Management Advisory Services & Business Consulting Archives - Page 11 of 45

The IRS has Announced 2022 Amounts for HSAs

Management Advisory Services & Business Consulting|June 22, 2021

The IRS recently released guidance providing the 2022 inflation-adjusted amounts for Health Savings Accounts (HSAs).

Fundamentals of HSAs

An HSA is a trust created or organized exclusively for the purpose of paying the “qualified medical expenses” of an “account beneficiary.” HSAs can only be established for the benefit of an “eligible individual” who is covered under a “high deductible health plan.” In addition, a participant can’t be enrolled in Medicare or have other health coverage (exceptions include dental, vision, long-term care, accident and specific disease insurance).

A high deductible health plan (HDHP) is generally a plan with an annual deductible that isn’t less than $1,000 for self-only coverage and $2,000 for family coverage. In addition, the sum of the annual deductible and other annual out-of-pocket expenses required to be paid under the plan for covered benefits (but not for premiums) can’t exceed $5,000 for self-only coverage, and $10,000 for family coverage.

Within specified dollar limits, an above-the-line tax deduction is allowed for an individual’s contribution to an HSA. This annual contribution limitation and the annual deductible and out-of-pocket expenses under the tax code are adjusted annually for inflation.

Inflation adjustments for next year

In Revenue Procedure 2021-25, the IRS released the 2022 inflation-adjusted figures for contributions to HSAs, which are as follows:

Annual contribution limitation

For calendar year 2022, the annual contribution limitation for an individual with self-only coverage under a HDHP will be $3,650.
For an individual with family coverage, the amount will be $7,300. This is up from $3,600 and $7,200, respectively, for 2021.

High deductible health plan defined.

For calendar year 2022, an HDHP will be a health plan with an annual deductible that isn’t less than $1,400 for self-only coverage or $2,800 for family coverage (these amounts are unchanged from 2021)
Annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) won’t be able to exceed $7,050 for self-only coverage or $14,100 for family coverage (up from $7,000 and $14,000, respectively, for 2021).

Many advantages

There are a variety of benefits to HSAs. Contributions to the accounts are made on a pre-tax basis. The money can accumulate tax free year after year and be can be withdrawn tax free to pay for a variety of medical expenses such as doctor visits, prescriptions, chiropractic care and premiums for long-term care insurance. In addition, an HSA is “portable.” It stays with an account holder if he or she changes employers or leaves the workforce. If you have questions about HSAs at your business, contact your employee benefits and tax advisors.

As always, please do not hesitate to call our offices to speak to your representative!

Providing Optimal IT Support for Remote Employees

Services|June 15, 2021

If you were to ask your IT staff about how tech support for remote employees is going, they might say something along the lines of, “Fantastic! Never better!” However, if you asked remote workers the same question, their response could be far less enthusiastic.

This was among the findings of a report by IT solutions provider 1E entitled “2021: Assessing IT’s readiness for the year of flexible working,” which surveyed 150 IT workers and 150 IT managers in large U.S. organizations. The report strikingly found that, while 100% of IT managers said they believed their internal clients were satisfied with tech support, only 44% of remote employees agreed.

Bottom line impact

By now, over a year into the COVID-19 pandemic, remote work has become common practice. Some businesses may begin reopening their offices and facilities as employees get vaccinated and, one hopes, virus metrics fall to manageable levels. However, that doesn’t mean everyone will be heading back to a communal working environment.

Flexible work arrangements, which include the option to telecommute, are expected to remain a valued employment feature. Remote work is also generally less expensive for employers, so many will likely continue offering or mandating it after the pandemic fades.

For business owners, this means that providing optimal IT support to remote employees will remain a mission-critical task. Failing to do so will likely hinder productivity, lower morale, and may lead to reduced employee retention and longer times to hire — all costly detriments to the bottom line.

Commonsense tips

So, how can you ensure your remote employees are well-supported? Here are some commonsense tips:

Ask them about their experiences

In many cases, business owners are simply unaware of the troubles and frustrations of remote workers when it comes to technology. Develop a relatively short, concisely worded survey and gather their input.

Invest in ongoing training for IT staff.

If you have IT staffers who, for years, provided mostly in-person desktop support to on-site employees, they might not serve remote workers as effectively. Having them take one or more training courses may trigger some “ah ha!” moments that improve their interactions and response times.

Review and, if necessary, upgrade IT systems and software

Your IT support may be falling short because it’s not fully equipped to deal with so many remote employees — a common problem during the pandemic. Assess whether:
- Your VPN system and licensing suit your needs,
- Additional or better cloud solutions could help, and
- Your remote access software is helping or hampering support.

Ensure employees know how to work safely

Naturally, the remote workers themselves play a role in the stability and security of their devices and network connections. Require employees to undergo basic IT training and demonstrate understanding and compliance with your security and usage policies.

Your IT future

The pandemic has been not only a tragic crisis, but also a marked accelerator of the business trend toward remote work. We can help you evaluate your technology costs, measure productivity and determine whether upgrades are likely to be cost-effective. Contact us today to see how we can help you.

Launching Small Businesses? Here are some Tax Considerations

Tax Prep, Planning & Strategy|June 9, 2021

While many businesses have been forced to close due to the COVID-19 pandemic, some entrepreneurs have started new small businesses. Many of these people start out operating as sole proprietors. Here are some tax rules and considerations involved in operating with that entity.

The pass-through deduction

To the extent your business generates qualified business income (QBI), you’re eligible to claim the pass-through or QBI deduction, subject to limitations. For tax years through 2025, the deduction can be up to 20% of a pass-through entity owner’s QBI. You can take the deduction even if you don’t itemize deductions on your tax return and instead claim the standard deduction.

Reporting responsibilities

As a sole proprietor, you’ll file Schedule C with your Form 1040. Your business expenses are deductible against gross income. If you have losses, they’ll generally be deductible against your other income, subject to special rules related to hobby losses, passive activity losses and losses in activities in which you weren’t “at risk.”

If you hire employees, you need to get a taxpayer identification number and withhold and pay employment taxes.

Self-employment taxes

For 2021, you pay Social Security on your net self-employment earnings up to $142,800, and Medicare tax on all earnings. An additional 0.9% Medicare tax is imposed on self-employment income in excess of $250,000 on joint returns; $125,000 for married taxpayers filing separate returns; and $200,000 in all other cases. Self-employment tax is imposed in addition to income tax, but you can deduct half of your self-employment tax as an adjustment to income.

Quarterly estimated payments

As a sole proprietor, you generally have to make estimated tax payments. For 2021, these are due on April 15, June 15, September 15 and January 17, 2022.

Home office deductions

If you work from a home office, perform management or administrative tasks there, or store product samples or inventory at home, you may be entitled to deduct an allocable portion of some costs of maintaining your home.

Health insurance expenses

You can deduct 100% of your health insurance costs as a business expense. This means your deduction for medical care insurance won’t be subject to the rule that limits medical expense deductions.

Keeping records

Retain complete records of your income and expenses so you can claim all the tax breaks to which you’re entitled. Certain expenses, such as automobile, travel, meals, and office-at-home expenses, require special attention because they’re subject to special recordkeeping rules or deductibility limits.

Saving for retirement

Consider establishing a qualified retirement plan. The advantage is that amounts contributed to the plan are deductible at the time of the contribution and aren’t taken into income until they’re withdrawn. A SEP plan requires less paperwork than many qualified plans. A SIMPLE plan is also available to sole proprietors and offers tax advantages with fewer restrictions and administrative requirements. If you don’t establish a retirement plan, you may still be able to contribute to an IRA.

We can help

Contact us if you want additional information about the tax aspects of your new businesses, or if you have questions about reporting or recordkeeping requirements

Building Customers’ Trust in your Business’ Website

Management Advisory Services & Business Consulting|June 1, 2021

The events of the past year have taught business owners many important lessons. One of them is that, when a crisis hits, customers turn on their computers and look to their phones. According to one analysis of U.S. Department of Commerce data, consumers spent $347.26 billion online with U.S. retailers in the first half of 2020 — that’s a 30.1% increase from the same period in 2019.

Although online spending moderated a bit as the year went on, the fact remains that people’s expectations of most companies’ websites have soared. In fact, a June 2020 report by software giant Adobe indicated that the pandemic has markedly accelerated the growth of e-commerce — quite possibly by years, not just months.

Whether you sell directly to the buying public or engage primarily in B2B transactions, building customers’ trust in your website is more important than ever.

Identify yourself

Among the simplest ways to establish trust with customers and prospects is to convey to them that you’re a bona fide business staffed by actual human beings.

Include an “About Us” page with the names, photos and short bios of the owner(s), executives and key staff members. Doing so will help make the site friendlier and more relatable. You don’t want to look anonymous — it makes customers suspicious and less likely to buy.

Beyond that, be sure to clearly provide contact info. This includes a phone number and email address, hours of operation (including time zone), and your mailing address. If you’re a small business, use a street address if possible. Some companies won’t deliver to a P.O. box, and some customers won’t buy if you use one.

Keep contact links easy to find. No one wants to search all over a site looking for a way to get in touch with someone at the business. Include at least one contact link on every page.

Add trust elements

Another increasingly critical feature of business websites is “trust elements.” Examples include:

Icons of widely used payment security providers such as PayPal, Verisign and Visa,
A variety of payment alternatives, as well as free shipping or lower shipping costs for certain orders, and
Professionally coded, aesthetically pleasing and up-to-date layout and graphics.

Check and double-check the spelling and grammar used on your site. Remember, one of the hallmarks of many Internet scams is sloppy or nonsensical use of language.

Also, regularly check all links. Nothing sends a customer off to a competitor more quickly than the frustration of encountering nonfunctioning links. Such problems may also lead visitors to think they’ve been hacked.

Abide by the fundamentals

Of course, the cybersecurity of any business website begins (and some would say ends) with fundamental elements such as a responsible provider, firewalls, encryption software and proper password use. Nonetheless, how you design, maintain and update your site will likely have a substantial effect on your company’s profitability.

Contact us for help measuring and assessing the impact of e-commerce on your business.

bFile System Ready for RELIEF Act Sales & Use Tax Credit

NEWS|May 19, 2021

Maryland Comptroller Peter Franchot announced on Tuesday, May 18^th that the State’s bFile system is now available for qualified business owners to claim a Sales and Use Tax Credit under the Relief Act of 2021.

If vendors report $6,000 or less in gross collected sales tax in that period, $3,000 will be the tax credit. If less than $3,000 of sales tax was collected, the credit will be the amount of sales tax collected, bringing the balance owed for that period to zero.

To be eligible for the credit, business owners must file timely returns and sales collections for March, April and May cannot exceed $6,000. The returns are typically filed in April, May, and June. However, the filing deadline for those months have been extended to July 15, 2021.

Read More Here.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

Governor Hogan Announces Emergency Stimulus & Relief Package

NEWS|January 14, 2021

Governor Larry Hogan recently proposed an emergency legislative package that will provide more than $1 billion in direct stimulus and tax relief for Maryland families, small businesses, and those who have lost their jobs as a result of the COVID-19 pandemic. If signed into law as drafted the legislation would

Repeal all state and local income taxes on unemployment benefits
Support small businesses with sales tax credits of up to $3,000 per month for four months— for a total of up to $12,000
Extend unemployment tax relief for small businesses. This provision codifies an emergency order the governor issued last month.
Safeguards Maryland businesses against any tax increase triggered by the use of state loan or grant funds.
For families that filed for the states earned income tax credit, provides payments for low-to-moderate income Marylanders, with benefits of up to $750 for families and $450 for individuals. This relief begins with immediate payments of $500 for families and $300 for individuals who filed for the Earned Income Tax Credit (EITC), followed by a second-round stimulus for EITC filers that would provide an additional $250 for eligible families and $150 for individuals. Similar to federal stimulus payments, no application for relief is necessary.

The Governor’s full announcement can be viewed here.

Employee Retention Credit changed for 2020 & 2021

As part of the recently passed 2021 Consolidated Appropriations Act Congress made a retroactive amendment and extension of the Employee Retention Credit (ERC) which was originally created and made available to businesses as part of the CARES Act of 2020. The extension applies to qualifying wages paid before July 1, 2021.

Previously, a business that received a PPP loan was not eligible to also claim the ERC. However under the new law, PPP borrowers can also apply for the credit, retroactive for 2020. Wages used to satisfy the PPP forgiveness eligibility cannot be used to claim the ERC. Employers that took PPP loans and had excess qualifying payroll should review their eligibility for any ERC available for 2020.

To be eligible for the ERC an employer must have experienced either : (A) Partial or full suspension of operations arising from a governmental order or (B) A significant decrease in gross receipts . The employer must also have continued to pay their employees during this period. A significant decrease in gross receipts is defined as:

2020 year- 2020 Gross receipts were less than 50% of gross receipts for the same quarter in 2019
2021 year- 2021 Gross receipts less than 80% of gross receipts for the same quarter in 2019

The credit computation depends on eligible payroll costs, the maximum eligible credit per employee is $5,000 for 2020 and $7,000 per quarter for Q1 & Q2 2021 (max $14,000).

For employers that have already filed and received their PPP loan forgiveness, additional guidance will be forthcoming as to claiming the 2020 ERC. For employers who received a PPP loan and have yet to apply for forgiveness they may want to consider holding their applications until additional guidance is released by the IRS and SBA.

For 2021 ERC, eligible employers will claim the ERC similar to how the 2020 ERC was claimed, that is by Form 941. In anticipation of receiving the ERC, eligible employers can fund qualified wages by: (1) Accessing federal employment taxes, including withheld taxes that are required to be deposited with the IRS, and (2) Requesting an advance of the credit from the IRS for the amount of the credit that is not funded by accessing the federal employment tax deposits, by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.

While the IRS has not yet updated their website for the new law, we anticipate updates shortly. Information can be obtained here.

The above is a summary of the ERC, additional eligibility requirements and exemptions apply. Employers with over 100 employees in 2020 or 500 employees in 2021 have additional restrictions.

Please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

Get smart when tackling estate planning for intellectual property

Tax Prep, Planning & Strategy|August 20, 2020

If you’ve invented something during your lifetime and had it patented, your estate includes intellectual property (IP). The same goes for any copyrighted works. These assets can hold substantial value, and, thus, must be addressed by your estate plan. However, bear in mind that these assets are generally treated differently than other types of property.

4 categories of IP

IP generally falls into one of four categories: patents, copyrights, trademarks and trade secrets. Let’s focus on only patents and copyrights, which are protected by federal law in order to promote scientific and creative endeavors by providing inventors and artists with exclusive rights to benefit economically from their work for a certain period.

In a nutshell, patents protect inventions, and the two most common are utility and design patents. Under current law, utility patents protect an invention for 20 years from the patent application filing date. Design patents last 15 years from the patent issue date. For utility patents, it typically takes at least a year to a year and a half from the date of filing to the date of issue.

When it comes to copyrights, they protect the original expression of ideas that are fixed in a “tangible medium of expression,” typically in the form of written works, music, paintings, film and photographs. Unlike patents, which must be approved by the U.S. Patent and Trademark Office, copyright protection kicks in as soon as a work is fixed in a tangible medium.

Valuing and transferring IP

Valuing IP is a complex process. So, it’s best to obtain an appraisal from a professional with experience valuing this commodity.

After you know the IP’s value, it’s time to decide whether to transfer the IP to family members, colleagues, charities or others through lifetime gifts or through bequests after your death. The gift and estate tax consequences will affect your decision. But you also should consider your income needs, as well as who’s in the best position to monitor your IP rights and take advantage of their benefits.

If you’ll continue to depend on the IP for your livelihood, for example, hold on to it at least until you’re ready to retire or you no longer need the income. You also might want to retain ownership of the IP if you feel that your children or other transferees lack the desire or wherewithal to take advantage of its economic potential and monitor and protect it against infringers.

Whichever strategy you choose, it’s important to plan the transaction carefully to ensure your objectives are achieved. There’s a common misconception that, when you transfer ownership of the tangible medium on which IP is recorded, you also transfer the IP rights. But IP rights are separate from the work itself and are retained by the creator.

Revise your plan accordingly

If you own patents or copyrights, you probably have great interest in who’ll take possession of your work after you’re gone. Contact us with any questions on how to incorporate IP in your estate plan.

ERM: A systemic approach to reducing your nonprofit’s risks

Accounting & Assurance|August 19, 2020

Do you associate enterprise risk management (ERM) with for-profit businesses? This systemic approach to risk reduction can be just as effective when adopted by nonprofit organizations. Even organizations with limited resources can — and should — use an ERM process to combat threats.

Weighing risks

ERM is a comprehensive program that considers an organization’s entire portfolio of risks. Rather than attacking every risk equally, ERM compares risks and strategically deploys resources depending on their likelihood and potential impact.

You might also have different tolerances for different kinds of threats — for example, be mildly cautious about reputational risks and very averse to financial risks. With ERM, you can contain those risks with the greatest potential impact and respond nimbly to others.

Using it effectively

Experienced financial advisors and risk-management consultants can help you set up an ERM program. Generally, you’ll want to start by establishing a risk management governance structure with assigned roles and responsibilities. Your nonprofit’s executives and board should define the organization’s risk tolerance and make clear its commitment to the program.

Next, your organization will want to:

Assemble a cross-departmental committee to develop the program. Different departments may have different perspectives on certain risks. For example, a finance manager might think inaccurate reporting of program information is less consequential because it’s unlikely to affect revenues or expenses. Your public relations manager may disagree, arguing that such errors could affect how donors and other supporters view your nonprofit.

Conduct a risk assessment. The committee’s first task is to identify risks. It shouldn’t rely on its own knowledge, but should conduct interviews with management and staff and, possibly, clients. Then, the committee will be ready to rank risks based on your organization’s tolerance and their potential impact. Which are most likely to occur? Which could cause the most harm? The bottom line: Which threats are most likely to prevent you from accomplishing your mission?

Create and implement a plan. Once risks are identified and prioritized, the committee can devise a plan to mitigate them appropriately. For each risk, it should determine whether to accept, reduce or avoid it. And it should implement controls, processes and procedures accordingly. The committee is then charged with rolling out the plan. This should include communicating it throughout the organization.

Review and revise. ERM is an ongoing process, with continual monitoring of key risks and key performance indicators to ensure appropriate adjustments. Be sure to update your initial risk assessment to reflect organizational changes (for example, new staff or services), as well as changes in the legal and regulatory environment.

Cost-effective method

Once it’s established, you should be able to manage an ERM program with internal staff and board input. So, it’s a fairly cost-effective method of containing threats. Talk to us about adopting ERM.

Why you should keep life insurance out of your estate

Tax Prep, Planning & Strategy|August 18, 2020

If you have a life insurance policy, you probably want to make sure that the life insurance benefits your family will receive after your death won’t be included in your estate. That way, the benefits won’t be subject to the federal estate tax.

Under the estate tax rules, life insurance will be included in your taxable estate if either:

Your estate is the beneficiary of the insurance proceeds, or
You possessed certain economic ownership rights (called “incidents of ownership”) in the policy at your death (or within three years of your death).

The first situation is easy to avoid. You can just make sure your estate isn’t designated as beneficiary of the policy.

The second situation is more complicated. It’s clear that if you’re the owner of the policy, the proceeds will be included in your estate regardless of the beneficiary. However, simply having someone else possess legal title to the policy won’t prevent this result if you keep so-called “incidents of ownership” in the policy. If held by you, the rights that will cause the proceeds to be taxed in your estate include:

The right to change beneficiaries,
The right to assign the policy (or revoke an assignment),
The right to borrow against the policy’s cash surrender value,
The right to pledge the policy as security for a loan, and
The right to surrender or cancel the policy.

Keep in mind that merely having any of the above powers will cause the proceeds to be taxed in your estate even if you never exercise the power.

Buy-sell agreements

If life insurance is obtained to fund a buy-sell agreement for a business interest under a “cross-purchase” arrangement, it won’t be taxed in your estate (unless the estate is named as beneficiary). For example, say Andrew and Bob are partners who agree that the partnership interest of the first of them to die will be bought by the surviving partner. To fund these obligations, Andrew buys a life insurance policy on Bob’s life. Andrew pays all the premiums, retains all incidents of ownership, and names himself as beneficiary. Bob does the same regarding Andrew. When the first partner dies, the insurance proceeds aren’t taxed in the first partner’s estate.

Life insurance trusts

An irrevocable life insurance trust (ILIT) is an effective vehicle that can be set up to keep life insurance proceeds from being taxed in the insured’s estate. Typically, the policy is transferred to the trust along with assets that can be used to pay future premiums. Alternatively, the trust buys the insurance with funds contributed by the insured person. So long as the trust agreement gives the insured person none of the ownership rights described above, the proceeds won’t be included in his or her estate.

The three-year rule

If you’re considering setting up a life insurance trust with a policy you own now or you just want to assign away your ownership rights in a policy, contact us to help you make these moves. Unless you live for at least three years after these steps are taken, the proceeds will be taxed in your estate. For policies in which you never held incidents of ownership, the three-year rule doesn’t apply. Don’t hesitate to contact us with any questions about your situation.

What does the executive action deferring payroll taxes mean for employers and employees?

Tax Prep, Planning & Strategy|August 18, 2020

On August 8, 2020, President Trump signed an executive memorandum that defers an employee’s portion of Social Security and Medicare taxes from September 1 through December 31, 2020. At this point, the taxes are just deferred, meaning they’ll still have to be paid at a later date. However, the action directs U.S. Treasury Secretary Steven Mnuchin to “explore avenues, including legislation, to eliminate the obligation to pay the taxes.”

The exact impact on employers and employees isn’t yet known. There are many open questions, including President Trump’s legal ability to implement the deferral. Some experts believe there may be legal challenges to this executive action.

Deferral details

The payroll tax deferral will be available for “any employee the amount of whose wages or compensation, as applicable, payable during any bi-weekly pay period generally is less than $4,000.”

The deferral will be calculated on a pretax basis or the equivalent amount with respect to other pay periods. Plus, the amounts will be deferred without any penalties, interest, additional amount or addition to the tax.

Stay tuned for additional guidance

No doubt there is much to flesh out about this payroll tax deferral. Secretary Mnuchin has been instructed to provide additional guidance and employers can’t act on the deferral until that happens. It’s also possible Congress could take action. We’ll be monitoring developments and their implications, so turn to us for the latest information.