Get To Know MORE about Chad Abbas.

We recently had the chance to catch up with Tax Partner, Chad Abbas.  He shared his thoughts on leadership, the accounting industry and the importance of communication skills.

What are some of the more important leadership lessons you’ve learned in your career?
I’ve learned to hold true to what I believe in.  The business environment can be tough, but you will be successful if you are able to not sacrifice those things that are most important to you.

Why accounting?  What brought you to this career and what do you like most about it?
I really enjoy working with people.  I get a lot of satisfaction from knowing that what I do every day helps people – whether those people are part of a business, an individual or a colleague!

Why BP?  What differentiates this firm for you?
Top to bottom there is a genuine care and concern for our clients and each other within this firm.  That passion for helping others is something that I not only relate to but it brings me in the door everyday ready to get to work!

What do you look for when you hire?
When someone makes it through the education systems that we typically recruit from, we know they have the technical background that it takes.  So, it really comes down to their communication skills and job experience.  And out of those things, we can give them the experience so it’s imperative that they can communicate and relate well to our clients.

How would you summarize your leadership philosophy?
You know, I try to keep an even keel most of the time.  I think that by not letting my highs get too high and my lows too low, I am able to set the tone for my team and lead by example.

What advice would you give someone getting out of school right now?
I would tell them to go after what they enjoy rather than what they think will bring wealth or prestige.  Your chance of success is so much greater when you genuinely enjoy what you do.

What Constitutes “Timely” when Remitting Employee Deferrals?

A challenging, but important, aspect of being in compliance with Department of Labor (DOL) requirements when evaluating your employee benefit plans is timely remittance of employee deferrals. 

If a plan provides for salary reductions from employees’ paychecks for contribution to the plan (such as in a 401(k) plan or a SIMPLE IRA plan), the employer must deposit the contributions in a timely manner. The law requires that participant contributions be deposited in the plan as soon as it is reasonably possible to segregate them from the company’s assets, but no later than the 15th business day of the month following the payday. If employers can reasonably make the deposits sooner, they need to do so. 

The Safe Harbor Rule applies to small employers with less than 100 participants in their 401(k) plan. If amounts withheld as elective deferrals are deposited with the plan’s trustee within seven business days, the deposit will be deemed to be timely.

In the end, consistency and actually defining what is reasonably within your organization is key. 

For further compliance assistance regarding Employee Benefit Plans, visit the Department of Labor website or contact a member of the Bergan Paulsen team. 

Bergan Paulsen is a member of the American Institute of CPAs’ Employee Benefit Plan Audit Quality Center. The center is a voluntary membership organization established to promote the quality of employee benefit plan audits. 

House-approved 3% tax repeal bill awaits Obama's signature

Unanimous bipartisan House approval of a bill to repeal the 3% withholding tax rule for contractors is a victory for the construction industry. The bill also provides tax incentives for companies that hire unemployed military veterans. The repeal “will provide some much-needed relief for a hard-hit industry and its struggling workers," said Stephen Sandherr, CEO of AGC. President Barack Obama has said he will sign the bill.

For more information about the 3% tax repeal bill click here.

Employee Benefit Plans – When is an audit required?

Most employers are expected to offer an employee benefit plan.  Although benefit plans can be a means for attracting and retaining quality employees, there are many challenges to offering such plans.
The most challenging aspects of an employee benefit plan come to interpreting the plan document.  Ensure that your organization reviews the plan yearly and that the person in charge of administering the plan is trained.  Ultimately it is the employer’s responsibility to keep the plan in compliance with applicable laws but helpful resources such as a third party administrator and a CPA can offer peace of mind.

Begin by counting the participants in your plan. 

4 keys to counting participants:

• Use the first day of the plan year, not the last day of the previous plan year (Count must include those who became eligible on the 1st day of the plan year).
• Include all employees who have met the plan’s eligibility requirements, taking into account entry dates.
• Include participants who are eligible but not contributing.
• Include all terminated employees who have account balances under the plan.

An employee benefit plan audit is required when a plan has 100 or more participants on the 1st day of the plan year.  It is also required if 6% or more of the Plan’s assets are invested in a real estate limited partnership that is self-trusteed. 

An employee benefit plan audit is NOT required when applying the 80/120 Exception.  A plan with no less than 80 but no more than 120 participants at the beginning of the plan year that filed a Form 5500 for the previous plan year may elect to file the same type (i.e. small plan or large plan) of Form 5500 it filed the previous year.  Any plan filing an annual report under this exception need not engage an auditor nor file detailed financial statements.


For further compliance assistance regarding Employee Benefit Plans, visit the Department of Labor website or contact a member of the Bergan Paulsen team. 

Bergan Paulsen is a member of the American Institute of CPAs’ Employee Benefit Plan Audit Quality Center. The center is a voluntary membership organization established to promote the quality of employee benefit plan audits.

Senate Moves to Repealing 3-Percent Rule

On November 7, the senate voted to take-up legislation that would repeal the 3-percent withholding tax imposed on federal contractors.  Senate Majority Leader Harry Reid plans to amend the bill with legislation that would provide tax credits for companies that hire veterans with service-connected disabilities.

The withholding tax repeal is estimated to cost $11.2 billion over 10 years, according to the Joint Committee on Taxation.  The House approved a measure that would offset the cost by changing the calculation of modified adjusted gross income in determining eligibility for some health care credits, including Medicaid, and the Children’s Health Insurance Program.  Reid said he would prefer a different pay-for but may change his mind if passage of the VOW to Hire Heroes Bill of 2011 is assured with the House offset.

The VOW to Hire Heroes Bill of 2011 proposes a tax credit of up to $5,600 for hiring veterans who have been looking for a job for more than six months, as well as a $2,400 credit for veterans who are unemployed for more than four weeks, but less than six months.  In addition, the measure calls for a tax credit of up to $9,600 for hiring veterans with service-connected disabilities who have been looking for a job for more than six months.  It also provides expanded training and education opportunities for all veterans.  Democrats have proposed paying the $1.6-billion cost of the legislations by delaying scheduled fee reductions on mortgage application for loans guaranteed by the Department of Veterans Affairs.

President Urges Passage

President Obama on November 7 appealed to members of Congress to pass tax credits for employers who hire unemployed veterans of the wars in Iraq and Afghanistan at a time when nearly three-million former service members are transitioning to civilian life.  “Our veterans did their jobs.  It’s time for Congress to do theirs,” Obama said at a Rose Garden event attended by former service members and representatives of veterans’ organizations that support the hiring incentives.  The president urged lawmakers to “put our veterans back to work, and pass this element of the jobs package that benefits our veterans and gives businesses an incentive to hire veterans.”

2011 Year-End Tax Planning - What You Need to Know

Twenty-five years ago, Congress overhauled the Tax Code in the Tax Reform Act of 1986. At that time, the 1986 Tax Reform Act was praised for simplifying a Tax Code that had grown too complex. Since 1986, complexity has returned to the Tax Code, largely because Congress has enacted a host of temporary tax incentives with a variety of expiration dates.

Few tax laws have complicated tax planning as much as the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). EGTRRA was enacted as a temporary tax law although many predicted that a future Congress would make EGTRRA permanent. And while some of EGTRRA's retirement savings provisions were made permanent in 2004, other provisions have only been extended one or two years at a time. Many of the extended tax provisions are scheduled to expire at the end of 2011 or the end of 2012, leaving year-end 2011 tax planning a challenge for many individuals and businesses.

Individuals

Income/deduction shifting. Income and deduction shifting is a traditional year-end tax strategy that is worth a look at year-end 2011. However, one key complication is uncertainty over the individual income tax rates after 2012. We know that the individual income tax rates will be 10, 15, 25, 28, 33, and 35 percent for 2012. Under current law, the 10 percent rate is scheduled to expire after December 31, 2012 and the remaining rates are scheduled to revert to 15, 28, 31, 36, and 39.6 percent after December 31, 2012. As a result, some taxpayers may want to abandon the traditional strategy of shifting income into a future year and recognize income in 2011or 2012 when the lower rates are available.

Capital gains/dividends. Reduced tax rates on qualified dividends and capital gains are scheduled to expire after December 31, 2012.  Taxpayers need to carefully review when to recognize income from qualified capital gains and dividends to maximize their tax savings in 2011 or 2012.

AMT. For many individuals, year-end tax planning requires "running the numbers" for regular federal tax liability and alternative minimum tax (AMT) liability, and this year is no exception. Taxpayers may want to explore if certain deductions should be more evenly divided between 2011 and 2012 and which deductions may qualify, or will not be as valuable, for AMT purposes.

Gift tax exclusion. Many individuals overlook gift-making as a year-end tax strategy.  Under current law, the annual gift tax exclusion per recipient on which no gift tax is due is $13,000 for 2011 and 2012. Married couples may make combined tax-free gifts of $26,000 to each recipient.  Use of a “lifetime” estate and gift tax exclusion should also be considered for larger gifts.

Bíg ticket purchases. Taxpayers planning a big ticket purchase in 2012 may want to accelerate that purchase into 2011 to take advantage of the deduction for state and local general sales taxes. The deduction for state and local general sales taxes is scheduled to expire after December 31, 2011. Taxpayers may take the deduction for state and local general sales taxes in lieu of the deduction for state and local income taxes.

Energy improvements. In recent years, Congress has enacted a number of tax incentives to encourage homeowners to make energy efficient improvements to their primary residences. The Code Sec. 25C tax credit for certain nonbusiness energy property is scheduled to expire after December 31, 2011. The credit is complex; if you are considering installing energy efficient improvements such as windows, doors, heat pumps, and other items, please contact our office to determine if your purchase qualifies for the credit.

More incentives. More individual incentives scheduled to expire after December 31, 2011 include (not an exhaustive list):

• Employee-side payroll tax cut
• Above-the-line deduction for qualified tuition and related expenses
• Tax-free distributions from individual retirement plans for charitable purposes by individuals age 70 1/2 and older
• Deduction for classroom expenses of qualified educators
• Expansion of adoption credit and adoption assistance
  

Businesses

Bonus depreciation. Business taxpayers have a limited window in which to take advantage of 100 percent bonus depreciation. One hundred percent bonus depreciation applies to qualified property acquired after September 8, 2010 and before January 1, 2012, and placed in service before January 1, 2012. Bonus depreciation is scheduled to drop to 50 percent for calendar year 2012.  State depreciation rules may differ.

Code Sec. 179 expensing. Business taxpayers also have a limited window in which to take advantage of enhanced Code Sec. 179 expensing. For tax years beginning in 2011, the Code Sec.179 dollar limit is $500,000 and the investment limit is $2 million. The dollar limit for years beginning in 2012 is scheduled to fall to $139,000 and the investment limit is scheduled to fall to $560,000. State depreciation rules may differ.

Real property expensing.  After 2011, special expensing rules for qualified real property are scheduled to expire.  A taxpayer that places qualified leasehold improvement property, qualified restaurant property or qualified retail improvement property in service in a tax year that begins in 2011 may elect to treat the property as Code Sec. 179 property and expense up to $250,000 of the cost of the property.

WOTC.  The Work Opportunity Tax Credit (WOTC) is scheduled to expire after December 31, 2011). The WOTC rewards employers that hire individuals from one of nine groups of targeted job seekers. Under current law, the WOTC applies to wages paid to qualified individuals who begin work for the employer before January 1, 2012.

 Research tax credit. The research tax credit is designed to encourage businesses to increase their spending on research and development of new technologies. The 2010 Tax Relief Act extended the credit through December 31, 2011.

FUTA Surtax. The 0.2 percent FUTA surtax expired after June 30, 2011. As a result, the FUTA tax rate falls to 6.0 percent for the remaining six months of 2011 before any state unemployment tax credits are taken into account. The IRS has indicated it will provide guidance for employers. Our office will keep you posted of developments.

Energy tax incentives. A number of tax credits for alcohol fuels and biodiesel/renewable diesel will expire after December 31, 2011. Tax credit for construction of new energy efficient homes and manufacture of energy efficient appliances will also expire after December 31, 2011.

FASB Issues Accounting Standards Updates for Certain Health Care Entities

The Financial Accounting Standards Board issued an Accounting Standards Update in July 2011 regarding “Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities.”

This update applies to entities within the scope of Topic 953, Health Care Entities that recognize large amounts of patient service revenue at the time of service even though the entities do not assess a patient’s ability to pay. The changes are as follows:

• Reclassifying the provision for bad debts associated with patient service revenue from an operating expense to a deduction from patient service revenue on their statement of operations.  
• Providing enhanced disclosure about their policies for recognizing revenue and assessing bad debts.  
• Disclosing patient service revenue as well as qualitative and quantitative information about changes in the allowance for doubtful accounts.  

Click here to read the full report.