What companies can do now to get ready for the 2016 tax season

Tracy Kaufman | October 5th, 2015

It’s time to do your business tax planning and, just like a doctor’s check-up, if you decide to skip it, you may regret it.

You could face a larger tax bill because you weren’t in close enough contact with your advisers when you did a transaction, changed a policy or practice, or amended what you are doing with insurance. You may encounter wide swings in income and tax due from one year to the next if you don’t check in with your advisers.

Smart Business recently interviewed Tracy Kaufman and Joe Popp about tax strategies business can implement now to prepare for the upcoming 2016 tax season. Want to learn more and see what you can start doing now? Check out the interview on Smart Business’s website.

What to read more posts about tax planning strategies? Check these out:

The Truth About Tax Extensions

Is Simplicity Worth The Cost Of Peace Of Mind?

5 Tax Deductions To Ease Your Business’s Tax Burden

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Happy Manufacturing Day 2015

Frank Festi | October 2nd, 2015

Manufacturing Day - Ohio CPA FirmToday, the team at Rea & Associates is celebrating you – our manufacturing leaders who continue to work hard to promote the American values that continue to make our country a great place to live, work and play. We are proud to stand at your side as you educate our citizens about the value of seeking prosperity through a career in the skilled trades; and we are united in the mission to build strong, sustainable communities – both locally and throughout our great nation. The manufacturing industry is undoubtedly the cornerstone of the American economy and we are proud to stand with you as you continue produce and disperse high-quality products, employ countless hard-working men and women, and give your ongoing support to our local and national educational systems, nonprofit organizations and business communities. You, our manufacturing leaders, have helped shape our history; and you will continue to forge our future. Thank you for all that you do. This year, in celebration of Manufacturing Day 2015, we had the opportunity to speak with manufacturing leaders who are doing great things throughout Ohio to find out what they consider to be some of the most challenging aspects of owning a manufacturing business and they had a lot to say about today’s regulatory roadblocks.

Click here to read what other manufacturing leaders facing and why they are calling for regulation reform.

We also thought you might find this slideshow to be a valuable resource.

Take A Detour: Top 4 Detours For Financial Relief – Created with Haiku Deck, presentation software that inspires

We hope you have a happy manufacturing day and a great weekend.

Check out these articles to discover more tips for manufacturing leaders:

Research & Development Credit Benefits Businesses Of All Sizes

From Good To Great: 5 Ways You Can Improve Your Manufacturing Business

The Cost Of Reimbursing Employees For Health Care

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Drebit’s Top 5 Insights In September

Dear Drebit | October 2nd, 2015

Sharing top financial and business news keeps a frog busy. In September he helped get the word out about new changes within the credit card industry, fraud, cyber security … and even shared a little bit of personal finance advice.

Top 5 Insights

But, what were you reading? Great question! Below is a quick recap of the top blog post from September. If you haven’t already, take a look. Some of these tips could save you and your business a lot of money!

  1. Fraudulent Credit Card Transactions Will Become Merchant’s Problem On Oct. 1 – As of Oct. 1, 2015, the liability for fraudulent transactions will no longer be assumed by the credit card issuing institution. Instead, if you (the merchant) fail to adopt EMV technology, your business will be responsible for any loss that results from a fraudulent transaction. Is your business ready?
  2. Who Is That Email Really From? – E-mail Account Compromise (EAC) is a sophisticated scam that uses legitimate email accounts that have been compromised to target unsuspecting victims, oftentimes tricking even the most tech-savvy individuals. Want to know how to protect your email? Read on.
  3. 5 Financial Secrets Of Successful Business Owners – After following through with a 13-week cash flow for almost a year, you will have better insight into how to spend your profits to help your business generate additional cash and sales. Want to learn more? Check out Rea’s podcastUnsuitable on Rea Radio.
  4. Will EMV Technology Change The Online Payment Option? –  Does a company that doesn’t physically swipe credit cards have to worry about increased liability when the new EMV rules are implemented in October? The answer might surprise you.
  5. How Far Back Can The IRS Go For Tax Auditing? – As a CPA I am frequently asked, “How far back can the IRS look to audit my tax return?” That’s a great question. Can the IRS go back and audit your tax return from five years ago? 10 years ago? 25 years ago? Before you start to panic, rest assured that the IRS has a statute of limitations in place that generally puts a limit on the time allowed to audit you and assess additional tax. Keep reading to find out how far back they can go.

Drebit is glad that you’ve been finding the tips and insight shared on his blog to be valuable and we want to keep providing you with the information and advice that matters most to you. So, if you’ve got a burning financial or business question? Ask away, Drebit – and the bright team at Rea – is here to help!

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5 Financial Secrets Of Successful Business Owners

Dave Cain | September 29th, 2015
Financial Secrets Of Successful Business Owners - Rea & Associates - Ohio CPA Firm

After following through with a 13-week cash flow for almost a year, you will have better insight into how to spend your profits to help your business generate additional cash and sales. Visit www.reacpa.com/podcast to learn more and listen to Rea’s podcast — Unsuitable on Rea Radio.

Many business owners find difficulty coming to terms with their financial obligations. They will dedicate long hours combing through their company’s expenses, invoices and payroll to arrive at an annual budget, only to let the report sit until it’s time to repeat the exercise again a year later. A 13-week rolling cash flow helps take the stress off business owners when it comes time to make important strategic decisions throughout the year. But in order to get your company back on the right track, you must be ready to change the way you look at your company’s finances. These five financial secrets of successful business owners will get you on the right track.

Listen To Unsuitable On Rea Radio – Why $1 Million Doesn’t Matter

1)     Know how much cash you have on hand.

We’re talking about tangible cash here; and to know how much you actually have on hand you will have to look beyond the ending balance on your business’s bank statement while not letting yourself get caught up in a sea of technical information, graphs and presentations. The three most important questions you should be asking every week are:

  • How much money do we have in the bank?
  • What is our accounts receivable balance?
  • Who do we owe and how much we owe them?

The other information and reports are still important, they just aren’t as critical when you have to make big decisions without a lot of time to ponder your company’s short- and long-term financial state.

2)     Understand your billing practices.

To get an accurate picture of your company’s cash flow, you will need to take a closer look at your current billing practices to find out if you are getting your bills out on a timely basis. Don’t be tempted to gloss over this step. It may surprise you to learn that a lot of decision-makers and business owners think they are on top of their billing activity, only to learn that they’re not. A 13-week cash flow budget will expose this weakness and will get you back on track.

3)     Delegate ownership of your cash flow. 

We are all busy and it’s easy to be enthusiastic about implementing a 13-week cash flow strategy — in theory. But when it’s time to actually put your strategy into action it’s easy to blame “lack of time” for why you put it off. The good news is that you can delegate the work to someone who has the time. You really can’t afford to ignore your cash flow. When you understand where your money is coming in from and where it’s going, you will begin to see positive results.

4)     Review your cash flow projection often.

While it’s great to write out an annual budget or a three-year-projection, most owners will push the document to the side … where it will begin to gather dust. Then, when the day comes when you need to know the financial state of your company for decision-making purposes, you are left with inaccurate, outdated information. When this happens, your effectiveness and accuracy as a leader is challenged. It doesn’t have to be though. When you review your cash flow regularly, you arm yourself with the tools need to make financially strategic decisions. For example, after following through with a 13-week cash flow for nearly a year, you will gain greater insight into how to spend your business profits to help generate the additional cash and sales needed to facilitate sustained growth.

5)     Put your accrual basis profit in its place.

While you may still need to have an accrual statement or generally accepted accounting principle statement to appease regulatory agencies, you would do well to remember that when it comes to the lifeblood of your business, cash flow is king. In all likelihood, businesses of all sizes should consider keeping two sets of records — an accrual and a cash basis statement — to maintain your company’s compliance among all stakeholders.

You can’t spend accrual basis profit. You can, however, spend cash basis profit. Which is why, at the end of the day, you’ll find that your banker, your lender, your shareholders, etc. … will take more interest in your cash flow strategy and your cash flow budget than your other reports.

Want to learn more? Click here to listen to Unsuitable on Rea Radio and find out “Why $1 Million Doesn’t Matter.”

By Dave Cain, CPA (Dublin office)

Visit www.reacpa.com/podcast for more episodes of Unsuitable on Rea Radio or click here to subscribe to the podcast on iTunes or click here to listen to the show on SoundCloud.

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Don’t Get Blown Away By A Cash Windfall

Ryan Dumermuth | September 28th, 2015

4 Tips for Managing Sudden Wealth

Manage Sudden Wealth -  Ohio CPA Firm

Before you make a move with your money, take a little time to think about you want to do with your cash and consider getting some advice from a financial professional and review these four tips for managing sudden wealth.

Congratulations – you just won the lottery! Or, in a more realistic scenario, a significant amount of money has landed in your lap through an inheritance or the sale of property.

Now what?

As many who have been in your shoes will attest, it’s important to pause, take a step back, and evaluate your options before making any big financial decisions. Sure, that brand new sports car would look
great in your driveway, but will you regret spending the money down the road? Significant money creates many opportunities. Some? Wonderful. Others? Money pits.

Read Also: Considering Gifting Your Family Owned Business?

Before you make a move with your money, think it through and talk to a pro. The truth is, there’s no right answer, as no two financial situations are exactly alike. But these four steps will help you decide what’s best for you.

  1. SLOW DOWN. It’s easy to get caught up in the excitement of new wealth, and the tailspin that can ensue. But don’t allow yourself to lose your footing and don’t be tempted to make excuses for reckless spending.

    Avoid making any significant or impulsive purchases for at least a month or two. Take a step back from the moment and think long-term … what sort of financial goals do you have for the future? How do you really want to spend this money?

    Begin thinking about this and write down your thoughts. Writing down goals and thoughts is a proven method of helping you achieve your goals. It’s also helpful to have these things in writing when you meet with your advisors.

  2. FAIL FORWARD. Think about some of your past financial blunders. We’ve all made mistakes – but they’re only truly mistakes if you don’t learn something and prevent them from happening again. You know yourself better than anyone, and you owe yourself this honest examination. Use your missteps to your advantage.
  3. DO YOUR HOMEWORK. If your decisions affect others, talk with them before acting. If someone has an investment idea, consider whether it’s too good to be true.

    If you are approached to help a charitable cause, ask yourself if it’s something you’re passionate about. And make sure you have an understanding of the organization. You should also find out if they will publicize your contribution.

  4. CONSULT WITH A PRO. Navigating new wealth is complicated, and it’s imperative you find experts to help guide you through the process.

    Talk with a few people you trust and respect. If an advisor’s name is mentioned more than once, it’s probably someone you should talk to. If you already have an advisor, consider whether or not they are up to the task at hand.

    You’ll want to work with a CPA, attorney and investment advisor. Be prepared to invest some time meeting with each advisor in an effort to decide who to hire. Each one will play a different, but valuable role.

    Depending on your situation, you could lose a chunk of your newfound wealth to income taxes, so be sure to talk to a CPA with a specialty in income tax. You will want to know what you owe and when you owe it. More importantly, you’ll want to learn if you can avoid, reduce or defer any of the tax.

Finally, before selecting the advisors you want to work with be sure you understand all of the fees involved with their services up-front. Be prepared to get what you pay for.

 

Whatever the reason for your windfall, make sure you take the time to respect it – and your financial future. Email Rea & Associates to learn more about managing sudden wealth.

By Ryan Dumermuth, CPA, CFP (Mentor office)

Want to learn more about managing your sudden wealth? You may like these articles:

Can Your Charity Profit From Instant Bingo?
How Can I Make The Most Of My Retirement?
Estate And Gift Tax Exemptions: New Wealth Transfer Rules

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Will EMV Technology Change The Online Payment Option?

Joe Welker | September 21st, 2015
Online Payment Option -Ohio CPA Firm

Does a company that doesn’t physically swipe credit cards have to worry about increased liability when the new EMV rules are implemented in October?

Dear Drebit: Does a company that doesn’t physically swipe credit cards have to worry about increased liability when the new EMV rules are implemented in October? Sincerely, Online Payments Only

Dear Online Payments: As you may already know, I recently wrote an article to inform merchants about the Oct. 1 deadline to implement Credit Card EMV (EuroPay, MasterCard and Visa) technology. When this change takes effect, the liability for fraudulent transactions will no longer be assumed by the credit card issuing institution. Instead, if you continue to use the credit card’s magnetic stripe to process payments, your business will assume liability for any resulting fraud. For most businesses – especially smaller businesses – a single instance of fraud could be crippling.

EMV technology essentially swaps out the magnetic stripe used on credit cards today for an embedded chip. The chip scrambles sensitive cardholder data at the point of sale, which makes it increasingly difficult to fraudulently access and replicate consumer data.

Click here to read the full article.

But what changes lie ahead for businesses that utilize online payment methods and don’t require customers to physically swipe their credit card to pay for a product or service? Do they need to be concerned about this liability switch on Oct. 1 too?

EMV Concerns For Online Merchants

Your third-party processor (such as PayPal), is responsible for ensuring that the payment is authentic. These companies validate payments using a variety of methods.

Natalie Gagliordi, a blogger with Small Business Matters, writes that “for most online merchants, whatever payment processing technology they are using will likely contain out-of-the-box security and authentication protocols.” PayPal, for example, “has developed complex end-to-end encryption to help protect consumers and merchants with their payment information.”

But just because your business doesn’t bare the sole responsibility for keeping your customers’ credit card data safe, doesn’t mean you have nothing to worry about – quite the contrary. Some experts expect credit card fraudsters to pay more attention on hacking online consumer data. This means, for your customers’ sake, you must continue to be informed of online security best practices and should not only be knowledgeable about what your third-party payment processor is doing to keep credit card data safe, but what your third-party payment processor requires of you to maintain your compliance. This could include maintaining current antivirus protection, a secure firewall and other online safety protocols.

The EMV Migration Forum’s Card-Not-Present Working Committee recently published an informative whitepaper to address the growing threat of Card-Not-Present Fraud. This resource will give online merchants a little more insight into the numerous options currently available to help authenticate online payments.

In the meantime, if you have additional questions or concerns, contact your third-party payment processor immediately. Requirement 12.9 of the Payment Card Industry Data Security Standard v3.0 states that they must provide you with – in writing – the details of its role in providing PCI compliancy, as well as any requirements of your organization. Click here to learn more.

How Can Drebit Help You?

Readers, do you have questions about data security, fraud, accounting, succession planning and other general business topics, but don’t really know who to ask? Let Drebit help find the answer! Simply fill out the brief form at the top, right side of this page. You can also click here to reach out to one of fraud experts directly. If you like the advice we offer, why not click here to subscribe to Dear Drebit and get notified of new articles and updates the minute they are posted?

By Joe Welker, CISA (New Philadelphia office)  

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Malware Threat Spreads To Smart Phones

Joe Welker | September 16th, 2015
Malware Goes Mobile  Ohio CPA Firm

According to the digital media analytics company comScore, between the months of December and March 2015, more than 187.5 million people in the U.S. owned smartphones. During that time, Google Android led the pack as the number one smartphone platform with 52.4 percent platform market share. In other words … that’s a lot of potential LockerPIN victims.

Would You Pay A Hacker’s Ransom If Your Phone’s Data Was At Risk?

Researchers and IT security experts from ESET, a global IT security company, recently announced that they had discovered a malware application that is designed to encrypt files and change PINs on Android devices in the United States. In return, victims are demanded to pay up to the tune of $500. Only then will hackers provide users with the recover key.

If it continues to spread, this form of malware could result in a staggering number of victims. Once again we are reminded of how important it is to vigilantly protect ourselves against fraudsters who will continue to exploit such weaknesses in our technological infrastructure.

According to the digital media analytics company comScore, between the months of December and March 2015, more than 187.5 million people in the U.S. owned smartphones. During that time, Google Android led the pack as the number one smartphone platform with 52.4 percent platform market share.

Read Also: Could Your Company Be Ransomeware’s Next Victim?

Malware Goes Mobile

The malware, called LockerPIN, spreads via third party applications, which are downloaded by the user to their Android device. Similar to the CryptoLocker and CryptoWall malware that has inundated users over the past several years, LockerPIN spreads malware’s reach to the mobile user.

Originally discovered in Ukraine in 2014 the malware has been modified to the point that it is just now making its North American debut. Disguised as a system update, the application changes the user’s PIN to a random setting without their knowledge. The worse part? The only known recovery solution is to perform a complete factory reset, which will result in the loss of all your data.

Fair Warning

It’s only a matter of time before this malware progresses to the point of being able to infect all phones. In the meantime, there are actions you can take to protect yourself.

1)     Never download apps outside of certified app stores.

2)     Back up your mobile devices to your computer or to the cloud regularly.

3)     Do not grant administrator privileges to apps unless you truly trust them.

4)     Stay away from suspicious apps and sites.

By Joe Welker, CISA (New Philadelphia office)

Want to learn more ways to protect yourself and your business from IT threats? Check out these articles.

Who Is That Email Really From? Red Flags To Be Aware Of When Opening Your Email

Who’s Fishing For Your Data Today?

Could A Cyber-Attack Cripple Your Business In 2015?

 

 

 

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Will An Audit Find Fraud In My Business?

Mark Van Benschoten | September 10th, 2015
Fraud in My Business - Ohio CPA Firm

Your annual audit isn’t designed to detect fraudulent activity, but if across suspicious transactions are discovered a fraud detection expert should be called in.

For the same reason you wouldn’t expect your eye doctor to repair your tooth, you shouldn’t depend on your annual audit to detect occupational fraud in your business. A financial statement audit validates your financial records and provides reasonable assurance that they are materially accurate. It does not look for fraudulent activity.

Of course, if your auditor comes across suspicious transactions or questionable information, they will certainly share their findings with you. In addition, a good auditor will be able to recommend a fraud detection expert to help you dig deeper into the questionable activity.

So, if your audit won’t detect fraud, how will you know if it’s happening in your organization? 

According to the Association of Certified Fraud ExaminersReport to the Nations on Occupational Fraud and Abuse, only 3 percent of the nearly 1,500 reported cases of occupational fraud were detected by an external audit. According to the study, employee tips continue to be the most common way in which fraudulent activity is reported – usually through a fraud reporting hotline.

Your employees are likely honest, hard-working individuals who would never do anything to jeopardize your business. But until you empower them with a secure, anonymous outlet to tip off this behavior, you will never truly know for sure.

Are you serious about protecting your business from fraud? Learn more at www.reacpa.com/red-flags or contact me directly.

This article was published in the September 2015 issue of Columbus Business First – Ask The Expert.

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Fraudulent Credit Card Transactions Will Become Merchant’s Problem On Oct. 1

Joe Welker | September 9th, 2015
Credit Card Fraud Prevention - Ohio CPA Firm.

As of Oct. 1, 2015, the liability for fraudulent transactions will no longer be assumed by the credit card issuing institution. Instead, if you (the merchant) fail to adopt EMV technology, your business will be responsible for any loss that results from a fraudulent transaction.

PCI to EMV – Protecting Credit Card Data

Your customers want their payment experience to be as easy and painless as possible, which is why you have come to depend on the ability to process credit card payments – especially if your average transaction is more than $20. But providing your consumers with the ability to pay with plastic has also been helpful to fraudsters looking to steal the information hidden within their card’s magnetic stripe. In an effort to crack down on fraudulent transactions, protect consumers and transfer liability from the credit card company to your business, the United States will begin to implement Credit Card EMV (EuroPay, MasterCard and Visa) technology.

Read Also: Businesses Beware: Sloppy Data Security Could Cost You

Change Is Necessary

Due to the increasing number of credit card breaches where millions of credit card numbers and associated data have been stolen, the industry has forced retailers and merchants to adhere to PCI (Payment Card Industry) Security Requirements. Supported by the PCI Security Council, the ultimate goal of EMV is to stop and prevent further fraudulent activity. Success has already been noted in countries outside the U.S. “Currently, almost half of the world’s credit card fraud happens in the U.S. where magnetic stripe technology is the standard,” states David Navetta and Susan Ross in a blog on Data Protection Report. “Outside the U.S., an estimated 40 percent of the world’s cards and 70 percent of the terminals already use the EMV technology. These countries are reporting significantly lower counterfeit fraud levels with EMV cards than with the magnetic stripe cards.”

Understanding EMV Technology

Credit Card EMV technology, which has been used in Europe since the early 1990s, replaces the magnetic stripe we have grown accustomed to with an embedded chip that, scrambles sensitive cardholder data at the point of sale terminal. This technology ultimately makes it more difficult to access and replicate consumer data in an attempt to commit fraud.

Businesses Can’t Afford Not To Comply

Why should you be concerned about the credit card industry’s switch-over to EMV technology? As of Oct. 1, 2015, the liability for fraudulent transactions will no longer be assumed by the credit card issuing institution. Instead, if you (the merchant) fail to adopt EMV technology, your business will be responsible for any loss that results from a fraudulent transaction. If your business currently accepts credit cards as a form of payment (and you would like to continue this practice), unless you want to be hit with potentially devastating losses, you must make sure to install and activate the new technology before the Oct. 1 deadline. That being said, some types of businesses will have a little more time to comply. If you aren’t quite sure whether or not your business is exempt, visit the website of each payment brand you accept to learn more.

Next Steps

  1. If you have not investigated or planned for EMV Technology, contact your card processor immediately to determine your business’s specific needs.
  2. Implementing EMV technology can be a cumbersome and time consuming project, but the best way to protect yourself from fraud and liability is to implement the new technology as soon as possible.
  3. If EMV technology has been implemented be sure to confirm that the chip reading capability has been enabled. In addition, confirm with issuers that cryptographic values are being associated with the card number to ensure that the EMV technology has been setup and configured properly.  Verifying that cryptographic values are being assigned will eliminate the chance of misconfiguration and possible fraudulent activity.
  4. Train your staff on the new procedures. When a customer tries to pay for a product or service using their card, they will notice some changes, such as their credit card being held in the EMV reading slot throughout the entire transaction process. This is normal, however your staff should be prepared to answer the questions that will certainly arise.

By Joe Welker, CISA (New Philadelphia office)

Want to learn more ways you can protect your business and your customers from a fraudster? Check out these articles:

Could Your Company Be Ransomware’s Next Victim? Don’t Turn A Blind Eye To PCI Compliance How Much Is Your Data Worth To Criminals?

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Don’t Like Your Retirement Plan Design?

Steve Renner | August 28th, 2015

Time’s Running Out to Establish, Alter Your Plan

Time's Running Out to Establish, Alter Your Retirement Plan Design - Rea & Associates - Ohio CPA Firm

If you haven’t made time to speak with a retirement plan specialist recently to make sure that your retirement plan still addresses your company’s unique needs, there’s a chance you are missing out on a more cost-effective solution. Your retirement plan team can quickly run some illustrative numbers to compare your SEP against a 401(k) plan to reveal whether a better option exists for your business.

Your SIMPLE IRA or Safe Harbor 401(k) plan isn’t going to establish or change itself and if you want yours to be effective in 2015, you need to know that an Oct. 1 deadline is looming – as though you really needed something else to worry about. Fortunately, a retirement plan expert will not only help you meet your deadline, they can make sure your plan is optimized to ensure maximum results.

If you’ve never taken the time to really understand how valuable your retirement plan can be for your business, this is your chance. Read on to learn six other reasons why you might want to pick up the phone and schedule a meeting with a retirement plan expert today.

Read: Why You Should Review Your Retirement Plan Documents Now

Six Reasons To Call Your Retirement Plan Administrator

  1. You have no retirement plan at all. Offering your employees a retirement plan is more than just a great recruitment tool; it’s an excellent way to make your company’s profits go further. Read Retirement Plan Design: One Size Does Not Fit All to learn more about how a retirement plan might help bolster your business’s growth strategy.
  2. You have a SEP Plan with more than two employees. If you haven’t made time to speak with a retirement plan specialist recently to make sure that your retirement plan still addresses your company’s unique needs, there’s a chance you are missing out on a more cost-effective solution. Your retirement plan team can quickly run some illustrative numbers to compare your SEP against a 401(k) plan to reveal whether a better option exists for your business.
  3. You are a business owner who is able to maximize deferrals every year with a SIMPLE IRA. If so, it may be time to consider a Safe Harbor 401(k) plan in 2016 for additional tax deferral. For more insight into how this option can work for you, read Safe Harbor 401(k) Plans Provide Smooth Sailing.
  4. You have a 401(k) but receive corrective distributions every year. You may be missing out on a retirement plan design that can not only alleviate this problem, but can help you maximize the benefits your business receives for being active participants in your employees’ retirement strategy. Access Safe Harbor FAQ here.
  5. You maximize deferrals every year under your Safe Harbor 401(k) plan but offer no profit sharing option. A better plan design for business owners in this situation might be to maximize profit sharing contributions while limiting the amount that has to be provided to employees. For example, cross-tested profit sharing plans may save you money if your company’s staff consists primarily of younger employees. A retirement plan expert can help you identify a plan that helps address the uniqueness of your business.
  6. You are maxing out your profit sharing plan every year. It’s time to add a cash balance option to your existing retirement plan. This is a great option for business owners in this position, because it allows for much higher employer contribution deductibles for owners. Click here to learn more about how these plans can help your business.

Take control of your retirement plan today. Email a Rea & Associates retirement plan expert to find out what you have been missing.

By Steve Renner, QKA (New Philadelphia office)

Check out these articles for more helpful retirement plan advice specifically for small and midsize businesses.

Like Losing Your Wallet – Only Worse
Retirement Roulette
The ‘Van Halen’ Philosophy of Retirement Plan Compliance

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Businesses Beware: Sloppy Data Security Could Cost You

Joe Welker | August 26th, 2015

Defend Against A Data Breach - Ohio CPA FirmAs if you didn’t have enough keeping you up at night, the topic of data security continues to send collective shivers up the spines of business owners worldwide. Unfortunately, the Aug. 24, ruling by the United States Court of Appeals for the Third Circuit didn’t make matters any better (or less expensive) for businesses guilty of failing to protect their customers’ data. In fact, companies that utilize poor security practices that ultimately lead to a breach of consumer data are at risk of facing further disciplinary action and penalties.

Read Also: How Prepared Is Your Business For A Potential IT Disaster?

What does the FTC’s Courtroom Win Mean To Business Owners?

If you haven’t taken data security seriously in the past, it’s time to get real serious about it real quick.

Prior to the ruling, companies at the center of a data breach had to battle with lawsuits while working to rebuild their reputations. Now, in addition to litigation and negative headlines, your organization must also risk being fined by the Federal Trade Commission (FTC). Businesses can no longer operate with a subpar data security infrastructure. Those that do are at risk of losing everything.

The court upheld the FTC’s 2012 lawsuit against Wyndham Worldwide, a company known for operating hotels and time-shares. Records show that the FTC filed complaints against Wyndham for three data breaches occurring in 2008 and 2009, which resulted in more than $10.6 million in fraudulent charges. In its decision, the appeals court reaffirmed previous rulings that found Wyndham to be responsible for implementing better security practices, which would have helped prevent such breaches from occurring in the first place.

According to the FTC’s argument, software used at Wyndham-owned hotels stored credit card information as readable text, hotel computers lacked a system for monitoring malware, there was no requirement for user identification and or to make password difficult for hackers to guess, the company failed to use firewalls and, ultimately, failed to employ reasonable measures to detect and prevent unauthorized access to the computer network or to conduct security investigations.

“Today’s Third Circuit Court of Appeals decision reaffirms the FTC’s authority to hold companies accountable for failing to safeguard consumer data,” said FTC Chairwoman Edith Ramirez. “It is not only appropriate, but critical, that the FTC has the ability to take action on behalf of consumers when companies fail to take reasonable steps to secure sensitive consumer information.”

Next Steps For Businesses

With regard to the case between the FTC and Wyndham, the next chapter of the story is uncertain. While the win in the courtroom has helped put some wind in the FTC’s sails, the commission has yet to levy any penalties or assertions against the defendant. What is clear, however, is that a data security breach is a very real threat – one that is felt by nearly every business in the world. Furthermore, as technology continues to advance and hackers adapt, the security procedures businesses deploy must be top-notch to avoid further complications and costs associated with a sloppy security infrastructure.

Will you be ready when disaster strikes? Email Rea & Associates today to learn what you can do to protect your business from unforeseen threats.

By Joe Welker, CISA (New Philadelphia office)

Want to learn more about how to protect your business from a data security crisis? Check out these articles:

Could Your Company Be Ransomware’s Next Victim?
Don’t Turn A Blind Eye To PCI Compliance
How Much Is Your Data Worth To Criminals?

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How to ensure your plans aren’t bigger than your finances in times of growth

Kent Beachy | August 17th, 2015

Growth is the goal for many companies — whether you get that growth from adding another location, forming an alliance, adding services, diversifying into other areas or merging with/acquiring another business. But not all growth is good. So, it’s critical that you properly manage it. Smart Business recently talked with Kent Beachy about monitoring and managing your business’s growth.

For example, when growth is on the horizon, construction companies will go out and take on more work than they can handle. They have to pay their labor weekly, but they may not get paid for 60 or 90 days. A big part of growth is being able to finance it; you must have the right financing sources, such as built-up profits and/or a line of credit.

To learn more about how to set up the right systems to monitor your financial accounting and cash flow in times of growth, read the full article on Smart Business’ website. 

Want to read more articles about business growth, check these out:

Don’t Shy Away From Business Debt

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

Do Your Business Metrics Need an Oil Change?

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Dear Drebit: Is There A More Customer-Friendly OUF-8 Notice?

Ben Jonard | August 11th, 2015
Unclaimed Funds - OUF-8 - Rea & Associates - Ohio CPA Firm

Unclaimed funds may include savings, checking, certificates of deposit accounts, payroll (wages, underlying shares principal), insurance proceeds, credit balances, customer deposits, traveler’s checks, money orders and other intangible interests or benefits that have had no activity over a specific period.

Dear Drebit: Is there a more customer-friendly OUF-8 notice businesses can provide to account holders? Sincerely, Unclaimed Funds In New Albany

Dear Unclaimed Funds:

You know that feeling you get when you pull a forgotten $20 dollar bill out from deep inside your jeans’ pocket; faded and pressed from being through a wash cycle or two. It always kind of seems like the cash just materialized out of thin air. In fact, maybe you even “remember” spending it … But alas, there it is, as plain as the gills between my toes.

Read Also: What Do I Need To Know About Unclaimed Property in Ohio?

Unclaimed funds are kind of like that too, but instead of finding a bit of cash in your pocket, you will likely find a notification in your mailbox.

Unclaimed funds may include savings, checking, certificates of deposit accounts, payroll (wages, underlying shares principal), insurance proceeds, credit balances, customer deposits, traveler’s checks, money orders and other intangible interests or benefits that have had no activity over a specific period.

Businesses are responsible for notifying account holders of their unclaimed funds by using the official Notice of Unclaimed Funds Form (also known as OUF-8), which will be sent to the account owner’s last known address. The purpose of this form is to notify you that the funds will be remitted to the state as unclaimed funds if you do not claim them over the next 30 days. NOTE: Your unclaimed funds cannot be remitted to the state until the 30-day period has expired.

Therefore, because the OUF-8 is the official form used throughout the State of Ohio, the answer to your question is no, there is not a more customer-friendly OUF-8 notice available. That being said, you are not necessarily required to complete the form in its entirety. The only information you must include is the:

  • Recipient/account owner’s name
  • Recipient/account owner’s address
  • The dollar amount in question.

From there, it is up to you to decide if you want to provide the recipient with more customer-friendly information.

For example, you may like the idea of including a cover letter with your OUF-8 forms as a way to provide helpful, more personalized and branded information to the account holder. The letter might include information about your business as well as instructions for claiming the funds. It may also be a good idea to inform them of what will happen if the account owner does not claim the funds within the next 30 days. Just remember that a cover letter is only meant as a supplement to the official OUF-8 form. The OUF-8 may either be sent on its own or with your customized cover letter – the cover letter cannot be sent in lieu of the OUF-8 form.

Unclaimed Fund Clarity

I certainly hope I could clear things up for you about the unclaimed funds/OUF-8 form; but if you have additional questions, please do not hesitate to ask the financial experts at Rea & Associates.

How Can Drebit Help You?

Readers, do you have questions about taxes, accounting, succession planning, fraud detection and other general business topics but don’t know who to ask? Drebit has answers. You are more than welcome to fill out the form at the top, right side of this page. You can also click here to reach out to one of our expert financial advisors directly. If you like the Dear Drebit blog, why not click here to subscribe to get news, advice and general insight delivered directly to your mailbox?

Want to learn more about unclaimed funds? Check out these articles for more great information. 

Free Money May Be Waiting for You!

Is Your Business in the Crosshairs? Ohio Commerce Div. Examines Taxpayers for Unclaimed Funds

Don’t Forget to File State and Local Taxes

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Dear Drebit: What Is The New Petroleum Activity Tax (PAT) Rate For The Second Half Of 2015?

David Shallenberger | August 7th, 2015
pretty drill

Are you familiar with PAT? Also known as the petroleum activity tax rate. While the PAT rate hasn’t changed for the second half of 2015, it is still making a buzz with recent changes. Read on to learn what all the buzz is about.

Dear Drebit: What is the new petroleum activity tax (PAT) rate for the second half of 2015? Sincerely, Wondering in Wooster

Dear Wooster:

The PAT, for those unfamiliar with the tax, is one that impacts suppliers of motor fuel. These amount suppliers are expected to pay – the rate – is measured by the supplier’s gross receipts from the first sale, transfer, exchange or other disposition of the motor fuel in Ohio to a point outside of the distribution system. Currently, this rate is set at 0.65 percent and it will not be changing during the second half of the year.

Read Also: Cash Continues To Flow From Ohio’s Shale Industry

That being said, there has been a change in the PAT that has been causing a bit of buzz (kind of like that fly that’s just close enough to be annoying, yet too far away for me to catch and enjoy for my dinner). This change is in regard to what gross receipts suppliers are expected to report. In the past, it was OK to use the supplier’s actual gross receipts. As of July 1, 2015, however, suppliers must adjust their calculation method to one that calculates gross receipts by multiplying the gallons of motor fuel sold by an average wholesale price.

Suppliers in need of help of calculating or reporting their PAT or need a second opinion to ensure that their reports are accurate and that they aren’t paying too much should reach out to one of Rea’s tax advisors for additional assistance. Those on the firm’s oil & gas team may be particularly suited to address your specific needs and concerns.

How Can Drebit Help You?

Do you have a question for Drebit? Don’t be shy! You can submit yours today by filling out the form on the top, right side on this page. You can also click here to contact one of our professionals directly.

Are you looking for more oil & gas industry advice? Check out the following articles for best practices and industry insights.

How Does Worker Classification Impact Companies In The Oil & Gas Industry?
How Can A Business Plan Prepare You For Your Future In The Oil & Gas Industry?
Looking To Stay Up-To-Date On Ohio Oil & Gas News?

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Colored Pencils, Glue and … Rubber Pants? Oh My!

Lisa Beamer | August 3rd, 2015

Five Things You Didn’t Know About Ohio’s Tax Holiday

Ohio Sales Tax Holiday - Rea & Associates - Ohio CPA FirmRegardless of whether you are a parent with younger children, a student, a teacher, or maybe just someone who wants to stock up on a ridiculously large supply of colored pencils and glue, by the time you buy everything you need for that first day of school, you (and your bank account) are drained. OK – maybe it’s really not that bad, but by the time you purchase new clothes and shoes, a book bag or two and all the items that go in it, you will have spent a large sum of money.

Fear not fellow Ohioans! The Department of Taxation is offering relief.

This year, for the first time ever, the State of Ohio is giving those who shop for clothing (priced at $75 or less per item), school supplies (priced at $20 or less per item) and school instructional material (priced at $20 or less per item) a break from paying sales tax beginning 12:01 a.m. Friday, Aug. 7 and ending 11:59 p.m. Sunday, Aug. 9, 2015. And there is no limit on the quantity of items you can purchase.

“As the new school year approaches, additional expenses can put a strain on family budgets, said Ohio Tax Commissioner in a news release. “The sales tax holiday will give back-to-school shoppers a break from paying sales tax, and let Ohio families save some money.”

The one-time tax holiday, which was enacted as a result of Senate Bill 243, also applies to eligible items purchased online, by mail, telephone or email. But to qualify, the order must be placed, paid for and accepted by the retailer for immediate shipment during the hours the tax holiday is in effect. That being said, actual delivery can occur following the tax exemption period.

Read on to learn five interesting facts about the upcoming tax holiday.

Five Things You Didn’t Know About Ohio’s Tax Holiday

  1. Retailers cannot “opt out” of the 2015 Ohio Sales Tax Holiday event. The holiday is set by law, therefore all vendors must comply.
  2. Qualifying items placed on, or picked up from, layaway during the sales tax holiday ARE exempt from sales tax.
  3. During the sales tax holiday, all clothing that costs $75 or less is exempt from sales tax. So, obviously items such as shirts, pants, dresses, uniforms, shoes, coats, etc. are tax exempt; but items like receiving blankets, diapers, rubber pants and athletic supporters also made the cut.
  4. While you won’t have to pay sales tax on your aprons, belts and beach capes, wigs, belt buckles and wetsuits are another story. Make sure to check the official web page for more clarification.
  5. Teachers are also encouraged to take advantage of the holiday! In addition to traditional school supplies, the tax exemption is valid for reference books, maps, globes, textbooks and workbooks.

SOURCE: http://www.tax.ohio.gov/sales_and_use/salestaxholiday/holidayfaq.aspx

Click here to learn more about Ohio’s 2015 Sales Tax Holiday. Happy back-to-school shopping!

By Lisa Beamer, CPA (New Philadelphia office)

 Want to learn more about state and local tax topics that impact your life?
You might like these articles:

[SLIDESHOW] The Truth About Tax Extensions
[INFOGRAPHIC] Top 3 College Savings Account Strategies
How To Pay Your Tax Bill In 6 Easy Steps

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Like Losing Your Wallet – Only Worse

Andrea McLane | July 31st, 2015
Retirement Plan Returns- Ohio CPA Firm

Typically, owners of businesses and their spouses who fail to file their annual retirement plan returns are in full-scale crisis mode – and rightfully so, since missing this deadline results in a penalty that’s about the size of a small fortune.

For most of us, misplacing our keys, losing sight of our shoes and occasionally forgetting to pay the phone bill on time is not a catastrophic phenomenon. It happens; and most likely we will freak out for a minute, find what we were looking for and move on – only to repeat our dysfunctional routine countless times over the course of a lifetime. Forgetting to file your retirement plan returns on the other hand … well, let’s just say that’s typically not a stress-free event.

Read Also: Do You Know What Your Retirement Plan Is Costing You?

Typically, owners of businesses and their spouses who fail to file their annual retirement plan returns (Form 5500-EZ) are in full-scale crisis mode – and rightfully so, since missing this deadline results in a penalty that’s about the size of a small fortune. To be more precise, in years past, those who failed to meet their filing obligation could face a penalty totaling up to $15,000 per return. Fortunately, the IRS recently announced that instead of facing such an extreme late fee, eligible business owners can take advantage of a “low-cost penalty relief program.”

How Much Would You Pay?

The relief initiative, which started as a one-year pilot program in 2014, was tremendously successful, resulting in the collection of about 12,000 late returns. Because of this success, the program secured it’s permanency in May of this year. According to the news release, the program allows eligible business owners and their spouses to file late returns and only pay a $500 penalty for each return submitted with a maximum of $1,500 per plan. Because the IRS caps the maximum penalty at $1,500, applicants are encouraged to include multiple late returns in a single submission.

Eligibility

The IRS says that businesses with plans that cover the owner or the business’s partners (depending on how the business is set up) and their spouses are eligible to take advantage of this low-cost plan. Complete information about the program can be found by clicking here.

Learn More

Remember, your return must be filed annually no later than the end of the seventh month following the close of your plan year. So, for example, if your plan is governed by the calendar-year, as most are, your 2014 return was due today (Friday, July 31, 2015). Did you fail to file your small business’s annual retirement plan returns? Would you like to find out if you qualify for this program? Email a retirement plan expert at Rea & Associates and take control of your IRS debt now.

By Andrea McLane, QKA (Dublin office)

Want to read more about the importance of Retirement Plan Compliance?
Check out these articles:

401(k) Loans and Keeping Your Plan In Compliance
Retirement Roulette
The ‘Van Halen Philosophy’ of Retirement Plan Compliance

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How to make your building work for you with a cost segregation study

Matt Sanders | July 29th, 2015

Have you recently purchased commercial real estate or invested in construction? If so, you might want to look into getting a cost segregation study. The benefits of a study can mean tax savings and improved cash flow. Smart Business recently sat down with me to discuss the benefits of a  cost segregation study.

For example, if you buy a building and it’s all capitalized as one lump sum on a business’s tax return, then it can only be depreciated over 27 to 39 years … But if you break it down into cost components, the business owner can depreciate certain costs over five, seven or 15 years to accelerate tax deductions.

To find out what a cost segregation study could do for your recent construction investment or commercial real estate purchase. Read the full article here or read more about cost segregation studies by clicking on the article links below. 

Learn more about cost segregation studies and how they can help your small business:

It’s No Secret – Cost Segregation Studies Can Save Business Owners Money

Uncork Bottled Cash Flow with Cost Segregation Studies

Uncover Tax Savings in Your Real Estate Through Cost Segregation

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How to set up internal controls on limited resources

Michaela McGinn | July 22nd, 2015

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

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

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

By Michaela McGinn, CPA (Dublin office)

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

10 Ways To Implement Internal Controls With Limited Resources

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

Does Your Company Have Solid Internal Controls?

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A Fair Assessment?

Christopher Axene | July 21st, 2015
Back taxes - Ohio CPA Firm

When a taxpayer files a false or fraudulent return, the taxpayer waves their right to statute of limitations protection. And if a taxpayer fails to file their income tax return, the IRS is allowed to undertake collection proceedings at any time and without assessment.

Bob recently received a copy of his account transcripts from the IRS. Upon reviewing the paperwork, he noticed that the government agency made note of a “date of assessment,” which prompted him to wonder how the date of assessment was determined? Moreover, he wanted to know what role one’s date of assessment plays with regard to the time frame the government has to collect back taxes.

If you ever find yourself in a situation similar to Bob’s, with questions about your tax history, in addition to speaking with your tax advisor, you can request that a copy of your tax return transcript and tax account transcript be mailed to you. Fill out the online form here, but make sure you are making the request for the current tax year’s transcript or transcripts for three years prior.

If you are requesting transcripts for older tax years or you need a wage and income transcript or verification of non-filing letter, you’ll need to complete Form 4506-T and send it to the address listed on the form’s instructions. Due to a recent security breach, your transcripts will not be sent electronically.

How Far Back Can The IRS Go To Collect Back Taxes?

If the IRS is attempting to collect past due taxes, the agency will assign a date of assessment to your IRS account transcript.

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

Like many of the invoices you see every day, every item on your transcript will be assigned a code. Your date of assessment is no different. To identify the date of assessment on your account transcript for the tax year in question, look for Transaction Code “150.”

As a general rule, the IRS must assess tax, or file suit against the taxpayer to collect the back taxes, within three years after the original tax return was filed. This three-year period of limitation on assessments also applies to penalties. In fact, this rule continues to apply regardless of whether the return was filed on time or not. In general, the statute of limitations will almost always begin the day after the taxpayer files their income tax return.

The Rules May Not Apply

It seems as though there are always exceptions to the rules we work so hard to uphold – taxes are not excluded from this trend. For instance, when a taxpayer files a false or fraudulent return, the taxpayer waves their right to statute of limitations protection. And if a taxpayer fails to file their income tax return, the IRS is allowed to undertake collection proceedings at any time and without assessment.

Parting Shots

While the statute of limitations for assessment is three years after your return has been filed, the IRS still has 10 years to actually collect the assessed tax. Below is an example of the assessment process in action:

  • April 15, 2015 – you filed your 2014 tax return with the IRS
  • March 31, 2018 – the IRS assesses additional taxes on your 2014 tax return
  • The IRS has until March 31, 2028, to collect the additional tax or file suit against you.

While this information may help to shine some light on IRS assessments and statute of limitations rules, every situation is unique and hinges on several specific variables. Your tax advisor can help you sort through codes and details to get you back on the right track. Email Rea & Associates to learn more.

By Christopher Axene, CPA (Dublin office)

Check out these articles to learn more about your responsibilities as a taxpayer:

How Far Back Can The IRS Go For Tax Auditing?

The Truth About Tax Extensions

If Something Happens To me, What Will Happen With My Financial Matters?

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This Settlement Rocks: Municipalities Can Claim A Portion Of $11.5M

Chad Welty | July 14th, 2015
rock salt settlement - Rea & Associates - Ohio CPA Firm

Photo Courtesy Of WDTN.com
Morton Salt, Inc., and Cargill Inc., the only two companies that mine rock salt in Ohio for commercial sale, agreed to pay a settlement totaling $11.5 million, in an attempt to resolve allegations that the two companies divided rock salt between themselves in an attempt to drive up salt prices.

Mother Nature has never been shy about hammering Ohio with frigid temperatures and record-breaking snowfalls, which is why rock salt continues to be essential in our battle to keep the state’s roads and bridges free from ice. And if you thought your municipality was paying a premium to beef up its salt reserves in the past, you were probably right.

Get Your Money Back

Last month, Ohio Attorney General Mike DeWine announced that the Ohio Department of Transportation (ODOT), the Ohio Turnpike Commission and local government entities may be entitled to get some of the money back that they spent on rock salt between July 1, 2008, and June 30, 2011.

Morton Salt, Inc., and Cargill Inc., the only two companies that mine rock salt in Ohio for commercial sale, agreed to pay a settlement totaling $11.5 million, in an attempt to resolve allegations that the two companies divided rock salt between themselves in an attempt to drive up salt prices. While the companies continue to deny any wrongdoing, they did agree to pay back some of the funds that were charged to public entities across the state.

According to the Attorney General’s Office, all eligible public entities will receive a payment based upon their share of rock salt purchases.

How To Submit Your Claim

To submit a claim, you must complete the official online claim form or the official mail-in claim form no later than Aug. 7.

Your claim must include:

  • Contact information for the public entity making the claim
  • The details of your entity’s salt purchase for each season, including:
    • The quantity (in tons)
    • The cost per ton
    • Total dollars spent
    • Any additional information that may be relevant to your claim
  • Certification that your claim is correct and that you are authorized to submit the form on behalf of your public entity.

While you do not need to submit invoices or other documentation with your claim, you will likely need this documentation to accurately complete your claim.

According to an official news release from the Ohio Attorney General, the antitrust lawsuit was brought against Morton and Cargill in Tuscarawas County on March 21, 2012, and alleged that the two companies agreed not to compete in an attempt to drive up the rock salt prices – a practice that persisted for nearly a decade, ending in 2010. As a result, ODOT, the Ohio Turnpike Commission and local government entities allegedly paid “above-market” prices for their rock salt supply, which is an essential resource that aids in their responsibility to keep all Ohioans safe by helping keep roadways, highways and bridges clear of ice.

“I believe that this settlement is a very positive result for the people of the state of Ohio. The millions that will be distributed to the state and to local governments would never have been returned to them if we had not filed this lawsuit and aggressively pursued this case,” said DeWine.

If you need help determining whether your public entity can claim a portion of this settlement or need help navigating the claims process, email Rea & Associates.

By Chad Welty, CPA (Medina office)

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Should I still be concerned about identity theft and tax fraud?

Joe Popp | July 9th, 2015

This article was published in the July 2015 issue of Columbus Business First – Ask The Expert.

Identity theft and tax fraud are problems that show no signs of stopping. This year, in an attempt to provide an added layer of protection, taxpayers in Ohio had the opportunity to get up close and personal with the Ohio Department of Taxation’s (ODT) newest fraud safety measure – the Identification Confirmation Quiz.

fraud_small

We hear about cases of fraud every week, but steps are being taken to slow it down and ultimately stop it.

While you may have heard your friends and family comment (perhaps unfavorably) about this added step, government officials have said that the quiz helped thwart countless attempts to steal refund checks from Ohio taxpayers this year. During the 2014 tax season, fraudsters pocketed more than $250 million worth of taxpayer refunds, prompting the need for additional safety measures. Due to its success, the ODT expects the quiz to become a mainstay of your tax prep routine.

But just because tax season is over, doesn’t mean you should let your guard down – quite the contrary. When it comes to protecting your identity, you must remain vigilant. Whether you are aware of it or not, criminals are still looking for ways to steal your personal identification information for a myriad of uses.

Do you know what to do if your ID is compromised? Visit www.reacpa.com and click on the “Tools” button in the top navigation bar. From there, you can read our compilation piece How to Recover from Identity Theft & Refund Fraud for more insight and information that can help you recover from identity theft and tax fraud.

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Could Your Company Be Ransomware’s Next Victim?

Joe Welker | July 8th, 2015
Preempt A Crisis - Rea & Associates - Ohio CPA Firm

While there is no surefire way to prevent a Ransomware attack on your data, it’s wise to implement the following best practices to reduce the possibility of infection or reinfection.

The malware known as CryptoLocker or CryptoWall continues to be a major concern for individuals and companies alike. So much so, that the FBI saw fit to issue a warning just last month and help raise further awareness about the threat.

According to the FBI, this Ransomware continues to evolve, which helps it avoid user’s virus detection software applications – even if they are current. Since April 2014, reported the FBI, there have been 992 incidents of CryptoLocker reported. These occurrences have resulted in the loss of around $18 million.

Read Also: How Much Is Your Data Worth To Criminals?

The Threat Is Real

Ransomware is a computer infection that’s been programmed to encrypt all files of known file types on your local computer and your server’s shared drives. Once it takes hold, it’s all but impossible for you to regain access to the data that’s been infected. Once this happens, you have one of two choices. You can:

  1. Restore their machine by using backup media, or
  2. Accommodate the hacker’s demands and pay up.

As a direct result of my experience as an IT audit manager, I have been made aware of several situations in which businesses were left with no choice but to succumb to the demands of malicious cybercriminals carrying out Ransomware attacks. And while the companies I have worked with were finally able to obtain their assailant’s encryption key code to unencrypt and regain access to their data after the ransom was paid, others are not as lucky – after all, the FBI has reported $18 million worth of losses in just over a year. Furthermore, there are no guarantees that you won’t be targeted again in the future.

Preempt A Crisis

While there is no surefire way to prevent a Ransomware attack on your data, it’s wise to implement the following best practices to reduce the possibility of infection or reinfection.

  • Implement mandatory computer safety training for all employees and implement and test an IT Disaster Recovery Plan in place.
  • Always use reputable antivirus software and a firewall and be sure to keep both up to date.
  • Put your popup blockers to good use. Doing so will help remove the temptation to click on an ad that could infect your computer.
  • Limit access to company’s data by ensuring that only a few employees have access to certain folders and data. You can facilitate this type of action by conducting annual reviews of your company’s employee access rights.
  • Backup all company-owned content. Then if you do become infected, instead of paying the ransom, you can simply have the Ransomware wiped from your system and then reinstall your files once it’s safe again to do so.
  • Never click on suspicious emails or attachments, especially if they come from an email address you don’t recognize. And actively avoid websites that raise suspicion.

Shut Down The Attack

If you are surfing the Web and a popup ad or message appears to alert you that a Ransomware attack is in progress, disconnect from the Internet immediately. Breaking the connection between the hacker and your data could help stop the spread of additional infections or data losses. In addition to informing your company’s IT department about the threat or occurrence, be sure to file a complaint with your local law enforcement agency.

Email Rea & Associates to learn more about the importance of your company’s online security.

By Joe Welker, CISA (New Philadelphia office)

 

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Could A Cyber-Attack Cripple Your Business In 2015?
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10 Ways To Implement Internal Controls With Limited Resources

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

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

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

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

Who’s Watching Your Money?

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

How To Address Your Internal Control Needs

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

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

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

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

10 Ways To Implement Internal Controls In Your Business

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

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

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

By Michaela McGinn, CPA (Dublin office)

 

Related Articles

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

Does Your Audit Process Protect You From Fraud?

Does Your Company Have Solid Internal Controls?

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Don’t Turn A Blind Eye To PCI Compliance

Joe Welker | July 2nd, 2015
PCI Compliance and Data Security - Rea & Associates - Ohio CPA Firm

Although you may employ a vendor to process credit card payments, it is still your client’s data and the ultimate need to protect that data is assumed by you.

You probably don’t have a lot of spare time on your hands. Between managing your business and employees, to ensuring your clients’ needs are being met. The last thing you might be concerned about is adhering to Payment Card Industry (PCI) Data Security compliance standards. But hold up. If your business (or any of your vendors) deals with client cardholder data or stores this information anywhere in your business’s IT systems, PCI standards are not something to ignore. It could be the difference between your business surviving and thriving or going down the drain.

PCI Data Security Best Practices

In November 2013, the Payment Card Industry (PCI) Data Security Standard version 3 was released. There were five requirements defined as “best practices.” And as of June 30, 2015, these requirements are mandatory and may affect your organization.

The Payment Card Industry (PCI) Data Security Standard v3.0 data sheet describes the need for compliance as: “All applications that store, process, or transmit cardholder data are in scope for an entity’s PCI DSS assessment, including applications that have been validated to PA-DSS.”

The two requirements that could most affect your organization are Requirements 12.9 and 9.9.

  • Requirement 12.9 – Additional requirements for service providers: Service providers acknowledge in writing to customers that they are responsible for the security of cardholder data the service provider possesses or otherwise stores, processes, or transmits on behalf of the customer, or to the extent that they could impact the security of the customer’s cardholder data environment.
  • Requirement: 9.9 – Protect devices that capture payment card data via direct physical interaction with the card from tampering and substitution.

So what exactly do these requirements mean for you (and your vendor)? In essence, Requirement 12.9 requires third parties to provide in writing the details of its role in providing PCI compliancy, as well as any requirements of your organization. Requirement 12.9 is relevant to Requirement 9.9 as it relates to devices used to scan or input credit card information. The vendor’s compliancy requirements could require the entity to adhere to Requirement 9.9 by protecting and monitoring devices used by the entity to scan or input credit card information. And because it’s ultimately the responsibility of your organization to protect client credit card information, it is important that your business obtain the PCI requirements of any vendors you work with and adhere to the requirements of their PCI Compliancy Standards.  It is always best practice to document in detail when testing for PCI or communicating with your vendor.

Remaining Three Best Practice PCI Compliance Requirements

The other three PCI compliance “best practice” requirements are listed below. These may or may not be items to be addressed by your organization depending on your current PCI classification. It’s best to review and determine if your entity needs to add to your current PCI testing procedures.

  • Requirement: 6.5.10 – Broken authentication and session management. Secure authentication and session management prevents unauthorized individuals from compromising legitimate account credentials, keys, or session tokens that would otherwise enable the intruder to assume the identity of an authorized user.
  • Requirement: 8.5.1 – Service providers with remote access to customer premises (for example,  for support of POS systems or servers) must use a unique authentication credential (such as a password/phrase) for each customer.
  • Requirement: P. 93 11.3 P. 55 6.5 – Implement a methodology for Penetration testing.  See P. 93 of the Payment Card Industry (PCI) Data Security Standard v3.0 data sheet for details.

The End of Outdated Secure Sockets Layer Encryption Protocol

Finally, in April 2015 the PCI Security Standards Council published a new version of the Payment Card Data Security Standard that calls for ending the use of the outdated Secure Sockets Layer (SSL) encryption protocol. The new standard requires that the use of SSL be discontinued and replaced by the use of the more secure Transport Layer Security (TLS) protocol. The deadline for this change has been set at June 2016.

Remember, although you may employ a vendor to process credit card payments, it is still your client’s data and the ultimate need to protect that data is assumed by you.

We hear of new breaches daily, so it’s in the best interest of your organization to know the responsibilities of your organization for PCI Compliancy.  Don’t assume that all the responsibility is on a third party vendor because it is all of our responsibility to maintain security and keep the integrity of our data secure.

By Joe Welker, CISA (New Philadelphia office)

 

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Obamacare Lives Another Day

Joe Popp | June 25th, 2015
United States Supreme Court Says Obamacare Will Live Another Day - Rea & Associates - Ohio CPA Firm

Certainly, for those who will retain their health care as a result of the Supreme Court’s decision, the outcome was optimal. But if you’re a business owner, you may not agree with the ruling.

The United States Supreme Court upheld a key provision of the Affordable Care Act Thursday after the justices released its 6-3 ruling on King v. Burwell, which will leave the law in tact in its current form. The four-word statutory passage – “established by the State” – stood at the heart of the case and the nine justices set to deliberate the interpretation of these words.

If taken literally, they would have rendered Obamacare immobile in many states. However, the judges opted to look beyond these words and interpret them in light of the rest of the law – which left healthcare subsidies intact for individuals and families throughout the nation.

Read Also: Obamacare: Discrimination Is Not An Option

“This case is about whether the Act’s interlocking reforms apply equally in each State no matter who establishes the State’s Exchange,” according to the official Opinion of the Court, which points to the provision that allows the federal government to establish a state’s exchange if the state fails to establish its own.

After much deliberation, the court found that phrase in question should be interpreted in context. According to the court’s formal opinion, the law “allows tax credits for insurance purchased on any Exchange created under the Act. Those credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that congress plainly meant to avoid.”

“We don’t look at four words, said Justice Elena Kagan. “We look at the whole text, the particular context” to gain “an understanding of the law as a whole.”

The Right Decision?

Was the decision of our nation’s highest court the right one? Well, as always, it depends who you’re asking.

Certainly, for those who will retain their health care as a result of the Supreme Court’s decision, the outcome was optimal. But if you’re a business owner, you may not agree with the ruling.

What is clear is that (at least for now) Obamacare is here to stay. Business owners and professional service providers must continue to work to understand it and to identify the best way to work in tandem with its multitude of provisions.

To learn more about your responsibilities under the Affordable Care Act, email Rea & Associates.

By Joseph Popp, JD, LLM (Dublin office)

 

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The Billy Beane Approach To Business Success

Katie Snyder | June 23rd, 2015
Big Data, Business and Baseball - Rea & Associates - Ohio CPA Firm

While most baseball teams attempt to excel in all aspects of the game, The Oakland A’s ushered in a different type of strategy – one rooted in the power of optimizing a single data point – getting hits to get the team’s players on base.

It’s summer and that means that baseball season is in full swing. I don’t know about you, but nothing truly beats the feeling of spending a few hours in a stadium cheering for your favorite team – mine just happens to be the Cleveland Indians.

While I am a devoted fan and will support my team at nearly every opportunity (Go Tribe!), I must confess that there are days when, rather than have my heart broken by another loss, I opt to spend my time watching something a little more … encouraging. So, the other night I turned to the movie Moneyball for some baseball-themed comfort.

Read Also: Is Your Business Batting A Thousand?

Based on a true story, Moneyball follows Oakland A’s General Manager Billy Beane as he attempts to overcome multiple challenges in the hopes of taking his baseball team to the next level by leveraging cost effective measures to transform his team. I was particularly struck by the part when Billy, played by Brad Pitt, made a point to zero in on a single characteristic in the hopes of taking his team to the top – hitting. Moving forward with this strategy, Billy turned to data for answers.

Big Data, Business and Baseball

I’m willing to bet that almost everybody reading this post right now is at least somewhat familiar with the term “Big Data.” Some of us are generally aware of its role in business while others help facilitate the collection of data and are ultimately responsible for its collection and interpretation. Then there are others who are acutely aware of Big Data’s magnitude. These are the people who readily acknowledge how data is being used to track our buying behavior, monitor our interests and influence our interactions with others. Today, it is common practice to zero in on the details, which may have cost us our ability to see the forest through the trees – but at least we know that our trees look fabulous.

The Big Data concept is articulated in Moneyball. While most baseball teams devote countless hours to offensive and defensive strategies in an attempt to excel in all aspects of the game, The Oakland A’s ushered in a different type of strategy – one rooted in the power of optimizing a single data point – getting hits to get the team’s players on base.

Billy’s strategy can apply to your business success as well. For example, if you are able to focus on your business’s key driver while cutting out the aspects of your business that are holding you back (such as a poorly selling product, costly production or a minimal return on a particular investment) you can take the steps to increase your efficiency, company-wide value and ability to meet a growing demand. And consider watching Moneyball for inspiration – it sure beats tuning in to another lackluster performance by the Indians.

By Katie Snyder (Wooster Office)

 

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Can Your Business Survive An Employee Exodus?

Tom Jeffries | June 23rd, 2015
Do Your Employees Love Their Jobs - Rea & Associates - Ohio CPA Firm

It’s easy to blame the pay scale when an employee leaves or when it becomes a struggle to recruit new talent and it’s common for top performers to leave for bigger and brighter opportunities that promise a larger pay check. But sometimes, the reason a top performer leaves has nothing to do with dollar signs. Sometimes their departure has everything to do with whether they believe their work is appreciated. When an employee does a good job, do you let them know?

As the economy continues to improve, it’s more important than ever to remain focused on the well-being of your team – because if you don’t, somebody else will.

Just because your employees aren’t actively looking for another job opportunity, doesn’t mean that other companies aren’t looking for them. And that makes it your responsibility to keep them happy in their current position or company more important than ever. Maybe your closest competitors have begun to regularly communicate with members of your team as part of a strategy to siphon your top talent or maybe an appealing job posting on LinkedIn has prompted one of your best employees to take a critical look at their current situation. While widespread mutiny among your rank-and-file may not top your list of business threats, it’s a real possibility that must be given proper consideration. If key members of your team determine that the grass is, indeed, greener on the other side, you could be left shorthanded, unable to fulfill your business obligations and ultimately branded with a bad reputation.

Read: Are Your Employees Stakeholders In Your Business?

Could your business recover after taking this kind of hit?

If you’re not sure how your company would be able to handle the exit of your star employee or a mass exodus of talent, try implementing these tips into your team-building strategy to help secure your overall business structure – and ultimately your success. As an added bonus, you might be able to earn the “workplace of choice” status in your community in the process, which can have an extraordinary impact on all aspects of your organization.

Be A Better Leader

How effective you are as a leader hinges on your ability to provide support, motivation and direction to your team on a regular basis while utilizing fair and constructive methods of communication. Leadership is not just about barking orders, it’s about listening to your team and providing solutions that address challenges and promote higher levels of proactivity and efficiency. Want to be a better leader? Get involved. Listen. Be hands-on. And actively demonstrate the qualities you expect to see from your team.

Encourage Ownership

When team members are able to take ownership of their work and accomplishments, they will take more pride in their work and in the company. Oftentimes, the quality of your team’s work will increase and they will be more likely to offer valuable insight into the effectiveness and shortfalls of certain aspects of their area in the organization. You can’t be everywhere and they can serve as your eyes. Your team’s intuition can be incredibly valuable and can help improve your business’s processes and procedures. One way to encourage your team to take ownership is to give them the chance to walk away with a bonus for their efforts. Individual and company performance bonus plans have been successfully implemented in many businesses.

Environment Matters

Want to know the best way to drive your employees away? Make them work in cramped space with poor lighting, uncomfortable working conditions and outdated facilities. On the other hand, if attracting great hires and retaining top talent is your goal, be sure to provide your team with the tools they need to do their jobs effectively while ensuring that your facilities are up-to-date and the working conditions are manageable. Just like you, your employees are working harder than ever to earn a living. Another great way to satisfy your team is to understand that many of the men and women working for you are part of a household that depends on both parents working full-time jobs. Therefore, respecting the need for greater work/life balance might also give your business the edge when it comes to attracting and retaining top talent.

Be Generous With Feedback

It’s easy to blame the pay scale when an employee leaves or when it becomes a struggle to recruit new talent and it’s common for top performers to leave for bigger and brighter opportunities that promise a larger pay check. But sometimes, the reason a top performer leaves has nothing to do with dollar signs. Sometimes their departure has everything to do with whether they believe their work is appreciated. When an employee does a good job, do you let them know? When your team works together to fulfill an especially difficult quota, do you speak up? When you notice that one, two, 10 or more members of your team are struggling, do you take the time to work with them and help them overcome their challenges? When you take the time to give employees feedback with regard to how well they are performing their specific job duties, you help provide them with a roadmap for their own success. Some companies have begun to implement longevity awards to help acknowledge their team for the great work they do. These rewards are not only great incentives, they become points of pride.

Email Rea & Associates to learn more about the benefits a great team can have on your company’s bottom line.

By Tom Jeffries, CPA (Millersburg office)

 

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Is Your Business Batting A Thousand?

Dave Cain | 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.


Is Your Business Batting A Thousand? – Created with Haiku Deck, presentation software that inspires

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)

 

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The Plight of the Snowbird

Trista Acker | June 19th, 2015

It’s warm and muggy now, but once winter blankets the Buckeye State with record snowfall and subzero temperatures again, you will likely be kicking yourself for not having hightailed it to Florida after last year’s bitter cold snap. Sure, it’s easy to say that you would like to pack up and head for a warmer climate during a seemingly endless freeze, but once the icicles melt and the flowers bloom, you begin to remember why you’ve stayed around for so long in the first place. Maybe the fact that your family and friends still call Ohio home is enough to convince you to stay put. Or perhaps its memories of your own childhood that are keeping you tethered to the state. Either way, now that it’s summer – the need doesn’t seem so intense anymore … that is, unless you are considering taking advantage of possible tax savings.

Will Taxes Influence Your Decision To Fly South This Winter?

The Plight of the Snowbird - Rea & Associates - Ohio CPA Firm

Now that you have settled on whether or not you will be packing up and moving for tax and/or weather reasons, make sure you know what’s involved when it comes to changing your state of domicile.

What if I told you that the State of Ohio has made it a little easier for you to escape the winter chill, spend more time in the nation’s heartland during the seasons you love and save on your tax bill? Would you consider making the move then? If so, you’re in luck!

Read: How Can I Make The Most Of My Retirement?

Which State Do I Call Home?

For some, it’s relatively easy to buy and maintain several homes across state lines. The hard part comes when the Internal Revenue Service wants you to decide which home should be considered your primary residence based on how much time you spend in each state. These are the facts that will ultimately influence whether you pay taxes or not. If you are a snowbird who flocks back and forth between Ohio and Florida, for example, to avoid reporting your income to Ohio for tax purposes, it’s up to you to prove that you have spent no more than seven months (or fewer than 212 contact periods) in the Buckeye State. That compares to the 182 contact sessions (or six months) snowbirds were allowed to remain in Ohio under prior rules. The rules were changed in March.

How Do I Change My Residence For Tax Purposes?

Now that you have settled on whether or not you will be packing up and moving for tax and/or weather reasons, make sure you know what’s involved when it comes to changing your state of domicile. Some states, such as Florida, require basic documentation to establish your change of domicile. Therefore, you should make sure all your paperwork is in order, including your Declaration of Domicile. And while you are filing paper work to establish your new residence for tax purposes, keep in mind that some states, including Ohio, require documentation in order to relinquish your residency. Ohioans looking to relocate must complete and sign an Affidavit of Non-Ohio Residency/Domicile. This document helps establish your desire to establish nonresidency within the state. But keep in mind that there are there are other bright line tests the State of Ohio may look at to help determine whether you are actually domiciled in another state. For example, the State may look for information that indicates where you are registered to vote, which state issued your driver’s license, where your vehicles are titled and what address is listed on your tax return.

Email Rea & Associates to learn more about the tax benefits some snowbirds enjoy and whether migration is right for you.

By Trista Acker, CPA, CFP (Dublin office)

 

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Want A Better Business? Structure Matters

Gene Spittle | 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.


Want A Better Business? Structure Matters – Created with Haiku Deck, presentation software that inspires

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 Gene Spittle, CPA, PFS, CGMA (Wooster office)

 

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Managing Wealth In A Volatile Industry

David Shallenberger | 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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What’s That ‘New’ Charge On Your Amazon Bill?

Joe Popp | June 2nd, 2015
Amazon Looks To Drone Delivery - Rea & Associates - Ohio CPA Firm

Amazon appears to be unaffected by the possible repercussions of adding sales tax to customer’s invoices as its focus seems to have shifted from a superior price point strategy to high efficiency and extra speedy service. According to reports, the online giant continues to move forward with initiatives that promise even speedier delivery – further cutting the time it takes for a product to hit the customer’s front porch after the order was placed.

If you aren’t already aware, Amazon is in the process of bringing three of its data centers and a distribution center to Ohio. And yes, the company’s decision to open up shop in the Buckeye State is expected to boost the state-wide economy and add about 1,000 jobs to the ranks. But what is generating the most excitement these days (at least throughout Ohio’s retail industry) is the company’s new responsibility to collect sales tax from our state’s shoppers.

Read: If You Buy Online You Might Owe Use Tax

Traditional retailers anticipate this move will effectively level the playing field, helping encourage the growth of the state’s locally-owned businesses. Amazon, however, appears to be unaffected by the possible repercussions of adding sales tax to customer’s invoices as its focus seems to have shifted from a superior price point strategy to high efficiency and extra speedy service. [SPOILER ALERT: Drone delivery appears to be imminent!] According to reports, the online giant continues to move forward with initiatives that promise even speedier delivery – further cutting the time it takes for a product to hit the customer’s front porch after the order was placed. The company is also exploring ways to keep the cost associated with such speed minimal – information from the US Patent and Trademark Office reveals the company’s desire to “dominate the skies.”

Ohio-Based Amazon Shoppers Begin Paying Sales Tax

Paying taxes on your purchased items is not a new phenomenon. In fact, you’re probably not too shocked to see the roughly 7 percent (based on your county) charge permanently affixed to the bottom portion your receipts whenever your purchase a variety of products from a local brick-and-mortar shop. Until June 1 though, Ohio residents didn’t see this charge when purchasing products from Amazon, simply because the online retailer wasn’t required to make those living in the Buckeye State pay these taxes.

In Ohio, only vendors with a physical presence in the state, such as a storefront, warehouse, factory or call center, must charge sales tax to in-state customers. Otherwise, it’s up to individual taxpayers to report and pay the taxes when filing their annual tax returns, which is a relatively uncommon practice.

“The Ohio Department of Taxation has estimated that Ohio will lose out on about $400 million in unpaid sales or use tax on unpaid sales or use tax on so-called remote sales this year,” reported The Columbus Dispatch. “More than 5 million Ohioans filed tax returns for 2012. Of those, a little more than 50,000 paid a total of $3 million in taxes due on Internet or mail-order purchases. Retail groups and analysts welcomed the news that Amazon will start collecting taxes.”

Ohio Taxpayers Still On The Hook For Other Purchases

It may seem like it’s too soon to start thinking about your 2015 tax return, it’s actually a great time to start collecting information you will need to complete your paperwork early next year. For example, while you won’t need to collect your Amazon receipts anymore, you may have to keep tabs of your Etsy habit (for example) to help make calculating your 2015 use tax as simple as possible.

Email Rea & Associates to learn more about use tax.

By Joe Popp, JD, LLM (Dublin office)

 

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Hackers Target IRS – 100,000 Taxpayer Accounts Breached

Lesley Mast | 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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School’s Out For Summer, But Tax Credits Are Still In

Denell Skelton | May 26th, 2015

Summer is an exciting time for families. It’s a time to get outside and have fun hanging out by the pool or to catch fireflies in a jar at the end of a long day. For many parents though, the summer holiday is overshadowed by the need to find affordable childcare during your work hours. The good news is that your opportunity to claim the Child and Dependent Care Tax Credit doesn’t end at the last day of school. In fact, you may be able to claim a variety of summertime childcare expenses when tax season rolls around again. Check out the list below to familiarize yourself with this credit.

Read: Can My Summer Day Care Expenses Earn A Tax Credit?

8 Tips To Help You Claim The Child Care Tax Credit

  1. Child care must have been provided so that you (and your spouse if filing jointly) can work or actively look for work. Your spouse must also meet this obligation during any month in which the child was a full-time student or was physically and/or mentally incapable of self-care.
  2. You must have earned income. Earned income includes earnings such as wages and self-employment. If you are married filing jointly, your spouse must also have earned income. There’s an exception to this rule for a spouse who is a full-time student or who is physically and/or mentally incapable of self-care.
  3. Care must have been provided for dependent(s) younger than 13 years old. Your spouse or another dependent qualifies if they lived with you for more than have the year and are physically and/or mentally incapable of self-care.
  4. Qualifying child care expenses include those that are used to secure enrollment at a daycare facility outside the home or at a day camp. Expenses for overnight camps or summer school tutoring do not qualify. NOTE: If you pay someone to come to your home to care for your child or children, you may be a household employer. For more information, see IRS Household Employer’s Tax Guide.
  5. If your employer provides dependent care benefits, special rules apply. See Form 2441, Child and Dependent Care Expenses.
  6. The credit is a percentage of the qualified expenses you pay for the care of a qualifying person and can be up to 35 percent of your expenses, depending on your income.
  7. You can claim up to $3,000 of your total unreimbursed expenses you pay in a year for one qualifying person or $6,000 for two or more qualifying persons.
  8. Keep your receipts and records to use when you file your 2015 tax return next year.  Make sure to note the name, address and Social Security number or employer identification number of the care provider. You must report this information when you claim the credit on your return.

Email Rea & Associates to learn more about the Child and Dependent Care Tax Credit or other tax incentives you may qualify for.

By Denell Skelton, CPA (Coshocton office)

 

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Don’t Shy Away From Business Debt

Dustin Raber | 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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Study: Nonprofit Organizations Lack Governance Structure, Processes

Mark Van Benschoten | May 19th, 2015
Directors of Nonprofit Organizations Lack Governance Structure - Rea & Associates - Ohio CPA Firm

Enacting proper policies throughout the organization will not only help rectify problems that stem from a weak system of governance, they will help solidify the connection between the directors and their organization while putting a solid structure in place for streamlining the nonprofit’s central objectives, such as fundraising, budgeting and lobbying.

If you had to guess, how strong do you think your nonprofit organization’s policies are? If you’re unsure or have that gut feeling they’re not strong, you’re certainly not alone. After surveying more than 900 directors of nonprofit organizations, the Stanford Graduate School of Business, in collaboration with BoardSource and GuideStar, reported some concerning findings in their 2015 Survey on Board of Directors of Nonprofit Organizations.

You may know that it’s important to have good governance when it comes to ensuring the stability and strength of your organization. Without having the right procedures in place to help govern the board of directors and the institution as a whole, the entire organization risks collapse.

Read: How Effective Is Your Nonprofit Organization?

While securing sources of revenue and recruiting new members are critical elements of every nonprofit, the real backbone of your organization is your board’s governance. Without the proper structure in place to help shape and reinforce your vision, mission and objectives, your board will not have the tools needed to lead – making your funding and membership objectives less effective.

According to Stanford Graduate School’s survey:

“Over two thirds (69 percent) of nonprofit directors say their organization has faced one or more serious governance-related problems in the past 10 years. Forty percent say they have been unable to meet fundraising targets. Twenty-nine percent have experienced serious financial difficulty. A quarter (23 percent) have asked their executive director to leave or had to respond to unexpected resignation [and] sixteen percent say they have had extreme difficulty attracting qualified new board members.”

Furthermore, the study found that:

  • Too many directors lack a deep understanding of the organization
  • Most lack formal governance structure and processes
  • Many directors are not engaged, do not understand their obligations

While the shortcomings underscored by this report highlight a widespread problem throughout the nonprofit industry, the solution may be as simple as writing (or reevaluating) and implementing a variety of key policies. Enacting proper policies throughout the organization will not only help rectify problems that stem from a weak system of governance, they will help solidify the connection between the directors and their organization while putting a solid structure in place for streamlining the nonprofit’s central objectives, such as fundraising, budgeting and lobbying. Policies can, and should, be in place to help manage the organization’s advisory council, board member orientation, ethics, confidentiality, donor relations, performance, and sponsorship activity – among many others.

Not sure what policies you should have in place? Take a look at this comprehensive Not-for-Profit Policy Checklist. Here are also a few examples of sample policies to give you greater insight into what you should be striving to accomplish.

By Mark Van Benschoten, CPA (Dublin office)

 

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Investing In Your Business’s Immortality

Don McIntosh | 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

Paul McEwan | 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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Charter Schools Can Thrive In An Era Of Reform?

Zac Morris | 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


Top 5 Tips For Charter Schools – Created with Haiku Deck, presentation software that inspires

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

Mike Taylor | 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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Cash Continues To Flow From Ohio’s Shale Industry

David Shallenberger | April 23rd, 2015
Companies Eye Mercer County For Fossil Fuel

Current news reports suggest that oil and gas companies will continue to invest in Ohio’s shale industry which could provide more opportunities for land owners.

For many of us, the future of Ohio’s shale industry has become a regular topic of conversation. And as a landowner in the state’s Marcellus and Utica shale regions, you’ve probably wondered what (if any) effect current events, such as the state budget and plunging energy prices, will have on your financial well-being. While nobody can predict the future, I’m optimistic we won’t see any major slowdowns over the next few years. Here are a few reasons why:

Severance Tax Sees The Cutting Room Floor

We recently learned that Gov. Kasich’s plan to increase the state’s severance tax on horizontal drilling to pay for the plan to cut income taxes was removed in the newest rendition of the state’s proposed budget bill.

The governor’s original two-year budget plan called for oil and gas produced by horizontal wells to be taxed at a 6.5 percent tax rate for product sold at the wellhead – while 4.5 percent tax would have been applied to product sold downstream. Earlier this year, Ohio Tax Commissioner Joe Testa told the media that the governor’s proposed tax hike was because Ohio’s horizontal drilling industry has become more developed and that drilling has proved to be less expensive than anticipated. In response, American Petroleum Institute’s Executive Director, Chris Zeigler, argued that the original budget proposal placed the “future development of Ohio Shale at serious risk.”

Now that the proposed tax increase in question has been removed, one could assume that drilling companies are breathing a sigh of relief. However, while there appears to be no new initiatives in play to raise the existing severance tax rate at the moment, the new budget proposal still has a long legislative journey to make before the June 30 deadline.

Shale Investment Appears To Be Untouched By Low Energy Prices

Lower prices at the pump might be a bit unnerving if you are, for example, in the process of finalizing a mineral lease agreement. But have no fear, even though new drilling initiatives in Ohio’s shale regions are slowing, according to Business Journal Daily, “oil and gas exploration continues to have positive ramifications across the region.”

As Ohio’s oil and gas industry matures, it continues to become more efficient, which has helped it persevere at a time when oil producers in the Middle East and elsewhere appear to be maintaining higher production quotas in an effort to price horizontal drillers out of the market. For example, the practice of “super fracking,” by which producers pump higher quantities of sand into the wells they fracture, has increased productivity from 400 barrels a day to 600. The result is a lower break-even cost for producers and, in general, more staying power than experts had initially thought.

To date, Energy In Depth, an oil and gas trade organization, estimates that Ohio’s shale industry has grown to $22.3 billion, and expects it to grow by another $8.1 billion by 2016, with the construction or extension of additional pipeline infrastructure, power plants and processing plants. In other words – don’t expect the Ohio’s oil and gas industry to slow down any time soon. In fact, it could be expanding as landowners from other parts of the state appear to have been approached by companies looking to increase their reserves.

Companies Eye Mercer County For Fossil Fuel

About 10,000 acres of farmland located in the Mercer County area, about 60 miles southwest of Lima, has been leased for 3D seismic oil and gas exploration according to The Daily Standard, a local news publication. The leased property, which is primarily farmland, will be subjected to noninvasive 3D seismic tests that will identify whether “significant amounts of oil and/or gas” are present. The results are expected to be available by June.

The newspaper reports that “[more] than 90 land leases involving thousands of acres have been filed in Mercer County since 2013 between various companies and property owners … the legal documents give companies access to test, drill or perform other action on the land as stipulated in each agreement.” Mercer County Commissioners agreed to test some government-owned property as well.

This news is not only important to the residents of Mercer County, but to residents throughout Ohio. The fact that companies are actively seeking to further their investment within the state is promising for all landowners. And at the very least, this recent move signifies that these companies have no plans packing up and shipping out anytime in the near future.

Email Rea & Associates if you have questions about how current events could affect your leasing options or if you are considering entering into a lease agreement for drilling or exploratory purposes.

By David Shallenberger, CPA (Wooster office)

 

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Last Chance To Claim Valuable Retroactive Tax Credit

Lisa Beamer | 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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Retirement Roulette

Darlene Finzer | April 22nd, 2015
Retirement Roulette - Rea & Associates - Ohio CPA Firm

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

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

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

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

2016 Budget Proposal Addresses Retirement Savings

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

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

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

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

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

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

What’s In It for the Employer?

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

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

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

Mind the Cap

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

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

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

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

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

 

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Research & Development Credit Benefits Businesses Of All Sizes

Ben Froese | 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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Six Things You Can Do Now To Protect Your Loved Ones’ Assets

Dave McCarthy | April 14th, 2015
Making Moments Count: Family Financial Challenges

Bright Idea: Make sure everyone in your family has their financial information organized in one place. The organizer you’ll find in the financial resources section of our website is a great place to start. Click here to view our Personal Financial Records Document and get started today.

The value of our existence is measured by an infinite collection of meaningful moments that have shaped our lives and the lives of those around us. Perhaps our most precious moments occur when we positively impact the lives of our loved ones. We are all capable of initiating these moments and, sometimes, a simple conversation is all that is needed to provide insurmountable relief – now and for years to come.

Find out what else you can do now to improve your personal and financial well-being.
Read: Take Control Of Your Financial Wellness In 2015.

Even if they have never expressed their concern about the realities of aging before, it is almost certain that your parents are worried about their own mortality. Because this topic doesn’t typically find its way into casual conversation, it is your responsibility to broach the subject. Your parents will be grateful you did.

Here are five things you can do now to actively protect your loved one’s assets:

1. Overcome Your Discomfort

The first conversation about your loved ones’ finances is probably the most uncomfortable one, but it’s also the most important. It’s uncomfortable to talk to our parents about their death. Mom and Dad don’t find it thrilling either because they don’t want to be a burden. But as awkward as it is to discuss, you may eventually be shouldered with responsibility of managing the affairs your parents leave behind.

2. Set Up A Power Of Attorney

In order for you to assume this important role, you must be named as your parents’ power of attorney. This step gives you legal authority to pay their bills, maintain their residence, complete tax returns and review their financial investments.

If your power of attorney was established more than two years ago, verify that it was issued properly by today’s standards. Even though powers of attorney never expire, some have reported having problems with establishments that have updated their forms. The new forms no longer identify powers of attorney that were named several years ago.

Your parents can name multiple powers of attorney. But to avoid possible disputes, make sure that you and your siblings have your own, clearly defined responsibilities. Also, if your parents have decided to name a power of attorney, and it’s not you, make a point to respect their decision – even if you don’t agree with it. As long as a plan is in place, you and your family are on the right track.

3. Understand Your Responsibilities

Being a power of attorney is a big responsibility. Not only are you empowered to make tough decisions, your actions are now able to be scrutinized by everybody from the IRS to other family members. To avoid problems, carefully track how much money is coming in and going out and maintain thorough records. And call in the professionals if you feel like you’re in over your head.

4. Send In The Team

In the past, did your parents work with a team of professionals to manage their finances, legal affairs or anything else? If so, make it a priority to talk to them before moving any money or assets around. You will need to know if your parents set up a will, trusts, or anything else over the course of their lives. This team will not only be able to compile the information you need, they can answer your technical questions, which will make the entire process go smoother.

5. Compile An Inventory

To manage anything well you must have a clear picture of what it is you are managing. To that end, make it a point to compile a complete inventory of your parent’s assets and liabilities to create a clearer plan of action.

Do you know how the value of real property is determined?
Read: How Do You Value Property For An Estate In Ohio to learn more.

6. Simplify, Simplify, Simplify

Once you understand your responsibilities, simplify everything. For example, if your parents have seven or eight open bank accounts throughout the county or state, consolidate them into one – and don’t stop there. From assets to investments, consolidating these affairs will make your job easier and less confusing as you try to track expenses.

It’s not easy to manage your loved ones finances, but with the right approach, plan and team of advisors, you can do it – and do it well. Once you get your ducks in a row, you can focus on other, more important things – like making every moment with your loved ones count.

By: David K. McCarthy, CPA, CSEP (Medina office) and Frank L. Festi, Jr. CPA, CFP (Medina office)

This article was originally published in The Rea Report, a Rea & Associates print publication, Winter 2015. If you don’t already receive The Rea Report, our quarterly print newsletter, in your mailbox, click here and start your subscription today!

 

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The Truth About Tax Extensions

Joe Popp | 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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Preserve Ohio History While Filing Your Taxes

Ben Antonelli | April 8th, 2015

We’re down to the wire. Just another week to go before April 15 – Tax Day. If you’re still working on your taxes, and are looking for an opportunity to make a donation on your state tax return – consider supporting the Ohio History Connection’s efforts. Read on to find out how you can support history preservation efforts throughout Ohio and even in your community.

 

Guest blog post by Emmy Beach of the Ohio History Connection:

The Ohio History Connection has developed an innovative way to help Ohioans support history preservation efforts across the state and in their communities. The best part: it can all happen in a matter of seconds.

It’s called the History Fund. The History Fund creates grants to help support local history and preservation-related projects in communities throughout Ohio. The History Fund is supported by Ohio taxpayers that select “Ohio Historical Society” as a donation fund on their state tax returns (the state tax form hasn’t caught up with their recent name change yet.).The entire process takes just seconds to complete.

The impact of donations can last for generations. Over the last three years, the History Fund has received nearly $300,000 in voluntary funding from Ohio taxpayers. This allowed the Ohio History Connection to green light more than 30 historic preservation projects that wouldn’t have received funding otherwise. History organizations have been able to accomplish important projects that have been on their wish-lists for years.

The History Fund impacts organizations big and small. This year, Cleveland’s Rock and Roll Hall of Fame received a grant to preserve the work of Plain Dealer rock and roll reporter Jane Scott; in Athens, the Dairy Barn Arts Center received a grant to repair the structure of their community’s popular arts venue. In each case, the generosity of Ohioans helped preserve a chapter of Ohio’s more than 200-year-old story.

“The History Fund helps us share and preserve Ohio’s story by supporting local projects and programs in communities throughout the state,” said Burt Logan, executive director and CEO for the Ohio History Connection. “The work of local history organizations is helping to strengthen our heritage and ensure Ohio’s story is told for years to come.”

The History Fund needs to receive at least $150,000 this coming tax season to stay on Ohio’s tax forms for the next two years.

The grant program received $165,000 last year, with average donations of around $10.

“Small donations can make a big difference,” said Andy Verhoff, History Fund grants manager. “If every donor who gave last year gives just $10 from their refund, we’ll cross over the $150,000 threshold easily and have even more to grant in the future.”

The tax check-off process is a win-win for taxpayers and the state. History and preservation organizations across Ohio are revitalizing their communities, one project at a time.

To learn more, visit the Ohio History Connection History Fund page. You can also see historic Ohioans Annie Oakley and the Wright Brothers promote the History Fund in public service announcements videos below.

 

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How To Pay Your Tax Bill In 6 Easy Steps

Wendy Shick | April 1st, 2015
Pay Your Tax Bill With Direct Pay - Rea & Associates

Available 24 hours a day, seven days a week, Direct Pay has proven to be a popular choice among Americans who are looking for a quick and easy option for settling their tax balances.

By now, you probably have a good idea whether you have an outstanding tax bill from the government, but did you know you can settle your balance online? Since May 2014, Direct Pay, a free and secure payment option, has provided millions of taxpayers with the option of making payments to the Internal Revenue Service at a time, and in a place that is convenient for them.

Late last year, employers learned that they were expected to file their taxes and make payments exclusively online. Click here to read more.

According to the IRS, four months after the initial launch of the payment program, more than a million payments, totaling more than $1.7 billion, were successfully processed. The web site currently accepts payments for current year tax returns, estimated tax payments, extension payments and prior year balances.

Available 24 hours a day, seven days a week, Direct Pay has proven to be a popular choice among Americans who are looking for a quick and easy option for settling their tax balances. Those who make payments receive an instant confirmation message that their payment has been submitted. Or, if you need a little more time, you can schedule your payment up to 30 days in advance as well as choose if you would like your payment to be withdrawn directly from a checking or savings account. Making a payment is as easy as following six simple steps.

How To Make An Online Tax Payment

  1. Visit the government website at www.irs.gov/payments
  2. Click on the blue box labeled: “IRS Direct Pay”
  3. Choose the reason for making your payment. Your choices are that you are making an installment agreement payment, a tax return payment, an estimated tax payment, an amended return payment or “other” type of payment. Be sure to choose the applicable year.
  4. Next, verify your identity by confirming your filing status, social security number, address and date of birth. ID verification is required for each payment requested.
  5. Then, you must enter the amount you plan to pay and your bank information. (The IRS does not retain any routing or account numbers.
  6. Finally, you will be directed to a “final authorization” page, which will provide you with an online confirmation.

Once your payment has been submitted using Direct Pay, allow two business days for processing. Note: Payments submitted after 8 p.m. EST will be processed on the next business day. And if you need to make a change to your scheduled payment, you can edit or cancel the payment up to 11:59 p.m. EST two business days before the payment is scheduled payment date.

Ohio Online Tax Payments

If you owe taxes to the State of Ohio, you can make your payments online as well by visiting www.tax.ohio.gov. The state’s online payment system also allows for advance payments and does not require registration.

Online payment options are another way government entities are making an effort to provide more user friendly services. By using Direct Pay, or the state’s web-based payment option, you can avoid a trip to the post office and, better yet, have more control over when your payment is made and received. Your tax preparer can help you determine if online payments make sense for you and can answer any questions you may have. Email Rea & Associates to learn more.

By Wendy Shick, CPA (Mentor office)

 

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

Chris Roush | 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?

Joe Popp | 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 To Avoid The Retirement Culture Shock

Dana Launder | March 24th, 2015
Retirement Doesn't Have To Hurt Contact Rea & Associates To Learn More - Ohio CPA Firm

When many of us start thinking about the realities of retirement, it’s already too late. Don’t let the “retirement culture shock” sneak up on you, these three tips will help as you attempt to navigate the road to retirement.

If you’re a newly retired American, then you are embarking on a new, exciting phase of your life. For many of you, increased travel, spending more time with grandchildren or pursuing a new hobby may be ways to enjoy this new journey.

Read: How Can I Make The Most of My Retirement?

But before you pack up your things and hop that next plane to Florida, here are three tips to help you avoid the retirement culture shock.

1. Taxes Don’t Vanish At 65

When you were an employee, your taxes were likely withheld from your paycheck. Today, however, is a new day. As a retiree, you no longer have a paycheck from which taxes can be withheld. But there are a few things you can do to make sure you won’t get hit with a large tax bill in April. For example, if you receive a regular pension payment or an annuity, consider withholding your tax payments from those. You also have the option of simply making quarterly estimated tax payments if withholding is not an option.

2. Transfer Your Pension To Avoid Added Tax Cost

If you do have retirement income from a pension plan, make sure to structure the transfer of your pension into an IRA as a direct rollover to avoid an additional tax. Basically, you want to make sure that the check is made out to your IRA and not directly to you, which will ensure that the funds are deposited into your IRA instead of your personal bank account. If you don’t structure your pension plan to disperse your money in this way, the company responsible for your pension payments is required to withhold 20 percent of the funds for the Internal Revenue Service (IRS). When this happens, the IRS will likely see fit to assess a tax to this 20 percent, effectively shrinking your retirement nest egg.

3. Don’t Miss Exclusive Tax Benefits

Retirees are eligible to receive a few nice tax incentives – perhaps to offset your new responsibility of paying your own quarterly estimated taxes and transferring your pension plan payments. Either way, these tax breaks are nothing to grumble about. Here are three tax facts to get you started:

  • If you turned 65 during 2014, your standard deduction increased by $1,550. This means that you can claim $7,750 instead of the $6,200 standard deduction allowed for those younger than 65.
  • For the next three years, taxpayers older than 65 are eligible to receive a reduced phase out of their medical expenses. Those who are older than 65 can deduct qualifying medical expenses to that exceed 7.5 percent of their adjusted gross income. Those younger than 65 can deduct qualifying medical expenses that exceed 10 percent of their adjusted gross income.
  • Self-employed individuals who have Medicare Part B, Part D or supplemental Medicare policies are eligible to claim an above-the-line deduction for these costs.

You have spent so many years putting in long hours, stressing over money and putting your wants and needs second. Retirement is your time. Make sure you are in control of your finances – and your future. Email Rea & Associates to learn how to make your money go further in retirement.

By Dana Launder, CPA (Cambridge office)

 

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How To Recover From Identity Theft & Refund Fraud

Joe Popp | March 18th, 2015
How To Recover From Identity Theft & Refund Fraud

Have you been (or suspect you’ve been) a victim of identity theft and refund fraud? Rea & Associates recently compiled a variety of information that will help you recover from this nightmarish scenario.

Suspecting, and then confirming, that you’ve had your identity stolen is a nightmarish scenario. It combines one of your worst fears, losing your wallet or purse, with all of the work of replacing the things that were lost. It can be so overwhelming you might be wondering: “Where do I even start?”

An increasing number of identity thefts are first identified when a thief attempts to file a tax return on your behalf and claim a federal or state tax refund. To help you navigate some of the issues you may be confronted with, we recently released a compilation of documents and resources.

The documents that are included are intended to help you navigate some of the issues you may be confronted with if you find that you’ve been an identity theft and fraudulent tax return victim.

Read “How To Recover From Identity Theft & Refund Fraud

Beat The Identity Thieves

The guidance includes a variety of valuable information for those who have been (or suspect they’ve been) a victim of identity theft and refund fraud. The following is a brief synopsis of information included in this guide.

The IRS has provided a short list of items for you to complete, which is substantially similar to the items the Federal Trade Commission (FTC) covered in its longer, checklist-style guidance.

  • The primary item to complete for the IRS is Form 14039 which initiates the IRS fraud protection procedures.
  • Also included is a form letter, one of several, the IRS may send to a taxpayer if tax return fraud is suspected to be occurring on the account.
  • The IRS has published a number of articles related to identify theft and how to protect yourself. A master page with links to all these topics is included in this packet. You may also check out some of our recent articles on the topic, which can be found in the “Related Articles” portion of this post.

The process of reporting fraud in Ohio is similar to the IRS procedures.

  • Ohio also sends form letters to the taxpayer.
    • Ohio recently added an identity quiz for roughly 50 percent of taxpayers requesting a refund. This letter simply asks the taxpayer to complete a quiz specifically used to prove their identity. Note: This request doesn’t indicate that your identity has been stolen (unless you haven’t filed your tax return for the year yet).
    • If the Ohio Department of Taxation suspects fraudulent activity on the account, the taxpayer will receive a second letter that will indicate these suspicions.
  • Ohio includes an affidavit (Form IT TA) that must be filled out to initiate their protection procedures, similar to Federal.

The FTC is the primary federal government agency dealing with identity theft.

  • The FTC has put together a very detailed, checklist to help you with the identity theft process. The guidance includes information on most forms of identity theft – of which tax identity theft is just one. While this may be more information than you need, if the fraud has gone beyond your tax returns and includes false credit activity (or you are concerned this may happen), this guide will be very useful for you.
    • The guide includes a wealth of information, such as sample letters and a variety of websites and contact information to relevant organizations that can help you. It also guides you through the process of making a police report in response to the theft of your personal information.
  • Note: The IRS and the FTC generally do not share data with each other. Therefore if you have completed the IRS identify theft notification procedures, don’t assume that the FTC, credit bureaus, etc., are also aware of your situation.

Check Your Mail, Not Your Caller ID

Remember, the first contact taxpayers will have with the IRS regarding any issue will be in the form of an official mailed letter – not a phone call. These scammers appear to be determined to steal your money and/or your identity and reports of these types of scams continue to be on the rise. By educating yourself, your friends and your family, you are taking a proactive stance against these criminals.

If you would like to learn more about how you can protect yourself against, and recover, from Identity Theft & Refund Fraud, click here to view our compilation of documents and resources. You may also email Rea & Associates for more information.

By Joe Popp, JD, LLM (Dublin office) and Lesley Mast, CPA (Wooster office)

 

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How Much Is Your Data Worth To Criminals?

Joe Welker | 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 Joe Welker, CISA (New Philadelphia office)

 

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Update: Ohio Tax Quiz Appears To Be Working

Lisa Beamer | March 13th, 2015
Tax ID Quiz

According to officials at the Ohio Department of Taxation, while the new Identification Confirmation Quiz may be a pain in the neck, it appears to be working as a identity theft deterrent – Rea & Associates – Ohio CPA Firm

We have learned over the last month that Ohio’s new system of validating taxpayer identification, the Identification Confirmation Quiz, appears to be working.

In an effort to boost security and prevent tax-fraud in the state, the Ohio Department of Taxation introduced the quiz at the onset of the 2015 tax season and began flagging tax returns with data points that are inconsistent with public and commercial data sources. If their returns are flagged, taxpayers are required to take a Quiz to prove their identities.

Read: Theft Safeguards To Cause Tax Return Delays In Ohio

“Through Feb. 18, more than 1.3 million tax returns have been filed with about 874,000 requesting a state income tax refund. About half of the refund requests have been selected for additional screening to ensure that they were not filed by an I.D. thief,” stated Ohio’s Tax Commissioner Joe Testa in a press release. “About 97 percent of taxpayers taking the quiz are passing. That proves they are who they say they are.”

That means about 3 percent who fail the test are being declined to receive refunds that they would have normally received in previous years. As long as that 3 percent consists of actual identity thieves, the results reported are significant.

By Lisa Beamer, CPA (New Philadelphia Office)

 

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5 Tax Deductions To Ease Your Business’s Tax Burden

Lesley Mast | 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.

Read More

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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Obamacare: Some Taxpayers Get Second Chance To Purchase Health Insurance

Joe Popp | March 12th, 2015
Special Obamacare Open Enrollment Period

The Centers for Medicare & Medicaid Services (CMS) have taken steps to create a special enrollment period to allow individuals and families to secure 2015 health insurance coverage through the federal marketplace. – Rea & Associates – Ohio CPA Firm

Did you get hit with the “shared responsibility payment” for not carrying health insurance on yourself or your family members in 2014? If so, you’re not alone.

Read: Are You Prepared To Pay? Obamacare’s Shared Responsibility Provision

Americans who were unaware of (or who simply didn’t understand) the fees they would be subjected to as a result of not carrying health insurance coverage may have been equally surprised to learn that the open enrollment period to obtain coverage for 2015 closed last month – meaning that even if they wanted to avoid the fees next year, they were out of luck. Fortunately, the Centers for Medicare & Medicaid Services (CMS) realized this dilemma and took steps to create a special enrollment period to allow individuals and families in this bind to secure 2015 health insurance coverage through the federal marketplace. This will be a big help to those who may have found out that they were eligible for premium subsidies to help pay for insurance – a little too late. The new open enrollment period is March 15, 2015, through April 30, 2015, and is only available for individuals and/or families that:

  • Are not currently enrolled in federally-facilitated coverage for 2015,
  • Had to pay an individual mandate on Form 1040 of their 2014 tax return, and
  • Live in a state with a federally-facilitated exchange (Ohio residents qualify. Those who do not live in Ohio may click here for a full list of other qualified states).

According to CMS, eligible enrollees also must “attest that they first became aware of, or understood the implications of, the Shared Responsibility Payment after the end of open enrollment in connection with preparing their 2014 taxes.” “We recognize that this is the first tax filing season where consumers may have to pay a fee or claim an exemption for not having health insurance coverage,” sad CMS Administrator Marilyn Tavenner in a press release. “Our priority is to make sure consumers understand the new requirement to enroll in health coverage and to provide those who were not aware or did not understand the requirement with an opportunity to enroll in affordable coverage this year.” Note that even if you don’t qualify for this open enrollment, there are a number of qualifying events that let you sign up for coverage on the exchange any time of year. If you want to know whether you qualify for subsidies to help shoulder the burden of health insurance, click here. Or you can email Rea & Associates for any Affordable Care Act questions.

By Joseph Popp, JD, LLM (Dublin office)  

 

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The ‘Van Halen Philosophy’ of Retirement Plan Compliance

Paul McEwan | 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?

Ben Antonelli | 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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If You Buy Online You Might Owe Use Tax

Joe Popp | March 2nd, 2015
Ohio Use Tax

Amazon purchases aren’t the only ones to consider when you sit down to file your tax return this year. Other popular online retailers and groups, including Etsy, are also depending on their consumers to pay use taxes on the products they sell. – Rea & Associates – Ohio CPA Firm

If you are one of the millions of people who love to browse and buy online, it may shock you to learn that the Ohio Department of Taxation is looking at you to declare and pay a little more when you go to file your 2014 tax return. From gifts to grocery shopping, many of us use the ease of online shopping to snag a good deal and avoid the hassle of braving the brick-and-mortar shops – especially during the holidays, but sometimes that convenience might come at a price.

Were you charged sales tax for that pair of shoes you bought last October or those books you had shipped to your house in June? If the company you made purchases from doesn’t have facilities in the state or a law that requires it to collect sales taxes for your state, then it’s likely you owe use tax to Ohio – and you have to report your use tax on Line 19 of your Ohio Form IT 1040.

Use Tax Is Not A New Tax

Declaring and paying sales and use tax on your state tax return is not a new responsibility. The Ohio Department of Taxation states that “in transactions where sales tax was due but not collected by the vendor or seller, a use tax of equal amount is due from the consumer.” In Ohio, the use tax rate is the same as sales tax rate you would have paid if sales tax was correctly charged by the vendor.  This is usually the place of purchase (or your home address for shipments from outside Ohio). You can read Ohio’s use tax law in its entirety here.

As a courtesy, Amazon provides a brief explanation of the consumer’s responsibility to pay use tax on its website. Because Amazon suspects its customers aren’t keeping a file of receipts, the online retailer provides customers with the option to create and download an Order History Report, which compiles your download, shipment, return and refund activity and can be used to help calculate use tax.

But your Amazon purchases aren’t the only ones to consider when you sit down to file your tax return this year. Other popular online retailers and groups, including Etsy, are also depending on their consumers to pay use taxes on the products they sell. So make sure you take a second look at that packing slip and receipt.

Little Box, Big Pause

While the responsibility of paying use tax isn’t new, this is the first year taxpayers in Ohio are required to certify their use tax claim before filing their return with the state. If you didn’t shop online or make a “sales tax-free” purchase, you should have nothing to worry about – simply check the box and continue on. On the other hand, if you did partake in online retail therapy in 2014 and don’t have your receipts handy, you may have to pause your tax preparation to give yourself a little more time to find out what you owe.

To find out more use tax, email Rea & Associates.

By Joe Popp, JD, LLM (Dublin office)

 

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Who’s Fishing For Your Data Today?

Joe Welker | 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 Joe Welker, CISA (New Philadelphia office)

 

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Obamacare: Discrimination Is Not An Option

Joe Popp | 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

Charlene Meadows | 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?

Dave Cain | 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

Paul McEwan | 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

Lesley Mast | 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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Is It A Charity Or A Scam?

Maribeth Wright | February 3rd, 2015

Remember when writing a check to a charity left you with a feeling of satisfaction and accomplishment? Unfortunately that feeling has been replaced with vulnerability and uncertainty as soliciting for fake charities has become a common way for scammers to prey on the generosity of strangers.

Remember when writing a check to a charity left you with a feeling of satisfaction and accomplishment? Unfortunately that feeling has been replaced with vulnerability and uncertainty as soliciting for fake charities has become a common way for scammers to prey on the generosity of strangers. Before you tear that check from your checkbook, take another look at the “Pay to the Order Of” line. That person who just spent the last 15 minutes explaining why your donation is critical to their organization might have less-than-admirable intentions.

Every year the Internal Revenue Service (IRS) warns taxpayers about what it considers to be the “Dirty Dozen” of tax scams. The annual report identifies schemes that appear to be more prevalent during filing season. And while you may be inclined to use some of your refund to help a worthwhile charity, the IRS reminds taxpayers to remain vigilant against scammers “masquerading as a charitable organization to attract donations from unsuspecting contributors” – particularly this time of year when scammers appear to be more active.

If you are approached by somebody who claims to be soliciting money for charity, here are a few tips to ensure that your money will be used for a worthwhile cause.

What’s In A Name?

Sometimes fake charities will adopt a name that’s similar to one you are sure to recognize and consider to be a respected organization within your community or nationwide. Even if you are confident that the not-for-profit you are about to donate to is reputable, a quick online search can remove any doubt. The IRS provides access to a search tool designed to help the public identify valid charitable organizations. You can also find registered 501(c)(3) organizations on Guidestar, an online tool that provides users with data and information about tax-exempt organizations and other faith-based nonprofits, community foundations and other groups typically not required to register with the IRS.

Keep Personal Information Private

Nonprofit organizations do not need your Social Security Number to complete the transaction, nor do they need to retain it for their files. So if someone claims to represent a charity and asks for any of your personal information (including passwords) – don’t give it to them! Scammers use this information to steal their victim’s identity. Protect yourself from fraud and remember to keep your personal information private.

Where’s The Proof?

When you make a decision to donate to a tax-exempt organization, make sure to have proof of the transaction. For your own security – and for tax record purposes – you should never make a cash donation. Use a check or credit card every time you give money to charity. Doing so not only proves that you made the donation; it will help you claim the contribution on next year’s tax return.

Ask An Expert

A trusted advisor can help you identify whether a particular charitable organization is reputable or not and can help you make the most of your donated dollars. Email Rea & Associates for more information.

By Maribeth Wright, CPA (Cambridge office)

 

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From Toddler To Teen And Beyond: Tax Breaks For Families

Jordan Miller | February 2nd, 2015
Families of all kinds can take advantage of a variety of tax incentives, which can ease some of the financial burden.

Families of all kinds can take advantage of a variety of tax incentives, which can ease some of the financial burden.

With parenthood comes many rewarding experiences – and expenses. You hear about how expensive it is to raise a child, but you never really know what to expect until that little bundle of joy enters your life. From diapers, pre-school, extracurricular activities and saving for college, the costs of raising kids adds up fast. My wife and I welcomed our daughter into our family last year; and this life-changing event got me thinking: What tax breaks are available to families?

Relief for New Parents

Families of all kinds can take advantage of a variety of tax incentives, which can ease some of the financial burden. From deductions to credits, this list will give you a good idea as to what is available to you.

  • Adoption Credit

-         A credit of up to $13,190 – dollar for dollar of qualified expenses – is available to families who have adopted children.

-         Qualified expenses include adoption fees, attorney fees, court costs, etc.

-         Adopting a child with special needs results in the full credit amount regardless of whether qualifying expenses were made.

  • Child Credit/Additional Child Credit/Dependent

-         Child Credit – This credit applies to up to $1,000 for qualifying children younger than 17. This credit is generally non-refundable, but the taxpayer may be able to qualify for the additional child credit if he/she has enough earned income.

-         Additional Child Credit – Part of the child credit may be refundable for taxpayers with more than $3,000 worth of earned income.

-         Dependent – Each child listed on a tax return may be eligible to be listed as a dependent, which results in an additional $3,950 exemption per dependent.

  • Earned Income Credit

-         This is one of the largest credits available to taxpayers and claiming it can save you thousands of dollars in taxes. Taxpayers with three or more children and who have earned income as high as $52,427 may qualify for the earned income credit. This credit generally decreases with fewer qualifying children or for those with higher income levels.

More To Know As They Grow

In addition to child and earned income credits, here are some additional ways to save on your taxes as your children continue to grow.

  • Dependent Care Credit

-         This non-refundable credit goes toward a portion of a dependent’s child care expenses. Common qualifying expenses include day care, pre-school, day camps and similar programs.

  • Preempting College Costs

-         Education Savings Accounts allow taxpayers to contribute up to $2,000 per year for children younger than 17. While there are no tax benefits for the year of the contribution, distributions toward qualified higher education expenses (including earnings on contributions) are tax-free. Taxes and penalties may apply if the funds are not used for qualified education expenses.

-         State College Savings (529 plans) allow taxpayers to make contributions to an investment account and take a deduction toward their state income tax. (There is no federal income tax deduction available when taking this option.) Similar to education savings accounts, taxes and penalties may apply to funds used on unqualified expenses.

  • Flexible Spending Plans

-         If you have a flexible spending plan through your employer, remember that your child-related medical expenses qualify under the plan too. The funds you already contribute to your plan are deducted pre-tax up to certain thresholds. But don’t forget to use the entire amount withheld in your plan before March 15 of the following year or you will lose it.

The College Years

It probably seems like it was just yesterday that your son or daughter was crawling across the living room floor – now you are preparing to send them off to college. But just because they are all grown up doesn’t mean that the tax incentives end. Here are some tax perks to help during your child’s transition into adulthood:

  • Dependency Extension

-         You can claim your child as a dependent until they are 19-years-old as long as you continue to provide more than half of their support and they lived with you for more than half the year. You may also continue to claim your child if they are younger than 24 and a full-time student.

  • Tax Relief For Education

When it comes to paying for higher education, there are a few opportunities for tax relief. Below are a few of your options. Remember that you may only claim one of these options. A financial advisor can help you determine which option is right for you.

-         You can claim the American Opportunity Credit for up to $2,500 (100 percent of the first $2,000 and 25 percent of next $2,000) for qualified education expenses. This tax credit is only available for undergraduate students. Qualified expenses include tuition, fees, books, supplies, etc. This credit is also 40 percent refundable.

-         Qualified education expenses, such as tuition, fees, books, etc., qualify you to claim the Lifetime Learning Credit, which could total up to $2,000 (20 percent of up to $10,000). Even though this credit is entirely nonrefundable, it helps reduce your tax bill.

-         If you are paying for tuition, fees, books and other school supplies for your student, you may find this above the line deduction of up to $4,000 for these expenses to be beneficial.

  • Student Loan Relief

-         Help is also available to those making payments on student loans. An above the line deduction of up to $2,500 is available for interest paid on education loans.

In addition to being expensive, taking care of children can be confusing at times. Claiming these tax deductions and tax credits doesn’t have to be. Email Rea & Associates to learn more.

By Jordan Miller, CPA (Millersburg office)

 

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How To Drive For Business And Save On Your Tax Bill

Tom Jeffries | 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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Virtual Money Is Real Money – Don’t Forget To Report Your Bitcoin

Lesley Mast | February 2nd, 2015
Virtual Money Is Real Money – Don’t Forget To Report Your Bitcoin

Virtual Money Is Real Money – Don’t Forget To Report Your Bitcoin

Now that the official 2015 tax season is upon us, you may be going through the process of checking off the laundry list of forms you need to have on hand to file your 2014 tax return. (If you still aren’t sure what files to gather, you can find a thorough checklist here.) While you’re collecting your W-2s and 1099s, don’t forget Form 1099-MISC, which is the form to use if you have used virtual currency over the last year.

The IRS informed taxpayers of the proper way to report virtual currency such as Bitcoin last year. Because the value of virtual currency is converted to the value of real currency, for tax purposes, Bitcoin and other virtual currencies are considered capital assets by the IRS. Therefore, these forms of currency are subject to capital gains rules for any applicable gains or losses that may accrue.

Capital gains rates are more favorable than normal tax rates. For most taxpayers, the rate will be no more than 15 percent. However, if you are in one of the following categories, you will be taxed at 20 percent:

  • If you earned more than $406,750 in taxable income
  • If you are married and filing jointly and earned more than $457,600
  • If you’re the head of your household and earned more than $432,200
  • If you’re married, but filing separately and earned more than $228,800

Do you treat Bitcoin as an investment?

If you buy and sell virtual currency, the IRS will treat it as if you were buying and selling stock. You will be required to report the cost basis of the transaction, also known as the difference between the cash price and the futures price of stock. In addition to being taxed at a lower capital gains rate, losses can cancel out any gains. And left-over losses can be deducted from your regular income.

Do you use Bitcoin like cash?

From ordering a pizza to shopping for a new computer, the transactions you make online with Bitcoin may result in gains or losses as well – although determining the value of a particular item or service based on market value is easier said than done. A financial advisor can help you identify whether you have gains and losses to report to the IRS.

Do you get paid in Bitcoin?

For example, for tax purposes, a babysitter who is paid in Bitcoin is the same as a sitter who’s paid in cash and those earnings must go through the same channels to be considered by the IRS. Payments of virtual currency are required to be reported on Form 1099-MISC or a similar form and must be reported using the fair market value of virtual currency, which should be converted to U.S. dollars.

For more information about managing and reporting Bitcoin, email Rea & Associates.

By Lesley Mast, CPA (Wooster office)

 

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Beware Of Small Business Wire Transfer Scam

Joe Welker | 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 Joe Welker, CISA (New Philadelphia office)

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Signing On The Dotted Line

David Shallenberger | January 20th, 2015

Know What Your Pipeline Easement Agreement Entails Before Signing

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

6 Things To Know Before You Sign

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

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

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

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

 

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How To Prepare For A Federal Tax Return Headache

Trista Acker | January 20th, 2015

Planning to buy a new big-screen television? Airline tickets for that Caribbean vacation you’ve been looking forward to?  A new car? You might want to wait a little longer.

IRS Commissioner John Koskinen recently warned American taxpayers that some federal refunds could be delayed for a week or more because of recent budget cuts. So, if you file your tax return on paper, before you start spending that income tax refund check, you might want to wait for the cash to actually find its way into your bank account. Expect to feel a little discomfort during this tax season.

Refund Delays

Historically, refunds for electronically filed federal returns were processed within 21 days of the e-filing acceptance date. Paper returns were typically processed within six to eight weeks from the date they were received. Amended tax return refunds take even longer – the turnaround for these returns were typically 12 weeks.

“People who paper file tax returns could wait an extra week – or possibly longer – to see their refund,” said Koskinen in a memo sent to IRS staff. “Taxpayers with errors or questions on their returns that require additional manual review will also face delays.”

In his memo, Koskinen didn’t explicitly address electronically filed returns, but it wouldn’t be a surprise for these refunds to be delayed (at least a little bit) as well.

Phone Jams

Nearly eight out of ten taxpayers receive an average tax refund totaling $2,800, which prompts many taxpayers to check in on the status of their refunds by calling the IRS. The agency is predicting an abysmal connection rate of these calls this year – 43 percent connection rate with a hold time of 30 minutes or more.

Instead, if you would like to track the status of your refund, hang up the phone and log onto the IRS’s website to use its Where’s My Refund feature.

Time will only tell how these budget cuts will impact next year’s tax return process, as well as other services provided by the IRS. In the meantime, start preparing to file your tax return as early as possible to avoid additional delays. Email Rea & Associates to learn more.

By: Trista Acker, CPA, CFP (Dublin office)

 

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File Faster With This Tax Prep Checklist

Lesley Mast | January 20th, 2015

It’s that time of year again – time to gather your information and prepare to file your tax return. If you want the process to go smoothly, make sure to gather and organize your information before sitting down with your tax preparer. You may be surprised how fast the entire filing process goes if you spend a little time preparing!

Here’s a list of some items to compile before you get started.

Personal Information

Hopefully you know YOUR social security number and date of birth by heart. But do you know your spouse’s SSN? Your kids? Make sure you remember to bring the social security numbers and birth dates of everybody who will be claimed on your tax return.

Income Info

While your W-2 is important, there are many other pieces of information you will need to collect before you will be able to get started. Gather the following pieces of relevant information:

  • W-2s for you and your spouse.
  • Investment income: This type of income will be listed on various 1099 forms including –INT, -DIV, -B, etc.). You may also have K-1s and stock option information to provide to your tax preparer.
  • Income received from state and local income tax refunds and/or unemployment. This income can be found on the Form 1099-G.
  • Gather information about any alimony you may have received.
  • If you are a business owner or farmer, don’t forget to provide a profit/loss statement and capital equipment information.  And if you use your home for business, your tax preparer will need to know the size of your house, the size of your office and what you have paid to maintain your home and office.
  • You will need to provide your IRA/pension distributions as well. This information will be provided to you on Forms 1099-R or 8606.
  • If you rent a home or other type of property, be sure to gather that information that proves the profit or losses you realized as a result of the rental.
  • Be sure to claim any Social Security benefits you may have received. This information is found on Form SSA-1099.
  • If you sold your house in 2014, you must provide your tax provider with Form 1099-C, which will include the income you received from the sale of the property. Your preparer will also take the home’s original cost and cost of improvements, the escrow closing statement and cancelled debt information into consideration.
  • Some other information you will need to pass along to your tax preparer includes items such as jury duty, gambling winnings, scholarships, etc..

Adjustments To Your Income

Now that you have collected all the information you can to adequately identify your income in 2014, some adjustments may need to be made. Making the following adjustments to your income may help increase your tax refund or lower the amount you owe to the government. If you have documentation of any of the following information, be sure to bring them to your appointment.

  • IRA contributions
  • Student loan interest
  • Medical Savings Account contributions
  • Moving expenses
  • Self-employed health insurance payments
  • Pension plans such as SEP and SIMPLE
  • Alimony you paid
  • Educator expenses

Itemized tax deductions and credits

This is another way to increase your refund or reduce what you owe. The following deductions and credits help lower the tax burden on individuals. Be sure to collect this information before filing your return.

  • Child care costs – child care provider’s name, address, tax ID number and amount paid
  • Education costs – these can be found on Form 1098-T
  • Adoption costs – the SSN of the child as well as legal, medical and transportation costs associated with the adoption
  • Home mortgage interest and points you paid, which can be found on Form 1098
  • Investment interest expense
  • Charitable donations that were made to not-for-profit organizations. Make sure you have the amounts and value of the donated property, and any out-of-pocket expenses you may have accrued in your effort to make the donation, including transportation costs. Include receipts for any contribution over $250

o   Losses you realized as a result of casualty and loss (the cost of the damage and insurance reimbursements

  • Medical and dental expenses
  • Energy credits
  • Other deductions include items such as union dues, unreimbursed employee expenses, such as unreimbursed employee expenses

New for 2014 returns

For the first time, you will need to provide information about your health insurance coverage to your tax preparer. Be prepared to answer questions such as these:

  • Was everyone claimed on your tax return covered by health insurance?

o   If not, why?

  • Did you or anyone on your return obtain health insurance coverage through Healthcare.gov or through a state run exchange in 2014?

o   If yes, did any of those individuals receive a premium tax subsidy, cost reduction, or premium tax credit? If yes, provide Form 1095-A.

It’s likely that you have already started receiving tax forms in the mail from various places. It’s easy to misplace these documents if you’re not careful. If you haven’t already, set aside a place for these items until you have collected them all. Once you have everything you need, you can set an appointment to file your taxes with your financial advisor or tax preparer. For additional tax information, or to speak with a tax expert, email Rea & Associates.

By Lesley Mast, CPA (Wooster office)

 

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Theft Safeguards To Cause Tax Return Delays In Ohio

Lisa Beamer | January 20th, 2015

If time is money then the new security measures to protect Ohio taxpayer’s returns and prevent identity theft comes at a price. The Ohio Department of Taxation (ODT) said that in an effort to boost security and prevent tax-fraud in the state, Ohio will implement an “up-front filter to all tax-refund requests to analyze the demographic information reported on the return.”

According to Joe Testa, the state’s tax commissioner, the ramped up security is in response to increased fraud attempts. The Columbus Dispatch reports that the state foiled $250 million in attempted tax fraud during the 2014 tax season, which is a significant increase over the foiled tax fraud average of $10 million in previous years. Figures of how much fraud went undetected last year or in previous years are not available.

The Tax-Fraud Quiz

If your tax return is flagged as a result of anomalies in reported demographic information then you will have to complete an Identification Confirmation Quiz, according to Testa. If you are selected to take the quiz, you should expect a delay as to when your funds will be dispersed. Traditionally, it takes up to 15 days to process refunds that will be distributed to the taxpayer via electronic deposit. Those who opt to receive their refunds in check form could wait 30 days to receive their money. This year, those who must take the quiz to validate their identities, may have to wait longer than they have in previous years to receive their refunds.

Which Returns Will Be Flagged?

On its website, the ODT says that tax returns will be analyzed for certain inconsistent data points against public and commercial data sources. For example, in the Dispatch article, taxation spokesman Gary Gudmundson said that “names and Social Security numbers that show up in a different part of the state, or in another state, after being located for years in a specific area of Ohio” may be flagged. This means that if you moved this year, your return may flagged as one that has a higher probability of fraud. The next step is to take the quiz to verify your identity. If the return is flagged, the taxpayer will be required to complete the quiz or prove their identity through documentation before the tax return will be processed.

How To Know If Your Return Was Flagged?

The ODT will send a letter to taxpayers who are required to take the identification quiz. Those who don’t receive a letter will not be able to complete the quiz. Those who are selected will have 60 days to complete the multiple choice quiz. The quiz will be timed and it must be completed online. The state agency has provided answers to Frequently Asked Questions about the quiz on its website.

Contact your financial advisor or seek out a tax professional to help guide you through these security measures. Email Rea & Associates for more information about this and other tax-related concerns.

By Lisa Beamer, CPA (New Philadelphia office)

 

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Six Things 401k Plan Sponsors Need To Do Now

Steve Renner | 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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Take Control Of Your Financial Wellness In 2015

Dave McCarthy | January 5th, 2015

Are you still looking for the perfect New Year’s resolution? What about challenging yourself with one that could put you financially ahead? Here are 15 ways you can start your year off on the right foot.

15 Tips For A Prosperous 2015

Adjust your 401(k) plan contribution.

If you have a 401(k) plan, your contribution limit will increase to $18,000 in 2015, and if you’re 50 years or older, you can contribute an additional $6,000 into your plan. When it comes to retirement savings, every little bit helps, so even if you can’t afford to contribute the maximum, at least consider increasing your contribution a little bit over what you put into it last year.

Pay off your debt.

Make 2015 the year you pay off all debts. Once you settle past debts, it will be easier to save for future expenses and retirement. For example, do you have credit card debt? Pay off the cards with the highest interest rates first. Once you have caught up, make it your goal to pay any outstanding balance monthly.

Set up a budget and follow it.

Review your monthly income and expenses and allocate money toward savings, debt resolution and other financial goals. Once you have a plan in place, stick to it. Try to set aside some time to review your budget to make sure you are on track.

Build a “rainy day” fund.

Some people say that you should have enough money saved to cover your expenses for at least six months to protect you and your family against unforeseen events that could impact your finances. Don’t let the timeline intimidate you, though. Get your rainy day fund up to one month’s worth of expenses and build from there.

Work with your significant other – not against them.

If you are planning to strengthen your financial foothold in 2015, make sure you have support from your significant other. If you and your significant other are on the same page, then you will have a better chance for success. For example, coming to an agreement on how much you each can spend on unnecessary expenses early on can save unnecessary drama in the future – and costs less than a divorce.

Review your company’s Section 125 plan.

If your employer offers a Cafeteria Plan to its employees, make sure you are aware of what benefit options are available to you and your family and that you taking full advantage of the pretax nature of these benefits. Benefits offered as part of your employer’s Section 125 plan could include health savings accounts, dependent care assistance, adoption assistance, group-term life insurance and others. If you are not sure what benefits are available to you or would like to make sure you are receiving the maximum benefit, set aside some time to speak with your company’s human resources department.

Know your credit score – then improve it.

An excellent credit score is one that is between 760 and 850. If you’re not sure what yours is, request your free copy and find out. Companies such as Experian, Transunion and Equifax will provide you with a free copy of your credit score. Once you know your score, work to increase your rating. This can be done any number of ways, but it takes time and hard work. And don’t be discouraged if you don’t see a massive increase over the next year. Even 20 points is considered a significant improvement.

Set up your will and power of attorney.

Don’t put off this critically important responsibility. If you haven’t already, make it a priority to establish your will and power of attorney as soon as possible. Or if you already have one in place, make sure it is not outdated. Set aside some time to review your current documents with your significant other and update it if needed.

Plan for the inevitable.

If something happens to you, will your family be able to carry on? Meet with your HR department to make sure you are taking full advantage of your life insurance options and disability plan.

Schedule a wellness visit for your mortgage.

When was the last time you reviewed your home mortgage? If it’s been awhile, you should review the interest rate and conditions of your loan. If you have been in your home for a while, you may be surprised to learn that there might be options out there that could save you money.

Organize, organize, organize.

Improving organization is one of the more popular resolutions to make. While you may be eying your closets, garage or basement, I suggest taking a look at your mailbox. Resolve to gather and organize your tax information as it is received. Doing so will ensure that you are not wasting time trying to find a piece of mail you misplaced a month ago and it will help you cut down on random clutter.

Review your retirement plan.

A new year means that you have another birthday on the horizon, which also means that you are another year closer to retirement. Schedule a time to meet with your financial advisor to determine if you should rebalance your portfolio to remain in line with your retirement goals.

Set up a 529 plan.

Are you saving for your children’s or grandchildren’s college education? Set up a 529 plan today and contribute to it early in the year to earn a return all year long. Earnings generated as a result of your contributions are not subject to federal or state taxes when used for qualified education expenses.

Find savings around the home.

If you take a hard look at your reoccurring monthly expenses, you may find that you don’t really need a lot of the services and utilities you are paying for. For example, does your home internet really need to be turbo-charged? Do you ever use the call forwarding or call waiting options on your home phone? Do you use your home phone at all? Are you paying for extra insurance to protect against a gas line leak? Depending on your circumstances, you could find significant savings by cutting back on some utilities you barely use.

Pass on the product warranties.

While it may seem like a good idea to pay a little extra for a warranty on that new appliance, a better option might be to put that money toward your rainy day fund instead. Sure, warranties are great for your peace of mind, but so is your rainy day fund. By opting out of the product warranty you will be able to put more money away while maintaining the freedom to spend it a way that makes more sense in the future.

Do you want this year to be filled with prosperity for you and your family? Email Rea & Associates to get more information on how you can succeed financially in 2015.

By Dave McCarthy, CPA, CSEP (Medina office)

 

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Could A Cyber-Attack Cripple Your Business In 2015?

Joe Welker | 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 Joe Welker, CISA (New Philadelphia office)

 

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Too Close For Comfort?

Lisa Beamer | December 17th, 2014

 

Tax Provisions Extended Just In Time

They may have waited until the 23rd hour, but members of Congress finally voted to extend more than 50 expired tax provisions slated to expire at the end of the year. Tuesday evening’s 76-16 vote in favor of the extensions was enough to send a collective sigh of relief among tax professionals nationwide. The bill will now be sent to President Barack Obama for his signature. Many tax professionals were worried that Congress would postpone the vote until after the New Year, which could have postponed the start of the 2015 tax season and hurt those on the tax prep front lines, including the IRS, tax preparers and some software providers. But today is a new day and instead of planning for the worst case scenario, tax planning can commence as planned. The Tax Increase Prevention Act of 2014, or H.B. 5771, temporarily extends several tax breaks and provisions while correcting some technical errors found in prior legislation. Including:

  • Extensions that benefit individuals:

-        A $250 above-the-line deduction for certain expenses of teachers

-        An election to deduct state and local sales tax

-        Tax-free charitable distributions from individual retirement accounts (IRAs)

-        The private mortgage insurance (PMI) itemized deduction

-        The energy efficient home improvement tax credit

  • Extensions that benefit businesses:

-        The work opportunity tax credit

-        A research and experimentation credit

-        The Section 179 expensing limit

-        50% bonus depreciation

A complete list of 2014 tax extenders can be found in this article, published by the Journal of Accountancy. Another bill within H.B. 5771 was also up for Congressional consideration – the Achieving a Better Life Experience (ABLE) Act of 2014. The legislation seeks to provide for tax-favored accounts that allow those who are disabled to save money to pay for disability expenses. This portion of the ABLE Act amends the definition of personal holding company income, institutes certain inflation adjustments and, for employment tax purposes, allows for certified professional employer organizations to be treated as employers for work-site employees who perform services for customers of the organization. The Tax Increase Prevention Act of 2014 is by no means a long-term fix. There were earlier proposals that sought to permanently extend some provisions while extending others for more than a year, but those suggestions were unable to find traction throughout the legislature. So, while we may be able to relax this year, we will likely have bouts of Déjà vu over the course of 2015. By Lisa Beamer, CPA (New Philadelphia office)

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Put Your Property Easement Agreement To Work

Jim Fracker | 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?

Joel Yoder | 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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The Tax Professional’s Christmas List

Lisa Beamer | December 12th, 2014

Move Over Santa, This One’s For Congress

While the holidays typically bring about feelings of joy and comfort, they can also be a time of stress. And as the year comes to a close, many individuals are left to frantically resolve a number of tasks that they had hoped would be completed before the end of 2014 – yet they are still lingering on their to-do lists.

If tax professionals across the country were to compose a letter this holiday season, it wouldn’t be sent to Santa. Instead, it would pass over the North Pole en route to Washington D.C. – and it would be addressed to the members of the United States Congress.

This year, all we want for Christmas is for our congressional leaders to extend the more than 50 tax provisions that were left to expire at the end of 2013 – before the end of the year. Failure to do so could have a negative impact on the 2015 tax season.

While it is possible for Congress to wait until the New Year to enact these provisions next month, a retroactive approach would ultimately hurt the IRS, tax professionals and software providers. This is why it is so important for the provisions to be extended before Dec. 31.

Furthermore, postponing this legislative action could postpone the start of the 2015 tax season, which would delay refunds to millions of American taxpayers.

What tax provisions are at risk?

Individual tax payers are at risk of losing:

  • A $250 above-the-line tuition deduction
  • An election to deduct state and local sales tax
  • Tax-free charitable distributions from individual retirement accounts (IRAs)
  • The private mortgage insurance (PMI) itemized deduction
  • The energy efficient home improvement tax credit

Popular business tax benefits at risk of disappearing include:

  • The work opportunity tax credit
  • A research credit
  • The Section 179 expensing limit
  • Bonus depreciation

This holiday season, it is our hope that Congress will move quickly to resolve this issue in a way that is favorable for American tax payers. Doing so would not only provide the IRS and tax professionals with the time they need to prepare for the 2015 tax season; such legislative action would help promote the financial wellbeing of the American taxpayers.

Would you like to discuss tax planning options for yourself or your business? Email Rea & Associates to speak with a tax professional today. Will you want help filing your 2014 business taxes and/or personal taxes? Would you like a little extra help preparing for the 2015 tax season, our tax experts will work with you to make your experience as worry-free and seamless as possible.

By Lisa Beamer, CPA (New Philadelphia office)

 

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New Year, New Mileage Rates

Lesley Mast | December 11th, 2014

Every mile you drive for business will be worth a little more next year, according to a recent IRS announcement. Beginning Jan. 1, 2015, the optional standard mileage rate for those calculating the deductible costs of driving for business will be 57.5 cents, which is up from 56 cents.

Based on a study of the fixed and variable costs associated with operating an automobile, the standard mileage rates take into consideration vehicle depreciation, insurance, repairs, maintenance, gas, etc. However, if you don’t intend on tracking your mileage, you also have the option of claiming deductions based on the actual costs of using your own vehicle rather than the standard mileage rates. Just be aware that you will not be allowed to claim both.

For example, if you have plans of claiming an accelerated depreciation on your vehicle, then you will not be able to claim the business standard mileage rate as well. If you are a business owner, you should also note that the standard rate is not available to fleet owners, or those who use more than four vehicles simultaneously. Additional details and rules can be found in Revenue Procedure 2010-51.

While the standard mileage rate for the business miles you drive will increase in 2015, those who use their vehicles for medical or moving purposes will see a reduction of half a cent in their mileage rates. Starting Jan. 1, the miles you drive for medical or moving purposes will be calculated at 23 cents per mile driven. And those driving their vehicles as a service to charitable organizations may calculate their deductions at 14 cents per mile driven.

Also in its announcement, the IRS noted an adjustment to the standard automobile cost allowable under the fixed and variable rate (FAVR) plan, which considers the costs taxpayers incur by driving their own vehicles for work-related purposes. In 2015, standard automobile costs may not exceed $28,200 or $30,800 for trucks and vans.

Do you use your vehicle for business? Make sure you track of your mileage. Every mile you travel is an opportunity to realize real tax savings. Our expert financial advisors can help professionals like you find opportunities you never even knew existed. Email Rea & Associates today and start the New Year out right.

By Lesley Mast, CPA (Wooster office)

 

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Save More For Retirement in 2015

Paul McEwan | December 2nd, 2014

As you work to secure your retirement, you may be pleased to find out about changes to several retirement-related items that may allow you to put a little more cash away in 2015. In October, the IRS announced several adjustments to the limitations previously set on retirement planning tools as a result of an increased cost-of-living. So what does that mean to you and your retirement plan(s) of choice? Take a look:

  • If you contribute to a 401(k), 403(b), 457 plan or a Thrift Savings Plan, the following changes could impact how you contribute:

-        You can now invest up to $18,000 annually – this is an increase up from $17,500.

-        If you’re 50 years old or older and are trying to catch-up on your retirement savings, you may now invest $6,000 annually. The previous catch-up contribution limit was $5,500.

  • If you contribute to an individual retirement account (IRA), you will see the following changes in 2015:

-        The annual limit and additional catch-up contribution limit for an IRA for individuals 50 years old and older will not change in 2015. The annual contribution is $5,500 and the catch-up contribution is $1,000.

-        Single filers and heads of household who are covered by a workplace retirement plan and have adjusted gross incomes (AGI) between $61,000 and $71,000 will no longer be eligible to receive a deduction for contributing to their traditional IRA. This has increased from $60,000 and $70,000 in 2014.

-        Married couples who file jointly, where one spouse makes an IRA contribution that is covered by a workplace retirement plan, will see an increased income phase-out range for taking the deduction as well. The new range is $98,000-$118,000 – up from $96,000-$116,000.

-        If you’re an IRA contributor, not covered by a workplace retirement plan, but are married to someone who is covered, the deduction is phased out if you and your spouse’s income falls between $183,000 and $193,000 – up from $181,000 and $191,000.

-        The phase-out range for a married taxpayer who files a separate return and who is covered by a workplace retirement plan will not change in 2015. The range remains $0 to $10,000.

  • If you make contributions to a Roth IRA, you will see the following changes:

-        The phase-out range for married couples filing jointly is $183,000 to $193,000 – an increase from $181,000 to $191,000.

-        The phase-out range for single filers and heads of household is $116,000 to $131,000 – an increase from $114,000 to $129,000.

-        The phase-out range for a married individual who files a separate return is unchanged.

As we approach the end of the year, there’s not a better time to evaluate your current retirement plan situation and determine if you need to make any changes for 2015. To learn more about how these retirement plan changes could impact your financial situation, email Rea & Associates.

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

 

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Employers Must File Taxes, Make Payments Electronically

Lisa Beamer | 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. Otherwise, you can register or log in to use the Ohio Business Gateway, click here. 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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New Adjustments Will Affect Your 2015 Tax Return

Lesley Mast | November 18th, 2014

The calendar may still say 2014, but the IRS is already looking ahead to 2016 – when you will file your 2015 tax returns. In doing so, it recently announced slight adjustments to more than 40 tax provisions to account for inflation. So, what can you expect? The adjustments are outlined fully in Revenue Procedure 2014-61, but a few points that may be of special interest include:

  • The new 39.6 tax rate. This rate will affect those who are single with income that exceeds $413,200, which is up from $406,750. Those who are married filing jointly will be affected if their income exceeds $464,850 – up from $457, 600. You can check out a great break down of the other tax rate increases here.
  • A slight standard deduction increase. Those who are single, or married filing separately, can expect their standard deduction to be $6,300 – up from $6,200. Married couples filing jointly will see standard deductions increase to $12,600 – up from $12,400.
  • Increasing elective contribution limits. In 2015, taxpayers will be allowed to defer $18,000 to your 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan. The deferral limit in 2014 was $17,500. The catch-up contribution limit for employees who are 50 and older will increase to $6,000 – up from the 2014 rate of $5,500.

You can read the full IRS article here. Navigating tax rate and IRS procedure changes can be difficult – not to mention time consuming. To get more information on how you may be impacted by these adjustments, email Rea & Associates.

By Lesley Mast, CPA (Wooster office)

 

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Manage Your Business’s Ethical Framework After You’re Gone

Cathy Troyer | November 18th, 2014

While the reasons for drafting an ethical will may seem more personal than business-related, an ethical will can be an effective way for business owners to pass along their vision for the future of their company after they are gone.

A properly drafted last will and testament is critical to ensure your estate’s financial well-being. Perhaps equally important is your responsibility to manage your intellectual assets, including knowledge and ethical values. An ethical will, also known as a legacy letter, is a way for you to pass along information to family, friends, colleagues and even communities.

Ethical wills have been around for many centuries. They were very prevalent in Medieval Times, but lost much of their popularity in modern times. Over the past couple of decades, they have regained their popularity.

While a last will and testament details how a person’s possessions will be distributed after death, an ethical will is a way to pass on a person’s values, hopes, dreams and life lessons – among other viewpoints. Though an ethical will is not a legal document, Business Week has described it as an aid to estate planning.

What should I include in my ethical will?

  • Your personal values – the importance of honesty, integrity and personal responsibility.
  • Your views on work ethic, dedication to one’s chosen profession and work-life balance.
  • Your views on charitable giving and community responsibility.
  • How to develop and cultivate personal and business relationships.
  • Your hopes and dreams for your spouse, children and other family members.
  • Anything that you have learned in life and would like to pass on to others.

When should I draft my ethical will?

  • Marriage
  • Birth of a child
  • Children leaving for college
  • When drafting a succession plan for your business
  • End of life
  • Or anytime

An ethical will can be an integral part of your overall estate plan, so consider putting one together today!

By Cathy Troyer, CPA (New Philadelphia office)

 

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