Do your employees receive tips? You may be eligible for a tax credit

Tax Prep, Planning & Strategy|

Are you an employer who owns a business where tipping is customary for providing food and beverages? You may qualify for a tax credit involving the Social Security and Medicare (FICA) taxes that you pay on your employees’ tip income.

How the credit works

The FICA credit applies with respect to tips that your employees receive from customers in connection with the provision of food or beverages, regardless of whether the food or beverages are for consumption on or off the premises. Although these tips are paid by customers, they’re treated for FICA tax purposes as if you paid them to your employees. Your employees are required to report their tips to you. You must withhold and remit the employee’s share of FICA taxes, and you must also pay the employer’s share of those taxes.

You claim the credit as part of the general business credit. It’s equal to the employer’s share of FICA taxes paid on tip income in excess of what’s needed to bring your employee’s wages up to $5.15 per hour. In other words, no credit is available to the extent the tip income just brings the employee up to the $5.15 per hour level, calculated monthly. If you pay each employee at least $5.15 an hour (excluding tips), you don’t have to be concerned with this calculation.

Note: A 2007 tax law froze the per-hour amount at $5.15, which was the amount of the federal minimum wage at that time. The minimum wage is now $7.25 per hour but the amount for credit computation purposes remains $5.15.

How it works

Example: A waiter works at your restaurant. He’s paid $2 an hour plus tips. During the month, he works 160 hours for $320 and receives $2,000 in cash tips which he reports to you.

The waiter’s $2 an hour rate is below the $5.15 rate by $3.15 an hour. Thus, for the 160 hours worked, he or she is below the $5.15 rate by $504 (160 times $3.15). For the waiter, therefore, the first $504 of tip income just brings him up to the minimum rate. The rest of the tip income is $1,496 ($2,000 minus $504). The waiter’s employer pays FICA taxes at the rate of 7.65% for him. Therefore, the employer’s credit is $114.44 for the month: $1,496 times 7.65%.

While the employer’s share of FICA taxes is generally deductible, the FICA taxes paid with respect to tip income used to determine the credit can’t be deducted, because that would amount to a double benefit. However, you can elect not to take the credit, in which case you can claim the deduction.

Get the credit you’re due

If your business pays FICA taxes on tip income paid to your employees, the tip tax credit may be valuable to you. Other rules may apply. Contact us if you have any questions.

© 2020

WCS Non-Profits Expertise

Non-Profits

Non-Profits |

Non-Profits

Non-profits have unique strategic visions and WCS has the insight and experience to help bring these visions to light and to the communities they serve.



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Non-Profit organizations play an integral role in our communities. Their dedication to their mission needs to be matched with a strong team focused on their unique accounting and compliance issues. We understand these challenges and provide industry knowledge, guidance, and advice built on over 40 years working with non-profits.

Our goal is to empower non-profit organizations with financial processes, procedures, and planning to fulfill their compliance obligations and achieve their mission in the future. We currently provide pre-audit preparation, Uniform Guidance audits, financial statement audits, reviews, client advisory services, and tax return services.

The WCS Non-Profit team also provides board presentations, performance measurement recommendations, budgeting, outsourced accounting services, and a review of accounting software systems.

At WCS, we are here to help you, help others.

To learn more about our Non-Profits Services contact Angeline S. White, Partner, CPA at 410.339.6464

Governmental Accounting - United States Courthouse

Governmental Accounting

Governmental Accounting |

Governmental Accounting

With years of experience helping local governments in Maryland, we are uniquely qualified to bring the technical skills necessary to achieve your goals while providing the close, personal attention you deserve, regardless of the size of your government.



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Local governments, agencies, and authorities face a unique set of challenges and regulatory responsibilities. At WCS, we have built a strong reputation for developing and implementing annual audit processes for State and Local governments that recognize, analyze, and plan for governments and municipalities’ unique demands.

As a member firm of the American Institute of Certified Public Accountants’ Government Audit Quality Center, we receive regular updates on topics directly related to audits of states and local governments. This is just one of the ways that we empower our staff to maintain the resources and knowledge necessary to provide the highest quality service and technical expertise to our clients.

In our experience working with other small-town municipalities, they’ve expressed concern that the annual audit process has become routine at best. Perhaps their current auditor spends little to no time learning about the day-to-day operations of the town. Without a proper understanding of your day-to-day operations, how can they provide any meaningful suggestions for improvement in management operations?

Our clients rely on our expertise throughout the year. We are always available to assist as needed, not just during the annual audit. Our proactive personal attention, combined with our governmental accounting insights and experience, sets us apart.

To learn more about our Governmental Accounting Services contact Angeline S. White, Partner, CPA at 410.339.6464

Did you get an Economic Impact Payment that was less than you expected?

Tax Prep, Planning & Strategy|

Nearly everyone has heard about the Economic Impact Payments (EIPs) that the federal government is sending to help mitigate the effects of the coronavirus (COVID-19) pandemic. The IRS reports that in the first four weeks of the program, 130 million individuals received payments worth more than $200 billion.

However, some people are still waiting for a payment. And others received an EIP but it was less than what they were expecting. Here are some answers why this might have happened.

Basic amounts

If you’re under a certain adjusted gross income (AGI) threshold, you’re generally eligible for the full $1,200 ($2,400 for married couples filing jointly). In addition, if you have a “qualifying child,” you’re eligible for an additional $500.

Here are some of the reasons why you may receive less:

Your child isn’t eligible. Only children eligible for the Child Tax Credit qualify for the additional $500 per child. That means you must generally be related to the child, live with them more than half the year and provide at least half of their support. A qualifying child must be a U.S. citizen, permanent resident or other qualifying resident alien; be under the age of 17 at the end of the year for the tax return on which the IRS bases the payment; and have a Social Security number or Adoption Taxpayer Identification Number.

Note: A dependent college student doesn’t qualify for an EIP, and even if their parents may claim him or her as a dependent, the student normally won’t qualify for the additional $500.

You make too much money. You’re eligible for a full EIP if your AGI is up to: $75,000 for individuals, $112,500 for head of household filers and $150,000 for married couples filing jointly. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$112,500/$150,000 thresholds.

You’re eligible for a reduced payment if your AGI is between: $75,000 and $99,000 for an individual; $112,500 and $136,500 for a head of household; and $150,000 and $198,000 for married couples filing jointly. Filers with income exceeding those amounts with no children aren’t eligible and won’t receive payments.

You have some debts. The EIP is offset by past-due child support. And it may be reduced by garnishments from creditors. Federal tax refunds, including EIPs, aren’t protected from garnishment by creditors under federal law once the proceeds are deposited into a bank account.

If you receive an incorrect amount

These are only a few of the reasons why an EIP might be less than you expected. If you receive an incorrect amount and you meet the criteria to receive more, you may qualify to receive an additional amount early next year when you file your 2020 federal tax return. We can evaluate your situation when we prepare your return. And if you’re still waiting for a payment, be aware that the IRS is still mailing out paper EIPs and announced that they’ll continue to go out over the next few months.

© 2020

Employee Benefit Plan Audits - Two people on the beach at sunset

Employee Benefit Plan Audits

Employee Benefit Plan Audits |

Employee Benefit Plan Audits

We audit 401(k), 403(b), defined benefit, and ESOP plans with total plan assets ranging from under $5 million to over $500 million.



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WCS understands the regulatory challenges of employee benefit plans. We provide our clients peace of mind by assisting them in complying with filing requirements; and providing recommendations for internal control improvements and discussions of best practices.

Our dedicated team of employee benefit plan professionals has in-depth technical knowledge of GAAP, ERISA, and DOL requirements. The teams’ vast experience allows them to quickly gain understanding and insight into your specific plan providing increased audit efficiencies.

We work with and have continuous communication with your other employee benefit plan service providers, including third-party administrators, lawyers, actuaries, and other consultants that work with your fund, which means that you get the best services possible.

We are proud to be an American Institute of CPAs (AICPA) Employee Benefit Plan Audit Quality Center member firm.

Our detail-oriented approach results in the timely filing of Form 5500s.

Our employee benefit plan audit services include:

  • Audits of 401(k) and 403(b) Plans
  • Audits of Defined Contribution Pension Plans
  • Audits of Defined Benefit Pension Plans
  • Audits of Employer Stock Ownership Plans (ESOPs)
  • Tax preparation, Forms 5500 and 8955-SSA

To learn more about our Employee Benefit Plan Audit services contact David Crisp, Partner, CPA – DavidC@wcscpa.com.or phone 410.838.2237

The Department of Labor (DOL) has begun the process of sending letters to plan administrators of employee benefit plans across the country to discuss the importance of having a quality plan audit performed. Click the link below to read more about our commitment to quality and why auditor selection matters.

Commitment to Quality – Why Auditor Selection Matters  (click to view)

Is your nonprofit’s tap running dry?

Accounting & Assurance|

The novel coronavirus (COVID-19) crisis has put enormous financial stress on many not-for-profits — whether they’re temporarily shut down or actively fighting the pandemic. If cash flow has dried up, your organization may need to do more than trim expenses. Here’s how to assess your financial condition and take appropriate action.

Put your board in charge

Ask your board of directors to lead your review and retrenchment efforts. In addition to having oversight experience and financial expertise, board members have a passion for your organization and will do whatever they can to assist. They may already have employer backing for your nonprofit, and those companies may be willing to step up their financial support. Or board members may be able to tap their social networks.

The first order of business should be to review programs relative to your nonprofit’s mission. If you identify one that isn’t critical to your mission and is a drain on cash balances and staff resources, consider cutting it. Terminating a non-mission-critical program frees up funds for other initiatives or administrative necessities. If you can redirect clients to similar programs offered by other organizations, such changes can be made without a break in service.

Your board may also be able to liberate cash from your investment portfolio. Your nonprofit may have investments or idle assets that aren’t generating operating income — for example, donated real estate, collections and other nonmarketable holdings. Divesting these possessions can raise critical operating funds.

Look to your endowment

Another potential source of operating funds is your organization’s permanently restricted endowment funds. Under the Uniform Prudent Management of Institutional Funds Act (UPMIFA), you may be able to spend what was once considered the untouchable original principal (or historical balance) of funds.

Access generally is available when the donor of the original gift is silent about restrictions or hasn’t specified that UPMIFA provisions don’t apply. In some cases, an original condition or restriction may no longer be practicable or possible to achieve. Your nonprofit should consult an attorney to learn whether this is an option.

If UPMIFA provisions don’t open up a source of funds, there’s another potential route — approach the original donor. Your organization can ask the donor to lift all or some of the spending restrictions so you may use a portion of the funds for operating costs.

We can help

These are only a few possible solutions for struggling nonprofits. If you know your nonprofit is in trouble, but don’t know how to start fixing it, contact us. We can work with your board to assess your situation and determine the best way to move forward.

© 2020

WCS Healthcare Industry Expertise

Healthcare Services

Healthcare Services |

Healthcare Services

While you care for your patients, WCS Healthcare Division cares for your business. We provide healthcare professionals the proactive and in-depth accounting and business consulting services to keep you focused on your patients and not your financials.



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We are a valued resource in the Mid -Atlantic region and work with many healthcare professionals, including Dentists, Physicians, and Veterinarians. We work with large practices and their Practice Managers as well as solo practitioners to meet their practice and individual needs.

Our typical engagement involves a financial check-up of your practice twice a year. The financial check-up consists of reviewing various financial reports and matrix such as cash flow analysis, industry overhead/benchmarking, owner compensation/benefit models that will aid in the wellness of the practice.

WCS’s healthcare team helps you monitor expenses, improve revenue, and generate discussions concerning your practice management objectives and long-term goals. Tax planning is also a vital component of our business consulting. We build strategies to benefit the practice owners and minimize the tax burden throughout the year and the lifetime of the practice.

For the wellness of your practice, we offer the following advisory services:

  • Practice start-up/purchase or sale assistance
  • Valuation Consulting and Cash flow analysis for practice mergers & acquisitions or expansions
  • Budgeting for multiple office locations
  • Industry Benchmarking Comparison
  • Guidance on funding options for acquisitions or expansions
  • Retirement Funding options
  • Facilitation of the Financial transition that occurs when buying or selling a practice
  • Monthly Bookkeeping services or training – QuickBooks online
  • Federal, state, and local tax return planning and preparation
  • Succession planning

To learn more about our Healthcare Services contact Brianne L. Baccaro Norris, CPA at 410.339.6464

WCS Construction, Real Estate, CIRA Expertise

Construction, Real Estate, CIRA

Construction, Real Estate, CIRA |

Construction, Real Estate, CIRA

At WCS, we know that success in the construction and real estate industry is complex. With all the uncertainties, intricacies, and volatility, choosing the right accounting firm for your business is imperative.



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We work with all sizes and types of construction and real estate industry companies, including; general contractors, home builders, real estate developers, subcontractors, specialty trades, and common interest realty associations. We offer a wide range of industry-specific accounting, business consulting, and tax services to help our clients with their unique challenges and opportunities.

Our diverse group of accounting professionals allows us to provide services such as performing due diligence, evaluation, and establishment of internal control systems, client advisory services, industry benchmarking, to name a few. This gives our construction and real estate clients access to a wealth of resources comparable to those of larger firms while maintaining the close personal attention that is the cornerstone of our firm.

WCS is an active member of the National Association of Construction Auditors (NACA), a professional association dedicated to enhancing the control environment related to construction projects and providing the specific professional certification of Certified Construction Auditor. We are also a member of the Maryland Associated General Contractors of America whose core mission is to be the primary resource in the region for commercial construction contractors to develop and advance their companies.

To learn more about our Construction /Real-Estate/CIRA Services contact Angeline S. White, Partner, CPA at 410.339.6464 

Work Opportunity Tax Credit extended through 2020

Tax Prep, Planning & Strategy|

If you’re a business owner, be aware that a recent tax law extended a credit for hiring individuals from one or more targeted groups. Employers can qualify for a valuable tax credit known as the Work Opportunity Tax Credit (WOTC).

The WOTC was set to expire on December 31, 2019. But a new law passed late last year extends it through December 31, 2020.

Generally, an employer is eligible for the credit for qualified wages paid to qualified members of these targeted groups: 1) members of families receiving assistance under the Temporary Assistance for Needy Families program, 2) veterans, 3) ex-felons, 4) designated community residents, 5) vocational rehabilitation referrals, 6) summer youth employees, 7) members of families in the Supplemental Nutritional Assistance Program, 8) qualified Supplemental Security Income recipients, 9) long-term family assistance recipients and 10) long-term unemployed individuals.

Several requirements

For each employee, there’s a minimum requirement that the employee has completed at least 120 hours of service for the employer. The credit isn’t available for certain employees who are related to the employer or work more than 50% of the time outside of a trade or business of the employer (for example, a maid working in the employer’s home). Additionally, the credit generally isn’t available for employees who’ve previously worked for the employer.

There are different rules and credit amounts for certain employees. The maximum credit available for the first-year wages is $2,400 for each employee, $4,000 for long-term family assistance recipients, and $4,800, $5,600 or $9,600 for certain veterans. Additionally, for long-term family assistance recipients, there’s a 50% credit for up to $10,000 of second-year wages, resulting in a total maximum credit, over two years, of $9,000.

For summer youth employees, the wages must be paid for services performed during any 90-day period between May 1 and September 15. The maximum WOTC credit available for summer youth employees is $1,200 per employee.

Here are a few other rules:

  • No deduction is allowed for the portion of wages equal to the amount of the WOTC determined for the tax year;
  • Other employment-related credits are generally reduced with respect to an employee for whom a WOTC is allowed; and
  • The credit is subject to the overall limits on the amount of business credits that can be taken in any tax year, but a 1-year carryback and 20-year carryforward of unused business credits is allowed.

Make sure you qualify

Because of these rules, there may be circumstances when the employer might elect not to have the WOTC apply. There are some additional rules that, in limited circumstances, prohibit the credit or require an allocation of it. Contact us with questions or for more information about your situation.

© 2020

If you’re planning to move overseas, it’s time for an estate plan review

Tax Prep, Planning & Strategy|

Whether you’re moving to another country for work-related reasons, retirement or simply want an opportunity to experience a new culture, it’s important to understand the potential tax and estate planning implications. If you don’t, you could be hit with some unpleasant surprises. Here are three possible pitfalls:

Double taxation. If you’re a citizen of the United States, U.S. taxes will apply even after you move to another country. So if your estate is large, you might be subject to gift and estate taxes in your new country and in the United States (possibly including state taxes if you maintain a residence in a U.S. state). You also could be subject to estate taxes abroad even if your estate isn’t large enough to be subject to U.S. estate taxes. In some cases, you can claim a credit against U.S. taxes for taxes you pay to another country, but these credits aren’t always available.

One option for avoiding U.S. taxes is to relinquish your U.S. citizenship. But this strategy raises a host of legal and tax issues of its own, including potential liability for a one-time “expatriation tax.”

Real estate issues. If you wish to purchase a home in a foreign country, you may discover that your ability to acquire property is restricted. Some countries, for example, prohibit foreigners from owning real estate that’s within a certain distance from the coast or even throughout the country. It may be possible to bypass these restrictions by using a corporation or trust to hold property, but this can create burdensome tax issues for U.S. citizens.

Unfamiliar inheritance rules. If you own real estate or other property in a foreign country, your heirs may run up against unusual inheritance rules. In some countries, for example, your children have priority over your spouse, regardless of the terms of your will.

Review before you relocate

If you’re considering a move overseas, discuss your plans with us before making a move. We can review your estate plan and finances and make recommendations to help avoid tax pitfalls after you relocate.

© 2020

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