Archive for the ‘Audit’ Category

How to set up internal controls on limited resources

Wednesday, July 22nd, 2015

Setting up internal controls in your small or midsized business is no easy task. It can be very time confusing, plus running the day-to-day operations always takes priority. I recently spoke with Smart Business to discuss what businesses and organizations with limited resources can do to implement internal controls.

If I handed you a briefcase of $100,000 and said, ‘Here hold this for me,’ would you be OK with that? … [What] if it was $500,000 or $1 million? That’s what you’re doing when you give full access to information and resources with no one monitoring it.”

To find out what your organization can do now and read the full article, visit Smart Business’s website or check out some of the articles below.

By Michaela McGinn, CPA (Dublin office)

Want to learn more about internal controls for your business? Check out these articles:

10 Ways To Implement Internal Controls With Limited Resources

What Are The Top 10 Signs Your Business’s Internal Controls Aren’t Strong?

Does Your Company Have Solid Internal Controls?

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10 Ways To Implement Internal Controls With Limited Resources

Tuesday, July 7th, 2015
How To Implement Internal Controls With Limited Resources - Rea & Associates - Ohio CPA Firm

Putting internal controls to work in your business doesn’t have to be an overwhelming task and you don’t necessarily need to beef up your workforce to get started. Start by simply picking a few key controls that can be easily woven into your daily or monthly processes and begin implementing a few changes at a time.

You’ve probably heard about how critical it is to establish internal controls throughout your business. But if you happen to own a small or midsize company, you may have dismissed this best practice in favor of maintaining your daily operations, optimizing customer service and streamlining your growth initiative. While running a successful business greatly depends on your ability to manage a variety of responsibilities, don’t let yourself become complacent when it comes to protecting your lifework from fraudulent activity. The mistake of ignoring the importance of internal controls in your business could end up costing you greatly.

Read Also: Where There’s Smoke, There’s Fire: 5 Internal Control Tips That Can Save Your Business From Fraud

Who’s Watching Your Money?

Would you be comfortable asking someone to watch a briefcase full of your cash, say $100,000? What if it held $500,000 or $1 million? Are you confident that your money would be there when you returned? Believe it or not, that’s essentially what you are doing every day when you run your business without internal controls – you are willingly handing over full access to your most valuable asset.

How To Address Your Internal Control Needs

Even if you don’t have the resources to implement a comprehensive internal control structure, there are still options available that can effectively provide your business with a level of oversight. Before you get started, be sure to consider the difference between preventative controls and detective controls.

As the owner of a small- to midsize-business, you may want to consider implementing a strategy that takes advantage of detective controls, which are typically put in place for the purpose of reviewing data for human error while ensuring that your assets remain secure. One example of this type of control is when, after your accounts have been reconciled, a reconciliation review is conducted to ensure accuracy.

Because of their size, smaller companies are more likely to give a few individuals full access to their business’s funds. These employees are often in charge of making deposits, issuing checks, managing payroll and performing monthly bank reconciliations. Enacting detective controls will not only provide you with the peace of mind you need, it may help take weight off of the shoulders of a trustworthy employee who would rather not have their trust questioned.

Preventative controls, on the other hand, are established by companies seeking to ensure that something doesn’t happen in advance. An example of a preventative control is when transaction limits and segregation of duties are established. This type of control can be very effective, but are oftentimes more difficult for smaller companies to establish due to the lack of resources they can commit to such a strategy.

10 Ways To Implement Internal Controls In Your Business

  1. Document and re-evaluate your operational processes (at least) annually.
  2. Make sure that more than one employee is familiar with your company’s operational processes to protect your business against unforeseeable circumstances, such as sickness, job loss or death.
  3. Conduct monthly reconciliations of key accounts (i.e. receivables, cash, inventory, payables, payroll costs, etc.) Then have these monthly reconciliations independently reviewed.
  4. Implement an approval process for employee spending.
  5. Establish transaction limits.
  6. Restrict access to your company’s general ledger to only a few key individuals.
  7. Review your vendor lists to ensure that they are current and accurate.
  8. Assign someone to review standard and nonstandard journal entries.
  9. Form a policy for creating credit limits for customers – and review it regularly.
  10. Review whether there are other areas unique to your business where employees may be able to manipulate information and identify how to monitor them.

Putting internal controls to work in your business doesn’t have to be an overwhelming task and you don’t necessarily need to beef up your workforce to get started. Start by simply picking a few key controls that can be easily woven into your daily or monthly processes and begin implementing a few changes at a time. Before you know it, aspects of your internal control strategy will become so commonplace that you may begin to wonder how you ever got by without them.

Email Rea & Associates to learn more about the benefits of an internal control strategy.

By Michaela McGinn, CPA (Dublin office)

 

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Retirement Roulette

Wednesday, April 22nd, 2015
Retirement Roulette - Rea & Associates - Ohio CPA Firm

The retirement savings provision outlined in the 2016 Budget Proposal not only provides individual Americans with an opportunity to save, it seeks to provide financial incentives to eligible companies that establish their own 401(k), auto-IRA or that offer another similar retirement plan to their employees by expanding the small business tax credit.

It’s difficult to paint a picture that adequately portrays the retirement readiness of the American people. How prepared the average person is for this phase of their life greatly depends on which report you are reading today. As a whole, however, credible sources indicate that as a population we are simply not prepared to take on the financial responsibility of supporting ourselves later in life, which is a problem that has received a lot of attention from our nation’s leaders.

Last year marked the introduction of myRA, a retirement account program that encourages individuals without access to an employer-sponsored retirement plan to save for their retirement. Developed by the United States Department of the Treasury, myRA seeks to offer a solution to those who “face barriers to saving for retirement.” But that’s not the only chatter heard on Capitol Hill these days, with regard to the retirement savings habits of Americans. Members of Congress have proposed other solutions that they hope will make the retirement picture a little bit brighter.

Read:  Retirement Is Knocking … Are You Ready To Answer The Door?

2016 Budget Proposal Addresses Retirement Savings

The U.S. government’s 2016 Budget Proposal includes provisions that target the promotion of retirement goals.

“Millions of working Americans lack access to a retirement savings plan at work. Fewer than 10 percent of those without plans at work save in a retirement account on their own. In 2015, retirement security will be one of the key topics of the White House Conference on Aging. The Budget would make it easy and automatic for workers to save for retirement through their employer – giving 30 million more workers access to a workplace savings opportunity. The Budget also ensures that long-term part-time employees can participate in their employers’ retirement plans and provides tax incentives to offset administrative expenses for small businesses that adopt retirement plans.”

What is important to note is that, in addition to retirement security, the Proposal focuses on generating government revenue, which would (in part) go toward the creation of new tax benefit programs. The impact, according to the Whitehouse, would result in savings for as many as 30 million American taxpayers.

Today, nearly 78 million working Americans are unable to save for retirement simply because they are not eligible to enroll or because their employer doesn’t offer the opportunity to save for retirement. This Proposal introduces a solution for those who would like to begin saving for their golden years.

For example, one possible scenario outlined within the budget calls for all part time workers (those who have worked for their current employer at least 3 consecutive years and who have worked at least 500 hours during each year of their employment), who are not currently contributing to a retirement plan, to be allowed to contribute to the company’s existing retirement plan without requiring the plan sponsor to add matching contributions for such individuals.

Another is for those who do not have access to an employer-based retirement plan, however, would be automatically enrolled in a separate IRA program, which would be funded by payroll withholdings. Of course, the taxpayer would have the option to opt out of the program.

What’s In It for the Employer?

The retirement savings provision outlined in the 2016 Budget Proposal not only provides individual Americans with an opportunity to save, it seeks to provide financial incentives to eligible companies that establish their own 401(k), auto-IRA or that offer another similar retirement plan to their employees by expanding the small business tax credit.

This provision would also include an additional credit for small businesses that currently offer retirement plans to include an automatic enrollment feature within their plans.

Employees who are still unable to save for retirement will have a third option available. The Budget Proposal calls for the allocation of $6.5 million to the Department of Labor, which would allow a limited number of states to implement state-based auto enroll IRAs or 401(K)-type programs.

Mind the Cap

President Barack Obama’s 2016 Budget Proposal, while ambitious in its initiative to strengthen Social Security and incentivize retirement savings programs for Americans, also includes a provision that had been proposed (and rejected) before. The additional provision seeks to cap (prohibit additional contributions) on IRAs and other tax-preferred retirement plans once they reach a balance of $3.4 million.

According to the president, this step ensures that the individual secures sufficient annual income in retirement while preventing the “overuse” of existing tax advantages by those who are able to contribute additional funds, creating higher balance accounts. The cap would also help the government generate additional revenue because the funds that exceed the $3.4 million cap would now be taxable under this provision.

As always, when it comes to the future of Social Security and the overall retirement readiness of the American people a lot can change in a short amount of time. The 2016 Budget Proposal still has a long way to go before any of the provisions outlined within become reality. It’s important for you to be aware of these provisions and how they could change our current retirement plan landscape.

In the meantime, don’t just wait for changes to happen. Take steps today that will maintain the flexibility of your existing benefit plan while optimizing your company’s current and future ROI. Email the Benefit Plan Audit team at Rea & Associates to learn more.

By Darlene Finzer, CPA, QKA, CSA (New Philadelphia office)

 

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Research & Development Credit Benefits Businesses Of All Sizes

Tuesday, April 14th, 2015
Plan For The Future - Rea & Associates - Ohio CPA Firm

While the 2014 tax season is now over, it’s never too early to start strategizing to secure future tax savings. For example, have you thought about improving your current processes to become more efficient? Believe it or not, taking steps to make your company “lean” may be just what you need to qualify for future tax savings.

If you own a small-to-midsize company, you probably haven’t given much thought to how the Research & Development (R&D) tax credit could help you. You might even think that the R&D credit is reserved for big businesses with tons of money to spare on technological investments. If so, then you may want to change your thought process and your business strategy.

Planning ahead is a great way to save your company’s tax dollars and there are many successful strategies from which to choose.
Click here to find out if you should be making a big purchase for your company that will help cut your tax bill.

The R&D tax credit applies to more than just businesses that have research facilities. In fact, many businesses across a range of industries may qualify for this valuable credit, but instead of asking their financial advisor for guidance, they give in to the misconception that they are not “big enough” or that they have not “big enough investments in technology.”

I recommend you avoid this mindset at all costs.

Plan For The Future

While the 2014 tax season is now over, it’s never too early to start strategizing to secure future tax savings. For example, have you thought about improving your current processes to become more efficient? Believe it or not, taking steps to make your company “lean” may be just what you need to qualify for future tax savings.

Are you familiar with Lean Six Sigma and how it can help you improve efficiency and effectiveness?
Read: Can You Explain The Concept Of Waste In Lean Six Sigma? to learn more.

According to consulting firm Smart Devine, in order to qualify for the R&D credit, your company must engage in an activity or initiative that:

  • Is technological in nature – Meaning it must rely on at least one of the following: physical sciences, biological sciences, computer science and engineering.
  • Is being conducted for a permitted purpose – Meaning that it must be intended to improve functionality, performance, reliability and quality.
  • Involves the elimination of uncertainty – Meaning the activity must be intended to identify information required to eliminate technical uncertainty.
  • Involves an experimentation process – Meaning that there must be some elements of experimentation, such as trial and error testing, prototyping, development and analysis of hypothesis.

The expenses that will be used to calculate the credit include your wages for research, supplies and contract research expenses.

Still Not Sure?

OK, so maybe you haven’t committed to an extensive lean-oriented strategy yet. That’s alright. There are many ways to qualify for this credit. Start by asking yourself the following four questions:

  1. Are you constantly developing new products or altering old products for new uses?
  2. Have you had a lean event to try and increase the productivity of a manufacturing facility, a single manufacturing line, or even a specific machine?
  3. Have you developed internal software because you couldn’t find one that met your needs on the market?
  4. Do you constantly develop prototypes to make sure your machines can produce a product that meets customer specifications?

If you answered yes to any one of these scenarios, chances are good that you will qualify for the credit.

Next Steps

If you do indeed qualify to receive the R&D credit, make an extra effort to maintain adequate records to substantiate the credit. This may seem daunting, but you are probably gathering the necessary information already. You probably just need to filter or tweak what you are already doing.

Email Rea & Associates to learn more about the Research & Development Credit and how to identify expenses that could qualify while promoting your company’s overall growth and sustainability. You may also be eligible to claim the R&D credit retroactively, contact us to learn more.

By Ben Froese, CPA (Wooster office)

 

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Where There’s Smoke, There’s Fire: 5 Internal Control Tips That Can Save Your Business From Fraud

Monday, March 30th, 2015
Prevent Fraud With Internal Controls - Rea & Associates - Ohio CPA Firm

When you implement internal control components into your management strategy, you not only deter fraudulent behavior, you help improve the overall quality of your financial statements, which could result in improved transparency, fewer external audit findings and even additional growth and sustainability. Start establishing internal controls today by incorporating these five components into your daily business or organizational activities.

Will the lack of internal control procedures result in the untimely demise of your business or organization? Studies show that if you don’t take action against fraudulent behavior today, tomorrow could be too late. The term “fraud” covers a lot of ground and includes actions that ultimately affect the accuracy of your financial statements. In fact according to the Association of Certified Fraud Examiners (ACFE), entities without internal control procedures are more likely to make errors on their financial statements and more likely to be victims of fraud, which is why it is so important for you to protect your business or organization with procedures that ensure accuracy and reliability of these records.

“The presence of anti-fraud controls is associated with reduced fraud losses and shorter fraud duration. Fraud schemes that occurred at victim organizations that had implemented any of several common anti-fraud controls were significantly less costly and were detected much more quickly than frauds at organizations lacking these controls” (ACFE, 2014).

Read: Fraud Hotlines Deter Occupational Fraud

Improve Accuracy, Eliminate Fraud

When you implement internal control components into your management strategy, you not only deter fraudulent behavior, you help improve the overall quality of your financial statements, which could result in improved transparency, fewer external audit findings and even additional growth and sustainability. Start establishing internal controls today by incorporating these five components into your daily business or organizational activities.

  1. Control environment – There’s no doubt about it, when it comes to setting the tone of your business or organization, all eyes are on you. Employees, volunteers, management and even the general public are more likely to “walk the walk” AND “talk the talk” if they see that you hold them and yourself to the same expectations. When leaders demonstrate a good ethical and moral framework, appear to be approachable about all issues and a commitment to excellence, nearly everybody takes notice and adjusts their behavior accordingly. It also helps to develop a rapport with your management team to encourage engagement throughout all levels of leadership.
  1. Risk assessment – Whether formal or informal, a risk assessment is critical to the process of identifying areas in which errors, misstatements or potential fraud is most likely to occur. By conducting a thorough risk assessment, you can identify which control activities to implement.
  1. Control activities – The best way to safeguard your business or organization is to segregate duties. This means that you should have different employees managing different areas of the company’s accounting responsibilities. When you put one person in charge of your accounting process you are freely giving them the opportunity to alter documents or mismanage inventory – and it’s a clear indication that you have weak internal controls. Dividing the work among your other employees is critical to the checks and balances of your company or organization. It’s also a good idea to develop procedures for recording, posting and filing documentation. Here are a few activities to get you started:
    1. Reconcile bank statements.
    2. Require documentation with expense reports.
    3. Match invoices with the goods and services you received prior to paying off your accounts payable balances.
    4. Make sure the person who has access to your business assets is different from the person responsible for the accounting of those assets, which will establish a form of checks and balances.
  1. Information and communication – Providing your employees with information about the internal control process and the resources available to them is a critical component to your success and the overall success of the internal control activities. In fact, simply knowing there are certain controls in place to promote accuracy and prevent fraud is enough to stop problems before they even start.
  1. Monitoring activities – Your job doesn’t end at the implementation of your internal control procedures; in fact, it’s just beginning. For your internal controls to work (and work well) you must establish your monitoring activities – and monitor frequently. Establishing internal controls is great, but they will have no effect if you neglect to monitor them. Furthermore, your internal controls should grow with your business or organization to ensure their long-term effectiveness.

Risk management and internal controls are necessary for the long-term success of every business and organization and a financial statement audit is a great way to provide you with insight into the internal controls of your organization or business. This kind of review structure can potentially reveal problems you didn’t even know were there – including fraud. But what if you are not planning on conducting an audit on your financial statements this year? Another option could be to work with a CPA who can help you document an understanding of the design and effectiveness of your internal control policies as a way to reassess your current strategies and identify areas for improvement. Email Rea & Associates to find out what options are available and how internal controls can put a stop to fraud in the workplace.

By Christopher A. Roush, CPA (Millersburg office)

 

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The ‘Van Halen Philosophy’ of Retirement Plan Compliance

Thursday, March 5th, 2015
David Lee Roth Performs

Singer David Lee Roth once said he “found the SIMPLE life ain’t so simple.: We think the same can be said about retirement plan compliance.
Pictured above: David Lee Roth performs with classic rock band Van Halen during a concert in 2012. Photo by Robert Yager

While I don’t really believe David Lee Roth and Van Halen were thinking about SEP or SIMPLE IRA retirement plans when they performed their 1978 classic rock song, “Runnin’ with the Devil,” the connection between the two is an easy one to make.

“I found the SIMPLE life ain’t so simple”

The many small business clients we work with who choose to sponsor these types of retirement plans do so because they are inexpensive to administer and they enable our clients to provide a reasonable retirement benefit for themselves and to their employees. However, these plans are far from simple to operate and, if you’re not on your game, can be full of costly traps. The “Devil” is in the details as they say.

Top 5 SEP and SIMPLE Compliance Failures

Here is a rundown of the top five compliance failures we see. If not identified and corrected in a timely manner, these compliance concerns can result in the loss of favorable tax benefits for you and your employees or potentially large penalties and corrective contributions for your business.

  1. No Current Plan Document – All retirement plans require a governing document that identifies the plan sponsor (and any related employers) and defines the plan’s terms. The IRS provides a model document for you to use for these types of plans, but you have to complete it and keep it in your plan files.
  2. All Employees are Not Covered – Both SEPs and SIMPLE plans require that all employees (including employees of related employers) meeting a minimum eligibility requirement be covered and that they receive the same contribution (as a percentage of their compensation). Other than for minimal service and age requirements specified in the plan document, no other employees may be excluded.
  3. Using the Wrong Definition of Compensation – Compensation used to determine the contributions that need to be made to the plan generally includes all wages, bonuses, tips, commissions and any elective salary deferral contributions, and is limited to a certain dollar amount depending on the year (for 2014 the limit was $260,000).
  4. Untimely Employee Notices and No Summary Plan Description – Sponsors of SIMPLE IRA plans need to tell employees before the beginning of each year whether they intend to make a  match contribution or a profit sharing contribution . Eligible employees must also receive a summary of the basic SEP or SIMPLE plan provisions.
  5. Untimely Remittance of Employee Salary Deferrals – All employee contributions must be remitted to the IRA of each participant within 30 days after the month in which the employee would have otherwise received the money.

A great time to review your compliance with retirement laws and regulations is during tax time at year end. Whether you need help understanding your plan design options or compliance requirements as a retirement plan sponsor, help is available. Email Rea & Associates for more information.

By Paul McEwan, CPA, MT, AIFA (New Philadelphia office)

 

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Don’t Forget About Your ERISA Fidelity Bond

Wednesday, February 11th, 2015
Don't Forget About Your ERISA Fidelity Bond

Avoid problems with the Department of Labor, make sure you know the ERISA fidelity bonding requirements.

If your company offers a retirement plan to its employees, make sure you are familiar with the Employee Retirement Income Security Act’s (ERISA) fidelity bonding requirements and the information you must include on your plan’s annual Form 5500.

Over the years we have noticed that many clients struggle with obtaining and keeping an active and accurate ERISA fidelity bond because of a general lack of understanding. The purpose of the fidelity bond is to protect your plan’s assets from the risk of loss due to fraud or dishonesty by employees handling the plan’s funds, such as when remitting plan contributions.

The required bonding amount is “10 percent of plan assets handled.” Because this is a difficult number to know with certainty, most plan trustee’s make sure the plan is bonded for at least 10 percent of all plan assets. This means that as your plan’s assets grow, so does your required bonding amount. There are two primary exceptions to this rule:

  1. The maximum required amount is $500,000 – regardless of your plan assets.
  2. If your plan has more than 5 percent non-qualifying plan assets, then a bond is needed to cover the amount of non-qualifying plan assets.
    • “Non-qualifying plan assets” includes anything that is not a marketable security held by a bank, trust company, registered broker-dealer or insurance company.
    • If a bond in the correct amount is not established, then an independent plan audit by a certified public accountant is required. These audits cost about $10,000 annually.

Even if your plan only contains qualifying plan assets, not maintaining a fidelity bond in the proper amount can be a red flag to the Department of Labor, which could prompt them to take a closer look at your plan.

NOTE: A fidelity bond is different than fiduciary insurance. Fiduciary insurance is not required, but should be in place to protect your plan fiduciaries from personal risk of loss. Your plan fiduciaries include any employee who serves as a plan trustee or who is on a plan investment committee tasked with ensuring that your plan is free from errors or omissions that could result in loss to your plan. Plan fiduciaries are personally liable for these potential losses, so having fiduciary insurance coverage is prudent (albeit not required).

To learn more about the ERISA fidelity bond requirements, email Rea & Associates.

By Paul McEwan, CPA, MT, AIFA (New Philadelphia office)

 

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Signing On The Dotted Line

Tuesday, January 20th, 2015

Know What Your Pipeline Easement Agreement Entails Before Signing

For years, state and national economists have pointed to the Marcellus and Utica shale regions as a source of relief for Ohio’s economic well-being. As momentum continues to grow, more and more pipeline infrastructure will be built, providing landowners with an opportunity to enter into a pipeline easement agreement. While you may be handed a contract that looks favorable to you, make sure you completely understand your rights and responsibilities before signing.

6 Things To Know Before You Sign

  1. A pipeline easement grants a pipeline company permission to use your real property to transmit natural gas liquids. This means that your entire property is not affected – just the portion outlined in the contract.
  2. Understand the difference between a temporary easement and a permanent easement. A permanent easement refers to a time period of 30 years or longer and the amount is taxed at capital gains rates. This happens when the amount received exceeds the cost basis of the portion of the property where the permanent pipeline covers. A temporary easement pertains to a shorter amount of time and is taxed at your ordinary tax rate. A permanent easement is normally more favorable to the taxpayer because of the capital gains treatment.
  3. You are eligible to be compensated for anticipatory damages to your property. Anticipatory damages are awarded for damages that have not yet taken place. They are generally negotiated with the easement. There are two types of anticipatory damages; Compensatory and Non-Compensatory damages.
  4. Compensatory damages are linked to items such as crop damages, business income interruption, temporary work site rental and temporary road access. Basically if you are using the property to produce ordinary income or the pipeline company wants to rent a portion of the property while they work, the anticipatory damage income you receive is taxed at your ordinary rate.
    Non-compensatory damages are damages that are not tied to the items listed above and are taxed at capital gains rates.
    As a landowner, you can also receive actual damages after the pipeline easement is complete. Actual damages are taxed at capital gains rates and any amount of the actual damage payment that is invested back into the property is non-taxable.
  5. Pipeline easement payments are not ongoing. You will be compensated once, which will likely be when you sign the contract.
  6. Different opportunities are available for different people. For many, a pipeline easement may be an opportunity to save for retirement. For others, additional economic opportunities may be available. Your CPA is qualified to help individuals identify your best options – those that make financial sense and those that do not alter your lifestyle.

There are many different myths about pipeline easements. Your financial advisor can help you understand the facts, ensure that you get a fair price and manage your tax obligations.

Email Rea & Associates to learn more about how to make the most of your pipeline easement.

By David Shallenberger, CPA (Wooster office) and Scott Moyer, CPA (Zanesville office)

 

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To Shred Or Not To Shred: That Is The Question … Ask Your Financial Advisor

Monday, October 6th, 2014

Are you wondering what to do with all those tax documents and records you have piling up around your office or in your computer files? Are you thinking about wiping them from your company’s hard drive or sending them to the shredder? Not so fast. The IRS has several rules when it comes to how long your business should keep its records. Make sure you are up to date on the current records retention schedule before you permanently delete something important.

Generally speaking, records that support your income or deduction claims for tax return purposes should be kept until the period of limitations for a particular tax return expires. The “period of limitations” is defined as the period of time the IRS gives you to change information on your return, particularly when the information relates to a refund or credit you have claimed. Also, just because you aren’t planning to make any changes to your tax return doesn’t mean the IRS won’t. Therefore it’s in your best interest to keep your documents until the IRS can no longer assess additional taxes or request additional information from you.

Below is a quick reference guide pertaining to some common records your office has been collecting over the years and how long you should keep them.

Records You Should Keep Permanently:

  • Copyright registration
  • Correspondence (legal and important matters)
  • Deeds, mortgages, bills of sale
  • Depreciation schedules
  • Financial statements (end-of-year)
  • General and private ledgers (and end-of-year trial balances)
  • Insurance records, current accident reports, claims, policies, etc.
  • Minute books for director and stockholder (including bylaws and charter)
  • Property appraisals by outside appraisers
  • Retirement and pension records
  • Tax returns and worksheets, revenue agent’s reports and other documents relating to determination of income tax, sales tax, or payroll tax liability

Records That Should Be Retained For At Least Seven Years:

  • Accident reports and claims (settled cases)
  • Accounts payable/receivable ledgers and schedules
  • Expense analyses and expense distribution schedules
  • Garnishments
  • Inventories of products, materials and supplies
  • Plant cost ledgers
  • Telephone logs/message books
  • Time books/cards
  • Withholding tax statements
  • Employee payroll records (W-2, W-4, annual earnings, etc.)

Records That Can Be Destroyed After Three Years:

  • Bank deposit slips
  • Employment records
  • General correspondence
  • Internal work orders
  • Production and sales reports
  • Sales commission reports

If the records you are looking for aren’t listed above, you can find additional record retention recommendations in our current record retention schedule.

IMPORTANT: The actual amount of time you are required to keep a specific document may be longer depending on your business or what is contained in the document. If you have questions about specific documents or would like some advice on your current record retention practices, email Rea & Associates.

Author: Joe Popp, JD, LLM (Dublin office)

 

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Getting Back To Business: How Outsourcing May Provide Relief To Your Business

Friday, September 19th, 2014

As a business owner, you have a lot to think about. Your investors, managers, employees and clients depend on you to deliver top notch products and services while keeping overhead costs low in favor of increased revenue. In fact, your business’s success can probably be attributed to your leadership skills and your knack for being able to see the big picture while bringing together all the other elements to reach a profitable conclusion. So why are you still in charge of handling your business’s accounting and bookkeeping needs when you could be so much more effective guiding your business toward further growth? Outsourcing may provide you and your business with the relief you need to get back on track.

Maybe you think your business is just too small to hire an accountant or bookkeeper or that you’re saving money by doing these jobs yourself. Perhaps you just aren’t aware of what options are available to you and your business. When you consider that the most effective solution is the one that effectively addresses your unique needs and budget, it should be no surprise that an outside accounting firm may be the answer you’ve been looking for.

Know Your Strengths And Weaknesses

The cost of hiring a full-time accountant or bookkeeper is a huge concern for many small business owners. To avoid a large expense, many owners or managers will purchase a copy of QuickBooks and try to work through their accounts themselves. Unfortunately, even if they have basic accounting skills, they may not have the patience, expertise and experience to handle the work. If done incorrectly, accounting flaws can be very costly, and could result in catastrophic consequences for your business.

Proper accounting and bookkeeping is essential to the short- and long-term success of your business. Outsourcing your accounting and bookkeeping work can help ensure accuracy and will free you up to focus on future growth, higher efficiency and increased sales. Below are a few examples of how outsourcing can solve your small business challenges.

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Issue: Your business is relatively small (with a similar budget), and you can’t justify bringing on a full-time accountant.

Solution: Hiring an in-house accountant could turn out to be a hefty expense, especially if the quantity of work is relatively minimal throughout most of the year. Not only do you have to pay the new employee a living wage and benefits, you must be prepared to invest in the software and/or training a new accountant needs. By filtering work to an outsourced controller, you will have access to affordable, ongoing or as needed reporting. As a result, your management team will become more flexible and will have more data – and thus more authority – when making decisions that directly affect the business.

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Issue: You’ve already invested in QuickBooks to manage your business’s finances. It seems to be working well so far, but you haven’t been formally trained on the software.

Solution: While QuickBooks is easy to use, sufficient supervision by someone who is proficient with accounting skills is essential. Without a QuickBooks expert on hand, you will have no clue as to what is going on “behind the numbers.” A trained and certified accountant can tap into the various capabilities of the software, which include the reconciliation process, accounts receivable tracking and accounts payable, etc. When your bottom line is at stake, you owe it to yourself and to your business to minimize problems that may occur. You can avoid any hiccups with the help of a CPA.

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Issue: You don’t need all the capabilities an accounting firm offers and you don’t want to pay for a service you may never use.

Solution: Your CPA will work with you to make sure all of your accounting needs are met and that the services that are provided only address the needs of your business. Services that can be outsourced include full accounting services, oversight work and everything in between. You also have the option of expanding services if and when you need them. Outsourcing options available to you include:

  • Working with an accountant several times throughout the year to clean up your accounting and ensure a smoother year-end tax process.
  • Tasking an accountant with filing certain commercial activities and taxes on time to insure accuracy and to avoid overpaying.
  • Hiring an accountant to provide periodic financial statements to banks.
  • Utilizing an accountant as an extra set of eyes on all manner of documents. This provides you with a great system of control when ensuring the accuracy of your books.

Speak to a Rea & Associates CPA to find out how an accounting firm can address your unique accounting and bookkeeping challenges while allowing you to make the best use of your time. Learn more about the services our business accounting professionals offers.

Article: Clayton W. Rose III, CPA (Dublin office)

 

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