Payroll Protection Program Loan Forgiveness and Tax Implications You May Not have Considered.

Late into calendar year of 2020, one that none of us will soon forget, the IRS issued additional guidance on the deductibility of expenses paid with proceeds from PPP loans.  Under Revenue Ruling 2020-27, the IRS states that expenses covered by PPP loan proceeds, whether paid or incurred, are not deductible if the taxpayer reasonably expects the loan to be forgiven. 

Understanding the language used in IRS guidance is always imperative and this is no different.  The ruling makes very clear that a taxpayer can make a reasonable expectation based on facts available.  It should also be noted that the timing of the loan forgiveness application being approved does not impact the deductibility of expenses.  For example:  A taxpayer receives PPP loan proceeds for which all are used to fund payroll and operating expenses for the year ending 2020.  The taxpayer did not apply for loan forgiveness prior to the end of the tax year, though did satisfy all other requirements for forgiveness of the loan.  If the taxpayer expects to apply for forgiveness in 2021, then the taxpayer has satisfied the reasonable expectation and therefore may not deduct the expenses paid with loan proceeds.

You may be asking yourself what happens when the reasonable expectation is wrong.  If 2020 has taught us anything, it’s that we should always leave room for the unexpected.  In addition to Revenue Ruling 2020-27, the IRS also issued Revenue Procedure 2020-51 which spells out a few ‘safe harbor’ rules for this type of situation.  Under the safe harbor guidelines, the taxpayer may deduct the expenses on a timely filed original (including valid extension) or amended return for 2020.  Under Safe Harbor #2 the expenses are deductible in the subsequent year.  The guidelines are as follows:

Safe Harbor #1:

  1. The taxpayer paid or incurred eligible expenses for which no deduction is permitted due to reasonable forgiveness of covered loan.
  2. The taxpayer submitted, or expects to submit, an application for loan forgiveness and
  3. The lender notifies the taxpayer in subsequent year that all or a part of the forgiveness is denied.

Safe Harbor #2: 

  1. Taxpayer satisfies points 1 & 2 of Safe Harbor #1 listed above and
  2. In the subsequent year, taxpayer decides not to seek forgiveness for some or all of the loan. 

As with all new legislation, the rules and application of the law is subject to change as time goes on.  If you need assistance in determining if your expenses are deductible or if you should apply for loan forgiveness, please contact our office.  

How the Tax Reform May Affect Your Return Next Year

The Tax Cuts and Jobs Act (TCJA) was signed into law at the end of 2017. These new laws and regulations could have a major impact on your individual and business tax planning. Below are some questions and answers that may be applicable to your tax situation. This is the right time to take advantage of last-minute tax planning opportunities that could potentially reduce your tax liability for 2018 and future years.


Will I still be able to claim a personal exemptions for myself and my dependents?

For 2018 through 2025, personal exemptions have been suspended. This will substantially increase taxable income for large families. However, increases in the standard deduction and the child credit, in conjunction with lower tax rates, could mitigate this increase.

The child credit has been doubled to $2,000 per child under age 17. In addition, the credit will be available to more families than in the past. The credit will not begin to phase out until adjusted gross income exceeds $400,000 for joint filers ($200,000 for all other filers), compared with the 2017 phase-out thresholds of $110,000 and $75,000, respectively. The TCJA also includes a $500 credit for qualifying dependents other than qualifying children.

Will I be better off itemizing or taking the standard deduction?

The TCJA nearly doubled the standard deduction for 2018 ($12,000 for single and separate, $18,000 for heads of household, and $24,000 for joint filers). This increased deduction may be more beneficial than itemizing, especially with the changes made to itemized deductions. As in the past, taxpayers on the borderline between itemizing and taking the standard deduction should consult with their tax preparer for tax planning strategies.

How will my itemized deductions change?

The deduction for state and local income taxes, real estate taxes, and personal property taxes (or sales tax if greater) is now capped at $10,000 per year ($5,000 for separate).

The home mortgage interest deduction will be limited to interest expense incurred on a maximum ceiling of $750,000 of home mortgage acquisition debt, unless the debt was incurred prior to 12/15/17, where the limitation remains at $1 million. The reduced ceiling is in effect from 1/1/18 through 12/31/25. 

In addition, the home equity loan interest deduction was repealed through 12/31/25. Home equity debt that qualifies as acquisition debt (secured by the principal residence and used to buy, build, or significantly improve your main or second home) and is less than the $750,000 limit previously noted would still be deductible. 

Miscellaneous deductions have been eliminated, which means that unreimbursed business expenses will be gone. Out-of-pocket employee expenses are no longer deductible. If the amount of these expenses is substantial, you might consider negotiating a wage increase or expense reimbursement by your employer. 

Is alimony still deductible under the new tax law?

If you are already divorced or your divorce is finalized in 2018, you will still be able to deduct your alimony payments. However, the new law eliminates the deductibility of alimony for divorces executed after 12/31/18. You will not lose your tax deduction if you need to modify an existing divorce decree. The original orders will still be governed by the laws in effect at the time those orders were entered. However, a couple will have the option of going by the new law when modifying their pre-2019 divorce in the future.

Are there any new benefits for pass-through business owners?

Self- employed individuals and owners of pass-through entities that meet certain requirements may be able to deduct as much as 20% of the net income that comes directly from the business (known as ‘qualified business income’) on their individual income tax returns. Taxable income must be under $157,500(or $315,000 if married, filing jointly) in order to receive the full deduction. There are additional qualifications and limits when income levels exceed these thresholds.

Am I still required to have health insurance for myself and members of my family?

The TCJA repealed the individual shared responsibility payment (penalty imposed on individuals who do not have health insurance). However, other aspects of the Affordable Care Act are still in place.


Did the tax reform act have any effect on business deductions?

Some business write-offs have been eliminated or made more complicated this tax season. 

The deduction for business interest expense now has limits based on sum of business interest income, plus 30% of adjusted taxable income 

Net operating losses can now offset only 80% of taxable income, rather than 100%, and no longer includes income in carryback years.

Entertainment expenses (i.e. taking your client to theater or sporting events) and various fringe benefits (i.e. your employees’ Commuting Fringe Benefits and Moving Expenses) are no longer deductible. Meals are still 50% deductible if associated with the operation of a trade or business.

The Domestic Production Activity Deduction (DPAD) was repealed for tax years beginning after 12/31/17.

The corporate alternative minimum tax (AMT) has been eliminated under the new tax law. This tax was designed to ensure that companies with large taxable incomes would pay at least a small amount of tax.  In addition, unused minimum tax credits can be refunded if certain criteria are met.

Businesses can claim a larger 100% first-year depreciation deduction on qualified property (new or used). The new law increased the maximum deduction form $500,000 to $1 million, and it also increased the phase-out threshold from $2 million to $2.5 million.

Get the Answers Now

The Tax Cuts and Jobs Act may have resulted in more questions than answers. Tax professionals are still waiting for Congress and the IRS to clarify many of the new provisions. Unfortunately, this is not simplification at all, and many tax professionals will find it necessary to increase their fees because of additional education requirements, staffing and the complexity of the requirement reporting.  Please contact our office, and we will be happy to assist you. 

3 keys to a successful accounting system upgrade

Technology is tricky. Much of today’s software is engineered so well that it will perform adequately for years. But new and better features are being created all the time. And if you’re not getting as much out of your financial data as your competitors are, you could be at a disadvantage.

For these reasons, it can be hard to decide when to upgrade your company’s accounting software. Here are three keys to consider:

Your users are ready.

When making a major change to your accounting software, the sophistication of the system needs to align with the technological savvy of its primary users. Sometimes companies buy expensive software only to have many of its features gather virtual dust because the employees who use it are resistant to change. But if your users are well trained and adaptable, they may be able to extract added value from a more sophisticated accounting system. For instance, they could track key performance indicators to generate more meaningful financial reports.

The price is right.

You’ll of course need to consider the costs involved. As holds true for any technology purchase, project leaders must set a budget and focus the search on products and vendors offering only the functions your company needs. But don’t stop there. Explore add-on services such as free trials, initial training and ongoing support. You want to get the most value from the software, which goes beyond the new and improved features themselves.

You need to integrate.

This is the concept of networking your accounting system with your other mission-critical systems such as sales, inventory and production. For most companies today, integration is essential to maximizing the return on investment in accounting software. So, if you haven’t yet implemented this functionality, an upgrade may be highly advisable. Just be aware that a successful company wide integration will call for buy-in from every nook and cranny of your business.

Sometimes a complete overhaul of your accounting system is not necessary.  We have created partnerships over the years with vendors of various applications that compliment accounting systems.  

For instance, a client with a small accounting office was looking to implement controls and efficiencies in there payables process.  We assisted them with implementing, a payables automation system.  We had another client that was looking for an easy way to gather credit card receipts that would sync with QuickBooks Online. We helped put receipt-bank in place to track and automatically sync with their QuickBooks.  In addition, we have also used other tools like Mile IQ and expensify to assist clients in organizing their spending.

If a company doesn’t need any major accounting process changes, it probably doesn’t need a major accounting software change either. But if upgrading both will help grow your business, it’s absolutely a step worth considering. It’s time to see how we can help.

IRS Steps in Against Identity Theft

By: Heather R Cunningham

Over the past several years, tax-related identify and refund fraud has become much more prevalent.  Identity thieves file tax returns using stolen social security numbers and claim false refunds.  They often file electronically and early in the year before the IRS is able to verify the information being submitted, and before the real taxpayers have a chance to file their returns.  Then, when the individual whose social security number has been falsely used attempts to file, their return is rejected because the IRS only allows one return to be filed per social security number.  Once this happens, the taxpayer is forced to file their return on paper, completing additional forms and procedures with the IRS to verify their identity, which delays the processing of their return and receipt of any refund.

The IRS is developing techniques to combat this tax-related fraud.  One way is by using a pilot program that began during 2015.  As part of this program, the IRS has started working with several large payroll companies to develop methods to help verify W-2 information.  The IRS developed a program which generates unique codes for the payroll companies to report on the W-2’s they prepare.  This unique code will then be entered into tax software when the individuals prepare their tax returns.  In order for that return to be accepted by the IRS the codes on the w-2 must match what was generated in the IRS’s system.  Since identity thieves will not have access to the w-2 codes when filing their false returns, the codes won’t match, the return will be rejected.

During the first year of implementation, the program was used for 1.5 – 2 million W-2’s.  The IRS plans to have it expanded to anywhere between 24 and 50 million W-2’s for the 2016 tax year.

As we all know of someone who has been the victim of some form of identity theft, it is good to see the government taking steps to prevent it.

If you have questions or concerns, contact us or call us at 216.524.8900

You should utilize these tax-saving strategies before it’s too late!

by: Franco DiLiberto, CPA

Time is flying, and the end of the year is quickly upon us.  With distractions like the holiday season, it can be easy for individuals to lose focus on opportunities to reduce your tax bill in the spring.  To assist you, we have compiled a list of our Top 7 tax saving strategies for you to consider before the end of the year.  Do not miss out on these opportunities!

  1. Contribute to your 401(k), Traditional IRAs, and Other Tax-deferred Retirement Accounts.

It is never too early to start saving for retirement, and tax-deferred retirement accounts are a great way to simultaneously grow your money and lower your tax liability.  If you work for an employer that provides a 401(k), it is highly recommended to contribute as much as you can afford up to a limit of $18,000 in 2016 for individuals under the age of 50.  Individuals aged 50 or older can contribute an additional $6,000, which is known as a catch-up contribution.  If you cannot afford to contribute the maximum, aim for contributing an amount that will be fully matched by your employer.  For employees, the 401(k) deferral due date is the date of the last paycheck for 2016 or December 31, 2016.

Traditional IRAs are another great tax-saving retirement vehicle, and unlike 401(k) plans, anyone is eligible to participate.  For 2016, the maximum contribution is $5,500 for individuals under the age of 50.  For individuals aged 50 or older, an additional catch-up contribution of $1,000 is also permitted for a total deduction of $6,500.  For 2016, the deadline to make this contribution is April 17, 2017, and no extension is permitted.  If you are setting up a new IRA, applications postmarked by April 17, 2017 will be accepted by the IRS.  However, if you or your spouse are covered by a retirement plan at work, exceeding certain income thresholds disallows the deductibility of these traditional IRA contributions.  If you are single or head of household, the deduction is fully disallowed if your modified adjusted gross income reaches $71,000.  If you are married filing jointly, the income phase out level is $118,000.  Finally, if you are married filing separately, the phase out amount is merely $10,000.  You are not required to make regular minimum distributions from a traditional IRA until you reach the age of 70 ½.

For self-employed individuals or small business owners, two additional retirement vehicles to consider are the Simplified Employee Pension (SEP) IRA and the Savings Incentive Match Plan for Employees (SIMPLE) IRA.  An important distinction between these two options is that contributions to a SEP IRA are only permitted by the employer, while a SIMPLE IRA allows employees to contribute as well.  For 2016, the maximum contribution to a SEP IRA is 25% of business income up to a cap of $53,000.  Therefore, SEP IRAs allow much higher contributions than 401(k) or traditional IRAs.  The maximum contribution for an employee in a SIMPLE Plan is $12,500 and a $3,000 catch-up for those employees aged 50 or older.

  1.  Open up a Health Savings Account

Now is a great time to consider opening a health savings account (HSA).  Contributions made to HSAs are fully deductible on your individual tax returns.  However, not everyone is eligible to participate in a HSA.  To be eligible, you must be covered by a high-deductible health plan (HDHP).  A HDHP is a plan with a deductible of at least $1,300 for single coverage and $2,600 for family coverage.  You are not eligible if any of the following applies:

  • Your health insurance plan is not an HDHP
  • You have health coverage in addition to the HDHP, with limited exceptions
  • You are eligible as a dependent on someone else’s tax return
  • You are enrolled in Medicare
  • You or your spouse have health coverage under a flexible spending account (FSA)

If you meet these requirements, you are eligible to open a HSA.  For 2016, the maximum contribution for single coverage is $3,350 and $6,750 for family.  Under the last month rule, if you are eligible and open up your HSA by December 1, then you can contribute the maximum amount for the entire year rather than prorated by month.  The due date for HSA contributions is April 17, 2017 and no extension is permitted.  

  1.  Take Capital Losses in 2016

Tax loss harvesting or selling underperforming investments before year end allows taxpayers to take capital losses in order to lower tax liability.  These losses can used to offset dollar for dollar any capital gains realized throughout the year.  Because December 31st falls on a Saturday in 2016, the deadline to sell investments to lock in losses is December 30th.  If your total capital losses exceed your capital gains, you are allowed to deduct up to a maximum of $3,000, and the remaining loss is carried forward to next year.  Tax loss harvesting is especially helpful to assist higher income taxpayers who are subject to the 3.8% Net Investment Income Tax.  If you are expecting large capital gains for 2016, then be sure to consider taking losses before the calendar turns to 2017.

  1.  Bunch your Schedule A Deductions

Similar to taking your capital losses at the end of the year, another strategy is to make payments before year end to maximize your itemized deductions on Schedule A.  Taxpayers who itemize are aware of deductions such as:

  • Medical costs
  • State and local income taxes
  • Mortgage interest
  • Real estate taxes
  • Charitable contributions
  • Other miscellaneous deductions.

Depending on your income and deduction levels, it may be advantageous for you to push your deductions into one tax year rather than spread evenly over two years.  Alternative minimum tax (AMT) is another area to consider when bunching itemized deductions since state, local, and real estate taxes are not deductible under AMT.  If bunching the deductions in 2016 is beneficial, be sure to issue the checks for real estate taxes and any state and city 4th quarter estimates before the end of the year.

Also, do not forget about charitable contributions.  For all cash and non-cash contributions of $250 or more, the IRS requires a signed letter from the charity specifically stating the name of the organization, the amount of the contribution, and that no goods or services were provided in return for the contribution.  Additionally, the IRS allows taxpayers to donate investments directly from their investment accounts.  If the donated asset was held for more than one year, you will receive the fair market value for the deduction.  In addition, you avoid any capital gains on this investment.  It is important to plan your costs now rather than scramble in late December.

  1.  Pay your 4th Quarter Estimates

If you were set up to pay federal, state, or city estimated taxes for 2016, be sure to make these payments in a timely manner.  The due date for making 4th quarter estimates is January 16, 2017.  However, as previously discussed, if you would like the itemized deduction for state and local income taxes on Schedule A, then the state and local estimates need to be paid by December 30th.  Paying estimates are important to not only reduce tax liability in the spring, but also to avoid any penalties for underpaying estimated tax during the year.  We are ready to assist you with income projections and estimated taxes for your specific tax situation.

  1.  File Timely and Apply for Direct Deposit

Be sure to organize your tax documents and send to your accountant as soon as possible in the spring.  The vast majority of forms, including W-2s, 1099s, and 1095s, are due to employees by January 31, 2017.  Getting your documents in early, especially through electronic delivery, assures your taxes will be filed timely, and, if applicable, you will receive your refund quicker.  Also, direct deposit of refunds is another method to ensure quicker processing of your applicable refunds.

Don’t wait until the end of the year to start thinking about these moves!  Whether you’re a current client or prospect, our team of experts will discuss the best options for you and your family.  If you have questions on any of these deductions or would like to discuss your specific individual situation, contact us by email at or call at 216.524.8900.  

Surviving an IRS Audit

by: Graham Blackburn

Throughout history, people have harbored a certain degree of anger and fear for tax collectors.  The modern day IRS is not too different.  It’s a massive organization tasked with implementing a tax system that is simultaneously complicated and impactful.  The dreaded IRS audit is the primary source of fear, but with a better understanding we can help alleviate some of that angst.

First off, it’s important to know that audit rates are declining.  In 2015, the IRS only audited 0.8% of individual taxes, or about 1.2 million returns, with higher income taxpayers more likely to be selected.  This marks an eleven year low.  Small businesses, S-Corporations and Partnerships are seeing similarly low audit rates.  Being selected for an audit does not mean you’ve done anything wrong.  Often selections are simply at random.

If you do happen to get audited, it’s helpful to understand the basics of what that means and what transpires when the IRS comes knocking.  Essentially, during an audit, the IRS has one of their agents review part or all of your tax return, in person or via mail.  They request information to support the reported figures, checking to ensure the validity.  Audits, or the potential for them, are the reason we’re told to retain reams of tax documents years after returns are filed.  As a general rule, the IRS can audit any return within the last three years.  However, if there is substantial error found on the return (>25% misrepresentation of income) the time-frame extends to six years.  In the event of an audit, our goal at Hobe & Lucas is to assist you in dealing with the IRS agent, aiming for a determination that there should be “no-change” to the tax return.

After dealing with the IRS in past instances, I have a few thoughts and recommendations:

  1. Remember that it’s going to test your patience. Generally, the larger an organization, the slower it will operate, and the IRS is one mighty large organization.  Resolution is not imminent.  Lengthy periods of silence from the IRS doesn’t necessarily mean there are problems.  It just tends to take them a long time to process information and correspond.
  2. Understand your appointed agent. It might be easy to think of IRS agents as a tax-collecting robots, but I think it’s important to realize that they are people with varied knowledge, motivations and personalities.  IRS agents have objectives and are actually trying to complete a difficult objective.
  3. Respond in a timely manner. Ignoring letters and requests won’t make them go away.  It’s best to correspond as soon as possible to stay in the good graces of the agent, even though it seems hypocritical given the IRS’s slow response time.
  4. Try to stay confident and positive. To understate the obvious, tax law is onerous.  Different individuals have varied interpretation of the law.  In an audit situation, the agent might challenge certain aspects of the return.  Defend your position if you believe it’s correct.

Overall, tax audits are fairly infrequent occurrences, but the fact is that some audits are unavoidable.  It’s unfortunate to be selected for audit, but the whole process is – manageable – and therefore nothing to fear. Hobe & Lucas tax personnel are experienced and knowledgeable in complicated tax issues and compliance with them, and we’re here to help. Give us a call 216.524.8900 or contact us.

Getting the Most Out of Annual Reports

By: Billy Nguyen

Are you a shareholder or investor in a company? If so, then pick up that annual report and begin looking for these key essential items!

Current and potential investors like to know where, and how their hard-earned money is being utilized by the companies they invest in.  Annual reports are required to be filed by companies each year to report their performance.

A current trend in annual reports, companies are using public communication to play an important role in how they communicate with their investors.  Companies are rapidly crossing into the digital age of creating their annual reports online, using video clips, infographics and even animation to attract and engage investors.

Whether online or on paper, some investors read annual reports but fail to read them effectively.  Annual reports should be approached with a sense of skepticism.  In other words, you should be reading between the lines to decipher the actual condition of the company.  Here are some key essential items to look for in a company’s annual report:

At first impression, lots of glossy color pages filled with photos or meaningless graphics used as space-filler is usually a red flag.  An annual report should not just be a marketing tool, but rather a true representation of how a company performed.  Instead of pictures, look for text, financial statements, and notes that give insight to what the company has been up to.

A good letter to shareholders should be candid and honest, and should provide an insight on the company’s future and its economic or competitive condition.  At the very least, management should provide an explanation of changes in sales and earnings from the prior year.

As you glance over the profit and loss financial data, it is important to look for these trends: sales, earnings, and dividends.  The questions that you should be asking:

  • Are these trends getting better or worse?
  • How does it compare to industry norms?

Ideally, you should be looking for a rise in sales and earnings, with earnings rising faster than sales as the firm leverages its infrastructure.

When jumping over to the balance sheet, think about the following key items: How is the balance sheet changing over time?  How do assets compare to debt or other liabilities? Check out the cash flow statement and see if the business has been a generator of cash or a user of cash.  What have they spent their cash on?

Afterwards, it’s time to determine if there are any hidden surprises that you might have missed.  The management discussion and analysis is the section to go to.  You should read the risk factors and the legal proceedings section.  This will allow you to determine if this industry is highly fragmented due to a rise in competitors or if they are experiencing a period of volatility in stock price.

Last but not least, you should be looking for that “unqualified opinion” on the audit report from a Certified Public Accounting firm.  An ‘unqualified opinion’ states that the financial statements were audited in accordance with standards of the Public Accounting Oversight Board and “present fairly, in all material respects”.

So there you have it!  Those are some key essential items that you should be looking for when reading an annual report.  By focusing on the most important aspects of the company, it avoids time wasted on companies that do not meet your standards for investment.  For help reading between the lines of your annual report, contact us or give us a call at 216.524.8900

Savings Options for Special Needs Individuals

by: Jillian Strunk

About 15% of children in the United States have developmental disabilities, including Down syndrome, cerebral palsy, intellectual disabilities, among others. With the great advancement in medical care, these individuals now have the chance to live long and full lives. This creates the need to provide financial support for their future as independent individuals for a much longer period of time. Luckily, there is a growing list of options to save for special needs individuals without disqualifying them from their disability benefits.


529 – ABLE Savings Accounts

In December of 2014, the Achieving a Better Life Experience Act (ABLE) was passed. ABLE allows families and individuals with disabilities to maintain investment accounts for qualified disability expenses tax-free without losing eligibility for public benefit programs. They are similar to 529 College Savings Accounts and 401(k) retirement accounts. The money deposited into the account is invested in different options allowing the growth of savings for long-term care. The money can be withdrawn at any time and is not taxed so long as the funds are used for approved expenses, including basic living expenses like rent and utilities, employment expenses like job-training, and wellness expenses like health insurance premiums and adaptive equipment. In Ohio, the first state to enact ABLE, these savings accounts are called STABLE accounts. There are a few minor fees for account maintenance and an initial deposit of $50 is required, but enrollment is online and very user-friendly.


Nonprofit Pooled Income Special Needs Trust

Managed by nonprofit organizations, these trusts receive funds from many individuals and pool them together for investment. This pooled fund is managed by a trust adviser who makes decisions on the investments. Each individual investor is treated exactly the same. This means that when a trade is made, it is made for everyone in the pool, not just one individual. The larger amounts created by the pooled funds increase the potential for growth. Using distributions from the trust, the special needs individual can increase their quality of life without interfering with their eligibility for government benefits. The individual can use money from the trust account for services that are not paid for by insurance or government benefits, but which provide benefits to the disabled individual such as telephone service, cable tv, vacations, and adaptive equipment.  Be sure to check the rules of the specific trust before entering, as some have rules on the frequency of distributions and what happens to the remaining funds after death.


OBRA Trust

Named for the Omnibus Budget Reconciliation Act of 1993, OBRA trusts are first-person trusts. This means that the assets funding the trust come from, and belong to, the disabled individuals themselves, often from a legal settlement or an inheritance.  OBRA Trusts are not included as assets when determining public benefit eligibility.  Funds within an OBRA trust can be used for anything public benefits don’t cover.  These trusts have more regulations, but are beneficial if the disabled individual is expecting a sudden windfall of cash.  Upon the death of the individual, the remaining funds are used to reimburse the government for previously received Medicaid benefits.


Third-party Special Needs Trust

The most common type of trust used to benefit people with special needs, in a Third-Party Special Needs Trust a donor, such as a parent or grandparent, can set up a trust with the disabled individual as the beneficiary.  This allows individuals to give money to their disabled loved ones without impacting their eligibility for benefits.  A benefit to a third-party special needs trust is that distributions are not limited to a specific list of supplemental needs.   Another benefit to this type of trust is that the funds never belong to the beneficiary, meaning upon death, unlike first-party and pooled trusts, the government is not entitled to reimbursement for previously paid benefits.   The remaining assets in the trust can pass to other beneficiaries at the donors’ discretion.


Planning for the future of your special needs child can seem like a daunting task. These 4 options, among others, are available to assist in securing your child’s future without disrupting government benefits. Most trust accounts require the filing of federal Form 1041 and STABLE accounts require Form 1099-QA and Form 5498-QA to be include with the federal Form 1040. If you need help filing these form for your special needs child, call Hobe and Lucas for guidance! (216)524-8900

The IRS v.s. Identity Theft and Scams

By Bob Casmer

By now almost everyone has either experienced for themselves, or heard stories about someone they know being the target of an identity theft or scam.  It is no surprise that as technology has evolved over the past several decades and our reliance upon computers and the internet to handle all phases of our financial activity has increased, so to have the criminals upped their game to try and obtain information about us and gain access to our bank and credit cards accounts.

One particular technique used by criminals to obtain such information is through the guise of them being with the IRS. Those three small letters can strike fear into the hearts of many people, which is exactly what these criminals are counting on.   These scammers will often try contacting people via the phone or through the internet, claiming to be with the IRS. They further claim the person they are contacting is seriously in trouble with the IRS, owes significant back taxes and penalties, and needs to do something immediately or they could be subject to liens, more fines, and even imprisonment.  

These scammers are counting on these people being so worried that they don’t question the validity of the request and willingly hand over their personal information.

First of all, the IRS will never just call you on the phone with no prior contact.  The chief way the IRS initiates any review or contact with someone is via mail.  Likewise, they will not contact you via email.  In fact, the IRS is extremely averse to sending and receiving any information or records/documents via email and normally will not accept anything emailed to them.  They always ask that you fax or mail hard copies of documents to them. Receiving an email asking that you click on attached links or respond back to them with personal information is usually a dead giveaway that you are being subjected to some form of identity theft or scam.  In such instances, do not ever click on or open any links, nor email or send back any personal information in response to such requests.

If you get a phone call from a supposed IRS representative with no prior correspondence from them, it is likely a scam.  Do not give out any information over the phone, and be sure to ask the supposed agent for their name and IRS badge number.  A real IRS agent is required to give you that information anytime they talk with a taxpayer.  You can also ask for a call-back number and see how they respond.  If you have any doubts or suspicions, don’t give out personal or banking information.

It is very easy to contact the IRS yourself through their website at or by phone, to check and find out if the phone call or email, or even a suspicious letter you got, was actually legitimate.  You can also contact us at 216.524.8900 and let us know what you received.  We can help you quickly discern if you were the target of an identity theft scam.

Looking for a Cloud Provider? Ten Important Questions to Ask the Provider as Part of Your Due Diligence

By: John Foster


When you are making the decision on picking a cloud provider, there are some important questions you should ask according to industry experts. The following are ten questions you should ask any cloud provider you might be considering:

Are you a reseller of cloud services, or do you own the equipment you provide the cloud services on?

If it’s someone else’s infrastructure, you may not have a good feel for who is responsible for service and support.

Where will my data be located?

There are a wide range of cloud providers these days, and you don’t want your data in someone’s basement.    Ideally, your information will be stored in a safe location that’s remote from your own location, so it’s not subject to the same regional risks.

What are the specs of the data center you operate out of?

This would include physical and electronic security measures, redundancies, etc.  You might want to consider dropping by for a visit.

What is the average total downtime for the services I’m subscribing to?

The provider should be able to tell you how often during a particular period of time their services are unavailable. A relatively low percentage is always best.

What can go wrong during installation or migration?

This could range from problems with Internet connection, to data loss or incompatibility.  It is helpful to find out the problems that previous users have faced.

Are you sharing hardware resources between clients?

You want to know whether your processing is being dedicated just to you, or if it’s being shared out among all the provider’s customers.

How much Internet bandwidth is needed for the solution to perform correctly?

Make sure that you know the figure per user. Also check with your Internet service provider to know what both your upload and download speeds are.

What is the recovery time if the systems hosting my data are completely destroyed? 

Also ask what kind of secondary backups they have, how often they’re made, and how often they’re tested.

Is my data automatically redundant across multiple data centers?

Knowing this will give you a good idea of their backup and security procedures.

Do you have documented data security policies?

Knowing what kind of formal security policies they have in place will give you an idea of how secure your data is from the provider’s own staff.


If you get good answers to these questions, you should be well on your way to making an informed decision picking your cloud provider.