The Do’s and Don’ts of Summertime Tax Prep

Meredith Mullet | August 7th, 2014

It’s the beginning of August and you’re probably not keeping yourself up at night thinking about your taxes. Frankly, who has time to think about itemized deductions and tax-free distributions when you would rather be grilling out, soaking in the sun, or enjoying your family vacation? April 15, 2015, may be more than 260 days away, but now is a great time to look at your taxes and make necessary adjustments to effectively sidestep any potential problems that might cause problems when tax season does arrive.

Consider These Tax Prep Do’s and Don’ts

  • Don’t assume that filing your taxes will be the same as the year before. More than 50 tax provisions expired on Dec. 31.
  • Do make yourself aware of any changes that have occurred since last tax season. Click here to view the most up-to-date list. Some of the most common expired provisions include:
    • Itemized deduction for state and local general sales tax
    • Itemized deduction for mortgage insurance premiums (PMI)
    • Tax-free distributions from individual retirement plans for charitable purposes
    • 50 percent accelerated tax depreciation (“Bonus depreciation”).
    • Increased expensing. (This provision allows businesses to deduct the full purchase price of qualified equipment.) Current 2014 provisions are $25,000 deduction with a $200,000 limitation on purchases.
  • Do take time to manage your files. It’s much more manageable to file six months’ worth of receipts vs. a whole years’ worth in January. Are you looking for inspiration? Now is a good time to start organizing medical and charitable contribution receipts.
  • Do make a note as to whether the size of your household changed.
  • Don’t forget to review your withholdings. Did you receive a large refund in 2013? Did you owe the IRS in April? To adjust your withholdings, speak with your payroll representative and complete a new W-4.
  • Do send your estimated payments for income to the IRS every quarter to avoid charges and penalties for underpayments. If you forgot to make a payment or you underpaid in April or June, don’t worry. There’s still time to catch up on your September and January payments.
  • Don’t underestimate the short-term value of retirement contributions. Aside from the long-term savings benefits, many retirement accounts are a great tax deferral. If you are participating and not maxing out, consider increasing your contribution. Contributions to a Traditional IRA are another consideration.
  • Do set aside some time to review your health insurance situation. Alternatively, if you did not maintain health care coverage (and were not exempted) you will owe a penalty with your 2014 1040.
  • Do confirm that you comply with the new repair/capitalization regulations.

Tax Prep Help

A few minutes of work and organization now could save you some major headaches in April. Don’t miss out on your opportunity to jump start your tax prep. Want more tax prep tips? Contact Rea & Associates. Our team of Ohio tax professionals can help you determine what you need to do now to ensure tax time goes smoothly for you.

Author: Meredith Mullet, CPA (Wooster office)

 

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Software Updates Don’t Have To Be Hard

Lesley Mast | 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)

 

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

Brent Ardit | 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)

 

Want more not-for-profit business advice? Check these posts out:

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Were You Overcharged By The Ohio BWC?

Joe Popp | 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)

 

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You Can’t Know Enough: The Importance of Knowing Your Fiduciary Responsibility

Paul McEwan | July 25th, 2014

You may find that the spotlight isn’t for you. But as the fiduciary of your company’s retirement plan, the spotlight is all on you. The Department of Labor (DOL) has placed a major emphasis on fiduciary responsibility in the past few years and continues to push the matter in its initiatives. So it’s important that you understand what you’re responsible for.

To meet your fiduciary responsibilities as a retirement plan sponsor, you need to understand the fiduciary standards of conduct as adopted by the Employee Retirement Income Security Act (ERISA). With these fiduciary responsibilities, there is also potential liability. Fiduciaries that don’t follow the basic standards of conduct may be personally liable to restore any losses to the plan. Pretty serious, right? To help ease your mind, here’s what you need to know.

Identifying Your Plan Fiduciaries

A plan’s fiduciaries will ordinarily include the named trustee in the document, investment advisors and all individuals exercising discretion in the administration of the plan. Under ERISA regulations, fiduciaries are responsible for:

  • Loyalty to the plan participants – acting in their exclusive best interest
  • Prudence – documenting expertise and a decision-making process
  • Following the plan documents
  • Diversifying plan assets
  • Paying only reasonable expenses for necessary services

Mitigating Your Risk As A Fiduciary

As a fiduciary of your business’s retirement plan, you should consider these items and answer these questions to ensure that you comply with ERISA regulations:

  • If participants in your plan make their own investment decisions, have you provided sufficient information for them to exercise control in making those decisions? Regulations under ERISA list the information and process required to be provided to participants in order to legally shift the responsibility for making investment decisions to the participants. Are you making the required participant fee and fund performance disclosures required annually by ERISA of all plans permitting participant investment direction?
  • How frequently do you deposit participants’ contributions in the plan, and have you made sure it complies with the law? Participant contributions, including loan repayments, are required to be remitted on a timely, consistent basis. Not remitting these funds in a timely manner is considered a misuse of plan assets, which is a prohibited transaction. Not meeting this requirement creates penalties for the plan sponsor.
  • If you’re hiring third-party service providers, including investment advisors, have you looked at several providers, given each potential provider the same information, and considered whether the fees are reasonable for the services provided? It’s required that you receive fee and service disclosures from all plan service providers, and you should also receive written acknowledgements from service providers serving in a fiduciary capacity. Here are some other items to consider relating to third-party service providers:

1. Have you documented your service provider hiring process?
2. Are you prepared to monitor your plan’s service providers, including investment fund performance?
3. Do you have a process in place to determine that the fees paid to service providers remain reasonable for the services provided?

  • Have you reviewed your plan document in light of current plan operations and made necessary updates? Have you provided participants with an updated summary plan description (SPD) or summary of material modifications (SMM)? Plans are required to operate according to the provisions stated in the plan document and these provisions must be communicated to participants. Changes are generally permitted, but again are required to be communicated to participants. If the plan is not operating in accordance with the written plan document, the plan could be disqualified, which would result in negative tax implications for you, the plan sponsor, and the participants.
  • Are individuals handling plan assets covered by a fidelity bond as required by ERISA?  Have you considered purchasing fiduciary insurance to mitigate the personal risk of loss to those employees you identified that are serving as plan fiduciaries? While a fidelity bond and fiduciary insurance are slightly different, both are a form of coverage to provide protection in regards to plans. The bond insures the assets of the plan in the event of employee misconduct and the fiduciary insurance provides personal protection to fiduciaries in the event of any claims for alleged errors, omissions, or breach of fiduciary duties.

Being a plan fiduciary comes with enormous responsibility. Don’t take your fiduciary responsibilities lightly. If you’re interested in learning more about what you’re responsible for as a retirement plan fiduciary, consider registering for a FREE seminar all about knowing your fiduciary responsibility. Rea & Associates has partnered with the Human Resources Association of Central Ohio (HRACO) to provide an all-day seminar dedicated to helping fiduciaries understand their responsibilities. The seminar will feature speakers from the Internal Revenue Service (IRS) and the DOL. It will be held on Tuesday, August 26 from 8:30 a.m. to 4:30 p.m. at BMI Federal Credit Union Event Center in Dublin, Ohio. More details, including a schedule, can be found here. Click here to register for this free event.

Fiduciary Responsibility Help

If you need assistance navigating the responsibilities of being a fiduciary, contact Rea & Associates or speak with one of our financial advisors.

Author: Paul McEwan, CPA, MT, AIFA (New Philadelphia office)

 

Looking for more articles about fiduciary responsibility? Check out these articles!

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