a lot of benefits in writing those assets off. So think about expense instead of taking the money out or just paying tax on it, that if you reinvest some of that money into your company, you can generate expenses, reduce your overall tax burden or defer it to the next year. But timing makes a difference.

Stan (30:25):
So I guess really a good time to look at that is maybe October, you know, so you have proper timing of you know, doing a request for proposal and making the purchases and getting that all done. You know, if you're on a cash basis by the end of the year or on the flip side, if you know, maybe it wasn't a great year and you know, you need these things anyway, maybe doing them in early January so that you get the benefit of it the following year.

Kathleen (30:54):
Absolutely. So timing is important and that's where the planning comes in. You need to be evaluating what you're going to do for the next 12 to 18 months, discuss it with your professional so that you pick the right timing that may have a positive impact on your tax bite. If you just look at it and don't plan, you certainly will generally pay more taxes than if you planned it and timed the purchase or the sale or the business activity in the right period. So with 2020, for a lot of companies, there are losses. You got to plan for that. And some of our cases, we're planning to carry those losses back to prior tax years, where we have profits and we're going to get refunds for our clients because they need the money now to keep the business going. So the timing of the events, and then obviously if things were bad capitalizing on them with the tax code, if possible.

Stan (32:01):
Proper timing is critical and having the right advice. I think that a lot of our listeners could be in a situation where, and I'm not knocking their CPA. You know, they've been with them a long time and they're doing the job, but, you know, there's may be some things that you're just missing out there that, you know, could really go back and amend prior returns or help you with the profit, the tax you paid on profit of prior returns when you have that loss year. So certainly a second opinion never hurts to make sure you're maximizing it.

Kathleen (32:35):
Absolutely. And as a CPA and accountant, I don't have a green eye shade. I don't have glasses. This stereotypical accountant is there to prepare your tax returns and financials. Maybe that's where my career started, but that's certainly not why my clients come back to me today and what they rely on me. We are consultants, we're advisors, we're family members. We really need to think about our CPAs in an expanded role because we're not just doing tax returns and financials. And I'm sorry, we are a necessary evil if you have bank loans, because they're going to want documents from us. But I think it's much more than that. And if you're working with a professional and you're willing to share your plans with them, I guarantee you we'll come up with savings to more than pay for the time that you're spending with them. And that you're going to pay for your professionals.

Stan (33:33):
In a traditional way of utilizing your professionals has morphed into really evolving into best practices and sometimes filling the void of that upper echelon management team. We fit right in as a third party professional.

Kathleen (33:51):
And the other value that I don't think that people realize is in my profession, 32 years, I have worked with hundreds of businesses and in my firm, I have the experience of not only myself, but all the businesses that my partners work with too. So I really have a lot of information that's coming in our direction that we analyze. And we come up with best practices that we then share with our clients. So it's not a one-off, I mean, some secret recipes or secret sauces, everybody can benefit from. It's not just every business is that different. There are certain things that we can all proactively do, there are people we can proactively engage in order to make our businesses more successful. And accounting is just one of them.

Stan (34:50):
Yeah. Why reinvent the wheel if you've been able to solve that same problem that our listener has, you know, the answer right away, it's just, you've heard the problem before it's just using a different tactic.

Kathleen (35:02):
Absolutely, absolutely. And so I think that's key.

Stan (35:07):
Why wanted to ask you a tax question? Because it actually just came up for me at the end of the year. And I think some of our listeners, their corporate structure benefit from this New Jersey BAIT tax kind of just arrived where it's a deductible expense like December of the past year. And a lot of us rushed to do it, but now we have the entire 2021 year to plan and be able to pay those, those monies. Do you think this is something that'll work for 2021 as well? Have you heard anything on that?

Kathleen (35:40):
Absolutely. Absolutely. We've been talking about this for nine months. The BAIT tax came about because at the federal level, they made a tax change that limited your tax deductibility of your state and local tax payments. It's called SALT. It's a SALT limitation. So individuals are only allowed to take a 10th maximum of $10,000 deduction on their federal returns for their real estate taxes and state and local taxes that they pay. And that's generally not a problem in states that have low tax rates, but in New Jersey, New York, Connecticut, California, we have higher real estate tax rates and higher income tax rates. So basically we were not getting a deduction at the federal level for the taxes we paid. So New Jersey and some other states came along with a workaround called BAIT. It's a BAIT tax where it allows us as business owners to pay our New Jersey income tax at the corporate level. So in December, a lot of corporations and partnerships, you had to have at least two partners to participate in this actually made New Jersey tax payments at their business level, to the state of New Jersey to pay their individual taxes on their individual tax return. And that way at the business level, we're going to get a federal tax deduction for it because we're not getting it at the personal level. I think that it's a good work around and it must have been very well received because the state received I think $1.3 billion in December and BAIT tax payments. So it was really a windfall to the state. So it did exactly what they wanted to do, you know, help the revenue collections.

Stan (37:35):
Well, it's a smart thing because it helps collect the money in the timeframe it should be collected. Right? And then second thing for a business owner like myself is, you know, why do you want to take a distribution to pay a tax when it's coming from the business to begin with, right? So anything that can streamline the process with the federal and state governments in taxation makes sense to me, and this seemed to be a win. So I'm excited and the takeaway is that it'll last into 2021 and hopefully permanently.

Kathleen (38:07):
Yes. So with that said, there is some discussions at the federal level that they're going to reverse this limitation. So you could deduct the SALT, your state and local taxes, 100% on your personal tax return. It's just discussions. We should pay attention to it. But even if that happens going forward, paying the tax at the corporate level should still be a bigger benefit than us paying it at a personal level. That's my speculation going forward. So even if it does get repealed, as long as the states still allow us to pay at the corporate level, we're going to get a better tax deduction doing it that way.

Stan (38:58):
Awesome. So we've been listening to Kathleen Alexander partner at Sax located in Parsippany, New Jersey, and I can't thank you enough, Kathleen, for the solid advice you've given some relating right now to the issues of the pandemic and some time tested theories of how to handle accounting, but really taking that into the next level, and the next decade of how technology will help us all evolve. And I truly, truly enjoyed sitting here with you and listening to you. And most importantly I wish you and your family you know, good health and safety in 2021. And I think we're going to have to have you on again here because I know there's some things we didn't hit upon, and I know there's a lot more accounting questions, business owners ask all the time. So once I get those questions, we're going to have you on for some accounting part two soon if you'll have us.

Kathleen (40:03):
Absolutely, absolutely. I enjoy talking about accounting tax business practices. I really want everyone to be successful and if I can play a small part in that success, then that's what keeps me coming back.

Stan (40:20):
Absolutely. Thanks again. And thank you to our listeners for joining us here again on Secret Sauce 365, where we provide you the answers that business owners ask themselves every day. Stay well everyone.

Conclusion (40:32):
Thank you for listening to another episode of Secret Sauce 365. Your feedback is how we grow, so please leave us a rating and review on your favorite platform. And if you want access to even more great information, go to secretsauce365.com.

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