Small Business

Does Your Retirement Plan Require an Audit?

April 24, 2026 by Nick Magone, CPA, CGMA, CFP®

For many plan sponsors, it starts with a letter.

You receive a notice that your retirement plan now has 100 participants, and you’re required to have an independent audit.

This may be the first you’ve ever heard of an employee benefit plan audit, and here’s what you need to know:

Who needs an employee benefit plan audit?

The Department of Labor (DOL) requires audited financial statements for any retirement plan with 100 or more eligible participants at the beginning of the plan year. Eligible refers to anyone who qualifies to participate, whether or not they’ve actually enrolled in the plan.

Why does the DOL require this?

Your retirement plan holds your employees’ money. And an independent audit ensures that your plan is healthy, having the funds to pay benefits to your participants.

It provides assurance that plan assets are being handled properly, contributions are going in correctly, distributions are being processed and nothing is slipping through the cracks.

What can you expect during the process?

During the audit, a CPA will examine the plan’s financial statements to:

Confirm that plan sponsors are fulfilling their fiduciary duty to plan participants
Evaluate internal controls and identify any weaknesses
Verify that contributions, distributions and loans are being processed in accordance with plan documents and regulations
Flag operational errors, compliance issues or potential fraud risks

What happens if you skip an audit?

If your plan qualifies as a large plan (100 or more participants), you cannot file your Form 5500 without an audited financial statement attached.

Miss the filing deadline? DOL penalties start at $2,259 per day. Beyond the financial hit, failing to comply can also expose your company to fiduciary breach claims from participants, meaning personal liability, not just penalties assessed against the plan.

Keep in mind, you may not know you need an audit until after the plan year has already started. For example, your plan year begins January 1st with 105 eligible participants. That triggers the audit requirement — but the audit itself can’t begin until after the plan year closes on December 31st. Your Form 5500 is due July 31st (or October 15th with an extension). If you’re approaching 100 participants, we recommend that you start the conversation with your CPA before you cross that threshold.

If your plan had fewer than 100 eligible participants at the beginning of the prior plan year and filed as a small plan, you may be able to continue filing as a small plan even if you’ve crossed 100, as long as you don’t exceed 120.

This transition period gives growing businesses a little more leeway, but it has specific conditions that you should also discuss with your CPA.

Ensuring a smooth process

Your first employee benefit plan audit may seem daunting, but here are a few things you can do to make go smoothly:

Get organized. Pull together your plan documents, investment review records, contribution calculations and any other supporting documentation. More importantly, make sure your plan is operating the way those documents say it should. We’ve found that discrepancies between the written plan and actual practice are one of the most common audit issues.
Know what will be tested. Auditors will typically cover contributions, participant data, payroll records, loans, distributions, non-discrimination testing and any prohibited transactions. Have the relevant documentation ready before they ask for it.
Loop in your third-party administrator (TPA) and recordkeeper. The audit team will need data from them too, and getting everyone aligned upfront saves a lot of back-and-forth. Having the right people accessible keeps things moving.

A health check for your employee benefit plan

An employee benefit plan audit protects your employees and provides confidence that everything is running the way it should.

The CPAs at Magone & Company can walk you through exactly what to expect. Our team has 30+ years of expertise with employee benefit plan audits across a wide range of industries. Reach out for a free consultation or call (973) 301-2300.

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance specific to your unique circumstances.

Internal Controls 101: What Your Auditor is Looking For

April 10, 2026 by Nick Magone, CPA, CGMA, CFP®

Most business owners assume an audit is about checking whether their numbers add up. But there’s a lot more to an audit than ensuring the accuracy of your financial reporting, and it all comes down to internal controls.

Internal controls are the checks and balances your organization puts in place to mitigate risk and protect your financials. It’s an ongoing system of policies and procedures that should be directed by management and carried out by your team.

In our 30+ years as experts in audit and assurance, evaluating those controls is always one of the first orders of business. Here’s a closer look at the process and how to get ahead of it.

What’s at risk?

Under Generally Accepted Auditing Standards (GAAS), auditors are required to obtain an understanding of your internal controls. They’re looking for any unintentional or intentional errors that could cause your financial statements to be wrong.

For example, a company that processes vendor payments without a secondary approval could allow fraudulent disbursements to go undetected, raising red flags during an audit.

Auditors assess your current controls to determine how much additional testing they need to do to satisfy audit requirements and sign off on your financials. In a nutshell, strong controls mean less testing while weak controls mean more.

What do auditors evaluate?

Auditors typically zoom in on five areas. They follow a structured framework to gain a closer look at how your organization manages financial risk.

Control environment. Does management take financial integrity seriously? Are ethical standards clear and enforced?
Risk assessment. Does your organization identify and respond to risks as the business changes? For example, a company that grows from five to fifty employees, but never updates its approval workflows, can cause a breakdown of oversight.
Control activities. Are there specific policies and procedures that put controls into action, including approvals, reconciliations, physical safeguards and IT access? This is where most of the hands-on audit testing happens.
Information and communication. Are the right people getting accurate, timely financial information? Are issues escalated appropriately?
Monitoring. Does management regularly check that controls are working? Controls that were effective three years ago might not be applicable to your business today.

Once your audit is completed, any control deficiencies are outlined in a letter with recommendations on how to address them. You’ll be expected to respond with a remediation plan.

If the same weaknesses continue to pop up audit after audit, that’s a signal to auditors, lenders and investors that you’re not working to address problems and improve the overall fiscal health of your organization.

Staying a step ahead

Don’t wait for an auditor to find problems. Make sure your policies are documented and followed. Walk through your key financial processes and pinpoint who’s responsible for each task. Look for anywhere one person controls an entire process from start to finish, which can put your organization at risk for fraud.

Need more support? The CPAs at Magone & Company are experts in internal control assessments. Whether you’re preparing for your first audit or need a more constructive approach to improving your processes, reach out or give us a call today at (973) 301-2300.

Three Conversations to Have with Your CPA (That Aren’t About Taxes)

March 13, 2026 by Nick Magone, CPA, CGMA, CFP®

Most business owners only talk to their CPA between February and April. While it’s a no-brainer to communicate during tax season, the real value comes from the conversations you have the other nine months of the year.

In fact, we meet with every business client at least quarterly.

What do we talk about?

From tax planning and compliance to adjusting projections due to changing economic conditions, there are many scenarios that warrant extra face time with your CPA.

Here are three conversations that can help move your business forward.

What are my numbers telling me about my business?

Dig into which products or services are profitable — not just generating revenue. For example, understanding how quickly you turn sales into actual cash reveals critical insights about your operations, and knowing the difference between profit and cash flow can transform how you run your business.

Questions to address with your CPA:

What patterns do you see in my numbers?
Where am I leaving money on the table?
Are there any red flags in my financial trends I should address now?

It’s easy to misinterpret a P&L, for example, if you’re not clear on accrual vs. cash basis and not realizing that some of your “income” hasn’t been collected yet.

What happens when I want to grow?

If you’re looking for financing, you need to plan ahead. Your CPA can explain what lenders and investors expect to see in your financial statements and whether your current business structure supports or limits your expansion goals. Different growth strategies carry different tax consequences, and deciding between bringing on partners vs. taking out loans has long-term implications for your business.

What to ask:

If I wanted a $500K line of credit next year, what needs to change in my books?
What specific numbers in my financials do lenders focus on, and where do I stand?
When expanding, what’s the tax difference between hiring W-2 employees vs. contractors?

With growth comes compliance issues, so be careful you’re clear on employment laws, especially if you employ remote workers outside your geographic area.

How can I get to where I want to be in three to five years?

Exit planning starts way before you’re ready to sell. Many effective tax strategies require years to implement properly, and your CPA can help ensure you’re building wealth both inside the business and in your personal finances.

Talk to your CPA about:

What steps should I take now to maximize my business’s value at exit?
What would a buyer want to see in my financials?
How do I start pulling money out of the business tax-efficiently?

It’s never too soon to start planning for a profitable exit.

Making conversations count

If you’re not touching on these topics when meeting with your CPA (or worse, not meeting at all), you’re missing out on an informed perspective to help move your business forward.

At Magone & Company, we provide year-round support and solutions to help your business grow. Touch base with us if you’re interested in a partnership structured to create value, build wealth and foster a long-lasting relationship.

What the One Big Beautiful Bill Means for Your Business

November 7, 2025 by Nick Magone, CPA, CGMA, CFP®

The One Big Beautiful Bill (OBBB) legislation represents an overhaul of the federal tax landscape, introducing dramatic changes to taxes, credits and deductions that will impact taxpayers across all income levels. And everyone from entry-level employees to Fortune 500 CEOs will be affected.

The good news is that once you wrap your head around these changes, your business may benefit from opportunities to optimize your tax strategy. Here’s what you need to know:

Paid family and medical leave credit. Now a permanent credit, employers can choose between two methods for calculating the credit: a percentage of wages paid to qualifying employees during family and medical leave, or a percentage of premiums paid for insurance policies providing paid family and medical leave. Additionally, employers may now elect to include employees with at least six months of service (reduced from one year).
Employer-provided childcare credit. Effective in 2026, the OBBB increases the credit percentage for “qualified childcare expenditures” from 25% to 40% for regular businesses and 50% for eligible small businesses. The maximum credit is $500,000 ($600,000 for eligible small businesses). Beginning in 2027, all amounts are subject to annual inflation adjustments.
Employee exclusion for employer-paid student loans. The OBBB permanently extends the employee exclusion for qualifying employer student loan payments. Starting in 2026, the current $5,250 maximum exclusion amount will be adjusted annually for inflation.

What’s next?

Stay in the know as additional guidance and regulations are released, and reach out to the tax planning experts at Magone & Company to get your questions answered.

Why Cyber Criminals Love Small Businesses (And How to Make Them Think Twice)

October 10, 2025 by Nick Magone, CPA, CGMA, CFP®

Remember the big Target data breach a few years ago?

Hackers didn’t just wake up one day and decide to attack the retail giant directly. Instead, they strategically planned and infiltrated a small HVAC contractor that serviced Target’s stores, using that access point to compromise over 41 million customer records.

Cybercriminals continue to view small businesses as stepping stones to bigger prizes — and your sensitive data makes your small business an attractive entry point.

The small business cybersecurity gap

Forty-seven percent of businesses with fewer than 50 employees have no cybersecurity budget. Even more alarming, 51% have no cybersecurity measures in place at all.

Small business owners wear many hats, juggling multiple responsibilities and often lacking the resources to stay on top of evolving security threats. Small businesses typically store valuable financial information — including tax records, employee data and customer payment details — while maintaining fewer security protocols than larger corporations.

When small businesses suffer breaches, the consequences ripple through the economy and impact countless livelihoods. Beyond the immediate financial losses, these attacks can force business closures, eliminate jobs and erode customer trust.

The good news? You don’t need a Fortune 500 budget to build a strong defense against cybercriminals. Check out 10 ways to help protect the sensitive data that your business needs to operate:

Maintain current software. Regular software updates are your first line of defense. Configure devices and applications to update automatically, ensuring you have the most updated security measures in place.
Implement strong authentication practices. Replace simple passwords with memorable passphrases that combine multiple unrelated words and symbols. Layer this protection with multi-factor authentication to make it as secure as possible.
Deploy anti-malware protection. Invest in reputable antivirus software and ad-blocking tools. These solutions actively scan for and neutralize threats before they can compromise your data.
Establish secure network connections. Utilize Virtual Private Network (VPN) services to encrypt your internet traffic, especially when accessing financial data remotely. This encryption makes intercepted data virtually unreadable to attackers.
Have backup systems in place. Maintain and secure backups of all critical documents and financial records. Store these backups on separate devices or in a cloud service that remains walled off from your primary systems.
Secure email communications. Since data often travels via email, implement encryption protocols and consider using secure file-sharing platforms for sensitive document transmission.
Limit access and permissions. Grant employees access only to the sensitive information necessary for their specific roles. Regularly audit these permissions, especially as employees move into new roles or leave the company.
Develop an incident response plan. In advance of a possible breach, make sure you have detailed procedures nailed down, including steps for containing threats and notifying impacted parties.

Turning knowledge into protection

Protecting your tax data is essential for small business survival. Be proactive in preparing your business for whatever the future may bring. Questions about how we protect our clients’ data? Don’t hesitate to reach out.

Breaking Down The One Big Beautiful Bill for Businesses

July 30, 2025 by Nick Magone, CPA, CGMA, CFP®

Recently enacted tax legislation known as The One Big Beautiful Bill was passed by Congress and signed into law on July 4, 2025.

This new legislation brings immediate relief in several key areas while creating strategic decisions that require prompt attention. Here’s a summary of the most critical provisions that may impact your business:

Research and Development (R&D) expensing. Businesses can once again fully deduct domestic R&D expenses in the year they’re incurred. Small businesses can amend 2022-2024 tax returns to claim immediate R&D deductions previously capitalized which may generate refunds and improve cash flow.

Large corporations cannot amend prior years but can take the full remaining deduction in 2025 or split it between 2025 and 2026.

Research credit coordination. New rules require choosing between claiming the full R&D tax credit or taking the full expense deduction, as you can no longer maximize both.

If you claim the Section 41 research credit, you must reduce your R&D deductions by the same amount. Alternatively, you can elect a smaller credit to preserve your full deduction.

Business interest limitation. The bill’s business interest deduction now limits returns to the more favorable 30% of EBITDA calculation, reversing the restrictive EBIT-based rules that had been in effect since 2022. This change is permanent, eliminating previous uncertainty about future policy shifts.

The key improvement is that depreciation and amortization are back in the calculation base, increasing the threshold for allowable interest deductions. This benefits manufacturers and other capital-intensive businesses that were hit hard by the previous rules.

But there’s one important clarification: Capitalized interest (interest added to asset costs rather than immediately deducted) must now be included in the limitation calculation, with the 30% cap applied to capitalized interest first before current deductible interest.

Foreign-derived income changes. The foreign-derived income deduction is being scaled back in two phases. The deduction rate drops permanently from 37.5% to 33.34% for tax years beginning after 2025. And starting mid-2025, income from selling intangible property and depreciable assets won’t qualify for the deduction, and only expenses directly tied to qualifying foreign income can reduce the benefit.

The 100% bonus depreciation is back for all qualifying equipment and property purchased after that date. This reverses the phase-down schedule that reduced the benefit to 60% in 2024 and 40% in early 2025. The reinstatement applies to plant, equipment and tangible personal property, including both new and used assets. There’s also a special elective provision for manufacturing and refinery property placed in service through 2031, giving these businesses additional flexibility in timing their depreciation benefits.

International tax changes. Starting in 2026, Global Intangible Low-Taxed Income (GILTI) rules are being renamed Net CFC Tested Income (NCTI), affecting businesses with foreign operations.

The deduction rate drops from 50% to 40%, which increases the effective tax rate from approximately 13.1% to 12.6% (around 14% when factoring in foreign tax credits). The previous exclusion for tangible asset investments is eliminated, meaning all foreign income is now subject to tax under these rules.

In addition, the foreign tax credit rate increases from 80% to 90%, and rules for allocating deductions against this income are being tightened to exclude interest and R&D expenses from the calculation base.

Next steps for your business

The One Big Beautiful Bill offers substantial tax relief, but maximizing these benefits requires proactive planning and strategic decision-making now. The professionals at Magone & Co can help. Reach out to our knowledgeable team or give us a call today at (973) 301-2300.