Archive for the ‘Business Advice’ Category

Is Your Business Batting A Thousand?

Monday, June 22nd, 2015

Why You Need A Banker On Your Team

A lot has changed since the first time I sat behind my desk at Rea & Associates in 1979. Technology has advanced in ways that no one could have imagined or predicted. Our nation endured – and survived – The Great Recession. And someone somewhere decided that Pluto isn’t a planet anymore (and I just became a grandpa!).

But with all these changes going on, one thing has remained the same: to be successful in business, you can’t go it alone.

Read Also: Why Is A Relationship With Your Banker Important To Your Business? 

You never know when you will need a sounding board, some insightful guidance or even someone to go to bat for you, but if you are looking to hit a home run, you need to make sure your team is stacked with advisors you trust – and be sure to make room on your roster for a banker.

As a business owner, it’s easy to get caught up in the daily responsibilities of managing operations, customer needs and stakeholder interests. If your banker is just watching from the bleachers, you are missing out on a great opportunity to improve your business. Get a banker on your team, and if it’s the right one, you’ll see results.


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A Key Player

Maybe you’re already making payments on a business loan, or perhaps you’re in the market to refinance or secure a new loan. Either way, you’ll have better results if you see your banker as a teammate.

When your banker is a key player in your business, you will find:

  • The bank is more willing to give you a loan.

    Banks don’t loan money to business owners they can’t trust. When you develop a relationship with your banker, not only do they get the chance to know you better, they get broader insight into your company and the objectives that drive your business. Yes, your cash flow, collateral and financial statements are important, but so is your character. If your banker knows you, likes you and trusts you – and knows, understands and believes in your business – you could be more likely to secure the financing you need when you need it.
  • You and your business are often top-of mind. When you have a strategic banking relationship, you’re more likely to get a call when a great opportunity arises. Your banker has greater insight into your short- and long-term strategies and will be able to alert you when a low interest loan program lands on their desk. Additionally, they are in a great position to recommend your business to other clients and professional acquaintances.

If you talk to your cousin’s neighbor’s dog-walker more often than you talk to your banker, it’s time to make a change. Try setting a recurring reminder on your calendar to meet for coffee, visit the batting cages or hit a few golf balls. Before long, you’ll start to see a return on your efforts.

By Dave Cain, CPA (Dublin office)

 

Related Articles

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Do You Understand Your Company’s Financial Statements?
Cash Flow Is King: Where Do You Need To Focus?

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Want A Better Business? Structure Matters

Friday, June 5th, 2015
Minimal Tax Liability - Rea & Associates - Ohio CPA Firm

Perhaps the biggest argument for establishing your business as an S-Corp is the minimal tax liability it provides to shareholders and to the business as a whole. Only the wages paid to owners and employees are considered earned income and subject to Federal Insurance Contributions Act (FICA) tax for Social Security and Medicare. Other net earnings passing through to shareholders are considered “passive income,” protecting them from the taxes that would otherwise be assessed per the Self Employed Contributions Act (SECA) tax.

Are you an entrepreneur who wants to take advantage of the benefits often awarded to small-to-midsize business owners? If so, you may want to consider establishing a limited liability company or an S-corporation. Both options offer several distinct advantages depending on the size and scope of your business and it’s even possible to combine the two – potentially providing you with the best options of both worlds.

Read: Is It Time To Review Your Choice Of Entity?

Keep in mind that in some circumstances, making the change to an LLC may simply be impractical. Given your particular situation, the switch may have unfavorable consequences. Consider working with a knowledgeable financial advisor and/or business consultant who can assist you with proper planning and who can articulate the advantages and disadvantages of each option. If you are ready for a structure change, be sure to look closely at your short and long term goals and objectives – and be sure to build in some flexibility so that your business can adapt as it matures.

While it may be nearly impossible to find a perfect fit with regard to your specific needs, you may find one option to be better than another when working toward accomplishing your unique financial and tax goals. Read on to learn more about a few organizational structures that might make sense for you.


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Just Passing Through

Regardless of whether you establish an LLC or an S-corp, you will receive the benefits associated with owning a pass through entity, meaning that your company’s income will pass directly through to the business owners – potentially receiving better tax treatment. Furthermore, both options grant owners with some form of limited liability protection.

What To Expect From Your LLC

If you decide to structure your business as an LLC you will likely enjoy the tax efficiencies and operation flexibility this traditional sole proprietorship or general partnership will provide. If you plan to enter into a partnership, each owner will be considered members and will report their portion of the profits and losses to the internal revenue service (IRS) on their personal federal income tax return. Another great benefit LLC members report is the ease of their operation and administration responsibilities. Members also enjoy fewer restrictions when the time comes to distribute earnings through profit-sharing.

Be aware, however, that the liability protection provided by an LLC is typically limited to each member’s personal investment in the company.

What To Expect From Your S-Corp

Corporate income, losses, deductions and credits are passed directly through to owners (or shareholders) of S-corporations. Shareholders of the company are then expected to report the business’s income and losses on their federal tax returns – similar to an LLC. Keep in mind that S-Corps may have no more than 100 shareholders. Furthermore, partnerships, corporations and non-resident aliens are not eligible to own S-corps. Shareholders only consist of individuals and certain trusts and estates.

Perhaps the biggest argument for establishing your business as an S-Corp is the minimal tax liability it provides to shareholders and to the business as a whole. Only the wages paid to owners and employees are considered earned income and subject to Federal Insurance Contributions Act (FICA) tax for Social Security and Medicare. Other net earnings passing through to shareholders are considered “passive income,” protecting them from the taxes that would otherwise be assessed per the Self Employed Contributions Act (SECA) tax.

But be forewarned, even though S-Corps have some great tax benefits, they also have complex administrative and recordkeeping obligations. All S-Corps are required to maintain formal minutes, bylaws, forms and filings. Additionally, because shareholders earnings are limited to a proportional percentage of capital contributions, profit sharing is difficult to establish. In other words, if you are looking for a relatively low-maintenance option – you may not want to choose to establish an S-Corp.

The Best Of Both Worlds

Wouldn’t it be great if you could structure your business in a way that allows you to enjoy the benefits of minimal tax liability, profit sharing, and fewer administrative and operational responsibilities while curtailing the restrictions posed by establishing the company solely as an LLC or S-Corp? Good news – that option exists!

There are steps you can take to establish your business as an LLC while allowing it to receive the tax treatment of an S-Corp – it just requires you to seek insight from a professional in business and financial matters and a special election with the IRS via Form 2583.

The decisions you make today will impact the future of your business for years to come. Email Rea & Associates to learn more about the pros and cons of LLCs and S-Corps, as well as other options that may be available to address your specific challenges.

By Kyle Stemple, CPA, CGMA (New Philadelphia office)

 

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Managing Wealth In A Volatile Industry

Thursday, June 4th, 2015
Navigate The Busts and Booms of Business - Rea & Associates - Ohio CPA Firm

Owning a business in a volatile industry can be a big gamble, but if you strategically manage your assets, your odds of success become much greater. Be prepared for outside factors that may force your business to go lean by preparing early and creating a solid, sustainable financial management strategy.

The oil & gas industry has long been known to experience regular cycles of booms and busts. One of the most recent examples occurred only a few months ago, when Organization of the Petroleum Exporting Countries (OPEC) made the decision to maintain its current level of production levels in an attempt to capture greater market share. This decision caused the price of oil to tank. By the time the dust settled, oil prices dipped 60 percent and the ripple effect had already begun to take a toll on companies throughout the industry.

Read: This Is An Intervention – Step Away From Your Business

This is just one example of how the market can change overnight, but this type of volatility is not exclusive to the oil & gas industry, which is why all business owners throughout all industries should consider taking the steps necessary to guard against a bust – even if you are still riding high on a boom.

3 Tips To Help You Navigate Your Industry’s Busts – And The Booms

  1. Take Good Care Of Your Assets – Successful navigation of a finicky industry depends on how well you manage your assets. For example, when times are good, take the necessary steps to manage your cash flow and consult with an advisor who can help you make wise, sustainable financial decisions. When it comes to investments made outside the volatility of your business, consider giving your blood pressure a break and make it a priority to first seek the preservation of your capital over your rate of return. Emphasizing capital preservation can better prepare you for those unexpected downturns.
  2. Live Frugally (Even When You Don’t Have To) – Don’t buy that new car unless you are absolutely sure that you will have the funds needed to cover the payments, and any other unexpected expenses, later on. Setting goals for your spending and saving habits, for example, can help keep your finances in line – helping you to keep your head above water when your business, or the industry, takes unexpected downturn. Instead of driving off the lot in that brand-new car, start by putting some money aside to make a nice down payment. Even though you may have to postpone the purchase for a few months or so, when you are finally able to put the money down you will also be able to significantly reduce your monthly payments – putting you in an even better long-term financial position.
  3. Choose To Play The Long Game – It may seem hard to diversify your business when so many others appear to be doing pretty good for themselves by chasing the quick rewards. But by operating your business and managing your personal finances more conservatively, you stand a better chance of securing long-term wealth – not to mention a comfortable retirement. In other words, when you diversify your assets, you are able to protect yourself and your business from a sudden and complete collapse.

Owning a business in a volatile industry can be a big gamble, but if you strategically manage your assets, your odds of success become much greater. Be prepared for outside factors that may force your business to go lean by preparing early and creating a solid, sustainable financial management strategy. Take a look at your current operations and consider what changes you can make today to help protect your business from a possible financial catastrophe tomorrow.

Email Rea & Associates to discover more ways to protect your business.

By David Shallenberger, CPA (Wooster office)

 

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Don’t Shy Away From Business Debt
Investing In Your Business’s Immortality
Why It’s Important To Have A Good Banker As Part Of Your Business Advisory Team

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Hackers Target IRS – 100,000 Taxpayer Accounts Breached

Wednesday, May 27th, 2015
Hackers Target IRS – 100,000 Taxpayer Accounts Breached - Rea & Associates - Ohio CPA Firm

Reports state that cyber-criminals were able to gain access to taxpayer accounts by obtaining specific, personal information, which allowed them to navigate the Get Transcript authentication process. The IRS said, since February, there have been about 200,000 attempts to access taxpayer’s Get Transcript accounts from “questionable email domains – of which, about 100,000 were successful.

Just when you thought it was safe to let your guard down, cyber-criminals have blindsided us again. This time they’ve used the Internal Revenue Service’s “Get Transcript” application to gain access to approximately 100,000 taxpayer accounts.

Read: Could A Cyber-Attack Cripple Your Business In 2015?

The IRS released a statement Tuesday stating the government agency is “working aggressively to protect affected taxpayers and strengthen [their] protocols even further going forward,” after learning that hackers used “non-IRS sources” to access data, including Social Security information, dates of birth and street addresses associated with the accounts of nearly 100,000 taxpayers. The IRS said the security breach occurred when criminals gained access to its online Get Transcript application, which has since been shut down pending a full investigation by the Treasury Inspector General for Tax Administration.

According to the IRS, “the online application will remain disabled until the IRS makes modifications and further strengthens security for it.”

The data breach was limited to the Get Transcript application, said an IRS representative. The main IRS computer system that manages tax filing submissions was not affected and remains secure.

Reports state that the criminals were able to gain access to the accounts by obtaining information specific to the certain taxpayers, which allowed them to navigate the Get Transcript authentication process, which includes asking the user to answer several personal questions to confirm their identity. The IRS said, since February, there have been about 200,000 attempts to access taxpayer’s Get Transcript accounts from “questionable email domains – of which, about 100,000 were successful.

Expect to receive a letter in the mail if your account was one of the 200,000 accounts targeted. And if your account was one of those that were compromised, your letter will provide additional information, including specific instructions to access free credit monitoring services that will be provided by the IRS to ensure your data is not being used in other financially damaging ways. According to the IRS, the letters started going out this week.

Concerned about identity theft as a result of this breach? Click here to learn what to do if your identity is stolen or if your personal information is compromised.

If you are a business owner, do you have protocols in place to protect your business from a cybercriminal?Email Rea & Associates to learn how you can protect your business from a cyberattack. You can also get some useful tips and information in the related articles below.

By Lesley Mast, CPA (Wooster office)

 

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Don’t Shy Away From Business Debt

Friday, May 22nd, 2015
Leverage Your Debt - Leverage Your Cash Flow - Ohio CPA Firm

Traditionally, companies with strong, positive cash flows are those with proper pricing models in place, a healthy labor force, controlled spending and active collections. When it’s time to grow, they are ready to make a move.

You know the satisfaction you feel when all of your debts have been settled and any extra cash flowing into your bank account is purely disposable income. Neither do I. But, contrary to popular belief, if you are a business owner, carrying a little extra debt could be a good thing – and here’s why …

Read: How Can My Statement of Cash Flows Transform My Business?

One of the most important jobs a business owner has is to prepare, monitor and analyze their company’s cash flow. As the single most important tool you have in your business’s arsenal, your company’s cash flow (business income minus its cash payments) provides you with an accurate way to measure its overall financial wellness.

Do You Know What You Need To Grow?

One of the most powerful ways to measure how well your company is doing is to monitor its projected/forecasted cash flow while analyzing the business’s past financial information.

  • Your company’s projected/forecasted cash flow should provide you an educated prediction of your future cash income and expenses. You can use this information to develop the initiatives needed to ensure the long-term growth and sustainability of your business.
  • When you monitor your company’s past cash flow you will tap into the data needed to zero in on the business’s strengths and weaknesses – effectively shining a light on processes, products, services and strategies that are hindering your company’s growth. Then you can act quickly to build upon the objectives that work and eliminate those that hinder ongoing success.

Traditionally, companies with strong, positive cash flows are those with proper pricing models in place, a healthy labor force, controlled spending and active collections. (Notice that I didn’t say that these companies were debt free!)

Leverage Cash Flow, Leverage Your Debt

The word “debt” has a bad reputation. Yes, for many reasons living your life and managing your business “debt free” can be a great thing. But, especially in business, working exclusively for the purpose of eliminating all debt can actually hinder you from experiencing healthy, sustainable growth. For example, in the quest to settle your company’s debts, you may be left with an anemic savings account and little-to-no cash to jump on opportunities that arise and could potentially propel your company to new heights. As a savvy business owner, you should always anticipate changes that could positively and negatively impact your business. The key is to leverage your company’s cash flow. Here are two ways you can get started.

  1. Take advantage of financing opportunities with favorable interest rates.  

Oftentimes, especially if you have taken the time to develop a strong relationship with a local financial institution, you can secure financing at a very low interest rate. This will allow you to take the cash that was not used to finance your project and reinvest it in the market, which can provide you with a better return. For example, in the current market, if you are able to finance new equipment for your company with an interest rate of 4 percent, you are free to invest your own cash in the market, which could yield a return rate greater than the interest charges you owe to the bank per your financing agreement.

  1. Utilize a line of credit

One of the best ways to invest in your business is to make sure you have the cash on hand that will allow you to take advantage of unforeseen opportunities. It’s hard to predict when a strategic partnership or change in the marketplace can open up a door that had previously remained shut. But when it does, an open line of credit makes seizing the opportunity possible while ensuring that your business’s current operations remain unaffected.

If you practice strategic control over your business, make sure you are giving your cash flow the same attention. To properly leverage your company’s debt you must constantly monitor your cash flow to ensure that these strategies make sense for you. Email Rea & Associates to learn more about leveraging your cash flow and whether it is the best move for your company.

By Dustin Raber, CPA (Millersburg office)

 

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Investing In Your Business’s Immortality

Monday, May 11th, 2015
Business Teamwork - Rea & Associates - Ohio CPA Firm

Ensuring that you have the right team in place – from the ground floor to upper management – is a solid, common sense strategy for business owners who are looking to add short-term and long-term value to their business. Not only are customers and clients more likely to equate your team’s passion with quality, which helps secure new business and develop long-term relationships, but the strength and self-sufficiency of your team is a major incentive to investors.

Go ahead. Take pride in all that you’ve accomplished. Relive the moment you decided to go into business and reflect on your trials and triumphs. And as you reminisce, identify everyone who helped you achieve your vision – because chances are you didn’t get where you are by yourself.

Make no mistake. In business, the strength of your team directly impacts your company’s success and overall val­ue. Therefore, it’s never been more im­portant to ensure that your exit from the company doesn’t lead to a “going out of business” sale.

Read: This Is An Intervention – Step Away From Your Business

Your Company’s Longevity

As a business owner, it’s your responsibility to continually evaluate your busi­ness. Part of the evaluation process is ensuring that the right people are in the right place to help guide and grow your company – even when you’re not around.

Whether they move on or retire, eventually every person on your leadership team will leave, including you. You must decide what kind of impact this will have on your company when it happens.

One of the best strategies you can em­brace is to become obsolete. That’s not to say that your work is not important, it just means that your team, your business, does not depend on you for its survival.

Every time you recruit an employee, you have an opportunity to reinforce your company’s mission. Do your due diligence to make sure the people you hire are on board with the company’s vision. They will continue to set the tone after you leave, which is why the qualities you consider when hiring a candidate should go beyond their education and experi­ence. Anyone you hire must have the passion to succeed, the capacity to learn and a personality that helps them easily overcome complicated situations. From entry-level to leadership positions, your ability to maintain a strong team ensures the longevity of your business.

Is Your Team Valuable?

Ensuring that you have the right team in place – from the ground floor to up­per management – is a solid, common sense strategy for business owners who are looking to add short- and long-term value to their business. Not only are customers and clients more likely to equate your team’s passion with quality, which helps secure new business and develop long-term relationships, but the strength and self-sufficiency of your team is a major incentive to investors.

Email Rea & Associates to learn more.

By Don McIntosh, CPA, CGFM, CFE (New Philadelphia office) and Tim McDaniel, CPA/ABV, ASA, CBA (Dublin office)

 

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Retirement Plan Design: One Size Does Not Fit All

Monday, May 11th, 2015
Planning Ahead for Retirement Makes All The Difference - Rea & Associates - Ohio CPA Firm

When it comes to your retirement plan, planning ahead can mean the difference between sipping tropical drinks on a beach to taking on a part-time job at 75 to make ends meet. Is your retirement plan advisor working in your best interest?

Do your employees dream of spending their golden years on a sun-drenched beach, sipping tropical drinks from a coconut shell? Or do you think they’re looking forward to taking on a part-time job at age 70 to pay medical bills and their mortgage? Like you, they’re probably expecting an R&R-fueled retirement – but they need your help getting there.

Read Retirement Roulette

An employer-sponsored retirement plan is a great tool for business owners. Not only do retirement plans provide businesses with leverage when it comes to attracting and retaining a skilled workforce, employers that make contributions to their employee’s accounts are entitled to tax incentives – which gives you more control over your company’s cash flow.

From Business Strategy To Retirement Planning

Whether your company presently offers a retirement plan or is planning to beef up its benefits package, work with a retirement plan advisor who can review your options and identify the plan that best addresses your company’s unique challenges. You’ll need to:

  1. Identify The Primary Purpose Of Your Retirement Plan
    Will your retirement plan be used as a recruitment tool or as a tax shelter? While all plans accomplish a little of both, make sure your plan design meets your needs. For example, when a closely held business offers a retirement plan, its primary goal is to provide maximum retirement benefits and income tax deferral to the owners, while minimizing the cost of benefits to the employees. Incorporating a retirement plan into your existing benefit package is also an opportunity to diversify your assets away from the reach of creditors – making you less dependent on the value of your company to provide an income stream in retirement.
  2. Get To Know Your Team
    Does your company hire younger workers? Do you have an established workforce that will retire from your company? Do you have high turnover? What does your projected workforce growth look like? Your plan design should consider your demographic information – and promote the short- and long-term financial wellness of your employees and your business.
  3. Put Your Own Retirement Goals In Perspective
    Your employees aren’t the only ones looking at your employer-sponsored retirement plan as a dependable source of retirement income. You and other key employees will likely use the plan as well. That’s why, during the design phase, your advisor will take a look at the current and projected profitability of your company alongside the ratio of key employees and the company’s other employees.

When all is said and done, your plan design could be the thing that stands between your employees and a comfortable retirement – or it could be what lets them reap the benefits of all their years of hard work.

This is a great time of year to explore your options. Email Rea & Associates to learn more.

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

 

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Will You Be Ready For Retirement? 

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Charter Schools Can Thrive In An Era Of Reform?

Friday, May 8th, 2015

It’s hard to avoid the topic of charter school reform these days. From news reports to proposed policy changes, everybody seems to have an opinion when it comes to the proper way to manage these public educational institutions. While it’s still too early to rewrite policy, it doesn’t hurt to monitor the ever-changing pulse of the legislature, especially when it has the potential to drastically impact the way our state’s charter schools are managed.

As students continue to flock to charter schools within their communities, the increased demand has effectively changed the landscape of Ohio’s education facilities. The National Alliance for Public Charter Schools reports that during the 2013-14 school year a record 119,533 students opted to attend one of Ohio’s 400 charter schools. Such a shift in our educational system has spurred increased scrutiny of the charter school industry and has prompted state leaders to call for increased organizational and financial transparency and accountability.

Slideshow: Top 5 Tips For Charter Schools


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Charter Schools Continue To Grow In Popularity

Charter schools have proven their worth and show no signs of going away, which has fueled efforts to secure greater regulation and oversight over the institutions. So far this year there has been no shortage of charter school reform proposals – with the most recent one being introduced by State Sen. Peggy Lehner mid-April.

The charter school reforms that are being debated in Ohio’s legislature call for companies and organizations responsible for operating the schools to do so under “higher standards” of quality education. Proponents of reform cite a trend of lower test scores and point to the government funding charter schools currently receive to back a position of greater accountability and transparency.

“Charter schools can be examples of exceptional education,” Lehner told The Cleveland Plain Dealer in April. “But Ohio has been ‘extremely loose’ in its rules about who can run (manage) schools … and (has) ‘failed to put up the sort of guardrails’ that force the schools to be of high quality.”

According to the Cleveland publication, the National Association of Charter School Authorizers (NACSA) points to the success of many national charter schools as examples how communities and students can continue to benefit from properly managed privately-held institutions and point to the importance of outside agencies, namely school districts, state or city panels, colleges and non-profits, “to do a better job of making sure schools provide solid educations to children.”

The three proposals introduced so far this year all call for stricter oversight with regard to which entities are authorized to set up charter schools across the state.

How Are These Proposals Different?

 

Charter School Changes - Rea & Associates - Ohio CPA Firm

The more charter schools grow in popularity, the more attention they get in the legislature – especially in Ohio where during the 2013-14 school year a record 119,533 students attended one of the state’s public charter schools.

Gov. John Kasich’s budget proposal called for Ohio’s charter schools to receive two new potential funding sources while holding school sponsors to a higher standard of accountability. His proposal sought to generate a $25 million facilities fund, which would be available only to the highest-rated sponsors. Those highly-rated sponsors would also be allowed to seek local tax levies while advocating for the closure of poorly performing schools. Furthermore, he would:

  • Require all sponsors to be approved by the Ohio Department of Education and go through the state review and rating process.
  • Prevent sponsors from selling goods and/or services to the schools they sponsor in an effort to avoid conflicts of interest.
  • Mandate that all charter schools only employ treasurers, auditors and lawyers who are not affiliated with the school’s sponsor or management company.
  • Advocate for stronger rules for schools and operators that apply directly to the state for sponsorship.

The next charter school reform that was proposed, House Bill 2, was touted as a solution that would promote accountability, transparency and responsibility by:

  • Requiring all charter schools – including district-created dropout recovery schools – to be included in the Ohio Department of Education’s report card.
  • Mandating that all contracts between schools and sponsors include more detail about expected academic performance of the schools as well as details about the school’s facilities and rental or loan costs.
  • Preventing charter schools from frequently changing sponsors in order to appear as though they are in good standing.
  • Requiring the full disclosure of all conflicts of interest.
  • Calling for the annual disclosure of financial reports that allow sponsors to better monitor the school while advising it.
  • Instructing all management companies or organizations to begin reporting their performance.
  • Prevent sponsors from selling goods and/or services to the schools they sponsor in an effort to avoid conflicts of interest.
  • Prohibiting school district employees and vendors from sitting on the school’s governing board.
  • Ensuring that school treasurers will no longer be hired by the school’s sponsor.

State Sen. Lehner’s most current proposal reportedly “takes many pieces of [the other proposals] and adds additional controls – and benefits.” The Cleveland Plain Dealer states “the bill does not have the state directly close poor-performing charters quickly … instead [it] takes the more indirect path that the charter school community prefers nationally. The bill pressures the ‘sponsors’ … to raise standards.” Her bill aims to:

  • Strengthen language that will prohibit “sponsor hopping.”
  • Increase the transparency associated with expenditures generated by operators.
  • Require all sponsors to have a contract with the Ohio Department of Education [ODE].
  • Incorporate Gov. Kasich’s charter school sponsor oversight proposal.
  • Limit the direct authorizing by the ODE and allows it to decline applicants.
  • Prohibit sponsors from spending charter funds outside of their statutory responsibly.
  • Encourage high performing schools with facilities by encouraging co-location and facility funding.

I am sure we will hear much more about this issue before it comes to a vote. But in the meantime, keep following these events and consider how changes might affect you. Email Rea & Associates to find out how we can help you overcome current challenges while preparing for the future.

By: Zac Morris, CPA (Millersburg office)

 

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This Is An Intervention – Step Away From Your Business

Tuesday, April 28th, 2015
Be The Leader You Want To Be - Rea & Associates - Ohio CPA Firm

Join organizations, attend events, and talk to other leaders about your business, your industry and your role in the world. It’s time to be the business leader you’ve always wanted to be.

As the driving force behind your company’s growth and success you have undoubtedly spent countless hours and dollars strategizing, networking and juggling a laundry list of managerial responsibilities. But your effort has paid off – today, you are praised for your work and are regarded as a leading entrepreneur within your industry. But maybe it feels like you have only begun to scratch the surface and that your business is long overdue for a growth spurt. While these are great challenges to have in the business world, if you are spending all your time in the office instead of hitting the pavement, it could seem like your ability to expand further is simply unattainable.

If only there were more hours in the day!

Read: Did You Know That Treating Your Business Like An Investment Can Lead To Wealth?

Throughout my career I have had the pleasure of working with many successful business owners. And while these men and women possess the skills, expertise and leadership traits essential for success in their respective industries, they have all learned that they are not immune to getting caught up in day-to-day managerial distractions. It can happen to anybody and before you know it you are caught up in a fruitless, energy-sapping, time-consuming headache that hurts your effectiveness as a business leader and prevents your company from achieving the growth and revenue you know it is capable of.

When that happens, it’s time to stop what you are doing, take a step back and reassess your organizational development strategy.


Step Away From Your Business – An Intervention – Created with Haiku Deck, presentation software that inspires

Work On Your Business, Not In It

“[The] executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there,” says Jim Collins in his book Good to Great: Why Some Companies Make the Leap … And Others Don’t. “No, they first got the right people on the bus (and the wrong people off the bus) and then figured out where to drive it.”

In other words, if you want to continue to grow a successful company, you can’t do it alone. While this advice may sound cliché, your ability to develop a strong organizational structure is directly responsible for your company’s long-term success. But it’s not easy and getting “the right people on the bus (and the wrong people off)” has been the single hardest objective for some of the most talented business owners. But once you are able to achieve this step, you will finally be able to maximize your time and talent by working on your business, instead of in your business.

How To Lead Your Business By Developing Your Organization

  1. First you must understand that organizational development is a never-ending process. To get started, develop a formal organizational chart and take time to identify “the right people” to effectively fill the top positions on your chart. To aid in the flexibility and evolution of your business’s organizational development, consider forming an advisory board to bring outside objectivity to the process.
  2. Next, step away from the daily grind of running your business. It’s time to be the business leader you’ve always wanted to be. Join organizations, attend events, and talk to other leaders about your business, your industry and your role in the world. Doing so will help you earn respect and influence throughout your community.
  3. Once you put some distance between yourself and the day-to-day grind of your company, you will be able to lead your company more objectively. This is an ideal time to observe your current organizational structure and brainstorm strategies to help you achieve your future success with your inner circle. Just make sure that those who make up your inner circle are not like you, will tell you the truth, will add value to you and your organization and are willing to have crucial conversations.
  4. Now that you have solidified your role as a business leader, it’s time to empower those in your organization to take ownership of the company and their place in it. This includes giving them the ability to make decisions while supporting and encouraging them and demonstrating your willingness to follow their lead.
  5. One of the most critical responsibilities of a business leader is planning for the future of your company. How will you transition your business once it is time to retire? What should you do now to ensure your company’s longevity? Do you know how much your business is actually worth? In order to protect your most important investment, your business, it is important to thoroughly understand the value of your business and develop a plan for its continued growth.

Starting your business is hard; growing your business is even harder. You will make mistakes. When you do get it wrong,act swiftly to make the necessary changes.

Maximize your time and talent. Email Rea & Associates today to learn more growth and development tips for your business. I won’t say that we have seen it all, but we have certainly seen a lot.

By Mike Taylor, CPA (Millersburg office)

 

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Last Chance To Claim Valuable Retroactive Tax Credit

Thursday, April 23rd, 2015
Work Opportunity Tax Credit - Ohio CPA Firm.

All businesses that hired members of targeted groups, such as qualifying veterans, must submit Form 8850, a pre-screening notice and certification request for each employee hired between Jan. 1, 2014 and Dec. 31, 2014 to the Ohio Department of Job and Family Services no later than April 30, 2015 to qualify for the WOTC.

It was a cold evening last December when Congress finally voted in favor of extending more than 50 tax provisions considered critical by several businesses and individuals. The Tax Increase Prevention Act of 2014 provided assurance that certain incentives would remain intact and that certain provisions would be put in place to allow for the retroactive extension of some key deadlines. Among them was the deadline to claim the 2014 Work Opportunity Tax Credit (WOTC). Now, as we teeter at the end of April, that deadline is set to expire.

Read: How Do You Qualify For Tax Credits And Incentives?

What You Need To Know

All businesses that hired members of targeted groups, such as qualifying veterans, must submit Form 8850, a pre-screening notice and certification request for each employee hired between Jan. 1, 2014 and Dec. 31, 2014 to the Ohio Department of Job and Family Services no later than April 30, 2015 to qualify for the WOTC.

According to the Internal Revenue Service, under normal circumstances, eligible employers are required to file the appropriate information with their respective workforce agencies within 28 days of the employees start date. Section 51 of the Internal Revenue Code concerning the WOTC states that eligible employers may claim a tax credit for a percentage of the qualified employee’s first-year wages (and second-year wages for some eligible hires).

Email Rea & Associates to learn more about tax incentives that can impact your business’s bottom line.

By Lisa Beamer, CPA (New Philadelphia)

 

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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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The Truth About Tax Extensions

Friday, April 10th, 2015

We find ourselves, once again, at the end of another income tax season. A time of year that many American taxpayers (and accountants) hold dear. We, however, know that while tax season may be “officially” over, there is still plenty of tax work to be done.

The first four months of the year is a busy time for accountants and, because we work closely with so many small businesses all year long, we are acutely aware of how much stress you are under to meet your first quarter obligations. This is why, instead of rushing just to get your taxes filed and out the door ahead of the April 15 deadline, we frequently recommend that our clients file for a tax extension.

Unfortunately, there are some pretty nasty rumors going around about tax extensions. Hopefully, I will be able to debunk some common tax extension myths while helping those who opted to extend their deadline sleep a little better tonight. Check out the slideshow and get the facts about tax extensions!


The Truth About Tax Extensions – Created with Haiku Deck, presentation software that inspires

Myth 1:

Filing a tax extension increases your chance of an audit.

Truth:

First and foremost, your chance of being audited by the IRS does not increase simply because you chose to file a tax extension. In fact, in the event that you are chosen to undergo an audit, you will be able to go into the process with more confidence. Tax extensions can be great for businesses that were simply overwhelmed by other critical responsibilities during the first quarter of the year. When you give yourself the luxury of filing an extension, you give yourself more time to compile all the files and information necessary to make tax return prep as seamless and thorough as possible.

Myth 2:

Tax extensions burden accountants.

Truth:

On the contrary, fling an extension not only gives your accountant extra time to check and double check the work, it gives them the added time needed to provide better service. For example, we pride ourselves on our work ethic, attention to detail and client service – especially during busy season. However, as trusted financial advisors, we are able to better serve our clients better when we have a chance to help them understand the opportunities they qualify for and how they can use certain tax strategies to help plan for the future. Believe me when I tell you that we do not look at extensions as burdens.

Myth 3:

There is nothing to gain by filing a tax extension; it’s just a way to prolong the inevitable.

Truth:

Filing a tax extension not only gives you more time to file your return with the IRS and the state, it effectively stalls some of your other looming deadlines as well. For example, a tax extension can award you more time pay your profit sharing plan, defined benefit, or your SEP IRA as part of your retirement plan contribution, which is an excellent short- and long-term benefit! Once your extension has been filed, you will have more time to file your retirement plan contribution, all while claiming the deduction in your prior year’s return.

Email Rea & Associates to learn more about the benefits of filing income tax extension with the IRS and the state.

By Joe Popp, LD, LLM (Dublin 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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Is Simplicity Worth The Cost Of Peace Of Mind?

Wednesday, March 25th, 2015
New Final Tangible Property Regulations - Ohio CPA Firm

Just because the IRS says you are no longer required to file Form 3115 to comply with its final tangible property regulations doesn’t mean it’s a good idea to stop. Read the article and find out why.

The IRS recently made the road on which business owners must travel to comply with final tangible property regulations a little less bumpy.  Currently, most businesses that buy, depreciate, or repair property were required to file Form 3115 basically telling the IRS that the business had changed its accounting methods to comply with the new IRS rules and safe harbor, regardless of whether the change actually impacted their income.

Today, now that Revenue Procedure 2015-20 (15-20 relief) is in effect, small business taxpayers have the option of foregoing that extra paperwork. This relief removes the requirement to file a 3115 or statement with the tax return just to tell the IRS that you are making the changes. But, is that a good idea?

The main reason that you might still want to file a 3115 is if you have favorable tax adjustments from the past that you can harvest and take on your tax return this year. Filing the form is the only way to get at those. You also waive the audit protection for prior years that would be available with filing the 3115.  But, you do get to save some money on tax prep fees and paperwork.

Here’s a brief “true-or-false” quiz to help you decide what to do.  Of course you have to be eligible for the 15-20 relief, so the eligibility statements must be true. You should also consider filing a 3115 if you answer false to the later items.

Eligibility

  • True or False? Your small business’s assets total no more than $10 million or, over the last three years, your gross receipts have totaled no more than $10 million. (only need one of these to be true).
  • True or False? You will not file Form 3115 for any other business activity or any other change in accounting method for the year.

Non-eligibility

  • True or False? You get no benefit (or you don’t care about the benefit) from harvesting favorable 481(a) adjustments as a result of partial dispositions made in previous years.
  • True or False? You don’t care about prior year audit protection.
  • True or False? You believe that adequate records will otherwise be maintained with regard to what you have done (and are going to do) to protect against an audit. For example, if you have chosen not to do repair X, Y and Z because of your obligation to list it on Form 3115, will you continue to maintain that information in the event an audit were to occur?

Better Safe Than Sorry

Because it’s the only way to harvest prior year benefits and because most taxpayers desire the audit protection on these issues for prior years, we will likely continue to file Form 3115 for many of our clients.

Email Rea & Associates to learn more about Revenue Procedure 2015-20 and to find out if the new simplified method of reporting property changes is right for you.

By Joe Popp, JD, LLM (Dublin office)

 

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How Much Is Your Data Worth To Criminals?

Friday, March 13th, 2015
Ransomware

There is no way to completely protect yourself and your network, but there are ways to preempt an attack against you and your business.

How much would you pay to regain access to your company’s network if it was compromised and held for ransom? Are you willing to shell hundreds of dollars to take your information back from a cybercriminal, or are you willing (and able) to just walk away and start anew? I wish I were asking hypothetical questions but, unfortunately, the increased popularity of Ransomware has made the risk of such an attack a very, very real possibility.

Sandra Ponczkowski, a manager of the IT security company KnowBe4, recently shared Your Money or Your Life Files, a whitepaper that details the history and real threat of Ransomware, a computer infection that encrypts all files of known file types on your local computer and server shared drives. Once infected, it becomes impossible for you to access your documents or applications that use these encrypted files. The only way to recover from such an infection is to either restore your machine by using backup media, or accommodating the hacker’s demands and paying their ransom.

Unfortunately, I know of several situations where the businesses involved in a Ransomware attack had no choice but to pay ransom demands to the cybercriminal. The silver lining for these companies was that, upon paying the ransom, they were able to obtain the assailant’s encryption key code, which allowed them to unencrypt their data and regain access to their data.

Long-term protection, however, cannot be guaranteed and there is a chance that your data can be held for ransom again.

The literature provided by KnowBe4 details the fluency with which the popular Ransomware infection CryptoLocker changes and adapts once a solution to unencrypt infected data files becomes available. When this happens, the CryptoLocker infection will evolve into a new strain, thus making the previous solution unusable.

While there is no way to completely protect yourself and your network, there are ways to preempt an attack against you and your business. I recommend the following best practices.

  1. Train yourself and your employees about computer safety practices.
  2. Complete a yearly review of your employee’s access rights to company-owned computers, server folders and backup media. For example, only a few, strategic employees should have access to the company’s folders and data. As a general rule, employee access should be restricted to include only the programs and software required for them to do their jobs. This also applies to work-from-home employees who typically attach a USB drive to their machines for backup protection.
  3. If you don’t already, put a disaster recovery in place and test it ever year to ensure accuracy and completeness.

Following these practices should make your business’s Ransomware prevention and recovery much easier. Email Rea & Associates to learn find out more about the importance of protecting your company’s online security.

By Brian Garland, CPA (Dublin office)

 

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5 Tax Deductions To Ease Your Business’s Tax Burden

Thursday, March 12th, 2015
Tax Deductions Add Up

If you made a donation to a nonprofit organization last year, it’s almost guaranteed that you are eligible to deduct at least a portion of your contribution from your income.

The Internal Revenue Service (IRS) reported earlier this month that nearly 59 million 2014 federal tax returns have been filed so far this filing season. While that may sound like a lot, there’s still a ways to go as, according to IRS estimates, three of five taxpayers are still waiting to file. For those of you still working on your tax prep, there is still time to claim some valuable deductions. Here are five deduction options to help small businesses make the most of the 2015 filing season:

1. Ohio Small Business Deduction

Many small business owners in Ohio are eligible to receive help from the state on their 2014 tax returns through the Ohio Small Business Deduction. Initiated by Ohio Gov. John Kasich and considered to be “the largest overall tax reduction in the country,” the deduction allows eligible small businesses to take a 50 percent tax deduction on their first $250,000 of business income. However, for the 2014 taxable year only, that percentage was increased to become a 75 percent deduction of “net business income from an individual’s adjusted gross income reported on their Ohio personal income tax return.” Your financial advisor can help you learn more about the Ohio Small Business deduction and help you take your business strategy to the next level.

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2. Section 179 Deduction

When Congress voted in favor of the Tax Extenders Act late last year, among the many tax incentives that were extended included an action to retroactively reinstate the $500,000 depreciation limit on the Section 179 deduction as well as the 50 percent bonus depreciation. Together, these tax incentives have the potential to save you and your company hundreds of thousands of dollars on equipment purchases. Limits and restrictions do apply, however, so make sure to work with a trusted advisor who can make sure your purchases actually qualify.

Read More

3. Personal Vehicle Deduction

If you drive your personal vehicle for business, then you may be able to deduct the expenses related to your car or truck as long as the vehicle was actually used for business purposes and not just commuting. A professional advisor can help you determine if you qualify to claim the deduction and can help determine which deduction method is the best one to use given your personal circumstances.

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4. Stock Gains Deduction

Some qualified businesses may also be able to exclude the gains generated by qualified small business stock per provision IRC Sec. 1202. Originally passed by Congress in the 1990s, this provision was designed to help reinvigorate the importance of continued investment into our country’s small business infrastructure. This incentive is a little more difficult than some of the others, but if you qualify, you could realize significant savings. Because of the complicated nature of this particular provision, it is essential that you work with a tax advisor to find out if you qualify.

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5. Charitable Giving Deduction

If you make a donation to a nonprofit organization during the year, it is almost guaranteed that you will be able to deduct at least a portion of your contribution from your income. But there are rules that need to be adhered to. A good financial advisor can help you get the maximum benefit for every dollar donated.

Read More

For more information related to specific tax and deduction questions related to your business, email Rea & Associates.

By Lesley Mast, CPA (Wooster 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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Is A Sale-Leaseback Transaction Right For Your Business?

Tuesday, March 3rd, 2015
Sales-Leaseback Transaction

Is it a better business strategy to enter into a sale-leaseback transaction on your current office building or other business property? Make sure you know the pros and cons before making any decisions – Rea & Associates – Ohio CPA Firm

Are you looking for a plan to increase your business’s cash flow? If you own business property, you may be able to benefit by entering into a sale-leaseback transaction. But while there several great benefits to this type of agreement, there are also some significant drawbacks. So, before you draw up the paperwork, schedule a time to meet with your financial advisor to find out if the benefit outweighs the risk.

Advantages Of A Sale-Leaseback Transaction

A sale-leaseback transaction occurs when you, the real estate owner and occupier, sell your property to a third party on the condition that they agree to lease the property to you. Entering into this type of arrangement has several benefits, including increasing your business’ cash flow while freeing your business up to allocate the capital to other areas of your business. Additional benefits include:

  • As the seller and eventual lessor, you essentially maintain control of the property, which prevents operational disruptions from occurring.
  • Assuming the current property is financed with debt, this long-term debt can be eliminated from the balance sheet under certain lease arrangements.
  • From a tax perspective, you gain an additional annual “write-off” for the portion of rent related to the land (as land is not depreciated).

Drawbacks Of A Sale-Leaseback Transaction

Perhaps the most significant disadvantage of entering into this type of agreement is that you stand to lose the flexibility that comes with owning the property outright since these transactions usually are for longer terms than a typical property lease (15 or more years). The typical sale-leaseback transaction takes the form of a “triple net lease,” which usually states that you, as the tenant, will be responsible for the net real estate taxes, net building insurance and net common area maintenance. Other disadvantages include:

  • The loss of the real estate’s appreciation value over the course of a lengthy lease term.
  • Significant income tax impact that comes in to play when a property’s sale price significantly exceeds the property’s “book value.” This typically occurs when you are selling a property that has been owned for a long period of time prior to the sale.
  • A decrease in your Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) as your depreciation expense on the property is replaced by the rent expense.

The financial benefits of sale-leasebacks must be balanced with your unique strategic and operating considerations. A financial advisor and business consultant can help identify whether this option is right for you and your business. Email Rea & Associates to learn more about sale-leaseback transactions and other strategic business decisions. By Ben Antonelli, CPA (Dublin office)  

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Who’s Fishing For Your Data Today?

Monday, February 23rd, 2015
Computer company Lenovo informed the public that desktop and laptop devices it sold between September 2015 and January 2015 may have arrived to users loaded with an extra (and unwelcome) feature - SuperFish.

Computer company Lenovo informed the public that desktop and laptop devices it sold between September 2015 and January 2015 may have arrived to users loaded with an extra (and unwelcome) feature – SuperFish. Users should not enter secure information on their device until they are certain that their security was not compromised.

If you purchased a Lenovo desktop or laptop between September 2014 and January 2015 you could be susceptible to “SuperFish” – adware that can be found lurking in the depths of your device.

Capable of hijacking Internet traffic data typically used for securing Internet transactions, SuperFish was installed on Lenovo devices by the manufacturer per an agreement with Superfish Advertising, a third-party software developer based out of Palo Alto, Calif.

“In our effort to enhance our user experience, we pre-installed a piece of third-party software … on some of our consumer notebooks. The goal was to improve the shopping experience using their virtual discovery techniques,” said the company in a prepared statement. “In reality, we had customer complaints about the software. … We stopped the preloads beginning in January. We shut down the server connections that enable the software (also in January), and we are providing online resources to help users remove this software.”

Until you are certain that your Lenovo system is safe from adware, refrain from online banking, making online purchases or engaging in any other online activity were security is critical.

To determine if SuperFish is present on your device and how to remove it, Lenovo released step-by-step SuperFish Uninstall Instructions on its website.

Unfortunately, in his article about the Lenovo crisis, Zack Wittaker cites ZDNet’s Chris Duckett as saying that “the only confirmed way of completely removing SuperFish appears to be reinstalling Windows … or moving to another operating system entirely” as simply uninstalling the adware may not remove the root certificate authority.

According to reports from IDC Worldwide Quarterly PC Tracker and Gartner, Lenovo shipped more than 16 million desktops and notebooks worldwide during the fourth quarter of 2014. Lenovo’s statement indicates that following models may have been effected:

  • G Series: G410, G510, G710, G40-70, G50-70, G40-30, G50-30, G40-45, G50-45, G40-80
  • U Series: U330P, U430P, U330Touch, U430Touch, U530Touch
  • Y Series: Y430P, Y40-70, Y50-70, Y40-80, Y70-70
  • Z Series: Z40-75, Z50-75, Z40-70, Z50-70, Z70-80
  • S Series: S310, S410, S40-70, S415, S415Touch, S435, S20-30, S20-30Touch
  • Flex Series: Flex2 14D, Flex2 15D, Flex2 14, Flex2 15, Flex2 Pro, Flex 10
  • MIIX Series: MIIX2-8, MIIX2-10, MIIX2-11, MIIX 3 1030
  • YOGA Series: YOGA2Pro-13, YOGA2-13, YOGA2-11, YOGA3 Pro
  • E Series: E10-30

Email Rea & Associates to learn more about the importance of protecting your virtual assets against cyber threats.

By Brian Garland, CPA (Dublin office)

 

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Obamacare: Discrimination Is Not An Option

Friday, February 20th, 2015

Do you provide health care benefits to a few of your employees and not others? This is an eligibility and richness of benefits issue. You may find yourself at risk for eligibility discrimination if, for example, you offer coverage only to the owner and an employee or two and not to the rest of your team. You also run into problems if you are found to be discriminating in the benefits your company provides. An example could be if you offer your management group 100 percent of premiums paid by the company and only offer your staff 50 percent of premiums paid. This is not related to the 50 full-time equivalent (FTE) large employer status.

While it might be possible to set up a plan to comply with the tax non-discrimination rules where employees throughout the company are offered different benefits, you also have to navigate through federal and state insurance laws and other Department of Labor regulations – the short answer is just don’t do it! The penalty for non-compliance is $100 per failure per day.

Do You Qualify For The Self-Insured Health Deduction?

Are you seeking to claim the self-insured health deduction (SIHD) on your 1040? If so, one of the following statements must be true:

  • You were self- employed and had a net profit for the year. (Profits should be reported on Schedule C, C-EZ or F).
  • You were a partner with net earnings from self-employment.
  • You received wages in 2014 from an S corporation in which you:

–        Owned more than 2 percent of shares and
–        Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2.

Easy enough … until it isn’t.

S Corps: Catch 22

If you are basing your self-insured health deduction on only the S Corp eligibility criterion above, you have to be very careful to a.) not violate ACA non-discrimination and, b.) maintain your eligibility for the self-insured health deduction.

In order to get the self-insured health deduction, S Corp either needs to pay directly or reimburse the owner and include the amount on form W-2. Whichever of those two choices the S Corp makes, the S Corp is providing coverage to that owner.  And, if you remember in the non-discrimination section above, ALL employees of the S Corp must receive the same benefit in order to comply with the non-discrimination rule.  So by doing the actions required to get that owner eligibly for the self-insured health deduction, S Corp is covered by the ACA non-discrimination testing and it had better be sure to offer coverage to everybody.

And if you think you can just get around the rule by simply increasing wages in lieu of paying for or reimbursing shareholder’s premiums, you’re wrong.  Doing this will put you at odds of the self-insured health deduction eligibility rules, making it impossible for your shareholders to claim the deduction.

Let this be your guide:

A shareholder of an S corporation (who doesn’t have a schedule C or one of the other SIHD criteria) will not be able to take the self-insured health deduction unless the S corporation is providing similar coverage to ALL other S corporation employees AND is including the amounts paid directly to the insurance provider or in payments reimbursed to the shareholder on Form W-2.

Remember, you do have options. A tax professional can help identify yours. Email Rea & Associates to learn more.

By Joseph Popp, JD, LLM (Dublin office)

 

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How To Phone For Help

Tuesday, February 17th, 2015
Phone Interview - Rea & Associates - Ohio CPA Firm

While you should never consider a phone interview to be a shortcut, with a little practice and preparation a brief phone screen can be an effective hiring tool.

We’ve all been there. You need to hire a new employee – fast. But you dread the process of advertising for the position and being inundated with countless inquiries and resumes. Going through the process of finding the right employee for the job can be a huge time commitment for everyone involved. And, let’s face it; if you had the time needed to properly filter candidates you wouldn’t be looking to hire a new employee in the first place. For those in need of a better way to winnow the applicant pool, help may be closer than you think.

Instead of filling your calendar with interviews, why not pick up the phone instead.

A brief phone interview is a great tool for employers. Not only does this method of communication allow you to assess their interest in the position, it helps you identify whether the candidate demonstrates specific professional qualities that you are looking for in an employee.

“A good initial phone screen can reveal a wealth of important information, including a candidates skills, experience, motivation, professionalism and salary expectations,” stated Kathryn Tyler in an article about pre-employment screening for the Society of Human Resources Management. “Phone screens can also give under-the-radar applicants – those who might be overlooked if HR were doing only in-person interviews – an opportunity to shine.”

When its time to bring in a new employee, make sure to use all the tools available to you to ensure the person you hire is truly the best fit for the job. A phone screen is just one of your many, many options. Email Rea & Associates to learn more about hiring top-notch employees and the overall impact they have on your company’s bottom line.

By Charlene Meadows, CPA (retired)

 

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Is Your Cash Flow Ready For Spring?

Tuesday, February 17th, 2015
cash flow - Rea & Associates - Ohio CPA Firm

Cash flow is arguably more important to your company’s success than your bottom line because it takes your past, present and future projections into consideration to arrive at a comprehensive analysis of your financial wellness.

Spring is the season of renewal. It’s the time of year when we emerge from our dens to enjoy warmer weather, the melting of snow and an abundance of greenery as nature appears to come alive. Spring is also an opportune time in the business world. And before we lose ourselves in the hustle and bustle of increased production and revamped initiatives, take this time to review and solidify your company’s cash flow projection.

Managing your cash flow now will help minimize mistakes later – when business and economic trends become more favorable. Still not convinced? Here are five more reasons to consider maintaining your company’s cash flow projection.

5 Reasons Why Managing A Solid Cash Flow Is Just Good Business Sense

  1. A cash flow projection will provide you with the information you need to make better, more lucrative decisions. For example, if you had insight into which of your company’s non-core assets are viable would you make changes to support future growth or would you simply maintain the status quo? With a well-maintained cash flow projection at your fingertips you can make decisions that will help secure a more lucrative future for your company.
  2. If you’re looking for a way to hold you and your team accountable for the company’s success and failures, look no further than your cash flow model. This tool can help you fine-tune your management strategy, which can help you and your team achieve better quality standards, increased production, enhanced efficiency and an improved reaction time.
  3. Your cash flow strategies can empower your team to take further ownership of their work and pride in the company. When they have a chance to see that their actions influence how well the business does as a whole they will be more likely to seek out opportunities for improvement.
  4. When you have a cash flow projection then you have the tool needed to develop timely and attainable goals. When you have a better idea as to how much money is going out and coming in (and why), you and your management team can put plans in place to better manage the company’s cash flow in a more favorable way.
  5. Are you managing cash that you acquired from an external source? Will you manage acquired cash in the future? Stakeholders love cash flow projections because they provide them with the information they need to monitor their investment. Oftentimes banks require you to provide quarterly financial information to prove that you’re complying with the terms of the loan package.

Cash flow is arguably more important to your company’s success than your bottom line because it takes your past, present and future projections into consideration to arrive at a compressive analysis of your financial wellness. Email Rea & Associates to learn more about the importance of cash flow projections and how you can use yours as a valuable management tool.

By Dave Cain, CPA (Dublin 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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Governor’s Budget Proposal Makes The Case For Tax Reform

Wednesday, February 11th, 2015
Proposed tax increase on oil and gas production

If the proposed two-year state budget proposal passes, oil and gas produced by horizontal wells will be taxed at a 6.5 percent tax rate for product sold at the wellhead. If sold downstream, a 4.5 percent tax will be applied.

Since it was unveiled last month, Gov. John Kasich’s proposed two-year state budget has many individuals, businesses, school districts, not-for-profit organizations and others scrambling to find out how his proposed tax reform package will affect them. In his recommendation, Gov. Kasich says his proposal seeks to “create more opportunities for each and every Ohioan.” To this end, the budget focuses on four primary objectives:

  1. To ensure that students are ready for college and careers
  2. To help more students get degrees
  3. To cut and reform taxes
  4. To help Ohioans move up and out of poverty and into jobs

To achieve these goals, Gov. Kasich has proposed implementation of several tactics to help fund his $35.5 billion 2016 budget, which is up 15.5 percent over the state’s projected spending in fiscal year 2015. Of those tactics, a slew of tax cuts and increases are central to his budget initiative. The following points address some primary changes Ohioans can expect to see if Gov. Kasich’s 2016-2017 budget plan is approved.

Proposed Tax Cuts

  • A 23 percent across-the-board income tax rate reduction. This proposed cut would drop the top income tax rate to 4.1 percent, the current from 5.33 percent.
  • Business owners of pass-through entities with gross receipts less than $2 million will pay no income tax on their business income.
  • Other Ohio business owners will see the 50 percent reduction incentive on income that totals $250,000 and less become permanent.
  • Individuals who earn less than $40,000 will see a $1,600 increase in their personal exemption (from $2,400 to $4,000). The personal exemption for those who make between $40,000 and $80,000 will increase by $900 (from $1,950 to $2,850).

Proposed Tax Increases

  • The commercial activity tax (CAT), which is measured by a business’s gross receipts on business activities in the state, will increase 0.6 percent to 0.32 percent.
  • The state’s sales tax will increase to 6.25 percent. The current sales tax rate is 5.75 percent and would be expanded to include management consulting, lobbying, market research and opinion polling, public relations, debt collection services, cable subscriptions and parking and travel services.
  • Means-tested tax credits and exemptions for retired taxpayers who earn more than $100,000.
  • Oil and gas produced by horizontal wells will be taxed at a 6.5 percent tax rate for product sold at the wellhead. If sold downstream, a 4.5 percent tax will be applied.
  • The state currently reduces the price paid for the new car or boat by the value of the trade-in. The proposal calls for a 50 percent deduction in this exemption.
  • The discount vendors receive for collecting, reporting and remitting sales tax will be capped at $1,000 per month.

To learn more about how tax reform could affect you, email Rea & Associates.

By Lesley Mast, CPA (Wooster office)

 

 

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How To Drive For Business And Save On Your Tax Bill

Monday, February 2nd, 2015
Deducting expenses related to your car or truck is an allowable business expense – as long as the vehicle is used for business purposes.

Deducting expenses related to your car or truck is an allowable business expense – as long as the vehicle is used for business purposes.

If you are one of the many men and women who drive their personal vehicles for business, don’t forget to claim the appropriate tax deduction on your tax return – the savings just might help you keep more cash in your bank account and more gas in your tank.

Here’s what you need to know. …

Deducting expenses related to your car or truck is an allowable business expense – as long as the vehicle is used for business purposes. And if you use it exclusively for business purposes, you may be able to deduct the full cost of your vehicle. But before you start claiming deductions on your tax return, make sure you understand what the IRS considers to be a valid business purpose. Hint: Commuting from your home to work is not considered a valid business purpose.

When To Claim A Deduction

Do – claim a deduction if you use your vehicle for travel between two places of business.

Do – claim travel expenses that result from traveling from one job to another, traveling from one customer or client to another and traveling from your office or business location to perform other business tasks.

Do – claim your travel expenses that accrue between your home and a business destination if you have a home office that is considered your primary place of business.

Which Deduction Is Better?

There are many factors to consider when choosing a deduction method that will result in the most tax savings. The two biggest factors are the cost of the vehicle and how many business miles you drive each year. Here are the nuts and bolts of your two options:

  • Standard Mileage Method – If you keep good notes, then you may prefer the standard mileage method to keep track of your deduction. Here’s how it works: Start by keeping a log or a journal of all your business trips – include who, what, when and where. Then add up all the miles you racked up on your trips and multiply that number by the IRS’s standard mileage rate – which currently stands at 57.5 cents per mile. For example: if you were to drive 15,000 business miles over the year, you can multiply that number by 57.5 cents per mile to claim an $8,625 deduction.
  • Actual Costs Method – This method requires that you to keep track of all costs associated with your vehicle, including depreciation, repairs, maintenance, gas, tires, etc. When you have collected all these costs and arrived at a total, multiply this number by the percentage of time the vehicle is used for business purposes. Your deduction is limited to the percentage of time the vehicle was used for business purposes.

So, which deduction method is better?

Say you purchased a car for $30,000 and you use it exclusively for business purposes. You have figured that you drive about 10,000 miles for business each year. If you use the standard mileage method, you could claim a $5,750 deduction each year. But if you were to use the actual costs method, instead you would find that during the first five years of owning the car the actual vehicle expenses significantly add up to a larger tax deduction.

If you use your vehicle for business purposes, a financial advisor can help you identify the best route to maximize your tax savings. Email Rea & Associates to learn more.

By Tom Jeffries, CPA (Millersburg office)

 

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Beware Of Small Business Wire Transfer Scam

Thursday, January 29th, 2015

Late last week, the Federal Bureau of Investigation (FBI) issued a wire transfer scam alert for all small businesses in the United States. According to the FBI alert, between October 2013 and December 2014 a total of 1,198 complaints from U.S.- based companies were received dealing with wire transfer scams. Losses from these incidents totaled more than $179 million. The FBI also reports that the scams can follow a Ransomware incident, and may involve a fraudster contacting a vendor and requesting a change of payment to an alternate fraudster-controlled bank account.

How To Mitigate This Type of Scam

If you’re a small business owner, you may be at risk for this kind of scam. The FBI recommends the following mitigation steps for these types of scams:

  • Keep all of your anti-virus software up-to-date.
  • Educate your workforce about security best practices.
    • Be sure that any changes to payments via electronic transfer are verified with an employee of the bank and at a phone number that you utilize for assistance.
    • Don’t use alternate phone numbers provided via email or by a bank representative contacting you.
    • Always call the institution back and verify that you are communicating with your bank.
  • Monitor all of your business’s financial transactions on a daily basis. Suspected electronic fraud must be reported in a single business work day.
  • Use two-party authorization access to complete all wire transfer transactions.
  • Utilize biometric authentication to verify the identity of authorized users.
  • Use online bank portals that require strong fraud controls to complete all wire transfer transactions.

You can find more information about the FBI’s scam alert here. This site also provides detailed samples of how the scams will be run against unsuspecting businesses.

If you have any specific questions about how this scam might impact you or if would like more information on IT security best practices, email Rea & Associates.

By Brian Garland, CPA (Dublin office)

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Six Things 401k Plan Sponsors Need To Do Now

Friday, January 16th, 2015
2015 Retirement Plan Deadlines - Ohio CPA Firm

Mark your calendars and don’t forget these 2015 retirement plan deadlines. Click on the image to easily see what is due and when to file.

January may be flying by, but the New Year is still fresh. This is still a great time to make sure that the qualified 401k plan you offer your employees helps them effectively save for retirement and remains qualified. Not sure where to start? Here are six ways to get the most out of your 401k plan:

1. Review Your Match Formula

An employer match can be critical to helping your employees meet their retirement goals and stretching the match formula is a great way to entice employees to save more. Instead of matching 100 percent on the first 2 percent of deferrals, consider changing your contribution formula to 50 percent on the first 4 percent of deferrals, or 25 percent on the first 8 percent of deferrals instead. Each one of these formulas will result in a 2 percent wage cost to you, the employer, but changing the formula may encourage additional employee saving. Instead of saving 4 percent of their income (2 percent employee income plus 2 percent employer match), the employee may be motivated to increase contributions to their retirement plan to 10 percent (8 percent employee income plus 2 percent employer match). Contact your TPA to discuss different strategies.

2. Check Your Contribution Limits

Did you know that the 401(k) and 403(b) plan deferral limits have increased to $18,000? Employees older than 50, now have the option to defer an additional $6,000 of their wages toward retirement. Encourage your employees to review their payroll deduction to ensure that they are on target to meet their personal savings goals.

3. Offer Your 401(k) Plan To All Eligible Employees

If your 401(k) plan has an entry date of Jan. 1, be sure all newly eligible employees were provided the opportunity to participate in the plan. Even if you have an employee who doesn’t want to participate, I recommend that you obtain a signed election form that indicates a 401(k) election of “0 percent.” By doing this, you have documentation that they employee was offered the chance to participate, even though they decided not to.

4. Provide Employee Census To Your TPA

Your third party administrator (TPA) needs yearly plan census information to conduct compliance testing, verify 401(k) and to calculate matching contributions and profit sharing allocations. The deadline for most compliance tests is March 15.

5. Check Your Fidelity Bond

The Employee Retirement Income Security Act (ERISA) requires a fidelity bond for every plan fiduciary and for those who handle the funds or property of a plan. The bond must be at least 10 percent of the company’s plan assets. It’s a good idea to ensure that your bond is still meeting the 10 percent minimum requirement.

6. Restate Your Plan Document

Prototype documents for 401(k) plans currently are in a restatement window; therefore, if your plan uses a prototype document, it must be updated to meet new IRS standards. This document restatement period is a great time to examine your plan provisions. For example, do you want to change eligibility requirements or add a loan provision that you have contemplated adding in the past? This is a good time to make those changes. The deadline for restating 401(k) prototype documents is April 30, 2016. Managing your company’s retirement plan can be confusing or overwhelming at times, but it doesn’t have to be. Email Rea & Associates today to learn more. By Steve Renner, QKA (New Philadelphia office)

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Could A Cyber-Attack Cripple Your Business In 2015?

Tuesday, December 30th, 2014

As we embark on a new year, many of us will set personal goals for ourselves or renew commitments to objectives that may have eluded us over the last year – and if you are a business owner you probably have a whole other list of initiatives to conquer in 2015. But before you dive into a new campaign, product launch or acquisition, take a moment to reassess your business’s disaster recovery and business continuity planning. Doing so could save you from unforeseen financial hardships that could devastate your bottom line.

From eBay’s server breach early in 2014 to the recent Sony Pictures hack, this year major U.S. companies found out that even the best defenses cannot guard against attacks carried out by a determined hacker (or hackers). And if these large-scale businesses are vulnerable, how is your small to midsize business expected to recover? In addition to building up a solid defense to these types of threats by employing firewalls and antivirus software, businesses with a solid business continuity plan are more likely to recover if (and when) a disaster does strike.

Plan For The Best – Expect The Worse

Could you recover from a cyber-attack or data breach? Do you have a plan in place to not only shield yourself from threats, but to swiftly respond and recover? The ISACA, an organization that engages in the development, adoption and use of globally accepted, industry-leading knowledge and practices for information systems, encourages business owners to take a proactive stance when guarding against disasters – online and offline. If you are unsure whether your business could recover, ask yourself these questions.

  1. Do you have a thorough understanding your business’s activities, including which ones are critical to support your overall operations while satisfying your customer’s expectations?
  2. Do you know what data you need to support your business’s critical operations and do you know where this data is kept?
  3. Do you have a clear understanding of the effects of downtime within your business and, using this information, are you able to identify where you are most vulnerable?
  4. Do you have current infrastructure in place to protect your business and data against hackers and viruses?
  5. Do you consider business continuity to be a priority to your business?
  6. Do you have a documented plan in place to guide all aspects of your business through a major emergency? How about smaller disruptions like organizational, process and technology changes?
  7. If a disaster were to strike today would you be able to recover quickly while protecting the best interests of your customers and business stakeholders?

If you answered no to any of these questions your business may find itself susceptible to risk and unable to recover from a cyber-attack or data breach. Make business continuity a priority in 2015. Email Rea & Associates for more information on how you can protect your business against countless internal and external threats.

By Brian Garland, CPA (Dublin office)

 

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Put Your Property Easement Agreement To Work

Tuesday, December 16th, 2014

The shale oil and gas play has spurred a significant amount of pipeline and infrastructure activity throughout certain areas of the United States. As a result, many landowners are now being approached by landmen armed with cash offers and easement agreements in the hopes of acquiring the right to use your property to process and transport oil and gas related products. Before you sign on that dotted line, be sure to seek advice from someone well versed in the complexities of property easements.

Be An Informed Property Owner

You probably want to keep as much money in your bank account as possible. So when it comes to paying your taxes, you probably have no intention of giving the government more than its fair share, right? Did you know that when you enter into certain agreements, such as land easements, you may be able to dictate the type of tax treatment your income receives? The trick is to fully understand the tax consequences of language in the agreement.

The tax treatment of a land easement typically is determined (at least in part) by the easement agreement itself. The easement language will either determine if the agreement is for a permanent (or perpetual) easement period, which is exclusive in nature; or if it’s a temporary easement, which will be effective for a finite period of time.

Understand Your Options

If you enter into a permanent easement agreement, the taxable part of the transaction could qualify for capital gains, which may result in an opportunity to save some money during tax season. If you are able to apply the capital gains tax treatment to the income generated from the land easement contract, as opposed to the ordinary income tax rate, you could stand to see your tax rate that is applied to this income drop by almost half.

  • Capital Gains tax rate = 20 percent
  • Regular Income tax rate = 39.6 percent

On the other hand, if you are looking for another option, which could eliminate current payment of tax all together (defer the tax consequence into the future), you might consider the like-kind exchange tax planning strategy. Like-kind exchange rules require the property that is exchanged and the property that is acquired to be held for productive use or investment purposes.

Agreements that receive like-kind treatment under U.S. Code 1031 may result in the deferral of your taxes being due until well into the future or until you dispose of the property acquired in the like-kind exchange. For this to work, the easement agreement must be considered perpetual or permanent and must also involve real estate that is used as part of your trade or business or that is being held for investment purposes.

Don’t Disqualify Yourself

While the thought of exchanging your land easement for other real estate while deferring your taxes may seem attractive, the process of entering into, and maintaining, a like-kind exchange is very complex and must be strictly adhered to. In other words, you will need to seek out help to navigate the waters. If you would like to see if you qualify for a like-kind exchange, email Rea & Associatesfor more information. And remember to always consult your current financial advisor or another professional well versed in like-kind exchange taxation, before signing any land easement contract. Failure to do so may disqualify you from favorable like-kind exchange treatment.

By Jim Fracker, CPA (Zanesville office)

 

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Should I Make a Big Purchase to Cut Taxes?

Tuesday, December 16th, 2014

This is a hectic time for business owners who are working to close their books on the previous year while strategically planning for the year ahead. For me, this is the time of year I find myself frequently fielding questions from clients who want to know if buying equipment will help them keep their taxes down.

Unfortunately, without the proper information, any answer I could provide would be about as useless as seeking business advice from a Magic 8-Ball. Fortunately, the answer really isn’t difficult to find, especially if you have a well-maintained balance sheet.

To determine whether purchasing equipment would be beneficial to your business from a tax perspective, I have to know what your profit looks like. And while it may be easy to pull out your profit and loss statement to find the answer, I would encourage you to take a look at your balance sheet as well. It’s capable of painting a detailed picture of your business and is a great tool that can help you make sound financial decisions for your business.

Before you make any decisions that could impact your business’s financial stability, make sure these six items on your balance sheet are accurate.

  • Cash Reconciliation
    • Check to make sure that all cash has been reconciled and make special note of checks that have remained uncashed for an extended period of time.
    • Verify that all checks – incoming and outgoing – have been recorded, and their status tracked.
  • Collectability of accounts receivable
    • Does your business currently have any bad debts? If so, have you taken the necessary actions to determine that the account in question is uncollectable?
    • Once an account is uncollectable, take the steps needed to prove that determination and receive the benefit from it.
  • Accurate Inventory
    • The end of the year is an ideal time to take a physical inventory.
    • An inaccurate inventory can greatly impact your profit – not to mention your ability to properly manage your resources.
  • New/Disposed Fixed Assets
    • Be sure to add all new assets (equipment, fixtures, etc.) to the correct accounts. Don’t let them become buried in your purchases.
    • If you are planning to sell your company in the next 5-10 years, it is extremely important to keep an accurate record of your assets because they can help determine your asking/selling price.
  •  Liabilities
    • Keep a current record of all your liabilities and update it regularly to maintain accuracy.
    • Make sure that all debts are tracked and recorded.
  • Member Draws
    • Check to make sure that your member withdrawal account is accurate. If there are any expenses you expected to see but didn’t, investigate and find out why.
    • If after year end you happen to find personal expenses that were in regular expenses, your profit increases and so do your taxes.

Your company’s profit is not just a number. Your profit is determined by a wide range of factors – and these are just a few. If you are really want to lower your taxes, make sure your bookkeeping is accurate before developing a plan.

Email Rea & Associates to discover more ways to increase your business’s profitability.

By Joel Yoder, CPA (Millersburg office)

 

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Employers Must File Taxes, Make Payments Electronically

Tuesday, December 2nd, 2014

Starting this January, employers filing in the state of Ohio will be required to use the Ohio Business Gateway (OBG) to file and remit payment for state and school district income tax withholding returns, according to the Ohio Department of Taxation. The new rule was finalized earlier this month and will go into effect on Jan. 1, 2015. The OBG Electronic Filing system was established to save Ohio time and money by simplifying business’ relationships with government agencies while providing them with an easier means to comply with regulatory requirements.  However, it is understood that some employers may not be able to use the electronic filing system at this time, which prompted the department to allow some preparers to opt out of the requirement if they can establish a valid reason for why they are unable to comply. To opt out of the department’s new rule, employers must provide the department with the following information on form WT OOR, including their:

  • Business name
  • Address
  • Phone number
  • Employer withholding number and Federal Employer Identification Number (FEIN)
  • Withholding type
  • Detailed reason for the request to be excluded from electronic filing and payment provisions.

“Preparers seeking to opt out of electronic filing must present strongly compelling reasons to justify the waiver of the requirement,” the department states in the Frequently Asked Questions page of its website. “Preparers filing tax returns with the state of Ohio should plan to comply with the electronic filing mandate and not assume that their request to opt out will be granted.” Anyone may apply to be excused from the electronic filing requirement and permitted to file their return by non-electronic means. However, if approval is given, it is only valid for one year. Preparers are required to resubmit their requests annually. The opt out request form can be found on the “Forms” portal of the department’s website or by calling 888.405.4039 – option 1. Additional assistance with navigation, filing a return and/or remitting payment, can be found by visiting the Self Help eLibrary. Email Rea & Associates to learn how you can stay in compliance with these new filing requirements and lessen the stress of filing and paying your state and school district withholding returns.

By Lisa Beamer, CPA (New Philadelphia office)

 

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Ready, Set, Download: IRS2Go Mobile App 2014

Monday, October 20th, 2014

In June, the Internal Revenue Service (IRS) made the 2014 version of IRS2Go available to mobile users. This free app can help you stay on top of your federal income tax refund. You can also request your tax return or account transcript or receive tips and updates from the IRS via the app.

Benefits of IRS2GO App

Compatible with Apple and Android devices, the IRS2Go mobile app has been redesigned and includes several new and updated features, such as:

  • IRS2Go makes it easier for individuals to check their refunds at a time that’s convenient for them. To get there, just click on “Refund Status,” enter your Social Security Number (which is masked for security purposes), then select your filing status and the amount of your anticipated refund. The new “status tracker” allows users to identify where their return is in the tax return process. NOTE: Returns filed electronically can be viewed 24 hours after the return was received by the IRS. Paper returns take longer to process and can take up to four weeks before their status is available to view.
  • Another helpful feature is your ability to request your tax records or your account transcript. While, for security reasons, the records cannot be viewed immediately on your Smartphone or device, the request will be processed and your records will be delivered promptly to the address on record.
  • If you need help preparing your tax return, IRS2Go helps users find IRS Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) programs by simply entering a ZIP code and mileage range.
  • Users also have the opportunity to stay connected, view more content and interact directly with IRS on Twitter, YouTube, Facebook or by signing up for email updates.

To download the IRS2Go app on your Apple iPhone, iPad or iPod Touch device, visit the iTunes app store. To download IRS2Go on your Android devise, visit the Google Play store.
By Kelly Leslie, CPA (Cambridge office)

 

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‘Ghost Assets’ Haunting Your Business?

Tuesday, October 7th, 2014

The IRS recently issued taxpayer-friendly guidance regarding the disposition of a component of real or personal property.

Under the Internal Revenue Code, taxpayers are required to capitalize certain amounts paid to acquire, produce or improve real or tangible personal property during the year and that is used for a trade, business or for the production of income. However, prior to the issuance of new regulations in 2013 taxpayers were unable to write-off the remaining cost of a component of a larger asset or building that was repaired or replaced (e.g. a roof). In fact, under the old rules, it was not uncommon for business owners to be required to depreciate “ghost assets” – assets that were removed or replaced by the taxpayer and are no longer in service.

The good news is that the IRS has changed its mind on these, so-called, “partial dispositions.”

So, What’s Changing?

Beginning Jan. 1, 2014, taxpayers were able to deduct the remaining cost of such components in the year they were replaced/repaired by making an election on their tax return.

Additionally, the IRS allowed taxpayers to apply the regulations to dispositions that had already happened in prior years as long as the ghost assets were still being depreciated.

What was unclear until recently was how a taxpayer could effectively make the election on a retroactive basis given that businesses were required to file their 2013 year tax returns before the IRS had issued definitive guidance.

The IRS’ Response

The IRS officially announced a specific revenue procedure that provides a limited opportunity for taxpayers to write-off assets that were disposed of during a prior year. The guidance outlines the procedures necessary for taxpayers to secure the write-off, as well as what documents they should include when filing their request. If you do plan to write off a ghost asset from a previous year, you must make plans do so now as this retroactive election opportunity is time sensitive. Taxpayers who miss this opportunity will be required to continue depreciating these ghost assets. For some, this means that you could be depreciating ghost assets for another 15-20 years.

Are you a business owner who is still paying the IRS for assets that you no longer have or that have been replaced? Do you want to learn more about the IRS’s new rules on ghost assets and how they can impact your business? Email Rea & Associates to find out if you can write off ghost assets that continue to haunt your business.

Author: Chris Axene, CPA (Dublin 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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From Good To Great: 5 Ways You Can Improve Your Manufacturing Business

Friday, October 3rd, 2014

Today, millions of hard-working men and women will celebrate Manufacturing Day across our nation. United in their mission to address common misperceptions about the industry, manufacturers will rally together to take charge of the industry’s public image, address the industry’s skilled labor shortage and promote the ongoing prosperity of manufacturing throughout the U.S.

Manufacturing has always been the backbone of Ohio – and Rea has been proud to support many companies throughout the state. In recognition of Manufacturing Day, here are five ways you, as a manufacturer, can overcome challenges facing your industry.

Be The Leader You Want to Be. 

As a seasoned manufacturer, you know your business inside and out – when there is a problem, you provide a solution; when a ball drops, you pick it up. If this sounds like you, then it’s time to get out of your comfort zone. If you always find yourself in the middle of daily business operations, you’re unlikely to get out in front of opportunities that could maximize your company’s long-term value. Be the leader your company needs. Stop putting out fires. Instead, make waves.

Tell Your Story, Invest In People. 

The manufacturing industry has had its share of problems when it comes to attracting and retaining a talented workforce, but you can alter how people think about a career in manufacturing by simply sharing your own stories and experiences. Unless you take the time to personally promote the manufacturing industry, your would-be employees may incorrectly associate the industry with unprofessional, dead-end jobs in dirty factories. Get out and connect with local vocational schools and other educational entities and community groups to tell your story.

Embrace A Strategy; Minimize Risk. 

Every company should have a strategic plan. From financial objectives to operational goals, your strategic plan should provide your workforce with an overview of the company’s operational and growth initiatives. Formal plans should also address the company’s budget and financial forecast. Proper utilization of these plans will help you reap optimal results by providing you with the information needed to make better decisions. Below are initiatives you can include in your strategy to gain greater insight into the industry and to learn how you can better manage your current financial and operational objectives.

  • Benchmarking is a proactive way to stay in line with, or ahead of, the competition. It’s important for you to understand how your company stacks up against the competition, as well as gain insight into current trends, future opportunities and potential risks.
  • Key performance indicators (KPIs) are critical to the management of your daily operations. In order for you to deliver results, you and your management team must understand the resources you are working with and how you are affected. Key indicators also provide management with insight into production and can alert leaders to potential areas of risk.
  • Get to know your ERP system. Many companies have implemented some type of enterprise resource planning (ERP) system in the hopes of streamlining their accounting, production, benchmarking and KPI efforts. Unfortunately, many are unable to actually use the system in the way they would like. You must take control of your ERP system and insist the vendor meet with your team to set up the ERP system in a way that makes sense to your company. An ERP system that is set up properly will provide your company with the data you need to manage your business more effectively.
  • Understand your cost structure. For example, understanding what it costs to make, distribute and/or sell each unit of each product line, will give you a better grasp of how much you’re spending on material, labor and overhead, which will better equip you to allocate your efforts and resources. Unfortunately, many managers don’t understand the company’s cost structure, which puts the company at risk of losing money in the long run.

Back-Up For Safety. 

Many companies in the manufacturing industry have taken steps to embrace technology and have added hardware and software to help collect data and streamline workflow; however, with the introduction of new programs and equipment comes the introduction of additional risks. Some companies have chosen to back-up their information as a way to avoid losing important data, but if the back-up isn’t tested, there is no guarantee that it will actually work. Unfortunately, some companies lose critical data simply because they fail to test the back-up.

Consider Going Lean. 

The manufacturing industry underwent a significant transformation in the 90s with the wide-spread practice of Lean Six Sigma, which helps companies become more efficient and effective by introducing better processes throughout the organization. Many companies, however, have yet to incorporate Lean Six Sigma into their operations. Much has changed over the course of two decades and new uses for Lean Six Sigma have been discovered and applied to additional departments outside of just the manufacturing floor, the service and transactional functions of businesses have really benefited. You should consider Lean Six Sigma as a way to become more efficient and effective in every aspect of their business. Especially while the industry struggles to attract new talent, Lean Six Sigma may be just your company needs when you need to do more with less.

These are just a few examples of challenges facing the manufacturing industry where a trusted advisor can help you navigate through possible solutions. If you own a company in the manufacturing industry or if you want to explore ways to improve your business’s efficiency, effectiveness, profitability and risk management systems, email Rea & Associates. Our team is passionate about helping manufacturers reach new heights, mitigate risks and attract and retain employees.

Author: Kyle Stemple, CPA, Director of Manufacturing Services (New Philadelphia office)

 

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Ohio Prepares For Year Three Of Its Workforce Training Voucher Program

Tuesday, September 23rd, 2014

The State of Ohio announced that it will launch its third round of the Incumbent Workforce Training Voucher Program. As in previous years, the state has upped the ante.

This time around businesses will have a chance to claim a piece of $29.4 million, which will allow Ohio’s employers to enhance the skills of their workforce. That’s the good news. The bad news however, is that you have to be quick if your business has a desire to claim any portion of these funds. We expect all of the training dollars to be claimed within hours of the application going live at 10 a.m. on Sept. 30.

According to the state, the funds are to be made available on a first-come, first-served basis. Employers can apply for a credit that will reimburse them up to 50 percent of eligible training costs – which could mean the business could be reimbursed up to $4,000 per employee. Training performed between Aug. 1, 2014, and Dec. 31, 2015, qualifies for the third round of the Incumbent Workforce Training Voucher Program – meaning that employers have the option to apply vouchers to training that has already taken place.

Similar to round two of the program, a pre-application process is available. The period to complete this process began Sept. 15, and will continue until the application officially goes live on Sept. 30. Pre-application allows employers to enter as much information and specific details as possible. Then, the minute the application goes live; all you need to do is log on to your account and submit it. Because we expect all funds to be accounted for within the first few hours of the application going live, we urge businesses to take time to complete the pre-application process as soon as possible.

What Is Considered Eligible Training?

  • Classes at an accredited education institution
  • Training that leads to an industry recognized certificate
  • Training provided in conjunction with the purchase of a new piece of equipment
  • Upgrading computer skills (e.g. Excel, Access)
  • Training for the ICD-10-CM/PCS diagnostics classification system
  • Training from national, regional or state trade associations that offers certified training
  • Training for improved process efficiency (e.g. ISO-9000, Six Sigma, or Lean Manufacturing)
  • HR Certification – limited to HR staff only

What Companies Can Apply?

For-profit entities located in Ohio and that operate in one of the following industries are eligible to apply for the Incumbent Workforce Training Voucher Program.

  • Advanced Manufacturing
  • Aerospace and Aviation
  • Automotive
  • Bio Health
  • Energy
  • Financial Services
  • Food Processing
  • Information Technology and Services
  • Polymers and Chemical
  • Research and Development
  • Companies with a Corporate Headquarters in Ohio (with limited availability of funds)

The Importance Of Pre-Application:

If your business wants to have a chance at claiming any of these dollars, it is imperative that you complete the pre-application. Your objective should be to simply log on to the page on Sept. 30 to formally submit your application. It is so important to carefully and completely fill out the pre-application form with as many specific details about the proposed training as possible. If you will apply, or think you may qualify and would like to apply, do your homework now.

If you would like help determining if your business is eligible for the program or if you want more information, email Rea & Associates.

Author: Joe Popp (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.

***

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.

***

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.

***

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: Ryan Dumermuth, CPA, CFP (Mentor office)

 

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How Prepared Is Your Business For A Potential IT Disaster?

Tuesday, September 9th, 2014

Natural disasters. Hardware meltdowns. New variants of viruses and malware. Unfortunately, we live in a day and age where anything can happen. It’s critical that your business is on its toes, ready to tackle any potential disaster or crisis that may come your way. But is it? If your business’s computer systems crashed tomorrow, how easy (or even possible) would it be for your business to recover? Has your business ever given thought to a disaster recovery (DR) plan? Do you have one of these plans?

It’s National Preparedness Month. A month where government agencies and businesses alike work to educate companies and organizations about the importance of being prepared whatever may come your business’s way. In honor of this month, below are five reasons why your business should create (if you don’t have one) a disaster recovery plan

Top 5 Reasons For A IT Disaster Recovery Plan

A Gartner report estimates that only 35 percent of small- to medium-sized businesses (SMBs) actually have a working and comprehensive DR plan. And from its research, Gartner also found that 40 percent of SMBs that manage their networks and Internet usage in-house will have their networks hacked, and more than 50 percent won’t know they were hacked. Pretty sobering statistics, right? There are many reasons why having a DR plan is a wise business move. In fact, here are the top five reasons why a DR plan is imperative to the success of your business:

  1. You can’t control when a disaster happens – it can happen at any time. Disasters can be natural or man-made – either way, you don’t have control over when it could happen. A DR plan will help you be prepared for anything at any time.
  2. A DR plan can help you save thousands, possibly even millions, of dollars in the event of a disaster. When a disaster strikes, it’s usually not a cheap fix. Depending on its severity, many businesses’ budgets are hit quite hard. And if this is an unexpected expense, it’s that much harder to make a complete recovery.
  3. You can mitigate your losses with a DR plan. Money isn’t the only thing at stake during a disaster. Don’t forget about the trust and confidence of your customers, employees, investors, vendors – the list goes on. A DR plan can help you retain your critical audiences during a disaster.
  4. A DR plan can help you reduce confusion among your staff and audiences. When a disaster hits, imagine the confusion and uncertainty that comes with it. In some cases, it may seem like you have no control over the situation. A DR plan can help you have an organized approach to resolving the disaster.
  5. The government may require businesses within your industry to develop and utilize a DR plan. If your business handles sensitive customer information or other information that could be critical if lost, the government may require you to have a formal DR plan, which should include yearly testing of offsite back-up recovery data.

Does your business have a DR plan? If not, you need to create one. Email Rea & Associates for more information about what to include in your plan. If you already have one in place, first pat yourself on the back, and then review it to ensure that it reflects your business’s current environment. Detailed and tested plans are imperative to the successful recovery and even for the longevity of your business.

Author: Brian Garland, CPA (Dublin office)

 

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Fraud Hotlines Deter Occupational Fraud

Monday, August 25th, 2014

When it comes to your business or organization, you are passionate about making sure your staff embodies your mission and objectives. You take care to select only the best candidates; and when you find them, you conduct thorough interviews, background checks and offer extensive training and timely performance reviews. Months later, now that you have invested significant resources into finding, training and polishing your new employee, you can finally rest easy knowing that you created a team dedicated to common goals and objectives – right?

Fraud Happens

In its most recent version of The Report to the Nations on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners (ACFE) analyzed 1,483 cases of occupational fraud, which resulted in losses totaling more than $3 billion. Of those cases, the ACFE found that businesses with 100 employees or less are more susceptible to financial losses as a result of the three categories of occupational fraud – corruption, asset misappropriation and financial statement fraud.

Here’s A Tip

Maybe, like so many other business owners, you have already considered these facts and have taken steps to deter fraud in your own offices by establishing and implementing codes of conduct and external audits. While those measures provide a good foundation, you may be surprised to learn that of the nearly 1,500 cases of fraud that were reviewed, auditing only revealed a few instances of fraud. On the other hand, 42 percent of these cases were detected by tips. These tips were frequently reported on fraud hotlines and resulted in a 50 percent quicker response time when it came to detecting and stopping fraud.

The Value of a Fraud Hotline

Be proactive about fraud prevention, instead of reacting when you’re caught in the middle of it. A fraud reporting hotline service, such as Red Flag Reporting, has helped clients stay informed about what’s going on in their businesses. Services like Red Flag provide businesses with an opportunity to focus on building relationships, increasing revenue and improving community outreach instead of chasing down occupational fraud in the workplace.

Fraud hotlines are utilized by small and large businesses alike and can help identify and deter other types of unethical behavior before it grows out of control. Fraud hotlines can result in:

  • Fewer OSHA violations
  • Lower Workers’ Compensation costs
  • A decreased likelihood of employment practices lawsuits
  • Zero-tolerance of discrimination in the workplace

Not all employees are bad and not everybody is looking for an opportunity to financially ruin their employer. In fact, fraud hotlines are great because they prove that you are have a team made up of responsible, honest, hard-working men and women. These professionals are the eyes and ears of your business or organization and you not only depend on them to help identify instances of fraud, you need them to report issues to you before they explode into situations that severely damage your financial well-being, employee morale and reputations. By providing your team with a hotline, they will be even more inclined to provide you with a tip or two without feeling like they are rocking the boat.

Are you concerned about the potential for fraud in your organization? Email Rea & Associates to learn more about how a fraud hotline could work for you.

Author: Annie Yoder, CPA, CFE, CFF (New Philadelphia office)

 

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New Form of Malware Catching Retailers Off Guard

Monday, August 25th, 2014

Last week, UPS announced that 51 of its stores were infected by point-of-sale (POS) malware that has been affecting other retailers across the U.S. In total, UPS estimates that approximately 105,000 POS transactions were comprised in the data breach, leaving many customers’ financial and contact information exposed, increasing their risk of identity theft and fraud.

POS malware, known as Backoff, was identified last week as having targeted a New Orleans restaurant, a much smaller retailer than UPS. On July 31, several government agencies sent out an alert about Backoff. The alert explained the risks that Backoff posed to U.S. businesses, including smaller merchants, and that this new form of malware was found to infect POS systems via access to a remote-access portal.

And just a few days ago, the U.S. Secret Service announced that an estimated 1,000 businesses have been infected by Backoff. Now the Department of Homeland Security is encouraging all businesses – no matter the size – to scan their POS systems to check for a possible compromise.

While these recent incidents may not affect you or your business directly, the discovery of this new form of malware should cause you to stop and assess your business’s IT security situation. Do you have the right security protocols in place to protect your business – and your customers – from a potential data breach?

How To Protect Your Business From A Data Breach

Your mind may be far from thinking about your business’s IT environment. You’re probably focused more on the day-to-day operations of your business and serving your customers. But think of protecting your business’s IT environment as one way of serving your customers. By protecting your IT systems, you are helping ensure that your customers’ personal and financial data is safe. Here are some ways you can protect your business’s IT environment:

  • Use End Point Protection monitoring to verify that all workstations are current on their virus definition files and OS patches.
  • Make sure all servers are patched with the most current operating system security patches.
  • Employ a vendor to complete penetration testing to find any open avenues to your network.
  • Consider implementing Intrusion Detection Systems (IDS) or Security Information & Event Management (SIEM) applications. Many companies utilize IDS/SIEM to monitor their incoming and outgoing network traffic. If the expense is too great or you don’t have qualified personnel, then consider a vendor to provide the service. Many vendors provide these services at a very reasonable price.

The Cost of Protecting Your Customers

What cost is too much to protect my customers’ data? Only you can answer this question. UPS and the restaurant have chosen to pay for identity theft and credit monitoring services for customers who may have been affected from their data breaches (a data breach-related expense many companies don’t consider). But take that one step further. What cost is too much to protect my business’s reputation? In order for your company to survive in today’s digital world, it’s critical for your business to cultivate a culture of trust with your customers. Many businesses find that they’ll do what it takes to prevent security breaches. What will you do?

Want more IT tips? Check out other articles that provide best practices on how to secure your business’s IT environment.

Author: Brian Garland, CPA (Dublin office)

 

Related Articles:

8 Tips For Crafting A Strong Password

Do You Know Who Has Access To Your IT Network?

How Can I Protect My Business From A Data Security Breach?

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Obtaining Tax-Exempt Status Just Got Easier

Tuesday, August 12th, 2014

Many individuals want to know how easy it is to obtain tax-exempt status. About a month ago, you would have been told that the application process alone was rather lengthy. In fact, the standard Form 1023, which is the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, is 26 pages in length. On July 1, the Internal Revenue Service introduced a significantly shorter application form – Form 1023-EZ – which is just three pages long.

What Is Form 1023-EZ?

Form 1023-EZ is a simplified version of Form 1023 and its use is limited to organizations with gross receipts of $50,000 or less and total assets of $250,000 or less. The IRS says that 70 percent of new applicants should be able to use the new form, but to ensure that the right organizations are using the right form; the IRS has outlined factors that may disqualify larger organizations from using the new form. Be sure to read the instructions carefully.

The IRS says it currently has more than 60,000 backlogged 501(c)(3) applications. The new, streamlined application form is anticipated to speed up the approval process for smaller groups, which means the agency will have more resources available to review applications submitted by larger organizations.

What You Need To Know About The 1023-EZ Form

If you are planning to fill out the new EZ form, here are three things you need to know:

  • The new EZ form must be filed online.
  • A $400 user fee is due at the time the form is submitted and must be paid through pay.gov.
  • Users must complete an eligibility checklist, which is included in the instructions for Form 1023-EZ, before filing the form.

Obtaining Tax-Exempt Status and Creating A Tax-Exempt Organization

The new EZ form makes it very easy to create a tax-exempt organization, but applicants should always seek professional assistance to ensure that their organization is operating, and will continue to operate, in accordance with their tax-exempt purpose.

Email Rea & Associates and ask if your organization qualifies to use Form 1023-EZ. Our team of business accounting and consulting professionals can answer your questions and guide you on your path to formally establishing your tax-exempt organization.

Author: Lisa Beamer, CPA (New Philadelphia office)

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Software Updates Don’t Have To Be Hard

Monday, August 4th, 2014

Your business probably uses a variety of software systems, whether it’s for an accounting function, a manufacturing process or a scheduling process. It has been said that technology doubles in advancement nearly every 12-18 months. New updates, new releases, and new products are brought to market constantly. Yet, when was the last time you or your team evaluated your current software or compared it to other existing options?

Most people dread the idea of switching software or converting to a newer version, but if you and your team do the homework, the transition doesn’t have to be so painful or costly.

Considerations For Your Current Software

Consider the following points when evaluating your existing software:

  • Does your current software do what you want it to? If so, does your staff know how to use it effectively?
  • Does your current software do what you need it to? Have you had to put many workarounds into your systems to make the software work?
  • Are your users complaining?
  • Is your IT department complaining?
  • Are you paying a lot for the service you are receiving?
  • Are you getting the IT support you need from the software company?

Five Tips For Easing Your Software Evaluation Process

When you decide to evaluate your software, here are some tips to ease the process:

  1. Assign a project manager. This person will be responsible for making sure team members are completing assignments and for keeping the group moving forward.
  2. Put together a team of users. Consider who uses the software and include members who vary in experience, IT savviness and tenure. Include a member of your IT team.
  3. Do your research. Call on companies who are in your industry to see what they use and ask them about their experiences. Are they satisfied with their software? How do they effectively use it? Also call on companies who use your existing software also to see what their experiences have been.
  4. Calculate a cost/benefit analysis. With any conversion, there are hard costs and soft costs involved. Calculate the amount of time and resources a change could involve, as well as its impact on your team’s morale. If there is a large conversion cost to incur, how quickly will you earn that back with the efficiencies to be gained from making the change?
  5. Keep the end goal in mind. What are you trying to accomplish by going through this process? For example, are you trying to find something that will help you gain efficiencies? Be sure the testing and research is focused around those kinds of end goals.

Best Practices For Selecting Business Software

Change for the sake of change is never a good thing. You want to be able to show that you adequately vetted out possible solutions and that the conclusion has been reached by the team. Perhaps you will find out that your current system is adequate, but that your team needs additional training on how to use it to its fullest potential. It would be more cost effective to schedule additional training rather than to go through an unnecessary and costly software conversion. Your team, and your budget, will thank you in the end.

If you would like to learn about more best practices, contact Rea & Associates. Our accounting professionals and business advisors can help you determine what steps you should take during your business software selection process.

 

Author: Lesley Mast, CPA, Macc-Taxation (Wooster office)

 

Looking for more business advice? Check out these blog posts:

Ohio Bureau of Workers’ Compensation To Pay Small Business Claimants $420 Million

Be On Guard For IRS Phone Scams

Is Your Business Running On Microsoft 2003 Servers? It’s Time To Update

 

 

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How Can Super Circular Reforms Work For Your Non-profit Organization?

Thursday, July 31st, 2014

When it comes to maintaining a high level of transparency and accountability, not-for-profit organizations face a lot of challenges. Not only does the community look to your organization to provide high-quality services and resources, the government expects your organization to utilize federal funding responsibly. The ability of not-for-profit organizations to secure federal assistance is critical, which is why industry leaders are seeking more clarity pertaining to a wide range of recent reforms made to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. These reforms are scheduled to take effect the Dec. 26, 2014. Here’s some insight into what you can expect moving forward.

Super Circular Reforms

Last December, the Office of Management and Budget (OMB) passed sweeping reforms to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, also known as the Super Circular or the Omni Circular. The goal for these reforms is to help the federal government streamline its guidance concerning administrative requirements while strengthening the oversight of federal funds. By ensuring compliance of these reforms, the OMB hopes to reduce financial waste, fraud and abuse.

Whether you’re the director of an organization that seeks federal grants and/or assistance, an accountant who serves such an organization, or a citizen who benefits from the organization’s government funding, the Super Circular is a big deal. The federal government awards more than $500 billion every year, and it is the OMB’s responsibility to ensure that every dollar spent is a good use of taxpayer funds.

What Do Super Circular Reforms Mean For You?

  • This newer guidance effectively consolidates eight federal circulars into one, which makes guidelines, cost principles, and audit requirements easily accessible. Having one “Super Circular” to thumb through – even though it tops 100 pages – is a welcome change to grant seekers, grant recipients and awarding agencies.
  • Now that the grant guidance is easily accessible and transparent, the OMB anticipates increased competition among agencies and organizations that are eligible for monetary assistance.

For example: If you have never applied for aid in the past, but you think your organization or government agency may be eligible for federal assistance, you can now easily find out. More agencies and organizations are expected to take advantage of the fact that these guidelines are easily accessible, which means there will be more people vying for government money.

A comprehensive list of federal assistance programs is available in the programs tab of the Catalog of Federal Domestic Assistance (CFDA) website. This site not only provides a list of programs and grants available, it provides key information about what is required to apply and qualify for federal assistance.

  • New provisions have established a higher threshold for an A-133 audit. The threshold for an A-133 audit is now $750,000 – which is higher from the previous threshold of $500,000. This means that not-for-profit organizations that bring in less than $750,000 annually are not required to complete an A-133 audit, which will provide some relief to about 5,000 non-federal organizations. This doesn’t mean the OMB will stop monitoring the federal aid that is distributed to these organizations, the OMB says 99.7 percent of aid awarded to organizations and agencies will still be subject to single audit oversight.

Please Note: If your fiscal year ends in December, the $750,000 single audit threshold won’t go into effect until your Dec. 15, 2015 audit. And if your fiscal year ends in June, it won’t go into effect until December 30, 2016.

  • The Super Circular significantly reforms how organizations and agencies will maintain their cost principles. Specifically, in its guidance, the OMB places a greater emphasis on internal controls. The Super Circular effectively defines what organizations and agencies can consider indirect costs, administrative salary direct costs, compensation, and costs associated with materials and supplies.

For example: While the salaries of your administrative and clerical staff may have been treated as indirect costs in the past, the OMB says that it may now be more appropriate to consider them as direct costs if the work performed is specifically outlined within the grant-funded project or initiative.

  • The deadline for organizations and government agencies to comply with the OMB’s reforms is Dec. 26, 2014.

Because the reform-laced Super Circular was written with the goal of helping organizations and agencies apply for aid, manage funds and prepare for audits, it is anticipated that the OMB will succeed in its efforts to increase competition among organizations and agencies that are eligible to receive aid. As a result, more insight and accountability will be demonstrated by recipients of federal assistance.

Super Circular Help

The OMB has repeatedly said that these reforms will make the process of obtaining federal funds easier and more transparent. If you have specific questions as to how the Super Circular will affect your organization or government agency, contact Rea & Associates. Our Ohio not-for-profit team can help you make sense of these revised regulations.

Author: Brent Ardit, CPA (Dublin office)

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Were You Overcharged By The Ohio BWC?

Wednesday, July 30th, 2014

Countless small businesses soon may find that they have money coming back to them. The Ohio Bureau of Workers’ Compensation (BWC) has decided to settle a class action lawsuit alleging that the BWC, over the course of many years, had a system of group rating in place that improperly overcharged many Ohio businesses. A lower trial court originally ruled in favor of the plaintiffs with possible damages exceeding $800 million. While the ruling was upheld on appeal, the appeals court sent the decision back to the initial court to better address the issue of damages.

Now the BWC has agreed to pay out $420 million to those affected by the state agency’s practice of overcharging for workers’ compensation premiums between the years of 2001 and 2008.

To fulfill its obligation under the settlement agreement, the BWC said it will create a fund that will be specifically used to pay: claims made by employers found to be participants in the class action lawsuit, attorney fees, court costs, and costs associated with administering the fund. According to the settlement agreement, any unclaimed money will be returned to the bureau.

Can You Make An Ohio BWC Claim?

In order to make a claim, you must have been a private, non-group rated employer at some point during 2001-2008 who:

  • Subscribed to the state workers’ compensation fund
  • Was not group-rated
  • Reported payroll and paid premiums in a manual classification for which the non-group effective base rate was “inflated” due to application of the group experience rating plan

Employers who were non-group rated for at least one policy year between 2001 and 2008 are eligible to claim a portion of the settlement.  Eligible employers should be receiving a notice that indicated their status as class members and how to make a claim.  A website where claim information can be submitting is currently under development.

Class members are required to submit their claims to Judge Robert McGonagle of the Cuyahoga County Court of Common Pleas. Claims must be postmarked no later than Sept. 22, 2014. More information on this ruling can be found here. More details are coming, so stay tuned!

If you’re entitled to a portion of the BWC settlement, make sure you understand your rights and know how to follow the transaction process. If you’d like more information about how to claim what’s yours, email Rea & Associates and ask for information about this process.

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

 

Stay up-to-date on other recent business advice blog posts. Check these out:

Be On Guard For IRS Phone Scams

Is Your Business Running On Microsoft 2003 Servers? It’s Time To Update 

Why It’s Important To Have A Good Banker As Part of Your Business Advisory Team

 

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Be On Guard For IRS Phone Scams

Thursday, July 17th, 2014

You get a call from a man who said he was from the IRS and was informing you that criminal activity was found after the IRS performed an audit on your past taxes. Then he asks if you had a criminal lawyer to represent you. And as you tried to get a word in edgewise, he told you not to interrupt him because the IRS and local authorities were recording your phone call. Pretty unnerving, right?

Well, unfortunately, this phone call actually took place with a client. And these types of phone calls are happening constantly. Back in April, the IRS issued a warning for consumers about phone scams targeting taxpayers. During the 2013 tax filing season numerous phone scams occurred, but the IRS has seen an increase in these scams since then. Because the IRS believes that these incidents will continue to plague taxpayers, it’s important to be vigilant for these kinds of calls.

The 4-1-1 On These IRS Phone Scams

  • Some taxpayers who received these calls were told they’re entitled to a big tax refund, or that they owe a lot of money to the IRS that needs to be paid immediately. Don’t be fooled. The IRS won’t contact you via phone about these matters. If you ever owe the IRS money, you’ll be sent a written notification via mail.
  • The IRS will never ask you for personal financial information over the phone, such as your credit or debit card information. If you’re asked for this information from someone claiming they’re from the IRS, don’t give it and report the incident immediately to the IRS.
  • Some IRS scammers use fake names/surnames (most of the time these names are common) and IRS badge numbers when they identify themselves.
  • It’s possible that a scammer knows and can tell you the last four digits of your Social Security number.
  • The phone number that a scammer calls you from could look like it’s from the IRS toll-free number.
  • If you take one of these scam calls, you may receive a bogus follow-up email to make it look like it is a legitimate inquiry from the IRS.
  • You may be threatened with jail time or driver’s license suspension from one of these scammers. They may then hang up on you and then call back pretending to be the police or DMV, further trying to prove their claim to you.

What Should You Do If You Get One Of These Calls?

So have you received one of these calls? If so, and you’re not sure the next step, here’s what you should do:

  • If you think you might owe taxes or there may be an issue with your taxes, call the IRS at 1.800.829.1040. Someone at the line can help you determine if you indeed have a payment due.
  • If you feel you received this call unexpectedly and know you have no IRS issues, call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.

In light of these increasing incidents, be on the lookout and don’t fall prey to these scams. Hang up if you’re uncomfortable with the call. And know that the IRS would never ask for personal financial information over the phone or in an email. If you receive any suspicious emails, forward the email to phishing@irs.gov.

Ohio Tax Help

If you’re ever unsure about anything you received from the IRS, whether it be a letter, a phone call or email, contact Rea & Associates. Our team of Ohio tax professionals can help you determine if the inquiry is legitimate, and assist you with responding.

Author: Maribeth Wright, CPA (Cambridge office)

 

Looking for other articles on how to protect you and your business? Check out these articles:

How Can Heartbleed Affect You and Your Business’s Online Identity?

How Can I Protect My Business From A Data Security Breach?

Are You Secure? Cyber Security Targets Employee Benefit Accounts

 

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Is Your Business Running On Microsoft 2003 Servers? It’s Time To Update

Wednesday, July 16th, 2014

As a business owner, you have a lot to be concerned about. Ensuring that your business is bringing in revenue. Providing quality customer service. Retaining quality employees. The list goes on and on. Is maintaining and keeping your IT systems anywhere near the top of your list? If not, you might want to think again.

Microsoft To Stop Supporting Microsoft 2003 Servers

Back in April, Microsoft announced it was no longer supporting its Windows XP workstation software … this means that Microsoft is not providing any security patches or upgrades to computers using Windows XP software. Despite this news, many companies are still using the non-supported operating system. This leaves a huge hole in your operating system security. While many entities are planning to replace their XP workstations, we now find that Microsoft has some additional changes coming.

Microsoft recently announced that it has posted end of life for its Microsoft Server 2003 and Server 2003 R2 systems. These two server operating systems will no longer be supported after July 14, 2015. So if your business uses these systems, you have a little under a year to plan and implement a replacement strategy for these servers. The consequence for not replacing? Serious security issues.

In many industries the use of these operating systems on servers could lead to non-compliance issues.  When looking at your upgrade options, consider using virtualization software such as VMWare or Hyper V or server operating systems like Linux, UNIX, Windows Server 2008 and Windows Server 2012.

What You Can Do To Prepare For The Microsoft 2003 Server Expiration

It’s important you work with your application vendors to make sure that your current applications will transfer over and operate correctly on the replacement server operating system you decide upon. It is recommended that your entity do an analysis of critical business applications currently being used on Microsoft Windows 2003 and Windows 2003 R2 servers and determine the best replacement option as well as conversion process.

IT Audit Help

Not sure what server(s) your business is running on? Or are you unsure how this Microsoft server expiration will affect your business? Contact Rea & Associates. Our IT audit team can assess your business’s IT systems and help you determine how these changes will affect you moving forward. Don’t delay in updating your servers. It could be the difference between a safe IT environment and an unsecured one.

Author: Brian Garland, CPA (Dublin office)

 

Looking for more information on how you can keep your business environment safe? Check out these blog posts:

8 Tips For Crafting A Strong Password

Do You Know Who Has Access To Your IT Network?

How Can I Protect My Business From A Data Security Breach?

 

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Why It’s Important To Have A Good Banker As Part of Your Business Advisory Team

Thursday, July 3rd, 2014

You want the best for your business, so it only makes sense that you surround yourself with like-minded individuals. As a business owner it’s important to get support from business advisors who have expertise in specific areas to help you make your business successful. Your CPA plays a critical role for you, but don’t forget about the others. It’s also important to cultivate relationships with a business attorney and business banker.

Your CPA can make sure that you have systems to capture and report timely, reliable financial information and, if needed, even provide assurance regarding your financial statements. A good attorney can help safeguard your business assets and provide assistance in drafting agreements, contracts and other legal proceedings. A business banker can provide lines of credit or loans to help meet the cash flow needs of your business.

The Importance of Your Banking Relationship

Strong banking relationships are built over time through regular two-way communication. You should be well-versed in upcoming cash needs, such as expanding inventory or the increased needs of personnel cost, and communicate these to your banker. As you keep them informed of business decisions and trends, this helps to build a lender’s confidence in your ability to manage your business. A well-informed and communicative business owner may be given extra consideration when business financial issues arise.

Four Key Indicators That Help Bankers Evaluate Your Ability To Repay

Banking is a low-risk industry and they have one major concern when lending money: your repayment. They evaluate your ability to repay based on these four areas:

  1. Cash Flow – This is a key indicator of your ability to repay the original loan. If you have strong cash flow, the chances are high that you are able to repay your loan.
  2. Collateral – When a loan is originated, it’s never the goal for the loan to be foreclosed on and collateral seized, but it is required as security.
  3. Credit – Another key indicator is your credit history and track record of your past ability and willingness to fulfill prior financial obligations. If you have a good credit score, you’ll be given more favorable treatment in both the receipt of a loan and the amount of interest charged.
  4. Character – Your relationship with your banker allows them to consider your integrity.  It’s critical to let your actions meet or exceed the expectations your words establish on a regular basis.

A good business banker is your advocate – they’re in your corner. Like CPAs, business bankers are exposed to multiple businesses and industries and they can be a great sounding board for ideas and help you strategize on ways to reach your financial objectives.

Business Relationship Help

Need to round out your business advisory team? Contact Rea & Associates. We can provide accounting services and business consulting services to your business, but we can also connect you to other business professionals that can help you complete your business advisory team.

Author: Chris Roush, CPA (Millersburg office)

 

Looking for more information on how to strengthen your business? Check out these blog posts:

Building Bridges: The Power of Networking

How Can You Build And Develop Your Organization?

Do Your Business Metrics Need an Oil Change?

 

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Help Is Available For Small Manufacturers Impacted By Foreign Imports

Wednesday, July 2nd, 2014

America is the land of the free, and a place where we’re all supposed to have boundless opportunities. So if you’re the business owner of a small manufacturer, and you’re feeling financially and competitively pinched because of foreign imports, know that there is relief.

Trade Adjustment Assistance

The U.S. Department of Commerce’s Economic Development Administration developed and funds a program to help manufacturing companies become more competitive against foreign imports. The program, “Trade Adjustment Assistance for Firms,” provides up to $75,000 in matching funds to qualifying manufacturers to invest in projects identified during the plan development phase. Qualifying projects must be time-limited and performed by third parties who provide knowledge-based help covering the areas of marketing, industrial and systems engineering or financial and general management consulting.

Examples of “qualifying projects” include:

  • New product development marketing
  • Lean manufacturing implementations
  • Quality certifications (ISO, TS)
  • Enterprise resource planning (system selection, training)

“Non-qualifying” projects include:

  • Capital expenditures (e.g. equipment or software)
  • On-going business expenses (e.g. FTE salaries)
  • On-going business processes

Big Benefit Of Trade Adjustment Assistance for Firms Program

An added benefit of the program is a customized diagnostic survey and comprehensive action plan created for the business by the program’s personnel. There is no fee to apply to the program. Once eligibility for the program is confirmed, the plan development phase typically takes one to three months with the implementation phase able to run for up to five years. Any funds not expended after five years are lost.

Funding for this program was recently renewed so now is the time to invest 30 minutes of your time to speak with a program representative to see if you qualify.

Ohio Small Manufacturer Help

If you’re an Ohio Small Manufacturer that’s having trouble keeping up with foreign imports and competition, and needs assistance with strengthening your business’s bottom line, contact Rea & Associates. Our Ohio manufacturing service team can help you evaluate your business’s current financial state and determine what steps you need to take to get back in the game.

Author: Christopher E. Axene, CPA (Dublin office)

 

Looking for more Ohio manufacturing-related articles? Check these blog posts out:

How Can Manufacturers Deal With Competition?

How Can I Solve My Staffing Woes In The Manufacturing Industry?

How Do You Take Your Business to the Next Level?

 

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8 Tips For Crafting A Strong Password

Thursday, June 12th, 2014

eBay Inc. recently recommended its users to change their passwords. Why? If you guessed there was a cyberattack on one of eBay’s databases, you are correct! Cyberattacks have been in the news almost daily, and unfortunately they seem to be increasing in number. While companies are busy trying to stave off any attacks, there are ways you can protect yourself.

Treat Passwords With Care

Like with other items, you should consider your passwords to be sensitive material. Treat them no differently than you treat your credit cards. Make sure your passwords are secure and change them regularly – as often as four times a year, or sooner if you believe it has been compromised.

A standard eight-character password with moderate security can be hacked within two to four hours. In comparison, passwords or passphrases of 12 characters with high complexity would take 17,000 years to breach.

8 Tips To Keep Your Passwords Strong and Safe

Here are eight tips and best practices you can implement to help keep your passwords strong and safe:

  1. Use passphrases instead of passwords or a string of characters and digits. Passphrases can be easier to remember. For example: “Myd0gisSamm@”
  2. Use upper and lower case letters, numbers and special characters in passphrases.
  3. Never use complete words within a passphrase.
  4. Change passphrases routinely.
  5. Never share passphrases with others.
  6. Be cautious of shared computers that do not have current virus detection programs installed on them, such as hotel data centers, publicly used computer kiosks.
  7. Change passphrases after using a shared public access computer.
  8. Use two-step verifications when available.

Password and IT Audit Help

Need some additional advice on how to create strong passwords that will protect you and your business? Contact Rea & Associates. Our IT audit professionals can help you determine where you can strengthen your IT security.

Author: Brian Garland, CPA (Dublin office)

 

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What You Need To Know About Obamacare Employee Dumping

Thursday, June 5th, 2014

You may have heard some buzz lately about the Obama administration and/or the IRS barring employers from “dumping” employees onto the health care exchanges – with some truly severe cash penalties for doing so. But is this really “new” news? What exactly does this mean? It might surprise you to know that employee dumping is not all it seems.

A recent New York Times article explains that “employee dumping” is the practice where an employer drops health insurance coverage to its employees, the employees go to the health care exchange to buy insurance, and then the employer on a pre-tax basis reimburses its employees for their premiums. This “have-your-cake-and-eat-it-too” approach (with various ways to accomplish it) was one of the leading responses to this legislation that Obamacare consultants developed. The administrating agencies (IRS, HHS, DOL) shut this option down when they issues guidance in September 2013. ANY attempt by an employer to pay an employee a pre-tax benefit for health insurance has since then been a very dangerous approach, although some exceptions exist (e.g. retirees only). This current “news” is simply a clarification that these things are indeed busted.

Can You Still Drop Health Care Insurance Coverage?

What if you want to drop your coverage, send employees to the exchange, and then increase their after-tax pay so that they can pay for exchange insurance? That’s OK, it doesn’t conflict with the rules. It’s only pre-tax benefits you should be concerned with.

What if you increase worker pay as I just described, and then the employee sinks that cash into an HSA that they get from a bank (for free)? That gets them a tax deduction (up to certain limits) … is that OK?  Yes! Remember that what the IRS is looking to prevent is employers trying to give pre-tax benefits without offering insurance – that is the “evil” that these regulations are designed to combat. Once the employer pays taxable wages to an employee, the employee is free to use whatever means they have available to be tax efficient.

A Pit Trap For The Unwary

So is “employee dumping” limited to the situation where employers are trying to push tax-free cash to employees? Actually no, and this is why I refer to this as “a pit trap for the unwary.” Dumping also refers to the practice of employers encouraging workers with high medical bills to go to the exchange.

What exactly does this mean? Think of it this way … As an employer, you have an insurance plan that still takes into account the health and claims of your workforce (they still exist). If you can get an employee to the exchange that has $400,000 of medical costs a year, you could potentially save a large sum of money and your employee is not harmed because they can get quality coverage on the exchange for no more than a healthy individual can.

Some companies throw a cash kicker on top for the employee to voluntarily drop coverage (what’s an extra $10,000 in cash if you are saving $100,000+). Everybody wins, right?  Well, not the Exchange. If it’s discovered that you – the employer – are doing this, there are administrative rules in place that can throw that cost back at you. Insurance companies have a duty to report suspected employee dumping, so be careful!

Obamacare Help

Have you considered “dumping” or are you unsure if you’re heading down this path? If so, contact Rea & Associates. Our team of Ohio tax professionals can help you determine what path is best for you to take, as well as help you stay in compliance with Obamacare rules and avoid any pitfalls along the way.

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

 

Interested in reading more on how Obamacare will impact you and your business? Check out these posts:

Peeling Back The Onion: Answering 3 Popular Obamacare Questions

Health Insurance Options: SHOP, Drop, Roll, or Self-insure?

How Will ACA Federal Exchange Premiums Affect Ohio Small Businesses and Consumers? 

 

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Building Bridges: The Power of Networking

Wednesday, June 4th, 2014

Every day we encounter people for a wide variety of reasons. You could be at the supermarket, or perhaps you’re standing in line for your latte. Or maybe you’re at a local Rotary lunch. Do you ever find yourself looking for business opportunities in the mundane routines in life? Good business people are constantly asking themselves the question “where will tomorrow’s business come from?”

Every Encounter Counts

Every contact you make is a potential opportunity to grow your business. And networking is a critical part of that process. But, what many individuals fail to understand is how a network works. Let’s take the engineering of a bridge for example. A bridge is not constructed through a two-point or three-point connection. The strongest bridges are constructed through a complex network of materials with overlapping points of contact. Those bridges span large areas and allow you to get from one place to another.

Professional networks are similar to a bridge’s network. The best networks are an overlapping of personal and professional lives. They interconnect at many points. The person you meet tomorrow at your child’s school play may not be a client for you, but you may introduce them to someone that can help them and that connection you have provided can then be used for another point of contact.

Networking In Motion

In a couple weeks, I’ll be having breakfast with a former colleague who has just returned to my neighborhood from the West coast. Chances are I won’t have an opportunity to provide services to him in the near future, but by reconnecting, I’m someone he’ll remember. Perhaps he may come across someone who needs services that I can provide.

This whole idea of networking and building bridges may seem like common sense, but it can be so easy to get caught up in the daily routine of life that it can quickly be forgotten. Next time you’re at your son’s baseball game, don’t miss any opportunities to connect with other baseball fans who could be your next customer.

Need Help In Growing Your Business?

If networking doesn’t come naturally to you or you’re unsure about how to grow your business, contact Rea & Associates. Our Ohio business consultants can help you evaluate where you’re at currently and help you determine what you need to do moving forward.

Author: Michaela McGinn, CPA (Dublin office)

 

Looking for more blog posts on how to grow your business? Check these out:

How Can You Build And Develop Your Organization?

What Are 6 Things You Can Do To Improve The Health Of Your Business in 2014?

Why Is A Budget Important To The Success Of My Business?

 

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Do Your Business Metrics Need an Oil Change?

Friday, May 23rd, 2014

Did you ever notice that little sticker in the upper left-hand corner of your windshield? The one that informs you your next service date for changing the oil and tire rotation. As you fire up the ignition, the fuel gauge is activated and the miles per gallon information is displayed. The on-board computer lets you know that the headlights are in the automatic position and the tires are properly inflated. The navigation system may even provide a weather update or a construction delay on the interstate. Within a matter of seconds of entering your vehicle, you have virtually all of the important metrics for your upcoming road trip.

Your business metrics and performance indicators should be as easy as locating your vehicle’s metrics. The metrics need to be meaningful to you and your team and used as a decision making tool in the day-to-day operations of the business. Many business owners and managers use daily and quarterly metrics more frequently than the monthly financial statements to run the day to day operations.

Business Metrics To Consider

Your business’s on-board computer can churn metric after metric and ratio after ratio. However, the quality of the metrics is far more important than the quantity. One recommendation is to identify four to six ratios that are unique to your business and industry and continue to study the trends on a daily or weekly basis. As a general rule, every business should consider metrics in the following areas:

  • Customer Metrics: How many new customers have you acquired over the last six months? How many customers have you lost? What is the average profit margin for each customer?
  • Cash Flow Metrics: These metrics should be designed to measure the company’s ability to meet obligations as they come due. For example: Is your inventory turning? How old are your accounts receivable?
  • Sales Metrics: A company should have sales metrics to measure sales and whether the sales are satisfactory for the company.
  • Employee Metrics: These metrics could be designed to measure how effectively the company is hiring and managing its employees.
  • Borrowing Metrics: This metric will measure how the company is effectively managing its debt. 

Once the metrics have been determined than a “windshield sticker” or dashboard can be affixed to your technology devices and reviewed by the management team on a regular basis. In addition, an industry scorecard can be developed to measure how the business compares to the industry.

Just like the oil in a car, the business metrics will need to be changed or enhanced on a regular basis to reflect changes in the economy and the business cycle.

Safe travels and be on the look-out for orange construction barrels and detours. Check your metrics!

Business Metrics Help

If you need help determine which business metrics are right for your business, contact Rea & Associates. Our team of Ohio business consultants can help you determine which business metrics are needed for the success and growth of your business.

Author: Dave Cain, CPA (Dublin office)

 

 Related Articles

How Can A Small Business Owner Keep More Money In Their Pocket?

How Can Analytics Help Reduce Fraud Risk At Your Business?

What Are 6 Things You Can Do To Improve The Health Of Your Business in 2014?

 

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What Should You Ask When Reviewing Your Life Insurance Policy?

Wednesday, May 21st, 2014

Throughout the past several months, I have written a couple of articles that explained the importance about why you should review your life insurance policy. It’s one of those things that we get for the “just in case” moment, and then sometimes forget about it. You’d be surprised how often unexpected slip-ups occur with life insurance policies. That’s why it’s so important to review your policy … to ensure that you’re not paying too much or too little for coverage, and to ensure that your policy is working properly for you.

All that said, here are six important questions you should ask when reviewing your life insurance policy:

Has my life situation or needs changed since I purchased my policy

Back in January, I wrote an article that outlined six common life changes that should cause you to stop and review your life insurance policy. These life changes ranged from the purchase of a new home to the changing of your job to the death of your spouse. If your life situation has changed since you originally purchased your policy, you’ll want to evaluate whether you need to increase or decrease coverage.

Have assumptions, such as interest rates, related to my policy change?

When you first purchased your life insurance policy, your insurer made some assumptions based on the market conditions at the time of your policy purchase. But as market conditions change, so can the assumptions your insurer originally made. By reviewing your policy, you’ll be able to determine if you need to make some policy adjustments that will help you receive the best benefits possible for your policy.

Do I have too much or too little life insurance coverage?

When you first took out a life insurance policy, you may have been making a lot less than you’re making now. If you’re making more now, you may find the need to increase your coverage. If you just said “Adios” to your youngest child who left your nest, you may find that you need less life insurance coverage now. It’s important to align your life insurance coverage with your needs and consider whether you’re paying for too much or too little of coverage.

Are my beneficiaries properly identified?

If you were to pass away while your life insurance policy is in effect, do you know who would receive the money? Many individuals name their spouses, children or parents as the beneficiaries. But if it’s been awhile since you purchased your policy, you might want to review it to ensure that your beneficiaries are properly identified. Make sure that your life insurance money will go to the individuals you really want it to go to.

How reliable is my insurer?

When you first purchased your life insurance policy, how well did you research the life insurance company you did business with? If you can’t recall spending a lot of time figuring out whether the company solid and reliable, you may want to evaluate the reliability of your insurer. The industry is rapidly changing, and with industry changes come concerns over whether certain insurers can continue to provide reliable service. If you question or are concerned about this, you’ll want to consider whether you need to change insurers.

Is my life insurance policy aligned with my estate/business plan?

Believe it or not, the lack of alignment between a person’s life insurance policy and their estate/business plan is seen more often than not. There are tax consequences for your beneficiaries if these two items don’t align, so in order to provide your beneficiaries with the maximum amount of money, ensure that your policy aligns with your estate/business plan.   

Life Insurance Review Help

Not sure where you and your life insurance policy stand? Don’t wait any longer. Get a review of your life insurance policy. Contact Rea & Associates, and we can help connect you to individuals who can help you with a life insurance review. You and your family will be glad you did.

Author: Don McInstosh (New Philadelphia office)

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What You Should Know Before Dipping Into Your 401(k)

Friday, May 16th, 2014

Got a 401(k) plan? Have you ever withdrawn money from your 401(k) account? If so, you’re part of the growing number of Americans using their 401(k) accounts to fund other areas of their lives. A recent Bloomberg article explains that more and more Americans are turning to their 401(k) accounts rather than to other means, such as a loan, to help cover any unexpected financial needs that come up.

Historically, Americans have used their homes as a source of additional money. According to the article, when home values rose, homeowners refinanced or took out second mortgages. But due to the housing collapse back in 2008, many homeowners don’t have these options anymore – so they turned to their 401(k) accounts. What many people don’t realize is that depending on their 401(k) plan, they could be penalized for either taking an early withdrawal and/or not putting that money back into their account in the appropriate amount of time.

Shocking 401(k) Withdrawal Statistics

The Bloomberg article cites an IRS report that states the agency collected $5.7 billion in withdrawal penalties in 2011. In other words, Americans withdrew nearly $57 billion from their retirement accounts. That’s $5.7 billion that the IRS would otherwise not have banked on receiving. And what’s the federal government doing with this “extra” income? Funding federal agencies and projects.

Think Before You Dip

Before you turn to your retirement plan for help, you should be aware of some things. It may seem like an easy option, but the IRS actually has some rules that you have to meet before taking money from your 401(k). One of the following conditions must occur before you can take money out without being penalized:

  • You lose your job
  • You claim disability
  • You or your spouse dies
  • You turn 59 ½ years old

401(k) Withdrawal Based on Financial Hardship

If you don’t meet the criteria listed above, but are facing a financial hardship, you may also be able to take an early withdrawal from your retirement account. The IRS’ hardship rules require you have one of the following needs to qualify for a hardship withdrawal:

  • Medical expenses for you or your immediate family
  • Financial assistance in the purchase of your primary residence (this excludes mortgage payments)
  • Tuition or other educational fees (maximum of 12 months) for you or your immediate family
  • Prevent the eviction of you from your primary place of residence
  • Burial or funeral expenses for deceased parent, spouse or other immediate family member
  • Expenses for the repair of damage to your principal residence

The amount of money you take can’t be more than the amount you actually need to cover your hardship. It’s important to note that your early withdrawal due to a financial hardship is subject to state and federal taxes, and is also subject to a 10 percent early withdrawal penalty if you are under age 59 ½. So keep all of these considerations in mind when deciding whether to dip into your retirement account.

401(k) Withdrawal Help

If you’re not sure if a retirement withdrawal is the best route to go, contact Rea & Associates. Our team of Ohio retirement plan services professionals can help you determine if you’re eligible and what you need to do to minimize your tax liability from a withdrawal.

Author: Steve Renner, QKA (New Philadelphia office)

 

Looking for more information related to 401(k) or retirement plan withdrawals? Check out these blog posts:

Will I Be Penalized for a Hardship 401(k) Withdrawal?

Raiding Your 401(k)? It’ll Cost You

What Are The Rules For Taking A Distribution from My 401(k) Plan?

 

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DOMA’s Effect On Retirement Plans And Beneficiary Forms

Monday, May 12th, 2014

Last June, the U.S. Supreme Court, in United States v. Windsor, ruled that Section 3 of the federal Defense of Marriage Act (DOMA) is unconstitutional. As you may recall, DOMA Section 3 states, “In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word ‘marriage’ means only a legal union between one man and one woman as husband and wife, and the word ‘spouse’ refers only to a person of the opposite sex who is a husband or a wife.”

By holding Section 3 of DOMA unconstitutional, qualified retirement plans must now treat the relationship of same‐gender married couples as a marriage in order to maintain the plans’ tax‐qualified status. The term “spouse” includes an individual married to a person of the same-gender if the individuals are lawfully married under state or foreign law.

The IRS recognizes a valid same-gender marriage even if the married couple is living in a state that does not recognize same-gender marriages. The term “spouse” doesn’t include individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not defined as marriage.

Important DOMA Information for Plan Sponsors

  • Participants (and their spouses) who are in same-gender marriages generally must be treated as married for all purposes under a retirement plan. This was effective as of June 26, 2013.
  • As of September 16, 2013, your plan must recognize same-gender marriages that were lawfully performed under the laws of the 50 states, D.C., U.S. territory or a foreign jurisdiction.
  • States that currently recognize same-gender marriages include: California, Connecticut, Delaware, Hawaii, Illinois (law will take effect on June 1, 2014), Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Rhode Island, Vermont and Washington.
  • Depending on whose retirement plan provider plan document you use, you may want to contact the provider to ensure that your retirement plan complies with these new rules. In general, amendments to such plans are due by the end of the plan’s remedial amendment period, or December 31, 2014.
  • As a plan sponsor, you have no obligation to notify current or former participants of the new rules.
  • All qualified plans must recognize same-gender marriages for all plan purposes. This would include provisions applicable to beneficiary designation, death benefits, applicable spousal consent requirements regarding distributions and loans, rollovers, etc.

Retirement Plan Help

Now is the perfect time to update beneficiary forms for all participants in your plan. It’s important you keep a current copy of each participant’s beneficiary form in his or her personnel file. If you need assistance with this, contact Rea & Associates. Our Ohio benefit plan services team can help you determine what you need to do to keep in compliance with IRS and DOL regulations.

Author: Andrea McLane, QKA (Dublin office)

 

Looking for more posts about retirement plan best practices? Check these out:

What Are The Rules For Taking A Distribution from My 401(k) Plan?

What Should Plan Sponsors Ask Their Investment Advisors?

What Are The Responsibilities of a Fiduciary?

 

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How Can A Small Business Owner Keep More Money In Their Pocket?

Thursday, May 8th, 2014

Who doesn’t want more money in their pocket? It’s something I think all of us would love to have. And small business owners are in luck! Accountants throughout the state of Ohio advocated for small business owners and worked with Ohio legislators to develop the Ohio Small Business Investor Income Deduction provision. In the 2013 tax year, Rea clients eligible for this tax deduction submitted nearly $80 million in tax deductions, and realized nearly $4 million in tax savings. This provision has truly helped small business owners keep money in their pocket!

How Do You Know If You Eligible For The Ohio Small Business Income Deduction?

If you’re a taxpayer who owns a business, such as a sole proprietorship, a partnership or a limited liability corporation, and you bring in $125,000 in Ohio-sourced income (that would be $250,000 if you’re married and file jointly), you’re eligible for this deduction. For the first $125,000 (or $250,000 married, filing jointly) you report, you can take up to a 50 percent tax deduction. For many business owners, that’s real, significant savings. Keep in mind that businesses themselves are not eligible for the deduction, but rather the business owner, as an individual taxpayer, is eligible.

Why This Deduction Matters  

This provision, along with others, provides a tax cut for individual taxpayers. Last year, Ohio Governor John Kasich released a broad tax reform package that was aimed at putting money back into Ohio taxpayers’ pockets. Part of this reform was the Ohio Small Business Investor Income Deduction (SBD). The Ohio SBD, along with a string of other tax cutting provisions, is aimed at cutting taxes for Ohio business owners and individuals by $2.7 billion over the next three years. The end goal: to build and accelerate economic and job growth in Ohio.

If you were eligible for this deduction in 2013, you should have realized tax savings. In looking to the future, have you considered what your 2014 tax savings could be by taking advantage of the Ohio SBD? If not, it’s something you should be looking into so you can keep more money in your business.

Ohio Tax Help

Unsure of your eligibility or need help in understanding how this deduction can apply to you? Contact Rea & Associates. Our team of Ohio tax professionals can review your operating structure and help you maximize your 2014 tax savings.

Author: Don McIntosh, CPA (New Philadelphia office)

 

Interested in reading more blog post about tax savings? Check these posts out:

How Will A Tax Credits and Incentives Plan Benefit Your Business?

So Is It a Tax Credit Or a Tax Deduction?

How Do You Make Your Charitable Contributions Count?

 

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How Can Analytics Help Reduce Fraud Risk At Your Business?

Friday, April 25th, 2014

Whether it’s due to limited resources or staffing, you may find it difficult to find time to closely review the financial activity of various departments within your business. But here’s the thing: not doing detailed reviews can leave your business exposed to increased risk of error or fraud. Incorporating analytics into your review process can be an efficient way to detect errors and fraud and will allow you to identify areas of risk within your business. Analytics are frequently part of audit procedures, and compare the correlation between key statistical data and actual financial activity.

How To Use Analytics In Your Reviews

  1. Identify the information. Identify the department, segment or line item you want to review and determine a time period that will allow the most effective review. Analytics can be used to compare financial activity on a monthly, quarterly or annual basis. Determine what information will allow for the most effective review. For example, if you’re reviewing the revenues related to food service operations you may want to breakout the revenues by type (i.e. lunches, breakfast, a la carte, adult).
  2. Identify the primary driving factors. The most important step in an analytic is identifying the primary factors that will cause significant changes in the activity you are reviewing. Use the changes in those factors to set expectations for the amount you expect the actual financial activity to change. Continuing with the example above, if you noticed the number of lunches served increased 10 percent in the current month compared to the previous month then you would expect the revenues to correlate with that change.
  3. Review the results. Compare your expectations to what actually happened. Based on the example I’ve been using, if your actual revenues decreased by 2 percent then you will want to investigate this change further. If actual revenues increased by 9 percent then you may determine the variance is acceptable and you don’t need to investigate any further.

The Discovery Of Potential Errors

If after you’ve compared the results of the analytics and identified a few areas that didn’t meet your expectations, what do you do next?

  1. Contact the person responsible for the area you reviewed. Determine if there are additional factors that would have caused the variance from your expectations.
  2. If you have determined there are no additional factors or what was communicated to you was not reasonable, you may want to consider a more detailed review. Theoretically, if you have considered all factors in your expectations, the only plausible explanation at this point for a variance is a misstatement probably due to error or fraud.
  3. If you have identified an error, review the controls and processes in place to determine what caused the error. This is where you can identify steps to improve the control strength to prevent future errors.
  4. Inform your auditors of the results of your analytics and the areas of risk you identified. This will allow your auditors to focus on these areas and provide more value to your audit. Your auditors will more than likely ask these questions and you’ll already know the answers.

Using analytics within your business will allow you to properly allocate more of your time and resources to the areas with the most risk. You will be able to efficiently identify the riskier areas and make the necessary improvements in processes and controls to address the risk.  This can prevent possible audit findings, adjustments and can even help prevent fraud.

Analytics and Financial Review Help

If you are looking to step up your game as it relates to financial reviews within your company, contact Rea & Associates. Our team of Ohio government auditors can help you incorporate analytics into your reviews so you can get a better picture of how funds are being used throughout your organization.

Authors: Chad Gorfido, CPA (Medina office), and Annie Yoder, CPA, CFE, CFF (New Philadelphia office)

 

Looking for more information on how to reduce fraud risk within your business? Check these articles out:

Have You Assessed Your Fraud Risk?

Do You Subscribe to a Fraud Hotline?

 

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How Can You Build And Develop Your Organization?

Wednesday, April 16th, 2014

If you run a manufacturing business, then you know it’s no easy task. You may often find that the day-to-day activities become your focus. It can be hectic, time-consuming and physically and emotionally draining. These issues can take away from your ability to focus on actually growing your business. It can be a “Catch 22” because if you aren’t building the right organizational structure, then the day-to-day activities continue to consume your time and before you know it, you’ll become like a cat chasing your tail.

Going From ‘Good to Great’

In the book Good to Great by Jim Collins, he touches on this very issue. He says, “The executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there. No, they first got the right people on the bus (and the wrong people off the bus) and then figured out where to drive it.”

Many closely-held business owners struggle to grasp this concept. In my experience, if you want to grow a successful company and have a reasonable quality of life, you must get your arms around your organizational structure. For individuals who don’t, your company probably won’t reach its potential and you may spend most of your time working in your business and not on it.

Building Your Organization May Require Tough Choices

In my career I have worked with many companies that have had a difficult time building their organization.  It’s not easy and you won’t always get it right. When you get it wrong you must move swiftly to make the necessary changes. Most of us know when we have the wrong person in the wrong position, but we just procrastinate in making a change. Making the right move is critical for building an organization, even when it’s a tough choice.

Maximize your time and talents – and the time and talents of your employees. But know that it can’t be done without the right people around you. Make sure you have a solid management team surrounding you that can help you move your business in the direction you want it to go.

Author: Mike Taylor, CPA (Millersburg office)

Are you interested in reading more blog posts about managing your business? Check these ones out:

What Are 6 Things You Can Do To Improve The Health Of Your Business in 2014?

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

What Are The Top 5 Challenges Business Owners Face in Today’s Economy?

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What Should You Do After Tax Season?

Monday, April 14th, 2014

Now that most of you have either filed your 2013 tax return or at least gathered your tax information and sent it off to your CPA, I know what you’re thinking. Phew! I’m done with my taxes for yet another year! But guess what? No, you aren’t!

Now is the time to start planning for next year. The sooner you plan ahead and strategize for next year’s tax season, the better off you may be. Not happy with the amount of taxes that you had to pay this past year? Not happy that you seem to work harder and harder only to pay more in taxes and get further behind? Start planning now for future tax seasons!

Tax Planning For the Future

Here are a few things you can start working on now to help create a better tax experience for yourself next year:

  • Develop an investment strategy. Most people don’t understand the affect this can have on your tax return. You can control when and how to take gains from your investments. You should work on developing a long-term investment strategy with your investment advisor.
  • Create a plan to sell property. Are you considering selling property sometime in the future? Did you know that there are ways to minimize taxes that need to be paid on the sale of property? This isn’t done by calling your financial advisor and letting them know you just sold some property. Get them involved now and discuss that you plan to sell some property in three to five years. Your financial advisor can help you structure the property sale and ultimately help you control the tax effect.
  • Establish a business plan. If you’re thinking about starting a new business, work with your financial advisor now to determine what tax savings you may be able to realize. Depending on the type of entity there could be significant tax savings down the road. 

Tax Planning Help

While there’s no single quick fix to solving all of your business and tax woes, planning now will certainly help you when tax season rolls around next year – and the year after that and so on. If you need help with your tax planning, contact Rea & Associates. Our team of Ohio tax planning professionals can help you develop a tax strategy that best suits you for years to come.

Author: Dave McCarthy, CPA, CSEP (Medina office)

 

Want to read some more articles related to tax planning? Check these posts out?

What Is The Difference Between Fixed Asset Expensing And Capitalization?

So Is It a Tax Credit Or a Tax Deduction?

How Will A Tax Credits and Incentives Plan Benefit Your Business?

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How Can Heartbleed Affect You and Your Business’s Online Identity?

Friday, April 11th, 2014

The Internet is a powerful tool – something that can make our lives (and businesses) easier. But it also can be our worst nightmare at times. If you keep up on the news, you may recall within the past few days hearing something about “Heartbleed.” No, this isn’t the name of a new rock-n-roll band. It’s the latest threat to your security on the Internet. News sites started reporting on this newest Internet threat earlier this week. But as more and more has become known about this Internet defect, it’s becoming clear that everyone with an online identity needs to be concerned about it.

Heartbleed is an exploit that basically allows malicious users to run a tool that will gain them access to a Web server and provide them with usernames and password from that server. What can this defect potentially affect? Every website on the Internet. Bank websites, social media sites, online merchant sites … the list goes on.

Within the past couple days, a Heartbleed defect was discovered that allows hackers to access chunks of a server’s memory that could contain Personally Identifiable Information (PII). Sites that integrate a Secure-Socket Layer (SSL) encryption certificate are now at risk of this new defect.

Steps For Protecting Your Online Identity

So what should you do to protect you and your business from this risk? Follow these steps:

  1. Take inventory of all of your online accounts and make a list of your accounts.
  2. Before changing your online passwords, contact the businesses of any accounts that may have SSL certificates to ensure that the company has issued new certificates. To check the “grade” of an SSL-secured site, you can visit Qualys SSL Labs website and input the URL of the site you’re checking. Sites are graded (A through F) on how secure they actual are.
  3. Change your passwords for each of your online accounts.
  4. Clear your Web browsers’ cache, cookies and history. Check out this ZDNet article for step-by-step instructions on how to do this.
  5. Closely monitor your bank and credit card statements to make sure there’s no unusual or suspect activity.
  6. If you receive emails or other online communication that promises a solution to your Heartbleed woes, don’t buy it. These communications are more than likely spam connected to dangerous malware or pointing you to malware. Heartbleed is a very complex online security threat, and there’s not a simple, quick fix for it.

Need Advice On Protecting Your Online Identity?

Following the steps outlined above will hopefully help lessen your chances of becoming a victim of identity theft and fraud. If you have questions or need additional guidance on how to protect your business, contact our IT audit professionals at Rea & Associates.

Author: Brian Garland, CPA (Dublin office)

 

Looking for other blog posts about protecting your business’s online identity? Check these posts out:

Do You Know Who Has Access To Your IT Network?

How Can I Protect My Business From A Data Security Breach?

How Can You Prepare For The Retirement of Microsoft Windows XP?

 

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Do You Know Who Has Access To Your IT Network?

Thursday, March 20th, 2014

You may find that your business relies heavily on the technical support provided by third-party hardware and software providers. But have you ever considered whether your vendors have direct access to your business’s internal IT network without having to gain permission from someone within your business? If you’re not positive about how to answer, then it’s probably time to do some digging to see if that’s the case or not. It’s possible that your vendor(s) has access to your business’s sensitive data and devices.  (more…)

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Which Life Insurance Policy Is Right For You?

Monday, March 17th, 2014

Back in January, I shared some insight about six common stages of life where you should review your life insurance policy. Today I want to provide some insight about how you can know what the right life insurance plan is for you.  (more…)

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Why Should You Review Your Retirement Plan Documents Now?

Tuesday, March 4th, 2014

“If it’s not broken, don’t fix it.” A lot of people adhere to this philosophy, but in some cases, a review of how something works is not only helpful, it is required. If a business’s retirement plan seems to be working fine, and there doesn’t appear to be anything out of place, many employers believe there is no reason to review the provisions of the plan. This may be the case for a plan that was recently established, but it is always a good idea to review provisions every few years to ensure the plan is still meeting the goals of both the employer and its’ employees.  (more…)

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How Can My Statement of Cash Flows Transform My Business?

Friday, February 28th, 2014

Do you realize that your business’s financial statements are a valuable management tool for decision making? You may be thinking, “Well, I just get them done because the bank needs them for my loan file,” or, “I think I have a copy in a drawer somewhere.” But if you take the time to understand your financial statements, you’ll be surprised to find that they can give you information on the condition of your company and allow you to make better business decisions.  (more…)

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What Could Ohio’s Small Business Investor Income Tax Deduction Do For Me?

Thursday, February 27th, 2014

In an effort to become more taxpayer-friendly and reduce the effective tax rate, Ohio enacted the Small Business Investor Income Tax Deduction effective for tax year 2013. This tax deduction benefits many of Ohio’s individual income taxpayers. So how exactly does this deduction work?  (more…)

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How Do I Apply For Ohio’s Honor Project Trust?

Wednesday, February 19th, 2014

Please note the funds from this project have been distributed. 

Could your nonprofit use some “extra cash”? I’m sure most of you answered “yes” to that question. And the timing couldn’t be better. A few months back I wrote a blog post about Ohio’s Honor Project Trust. The Honor Project Trust was created as a result of a lawsuit settlement. Excess settlement proceeds from the lawsuit totaling approximately $9 million were earmarked for Ohio nonprofits. The trust’s mission is to identify and providing funding to not-for-profit charitable organizations that have a societal impact in the State of Ohio.  (more…)

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What Should Plan Sponsors Ask Their Investment Advisors?

Wednesday, February 12th, 2014

Like many business owners, running your business every day is a top priority for you. But as a sponsor of a 401(k) plan, you have an obligation to your employees to make your plan a priority as well. The truth is, most business owners are not 401(k) experts. Therefore, working with a quality 401(k) investment advisor should also be a priority. As a plan sponsor, there are questions you should be asking your advisor to ensure they are helping your meet your fiduciary obligations as the plan sponsor.  (more…)

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What Do The Recent IRS Final Regulations for Obamacare Entail?

Wednesday, February 12th, 2014

You’ve probably never received a Valentine’s Day gift from the IRS, but this year you did! On Monday, the IRS issued final regulations on Obamacare’s employer shared responsibility payment provision, otherwise known as the “pay or play” provision. Like many things the IRS announces, there’s quite a bit a fine print. This time is no exception. Check out some of the highlights of the final regulations and learn what you need to know moving forward.  (more…)

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When Should You Start Thinking About Succession Planning?

Monday, February 10th, 2014

You’re busy serving customers. Managing employees. Overseeing the day-to-day operations of your business. Stepping down as the head of your company may not be on your radar, but sooner or later you’ll need to think about what will happen to your business once you’re out of the picture. We recommend that business owners start thinking about their business succession plan at least five years before planning to implement it.  (more…)

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What’s The Relationship Between Side-Businesses And Tax Deductions?

Friday, January 31st, 2014

Do you or someone you know enjoy knitting or jewelry-making? Or perhaps you do résumé writing or other professional consulting work? If you do any of these as a side business and make a profit, did you know that you can deduct expenses that are ordinary and necessary to your business? If your side business expenses exceed the income for your business, then the loss can be deducted against other income. However, if your loss is from a business that’s not making a profit, then you’re not allowed to deduct your loss against other income.  (more…)

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When Is The Best Time To Review My Life Insurance Policy?

Thursday, January 30th, 2014

Cartoon characters and celebrities all tell you to get it – life insurance that is. Now that you have it (or are at least considering purchasing it), is that it? Do you just sit back and pay your monthly life insurance fee until your policy expires? No way!  (more…)

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Will You Be Paying With Cash, Credit Or Bitcoins?

Wednesday, January 29th, 2014

Bitcoin has been all over the news lately, and you may be asking – what exactly is it? Bitcoin is a virtual currency. Only existing online, it’s powered by its users and not backed by any government agency. This new currency offers anonymity, convenience, helps facilitate international commerce and can fluctuate in value. Check out www.bitcoin.org for more information and frequently asked questions.  (more…)

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How Can You Prepare For The Retirement of Microsoft Windows XP?

Thursday, January 16th, 2014

You’ve probably heard by now about the Target data breach, but just this week other retailer data breaches during the 2013 holiday season have become known. In light of these broad, major data breaches, this is a great time to ask yourself: When was the last time you evaluated your business’s IT network? If this has been an area of your business that you’ve let slide, then let it slide no more!  (more…)

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What Should You Know About 2014 Standard Mileage Rates?

Tuesday, January 14th, 2014

Do you use your personal vehicle for business purposes when you’re on the clock? Or do you use your vehicle medical, moving or charitable purposes? If so, did you know that you can claim a tax deduction on the mileage you rack up?  (more…)

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What Are 5 Things You Should Do Financially Now?

Tuesday, January 7th, 2014

As a small business owner, you probably find the end of the year a busy time. Before you know it, you find yourself into January trying to determine what the New Year will bring. One of the keys to being a successful business owner is taking a break from the day-to-day routine and spending some time doing valuable planning. This is sometimes referred to as working on your business, not just working in your business. To help you with this process, here are five things you should consider doing as a small business owner as you start the New Year.  (more…)

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What Are 6 Things You Can Do To Improve The Health Of Your Business in 2014?

Monday, December 30th, 2013

Are you out of breath from the impact the economy had on your business during the last several years? Is it time to develop some New Year’s resolutions that will make a difference in your business? Adopting a new diet, jumping on the treadmill or committing to run a half marathon are common items on the “personal” resolution menu. However, is it time to add energy and resources to your resolutions in order to improve the health of your business?  (more…)

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Obamacare Exchange Enrollment Deadline Extended One Day

Monday, December 23rd, 2013

Things are continually changing on the Obamacare front. I wanted to provide you with a brief update since my blog post from last Friday. In last Friday’s post, I explained that today (Dec. 23, 2013) was the last day for individuals to sign-up for insurance through the federal government (“the Exchange”) that would take effect on Jan. 1, 2014. However, the Obama administration announced today that it is extending the deadline by one day. If you’re interested in obtaining health insurance through the Exchange, you can now enroll through tomorrow, Tuesday, Dec. 24. For more information on the deadline extension, view this recent CNNMoney article(more…)

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Do I Need To Have Health Care Coverage Before Jan. 1, 2014?

Friday, December 20th, 2013

Christmas is upon us, but you know what else is? The federal deadline to pay for exchange insurance that’s effective Jan. 1, 2014. Yes, that’s right. If you want health insurance through the federal government, you’ve got until Monday, Dec. 23, 2013, to apply and pay for it. Some insurance companies have delayed this deadline to Jan. 10, 2014 – but not all. So don’t wait – make sure you’re covered today.  (more…)

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How Can Manufacturers Deal With Competition?

Friday, December 20th, 2013

Contrary to popular belief, the manufacturing industry is alive and well. For years, we’ve heard that it’s a “dying” industry. But that’s just not so. In fact, many manufacturers are enjoying higher profitability than 2008 pre-recession levels. However, if your manufacturing business is still young or you’ve hit a rough patch and are starting to see a downward shift in your sales and employment, there’s assistance that you may qualify for to help you get out the rut you’re in.

(more…)

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How Can I Protect My Business From A Data Security Breach?

Thursday, December 19th, 2013

We live in an ever-increasing digital world. And with that comes risk – and lots of it. The number of stolen debit/credit card numbers continues to grow every day. Today’s news story about how nearly 40 million Target customers had debit or credit card information stolen is the most recent example of the kind of risky, digital world we live in.  (more…)

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What Are Some IT Audit Tips That Can Keep You off Santa’s Naughty List?

Thursday, December 19th, 2013

The end of the year is near, and it’s easy to get caught up in the excitement of the holidays. But don’t let that be an excuse to forget about your entity’s security and information technology (IT) operations. As you close out your year, here are seven areas and tips that can help you strengthen and further secure your entity’s IT environment – and keep you off Santa’s naughty list!  (more…)

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Where Can I Find Easy-To-Use Tools For Calculating Complex Data?

Wednesday, December 18th, 2013

The holidays are upon us, and right now you’re probably looking forward to celebrating with family and friends. Your finances may be one of the furthest things from your mind, but once Jan. 1 hits, the holidays are over and we all go back to our “regular” lives. If you’re an individual who sets goals or resolutions for the New Year, you may find yourself hoping to get into better physical shape or get better organized. But in the craze of the holidays and in the midst of your New Year’s resolutions, have you considered your finances?  (more…)

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Peeling Back The Onion: Answering 3 Popular Obamacare Questions

Thursday, December 12th, 2013

As Obamacare becomes more and more of a reality to individuals, I’m being asked lots of questions. In the past few weeks, I received three questions that I’m finding are common concerns among the people I’ve talked with. I wanted to share these questions and provide some insight into each. So let me peel back the Obamacare “onion” and help you better understand how you may be impacted or what options you have available to you.  (more…)

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Will There Be Changes To The Small Business Health Care Credit?

Friday, December 6th, 2013

Has your business enjoyed the small business health care credit for the last few years? Well, get ready because changes are coming in 2014.  (more…)

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How Can You Best Prepare For The Upcoming Tax Season?

Wednesday, December 4th, 2013

It’s the holiday season, and you know what that means. I’m not talking about shopping or decorating or eating until your heart’s content. I’m talking about cleaning out those filing cabinets and getting ready for tax time! The more prepared and organized you can be as you approach tax season, the smoother a process you can create for yourself or your business.  (more…)

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How Can Franchising Work For You?

Monday, November 25th, 2013

Purchasing a franchise might seem like a very daunting process, enough so that you might not even consider it a possibility for you. However, have you ever considered what advantages buying a franchise might bring to you? Before jumping ahead to the benefits, let’s first look at what exactly franchising is.  (more…)

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Health Insurance Options: SHOP, Drop, Roll, or Self-insure?

Thursday, November 14th, 2013

You may recall the popular saying, “Stop, Drop and Roll.” This is what we were taught in case a piece of our clothing or hair caught on fire. This same clever saying can (in a roundabout way) be applied to the list of options that businesses now have because of Obamacare. SHOP, Drop, Roll or Self-insure.  (more…)

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

Friday, November 8th, 2013

Internal controls are procedures that companies develop to safeguard their assets and to produce accurate, reliable financial statements. When a company doesn’t have strong internal control procedures, fraud can occur much easier. Other issues that can arise include inaccurate financial statements, the inability to find certain documents such as invoices or purchase orders, or a higher than usual number of customer complaints.  (more…)

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Does Your Company Have Solid Internal Controls?

Thursday, October 24th, 2013

Let’s admit it… we all want to be able to trust other people. And we generally do…until we’re proven wrong. Owners of small, family-owned businesses are no different, and must put their trust in someone to handle their revenue, disbursements, payroll and inventory, among other financial functions.  (more…)

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