Education Tax Credits: Two Benefits to Help You Pay for College

BY Justin Koppa

If you paid for college it can mean tax savings on your federal tax return. There are two education credits that can help you with the cost of higher education. These credits include the American Opportunity Credit and the Lifetime Learning Credit.  Here are some important facts you should know about these education tax credits.

The American Opportunity Tax Credit allows you to claim up to $2,500 per eligible student. Some tips to consider under this tax credit:

  • The credit only applies to the first four years at an eligible educational institution.
  • It reduces the amount of tax you owe. If the credit reduces your tax to less than zero, you may receive up to $1,000 as a refund.
  • It is available for students earning a degree or other recognized credentials.
  • The credit applies to students going to school at least half-time for at least one academic period that started during the tax year.
  • Costs that apply to the credit include the cost of tuition, books, required fees and supplies.

The Lifetime Learning Credit is limited to $2,000 per tax return, per year. Some tips to consider under this tax credit:

  • This credit is available for an unlimited number of years as it applies to all years of higher education at an eligible educational institution. This includes classes for learning or improving job skills.
  • The credit is limited to the amount of your taxes.
  • Costs that apply to the credit include cost of tuition, required fees, books, supplies and equipment.

Let Us Help You Leverage What You Can Learn from Your Tax Return

BY Jay Grokowsky

What does your tax return say about your financial situation? The fact is, the paperwork you file each year offers excellent information about how you are managing your money—and about areas where it might be wise to make changes in your financial habits. If you have questions about your financial situation, remember that we can help. Our firm is made up of highly qualified and educated professionals who work with clients like you all year long, serving as trusted business advisors.

So whether you are concerned about budgeting; saving for college, retirement or another goal; understanding your investments; cutting your tax bite; starting a business; or managing your debt, you can turn to us for objective answers to all your tax and financial questions.

We Can Help You Address the Issues that Keep You Up at Night

Where will your business be in five years? Would strategic budget cuts in some areas improve your company’s health? Are there ways you can boost revenue? If you are nearing retirement, is there a buyer or successor in the wings? These are the kinds of questions that keep many business owners up at night. Fortunately, we can help you address these questions and maybe sleep a little easier.

We can review your financial situation and develop creative strategies to minimize your tax liability and help you meet your financial goals. Contact one of our professionals today.

Preparing for the New Overtime Pay Rule

BY Bernie Hull

After much anticipation, the Department of Labor (DOL) recently released a new rule which will change how employers compensate employees. Effective December 1, 2016, workers who earn above the previous threshold but below the new one will qualify to receive time-and-a-half for each hour they work surpassing 40 hours a week. An estimated 4.2 million salaried workers will become eligible for overtime pay under the new rule.

According to the DOL, the new rule will:

  1. raise the salary threshold at which white-collar workers are exempt from overtime pay from $23,660 to $47,476 per year;
  2. automatically update the salary threshold every three years, based on wage growth over time;
  3. strengthen overtime protection for salaried workers already entitled to overtime; and
  4. provide greater clarity for workers and employers.

It should also be noted that, under the new rule, an employee’s nondiscretionary bonus/incentive payments can count toward up to 10% of the salary threshold, provided that the incentives are paid on a quarterly or more frequent basis.

Job titles do not determine exempt status. In order for an exemption for overtime to apply, an employee’s specific job duties and salary must meet all the requirements set by Department of Labor regulations. If you are unfamiliar with the criteria, more details are available on the Department of Labor website (www.dol.gov).

Many businesses will be affected and must comply with the new rule. According to the DOL, “employers may:

  1. increase the salary of an employee who meets the duties test to at least the new salary level to retain his or her exempt status;
  2. pay an overtime premium of one and a half times the employee’s regular rate of pay for any overtime hours worked;
  3. reduce or eliminate overtime hours;
  4. reduce the amount of pay allocated to base salary (provided that the employee still earns at least the applicable hourly minimum wage) and add pay to account for overtime hours worked over 40 in the workweek, to hold total weekly pay constant; or
  5. use some combination of these responses.”

Below are four steps you can implement which will help integrate the changes successfully into your workflow.

  1.  Review payroll and identify employees who are exempt. The first step is to review your payroll and identify who are currently classified as exempt employees whose salaries are below the new proposed thresholds for executive, professional and administrative white collar exemptions. You should also review the job duties of all employees who are currently classified as exempt to ensure that they meet the duties test under the Fair Labor Standards Act for their overtime exemption to be recognized.
  2. Consider which positions to transition to non-exempt status. Once you have reviewed your payroll and identified the employees who are exempt it will be essential to carefully consider which positions to transition to nonexempt status. Employers have two options: they can either increase the salary level to maintain an employee’s exempt status or transition the position to nonexempt status. When transitioning positions to a nonexempt status, ask yourself the following questions:
  • What will be the basis for pay: hourly or salaried?
  • Does this meet the minimum wage requirements?
  • Will overtime be permitted? Is it necessary?

3.  Evaluate timekeeping practices.

Anticipate more time to track for employees transitioning from exempt to nonexempt status. Establish a formal policy to help track and record time. The policy should define:

  • What is considered time worked?
  • How is overtime approved?
  • Who approves overtime?
  • What are the consequences for failing to follow the policy?

4.  Communicate changes internally.

The final step is to communicate and educate staff of any policy changes. Don’t forget to include employees who are already nonexempt; they will also need a refresher. Communications and training programs must be timely. Consider having supervisors regularly review employee time-keeping practices to ensure employees are properly reporting their time worked.

Employers have a few months to prepare for the new rule. Our firm’s professionals can help you develop a strategy to ensure your business is in compliance. Call us today.

Bauman Associates Announces Expansion of Hudson Office

BY Bauman Associates

Hudson, WI – November 23, 2015: Bauman Associates plans to expand its Hudson office by combining employees from its neighboring River Falls office. According to Managing Principal John Satre, this move will help the firm better serve clients in both the River Falls and Hudson markets.

By combining the River Falls and Hudson teams in one location, clients of both offices will benefit from larger client service teams and broader industry expertise. Additionally, consolidating the two offices into one will also help the firm to reduce overhead costs and allow the firm to maintain its competitive billing rates.

By December 1st, the firm plans to close its River Falls office and relocate all of these employees to its Hudson office. The address for the Bauman Associates expanded Hudson office will remain the same: 816 Dominion Drive, Suite 201, Hudson, WI 54016. The office main phone line is 715.386.8181.

About Bauman Associates, Ltd
Bauman Associates was founded in 1947 as a certified public accounting firm and has offices in Eau Claire and Hudson, Wisconsin. The firm provides multi-discipline professional services to businesses and individuals including business consulting; technology training; human resource consulting; tax strategy, planning and preparation; accounting and auditing services; and estate, trust and retirement planning. For more information, visit www.baumancpa.com or call 888-952-2866.

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