Bergan Paulsen

Work Opportunity Tax Credit Now Available to Qualified Tax-Exempt Organizations that Hire Veterans

2012-02-23T14:00:00.000-06:00

The work opportunity tax credit provides an elective credit to employers that hire individuals from targeted groups that have a high unemployment rate. This credit has been extended only with respect to qualified veterans who begin work for an employer on or before December 31, 2012. For the first time, this credit is available to certain tax-exempt organizations. Effective November 21, 2011, a tax-exempt organization may claim a credit against its FICA tax obligation for hiring a qualified veteran. To be considered a veteran, an individual must:

Have served on active duty (not including training) in the U.S. Armed Forces for more than 180 days or have been discharged or released from active duty for a service-connected disability, and
Not have a period of active duty (not including training) of more than 90 days that ended during the 60-day period ending on the hiring date.

In addition to the above, the veteran is considered qualified for purposes of the credit if he or she is certified as:

A member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) (food stamps) for at least a three-month period during the 12-month period ending on the hiring date.
Unemployment for a period or periods totaling at least four weeks (whether or not consecutive) but less than six months in the one-year period ending on the hiring date (short-term unemployed).
Unemployment for a period or periods totaling at least six months (whether or not consecutive) in the one-year period ending on the hiring date (long-term unemployed).
Entitled to compensation for a service-connected disability and hired not more than one year after being discharged or released from active duty in the U.S. Armed Forces.
Entitled to compensation for a service-connected disability and unemployed for a period or periods totaling at least six months (whether or not consecutive) in the one-year period ending on the hiring date.

The credit is equal to 26% of qualified wages paid to a qualified veteran during the first year of employment if the veteran performs at least 400 hours of service and 16.25% of qualified wages paid to a qualified veteran during the first year of employment if the veteran works less than 400 hours, but at least 120 hours. No credit is available for a veteran who works fewer than 120 hours.

Qualified wages are limited to $6,000 for a short-term unemployed veteran or a veteran certified as being a member of a family under SNAP (for a maximum credit of $1,560). The limit on qualified wages is $14,000 for a long-term unemployed veteran (for a maximum credit of $3,640). The limit on qualified wages for a disabled veteran who is hired not more than one year after being discharged or released from active duty is $12,000 (for a maximum credit of $3,120). Qualified wages for a veteran with a service-connected disability is doubled to $24,000 (for a maximum credit of $6,240) if the veteran is certified as having been unemployed for an aggregate of six months or more during the one-year period ending on the hiring date.

Tax-exempt organizations can only take into account the wages paid to a qualified veteran for services that further the exempt purpose or function of the exempt organization. The total credit allowed for hiring all qualified veterans cannot exceed the total amount of FICA tax imposed on the organization as an employer on wages paid to all employees during the period the qualified veterans were hired.

For further questions, feel free to contact one of the CPAs within our nonprofit specialty team.

Contractors Deal With Confusing Sales Tax Laws

2012-02-23T07:47:00.001-06:00

ARTICLE: CONTRACTORS DEAL WITH CONFUSING SALES TAX LAWS

Bergan Paulsen Partner, Tom Kunz, recently shared his expertise with the Corridor Business Journal in an article entitled Contractors Deal with Confusing Sales Tax Laws. The article discusses challenges that contractors face regarding sales tax. Some contractors erroneously pay the sales tax from their equipment purchase and then submit the full amount of sales tax paid by the end consumer. One example highlighted in the article resulted in a sales tax refund of $75,000 due to overpayment of sales tax. Find out more by reading the full article.

In addition, we've outlined an example below where sales tax has been calculated and paid correctly.

Congress Passes 2012 Payroll Tax Holiday Extension

2012-02-21T12:33:00.000-06:00

Congress has extended the employee-side payroll tax cut through the end of 2012. After weeks of uncertainty over whether an agreement could be reached, the House passed the Middle Class Tax Relief and Job Creation Act of 2012 (H.R. 3630) by a vote of 293 to 132 on February 17, 2012. Senate approval quickly followed, also on February 17, by a vote of 60 to 36.

Lawmakers agreed not to require the $93.2 billion estimated cost for the payroll tax cut extension to be offset by revenue-raising provisions. A potential impasse over revenue increases was avoided entirely when both parties agreed to offset costs of the full-year, two percentage point payroll tax cut through transfers from the general fund of the Treasury to the OASDI trust fund.

In a revenue neutral provision, however, the new law eliminates a timing-shift in the estimated tax payments that had been required of certain large corporations under previous laws. Non-tax provisions within the new law extend unemployment benefits and implement a “doc fix” for Medicare.

President Obama is expected to sign the bill as soon as it reaches the White House.

Impact: The Joint Committee on Taxation (JCT) has estimated that approximately 170 million wage earners and self-employed individuals will benefit from the payroll tax reduction in 2012.

This tax rate and other payroll information can be found on the Bergan Paulsen payroll tax card. Visit our website to view/print.

How Long Should You Keep Financial Records? Sample Retention and Destruction Schedule

2012-02-14T08:00:00.000-06:00

We oftenget asked how long you should keep important documents and when is it time toclean up the office. So, we compiled thebelow chart with some rules-of-thumb to help keep your business organized.

Description of Records	Manner of Keeping Record	Retention Period	Disposition
Accounts payable ledgers and schedules	Compile and file records on annual basis.	Seven Years. Store with financial records.	Archive with financial records and shred after three years of storage.
Accounts receivable ledgers and schedules	Compile and file records on annual basis.	Seven Years. Store with financial records.	Archive with financial records and shred after three years of storage.
Annual information returns (IRS Forms 990)	Federal law requires that the three most recent years’ returns be kept in the organization headquarters and be made available for public inspection.	Permanent. Store with financial records.	Archive with financial records at the end of the retention period.
Audit reports	Compile and file records on an annual basis.	Permanent. Store with financial records.	Archive with financial records at the end of the retention period.
Banking statements and reconciliations	Compile and file records on an annual basis.	Three Years. Store with financial records.	Shred at the end of the retention period.
Cash books	Compile and file records on an annual basis.	Seven Years. Store with financial records.	Shred at the end of the retention period.
Chart of accounts	Compile and file records on an annual basis.	Seven Years. Store with financial records.	Shred at the end of the retention period.
Cancelled checks	For important payments, i.e., taxes, purchases of property, special contracts, etc., checks should be filed with the papers pertaining to the underlying transaction. Otherwise compile and file records on an annual basis.	Seven Years. Store with financial records.	Shred at the end of the retention period.
Depreciation schedules	Compile and file records on an annual basis.	Six Years. Store with financial records.	Shred at the end of the retention period.
Duplicate deposit slips	Compile and file records on an annual basis.	Six Years. Store with financial records.	Shred at the end of the retention period.
Expenses analysis and distribution schedules	Compile and file records on an annual basis.	Seven Years. Store with financial records.	Shred at the end of the retention period.
Financial statements (year-end, other optional)	Compile and file records on an annual basis.	Permanent. Store with financial records.	Archive with financial records at the end of the retention period.
General / private ledgers	Compile and file records on an annual basis.	Seven Years. Store with financial records.	Shred at the end of the retention period.
Journal entries	Compile and file records on an annual basis.	Seven Years. Store with financial records.	Shred at the end of the retention period.
Notes receivable ledgers and schedules	Compile and file records on an annual basis.	Permanent. Store with financial records.	Archive with financial records at the end of the retention period.
Payroll records and summaries	Compile and file records on an annual basis.	Seven Years. Store with financial records.	Shred at the end of the retention period.
Petty cash vouchers	Compile and file records on an annual basis.	Seven Years. Store with financial records.	Shred at the end of the retention period.
Property records, including costs, depreciation reserves, year-end trial balances, depreciation schedules, blueprints and plans	Compile and file records on an annual basis.	Permanent. Store with financial records.	Archive with financial records at the end of the retention period.
Purchase orders	Compile and file records on an annual basis.	One Year. Store with financial records.	Shred at the end of the retention period.
Requisitions	Compile and file records on an annual basis.	Seven Years. Store with financial records.	Shred at the end of the retention period.
Tax returns, worksheets, and revenue agents’ reports	Compile and file records on an annual basis.	Permanent. Store with financial records.	Archive with financial records at the end of the retention period.
Time cards	Compile and file records on an annual basis.	Seven Years. Store with financial records.	Shred at the end of the retention period.
Vouchers (invoices) for payments to vendors, employees, etc. (includes allowances and reimbursements of employees, officers, and consultants for travel and entertainment expenses.)	Compile and file records on an annual basis.	Seven Years. Store with financial records.	Shred at the end of the retention period.
Withholding tax statements	Compile and file records on an annual basis.	Seven Years. Store with financial records.	Shred at the end of the retention period.

If you have further questions or think we missed something, feel free to contact one of our team members.

Changes to Form 990 for 2011

2012-02-09T08:58:00.000-06:00

The Internal Revenue Service has posted a new version Form 990 for 2011 filings by tax-exempt organizations. Among other changes, the new form revises how exempt organizations report income from joint ventures and changes the threshold for required reporting of activities outside the United States.

For more information on the changes to Form 990, please refer to this article on the American Institute of CPAs website.

Bergan Paulsen 2012 Goals [VIDEO]

2012-02-03T12:17:00.000-06:00

We are excited to share our 2012 company goals. We believe that by investing in growth, talent and a one firm mentality we can continue our history of providing timely, quality services which exceed the expectations of our clients.

We want your feedback! Send thoughts, comments and suggestions to feedback@berganpaulsen.com.

Does the Yellow Book Apply to My Organization?

2012-01-12T08:30:00.000-06:00

To clarify, for purposes of this article we are not talking about the phone book. Instead, we are talking about a generally accepted standard for audits that goes by many names including Government Auditing Standards, Generally Accepted Government Audit Standards, GAGAS, and the Yellow Book.

The Yellow Book was actually created by the Government Accountability Office as a guide for their own auditors. In 1984 the Single Audit Act was passed by Congress with the purpose of reducing the number of audits that federal grant recipients had to endure. Before this Act, it was common that a grant recipient was audited by various auditors in a short time span. Through this process, generally accepted government auditing standards became synonymous with the Yellow Book.

Do Yellow Book standards apply to your organization? Well, that depends. The Yellow Book has to be required by something external to it. It may be called forth by law, policy or your organization’s bylaws. However, even if not required to, some auditors prefer to follow GAGAS when performing government program audits.

What does my organization need to know? In the end, it remains your responsibility (not the auditor’s) to determine whether or not your organization is subject to a Yellow Book audit. Ensure that you are familiar with your policies, grants and contracts to ensure that you are meeting government auditing standards, and if you have questions about where to look or what to look for, feel free to contact one of the Bergan Paulsen team members.

Form 1099 Filing Requirements

2012-01-09T08:30:00.000-06:00

The Internal Revenue Service requires nonprofit organizations to issue a Form 1099 for each person to whom you paid at least $600 during the year. Payments include rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments and gross proceeds to an attorney. This is required whether these payments are spread out over the course of the year or are paid in one lump sum.

Exceptions

This form is generally not required to be issued to incorporated businesses. However, payments made corporations for medical and health services and attorney fees must be issued whenever payments exceed $600.

Rents and Medical and Health Care Payments

Rents include real estate rentals paid for office space (unless paid to a real estate agent), and machine rentals (for example, renting a bulldozer to level your parking lot).

Medical and health care payments include payments to each physician or other supplier or provider of medical or health care services. The exemption from issuing a 1099-MISC to a corporation does not apply to payments for medical or health care services provided by corporations. However, you are not required to report payments made to a tax-exempt hospital or extended care facility or to a hospital or extended care facility owned and operated by the United States, a state, the District of Columbia, or any of their political subdivisions, agencies, or instrumentalities.

Required information

In order to file an accurate 1099, the following information must be obtained:

Name as shown on income tax return
Business name, if different
Type of organization
Address
Taxpayer Identification Number

The most effective way to obtain the information needed to prepare the Form 1099 is by requiring that an IRS Form W-9 be completed prior to any payment being made. Blank W-9 forms and specific instructions for Form 1099 – MISC can be obtained on the IRS website at www.irs.gov.

Penalties

The penalty for failure to file Form 1099 can be as much as 50% of the amount paid for services. The responsibility for filing the Form 1099 is on the organization paying for the services. It is the responsibility of the individual/business receiving the Form 1099 to handle it properly on their income tax return.

New Form 990 Filing Thresholds

Required to File:    If gross receipts are:                                          And if total assets are:
Form 990-N          Normally less than $50,000.                              N/A
Form 990-EZ        Greater than $50,000 and less than $200,000    Less than $500,000
Form 990              $200,000 or greater                                          $500,000 or greater

These filing requirements have changed significantly from prior years. Allow the staff at Bergan Paulsen to assist you in determining which form your organization may be required to file. Our team of experts can review your information to determine if you should issue Form 1099, and what Form 990 must be filed. In addition, we can prepare and file your 1099s and 990.

Related Articles: Information Returns (W-2s & 1099s) - Are You Complying?

Get to know MORE about Al Laird

2012-01-05T08:00:00.000-06:00

We caught Al literally as he was heading out the Bergan Paulsen door. As Al reflects on his career and gears up for retirement, we chatted with him about how the accounting industry has changed over the years and what advice he has for new comers. Best of luck to you, Al, and thanks for your insight!

What are some of the more important leadership lessons you’ve learned in your career?
My attitude has always been that if someone is working, I am working too. I have made it a habit to work alongside my employees to ensure they know that if they are working late for a client, I will be right there with them!

What advice would you give someone getting out of school right now?
I would advise them to try public accounting first. I think it’s much easier to go from public to private accounting rather than vice versa.

What is the biggest change that you’ve seen in an auditor’s job over the years?
When I first started everything was done by hand and today we are nearly paperless! I used to keep the old work papers in the basement of our office and after so many years, it got to the point that I felt comfortable throwing them out. When the company came to shred them, they weighed the paper and it was 3 tons of accumulated work!

Biggest change to how Co-ops and Agribusiness entities work?
Today they are much larger organizations and with that growth have come a better caliber of employees.

What should Agribusinesses look for when choosing a CPA firm?
I think experience and expertise in your industry is important. I would also recommend really understanding both the history of the firm and the history of the people within the firm.

Why accounting? What brought you to this career and what do you like most about it?
I can’t remember a time when I ever wanted to be anything different. I have always enjoyed math, always wanted to be an accountant and I’ve enjoyed every step of my career.

Why BP? What differentiates this firm for you?
This firm has always taken a very client-centric approach. Everyone thinks more about clients than themselves and there is a general understanding that when a client succeeds, we succeed. And, I would say they take the same approach with employees.

Information Returns (W-2s & 1099s) - Are You Complying?

2012-01-03T10:23:00.001-06:00

Request a completed W-9 form to
verify 1099 recipient information.

Increased IRS 2011 information returns penalties
The IRS has increased penalties for information returns (W-2s and 1099s). Penalties may be assessed for missing/incorrect taxpayer identification number (TIN), untimely filing, or using an incorrect media or format. These penalties can quickly add up to thousands of dollars.

Bergan Paulsen advises that you verify W-2 and 1099 recipient information before the returns are prepared. You may request the information by mail or electronically by sending the 1099 recipient a W-9 form to complete and return. In the case of a W-2 recipient, a W-4 should already be in their personnel file. The payee may also be contacted by phone for their information.

All communication methods must state that the recipient provide an accurate TIN number for reporting purposes or they may be subject to backup withholding. You, as the employer or payor, should document and retain the solicitations to ensure a reasonable cause defense on a penalty notice.

How do I prepare the recipient section of my 2011, 1099 forms correctly?
A business EIN must be used for a partnership, corporation, or non-disregarded Limited Liability Company (LLC). A Social Security number (SSN) must be used with an individual name (in the first name line). A Sole Proprietor must always provide his/her individual name. A Sole Proprietor may provide his/her Doing Business As (DBA) name (in the second line) in addition to the required individual name together with the matching SSN.

How is a Name/Taxpayer ID (TIN) number mismatch identified?
A Name/TIN combination is incorrect if it does not match, or cannot be found, on IRS or Social Security Administration files. For example, a Name/TIN mismatch occurs when an individual name is submitted with a TIN not associated with the individual name provided. A TIN is not interchangeable with different names.

IRS Taxpayer Identification Number (TIN) Matching
TIN matching is a pre-filing e-service that allows authorized payers the opportunity to match 1099 payee information against IRS records prior to filing information returns. The interactive TIN matching will accept up to 25 payee TIN/Name combinations on screen while bulk TIN matching will allow up to 100,000 payee TIN/Name combinations to be matched via a text file submission. You may register for this service at the e-services section on the IRS website.

Due Dates to Remember:

2011 W2 Forms :

January 31, 2012 Provide W2s to employees
February 29, 2012 Paper W2 & W3 forms due to the Social Security Administration
April 2, 2012 e-filed W2 & W3 forms due to the Social Security Administration

2011 1099 Forms:

January 31, 2012 Provide 1099s to recipients
February 29, 2012 Paper 1099 forms due to the IRS
April 2, 2012 e-filed 1099 forms due to the IRS

Related Article: Form 1099 Filing Requirements

Claiming Charitable Donation Deductions – What Donors and Charities Need to Know.

2011-12-28T14:17:00.000-06:00

Donors:

When making a charitable donation of cash or property of $250 or more, it is the donor’s responsibility to prove entitlement of a deduction. The charity should provide a contemporaneous written acknowledgement (CWA) of your donation – either at the time of donation or by sending all CWAs at the end of the year – but in the end, the taxpayer bears the burden of proof. This documentation – a receipt of sorts – must contain three pieces of information.

The amount of cash and a description of any property contributed.
A statement as to whether the donor received any goods or services in return for the donation.
A description and estimate of the value of any goods or services provided to the donor.

Additionally, CWAs must be submitted to the donor on or before the date of the donor’s tax return for the year the contribution was made is filed, or the due date (including extensions) of the return, whichever is earlier.

If you make a donation of less than $250 to a charity, you do not need a CWA. For example, donations of $200 three times during the year would not require a CWA to claim the deduction even though the total contribution to the charity exceeded $250.

Charities:

While the burden of proof lies with the taxpayer, it is in the best interest of the charity to provide donors with all the necessary documentation whether they ask for it or not. We encourage charities to send valid CWAs to donors throughout the year; however, no later than January of the following year.

Related Article: Tax Tip: 9 Things the IRS Wants Taxpayers to Know About Charitable Giving

Fuel Tax Updates

2011-12-23T06:00:00.000-06:00

Biodiesel Blender’s Credit

The biodiesel blender’s credit is due to expire at the end of 2011, and at this point, no extension will be granted. Eligible gallons of biodiesel must be blended AND sold in 2011 in order to receive the $1 per gallon federal biodiesel blender’s credit. Biodiesel purchased and blended in 2011 but not sold until 2012 will not be eligible.

Illinois Extends State’s Biodiesel Tax Credit Through 2018

The Illinois tax credit, previously due to expire at the end of 2013, has been extended five years through 2018. The incentive gives complete fuel tax exemption for any blend of biodiesel greater than 10%.

Tax Free Sales of Gasoline

Gasoline sold for the exclusive use by state, local government or non-profit education organizations are sales which are eligible for a refund of the federal gasoline excise tax. Gasoline may be sold tax free by an Ultimate Vendor as long as the ultimate purchaser fits one of these three categories.

As a reminder, Ultimate Vendors are not immune to IRS audits, so take a moment to review the claim requirements below.

According the IRS, the Ultimate Vendor is the appropriate party to claim a refund of taxes as long as the Ultimate Vendor is registered with the IRS. Each claim must contain:

Total number of gallons covered by the claim.
The claimant’s registration number.
Statement that the claimant has sold the fuel without tax included in the price, repaid the tax to the ultimate buyer, or has written consent of the buyer to seek the claim.
An unexpired certificate from the buyer. Model certificates can be found on the IRS website. Refer to Model Certificate M or Model Certificate P.

All information on the certificate must be current, and the certificate expires on the earlier of one year after the date of the certificate or the date a new certificate is given to the registered ultimate vendor.
More information can be found on the IRS website.

This Holiday Season Bergan Paulsen Wishes You MORE…

2011-12-20T16:54:00.001-06:00

The Who, What, When and Why of a Compilation, Review & Audit

2011-12-20T08:30:00.000-06:00

The difference between a compilation, review and audit comes down to the level of assurance your organization is looking for and what outside parties may require from you. We break each one down for you below. In addition, we’ve offered additional insight as to why your organization may benefit more from a compilation, review or audit.

Compilation

What: A CPA (or team of CPAs) will gain an understanding of your business and the accounting practices common in your industry. The team will then compile financial statements from the information provided by the management of your organization ensuring the statements are free from obvious material errors. Finally, the team will issue a report stating that the financial statements were compiled but not review or audited.
Who: Generally small, privately held companies that need help in preparing financial statements.
When: Compilations can be prepared on a monthly, quarterly or annual basis.
Why: You may want to consider a compilation if your organization or business has limited capabilities for preparing financial statements.

Review

What: When a CPA (or team of CPAs) reviews financial statements, he or she will issue a report that provides limited assurance that material changes to the financial statements are not necessary. Before a review can happen, all financial statements must be compiled by the organization’s management team not the CPA performing the review. This compilation will allow the CPA to gain more insight into your organization and the industry in which you work. From there, the CPA will ask questions concerning the accounting practices of your organization and then will analyze financial statements for unusual items and trends. This procedure will only ensure the financial statements are reasonable.
Who: Organizations that need to submit financial statements to third parties such as creditors and regulatory agencies. A review may also be useful for business owners who are not actively engaged in day to day business activities.
When: Reviews are generally completed annually.
Why: Some creditors and business owners require only a review with a limited level of assurance of financial statements instead of a full audit.

Audit

What: An audit provides the highest level of assurance since financial statements are analyzed with a fine-tooth comb. An independent CPA will confirm balances with banks and creditors, observe inventory counting and test selected transactions by examining supporting documents. The CPA will also contact outside sources to verify information to reduce the risk that the statements will be materially inaccurate. The CPA will issue a report with findings and a statement that financial statements are presented fairly. An auditor approaches an audit with professional skepticism and provides a reasonable level of assurance that the financial statements are free from material errors and fraud. Who: Businesses or organizations that need a higher level of assurance to outside entities.
When: Audits are generally completed annually.
Why: An organization or business will need an audit when a high level of assurance is required by third party entities and groups.

For more information, visit our website. You can also contact any of our CPAs that offer assurance services.

Ag Tax Incentives Boosted for 2011

2011-12-15T09:50:00.002-06:00

ARTICLE: TAX INCENTIVES BOOSTED FOR 2011

Bergan Paulsen Partner Mike Regan recently shared his expertise with Heartland Co-op for their Lifeline newsletter publication. The article entitled Tax Incentives Boosted for 2011 explores various tax incentives offered for 2011 specifically the Section 179 Expense Deduction, available for both new and used equipment purchases, and Bonus Depreciation, new equipment purchases only. Further, farmers can write off for taxes certain expenses for prepaid supplies and crop inputs, but there are certain requirements that must be met. Find out more about these incentives and requirements by reading the full article.

Click here to view the full publication.

State of Iowa Fuel Taxes

2011-12-12T08:30:00.000-06:00

Update as of 1/12/2012: While the Department of Transportation will still need to find nearly $50 million in savings, Legislators are considering a gas tax increase in 2 phases with Branstad’s approval. The proposal would call for a 4 cent increase in fuel tax in both 2013 and 2014.

Iowa Governor Terry Branstad has made the decision to not support recommendations made by the Transportation 2020 group. These changes include an eight to ten cent gas tax increase and an increase in other fees to generate revenue for road repairs during the 2012 legislative session. Without the support of the Governor on this issue, it is unlikely that enough votes from Senate and House Republicans will be secured to pass the bill.

Instead of an increase in the gas tax, the Governor has asked the Department of Transportation to look for nearly $50 million in savings over the next year, through reduced administrative costs and duplication at all levels of state government. This would be the equivalent of about two cents of fuel tax revenue. The Governor acknowledges the need for additional revenue to support repairs for the state's highways, but stated that funding should come from increased efficiency in highway programs before the state increases taxes. He wants to ensure that current tax revenue received from fuel taxes is being spent appropriately before an increase is implemented.

There are several factors that have led to annual shortfalls in revenue to maintain the road system including:

Decrease in federal funding;
The state gas taxes haven't been increased since 1989;
Vehicles are more fuel efficient today than they were when the gas tax was last increased and consumers are leading towards purchase of these fuel efficient vehicles; and
An increase in the costs to repair old roads and construct new roads.

Even though it is unlikely to see an increase in fuel taxes during the next legislative session, the issue is will likely be revisited by those in favor of it in the 2013 session

President Signs into Law New Tax Breaks for Hiring Veterans

2011-12-08T13:37:00.001-06:00

President Obama has signed into law increased tax credits for hiring certain veterans. The credits are part of the Work Opportunity Credit, which requires that employers certify through state jobs agencies that employees qualify for the credits.

The veteran credits available effective for veterans hired starting November 22:

- A maximum $4,800 credit (40% of the first $12,000 in qualifying wages) for veterans with a service-related disability hired within 12 months of discharge (no change from prior law).

- A maximum credit of $9,600 (40% of the first $24,000 in qualifying wages) for veterans with a service-related disability who have been unemployed for at least six months of the prior 12 months.

- A maximum credit of $5,600 (40% of the first $14,000 in qualifying wages) for non-disabled veterans who have been out of work for at least six months out of the prior 12 months.

- A maximum credit of $2,400 (40% of the first $6,000 in qualifying wages) for veterans who have been unemployed at least four weeks, but less than six months, in the past year.

Employers claiming the WOTC have to have the employee certified as qualifying by the state job service before hiring; they may instead complete a "pre-screening notice (Form 8850) by the date of the employment offer and submit it to the state agency within 28 days after the employee start date.

While the rest of the WOTC expires at the end of this year (unless it gets extended again), the veterans credits apply for hires through 2012.

Commercial Enterprises in Iowa are Exempt from Paying Sales Tax on Computers

2011-12-05T09:25:00.000-06:00

Did you know that “commercial enterprises” in Iowa are exempt from paying sales tax on computers and all devices fastened to it? We’ve had this tid-bit come up with a few clients recently and thought it might be good information to share with all of our Iowa clients.

Who is eligible?

Commercial Enterprises include businesses and manufacturers conducting business for profit but excludes professions, occupations, and nonprofit organizations.

More definitions:

“Profession” means a vocation or employment requiring specialized knowledge and often long and intensive academic preparation. Lawyers and doctors are examples of professions. Professions, including professional corporations, do not qualify for the exemption.
“Occupation” means an individual who has a particular skill or trade. Farming is considered to be an occupation; therefore, farmers do not qualify for the exemption.

What is eligible?

“Computer” means stored program processing equipment and all devices fastened to it by means of signal cables or any communication medium that serves the function of a signal cable. A computer is a device having information processing capabilities and includes word processing equipment, testing equipment, and programmed or programmable microprocessors and any other integrated circuit embedded in the machinery or equipment.
“Devices” means the physical computer assembly and peripherals fastened by a signal cable or other communication medium including, but not limited to, such items as the central processing unit, keyboards, consoles, monitors, display units, memory, disk and tape drives, terminals, printer, plotters, modems, tape readers, card readers, card or tape punchers, document sorters, optical readers, and digitizers.
For further definitions, please click here.

If you are an organization that qualifies and have purchased technology equipment, it may be worth your time to do some further investigating to see if you qualify. Feel free to get in touch with one of our team members with further questions.

Get To Know MORE about Chad Abbas.

2011-11-30T16:41:00.001-06:00

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?

2011-11-22T12:50:00.000-06:00

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

2011-11-17T09:46:00.001-06:00

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?

2011-11-14T11:53:00.000-06:00

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

2011-11-11T12:46:00.001-06:00

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

2011-11-07T11:45:00.000-06:00

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

2011-11-03T12:49:00.001-05:00

TheFinancial Accounting Standards Board issued an Accounting Standards Update inJuly 2011 regarding “Presentation and Disclosure of Patient Service Revenue,Provision for Bad Debts, and the Allowance for Doubtful Accounts for CertainHealth 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:

Reclassifyingthe provision for bad debts associated with patient service revenue from anoperating expense to a deduction from patient service revenue on their statement of operations.
Providing enhanced disclosure about their policiesfor recognizing revenue and assessing bad debts.
Disclosing patient service revenue as well as qualitative and quantitativeinformation about changes in the allowance for doubtful accounts.

Click here to read the full report.

Get To Know MORE About Chris Honkomp.

2011-10-17T13:43:00.001-05:00

Chris was recently honored to be recognized by the Corridor Business Journal as one of the 40 of the Corridor’s outstanding leaders under the age of 40. We spent 15 minutes with him to pick his brain on leadership, family and writing papers in college!

1.   What are some of the more important leadership lessons you’ve learned in your career?
I have learned the true meaning behind the cliché, “you’re only as strong as your weakest link.” To me, leadership is about developing young talent as fully and quickly as possible so that the overall team succeeds.

2.   Why accounting? What brought you to this career and what do you like most about it?
To be honest, I chose a major in college that would require me to write the least amount of papers. And although that was beneficial to me at the time, I’ve since learned what a career in accounting really means. Today it’s a challenging environment that is different every day and is conducive to my competitive nature. I put that competitive energy toward helping clients consistently get better!

3.   Why BP? What differentiates this firm for you?
You know, coming out of school, I thought about leaving Iowa but with four younger brothers still here and active in school and sports, I knew that I wanted to stick close to home. I chose to invest in my family and community and work for the firm that had the reputation as the best and that was – and is – Bergan Paulsen!

4.   What do you look for when you hire?
We look for individuals that come from a good educational program but beyond that we look at their work experience. We want people to come to us with developed communication skills and a desire to help clients succeed.

5.   How would you summarize your leadership philosophy?
Balance. This is an interesting and important word to me. I think with most things, in work and in life, the right answer usually lies somewhere in the middle. The word pertains to work / life balance as well as the balance you bring to providing the right solution for a client.

6.   What advice would you give someone getting out of school right now?
Find what you’re passionate about and good at, set goals and go after it! Be confident in your ability to share fresh ideas and make an impact!

FASB Committee Considers Nonprofit Financial Reporting Changes

2011-10-11T10:00:00.000-05:00

Nonprofit organizations are neither public nor private businesses creating a unique situation in regards to accounting standards. Because nonprofits are accountable to the public, the Financial Accounting Standards Board’s (FASB) Not-for-Profit Advisory Committee (NAC) is studying ways to improve financial reporting for nonprofit entities. The NAC has identified several potential projects for the FASB’s standard-setting agenda, three of which are:

Net Asset Classes – Redefine or relabel classifications to better convey nonprofit liquidity.
Form of Financial Statements – Improve statements to better communicate the financial landscape.
Management Discussion & Analysis – Include commentary from nonprofit directors to further explain the financial story.

For more information, read the full article: FASB Not-for-Profit Advisory Committee Recommends Improvements to Financial Reporting.

Tax Strategies for a New Economy

2011-10-07T11:27:00.000-05:00

During economic downturns, states are often searching for ways to supplement their declining tax revenues while businesses are formulating strategies to improve their profitability by reducing tax liabilities. Businesses look to sales and property taxes to reduce their overall tax payments but in an economic environment that has been declining, companies must prepare themselves to deal with states’ more aggressive pursuit of sales and property tax revenues.

Options to Minimize Corporate Sales Tax

Restructuring Individual Transactions or Business.
Vendor contracts often offer good opportunities to restructure transactions to be more tax advantageous. For instance, a vendor that bills one lump sum for both telephone support and software updates could be restructured to bill them separately so that the support is not subject to state sales tax.
In addition, a company may look at restructuring its business. For instance, a company may operate an internal fleet of trucks and delivery vehicles. By restructuring, the company could isolate the delivery of its own products to possibly take advantage of a exemption on the trucks, tires and fuel used for delivery of business’ goods.
Request Formal Rulings on State Tax Interpretations.
Companies can also request formal rulings on state tax interpretations which could provide further insight into what is taxable.
Adjust Business to Market Products that are Exempt from Sales Tax.
Companies may be able to tweak their offerings in order to remain exempt from sales tax. As an example, an electronic information service company may change its model so that consumers are unable to print anything tangible.

External Obsolescence and Property Taxes
External obsolescence can be used to reduce the assessed value of property and, in turn, property taxes. While sales taxes may increase, there is potential to offset that cost with reductions in property taxes during a down economy. External obsolescence occurs when external forces beyond a company’s control – such as the economy – negatively influence property value. In today’s market, it’s not a question of whether a company or industry is experiencing external obsolescence but rather to what extent is it experiencing external obsolescence?

In a tight economy, companies must be aware of the effects that sales and property taxes can have on their profitability. As always, it’s important to work with a trusted advisor who can help you navigate tough times so that you can weather the storm and come out the other side better than before!

Fraud: No Organization is Immune

2011-10-05T08:30:00.000-05:00

Bergan Paulsen Partner, Mike Regan, was published in the most recent Falledition of the Minnesota Grain and Feed Association’s Mill & Elevator Magazine. The full article, “Fraud:No Organization is Immune” dives into what agribusiness organizations can doto protect themselves from the three types of fraud. Read the highlights below.

Businesses purchase insurance toprotect their companies from natural disasters and develop procedures to securetrade secrets from outside competitors, but not all businesses have developedthe proper processes to protect themselves from internal corruption andfraud. Because instances of fraud cancost a company millions, it is important to know that there are ways to preventfraud and to detect these instances early.

The top five things agribusiness organizationscan do to protect themselves from fraud:

1. Fraudhotline – Allowing others in the organization to submit anonymous tips offraudulent activity accounts for over 40% of initial detections and is, by far,the most effective action an organization can take.

2. Internalprocedures established by management – Developing budgets and establishingmeasurable financial objectives set clear expectations of acceptable employeebehavior.

3. Fraudawareness/ethics training – Ensure that all employees are aware of whatto look for and understand company policies and procedures on reportingpotential fraudulent activities.

4. Internalaudits – Internal auditors provide ongoing monitoring and assessments ofactivities.

5. Surpriseaudits - An unannounced audit or a different auditing process can bringto light fraud that perpetrators did not have time to cover up. Surprise auditscan also be useful at deterring fraud, not just detecting it.

Source:2010 Report to the Nations onOccupational Fraud and Abuse, published by the Association ofCertified Fraud Examiners.

Ask the Quickbooks Experts: Online vs. Desktop Editions?

2011-09-30T14:01:00.001-05:00

Our team of QuickBooks ProAdvisors is frequently asked the same question, “Which version is right forme – the online or the desktop edition?” The answer usually depends on your business, lifestyle and needs. Below, we created an easy comparison based onour tried-and-true experiences.

Round1: Cost

Theonline edition is available for a low fixed cost per month beginning at $12.95per month.
Thedesktop edition is available for an affordable, one-time purchase price.

Winner? Wereally think it’s a toss-up. Dependingon your needs, both are affordable options.

Round2: Reports

Thisonline edition gives you the ability to view reports almost anywhere and at anytime but the report offering is limited.
Therobust reporting that the desktop version offers gives you the ability to turnalmost any report into a visual graph or pie-chart.

Winner? Thedesktop version takes the cake for us thanks to its visual reporting elements.

Round3: Modules

Theonline version supports simple accounting and but isn’t able to support themore complex modules.
Onlythe desktop version allows users to manage purchase and sales orders, progressbilling or job costing/work orders. Additionally, the desktop edition gives you the ability to pay yourbills using the QuickBooks Bill Pay Service.

Winner? Thedesktop version wins another round with its additional capabilities that creategreater efficiency.

Round4: Access

Theonline version is available anywhere you have an internet connection and isconvenient for those clients who travel frequently or have numerous locations.
Youcan access the desktop version only on computers in which you have installedthe program.

Winner? Theonline version creates maximum convenience and efficiency when it comes tohaving access when needed.

Round5: Data Back-up

Withthe online edition your files are secure, updated automatically and backed-upwithout any additional steps on your end.
Thedesktop version requires you to have a back-up process in place and usuallyrequires additional steps on your end.

Winner? Theonline version offers the most efficient back-up process.

A Day in the Life of a Bergan Paulsen Accountant - Pt. 2

2011-09-15T14:48:00.000-05:00

From Gary Wilgenbusch, Staff Accountant

A Day in the Life of a Bergan Paulsen Accountant - Pt. 1

2011-09-15T14:44:00.000-05:00

From Breann Moore, Staff Accountant

FASB Changing Disclosures by Entities Participating in Multiemployer Pension Plans.

2011-09-14T15:51:00.000-05:00

Recently,the Financial Accounting Standards Board announced that it had approvedrevisions to the proposed Accounting Standards Update (ASU), Compensation --Retirement Benefits -- Multiemployer Plans (Subtopic 715-80): Disclosure aboutan Employer’s Participation in a Multiemployer Plan. The proposed ASU andthe FASB’s related revisions are intended to provide more information about anemployer’s financial obligations to multiemployer pension plans. Multiemployerpension plans are commonly used by an employer to provide benefits to unionemployees who may work for many employers during their working life, in orderto enable them to accrue benefits in a single pension plan.

Currently,employers are required to disclose only their total contributions to allmultiemployer plans in which they participate.

The newdisclosures announced by the FASB include:

Theamount of employer contributions made to each significant plan and to all plansin the aggregate;
Anindication of whether the employer’s contributions represent more than 5% oftotal contributions to the plan;
Anindication of which plans, if any, are subject to a funding improvement plan;
Theexpiration date(s) of collective bargaining agreement(s) and any minimumfunding arrangements;
Adescription of the nature and effect of any changes affecting comparability foreach period in which a statement of income is presented; and
Themost recent certified funded status of the plan, as determined by the plan’sso-called “zone status,” which is required by the Pension Protection Act of2006.

Ifthe zone status is not available, an employer will be required to disclosewhether the plan is: (a) less than 65% funded; (b) between 65%and 80% funded; or (c) greater than 80% funded.

The FASBexpects that the revisions will be finalized and added to the Codification inSeptember 2011. For public entities, the enhanced disclosures will be requiredin fiscal years ending after December 15, 2011. For nonpublic entities, theenhanced disclosures will be required in fiscal years ending after December 15,2012.

Asset-Based Financing 101

2011-09-09T07:06:00.000-05:00

Onceconsidered financing of last resort, asset-based lending and factoring havebecome popular choices for companies that do not have the credit rating ortrack record to qualify for more traditional types of financing.

Ingeneral terms, asset-based lending is any kind of borrowing secured by an assetof the company. For our discussion purposes today, we will consider asset-basedlending to mean loans to businesses that are secured by trade accounts receivableor inventory.

Because asset-based lenders focus on collateral,rather than credit-worthiness, they do deals that more traditional lenders shyaway from. Borrowers put up equipment, inventory, accounts-receivable and otherliquid assets in exchange for the money. Asset-based lenders that are eithernonbanks or separate subsidiaries of banks are not subject to such constraints.This gives asset-based lenders the freedom to finance thinly capitalizedcompanies.

Your Guide toAsset-Based Lending Terms

A revolver is a secured line of credit. Thegranting of the security interest to the lender creates a borrowing base forthe loan. As receivables are collected, the money is used to pay down the loanbalance.
A “lockbox” or a “blockedaccount” isestablished by the lender for the receipt of collections of the accountsreceivable. The company’s customers are instructed to pay their accounts to thelockbox, and the lender pays down the loan with these funds.
Eligible inventory includes finished goods andmarketable raw materials and excludes work-in-process and slow-moving goods.There could be additional limits on the advance rate for specially manufacturedgoods that can only be sold to a specific customer.
Purchase order financing can be used by companies thatreceive an unusually large order. The credit grantor accepts the purchase orderfrom the company’s customer as collateral for the loan.
Factoring is a financial transactionwhereby a business sells its accounts receivable to a third party, the factor,at a discount to obtain cash. Factoring differs from a bank loan in three ways:(1) The emphasis is on the value of the receivables, not the borrower’screditworthiness; (2) factoring is not a loan—it is the purchase of thereceivable; and (3) a bank loan involves two parties whereas factoring involvesthree.

Tax Tip: Charitable Giving

2011-09-07T08:54:00.000-05:00

Most of us know that if you make a donation to a charity, you may be able to take a deduction for it on your tax return. What we don’t all know is how do we go about doing that and what should we know before we take the deduction?

Here are the top nine things the IRS wants every taxpayer to know before deducting charitable donations.

1. Make sure the organization qualifies. Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization or check IRS Publication 78, Cumulative List of Organizations.

2. You must itemize. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.

3. What you can deduct. You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.

4. When you receive something in return. If your contribution entitles you to receive merchandise, goods, or services in return - such as admission to a charity banquet or sporting event - you can deduct only the amount that exceeds the fair market value of the benefit received.

5. Recordkeeping. Keep good records of any contribution you make, regardless of the amount. For any cash contribution, you must maintain a record of the contribution, such as a cancelled check, bank or credit card statement, deduction record or a written statement from the charity containing the date and amount of the contribution and the name of the organization.

6. Pledges and payments. Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, you can only deduct $200.

7. Donations made near the end of the year. Include credit card charges and payments by check in the year you give them to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.

8. Large donations. For any contribution of $250 or more, you need more than a bank record. You must have a written acknowledgment from the organization. It must include the amount of cash and say whether the organization provided any goods or services in exchange for the gift. If you donated property, the acknowledgment must include a description of the items and a good faith estimate of its value. For items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attach the form to your return. If you claim a deduction for a contribution of noncash property worth more than $5,000, you generally must obtain an appraisal and complete Section B of Form 8283 with your return.

9. Tax Exemption Revoked. Approximately 275,000 organizations automatically lost their tax exempt status recently because they did not file required annual reports for three consecutive years, as required by law. Donations made prior to an organization's automatic revocation remain tax-deductible. Going forward, however, organizations that are on the auto-revocation list that do not receive reinstatement are no longer eligible to receive tax deductible contributions.

The Bonus Depreciation.

2011-08-08T11:30:00.000-05:00

The 2010 Tax Relief Act benefits businesses by increasing 50 percent bonus depreciation to 100 percent for qualified investments made after September 8, 2010 and before January 1, 2012 (before January 1, 2013 for certain longer-lived and transportation property).

This provision is especially beneficial for businesses because bonus depreciation, unlike Code Sec. 179 expensing, is not limited to smaller companies, or capped at a certain dollar level. However, only new property qualifies for the 100 percent bonus depreciation (unlike Code Sec. 179 expensing, which can be claimed for both new and used property).

How does this help the health care industry?

In January 2011, XYZ medical practice, a calendar year business, buys $1 million of qualifying property eligible for the 100 percent bonus depreciation deduction. Under the 2010 Tax Relief Act's enhanced 100 percent bonus depreciation provision, XYZ medical practice will be able to claim a $1 million depreciation deduction for the property on its 2011 Federal tax return. This provision can also apply to the nonstructural components of construction of a new facility, remodeling of an existing facility, or an addition. Most of the states did not couple with this legislation including Iowa.

Additional Assistance.

Although enhanced 100 percent bonus depreciation is not extended into 2012, the new law does provide 50 percent bonus depreciation for qualified property placed in service after December 31, 2011 and before January 1, 2013.

Code Section 179 Expensing.

Over the years, Congress has repeatedly increased dollar and investment limits under Code Sec. 179 to encourage spending by businesses. For tax years beginning in 2010 and 2011, the 2010 Small Business Jobs Act increased the Code Sec. 179 dollar and investment limits to $500,000 and $2 million, respectively. For tax years beginning in 2012, the new law provides for a $125,000 dollar limit and a $500,000 investment limit (both indexed for inflation). Without this provision, the dollar and investment limits would have reverted to $25,000 and $200,000, respectively, for tax years beginning after 2011. Amounts that are not eligible for expensing due to excess investments cannot be carried forward and expensed in a later year; they may only be recovered through depreciation.

Iowa recently passed legislation to couple with this legislation and allow the correction to be made on the 2011 tax return in lieu of amending 2010. This change will allow you to “double-up” your Sec. 179 claim on your 2011 Iowa return.

IRS Grants Filing Extension to Trucking Companies for Form 2290 Tax Returns

2011-08-03T11:42:00.000-05:00

The Internal Revenue Service recently advised trucking companies and other business owners of heavy highway vehicles that their next federal highway use tax return, usually due August 31, will instead be due on November 30, 2011.

Because the highway use tax is currently scheduled to expire on September 30, 2011, this extension is designed to alleviate any confusion and possible multiple filings that could result if Congress reinstates or modifies the tax after that date.

Under temporary and proposed regulations, the November 30 filing deadline for Form 2290 -- Heavy Highway Vehicle Use Tax Return -- for the tax period that begins on July 1, 2011, applies to vehicles used during July, as well as those first used during August or September. Returns should not be filed and payments should not be made prior to November 1.

To aid trucking companies applying for state vehicle registration on or before November 30, the new regulations require states to accept as proof of payment the stamped Schedule 1 of the Form 2290 issued by the IRS for the prior tax year ending on June 30, 2011.

This is an adjustment as normally, after a taxpayer files the return and pays the tax, the Schedule 1 is stamped by the IRS and returned to filers for this purpose. A state ordinarily may accept a prior year's stamped Schedule 1 as a substitute proof of payment only through September 30.

For those acquiring and registering a new or used vehicle during the July-to-November period, the new regulations require a state to register the vehicle without proof that the highway use tax was paid if the person registering the vehicle presents a copy of the bill of sale or similar document showing that the owner purchased the vehicle within the previous 150 days.

Five Reasons Why Mandatory Firm Rotation Will Not Lead to Higher Audit Quality

2011-08-01T12:00:00.000-05:00

From the American Institute of CPAs (AICPA)

The importance of audits of state and local government entities and nonprofit organizations is important to the success of our communities. It is always in our best interest to review new initiatives to increase effectiveness and quality of audits for these organizations, but mandatory firm rotation may lead to unintended and undesirable consequences.

1. Increase in audit failures. Studies found that audit failures are three times more likely in the first two years of an audit (Public Oversight Board, Commission on Auditor’s Responsibilities, and the National Commission on Fraudulent Financial Reporting). In addition, the Committee of Sponsoring Organizations of the Treadway Commission found that 26% of the organizations that released fraudulent financial statements changed auditors between the last clean financial statements and the last fraudulent financial statements, whereas only 12% of no-fraud organizations switched auditors during that time.

2. Increased start-up costs. Changing auditors results in more frequent start-up costs, both for the auditor and the organization.

3. Increased difficulties in timely reporting. Timely reporting becomes more difficult because audit firms need to meet a very short “learning curve” to perform a rigorous audit.

4. Loss of “institutional knowledge.” Over successive audits, firms increase institutional knowledge, including, for example, their knowledge of the client’s accounting and internal control systems. This benefit would be greatly diminished by mandatory rotation.

5. Reduced incentives to improve efficiency and audit quality. Mandatory rotations fail to fully reward firms that achieve greater efficiency and audit quality because rotation reduces potential demand. Auditors providing less efficient and quality services are likely to survive because there will constantly be organizations looking for new auditors. Conversely, quality firms no longer have the incentive to increase market share and profits since they lose clients after the maximum allowed duration.

Employee and Independent Contractor Classifications Defined

2011-07-28T13:54:00.000-05:00

As your company grows, the size of your staff will, too. Depending on the roles the people on your team will fulfill, they can either be classified as independent contractors or employees. This distinction can be a complicated process and revolves around the working relationship between the individual and the company.

If a company has the right to control what is to be done, how it is done, which tools are provided and if expenses are reimbursed, a person is probably an employee. Conversely, an individual is probably an independent contractor if the company directs only the result of the work. Independent contractors generally have invested into their services and may provide these services to others outside of your company.

Other factors taken into consideration for worker classification include:

1. Can the employer and worker part ways without penalty? The right to discharge or terminate a relationship is present in an employer/employee relationship; however, discharge or termination in an independent contractor situation may constitute a breach of contract.

2. Is the worker paid fixed wages calculated on hourly or weekly basis? If yes, the worker is more likely an employee. Independent contractors typically perform a specific job at a fixed price.

3. Does the worker have the right to employ assistants? The exclusive right of the worker to hire, supervise and completely delegate the work of assistants is an indication of an independent contractor.

An employer misclassifying an employee as an independent contractor fails to pay mandatory employee withholding taxes, FICA taxes, unemployment taxes and workers’ compensation premiums. Not only does this jeopardize a fair and competitive marketplace by underbidding honest law-abiding businesses, this can also result in devastating penalties and fines, interest on back taxes and criminal charges to the employer under various laws. In addition, the employer may be responsible for the incorrectly classified employee’s unpaid income taxes.

The IRS has provided a video workshop that outlines and demonstrates the differences between independent contractors and employees. Click here and when the video loads, select Lesson 6.

Taking the time on the front end to determine the correct classification for your team members will save time, money and your sanity in the long run.

Iowa Modifies Renewable Fuel Incentives and Creates Biodiesel Refund and E-15 Credit

2011-07-25T12:53:00.000-05:00

The following summaries tell of upcoming changes to the various Iowa renewable fuel tax credits.

Ethanol Promotion Tax Credit
The ethanol promotion tax credit has been increased from 6.5 cents per gallon to a maximum credit of 8 cents per gallon. In addition, retail fuel dealers may now claim the credit on a company-wide basis along with the location-by-location basis allowed previously. The amendments are applicable retroactively to January 1, 2011.

E-85 Gasoline Promotion Tax Credit
The phase-down of the current E-85 credit has been eliminated and replaced with a 16-cent per-gallon credit, effective January 1, 2012, through December 31, 2017.

Biodiesel Blended Fuel Tax Credit
The December 31, 2011 expiration date for the biodiesel blended fuel tax credit has been extended until December 31, 2017. In addition, retailer’s diesel gallon sales no longer are required to meet a threshold of at least 50% biodiesel to qualify for the credit.

The legislation also establishes new per-gallon tax credit rates. In calendar year 2012, biodiesel blended fuel classified as B-2 or higher, but less than B-5, is at the designated rate of 2 cents while fuel classified as B-5 or higher, is at 4.5 cents.

Beginning in calendar year 2013, biodiesel blended fuel must be classified as B-5 or higher to qualify for a credit of 4.5 cents.

E-15 Plus Gasoline Tax Credit

A new credit has been created for ethanol blends between E-15 and E-69 equaling 3 cents per gallon for calendar years 2012 through 2014 and 2 cents per gallon for calendar years 2015 through 2017.

Biodiesel Production Refund
The legislation creates a per-gallon production refund on no more than 25 million gallons of biodiesel per facility produced in Iowa by a qualified manufacturer. Specifically, a qualifying producer may apply for a refund of the amount of the sales tax imposed and paid upon purchases made by the producer. The refund is made on a quarterly basis, according to the following per-gallon rates; 3 cents for calendar year 2012; 2.5 cents for calendar year 2013; and 2 cents for calendar year 2014.

For corporate and personal income tax purposes, a subtraction adjustment is allowed for the amount of any biodiesel production refund, to the extent included in federal taxable income or adjusted gross income.

The refund provision is repealed on January 1, 2015.

Elimination of the LIFO Method?

2011-07-25T11:56:00.001-05:00

One of the biggest revenue-raisers proposed by President Obama, as talks continue regarding the nation’s debt ceiling, is what he describes as an arcane change in the tax treatment of business inventories — things like steel, groceries and oil. The elimination of this method would dramatically affect the manufacturing and distribution industries.

The proposal would prohibit the use of an accounting technique known as last in, first out, or LIFO. The technique is used to determine the cost of goods sold, and therefore the income earned, by a company.

The repeal of LIFO would have a tremendous impact on closely held businesses using LIFO. The LIFO reserve would be brought back into income and taxed accordingly. Many closely held businesses have significant LIFO reserves that have built-up over time and the taxation of these reserves will result in a major tax hit to the company. In some cases, the tax effect may be significant enough to force a company out of business given the current economic challenges that exist. We will continue to monitor the developments relating to LIFO and assist our clients as necessary.

Final Regulations on 3% Withholding Released

2011-07-25T11:53:00.000-05:00

We have been carefully monitoring a new law passed on May 6, 2011 that says federal, state and other units of government with annual payments for goods and services – including contractors – of $100 million or more must withhold income tax of 3% of the total payment for goods and services. The final regulations for the provisions taking effect January 1, 2013 are summarized below.

The following are subject to the new requirement:

The entire U.S. government, including all federal agencies, the executive branch, the legislative branch and the judicial branch.

All states including the District of Columbia (but not including Indian tribal governments).
All political subdivisions of a state government or every instrumentality of such subdivisions unless the instrumentality makes annual payments for property or services of less than $100 million.

Exception for Small Entities
Subdivisions of a state, or instrumentalities of a subdivision of a state, are exempt from the withholding requirement if its total annual payments for property and services (not including wages) are less than $100 million. The proposed regulations provide a simple rule for determining whether an entity makes annual payments less than $100 million. In general the entity looks to its accounting year ending with or within the second preceding calendar year For example, if total payments for the entity’s 2011 accounting year exceed $100 million, the withholding requirement will apply in 2013.

Under an optional rule, an entity may average payments made during any four of the previous five accounting years ending with the accounting year ending with or within the second preceding calendar year.

Payments Subject to Section 3402(t) Withholding
Generally, withholding is required on all payments to all persons providing property or services to the government, including individuals, trusts, estates, partnerships, associations, and corporations. Withholding is required at the time of payment. If the government entity fails to withhold the tax required under section 3402(t), it becomes liable for the payment of the tax.

Payment Threshold
The proposed regulations create a payment threshold of $10,000 and provide that payments below the threshold are not subject to withholding. The regulations also include an anti-abuse rule that payments of $10,000 or more may not be divided into payments of less than $10,000 solely for the purpose of avoiding the withholding requirements.

Exceptions
The regulations provide the following exceptions from the withholding requirements:

Payments otherwise subject to withholding, such as wages. Payments for retirement benefits, unemployment compensation, or social security.

Payments subject to backup withholding, if the required backup withholding is actually performed.

Payments for real property, including land or completed buildings.

Payment of interest.

Payments to other government entities, foreign governments, tax exempt organizations, or Indian tribes.

Payments made under confidential or classified contracts, as described in IRC 6050M(e)(3).

Payments made by a political subdivision of a state, or instrumentalities of a political subdivision of a state that make annual payments for property of services of less than $100 milllion.

Public assistance payments made on the basis of need or income. However, assistance programs based solely on age, such as Medicare, are subject to the requirements.

Payments made under a government grant principally for a public purpose.

Payments to employees in connection with service, such as retirement plan contributions, fringe benefits, and expense reimbursements under an accountable plan.

Payments received by certain nonresident aliens and foreign corporations.

Payments in emergency or disaster situations.

Certain payment card transactions reportable under section 6050W.

We will continue to monitor this important change so check back regularly for updates!

The Path to a Differential Standard-Setting Framework

2011-07-19T13:04:00.000-05:00

The Financial Accounting Standards Board (FASB) staff recently completed an initial assessment of the differences in the way that private company financial statements are used by lenders, investors and others. The assessment examined how and why the needs of those who use private company financial statements differ from those who use public company financial statements and how the cost-benefit-considerations of financial reporting vary between private and public companies. These findings will assist the Board in developing a new framework for deciding when and how to modify specific U.S. GAAP accounting standards for private company use.

The initial findings by the staff indicated six key differences in the way private and public companies’ financial statements are used; types of users, investment strategies, ownership structures, accounting resources and education. Click here for a more in depth analysis of these differences.

The FASB staff will continue to work with the Private Company Resource Group in developing a differential framework for the Board’s consideration. During this time, the FASB will continue to solicit input from those using, preparing and auditing the financial statements of private companies.