Archive for May, 2016

How To Become A Millionaire

Thursday, May 26th, 2016

Kick Your Lottery Ticket Habit

Your Money Multiplied - Ohio CPA Firm

PHOTO CREDIT: Akron Beacon Journal
The odds of winning Powerball are 1 in 292 million. The odds of winning Mega Millions are 1 in 259 million. The odds of winning Ohio’s Classic Lotto are 1 in 14 million. But if you were to invest the money you would normally spend the lottery into a 401(k) plan, your chances of winning big are all but guaranteed!

I recently found myself standing in line at a local convenience store behind a guy who was in the process of redeeming his winning $2 scratch-off lottery ticket for another chance to uncover his fortune. My mind started to wander and it wasn’t long before I starting wondering how much the Ohio lottery takes in every year and how a person’s lottery habit could be transformed into a pretty substantial retirement plan.

According to the annual report from the Ohio Lottery Commission, about $2.8 billion was collected by the Ohio Lottery between July 1, 2014 and June 30, 2015. Perhaps even more shocking is that more than half of these funds, or $1.55 billion, was a direct result of instant ticket sales – the scratch-offs! Since we know that Ohio has about 9 million residents who are 18-years-old and legally permitted to play the lottery, we can conclude that the average Ohioan is spending $323 annually on the lottery. (And since I know that I spend $0, I can only assume that there are men and women out there spending $600 or more on lottery tickets every year!)

Read Also: Don’t Get Blown Away By A Cash Windfall

For Fun or For Money?

Whether you view the lottery as a form of inexpensive entertainment or “a convenient and accessible tool for radically altering [your] standard of living,” if your objective is to obtain financial security … there’s a better way.

Countless studies have been conducted in order to explain why those with lower incomes tend to spend more of their income on the lottery. Some of the reports are simply astounding. Just a decade ago 21 percent of those who played believed that the lottery was the most practical path to wealth. It’s this skewed thought process that continues to drive lower income residents in particular to spend a significant portion of their income on these tactics rather than invest in more effective wealth enhancement solutions.

  • The odds of winning Powerball are 1 in 292 million.
  • The odds of winning Mega Millions are 1 in 259 million.
  • The odds of winning Ohio’s Classic Lotto are 1 in 14 million.
  • The odds of winning Ohio Rolling Cash 5 are 1 in 575,757.
  • And if you want to know how many prizes are left for the popular scratch-off games in Ohio on any given day you can find that out here.
  • But if you were to invest the money you would normally spend the lottery into a 401(k) plan, your chances of winning big are all but guaranteed!

Your Money Multiplied

Let’s assume a 30-year-old who normally spends $25 a week on the lottery (or $100 a month) decides to invest these funds into a 401(k). What would happen to the investment if we were to assume the following conditions?

  • The employer matches 50 cents on each dollar, bringing the total monthly investment to $150.
  • We assume an 8% average annual return on the investment.

In 35 years, the $100 he previously spent on the lottery plus the $50 his employer is kicking in would come to around $344,000 when you factor in the 8% average annual return. What’s incredible to consider is that over the course of 35 years, this individual will have only invested $1,200 per year of personal income (or $42,000 total).

Now, what if the employee decided to kick their monthly $100 lottery habit earlier at the age of 21?  If we were to apply the same conditions outlined above, in 44 years (when the employee reaches age 65), the same investment and company match would result in a 401(k) plan worth $1,457,677. Over the course of this 44-year career only $52,800 in personal funds would be contributed to the plan, but with the company match and 8% average annual return, the funds would continue to multiply – 27 times to be exact!

Don’t pass up on an opportunity to facilitate a discussion about retirement savings and the big impact even a few dollars can make over time. If you have questions about how you can make the most of your retirement saving strategy, email Rea’s retirement plan services team for more information.

By Steve Renner, QKA (New Philadelphia office)

For more insight into our retirement plan services, check out these articles:

Don’t Let These Common Retirement Plan Mistakes Hurt Your Business

How Your Plan Design Can Help Improve Your Retirement Plan Participation

Retirement Plan Participants Are Content To Watch Their Savings Simmer

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Would You Know If Someone Was Stealing From Your Business?

Friday, May 20th, 2016
Employee Fraud- Ohio CPA Firm

According to the 2016 Report to the Nation on Occupational Fraud & Abuse by the Association of Certified Fraud Examiners (ACFE), the typical organization loses 5 percent of its annual revenue to fraud. What are you doing to prevent fraud from occurring in your organization?

A 20-year employee at a city school charged with managing adult education programs was known as a hard worker who had secured her colleagues’ respect. But when external auditors came into the district to review the school’s financial records, it didn’t take long to realize that something just wasn’t adding up. Questions began to circulate and people starting comparing notes. It wasn’t until her co-workers started questioning how she could afford the costly gifts during the holidays and lavish purchases made to redecorate her home that all the pieces began to fit together. After all, that type of money was certainly not in line with her position’s established pay scale.

Read Also: Are Your Employees Skimming From The Top?

Warning Signs

The funds this woman used to redecorate her home were not acquired honestly. They were obtained as part of an embezzlement scheme that lasted for at least two years. Because she attempted to cover her tracks by destroying the financial records, forensic accounting professionals were called in to reconstruct the activity using the school’s enrollment records.

The fraudster was thwarted in this instance … but this is certainly not an isolated incident. In fact, it happens more than you might think.

According to the 2016 Report to the Nation on Occupational Fraud & Abuse by the Association of Certified Fraud Examiners (ACFE), the typical organization loses 5 percent of its annual revenue to fraud. The group estimates that the potential financial loss to organizations worldwide due to fraud is at least $3.7 trillion dollars. The median loss in this particular study, which compiled data from 2,410 cases of occupational fraud in 114 different countries, was $150,000. Nearly one-quarter of all frauds in this worldwide study topped $1 million or more.

What Are You Doing To Prevent Fraud In Your Organization?

If you are looking to significantly decrease the fraud threat in your organization you must have a strategy in place to prevent and detect it. And if a fraudster is in your midst, implementation of anti-fraud controls are effective are an effective way to shut fraud down faster. The Report to the Nations states that the presence of anti-fraud controls correlated to fewer losses and quicker detection.

Which Control Is The Right Control?

According to the report, the top five anti-fraud controls utilized by organizations today are:

  1. External Audit of Financial Statements
  2. Code of Conduct
  3. Internal Audit Departments
  4. Management Certification of Financial Statements
  5. And External Audit Internal Control over Financial Reporting

But are they the most effective?

Over the course of this study, researchers found that the five most effective controls when it comes to preventing and stopping fraud are:

  1. Tips
  2. Internal Audits
  3. Management Review
  4. By Accident
  5. Account Reconciliation

A key opportunity to guard against fraudulent behavior is still being missed. For example, while tips were the most common detection method regardless of whether a hotline was in place, fraud schemes were detected by tip in 47.3 percent of cases at organizations that had fraud hotlines. In contrast, only 28.2 percent of cases were detected by tips at organizations without hotlines. It’s clear that businesses and organizations should invest in a fraud prevention strategy that encourages anonymous tips if they aren’t doing so already.

Is your business or organization at risk? Do you want to learn more about which controls are most effective at preventing and detecting fraud? To learn more on this topic, email Rea & Associates.

By Annie Yoder, CPA, CFE, CFF (New Philadelphia office)

Check out these articles for more fraud-prevention strategies:

Let’s Talk About The F-Word

Cost-Effective Ways To Deter Fraud

How Much Money Could You Be Losing From Fraud?

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New DOL Rule Shakes Up Exemption Threshold

Wednesday, May 18th, 2016

The Department of Labor (DOL) announced its publication of a final rule to update the regulations governing the exemption of certain classes of employees from minimum wage and overtime pay protections of the Fair Labor Standards Act (FLSA). The final rule, which goes into effect Dec. 1, provides for an updated salary and compensation threshold for executive, administrative and professional (EAP) employees to be considered exempt as well as provides an amendment to the salary basis test to allow employers to utilize nondiscretionary bonuses and incentive payments to satisfy up to 10 percent of the new standard salary level.

The new rule sets the salary level at $913 per week or $47,476 annually. The total annual compensation for highly compensated employees (HCE) was also adjusted to $134,004. Additionally, the rule provides for an automatic update to the salary and compensation levels every three years to ensure they continue to provide effective tests for exemption.

The new salary and compensation level is an increase of 100 percent over the previous salary level, set at $455 per week or $23,660 annually in 2004. The DOL anticipates the rule to automatically extend overtime pay eligibility to 4.2 million workers and says the American worker will see more money in their pockets or more free time to improve work-life balance as a result of the measure. Furthermore, the DOL sees this change as an effort to improve workers’ health and increase productivity through improved morale and reduced turnover.

The change is not well received by many.

“We are disappointed by the Labor Department’s 100% increase to the salary threshold for overtime eligibility,” said Scott Wiley, CAE, president and CEO of the Ohio Society of CPAs, in an article on the society’s website. “This rule will impose serious hardships on public and private sector employers and employees, which will have damaging consequences for the communities they serve. We urge Congress to support legislation to rethink overtime changes that strain employers.”

Employers have time to complete internal analysis of how the final rule will impact their business prior to the Dec. 1 effective date. Staffing and budgeting decisions will need to be re-examined, and employers will need to have discussions with their employees regarding their employment classification and any impact the final rule may have. The anticipated increase in cost to employers is $1.2 billion per year in increased wages.

There are planning opportunities surrounding pay and bonus structure to mitigate the impact the final rule may have on employers. You can find an informative whitepaper report on the issue on the DOL website. You can also email Rea & Associates if you have questions about the new rule and how it will affect your business or if you need help navigating the change and implementing a plan that works for your business and employees.

By Renee West, SHRM-CP, PHR (New Philadelphia office)

Take a look at these articles for more business insight:

Phishing Scam Is A Threat To Ohio Businesses

Protect Your Business With These 6 Tips

Can Your Business Survive An Employee Exodus?

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Business Improvement Begins Internally

Wednesday, May 18th, 2016
Lean Six Sigma - Ohio CPA Firm

Chris Liebtag recently appeared on an episode of unsuitable on Rea Radio, a weekly podcast produced by Rea & Associates. Chris, and host Mark Van Benschoten, discuss Lean Six Sigma and why all businesses can benefit by implementing the discipline. Click here to listen to the show!

When you think about the utility of Lean Six Sigma, you are likely thinking about its usage in the manufacturing industry. But did you know that business owners across a wide range of industries can find value in Lean Six Sigma as well? The usefulness of this practice spans far beyond a manager’s ability to improve efficiency on the production room floor. In fact, this discipline has yielded significant results in a variety of businesses spanning all types industries with varying product and service offerings.

Start listening and Discover The Hidden Factory of Lean Business Building on unsuitable on Rea Radio

Why You Should Run A Lean Office

Like most businesses (if not all businesses), one of the basic tenants of Lean Six Sigma is to understand and drive client value. Using this fact as a starting point, the Lean Six Sigma discipline is then used to identify areas of improvement in your organization while implementing effective, more efficient, solutions.

Even though a manufacturing company and a doctor’s office appear to be fundamentally different, both organizations can find significant value through the implementation of Lean Six Sigma because they share the same basic tenant – to understand and drive client value. From a healthcare perspective we know that patients value shorter wait times and improved professional interaction. Using Lean Six Sigma, we would review the office’s processes and determine how to make them more effective in the interest of driving client value. One solution might be to improve the general organization of the office. Doing so could feasibly result in greater efficiency among the staff, shorter wait times and longer, more meaningful interactions with patients.

This same scenario can play out in all offices where client value is considered a priority.

Better Quality Begins At The Beginning

When you have two people doing the same job without any formal processes, they’re bound to produce different results. Unfortunately, lack of consistency negatively impacts the company’s overall ability to produce quality products and/or services.

Companies and organizations that implement Lean Six Sigma, go through the exercise of deconstructing organizational processes to determine best practices, implement changes and establish quality control measures throughout every step of the process – not just at the end. Making quality a priority early in the process will consistently produce higher quality products and services.

Just Getting Started

Obviously we are just scratching the service of what Lean Six Sigma can do. I recently had the opportunity to talk about the effectiveness of Lean Six Sigma on an episode of unsuitable on Rea Radio with Mark Van Benschoten where I was able to talk a little more about the practice. You can go to www.reacpa.com/podcast or click the play button on the media player below to listen to our conversation. You can also email Rea & Associates if you have questions this topic.

By Chris Liebtag, LSSBB, PMP (Dublin office)

Check out these articles for even more tips to help you move the needle:

Your Business Could Be Doing Better

Turning The Tables On Ourselves: How We Used Lean Six Sigma

Gaining Efficiencies In Service With Lean Six Sigma

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Can The IRS Collect Back Taxes 10-Years After The Original Date Of Assessment?

Wednesday, May 11th, 2016

Greetings Drebit! Please excuse my ignorance when it comes to IRS matters. I read your article about finding the date of assessment on my IRS Transcript. My transcript code is 150-5/29/2006. When can I exercise my right under the 10-year Statutes of Limitations? Thank you. – Wendy


Click here to read the original article


Dear Wendy,

Thank you for taking the time to send in your question. You correctly identified the date of assessment on your account transcript by zeroing in on the “150” Transaction Code. Based on this date, I can determine that your tax return was assessed on “5/29/2006.” Because the statute of limitations almost always begins the day after the taxpayer files their income tax return, the simple answer to your question is that the 10-year statute is set to expire on May 30, 2016.

However, there may be other factors to consider. For example, if you entered into an installment agreement with the IRS to pay any amount that was owed, as identified on your 2005 tax return, it’s highly likely that the 10-year statute of limitations date would have been extended to a date ending after May 29, 2016. While we have no way to know for certain if your assessment date was adjusted, I can tell you that, in this scenario, it is common practice for the IRS to extend the timeline to accommodate their ability to collect taxes owed – particularly if the installment payment period extends beyond the original expiration date.

I recommend that you speak with your financial advisor about this matter or email Rea & Associates to speak with a member of our team’s tax experts. You also might find value in the following articles.

Good luck!

By Christopher Axene, CPA (Dublin office)

Check out these articles for more helpful tax advice:

IRS Says You Owe More? Don’t Write That Check Yet!

How Far Back Can The IRS Go For Tax Auditing

When You Make A Mistake On Your Tax Return

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Who’s Driving Your Business’s Results?

Monday, May 9th, 2016
Jeremy Senften | unsuitable on Rea Radio | Ohio Accounting Podcast

Jeremy Senften, CPA, CGMA, Rea’s chief operating officer, joins Mark Van Benschoten on an episode of unsuitable on Rea Radio to talk about the benefit of tracking your business’s success. Listen to episode 31, “Bet On Your Business By Scoring Your Success,” now!

Businesses that drive consistent revenue growth are able to do so because they have honed in on the importance of working with their teams to drive measurable results. And, believe it or not, it’s not rocket science! Take a look at these three tactics for tips to help you achieve the growth goals you’ve been working toward.

Listen To Bet On Your Business By Scoring Your Success on unsuitable on Rea Radio

Place Your Bet

If you had to bet that one particular action would drive the results you are looking for, what would that bet look like? For example, if your goal was to increase your company’s sales, I would be willing to bet that increasing the number of calls your team makes to customers would bring you closer to reaching your goal. Placing your bet on a particular initiative will help you identify where you need to focus your efforts and work you do to reinforce the bet will help you achieve the goal.

Keep Score

Just because you are not keeping score in the traditional sense, doesn’t mean somebody else isn’t tallying up points. Generally speaking, we like to keep score because we like to know if who is winning. As competitive beings, people like to see what the others are doing. That way we have an idea of what we need to do to one-up them. Companies can harness this drive and put it to good use when it comes to driving desired results in your business. Tracking your success is so important and communicating these results is just as critical. Your team wants to know how what they are doing has an effect on what is going to happen and how those results impact the big picture. It’s your job to show them.

Communicate

If you aren’t constantly communicating news, results and other critical information, your efforts are doomed to be chalked as just another “flavor of the month.” You’ve likely make a significant investment in this particular initiative, so it’s critical that you talk it up – and often. Some people say that a person has to hear something seven times before it actually “clicks.” I like to joke that you should talk about it until you are tired of talking about it … then mention it 10 times more. You shouldn’t be the only one delivering the message either. Try to establish a team to champion your message to encourage others to take ownership of the initiative as well.

Are you looking for more insight into the goal-setting (and achieving) process or would you like some additional clarity on the points above? Listen to my interview with Mark Van Benschoten on unsuitable on Rea Radio and “Bet On Your Business By Scoring Your Success.”

By Jeremy Senften, CPA, CGMA (New Philadelphia office)

For more insight into achieving business growth, check out these articles:

From Good To Great: How To Create A Strategic Plan That Propel Your Business Forward

If It’s Going To Be, Then It’s Up To Me

Measure Your Operations With Key Financial Information

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Last Minute Tax Tips, Financial Stress and Cybercriminals …

Monday, May 2nd, 2016

April’s Top Posts Had Readers On Edge

So our month was pretty intense … how was yours? The good news is that we made it through another tax season, the bad news is that business owners are clearly still on high alert due to continuous influx of hacker activity. Take a look at our top five blog posts in April for some useful tips and insight you can use all year long.

Top 5 Blog Posts For Business Owners In April

  1. Can A Cybercriminal Crack Your Company’s Network? Small and midsize businesses are not immune to becoming the target of a crippling cyberattack and without the proper procedures in place business owners risk the very real threat of a large-scale assault on their company’s data. Would you be able to recover if your organization was attacked?
  2. How Flexible Is Your Company’s Management Style? Never before has the American business owner had to manage a workforce consisting of employees whose ages span five generations. And because each generation is unique, your company’s leadership team is left with the impossible task of adopting a management style to accommodate an incredibly diverse workforce. Keeping reading to learn more.
  3. What Tax Liabilities Accompany Inherited Real Estate? So you just inherited some real estate. You’re probably now wondering – is this a blessing or a curse? From the tax perspective, of course. And that’s a good question to ask. Just because you inherit something doesn’t mean that you’re free and clear of any potential tax liabilities. Depending on how you use the property and if you sell it will determine if you have a taxable situation. So here’s what you should know about taxes and inherited real estate. Read on to learn more.
  4. Increased Financial Stress Hurts Your Company’s Bottom Line Earlier this month, in a proclamation that reiterated the importance of equipping everybody with the “knowledge and protections necessary to secure a stable financial future for themselves and their families,” President Obama declared April to be National Financial Capability Month. While the timing of the proclamation makes this a great time to raise general awareness about the importance of financial fitness, businesses have a great opportunity to educate their employees about the importance of financial wellness all year long.
  5. How Can You Track Use Tax in QuickBooks? Now that you have filed for use tax amnesty and are all set up with an account, how are you going to track it daily going forward? If you use QuickBooks, the answer is as simple as 1-2-3.

April was great, but we are excited to see what May brings. More tips for business success? More financial news and updates? Personal finance advice? Of course! Stay tuned.

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