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.

2017 Standard Mileage Rates Announced for Business, Charitable, Medical and Moving Purposes

BY Justin Koppa

The Internal Revenue Service recently issued the 2017 optional standard mileage rates to be used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

As of January 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) are:

  • 53.5 cents per mile for business miles driven (54 cents for 2016)
  • 14 cents per mile driven in service of charitable organizations (14 cents for 2016)
  • 17 cents per mile driven for medical or moving purposes (19 cents for 2016)

It is important to remember that a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. For more information, please contact one of our professionals today.

New Form I-9 for Employment Eligibility Verification, Effective 1/22/2017

BY Bernie Hull

Congress passed the IRCA (Immigration Reform and Control Act) in 1986, which required the use of the Form I-9 to verify identity and employment authorization for all new employees, including U.S. citizens hired after November 6, 1986. New hires are required to complete this form within three (3) business days of the date of hire. Employers are required to retain the completed Forms I-9 for all employees, as long as the individuals work for the employer and until one year after the date the employment is terminated or three years after date of hire, whichever is later.

On November 14, 2016, USCIS (U.S. Citizenship and Immigration Services), published a revised version of the Form I-9. Employers must begin using the new version by January 22, 2017.  The form has been modified to make it easier to complete on a computer, including prompts to ensure information is entered correctly and drop down lists and other enhancements.

You may obtain a copy of the new form (paper version and fillable PDF version) and a copy of the Handbook for Employers—Guidance for Completing Form I-9 (publication M-274) at the official website www.uscis.gov/i-9.  There is no fee to obtain these forms via this website.

Preparing Your Business for the New 2017 Filing Deadlines

BY Brittany Gerth

This is a reminder to employers and small businesses of the new January 31 filing deadline for Form W-2.  A new federal law, aimed at making it easier for the IRS to detect and prevent refund fraud, will accelerate by a month the W-2 filing deadline for employers from February 28 to January 31.

The Protecting Americans from Tax Hikes (PATH) Act, enacted last December, includes a new requirement for employers. They are now required to file their copies of Form W-2, submitted to the Social Security Administration, by January 31. The new January 31 filing deadline also applies to certain Forms 1099-MISC reporting non-employee compensation such as payments to independent contractors. As it relates to Form 1099-MISC, the new filing deadline will only impact filers that report nonemployee compensation payments in box 7.

In the past, employers typically had until the end of February, if filing on paper, or the end of March, if filing electronically, to submit their copies of these forms. Also, there are changes in requesting an extension to file the Form W-2. Only one 30-day extension to file Form W-2 is available, and this extension is not automatic. If an extension is needed, a Form 8809 Application for Extension of Time to File Information Returns must be completed as soon as you know an extension is necessary, but by no later than January 31.

The new accelerated deadline is intended to help the IRS improve its efforts to spot errors on taxpayer filed returns. Receiving W-2s and 1099s earlier will make it easier for the IRS to verify the legitimacy of tax returns and properly issue refunds to taxpayers eligible to receive them. According to, the IRS it will make it easier to release tax refunds more quickly.  The January 31 deadline remains unchanged and has long applied to employers furnishing copies of these forms to their employees.

We anticipate the new deadline will increase your businesses workload. To minimize stress, we recommend the following steps:

  • Verify your employee filing status and confirm their mailing addresses before December 31, 2016.
  • Verify form W-9 information (for your 1099-Misc contractors) is completely up-to-date and accurate.
  • Collect all the necessary information to ensure your forms are “good-to-go” on or about Monday, January 2, 2017.

The professionals in our office can answer any questions you may have about the new filing deadlines and how they will impact your business, call us today.

Tips to Avoid Embezzlement

BY Bernie Hull

Why does something like this happen to good people—Trust. According to FBI profiles, an embezzler is typically an employee with 5-6 years of experience, often described as good-to-above average, highly desirable, reliable, bright, motivated, trustworthy, and an achiever with good self-control. The typical motive is the need for money caused by a specific problem.”

Potential warning signs:

  • Unusual behaviors—for example, making sure she always gets the mail, intercepts phone calls, never takes vacation—even when on vacation, etc.
  • Lack of timeliness in updating/reconciling the accounting records

Do you have to stop trusting people to avoid such a thing from happening to you? No, but you need to implement good internal controls to reduce the risks. In my opinion, an honest bookkeeper would welcome the fact that controls are put in place—if for no other reason than to avoid the risk of ever being accused of wrongdoing.

Tips to consider:

  • Hire smart—develop accurate job descriptions and MUST do reference checking. During reference checking, make sure you ask former employers, “Would you rehire this person?”
  • Evaluate your internal controls—either on your own, or with the help of your CPA. (IC questionnaire)
  • Remember that as a manager or small business owner you are ultimately responsible for the numbers—so get involved in the process
  • Receive all mail—consider having post office hold mail until you return from vacation, if office is closed in your absence.
  • Review statements from vendors. Many vendors have stopped sending statements, but they will send late notices. Make sure your business is in good standing with vendors. Long overdue invoices may be an indication that a check you thought was going to a vendor actually went in someone else’s pocket, or that an invoice had been overlooked.
  • Receive bank statements directly, unopened. Insist on cancelled checks or check copies. Review cancelled checks for reasonableness of date, payee, amount, authorized signature and endorsement on the back of the check.
  • Review the bank reconciliation every month. This step is particularly important if you have one person doing the bookkeeping, writing checks, posting entries, preparing financial statements. Look closely at any adjustments to the bank accounts. Are there any old outstanding checks/deposits listed on the bank rec.?
  • Scan the check register periodically (every 3-4 months) to verify all payees and amounts paid make sense. Multiple checks written around the same time to the same vendor could be an indication that funds are being diverted—or just an inefficient use of time to write and code multiple checks. Verify check number sequences.
  • Review all credit card statements—are all charges authorized? Look for unusual late fees and finance charges. Pay off credit card balances monthly to avoid late fees. (Financial management point—check into lining up a line of credit with your bank—before you need the money, to manage short term cash flow/seasonal issues—at a lower rate and fees than a credit card.)
  • Review all payroll tax reports—consult with your CPA to verify deadlines and make sure that all reports are filed on time. Consider asking for account transcripts from the IRS and contact WDR at least annually to verify that all taxes were paid on a timely basis and that there are no balances outstanding.
  • Review payroll registers – review frequency of paychecks and amounts paid for reasonableness. Hand out pay checks/ pay stubs.
  • Review your accounts receivable aging summary schedule on a regular basis. This is beneficial not only to determine if you have any slow paying customers. It may also disclose if any customer payments have been misapplied.
  • Evaluate controls over inventory. Establish records to properly and consistently track inventory. Do period physical inventory counts and compare to your perpetual inventory system. Are controls implemented to reduce risk of theft?
  • DON’T EVER pre-sign blank checks. Keep all blank checks in a secured location—with you controlling the key/combination. (Anyone can forge a check.)
  • Make sure employees who can handle cash are bonded. Do you have embezzlement/theft insurance in place? Is it adequate to cover a potential loss and professional fees to determine amounts taken?

Overtime Extension Blocked by Texas Judge

BY Bauman Associates

Just before Thanksgiving, Texas U.S. District Judge Amos Mazzant granted a nationwide injunction against the overtime extension rules that were set to go into effect on December 1. The blocked rules would have increased the maximum salary from $23,660 to $47,500 for a worker to be eligible for overtime pay, impacting an estimated 4.2 million working Americans. Mazzant issued the injunction following arguments against the rule from 21 states and the U.S. Chamber of Commerce, who argued that the extended overtime ruling was unlawful. While the injunction has put a halt to things for now, we expect the discussion is far from over. Let us know if you have any questions on how this could affect you. If you’d like to learn a bit more, check out these articles:

Preparing Your Business for New Filing Deadlines

BY Robert Sorensen

In July of 2015, President Obama signed into law a new Highway Funding Bill. Section 2006 of that bill modifies the tax filing due dates for tax years beginning after December 31, 2015. The filing deadlines for a variety of entities, including partnerships and C corporations, will change.

As a business owner, it is important to be aware of the new filing deadlines to make sure you are submitting tax returns timely. The following two questions will determine your due date:

  1.  What entity is your business considered?
  2.  When is your tax year end date?

The new due dates are effective for tax years beginning after December 31, 2015 with the exception of C Corporations with fiscal years ending on June 30 (new due dates for June 30 year ends will go into effect for returns with taxable years beginning after December 31, 2025).

We have highlighted below some of the major changes. For a complete list of new due dates, please refer to our giveaway this month, a copy of the AICPA’s resource which includes a list of all original and extended tax return due dates.

Return Type Prior Due Dates New Due Dates
Partnership (calendar year) April 15 March 15
S Corporation (calendar year) March 15 No change
C Corporation (calendar year) March 15 April 15
FinCEN Report 114

(Replaces FBAR return)

June 30 April 15
Individual Form 1040 April 15 No change
 

Extension Modifications for Calendar Year Filers

Form Extension
1065 6 Months
1041 5 ½ months
5500 3 ½ months
990 6 months
3520-A and 3520 6 months
FinCEN report 114 6 months
 

Extension Modifications for C Corporations

June 30 FYE 7 months
December 31 FYE 5 months
All other FYE’s 6 months
After 12/31/25 All revert back to 6 months

Will individual tax filers be affected by the new due dates?

Yes, those who file foreign bank account reports will notice a change. The due date for FBARs will move from June 30 to April 15. FBAR filers are also applicable to receive a six-month extension, similar to tax returns.

 Trust Returns

The extension dates for trust returns are receiving an extension. Trust returns are still due in April, but the extension will change from September 15 to September 30.

You will want to review your return-filing procedures and determine what changes need to be made to comply with the new dates. The professionals in our office can help you understand how this will affect your business; call on us today.

Creating Your Small Business Exit Strategy

BY Jay Grokowsky

Do you know what will happen to your business when you retire? By necessity, many busy small business owners spend all of their time thinking about the here and now, with little opportunity to focus on the future. But your company’s long-term survival -— and your own retirement security -— may depend on establishing a realistic and workable exit strategy.

Set a retirement date

Here is your first question: When do you plan to quit working? You may have a general idea of the age range when you would like to retire, but now is the time to set a precise date. That gives you a timeline to work with, which will make all your other planning easier.

Consider your options

The next essential question: Who do you expect will take over your business? Many companies make one of two choices: either someone buys the company from you or a family member or employee takes over as chief executive when you retire. It is important to consider which one is the most realistic option so that you can ensure a smooth transition down the road. Depending on your plans, there are different steps you should take now to ensure a smooth transition.

If you plan to sell

If you are going to sell your company to another business or individual, you will need an accurate idea of what it is worth. You should get a business appraisal when you are ready to sell; but it may be a good idea to get one now, even if there are many years until your planned retirement. An appraisal can help to spot your company’s strengths and weaknesses so you can analyze how those attributes impact its overall worth.

The information in the appraisal can be used to make changes that improve operations, sales and revenues and make you a more competitive player in the marketplace. Those steps will help increase your company’s value and its appeal to potential buyers at the time you decide to sell.

If you plan to promote from within

It is always a good idea to have a current idea of your company’s worth, but there are also other necessary factors to consider if you are hoping that someone within your company will one day take over the reins of leadership. The first question, of course, is who will that person be? Is there a very talented younger employee who you believe could one day take over? If so, begin grooming him or her now. This includes introducing the employee to key clients, increasing his or her level of responsibility and including the person in decision making whenever possible.

Even if you expect to sell your business, it is a good idea to have a promising future leader ready to take over the reins. In most cases, a potential buyer will be happy to see that there is someone in place to carry on.

There are many possible exit strategies available to small business owners. No matter which you choose, it will be a good idea to have an accurate sense of the company’s worth and to have a strong management team in place. Our firm’s professionals can help you develop a strategy to suit your business. Call us 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.