CVW News 4th Quarter | 2023

Table of Contents

Client Note of Appreciation & Survey Invitation

As the year comes to a close, we would like to take a moment to express our heartfelt gratitude to each of our clients for your continued support and collaboration.

Your trust in our services has been instrumental in our success, and we sincerely appreciate the opportunity to serve your financial needs. It is through strong client relationships like yours that we are able to deliver the higest level of accounting services.

To continue to meet or exceed your expectations, we invite you to share your valuable feedback through an anonymous survey:

This brief survey focuses on the following:

• Ease of communication and responsiveness of our team
• Accuracy and timeliness of financial reporting
• Suggestions for enhancing or adding services

We thank you in advance for your time and feedback; Your insights are instrumental in our our commitment to providing exceptional accounting services to the interior design community. Thank you again for partnering with us.

Year-End Tips & Checklist

To ensure a smooth year-end close and timely financial reporting, CVW recommends completing the following in December or early January:

*Year-End Payroll Review Includes the Following:

• Verify business & employee information
• Set compensation to meet "reasonable compensation" requirement for S Corporation officers (if applicable)
• Set year-end bonuses
• Inform employees about unused benefits (PTO, flex spending, etc)
• Set medical insurance premiums on behalf of greater than 2% S Corporation shareholder-employee as reportable wages on their Form W-2 (if applicable)
• Review payroll records to ensure they tie to submitted payroll tax forms (i.e. 941s)
• Set compensation and benefits/deductions for next year
• Initiate next year's payroll schedule

In addition to the list above, we also recommend reviewing your current year performance and identifying a plan for next year (i.e. budget, forecast, cashflow projections).

If you have any questions on what you need to complete or submit for year-end reporting, please check in with your Accounting Manager. Otherwise, read on for some additional tips on maximizing deductions.

Maximizing Deductions: A Guide for Interior Designers

By Jen Bastian, CPA

Running a successful interior design business requires not only an eye for aesthetics but also a savvy approach to financial management. Understanding what expenses are deductible can significantly impact your bottom line. In this guide, we'll explore some common deductible expenses available to interior designers as well as a few updates for 2023.

Home Office Expenses:

Many interior designers operate their businesses from home. In such cases, a portion of home-related expenses, like utilities and rent or mortgage interest, may be deductible for spaces used exclusively for business. Per the IRS guidelines, there are generally two basic requirements for a taxpayer's home to qualify as a deduction:

1. There generally must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
2. The home must generally be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.

If you qualify, there are two ways to take a deduction for your home office space; The direct method and the simplified method.

The direct method involves calculating the percentage of your home used exclusively for business purposes, and then applying that percentage to your home-related expenses. It is important to keep track of all expenses throughout the year as support for your calculation, and to ensure you receive the highest deduction.

If your records aren't the best, or you utilize a smaller space, you may opt for the simplified method to calculate your home office deduction. This method allows for a deduction of $5 per square foot, up to $1,500 or 300 square feet, per year for your exclusive home office space. No additional calculations or records are required.

Travel for Inspiration

Visiting trade shows, design exhibitions or travel for inspiration can be considered a business expense, especially if it directly impacts design work or specific projects. Designers often need to travel to meet clients or check in with suppliers, which is also deductible. Keep track of accomodation costs, mileage or gas, and meals associated with all business-related travel. These expenses are generally deductible and can quickly add up over the course of a year.

Professional Development and Association Fees:

Expenses related to workshops, courses, and conferences that enhance your skills and knowledge are generally deductible. This includes the cost of materials and associated travel expenses.

The costs to join professional associations or subscribe to industry publications are also typically deductible. Examples of deductible memberships include the American Society of Interior Designers (ASID), the International Interior Design Association (IIDA), and the National Council for Interior Design Qualification (NCIDQ). As with any business expense, be sure to use business cash or credit card accounts when making these purchases to ensure they are tracked and deducted appropriately.

Meals...but not Entertainment:

The Consolidated Appropriations Act that was signed into law in December of 2020 allowed for a 100% deduction for food and beverages purchased from a restaurant in 2021 and 2022.

For 2023, the rules revert back to how they were defined in the Tax Cuts and Jobs Act. This means meals at restaurants are no longer 100% deductible. Businesses can now generally deduct 50% of qualifying business-related meal expenses. This includes meals with clients, customers, and employees while discussing business matters. If friends or spouses are invited, the cost of their meals is non-deductible.

Entertainment expenses, such as tickets to events or concerts, are also non-deductible. Below is summary of deductions for 2023:

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Understanding and maximizing deductible expenses is an important aspect of financial management. By carefully documenting and categorizing your expenses, you not only ensure compliance with tax regulations but also optimize your business's financial health. Consult with a tax professional to tailor these general guidelines to your specific circumstances.

What's New in Sales Tax?

There's always something changing in the world of sales tax. Here's an overview of some recent updates.

State Update - Georgia - Digital Artwork, Books & Photography: In addition to rate changes, Georgia is implenting additional sales tax regulations for 2024. Effective January 1st, sales of specified digital products, other digital goods and codes sold to an end user in the state are subject to Georgia sales and use tax, provided that the end user receives or will receive the right of permanent use of such products, goods, or codes and the transaction isn’t conditioned on continued payment by the end user.

“Specified digital products” means digital audio-visual works, digital audio works or digital books.

"Other digital goods" means the following items transferred electronically to an end user:

• Artwork
• Photographs
• Periodicals
• Newspapers
• Magazines
• Video or audio greeting cards
• Video games or electronic equipment
• A key, activation, or enabling code that conveys a right to obtain a digital good

If you believe your design business may be impacted by this update or other sales tax rate or rule changes, or if you have questions on nexus or other sales tax regulations, please contact your Accounting Manager to discuss. We are here to help!

Upcoming Office Closure Dates

Christmas Eve Observed ~ Friday, December 22nd

Christmas Day ~ Monday, December 25th

New Year's Eve Observed ~ Friday, December 29th

New Year's Day ~ Monday, January 1st

Martin Luther King Jr. Day ~ Monday, January 15th

President's Day ~ Monday, February 19th