News & Articles

New Overtime Rules

August 9, 2016: In May of 2016, the final rules on overtime pay regulations were announced. These new rules will take effect on December 1, 2016. These rules aim to ensure that any professional or administrative employee that works over 40 hours a week and is paid under $913 a week ($47,476 annually) whether paid as a salary or not, is paid overtime. This exemption amount is almost double from the current rule of $455 a week ($23,660 annually). The update also increased the highly compensated employees salary level, at which point workers will be ineligible for overtime pay from $100,000 to $134,004, annually.

Overview:

  • Changes have been made to “white collar” workers overtime pay rules, exemption from overtime pay must meet all three of the following criteria:
    • Be paid on a salary basis (unchanged)
    • Be paid at least $913 per week (increased from $455 per a week)
    • The employee’s primary job duties must involve the kind of work associated with exempt executive, administrative, or professional employees (unchanged)

Important Facts:

  • Nondiscretionary Bonuses, commissions, and incentives only count towards the exemption amount ($913/week) if they are paid at least quarterly and in addition they can only make up 10 percent of the total salary threshold
    • If you have employees that a majority of their pay comes from commissions you may need to make some adjustments.
  • Private employers cannot use comp time to satisfy the overtime payment, instead the employer must pay the employee overtime for hours worked over 40 during any week
    • If you currently have non-exempt employees who have comp work schedules, you may need to make adjustments also.
  • The exemption amount will be adjusted on January 1, 2020 and then every three years thereafter

How to prepare for the changes taking effect December 1, 2016:

  • Identify employees that fall into these wage categories and might possibly work more than 40 hours in any given week during the year.
  • Adjust compensation accordingly:
    • Either by increasing salary levels to above the exemption limit
    • Convert these positions to hourly positions
    • Or be prepared to track the overtime pay non-exempt salaried employees work over 40 hours and compensate them for this time

For more information please visit: https://federalregister.gov/a/2016-11754. This article was intended to provide a brief overview of the topic, and not to provide any specific accounting or legal advice or services. These new rules are complex and you should consult with a qualified professional.

Applying “Little GAAP” in 2014

November 18, 2014: For those Companies that are not publicly-traded entities and prepare their financial statements on a GAAP (generally accepting accounting principles) basis, there have been several developments over the past year that change how transactions and balances are reported in your financial statements. The PCC (Private Company Council) was established in May 2012 by the Financial Accounting Foundation to improve the process for setting accounting standards for non-public entities. In January 2014, the FASB (Financial Accounting Standards Board) started issuing standards that the PCC proposed for non-public entities, essentially creating “Little GAAP.” Since January 2014, there have been three standards issued that are strictly for non-public entities.

  • Accounting for Goodwill. An entity that elects this accounting alternative should amortize goodwill on a straight-line basis over 10 years, or less than 10 years if the entity demonstrates that another useful life is more appropriate. The entity is required to make an accounting policy decision to continue testing goodwill for impairment at either the entity level or the reporting unit level when a triggering event occurs that indicates the fair value of an entity (or a reporting unit) may be below its carrying amount. The PCC further simplified goodwill impairment testing by eliminating step two of the current test, which requires the hypothetical application of the acquisition method to calculate the goodwill impairment amount. That amount, if any, represents the excess of the entity’s (or the reporting unit’s) carrying amount over its fair value (limited to the carrying amount of goodwill of the entity or reporting unit).
  • Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps.  The amendments in this standard allow the use of the simplified hedge accounting approach to account for swaps that are entered into for the purpose of converting a variable-rate borrowing into a fixed-rate borrowing. Under this approach the income statement charge for interest expense will be similar to the amount that would result if the entity had directly entered into a fixed-rate borrowing instead of a variable-rate borrowing and a receive-variable, pay-fixed interest rate swap. Entities within the scope of this update are provided with a practical expedient to qualify for cash flow hedge accounting. An entity may assume no ineffectiveness for qualifying swaps. This method can be applied to a cash flow hedge of a variable-rate borrowing with a receive-variable, pay-fixed interest rate swap provided certain criteria are met. A private company has the option to measure the designated swap at settlement value instead of fair value. The primary difference between settlement value and fair value is that nonperformance risk is not considered in determining settlement value.
  • Applying Variable Interest Entity (VEI) Guidance to Common Control Leasing Arrangements.  This standard permits a private company lessee (the reporting entity) to elect an alternative not to apply VIE guidance to a lessor entity if (a) the private company lessee and the lessor entity are under common control, (b) the private company lessee has a lease arrangement with the lessor entity, (c) substantially all of the activities between the private company lessee and the lessor entity are related to leasing activities (including supporting leasing activities) between those two entities, and (d) if the private company lessee explicitly guarantees or provides collateral for any obligation of the lessor entity related to the asset leased by the private company, and the principal amount of the obligation at inception of such guarantee or collateral arrangement does not exceed the value of the asset leased by the private company from the lessor entity. The alternative is an accounting policy election that, when elected, should be applied by a private company lessee to all current and future lessor entities under common control that meet the criteria for applying this approach. If elected, the accounting alternative should be applied retrospectively to all periods presented.

 

**The above standards for non-public Companies will be effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015. Early application is permitted, including application to any period for which the entity’s annual or interim financial statements have not yet been made available for issuance.

 

Six IRS Tips for Year-End Gifts to Charity

November 17, 2014: Many people give to charity each year during the holiday season. Remember, if you want to claim a tax deduction for your gifts, you must itemize your deductions. There are several tax rules that you should know about before you give. Here are six tips from the IRS that you should keep in mind:

      • Qualified charities. You can only deduct gifts you give to qualified charities. Use the IRS Select Check tool to see if the group you give to is qualified. Remember that you can deduct donations you give to churches, synagogues, temples, mosques and government agencies. This is true even if Select Check does not list them in its database.
      • Monetary donations. Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.
      • Household goods. Household items include furniture, furnishings, electronics, appliances and linens. If you donate clothing and household items to charity they generally must be in at least good used condition to claim a tax deduction. If you claim a deduction of over $500 for an item it doesn’t have to meet this standard if you include a qualified appraisal of the item with your tax return.
      • (Goodwill will give you a blank receipt with the date of your donation. It is your responsibility to keep records of the items donated and value for each of those items. Goodwill has a Valuation Guide to assist you for calculating your non-cash donation. – PCA)
      • Records required. You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.
      • Year-end gifts. You can deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2014. This is true even if you don’t pay the credit card bill until 2015. Also, a check will count for 2014 as long as you mail it in 2014.

(Source: IRS.gov)

 

Still Time to Act to Avoid Surprises at Tax-Time

October 24, 2014: Even though only a few months remain in 2014, you still have time to act so you aren’t surprised at tax-time next year. You should take steps now to avoid owing more taxes or getting a larger refund than you expect.  Here are some actions you can take to bring the taxes you pay in advance closer to what you’ll owe when you file your tax return:

      • Adjust your withholding.  If you’re an employee and you think that your tax withholding will fall short of your total 2014 tax liability, you may be able to avoid an unexpected tax bill by increasing your withholding. If you are having too much tax withheld, you may get a larger refund than you expect. In either case, you can complete a new Form W-4, Employee’s Withholding Allowance Certificate and give it to your employer. Enter the added amount you want withheld from each paycheck until the end of the year on Line 6 of the W-4 form. You usually can have less tax withheld by increasing your withholding allowances on line 5. Use the IRS Withholding Calculator tool on IRS.gov to help you fill out the form.
      • Report changes in circumstances.  If you purchase health insurance coverage through the Health Insurance Marketplace, you may receive advance payments of the premium tax credit in 2014. It is important that you report changes in circumstances to your Marketplace so you get the proper type and amount of premium assistance. Some of the changes that you should report include changes in your income, employment, or family size. Advance credit payments help you pay for the insurance you buy through the Marketplace. Reporting changes will help you avoid getting too much or too little premium assistance in advance.
      • Change taxes with life events.  You may need to change the taxes you pay when certain life events take place. A change in your marital status or the birth of a child can change the amount of taxes you owe. When they happen you can submit a new Form W–4 at work or change your estimated tax payment.
      • Be accurate on your W-4.  When you start a new job you fill out a Form W-4. It’s important for you to accurately complete the form. For example, special rules apply if you work two jobs or you claim tax credits on your tax return. Your employer will use the form to figure the amount of federal income tax to withhold from your pay.
      • Pay estimated tax if required.  If you get income that’s not subject to withholding you may need to pay estimated tax. This may include income such as self-employment, interest, or rent. If you expect to owe a thousand dollars or more in tax, and meet other conditions, you may need to pay this tax. You normally pay the tax four times a year. Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax.

(Source: IRS.gov)

 

Small Employers Should Check Out the Health Care Tax Credit

October 8, 2014; New and existing small employers who do not yet benefit from the Small Business Health Care Tax Credit should look into whether the credit can help them provide insurance to their employees.

For tax years beginning in 2014 and after, the maximum credit is 50 percent of premiums paid for small business employers, and 35 percent of premiums paid for tax-exempt small employers, such as charities.

Beginning in 2014, a small employer may qualify for the credit if:

      • It has fewer than 25 employees who work full-time, or a combination of full-time and part-time. For example, two half-time employees equal one full-time employee for purposes of the credit.
      • It pays premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program Marketplace or qualifies for an exception to this requirement.
      • The average annual wages of full-time equivalent employees are less than $51,000. The annual average wages will be adjusted annually for inflation.
      • It pays a uniform percentage for all employees that is equal to at least 50 percent of the premium cost of the insurance coverage.

The credit is available to eligible employers for two consecutive taxable years.

A small business employer who did not owe tax during the year can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is greater than the total credit claimed, eligible small employers can still claim a business expense deduction for premiums in excess of the credit.

For tax-exempt small employers, the credit is refundable. Even if the tax-exempt small employer has no taxable income, it may be eligible to receive the credit as a refund so long as it does not exceed its income tax withholding and Medicare tax liability.

More information about the Small Business Health Options Program Marketplace – better known as the SHOP Marketplace – including the Federally Facilitated Marketplace, is available at HealthCare.gov .

Find out more about the small business health care tax credit at IRS.gov/aca.

Find out more about the health care law at HealthCare.gov.

(Source: IRS.gov)

 

Federal Defense of Marriage Act Struck Down: What You Need to Know

On June 26, 2013, the U.S. Supreme court struck down Section 3 of the discriminatory Defense of Marriage Act (DOMA). In light of this historic decision, nearly a dozen national LGBT organizations have created fact sheets to provide guidance to same-sex couples and their families on accessing federal rights, benefits and protections. You may access the full article and fact sheets by clicking on the Glad.org link:

IRS Provides Guidance for Clients Affected by Defense of Marriage Act

It is now estimated that more than 50% of American’s live in a state where marriage equality is legal. What you need to know now about how these new changes will impact you this tax filing season:

 
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