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Concerned about the Future?

So not to scare you.. ok, maybe to scare you a little bit, every time the Republican’s have had a Super Majority in American Government (House, Senate & Presidency) they have crashed the Economy.  So far in history that’s 3 for 3 or 100% of the time!  In 1907/1908 during the Banking Panics; 1928 when the GOP gained power, the Stock Market Crashed in October 1930 and created the Great Depression from 1929-1937; and finally the 2007/2008 credit crisis crash that lead to thousands losing their jobs and homes.   Honestly, there a lot of CPA’s out there keeping it neutral, but I’m thinking I’d rather go out on limb, be proactive to help people rather than reactive giving advice after the fact.  We could be headed for a fourth time in the next 2 years, some of the signs are already there (discussions about eliminating Dodd-Frank, reducing Banking Regulations, Trade rhetoric and fair pay/minimum wage) are just a few of the issues that cause alarms to go off for me.

Now I hope I’m reading the signs wrong, but I was correct about the housing crash and the indicators I saw then.  So, here’s my suggestions and you can take them for what they are worth, or not, it’s up to you.

1st, resist buying things you don’t need and pay off as much of your Credit Card debt as you can NOW! Currently your rates are protected by the Frank-Dodd Act which the GOP has whole-heartedly set out to dismantle which means we could be going back to the days of 29.99% credit card interest (that was just 8 short years ago btw).

2nd, Refinance you home if you don’t already have a low FIXED interest rate. Once you are locked in, unless you’ll need to refi for medical or other emergency reasons, you should be ok with your Mortgage with what could be another housing fiasco (again due to the Wall Street Lobbyists on the new Administration). If you have an ARM (Adjustable Rate Mortgage) refinance out of it into a Fixed Rate as soon as possible.  This will stabilize your cash flow and hold your payments steady in the event interest rates climb.  And if you are planning or buying a new home, shop for that best rate – and don’t take out more than 80% of the value of your home on the Mortgage and always find a FIXED RATE so that you can count on a steady repayment amount.  Otherwise, sit tight and enjoy your current home.

3rd, Don’t SPLURGE on spending, but don’t stop spending altogether either. Remember the economy is only sustainable if/when there is demand from consumers for products. Without demand, supplies increases, prices drop and layoffs happen which leads to less disposable income in the economy which will begin to spiral the economy into a downward spin.  This is one of the things that happened in the early 2000’s – Sunbeam comes to mind.

4th, BUY LOCAL WHENEVER POSSIBLE! One of the things that will help support our communities is to keep as much in the local economy as possible… Use SMALL LOCAL Credit Unions or Community Banks vs Large Corporate Banks (remember these guys are the ones who got drunk on Wall Street and taxpayers ended up needing to bail out). Buy American if you can’t buy local. Obviously we don’t have Car Manufacturers in all our neighborhoods but we can support other local communities by sticking to American Made goods.  This not only helps American Manufacturing plants but also helps the downstream suppliers and local businesses that depend on that plants employees.

5th, be cautious of Phantom Profits in the Stock Market.  Phantom Profits are essentially Speculative gains on the value of the Stocks and are not based on REAL earnings of an entity.  This was one of the things that happened during the Banking/Credit Crisis of 2007 where approximately 30% of some stock’s value was phantom earnings.  When the Market corrected, thousands lost their life savings.  Stick with a LONG-TERM strategy – there is no getting rich quick, but you can certainly gamble it all away overnight on something that’s not consistent and not a sound, tested long standing company.

Finally… if you have a good job with good benefits… consider whether or not now is a good time to change. Granted sometimes you can’t help it, but by keeping your life constant through the next couple years, you will have a better chance of getting through possible crises unscathed.

12-7-2016a

Don’t Skip These Business Year-Enders

“In The Loop” Magazine

Nov – Dec, 2016 Issue

Don’t Skip These Business Year-Enders

 It’s a fact, there’s only a few weeks left of the year, and they will likely be hectic for you and your business. Before you dive into the holiday season and relax, it’s important to get your business in good shape for tax season—or you’ll be feeling the pain come January. Here’s a list of business “year–enders” that you should tackle now so you can enter 2017 feeling in control and stress-free.

1. Determine employee bonus payments and withhold the required tax amounts.
If you’re rewarding your employees with bonuses, don’t forget about tax. Bonuses are subject to income tax withholding, FICA and FUTA taxes—just like regular pay.

2. Pay your vendors and contractors in full by year end.
For contractors, you may have to submit a W-9 form, and you’ll also need to give each contractor a 1099-MISC form by January 31.

3. Prepare your records for local, state and federal payroll.
Make sure you have everything up-to-date and comply with all payroll regulations, including any recent changes.

4. Review your balance sheet and profit and loss statement.
Taking a look at your assets, liabilities and equities will give you an idea of how well your business performed this year and help you identify any areas that you need to improve. In addition, your income statement will list each revenue-generating item, along with your tax-deductible expenses. This is a useful way to look at your profit and loss for the year.

5. Analyze your cash Flow.
Use cash reports to understand how much cash you have on hand. Cash flow is crucial, so if you’re having trouble controlling it, please reach out to our firm for help.

6. Tally up your estimated tax payments for the year.
If your business is like most small businesses, you’ve paid quarterly estimated tax payments throughout the year. Keep track of what you’ve paid, so that you have those numbers ready for your taxes and so you know how much you’ll owe after year end.

7. Review all of your payroll information.
Now’s the time to make sure that you have all of your employee information current and securely stored. In addition, make sure that you have the people who work for you correctly classified to avoid a payroll audit and penalties.

8. Take stock of how well you met your goals for the year.
Take some time to consider if you achieved everything you intended to last year. If so, great. If not, try to find out why. Making goals for the coming year can help keep you motivated as your business grows. Review them regularly to stay on track.

These “year-enders” are important steps to help you prepare to close out 2016 and look ahead to the coming year. Once you’ve checked off the list, enjoy some well deserved downtime.

Source: Xero.com

11-28-2016

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11-17-2016a

Important changes coming in 2017 to deadlines for business tax filings

Important changes coming in 2017 to deadlines for business tax filings including:

  1. W-2 and 1099 filings are due on January 31, 2017 – This is 30 to 60 days EARLIER than past years. These forms are still due to your employees and contractors by January 31, so it is still a good idea to prepare and file these early.
  2. Partnerships, LLPs and Multi-Member LLCs (filing Partnership Form 1065)  – Shorting filing period – Need to be filed by March 15 or the 15th day of the third month following the end of the organization’s fiscal year end. The previous deadline for this return was April 15. Extensions are available for up to six months, filed no later than September 15, 2017.
  3. S-Corporations Form 1120S – No change to filing deadline or extensions.  Returns for these entities are still due in March 15th or the 15th of the Third month following the organizations Fiscal year end.
  4. C-Corps filing Form 1120 Previously filed on March 15th now get an extra 30 days with the new Due Date of April 15th or the 15th day of the fourth month following the end of the organization’s fiscal year. Extensions can be filed no later than September 15. After 2026, C-Corporation extensions will be available for up to six months after the initial due date.
  5. Trust and Estate filing Form 1041 the extension due date has changed from September 15 to September 30.
  6. Exempt Organizations filing Form 990 now have only one extension until November 15.

If you have any questions about the above changes please do not hesitate to contact our office.

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New Overtime Rules for Employees – What you need to Know

11/30/2016 – DELAYED!
As of right now, the new overtime rules do NOT go into effect tomorrow.   On November 22nd, a US District Court Judge in Eastern Texas granted an Emergency Motion for a Preliminary Injunction which stayed the implementation of the updated Overtime rule.

In my opinion (take it for what it’s worth) this is a double edged sword.   Would the new rule have hurt business?  Yes some, but mostly those businesses who were abusing the employee’s stated position (ie Manager, Director) to get around paying overtime to individuals who were earning a mere $10/hour while those same employees did not meet the Criteria to be considered Exempt from Overtime.   This new rule attempted to rectify that classification so that workers could not be exploited.

On the other edge of the sword are the workers themselves.   The new rule was an attempt to ensure that employees who did not meet certain managerial job duties were not miss-classified as managers denying these employees overtime pay for work over 40hrs.   This new rule didn’t say you needed to necessarily give your employees a raise if they were Exempt salaried, it merely helped to define a living wage for those who were working over 40 hrs and not compensated for that work.   An employer has 2 choices under the new rule – Either Pay overtime to employees that clearly are not Management (either by pay scale or duties) or Hire additional Labor to fill in the hours that were not being compensated under the old rule.   Assume this person was working 50 hrs a week and only compensated for 40 at $10/hr – 2 things happen under this scenario (1) the person’s hourly wage is effectively reduced to $8 when not compensated for the other 10 hrs (2) their time away from their family is effected and (3) something most probably don’t think about, resentment and employee dissatisfaction become an issue.   The later may be something that actually costs an employer more than if the employee were happy and enjoyed their job.

Stay posted to this page.   I will update this information when more is available.  But as of now, no changes are in effect regarding overtime pay.

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Effective December 1st, 2016, new Exempt Overtime rules go into effect.   As an employer you will need to start paying Overtime to your SALARIED employees whose salaries are under $47,476 per year and even if they meet the other regulation criteria to be considered exempt.

What the new legislation does is merely lift the pay threshold from $23,660 ($455/week) to the new higher threshold for anyone earning under $913/week.    You won’t necessarily have to change your Salaried employees over to hourly, but you will need to find some method of tracking those hours so that overtime can be accurately calculated and paid.

A bit of History on who could be classified as Exempt

You could classify an employee as exempt from overtime if they met certain job/pay related tests.   The main tests are the employment classification:  Executive, Administrative, Professional, Computer or Outside Sales.   On top of these general classifications, the employee would need to have a position of responsibility – managing employees, exercising discretion/judgement, have advanced knowledge among other related qualification type tests.   However, under each of the tests, the minimum weekly pay for each of the classifications was $455/week.   This had the tendency to lead to employees being misclassified as exempt from overtime even though, the employee may not meet the other Employment Classifications.

Keep in mind, you can and could still pay employees based a Base Salary even if they didn’t meet the exempt standards, but you were and are required to pay overtime (time WORKED over 40 hours in a given work week) to salaried employees even if they did not qualify for exempt status. The term “Salary” was not and should not be confused with being exempted from earning overtime pay.

How to implement the New Rules

Effective on Dec 1st, employers will be required to pay overtime to every employee who does not meet the Exempt Work regulations – those rules have not and are not changing.  What has changed is the weekly earnings in ADDITION to the exempt criteria.    The weekly minimum pay is being increased from $455/week to $913/week.

Attached (via this link)  https://www.dol.gov/whd/overtime/fs17a_overview.pdf  is the U.S. Dept of Labor fact sheet on WHO is exempted from overtime.  For any employees that you are not paying overtime to, you should review that employees job responsibilities to see it they meet the exemption standards for overtime.   If they do not, you need to begin paying overtime to the employees covered under this new change.   You may want to review these rules now to see if you are in compliance as you could potentially owe your employees hundreds (potentially thousands) if you have had them misclassified incorrectly all alone.   For those employees who do meet the job duty classifications but are under the new pay threshold, you have a couple options – (1) Raise that employees salary to an amount that exceeds $913/week, (2) Leave their salary as is but convert their Salary to hourly so their overtime hours can be easily determined or (3) Leave the Salary as is and weekly recalculate their hourly rate and pay overtime according to you state’s overtime rules.

What hours Qualify for Overtime

Overtime hours are those hours an employee WORKS in excess of 40 hours per week.  If your employee works 40 hrs but has 8 hours of vacation, the 8 hours of vacation is not Worked time and therefore no overtime is payable.   However, if your employee is continually working 45 hours per week, they will be due 5.0 hrs of overtime each Week – do not confuse this with pay periods.  If you pay on a bi-weekly period or some other pay period, you will need to determine if the employee worked over 40 hours in a given WEEK.

Example:  You pay your employees every other week (your pay cycle is Bi-Weekly).  Your employee who makes $15/hr and does not meet any of the exempt criteria turns in their time sheet for 80 hrs.  However, that 80 hrs consists of them working 45 hrs on week 1 and 35 hours on Wk 2 – The employee is entitled to 5 hours of Overtime pay for week 1 even though their total hours equal what would normally be 2 weeks at 40 hrs per week.

Each state has it’s own laws on what the overtime rate is.  Wisconsin is 1.5x the regular hourly rate.  Under these laws, in the example above, this employee would be paid 5.0 hrs at $22.50/hr for the overtime hours.   Some states may have laws which may 2.0x the employees hourly rate when/if hours exceed a given amount of overtime or if overtime occurs on a holiday.  Be Sure you know what your states Overtime pay laws are.

It’s important to understand that the employees who are entitled to overtime pay is NOT changing!  It’s only the amount that the already exempted employees earn that is being adjusted.   In other words, your employee meets the work related criteria to be considered exempt from overtime but they don’t meet the new pay threshold beginning on Dec 1st – this employee would now no longer be exempt simply because the pay threshold has changed.

LKM Accounting is here to help!  Feel free to give a jingle or shoot us an email.  We are happy to help small businesses understand the tax and pay laws.

 

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Where is my refund??

Tax Refunds Not in your bank yet?

So you are panicking! Your tax accountant said it should about 10-14 days (give or take) and most individuals are getting their refunds back – but it’s day 10 and you haven’t seen yours yet.  Well, hang in there! Unless you filed your return in early February, your return filing is in the height of the return season so it may be a couple more days of processing than it was a month ago. Additionally, if you have anything special happening on your return, Earned Income Credit, increased Medical Expenses, or maybe lots of stock sales… it could take a few days longer.

You can always go out to the IRS (or maybe even your State Revenue Department Website) and check on the “Where’s my Refund” option.  Have your tax return in front of you so you can verify who you are and click submit. These sites will give you a current status of your tax refund situation. Note that most refunds right now from the U.S. Treasury are out about 21 days. Long gone are the days of paper checks which took 6-8 weeks for the refund to get to you…. Remember that?  Aren’t we glad we are not back in those days!

Here is the IRS website to check on your refund.   https://www.irs.gov/Refunds

Remember, Tax Preparers are extremely busy right now so unless it’s been a month or more, try researching on the IRS or State Website first.  Your Tax Preparer will be very grateful you did.

 

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Filling out your Federal W-4 Form

If your employer hasn’t already, they should have given you a new W-4 form to update your Withholding exemptions. These should really be updated each year and adjusted according to what your tax liability was for the prior year. Now, being it’s only January, you most likely won’t have your W-2 or Tax Returns completed yet for last year but if your filing status has changed … ie you got married, had a child or other dependent, or possibly bought a house… you should go through the step by step calculation to see if you have your exemptions correct.

What is an exemption? A Withholding Exemption is a deduction from your gross income that reduces your period income by a given dollar amount when calculating your Federal and State income tax on that payroll amount. Example: If you are paid weekly, 1 exemption is equal to $43.30 (rate for 2016) so if you claimed 3 exemptions and were paid $500 per week, your TAXABLE income for Income tax purposes would be $370.10 ($500 less 3x$43.30 or $129.90). The exemption amount changes depending the frequency you are paid. The annual value of each exemption is $2,250 so if you are paid monthly, your exemption amount would be equal to $187.50 PER EXEMPTION (or $2,250 divided by 12).

How many exemptions should I claim? Don’t get carried away on claiming exemptions! The more exemptions you claim, the less is withheld in Federal and State income taxes on each paycheck. Although this may sound like a great idea, it could end up leaving you with a very large tax bill at the end of the year when you finally do your tax returns. Try to match your exemptions to what your liability actually is so that you come out with a Zero net tax, in other words No Tax Due but No Tax Refund either. This may be something you want to consult with your tax accountant on. I know a lot of people think that if they have more withheld that means a nice large check at the end of the year but I don’t agree with this savings plan. Set up a Savings account and put those funds in an account that you have access to in the event you have an emergency and need access to your money! Remember if you give it to the Government, you’ll need to wait to get it back. Wouldn’t you rather collect interest on that money and have it available if you need it?

The basic rule on exemptions is you get 1 exemption for each person who appears or will appear on your Income Tax Return. However, this basic amount is a TOTAL number of exemptions you can claim. So is you are married with a child, the total basic exemption you can claim on your W-4 is 3. You can split these in any way you’d like between you and your spouse.  If your spouse works too, you and your spouse need to split up the exemptions – if you take all 3, your spouse would need to claim 0. So long as you add up to 3 between the 2 of you, you and your spouse can claim any combination. In addition to the exemption for each person on the return, there are also exemptions you can claim for Child Care, Head of Household, and other Dependent Care expenses.

Should I be claiming Exempt from Withholding Taxes? Unless you are a FULL TIME STUDENT AND/OR your income is LESS than your Standard Deduction and Personal Exemption(s) on your Tax return, you can not claim exempt from withholding – period! This status is meant for tax payers who will have NO Tax Liability in the given tax year. If you claim this and your employer suspects that you do not fall into the category that allows you to claim exempt, they can consider your Form W-4 as invalid and request you complete a new form. However, if you refuse, they can send in your W-4 to the IRS for review. If the IRS reviews your W-4 and determines that you have falsely completed your form, the IRS will send you and your Employer an “INITIAL LOCK IN LETTER”. This letter will indicate that you have 10 days to correct your W-4. However, the IRS can also send you and you Employer a “LOCK IN LETTER” that permanently sets the amount of withholding exemptions you are allowed to claim. And normally, they will set your new withholding Exemptions at Single with 0 Exemptions – insuring the maximum amount of withholding. Under these letters, you can appeal but your employer can not change your withholding without a release from the IRS. Basically, the IRS is punishing you for not withholding federal income taxes based on information they have from your prior years Tax Return and your filed W-2. If you are not sure if you can claim exempt, ask your tax accountant or your Payroll Administrator at you place of work.