Business Consultants & Certified Public Accountants

Obama/DOL 2016 Overtime Rule Dead

By Jill Scheetz, PHR, SHRM-CP

Remember that work you put into verifying the exempt status of your workers and minimum salary requirements back in late 2015 and early 2016? Well, that was all for naught…kind of. 

 On August 31, 2017, a federal judge in Texas granted a summary judgment to numerous business groups that had challenged the 2015 Obama administration proposal, which was made rule in 2016 by the U.S. Department of Labor but blocked by a temporary injunction issued by the same Texas court last November. The August 2017 ruling makes the overtime rule invalid, unless appealed by the DOL, which seems unlikely with the current administration. 

This means that the minimum salary requirements under the Fair Labor Standards Act are back to the 2004 requirements of $455 weekly ($23,660 annually). However, we may not have heard the end of this topic under the Trump administration. Actions taken by Alexander Acosta, the U.S. Secretary of Labor, indicate that they may be looking for some sort of increase, but probably not to the level proposed by the Obama administration. 

I also point out that the FLSA white collar exemption tests still remain, and employers should be certain that all employees classified as salaried, or exempt, should pass the duties test, which can be found on the FLSA or DOL websites. You can also contact me at 215-997-7270 or [email protected] to assist you in determining the status of employees of whom you’re uncertain. 

Support Your Community & Reduce Your PA Taxes

By Luke Wischnowski, CPA

As a business owner or employee of a business in Pennsylvania, you have the opportunity to redirect your state tax liability to an educational organization of your choice.

The Pennsylvania Educational Improvement Tax Credit (“EITC”) program allows businesses to receive a tax credit for charitable contributions made to a qualifying educational organization. Eligible businesses include any company (including partnerships, single-member LLC’s, multi-member LLC’s and S-corporations) authorized to do business in Pennsylvania that is subject to the following:

  • Personal Income Tax
  • Capital Stock/Foreign Franchise Tax
  • Corporate Net Income Tax
  • Bank Shares Tax
  • Title Insurance & Trust Company Shares Tax
  • Insurance Premiums Tax
  • Mutual Thrift Tax
  • Malt Beverage Tax

PA Act 194 of 2014 made it possible for business owners or employees of a qualified business to create a “special purpose entity” (“SPE”) solely for the purpose of making donations under the EITC program. Only shareholders, partners, members or employees of business firms can create a special purpose entity that qualifies for the EITC program. As a result of this legislation, business owners can participate in the EITC program even if other owners in their firm are not interested. In addition, employees of qualified business firms can join SPE’s and make contributions under the EITC program. There are numerous SPE’s that have already been created throughout Pennsylvania and allow certain individuals wishing to participate in the EITC program to join. Most existing SPE’s require individual members to be “accredited investors,” which includes individuals with the following:

  • Earned income exceeding $200,000 in each of the prior two years (or $300,000 together with a spouse) and expects the same for the current year, or
  • Net worth greater than $1 million, either alone or with a spouse (excluding the person’s primary residence).

The requirement to be an “accredited investor” derives from the Securities and Exchange Commission (“SEC”) regulations that require a company that offers or sells its securities to register with the SEC or find an exemption from the registration requirements, one of which is selling its securities to “accredited investors” as defined above. In general, a company can offer its securities to 35 “non-accredited investors” without meeting the requirement to register with the SEC. Since most established SPE’s in Pennsylvania attract more than 35 investors, these organizations prefer to only secure financing from accredited investors.

To receive tax credits, a business or SPE must fill out a short application on the PA Department of Community & Economic Development (“Department”) website (http://dced.pa.gov/programs/educational-improvement-tax-credit-program-eitc/). Applications are approved by the Department on a first-come, first-served basis until the amount of allocated funds is exhausted. For the 2017-2018 fiscal year, the application process for companies applying for the first time began on July 3rd. Once approved, the business must contribute cash, personal property or services to a qualifying Scholarship Organization, Educational Improvement Organization or Pre-K Scholarship Organization within 60 days and provide the Department proof of the payment within 90 days of the approval date. Qualifying organizations are listed on the Department’s website. Many qualifying organizations, such as private schools, include a section on their website explaining how contributions can be made to their particular institution.

The state tax benefit that a business receives varies based on the number of years the business pledges to make the contribution. The tax credits awarded to a business that makes a one-time contribution is 75% of the total contribution, up to a maximum of $750,000 per taxable year. If a business agrees at the time of its application to make a contribution for two consecutive years, the amount of the tax credit is increased to 90% of the contributions, up to a maximum of $750,000 per taxable year. Tax credits can be applied to any type of PA tax liability and are considered effective on the first day of the taxable year in which the contribution is made. Married taxpayers may file a joint PA tax return and apply the EITC credit to the couple’s joint tax liability.

The charitable contribution made in connection with the EITC program does not affect the treatment of the donation for federal income tax purposes. The business can deduct the payment on its federal income tax return if it qualifies as a charitable contribution as defined in the Internal Revenue Code. In the case of a pass-through entity (i.e. partnership or S-corporation) or SPE, the contribution would pass through to the owner’s individual income tax return as an itemized deduction.

Participating in the EITC program is a great way to give back to your local community while simultaneously reducing your effective tax rate. If you wish to participate in the program during 2017, you should start the application process as soon as possible before the allocated funds in the state budget are depleted. Even if you do not meet the deadline for 2017, understanding more about the EITC program can help you plan your charitable giving arrangements for next year. As a reminder, the program requires approval from PA lawmakers on a yearly basis in conjunction with the passage of the state budget and has been running since its inception in 2001. As your trusted advisors, we at PBGW would be happy to assist you with determining the most effective way to participate in the EITC program and support your local community.

 

 

Do You Have A Will? And, If So, Is It Up To Date?

If you’re anything like me, by now you have broken all of your New Year’s resolutions. Actually, if you’re like me, you’ve stopped making any New Year’s resolutions (can’t stand the failure rate).

But please don’t fret, there is still plenty of 2016 left for you to redeem yourself. You still have time to review, update or prepare your will. But what if you’re thinking that considering your will was not on your list of resolutions? What then? I really don’t care, because it should have been on your list of resolutions. It should be reviewed every few years to make sure your final directives really say what you want.

So, when is the last time you considered your will? Do you even have a will? If you have a will, do you know what it says? Does it still say what you would like it to say?

What happens if you don’t have a will? Many people are surprised to find that if you’re a Pennsylvania resident and haven’t written your own will, the Commonwealth of Pennsylvania has written one for you. If you die having written your own will (called testate), then you can appoint your own executor and dispose of your assets as you wish (as long as what you direct is allowed by law). If you die without a will (called intestate), then your estate is required to follow the Pennsylvania laws of Intestate Succession. Therefore, if you die without a will, your executor is determined by the Courts and your assets are disposed of as required by these intestate laws, none of which may be what you would have wanted.

In addition to what your will directs (or in spite of what your will directs), some assets will be transferred based on how they are titled. Real estate, bank accounts, life insurance, and retirement accounts are good examples of this. You may direct in your will that a piece of real estate gets transferred to a certain person. However, depending on how you have the real estate titled, it may go to someone else. The titling of property will generally take precedence over what your will states. Your will may also direct that your bank accounts all go to your spouse or be split evenly between all of your beneficiaries; however, if you have the account titled in joint names or as a payable-on-death (POD) account, it will follow what is on the account. Another item we see a lot is accounts with beneficiary designations. Again, generally upon your death these retirement accounts, life insurance contracts, annuity contracts, and IRA accounts will be paid to the named beneficiary no matter what your will says. A quick item related to this is to check these beneficiary designations. Are the named beneficiaries still alive and still the people you want to be beneficiaries? You may be surprised at the number of ex-spouses that are still (mistakenly) named as beneficiaries on life insurance policies.

I find that generally no one likes to talk about their final wishes and what will happen when they are gone. So why am I pushing such a grim subject? Unfortunately, a couple of years ago one of my new clients was tragically killed in an accident at work. He had a wife and three children. I was surprised to learn that he and his wife had never gotten around to preparing a will. So, unfortunately, in addition to all of the terrible problems dealing with the accident, the lack of a will caused many additional problems and issues that needed to be dealt with.

So this is now one of my soap box items for all of my clients. I want you all to have a will and know what it says. I realize that there are many more issues that may need to be considered in your will, especially if you have minor children, but please do not let this stop you from preparing a will. Even a simple will is better than no will. Although there may be plenty of 2016 left, none of us knows how much time we actually have to get this done. So do it now!

Please let us know if you would like some help with this. We may be able to help you work through some of the various options including coordinating your will with the titling of your assets and review various tax consequences and gifting alternatives.

–Ted Landis
Shareholder

Ransomware: Could Your Data Be Held Hostage?

If you are browsing the web precariously, opening mysterious emails, or downloading suspicious files, you might pay the price…literally.

Ransomware is a malicious type of software that once loaded on your computer, encrypts your data and holds it hostage until the ransom fee is paid. It’s quite simple, really. You sit down at your computer with your morning coffee and see an email which appears legitimate, asking you to download a .zip file or even a simple document. Of course, the situation can vary. The sender could be claiming to provide UPS or FedEx information regarding an important delivery or a bank or credit union sending you a routine financial statement.

Once the file is downloaded to your computer and opened, the infection has already started and it displays no immediate evidence. Behind the scenes, the ransomware encrypting all of your applications, files, and even system files which can disable certain functionality of your operating system. You won’t find out that your system has been infected until you see the infamous ransom note demanding a non-negotiable payment in the form of bitcoin with a countdown of the time remaining to pay up or your data will be encrypted for good.

You might think that they are bluffing, but do you really want to wait to find out?

Before you hand over a large sum to the cybercriminals, paying the pricey ransom isn’t your only option. I recommend talking to your IT department or an IT professional before performing any actions when you know you are infected. One option is to reformat your hard drive and restore from a backup that was created before your computer had become infected; that is, if you created a backup. If not, unfortunately your options are even more limited.

First seen in 2013, this malicious software has become quite popular to virus programmers because of the potential income. In the news, Ransomware has begun spreading to large businesses, causing havoc and a crippling amount of downtime. Similar ransomware has been created under different names such as Locky, CryptoWall, CryptoDefense, TorrentLocker, TeslaCrypt, VaultCrypt, VirLock, and KeRanger.

Of course, you should not have to use your computer in fear that you may be prone to these infections. There are many preventative actions that can be taken to decrease the chances of encountering ransomware. Most importantly, ensure that you have both an anti-virus program and anti-malware program that have real-time detection which can quarantine the malicious software so that it doesn’t implant itself on your computer. Also, viruses and malware have been known to target out of date browser plug-ins. Be sure to keep your plug-ins up to date and uninstall plug-ins you are no longer using. The most common practice that can protect you is to be smart and cautious when browsing unknown websites or viewing suspicious emails. Don’t open an email from a sender you do not trust and be sure to run a malware scan on any attachment you download. When browsing the web, refrain from clicking and advertisement that are found on the page. These simple methods can absolutely help prevent infection, however, no one is completely immune to an attack. Be sure to backup all of your data on an external device daily. This will limit the amount of data you may lose in case you are forced to reformat your hard drive.

New malicious software programs are written and released every day. You can help prevent them from spreading by being prepared and taking the right action against them.

If you ever encounter suspicious activity on your computer or have any questions about how to protect yourself from ransomware or malware, feel free to contact the PBGW IT Department.

If you are browsing the web precariously, opening mysterious emails, or downloading suspicious files, you might pay the price…literally.
Ransomware is a malicious type of software that once loaded on your computer, encrypts your data and holds it hostage until the ransom fee is paid. It’s quite simple, really. You sit down at your computer with your morning coffee and see an email which appears legitimate, asking you to download a .zip file or even a simple document. Of course, the situation can vary. The sender could be claiming to provide UPS or FedEx information regarding an important delivery or a bank or credit union sending you a routine financial statement.

Once the file is downloaded to your computer and opened, the infection has already started and it displays no immediate evidence. Behind the scenes, the ransomware encrypting all of your applications, files, and even system files which can disable certain functionality of your operating system. You won’t find out that your system has been infected until you see the infamous ransom note demanding a non-negotiable payment in the form of bitcoin with a countdown of the time remaining to pay up or your data will be encrypted for good.

You might think that they are bluffing, but do you really want to wait to find out?

Before you hand over a large sum to the cybercriminals, paying the pricey ransom isn’t your only option. I recommend talking to your IT department or an IT professional before performing any actions when you know you are infected. One option is to reformat your hard drive and restore from a backup that was created before your computer had become infected; that is, if you created a backup. If not, unfortunately your options are even more limited.

First seen in 2013, this malicious software has become quite popular to virus programmers because of the potential income. In the news, Ransomware has begun spreading to large businesses, causing havoc and a crippling amount of downtime. Similar ransomware has been created under different names such as Locky, CryptoWall, CryptoDefense, TorrentLocker, TeslaCrypt, VaultCrypt, VirLock, and KeRanger.

Of course, you should not have to use your computer in fear that you may be prone to these infections. There are many preventative actions that can be taken to decrease the chances of encountering ransomware. Most importantly, ensure that you have both an anti-virus program and anti-malware program that have real-time detection which can quarantine the malicious software so that it doesn’t implant itself on your computer. Also, viruses and malware have been known to target out of date browser plug-ins. Be sure to keep your plug-ins up to date and uninstall plug-ins you are no longer using. The most common practice that can protect you is to be smart and cautious when browsing unknown websites or viewing suspicious emails. Don’t open an email from a sender you do not trust and be sure to run a malware scan on any attachment you download. When browsing the web, refrain from clicking and advertisement that are found on the page. These simple methods can absolutely help prevent infection, however, no one is completely immune to an attack. Be sure to backup all of your data on an external device daily. This will limit the amount of data you may lose in case you are forced to reformat your hard drive.

New malicious software programs are written and released every day. You can help prevent them from spreading by being prepared and taking the right action against them.

If you ever encounter suspicious activity on your computer or have any questions about how to protect yourself from ransomware or malware, feel free to contact the PBGW IT Department.

— Dylan Geisinger
IT Specialist

Yes, a Benefits Plan Audit Could Happen to You

Many business owners worry about an income tax audit. But, if you sponsor an employee benefits plan, the IRS could audit it as well. Here are some common questions that plan administrators and sponsors might ask about plan audits.

Where’s the bull’s-eye?

The IRS targets plans in one of four ways:

  1. As part of a special IRS initiative focusing on a specific issue,
  2. On a tip-off,
  3. After discovering questionable or unusual items on a plan’s return, or
  4. By random selection.

The agency says audits aren’t merely a game of gotcha. The purpose is to develop corrective strategies and help plan sponsors execute these strategies.

How can you prepare?

Before a plan audit, the IRS usually requests a list of documents to review. An examiner then visits your office or facilities to conduct the audit.

Like a tax audit, a plan audit is best dealt with in consultation with a benefits expert. Make sure to authorize this person to act on your behalf in writing, using the required IRS form (Form 2848, “Power of Attorney and Declaration of Representative”), and that he or she is licensed to practice before the IRS.

What are auditors looking for?

The IRS typically examines a wide variety of plan operational areas. For starters, it will likely look into whether all eligible employees are properly participating, and whether the plan is properly crediting service and vesting in the plan.

Naturally, contributions and distributions are often investigated closely, too. And the agency may examine whether the plan document and trust meet current tax law, as well as whether you’ve timely and accurately filed federal returns and reports.

Who can help?

If you receive a notice of an IRS plan audit, please give us a call. We can work with your benefits advisor to gather the necessary documents and help you navigate the process.

Take a Shot at a SWOT Analysis

Many business owners have used strengths, weaknesses, opportunities and threats (SWOT) analyses to frame their strategic planning. If you’re looking to map out your company’s next big move, now might be a good time to take a shot at it yourself.

Think about your customers

A SWOT analysis starts by spotlighting internal strengths and weaknesses that affect the success and value of a business. Strengths are competitive advantages or core competencies that generate revenue, such as a strong sales force or exceptional quality.

Conversely, weaknesses are factors that limit a company’s performance. Generally, weaknesses are evaluated in comparison with competitors. Examples might include weak customer service or negative brand image.

A company’s strengths and weaknesses are often tied to customer requirements and expectations. A characteristic affects future cash flow — and therefore, success — if customers perceive it as either a strength or a weakness.

Envision the future

The next step in a SWOT analysis is to predict future opportunities and threats. Opportunities are favorable external conditions that could generate return if the company acts on them. Threats are external factors that could prevent the company from achieving its goals.

When differentiating strengths from opportunities (or weaknesses from threats), the question is whether the issue would exist without the company. If the answer is yes, the issue is external to the company and, therefore, an opportunity or a threat. Changes in demographics or government regulations are examples of opportunities or threats a business might encounter.

Pick your path

Generally, there are two directions you can go with the information gathered from a SWOT analysis:

  1. Capitalize on opportunities with strengths, or
  2. Convert weaknesses into strengths — or threats into opportunities.

Need help with the decision? Please contact our firm. We can assist you in conducting a SWOT analysis from start to finish.

Your Accounting Software Should be a Many-Splendored Thing

You’ve probably heard the song, “Love is a many-splendored thing.” Well, your company’s accounting software should be, too. That is, you’ve got to make sure your system does all of the big and little things necessary to efficiently and accurately track your financials.

It’s not only about revenue

Annual revenue doesn’t always dictate what software you should acquire. Some $50 million a year businesses will do just fine using a less expensive accounting software package, while some $5 million businesses will require a much higher end product. The key is to thoroughly review your accounting processes, tax-reporting requirements, transaction volumes, staff’s abilities and management reporting needs.

The future matters as much as the present

Another important factor: your company’s growth rate. If you’re growing 20% or more per year, you must have an accounting package that can grow with you. Otherwise, converting to a new accounting system every couple of years will be a painful and expensive process.

Your users matter the most

You’ll never get maximum value out of accounting software that your employees can’t fully use. Better systems provide on-screen tutorials that walk users through a sample company’s transactions and offer prompts for completing certain tasks. Extensive help should be available on-screen as well as via a 24-7 phone number. Some providers even provide support through instant messaging.

You’re not just tracking, you’re analyzing

The system should allow you to readily generate monthly and annual accounting reports. This means being able to easily record and access bank reconciliations, recurring transactions, and aging of accounts payable and scheduling of payments. A better package will customize reports that include instant unadjusted trial balances, income statements, balance sheets, cash flow statements, statements of retained earnings and more.

A second opinion is always helpful

So do you love your current accounting system? If you can’t say “yes” unequivocally, give us a call. We can review your existing functionalities and make recommendations regarding whether and how you should upgrade.

 

5 Ways to Cut Costs and Improve Cash Flow

When business owners start to feel the choking effect of a slow cash flow, they often blame their customers. “Why aren’t we getting paid on time?!” But it’s important to remember that cash flow is affected by a variety of elements. For example: Operating expenses and overhead can have a significant impact. Here are five often-missed ways to cut costs and improve cash flow:

1. Review your rent or mortgage. Can you negotiate a lower rent with your landlord or refinance your mortgage? Also look into whether you may not need as much office space if you’ve begun to allow many employees to telecommute.

2. Implement energy efficiency improvements. You’d be surprised by how much of a difference little changes can make to lower your utility bills. For example, draw the shades in the summer and adjust the thermostat a few degrees. Or look into whether it’s time to make an upfront investment in better windows or HVAC equipment.

3. Take a close look at travel and entertainment expenses. Can you pare these down by conducting more meetings via teleconferencing or using a Web-based application? Can you cut back on expensive meals and, if applicable, sports and concert tickets for clients? Clearly, you don’t want to diminish relationships with clients and vendors by cutting back too much. But there may be ways to save.

4. Slow down shipping expenses. Employees often send packages overnight when two- or three-day shipping would suffice. Establish or re-establish clear policies. In addition, you might be able to find some lower cost shipping arrangements by comparing providers.

5. Give us a call. We’d be happy to take a comprehensive look at your company’s expenses and assess how they’re affecting your cash flow. Most likely, we can make some strong money-saving recommendations.

 

Is It Time To Get Accountable With Your Employees’ Expenses?

Many companies start out, and get pretty far down the road, using the “per diem” approach when reimbursing employees for lodging, meals and incidental expenses. Doing so involves the use of either IRS tables or a simplified high-low method to reimburse workers up to specified limits.

The per diem approach is relatively simple and doesn’t involve too much record keeping. But it also puts businesses at risk if they exceed the per diem limits, exposing them to IRS penalties and employees to higher tax liability. For this reason, companies often reach a point where they create an “accountable plan” for handling employee expense reimbursements.

Reaping the tax advantages

An accountable plan is a formal arrangement to advance, reimburse or provide allowances for business expenses. The primary advantage is that your business can deduct expenses (subject to a 50% limit for meals and entertainment), and employees can usually exclude 100% of advances or reimbursements from their incomes. Workers whose jobs involve frequent travel may realize significant tax savings.

Qualifying for eligibility

To qualify as “accountable” under IRS rules, your plan must meet the following criteria:

  • It must pay expenses that would otherwise be deductible by the employee.
  • Payments must be for “ordinary and necessary” business expenses such as airfare and lodging charges.
  • Employees must substantiate these expenses — including amounts, times and places — ideally at least monthly.
  • Employees must return any advances or allowances they can’t substantiate within a reasonable time, typically 120 days.

If you fail to meet these conditions, the IRS will treat your plan as nonaccountable, transforming all reimbursements into wages taxable to the employee, subject to income and employment taxes — though potentially deductible by the employee.

Getting some help

Accountable plans take time to establish and require meticulous record keeping. Let us help. We’d be happy to assist you in setting up your accountable plan and regularly reviewing its compliance with IRS rules.