Management Advisory Services & Business Consulting Archives - Page 11 of 46

IRS Extends Administrative Relief for 401(k) Plans

Industries|August 5, 2021

As mitigation measures related to COVID-19 ease, it will be interesting to see which practices and regulatory changes taken in response to the pandemic remain in place long-term. One of them might be relief from a sometimes-inconvenient requirement related to the administration of 401(k) plans.

A virtual solution

In IRS Notice 2021-40, the IRS recently announced a 12-month extension of its temporary relief from the requirement that certain signatures be witnessed “in the physical presence” of a 401(k) plan representative or notary public.

The original relief, which appeared in IRS Notice 2020-42, was provided primarily to facilitate plan loans and distributions under the CARES Act. However, the relief could be used during 2020 for any signature that, under regulations, had to be witnessed in the physical presence of a plan representative or notary public. This included required spousal consents. The relief was subsequently extended through June 30, 2021, under IRS Notice 2021-03.

Under the notices, signatures witnessed remotely by a plan representative satisfy the physical presence requirement if the electronic system uses live audio-video technology and meets four requirements established under the original relief:

Live presentation of a photo ID,
Direct interaction,
Same-day transmission, and
Return with the representative’s acknowledgment.

Signatures witnessed by a notary public satisfy the physical presence requirement if the electronic system for remote notarization uses live audio-video technology and is consistent with state-law requirements for a notary public.

Comments requested

As mentioned, IRS Notice 2021-40 further extends the relief — subject to the same conditions — through June 30, 2022. The notice also requests comments regarding whether permanent modifications should be made to the physical presence requirement. Comments are specifically requested regarding:

The costs and other effects of the physical presence requirement and its temporary waiver,
Whether the relief has resulted in fraud, coercion or other abuses,
How the witnessing requirements are expected to be fulfilled as the pandemic abates,
What procedural safeguards should be instituted if the physical presence requirement is permanently modified, and
Whether permanent relief should use different procedures for witnessing by plan representatives or notary publics.

Comments should be submitted by September 30, 2021.

More information

Going forward, the need for a signature may often relate to spousal consents. If your business recently established a 401(k), the plan may be designed to limit or even eliminate the need for spousal consents.

However, plans that offer annuity forms of distribution are still subject to the spousal consent rules. And other 401(k) plans must require spousal consent if a married participant wants to name a nonspouse as primary beneficiary.

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.

10 Fact: Pass-Through Deduction for Qualified Business Income

Tax Prep, Planning & Strategy|August 4, 2021

Are you eligible to take the deduction for qualified business income (QBI)? Here are 10 facts about this valuable tax break, referred to as the pass-through deduction, QBI deduction or Section 199A deduction.

It’s available to owners of sole proprietorships, single member limited liability companies (LLCs), partnerships and S corporations. It may also be claimed by trusts and estates.
The deduction is intended to reduce the tax rate on QBI to a rate that’s closer to the corporate tax rate.
It’s taken “below the line.” That means it reduces your taxable income but not your adjusted gross income. But it’s available regardless of whether you itemize deductions or take the standard deduction.
The deduction has two components: 20% of QBI from a domestic business operated as a sole proprietorship or through a partnership, S corporation, trust or estate; and 20% of the taxpayer’s combined qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership income.
QBI is the net amount of a taxpayer’s qualified items of income, gain, deduction and loss relating to any qualified trade or business. Items of income, gain, deduction and loss are qualified to the extent they’re effectively connected with the conduct of a trade or business in the U.S. and included in computing taxable income.
QBI doesn’t necessarily equal the net profit or loss from a business, even if it’s a qualified trade or business. In addition to the profit or loss from Schedule C, QBI must be adjusted by certain other gain or deduction items related to the business.
A qualified trade or business is any trade or business other than a specified service trade or business (SSTB). But an SSTB is treated as a qualified trade or business for taxpayers whose taxable income is under a threshold amount.
SSTBs include health, law, accounting, actuarial science, certain performing arts, consulting, athletics, financial services, brokerage services, investment, trading, dealing securities and any trade or business where the principal asset is the reputation or skill of its employees or owners.
There are limits based on W-2 wages. Inflation-adjusted threshold amounts also apply for purposes of applying the SSTB rules. For tax years beginning in 2021, the threshold amounts are $164,900 for singles and heads of household; $164,925 for married filing separately; and $329,800 for married filing jointly. The limits phase in over a $50,000 range ($100,000 for a joint return). This means that the deduction reduces ratably, so that by the time you reach the top of the range ($214,900 for singles and heads of household; $214,925 for married filing separately; and $429,800 for married filing jointly) the deduction is zero for income from an SSTB.
For businesses conducted as a partnership or S corporation, the pass-through deduction is calculated at the partner or shareholder level.

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.

Pondering the Possibility of a Company Retreat

Industries|July 27, 2021

As vaccination levels rise and major U.S. population centers fully reopen, business owners may find themselves pondering an intriguing thought: Should we have a company retreat this year?

Although there are still health risks to consider, your employees may love the idea of attending an in-person event after so many months of video calls, emails and instant messages. The challenge to you is to plan a retreat that’s safe, productive and enjoyable — and that doesn’t unreasonably disrupt company operations.

Mixing Business with Fun

First, nail down your primary objectives well in advance. Determine and prioritize a list of the important issues you want to address but include only the top two or three on the final agenda. Otherwise, you risk rushing through some items without adequate time for discussion and formalized action plans.

If one of the objectives is to include time for socializing or recreational activities, great. Mixing business with fun keeps people energized. However, if staff see the retreat as merely time away from the office to party and golf, don’t expect to complete many work-related agenda items. One way to find the right mix is to consider scheduling work sessions for the morning and more fun, team-building exercises later in the day.

Craft a Flexible Budget

Next, work on the budget. Determining available resources early in the planning process will help you set limits for variable costs such as location, accommodations, food, transportation, speakers and entertainment.

Instead of insisting on certain days for the retreat, select a range of possible dates. Doing so widens site selection and makes it easier to negotiate favorable hotel and travel rates. Keep your budget as flexible as possible, building in a 5% to 10% safety cushion. Always expect unforeseen, last-minute expenses.

The good news is that the hospitality industry is generally trying to rebound from the very difficult downturn it suffered because of the pandemic. So, you may be able to find some special deals offered to “draw out” companies that haven’t held a retreat in a while.

Also, if you wish to truly minimize the health risks, you might want to focus on venues with outdoor facilities, such as farms or golf resorts. You could hold sessions mostly outdoors (weather permitting, of course) where it’s very safe.

Reunite and Reenergize

Holding a company retreat this year may be a great way to reunite and reenergize your workforce. As convenient and practical as video meeting technology may be, there’s nothing quite like seeing each other in person. We can help you assess the costs and establish a reasonable budget that supports an enjoyable, productive and cost-effective retreat. Contact us today!

Tax Advantages of Hiring your Child at your Small Business

Tax Prep, Planning & Strategy|July 15, 2021

As a business owner, you should be aware that you can save family income and payroll taxes by putting your child on the payroll.

Here are some considerations.

Shifting business earnings

You can turn some of your high-taxed income into tax-free or low-taxed income by shifting some business earnings to a child as wages for services performed. In order for your business to deduct the wages as a business expense, the work done by the child must be legitimate and the child’s salary must be reasonable.

For example, suppose you’re a sole proprietor in the 37% tax bracket. You hire your 16-year-old son to help with office work full-time in the summer and part-time in the fall. He earns $10,000 during the year (and doesn’t have other earnings). You can save $3,700 (37% of $10,000) in income taxes at no tax cost to your son, who can use his $12,550 standard deduction for 2021 to shelter his earnings.

Family taxes are cut even if your son’s earnings exceed his standard deduction. That’s because the unsheltered earnings will be taxed to him beginning at a 10% rate, instead of being taxed at your higher rate.

Income tax withholding

Your business likely will have to withhold federal income taxes on your child’s wages. Usually, an employee can claim exempt status if he or she had no federal income tax liability for last year and expects to have none this year.

However, exemption from withholding can’t be claimed if: 1) the employee’s income exceeds $1,100 for 2021 (and includes more than $350 of unearned income), and 2) the employee can be claimed as a dependent on someone else’s return.

Keep in mind that your child probably will get a refund for part or all of the withheld tax when filing a return for the year.

Social Security tax savings

If your business isn’t incorporated, you can also save some Social Security tax by shifting some of your earnings to your child. That’s because services performed by a child under age 18 while employed by a parent isn’t considered employment for FICA tax purposes.

A similar but more liberal exemption applies for FUTA (unemployment) tax, which exempts earnings paid to a child under age 21 employed by a parent. The FICA and FUTA exemptions also apply if a child is employed by a partnership consisting only of his or her parents.

Note: There’s no FICA or FUTA exemption for employing a child if your business is incorporated or is a partnership that includes non-parent partners. However, there’s no extra cost to your business if you’re paying a child for work you’d pay someone else to do.

Retirement benefits

Your business also may be able to provide your child with retirement savings, depending on your plan and how it defines qualifying employees. For example, if you have a SEP plan, a contribution can be made for the child up to 25% of his or her earnings (not to exceed $58,000 for 2021).

Contact us if you have any questions about these rules in your situation. Keep in mind that some of the rules about employing children may change from year to year and may require your income-shifting strategies to change too.

Ensure Competitive Intelligence Efforts are Helpful, not Harmful

Industries|July 13, 2021

With so many employees working remotely these days, engaging in competitive intelligence has never been easier. The Internet as a whole, and social media specifically, create a data-rich environment in which you can uncover a wide variety of information on what your competitors are up to. All you or an employee need do is open a browser tab and start looking.

But should you? Well, competitive intelligence — formally defined as the gathering and analysis of publicly available information about one or more competitors for strategic planning purposes — has been around for decades. One could say that a business owner would be imprudent not to keep tabs on his or her fiercest competition.

The key is to engage in competitive intelligence legally and ethically. Here are some best practices to keep in mind:

Know the rules and legal risks.

Naturally, the very first rule of competitive intelligence is to avoid inadvertently breaking the law or otherwise exposing yourself or your company to a legal challenge. The technicalities of intellectual property law are complex; it can be easy to run afoul of the rules unintentionally.

When accessing or studying another company’s products or services, proceed carefully and consult your attorney if you fear you’re on unsteady ground and particularly before putting any lessons learned into practice.

Vet your sources carefully.

While gathering information, you or your employees may establish sources within the industry or even with a specific competitor. Be sure you don’t encourage these sources, even accidentally, to violate any standing confidentiality or noncompete agreements.

Don’t hide behind secret identities.

As easy as it might be to create a “puppet account” on social media to follow and even comment on a competitor’s posts, the negative fallout of such an account being exposed can be devastating. Also, if you sign up to receive marketing e-mails from a competitor, use an official company address and, if asked, state “product or service evaluation” as the reason you’re subscribing.

Train employees and keep an eye on consultants.

Some business owners might assume their employees would never engage in unethical or even illegal activities when gathering information about a competitor. Yet it happens. One glaring example occurred in 2015, when the Federal Bureau of Investigations and U.S. Department of Justice investigated a Major League Baseball team because one of its employees allegedly hacked into a competing team’s computer systems. The investigation concluded in 2017 with a lengthy prison term for the perpetrator and industry fines and other penalties for his employer.

Discourage employees from doing competitive intelligence on their own. Establish a formal policy, reviewed by an attorney, that includes ethics training and strict management oversight. If you engage consultants or independent contractors, be sure they know and abide by the policy as well.

Our firm can help you identify the costs and measure the financial benefits of competitive intelligence. Contact us today!

5 ways to Streamline and Energize your Sales Process

Industries|June 29, 2021

The U.S. economy is still a far cry from where it was before the COVID-19 pandemic hit about a year ago. As vaccination efforts continue, many experts expect stronger jobs growth and more robust economic activity in the months ahead. No matter what your business does, you don’t want your sales staff hamstrung by overly complicated procedures as they strive to seize opportunities in the presumably brighter near-future. Here are five ways to streamline and energize your sales process:

1. Reassess territories.

Business travel isn’t what it used to be, so you may not need to revise the geographic routes that your sale staff used to physically traverse. Nonetheless, you may see real efficiency gains by creating a strategic sales territory plan that aligns salespeople with regions or markets containing the prospects they’re most likely to win.

2. Focus on top-tier customers.

If purchases from your most valued customers have slowed recently, find out why and reverse the trend. For your sales staff, this may mean shifting focus from winning new business to tending to these important accounts. See whether you can craft a customized plan aimed at meeting a legacy customer’s long-term needs. It might include discounts, premiums and extended warranties.

3. Cut down on “paperwork.”

More than likely, “paperwork” is a figurative term these days, as most businesses have implemented electronic means to track leads, document sales efforts and record closings. Nevertheless, outdated or overly complicated software can slow a salesperson’s momentum.

You might conduct a survey to gather feedback on whether your current customer relationship management or sales management software is helping or hindering their efforts. Based on the data, you can then make sensible choices about whether to upgrade or change your system.

4. Issue a carefully chosen challenge.

What allows a business to grow is not only retaining top customers, but also creating organic sales growth from new products or services. Consider creating a sales challenge that will motivate staff to push your company’s latest offerings. One facet of such a challenge may be to replace across-the-board commission rates with higher commissions on new products or “tough sells.”

5. Align commissions with financial objectives.

Along with considering commissions tied to new products or difficult-to-sell products, investigate other ways you might revise commissions to incentivize your team. Examples include commissions based on:

Actual customer payments rather than billable orders,
More sales to current customers,
Increased order sizes,
Delivery of items when customers prepay, or
Number of new customers.

Again, these are just ideas to consider. Ultimately, you want to set up a sales compensation plan based on measurable financial goals that allow your sales staff to clearly understand how their efforts contribute to the profitability of your business.

Contact us for help evaluating your sales process and targeting helpful changes.

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.