July, 2014 | RKL LLP
Posted on: July 28th, 2014

RKL Leibenguth Earns PICPA’s “Young Leaders” Award

PRESS RELEASE

WYOMISSING, PA (July 28, 2014) – Reinsel Kuntz Lesher LLP (RKL), Certified Liebengoth_2-  72dpiPublic Accountants and Consultants, is pleased to announce that Amy Leibenguth, CPA, has been named to the Pennsylvania Institute of Certified Public Accountants’ 2014-2015 Young Leaders Award list for her demonstrated commitment to the accounting profession and to her community.

Leibenguth, along with her peers in the accounting industry from across the Commonwealth, will be honored at the PICPA’s Leadership Conference on Monday, September 29 at the Sheraton Hotel in Harrisburg, PA. Recipients are selected based on their active involvement with the PICPA and their volunteerism in the community.

Leibenguth is a manager in RKL’s Small Business Services Group. She is an active member in PICPA, AICPA, board vice president of the Ziegel’s United Church of Christ, and finance committee member of the South Mountain YMCA. Leibenguth is a graduate of Kutztown University and resides in Fogelsville, PA.

Posted on: July 22nd, 2014

Adding It Up: The Tax Implications for Individuals Forgoing Health Insurance

Under the Affordable Care Act, individuals who forego health insurance will assume tax liabilities.

Under the Affordable Care Act, individuals who forego health insurance will have a shared responsibility payment when they file their 2014 taxes.

Under the Affordable Care Act, the responsibility for health insurance is shared among Federal government, State governments, insurers, employers and individuals. The individual shared responsibility provision requires that all individuals in a family have minimum essential coverage, an exemption from minimum essential coverage or make a shared responsibility payment when the 2014 Federal income tax return is filed.

What is minimum essential coverage?

If you have employer-sponsored insurance or coverage obtained through a Health Insurance Marketplace, you have minimum essential coverage. Certain other plans will qualify as well.

What if you don’t have minimum essential coverage?

The first consideration is, are you exempt? This applies to individuals who are members of certain religious sects, a federally recognized Native American tribe or a health care sharing ministry, those without coverage for less than three consecutive months and individuals whose minimum essential coverage costs more than eight percent of their household income. If none of those apply, you will need to make a shared responsibility payment with your 2014 tax return when it is filed in 2015.

How much is the shared responsibility payment?

If you or any of your dependents do not have minimum essential coverage for 2014, the individual shared responsibility payment is the greater of : one percent of your household income that is above your tax return filing threshold or a flat dollar amount based upon the number of family members without minimum essential coverage. For 2014, the flat dollar amount is $95 per adult and $47.50 per child under age 18, limited to 4 children. For those who have minimum essential coverage for part of the year, the payment is pro-rated based upon the number of months the individual is without health care coverage. The maximum amount paid cannot be more than the cost of the national average premium for a bronze level plan available through the Marketplace in 2014.

Can you give me an example?

For example, assume Jim and Julia are both under age 65 with two dependent children under the age of 18. They do not have minimum essential coverage for all of 2014 and no one qualifies for an exemption. For 2014, the Federal tax filing requirement threshold is $20,300 for taxpayers filing married filing jointly. Jim and Julia’s household annual income is $65,000. Based upon the income formula, their payment would be $447, $65,000 less the $20,300 filing threshold is $44,700 and 1% of $44,700 is $447. Their flat dollar amount is $285, which is $95 per adult and $47.50 per child. Since $447 is larger than $285 and less than the national bronze level premium, Jim and Julia’s shared responsibility payment for 2014 would be $447.

The percentages and flat dollar fee amounts increase in 2015 and 2016. For 2015, the individual shared responsibility payment is the greater of: 2% of household income above the tax return filing threshold or a flat dollar amount of $325 per adult and $162.50 per child under age 18. For 2016, the individual shared responsibility payment is the greater of: 2.5% of household income and $695 per adult and $347.50 per child under age 18.

Have questions about the impact of the Affordable Care Act on your business or personal tax position? RKL is here to help. Contact your RKL  service provider.

shaub_closeupContributed by Krista L. Shaub, CPA, CSEP, a manager in RKL’s Tax Services Group. Krista has more than 13 years experience in public accounting, specializing in tax planning and compliance for individuals, businesses and fiduciary clients. 

Posted on: July 14th, 2014

Employee or Contractor? Not Knowing the Difference Could Cost Your Business

Business team standing in cubicle smiling

The lack of a definitive test for classifying employees vs. contractors presents unique challenges to employers, who are nonetheless responsible for compliance.

In today’s business climate, employers are increasingly using outside workers to reduce expenses, including payroll tax costs. The classification of a worker as an employee or as an independent contractor can mean a substantial difference in the amount of employment taxes the business pays.

With the new health care reform law imposing coverage requirements on an employer with more than 50 full-time employees, it may be even more tempting for many employers to hire independent contractors instead. It is one thing to legitimately employ an independent contractor, however, an employer who misclassifies his employees either inadvertently or deliberately to minimize its employment tax or health care coverage responsibilities may become subject to interest, penalties and even tax liens.

Employee or Contractor: Telling the Not-So-Simple Difference

Despite the importance of the decision, classifying a worker as either an independent contractor or an employee is not straightforward. The lack of a definitive test for classifying workers, coupled with confusion and uncertainty about the application of existing rules, contributes significantly to the worker classification problem. The determination depends on a number of factors and can be quite complex.

The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done).  However, it is not necessary that the business actually direct and control the worker, but rather that the business has the right to do so. What matters is that an employer has the legal right to control the details of how, when and where the services are performed.

Below are some guidelines to be used when making your determination: Keep in mind that the IRS will make its decision based on the whole picture, not just a single factor.

Workers are more likely to be classified as independent contractors if they:

  • Make a significant investment in business property, such as tools
  • Pay their own business expenses
  • Receive a flat fee that is not based on an hourly or similar rate
  • Are not prohibited from doing work for other companies
  • Can pay subcontractors to get the job done
  • Are not performing services as an integral part of your regular business

Workers are more likely to be classified as employees if they:

  • Are given specific instructions and on-going training in how to get the work done
  • Cannot work for others
  • Have expenses paid by your company
  • Are paid with a salary or hourly wage
  • Do not make a significant investment in their trade or business
  • Are an integral part of your regular business
  • Receive direct reimbursement for all, or almost all, expenses

Fortunately, for employers who may have misclassified their employees as contractors, the IRS is currently offering a Voluntary Classification Settlement Program. The program provides an opportunity for taxpayers to reclassify their workers as employees for employment tax purposes for future tax periods with partial relief from past federal employment taxes. To participate, the employers must meet certain eligibility and application requirements. For help, contact your RKL service provider.

Reading, Michael_croppedContributed by Michael Reading, CPA, supervisor in RKL’s Small Business Services Group. Michael is an experienced accounting and tax professional with more than ten years experience helping companies meet compliance obligations, minimize taxes, meet their financial reporting needs and achieve success. He specializes in working with small businesses in industries including construction, manufacturing/distribution, retail and others.

 

Posted on: July 7th, 2014

Three Ways to Get Your Board Engaged

Thoughtful planning can go a long way in getting the most from your company's board of directors.

Thoughtful planning can go a long way in getting the most from your company’s board of directors.

You have recruited a strong board of directors that is rich in experience and expertise.  How do you make the most of this assembled talent to benefit your company? The answer lies in establishing lines of communication and conducting effective board meetings.

Many times, business owners take a laissez-faire approach to board meetings with the intention to allow for open discussion and free flow of ideas. However, this tactic can lead to unfocused, chaotic meetings during which nothing gets accomplished. How can you solicit meaningful board participation and avoid a free-for-all? Consider these three factors as you continue to develop your own board meeting style.

  1. Timing. Avoid dumping information on board members right before a board meeting. Most will not have the chance to fully digest the information and effectively participate in board discussion. Remember that most of your board members are not involved with your company’s daily operations. They will need time to reacquaint themselves with your company’s critical issues. Distribute board packages at least two to three days before the meeting. Or, provide key information to board members periodically between meetings.
  2. Balance. Strike a balance between presentation of information and discussion/decision making. There is no one rule of thumb for the best allocation of board meeting time.  However, sharing information with board members on a regular basis between meetings will allow you to spend less time on presentation and increase time devoted to discussion of key issues. Not every meeting will be identical. But if you find yourself talking more than listening, you may have wasted the opportunity to glean valuable wisdom from your board members.
  3. Planning.  Developing a plan for each of your board meetings is an obvious requirement for effective meetings. However, it is equally important to develop an overall strategy for your board agenda a year in advance. This is a chance to disengage from daily operations and objectively assess performance. Are you executing? Are you innovating? Are you building a management team? Are you growing the customer base? Are you doing so according to the last plan you laid out? And is that plan still good enough to win or do you need a new plan and new targets? The answers to these questions should naturally trigger a board agenda for the year ahead.

Planning ahead and being intentional with the content of your board meetings is a win-win for you and your board. It will make for a valuable exchange of information and provide meaningful engagement for everyone involved.

To learn more about launching and managing an effective board, stay tuned to Working Capital for the third installment of our series on private company boards.

Looking for professional help determining whether your company is structured for success? RKL offers a wide range of resources and expertise in the areas of strategic planning, succession planning, benchmarking, mergers and acquisitions and more. Contact Paula K. Barrett, CPA/ABV, CVA, partner and leader of RKL’s Business Consulting Services Group, at pbarrett@rklcpa.com or 610.376.1595.

gretchen_2Contributed by Gretchen G. Naso, CVA, MBA, a principal in RKL’s Business Consulting Services Group. A Certified Valuation Analyst, Gretchen has extensive experience in general and family limited partnerships and valuations for financial reporting, purchase price allocation and gifting and estate tax purposes.

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