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

Steve Renner | March 28th, 2016
Administrative Mistakes | Retirement Plan Sponsors | Ohio CPA Firm

Even data entry gurus aren’t immune to making mistakes and, as many of us are already aware, it only takes a minor slip up to cause major havoc – especially where your plan contribution records are concerned. Read on to discover some common administrative mistakes retirement plan sponsors should know about and how to avoid them moving forward.

When it comes to saving for retirement, your employees trust you to help them get their finances in order. Don’t undermine their trust by making mistakes that could have been easily avoided. Instead, take a proactive approach to the administrative responsibilities you are expected to manage. Keep reading to discover three areas retirement plan auditors are checking for mistakes and what you can do to avoid future issues.

Enrollment

Pay close attention to your plan’s eligibility requirements. The enrollment dates for some employees can get confusing. Consider the following example.

According to your plan document, in order for an employee to enroll in your company’s retirement plan, they must be at least 21-years-old and have had worked for you for at least six consecutive months. Once they have met these requirements, they can enroll during the plan’s entry dates, which fall on the first day of each quarter.

Considering this scenario, on what day will you be able to enroll “John” into your company’s retirement plan if:

  • He was hired March 17, 2016
  • His birthday is Oct. 25, 1995

While it’s true that John will meet the 6-month employment requirement on Sept. 17, he’s unable to meet the age requirement. When he turns 21 on Oct. 25, he will still have to wait until the first day of the next quarter – Jan. 1, 2017.

If an employee misses the opportunity to participate as a result of an error made by the plan sponsor, the employer is required to correct the mistake by making a corrective contribution.

This common mistake can easily be avoided as long as your business has solid processes in place to determine the appropriate for all new employees who are choosing to enter into the plan.

Contributions

Even data entry gurus aren’t immune to making mistakes and, as many of us are already aware, it only takes a minor slipup to cause major havoc – especially where your plan contribution records are concerned.

When you manually enter your employee’s retirement plan contributions, you become vulnerable to data entry errors. It’s not uncommon for a wrong keystroke to lead to deposits being made into the wrong employee’s account, for example.

Fortunately, this mistake is easily avoidable if you take steps toward automation. Ask your payroll company if they can create a file that can be easily uploaded to your retirement plan’s record keeper in an automated format and save yourself any future data entry headaches.

Compensation

It’s very important to be clear about what your plan document considers to be compensation. For example, if your plan document makes a point to reference “W-2 compensation,” you are required to withhold retirement plan funds from all regular wages, bonuses, commission, overtime, etc. This means, that if you pass out performance bonuses and neglect to withhold their 401(k) contribution, your document has failed and your business is opened to unpleasant consequences.

Fortunately, it’s not too late. Your plan document most likely offers the flexibility to make a separate plan election on bonuses. If your employee does decide to elect a portion of their bonus to the plan, ask them to document the election request for your records as well as their own.

Mistakes happen, but you can minimize the chance of making some pretty major mistakes simply by adopting a more proactive management style. The tips above will certainly help you get started. But for even more, email Rea & Associates today.

By Steve Renner, QKA (New Philadelphia office)

Get more retirement plan advice for your business. Check out these articles:

How Your Plan Design Can Help Improve Your Retirement Plan Participation

13 Fees That Can Kill Your Retirement Plans

Retirement Plan Participants Are Content To Watch Their Savings Simmer

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Phishing Scam Is A Threat To Ohio Businesses

Lisa Beamer | March 28th, 2016
IRS Phishing Scam - Ohio CPA Firm

You can take a proactive stance when it comes to protecting your company from these scams by encouraging your employees to pay close attention to emails that request sensitive information, such as the names of employees, Social Security numbers, dates of birth, addresses and/or salary information or copies of employee’s W-2 information.

The Ohio Department of Taxation (ODT) is echoing phishing scam alerts made by the IRS earlier this month in an effort to protect businesses and employees state-wide from identity theft and tax fraud.

Read Also: Payroll, HR Departments Targeted By Cyber Criminals

According to ODT, payroll and human resources offices at companies nationwide – including some in Ohio – reportedly received emailed requests that appear to be sent from a high ranking member of the company’s management team requesting confidential payroll data. While the emails appear to be legitimate, they are actually being sent by cybercriminals who are looking to fool employees into sending them detailed payroll and W-2 information. The imposters then use the information to file fraudulent tax returns.

“The scam has worked on more than 30 companies resulting in the theft of W-2 tax information for thousands of current and former employees,” ODT’s news release states. “The W-2 form contains an employee’s Social Security number, salary and other confidential data. This information enables thieves to create a realistic looking, but fraudulent tax return requesting a tax refund that is then filed with Ohio or other states, and the IRS.”

The frequency of tax fraud and identity theft continues to increase at an alarming rate. This tax season alone, the IRS reported an approximate 400 percent increase in phishing and malware incidents – a surge that was addressed back in February.

“If your CEO appears to be emailing you for a list of company employees, check it out before you respond,” said IRS Commissioner John Koskinen. “Everybody has a responsibility to remain diligent about confirming the identity of people requesting personal information about employees.”

You can take a proactive stance when it comes to protecting your company from these scams by encouraging your employees to pay close attention to emails that request sensitive information, such as the names of employees, Social Security numbers, dates of birth, addresses and/or salary information or copies of employee’s W-2 information. You can also let them know that they should never send sensitive information until a conversation takes place, either in-person or over the phone, with the member of management seeking the information. You can also check out the information provided here for general insight from ODT that could be used to help your employees identify phishing attempts and email scams.

If your Ohio business has been the victim of or experienced this or any other type of email phishing scheme, contact ODT immediately at 800.282.1780 to protect against potential tax fraud and safeguard Ohio taxpayer dollars.

Those who are interested in learning more about the increasing threat of cybercrime should check out The Columbus Cybersecurity Series. Presentations are scheduled to take place throughout the year and will focus on ways to help business owners learn more about cyber threats. The first installment is scheduled for Wednesday, April 6. The event is free but registration is required to attend. Attendees will walk away with new insight into these attacks as well as tips and advice that will help you protect your business.

By Lisa Beamer, CPA (New Philadelphia office)

Want to protect your employees from identity theft and tax fraud or need help recovering? Check out these articles:

How Can You Protect Yourself From Tax Fraud

Identity Theft Prevention: Tips To Reduce Your Risk of Becoming a Victim

How To Recover From Identity Theft & Refund Fraud

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How To Trigger An IRS Audit

Chad Bice | March 25th, 2016
How To Trigger An IRS Audit - Ohio CPA

When was the last time you were happy – jubilant even – after receiving a letter from the IRS ? Exactly … Keep reading to learn how to keep the tax man out of your mailbox.

Only .84 percent of the 146.9 million individual tax returns filed in 2015 were audited by the IRS. The last time the audit rate was that low it was 2004 and most of us were walking around in Uggs. And even though the IRS says it expects to see even fewer audits in 2016, your chance of being audited tends to increase when:

You fail to report all taxable income

You will be notified if the IRS notices any inconsistencies between the taxable income reported on your tax return and the combined amount reported on your 1099s and W2s. Be sure to make the issuer of your 1099 aware of any mistakes, including incorrect income reported or receiving a form that is not yours.

You own a cash-intensive business

If you operate a taxi, car wash, bar, hair salon, restaurant or any other cash-intensive business, the IRS will be watching your tax return closely. Historically, cash-intensive businesses have been less accurate in reporting all taxable income. In response, agents are using special techniques to interview business owners and audit for unreported income.

Read Also: What’s Worse: An IRS Audit Or A Root Canal?

You claim large charitable deductions

IRS agents don’t have a problem with you philanthropic behavior, it’s the people abuse this tax deduction they have a problem with. This is another area the agency has had problems with in the past, which is why agents pay special attention to these types of deductions – especially if the deduction is disproportionately large in relation to your taxable income. So, if you are going to make a gift to a nonprofit organization, make sure to do it the right way. Keep your receipts, document everything and obtain an appraisal if the donation is for property worth more than $500 (and be sure to file Form 8283 with your return). It’s also important to note that donated cars, boats and planes continue to draw special attention.

You claim home office deductions

If you can claim the home office deduction – great! However, many are often unsuccessful because they ultimately realize that they don’t meet the strict requirements. Or, if they do successfully claim it, they overstate the deduction. For this reason, this is another area the IRS tends to scrutinize. Remember, if home office space must be used exclusively and on a regular basis as your primary place of business in order to claim a percentage of the rent, real estate taxes, utilities, phone bills, insurance and other costs.

Your claim for meals, travel and entertainment is disproportionately high

This is another area where taxpayers have made excessive claims in the past, causing the IRS to look closely at meal, travel and entertainment deductions for self-employed taxpayers. When the deduction appears too large for the business, agents look for detailed documentation including the amount, place, persons attending, business purpose and nature of the discussion or meeting.

You claimed 100% business use of a vehicle

It’s very rare that a taxpayer actually uses vehicle exclusively for business, especially if no other vehicle is available for personal use. If an IRS agent sees this type of claim, they won’t just see red flags, they will hear sirens. If you are planning to claim a percentage of your vehicle usage on your tax return, be sure to keep detailed mileage logs and precise calendar entries for the purpose of every road trip.

The best way to guard against an IRS audit is to have your business and personal tax returns prepared correctly every year by a team of tax specialists. Email Rea & Associates to learn what other red flags the IRS is looking for.

By Chad Bice, CPA (Zanesville office)

Check out these articles for even more popular tax tips:

How To Make Dealing With The IRS Less Stressful

How Far Back Can The IRS Go For Tax Auditing?

A Use Tax Audit Could Cost You

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Your Secret Weapon: The Business Advisory Team

Dave Cain | March 22nd, 2016
Business Advisory Podcast - Ohio CPA

On episode 25: the advisory advantage: a left-handed fireball pitcher for your business, Dave Cain, CPA, a principal at Rea & Associates, advises business owners about the benefit of having an advisory team. Start listening now.

If you have the opportunity to get great advice from a team of established business professionals and industry veterans, people who have lived, breathed, touched, and experienced the journey you are about to embark on – wouldn’t you? When you have a business advisory team to challenge and motivate you, you hold the secret weapon to long-term business value and personal and professional success.

But first you have to establish your team. Here are some tips that should help point you in the right direction.

Establishing A Core Group of Advisors

Although the makeup of the group could change or adapt depending on the needs of your business, usually the business advisory group will consist of a CPA, an attorney, a banker and a financial planner. Your advisory team has to be able and willing to have the crucial conversations necessary to facilitate real growth and change – and you need to be willing to hear all their opinions. Even if you don’t agree with some of the opinions that may be expressed, be an active participant in the conversation, sometimes these dissenting opinions will become the catalyst for achieving some major milestones.

Trust that you’ve put together a strong group of advisors with a wide range of skills and experiences needed to take your business to the next level. The journey may, at times, be a little bumpy, but if you all stick together, the destination will be worth it.

Your Business Advisory Meeting

Meeting with your business advisory team should be more than a scheduled play date. You should have a plan for how the meeting is going to flow.

Remember that this meeting is a strategic session that will focus on the tactics necessary to fulfill the goals you’ve established for your business. This is not a time to look back at you prior year’s financial statements or tax returns. This is your chance to look at the stuff that you don’t get to touch every day because you have been too busy working in your business – rather than on your business.

To ensure that your advisory team leaves the meeting with a concrete action plan, make sure to come to the meeting prepared with an agenda. To maximize your success, everybody should have a clear picture of what their next steps are and what should be able to report to the group at the next meeting.

It’s not always easy to stick to an agenda. Everybody has an opinion and new ideas will sprout from seemingly nowhere. Consider appointing an advisory team quarterback who can ensure that the meeting topics and decisions that materialize are consistent with the company’s mission statement, vision statement and core values. Your quarterback can also reel in the team when talks begin to become a little one-sided.

unsuitable on Rea Radio | Ohio Accounting Podcast | Rea & AssociatesWant more? Listen to episode 25: the advisory advantage: a left-handed fireball pitcher for your business on unsuitable on Rea Radio and find out if a business advisory team is right for you and your business.

By Dave Cain, CPA (Dublin office)

Still not sure if it makes since to establish a formal business advisory team for your company? Check out these articles for further insight.

Getting By With A Little Help From Your Friends

Is Your Business Batting A Thousand?

5 Best Practices For Taking Your Business To The Next Level

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Your Pot o’ Gold Awaits

Dear Drebit | March 17th, 2016

Seven Tips For Business Success – Now That’s Lucky!

Savvy business owners know that you don’t have to follow a rainbow or chase down a leprechaun to find the riches they’re after. Rather than counting on the luck o’ the Irish, these seven tips are all you need to find the pot-of-gold you seek.

7 Business TIps

Leprechaun Clay is searching for his pot o’gold, use these tips to find yours.

  1. From Good To Great: A great plan is only, well, great, if it’s backed by a great strategy – the more you plan and forecast for the future, especially when it comes to business endeavors, the more likely you are to succeed.
  2. Pay more attention to your company’s cash flow for a prosperous 2016: A 13-week rolling cash flow budget lets you harness the past, present and future of your company to arrive at a comprehensive analysis of its overall financial well-being – making you a more effective leader and decision-maker. Keep reading to learn how to get started.
  3. Your Business Could Be Doing Better: Those in the manufacturing industry are familiar with the significance of implementing tactics to increase efficiency and effectiveness throughout the organization. But did you know that these same concepts can benefit businesses outside of the manufacturing realm?
  4. 5 Financial Secrets Of Successful Business Owners: Here are five financial secrets of successful business owners will get you on the right track.
  5. Want A Better Business? Structure Matters: 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. Read on to learn why.
  6. Managing Wealth In A Volatile Industry: 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. Why you ask? Keep reading to find out.
  7. Tax-Free Stock Option Exists For Some Small Businesses: Back in the early 90s, Congress passed a tax provision designed to increase investment in America’s small businesses. And while the provision’s name, IRC Sec. 1202, may not roll off your tongue very easily, it’s one that some small business owners need to know.

Some of us have to depend on more than just luck to help us manage a successful business, which is why we think you will agree that these time-tested pro tips to be more helpful than any four-leaf clover you could ever find. And if you still need some guidance, email the professionals at Rea & Associates for assistance. This team of CPAs and business professionals has helped others find their pots o’ gold, and they can help you too!

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Protect Yourself From Identity Theft & Refund Fraud

Ashley Matthews | March 16th, 2016

It’s unfortunate that identity theft and refund fraud have become commonplace in our society, especially during tax season. On the other hand, it’s reassuring to see our government agencies stepping up to protect taxpayers from this threat.

In Ohio, the Identification Confirmation Quiz has been especially successful. Last year, the quiz helped prevent an estimated $259.1 million from going to fraudsters. At a federal level, during the 2013 filing season, the IRS launched a number of counter attacks to prevent around $24.2 billion from being claimed as the result of bogus income tax returns.

Read Also: How To Recover From Identity Theft & Refund Fraud

Even though identity theft and refund fraud show no signs of slowing down, in addition to the state-wide and federal efforts to protect taxpayers, there are ways you can help protect yourself. During tax season, take care when choosing your tax preparer. It’s important to be sure that they take their responsibility to safeguard your information very seriously. And, all year long, take common-sense precautionary measures that include:

  • Keeping your computer secure.
  • Avoiding phishing email and malware.
  • Protecting your personal information on and offline.

Few things are worse than suspecting, and then confirming, that you have had your identity stolen. Recovering from such a violation can be overwhelming. The good news is that you don’t have to go through it alone. Your tax preparer can help you along the way. Email Rea & Associates to learn more.

This article was originally published in the March 2016 edition of Consult The Expert column published in Columbus Business First.

By Ashley Matthews, CPA (Dublin office)

Want to learn more about the refund fraud epidemic? These articles will help.

Join The Fight Against Identity Theft & Income Tax Fraud

Should I still Be Concerned About Identity Theft And Tax Fraud?

Quiz Results Are In – And The News Is Good

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Don’t Miss Out! Claim The Work Opportunity Tax Credit

Christopher Axene | March 11th, 2016

The IRS has finally issued guidance on how to deal with the retroactive extension of the Work Opportunity Tax Credit (WOTC) for 2015. In short, it’s an opportunity you don’t want to pass up.

How The WOTC Works For Business Owners

To claim this valuable tax credit, employers have 28 days from the date an employee was hired to certify that they fall into one of the qualifying categories. To do this, the new employee is typically asked to complete Form 8850 by the employer. The form is then filed with the IRS, while another form is filed with the Ohio Department of Jobs and Family Services. Once the new employee’s qualification is confirmed, the business may claim a credit against the income tax of a percentage of first-year wages.

Even though the credit was left to expire in 2015, some businesses continued to collect qualifying information from new hires – just in case. This turned out to be a good strategy because late last year, Congress finally voted to pass the PATH Act of 2015, which, among other things, extended the WOTC through 2019.

While some business owners may have phased out the practice of passing out Form 8850 to new employees, those who continued to qualify their new hires now have a chance to retroactively claim the WOTC credit. Employers have until June 29, 2016, to complete and file paperwork for qualifying employees to successfully claim the tax credit.

Tax Credit Available When You Hire Unemployment Recipient

The retroactive WOTC extension is not the only thing business owners should be aware of. In 2016 and until 2019, hiring long-term unemployment recipients (or an individual who has been unemployed for at least 27 consecutive weeks and who has, at some point, received unemployment benefits) will also qualify your business for the tax credit. To qualify for the WOTC under this new category, your employee(s) must have been hired between Jan. 1 and May 31, 2016.

Don’t miss out on your chance to claim the WOTC. Email Rea & Associates to learn more.

By Christopher Axene, CPA (Dublin office)

Are you looking for more tax help? These articles could help guide you along:

‘Ghost Assets’ Haunting Your Business?

What’s The Difference Between Fixed Asset Expensing And Capitalization?

How Does The IRS Treat Property Repair Expenses?

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Payroll, HR Departments Targeted By Cyber Criminals

Ashley Matthews | March 4th, 2016
Identity Theft | Refund Fraud | Ohio CPA Firm

The best thing to remember when it comes to protecting your business, and yourself, from becoming a victim of fraud is that if something seems a little out of the ordinary, it’s worth checking out before you act. Read on to learn about the newest threat to your identity.

Over the last few years, the threat of refund fraud and identity theft has become a very real concern, and criminals have proven that they will go to great lengths to get the information they need to complete their scams. This recent phishing scam is no exception.

Read Also: Join The Fight Against Identity Theft & Income Tax Fraud

Criminals Phish HR, Payroll Departments

The IRS recently alerted payroll and human resources professionals of an “emerging phishing email scheme that purports to be from company executives and requests personal information on employees.” The scam has already claimed several victims.

IRS Commissioner John Koskinen said that this particular tactic appears to be “a new twist on an old scheme.” These cyber criminals are using the cover of tax season to trick people into sharing confidential data.

“If your CEO appears to be emailing you for a list of company employees, check it out before you respond,” said Koskinen. “Everyone has a responsibility to remain diligent about confirming the identity of people requesting personal information about employees.”

According to the IRS, a criminal investigation is already in place and several cases in which people have been tricked into sharing social security numbers and other sensitive information with criminals are being reviewed. Officials report that criminals regularly use the stolen personal information to file fraudulent tax returns for refunds.

Remind Employees To Remain Alert

To avoid becoming a victim of this particular scam, encourage your employees to pay close attention to emails that contain the following information:

  • The actual name, title and contact information of somebody in the company

o   Oftentimes, criminals will use the name of the company’s CEO to enhance the message’s legitimacy.

  • A request to provide sensitive information, including:

o   The names of employees along with their Social Security Numbers, date of birth, address, and/or salary

o   A PDF of an individual’s 2015 W-2 or an earnings summary of all the company’s W-2s.

Other Scams Abound For Businesses, Individuals

Unfortunately, businesses appear to have seen an increase of cyber attacks – especially over the last year. Last June, the Financial Services Information Sharing and Analysis Center, the FBI and the United States Secret Service issued a fraud alert in response to a scam dubbed the “Business Email Compromise,” in which fraudsters compromise “legitimate business email accounts for the purpose of conducting an unauthorized wire transfer.”

Also, in response to a nearly 400 percent increase in phishing and malware incidents so far during this tax season, the IRS also renewed its wider consumer alert for email schemes. These emails are designed by scammers to trick taxpayers into believing they are being sent directly from the IRS, other tax industry professionals and/or software companies.

The best thing to remember when it comes to protecting your business, and yourself, from becoming a victim of fraud is that if something seems a little out of the ordinary, it’s worth checking it out before you act.

By Ashley Matthews, CPA (Dublin office)

Want to take steps to ensure that you won’t be a fraud victim this year? These articles feature information that can help.

How can you protect yourself from tax fraud

Identity Theft Prevention: Tips To Reduce Your Risk of Becoming a Victim

How To Recover From Identity Theft & Refund Fraud

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Readers Were Happy To Leap Into Tax Season This February

Dear Drebit | March 4th, 2016

Upon reviewing our most popular blog posts for the month of February we are left to conclude that it is once again that time of year – tax season.

February’s most read blog posts were mostly tax related. From additional insight into the Affordable Care Act, to recommendations about how to report your fantasy football winnings and updates about Ohio’s identity theft quiz; one thing is certain – this is shaping up to be another busy year in the world of taxes.

Read on to find out what others were reading in February.

  1. Are Your Employees Skimming From The Top? A question from one of our readers: As a new business without a cash register, what is the best way (accounting method-wise or other) to protect cash receipts from sales against employee theft or dishonest activity? Want the answer? Keep reading to find out how to prevent fraud in your small business.
  2. Five Reasons To Fall In Love With Your Financial Advisor While your financial advisor is probably the last person you are thinking about during those romantic holidays, you may want to reconsider and here’s why
  3. Don’t Miss Your Chance To Secure Tax-Free Wealth We already know that making contributions to tax deferred retirement accounts (i.e. deductible IRAs, SEPs, SIMPLEs and 401(k) plans) is the most obvious way to reduce your current year taxes, but with a little planning, you could develop a strategy to avoid paying future taxes as well. Take a look at these five tax advantage savings ideas and discover how easy it can be to hold on to more of your money.
  4. How Far Back Can The IRS Go For Tax Auditing? As usual, this is a pretty critical topic for our readers, which is why it’s a top blog post again this month! Read on to learn how far back the IRS can audit your tax return.
  5. Theft Safeguards To Cause Tax Return Delays In Ohio Get ready to watch your mailbox – at least if you want to make sure you get your state tax refund. The Ohio Department of Taxation will once again ask some Ohioans to confirm their identity before their refunds are issued. Why? Keep reading to find out.

We have a lot more tips and tidbits coming up in March, so make sure you have subscribed to our blog so you don’t miss a single post.

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