February, 2017 | RKL LLP
Posted on: February 23rd, 2017

Tax Tip: Gather W-9 and W-4 Info in Real-Time to Streamline Year-End Reporting

Tax Tip: Gather W-9 and W-4 Info in Real-Time to Streamline Year-End ReportingWith so many deadlines demanding attention, business owners will often meet one and then put it in the rearview mirror as they move onto the next. While it is certainly satisfying to scratch a filing off the to-do list, putting some compliance requirements out of mind until the next year-end can actually compound the work and stress the next time they come due.

A perfect example of this phenomenon is Form 1099 reporting of certain payments made in trade or business. Even though this year’s January 31 deadline has come and gone, companies that stay on top of collecting the necessary information from vendors throughout the year via IRS Form W-9 can considerably reduce the headache of tracking it all down at once at the end of the year.

Request W-9s in real time

Whether you do business as an individual or sole proprietor or your company is classified as a partnership, corporation or LLC, the IRS requires the reporting of vendor and other types of payments via Form 1099 each calendar year. Taxpayers must use Form W-9 to gather information about each vendor. Staying on top of the W-9 requirement becomes much easier when collected in real time.

Requesting a W-9 from each vendor as soon as the business relationship begins is a best practice for tax record keeping and also prevents a year-end rush to track down vendors with whom you may no longer be working. Now that 1099s are due to the IRS one month earlier (January 31 instead of the February 28 due date in previous years), businesses have even less time to gather information and prepare this filling.

Stay on top of W-4s

In order to file accurate payroll information with the IRS, companies need updated Form W-4s on file for every employee. This employee withholding allowance certification instructs employers on how much federal income tax to take out of each paycheck. While most companies do not require new W-4s to be filed each year, it is a good idea to consistently remind employees to review and update should their personal or financial situation changes.

RKL has a team of professionals dedicated to helping businesses prepare for and comply with payroll and 1099 reporting requirements. Contact one of our local offices with any questions or for assistance.

 

Contributed by Susan L. Smith, Advanced Tax Paraprofessional in RKL’s Tax Services Group. Sue has more than 30 years’ experience conducting payroll services and preparing individual tax returns for clients. 

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Posted on: February 21st, 2017

Is Your Company Prepared for a Sales Tax Audit?

Is Your Company Prepared for a Sales Tax Audit?As state governments cast a wider net to identify much-needed tax revenue, sales and use tax reporting has received greater attention. Last summer, the Pennsylvania Department of Revenue launched a desk review pilot program to remotely audit sales and use tax returns, and other states are also working to identify under-reporters or non-filers. Amidst this environment of increased scrutiny, business taxpayers can benefit from better understanding the audit process and proactively assessing their sales and use tax liability exposure.

Why sampling method matters

In a perfect world, all sales and use tax audits would consist of a detailed examination of every transaction that occurred during the audit period. In the real world, however, full transaction reviews are simply not possible due to the large volume of transactions, so state tax auditors rely on sampling to project liability and assess compliance.

Virtually all state sales and use tax auditors use some form of sampling on large corporate taxpayers, but auditors in recent years are trading the block sampling methods of the past for more advanced methods. The complexity of these newer sampling methods requires close scrutiny to verify the accuracy of the results and how they are projected against the entire population of transactions. Remaining engaged throughout the audit process and understanding the methods used can help taxpayers ensure the results are representative of their businesses.

How liability is identified

Most taxing agencies typically apply statistical sampling in sales and use tax audits. In certain cases, an auditor will also stratify the transaction population into groups based on a certain criteria. For sales and use tax audits, stratification is based on the dollar amount of the transaction. This process is intended to improve efficiency, preserve the validity of the sample population and offset the impact of extreme transaction values.

Once the sample transaction population is created and stratified if necessary, auditors examine it for errors like tax overpayments or underpayments. Errors identified in the sample population are projected to create an estimate of the errors in the general transaction population. Positive (overpayment) and negative (underpayment) errors are usually combined to yield a total net error; however, auditors are not obligated to identify overpayments or credits so the positive errors may not always be counted against the negative.

When being proactive pays off

Regardless of the method used, the auditor and the taxpayer must each evaluate the results of the sample and sample projection. It is the taxpayer’s right to challenge the audit outcome or assessment, including specific issues with the audit methodology. Unfortunately, most taxpayers do not have the in-house expertise or familiarity with sales and use tax audits needed to determine whether a challenge is warranted, and seek the counsel of an experienced state tax advisor like RKL.

Sales tax compliance is much more than knowing what tax rate to apply to a transaction – the reliability of a company’s record-keeping systems and the soundness of its financial procedures can also impact the outcome of a sales and use tax audit. Taxpayers who are proactive in managing compliance processes and using technology to increase the accuracy and realiability of transaction data can mitigate potential exposure and stress related to undergoing an audit.

RKL’s State and Local Tax professionals can conduct a sales and use tax process review for companies to better understand their level of compliance and identify improvements that will result in not only time savings but also expenses related to poor audit outcomes. Contact me with any questions about a process review or general inquiries about sales and use tax audits at ftobias@rklcpa.com or 717.394.5666.

 

 Frank J. Tobias, CGFM, Principal in RKL’s Tax Services Group. State and local taxes, Pennsylvania taxes, multi-state taxationContributed by Frank J. Tobias, CGFM, Principal in RKL’s Tax Services Group. He specializes in the area of multi-state planning and compliance, with extensive experience in all areas of Pennsylvania taxation.

 

 

 

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Posted on: February 15th, 2017

RKL Announces New Hire in Business Consulting Services Group

Ryan P. Hurst, ASA, Manager in RKL's Business Consulting Services GroupPRESS RELEASE

WYOMISSING, PA (February 15, 2017) – RKL LLP today announced the hiring of Ryan P. Hurst, ASA, as a Manager in its Business Consulting Services Group. Based in the firm’s Wyomissing office, Hurst will perform valuations and related consulting services for clients in a wide range of industries throughout RKL’s Central and Eastern Pennsylvania footprint.

Hurst’s expertise includes conducting valuations for gifting and estate planning purposes, employee stock ownership plans (ESOPs), business purchases and sales, buy/sell agreements, fair value accounting and GAAP reporting (ASC 805 and 350), litigation support for shareholder disputes and strategic alternatives analyses.

An Accredited Senior Appraiser (ASA), Hurst brings 13 years’ experience in valuation, investment banking and consulting to RKL, including several years at major investment banks and a top 25 public accounting firm. He serves on the Board of the Berks County Estate Planning Council, and is a member of the Estate Planning Council of Central Pennsylvania. Hurst is also a member of the ESOP Association and National Center for Employee Ownership (NCEO).

Hurst received his B.S. in Business Administration with a concentration in Accounting and Finance from Shippensburg University. He is a member of the Greater Reading Young Professionals and the Philadelphia chapter of the GF Network. Hurst is an avid runner, cyclist and Ironman triathlon finisher. He resides in Sinking Spring with his wife, Kristen, daughters, Sadie and Kallie, and dog, Joey.

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Posted on: February 14th, 2017

The Cost of Risky Employees is High. Here’s How to Reduce It.

 RKL’s Business Consulting team explains why pre-hire verification and vetting is a critical component of a company’s fight against fraud. Business is booming and you need to hire more staff, but bringing new employees on board is not without risk. Employers should ask themselves how well they know the person they are about to hire, particularly those whose positions entail the handling of financial, sensitive or confidential information.

According to the Association of Certified Fraud Examiners, 40 percent of fraud is carried out by employees in the accounting or operations department. This statistic begs the question: If a company is going to give an employee access to sensitive or financial information, shouldn’t that company also screen those individuals as thoroughly as possible prior to hiring?

There is no magic wand to wave to ensure a perfect hire, but there are several steps companies can take to strengthen pre-hiring screening and verification.

Conduct a background check

Long considered a standard part of the hiring process, more companies are skipping the background check to cut costs. This is a huge oversight, as a background check can uncover critical red flags and help companies eliminate unfit candidates right out of the gate.

Run credit and employment-related checks

Financial troubles rank high on the list of factors that drive an employee to conduct fraud, so a credit check can highlight such vulnerabilities. Employment and education-related verifications are also key to determining honesty about credentials and experience.

Send applicants for drug tests

Another time-consuming expense that is often passed over, drug tests are a proven method for filtering out applicants. Substance abuse is another risk factor for fraudulent behavior, and it can also create other operational risks for a business.

Dig deeper with references

It is important to obtain references from job applicants, but it is even more important to make the most of them. Take the time to go beyond the basic checklist of questions – asking open-ended inquiries and encouraging elaboration is a great way to get a sense of what the applicant is like as a colleague.

Maintain confidentiality and legal regulations

When using these methods to obtain information about applicants, it is critical to adhere to the legal or regulatory precedent in the employment arena, like the federal Fair Credit Report Act or the U.S. Equal Employment Opportunity Commission. There are many employment and hiring related issues subject to litigation, regulation and legislation, so be sure to develop policies and procedures that protect the rights and personal data of both employer and applicant.

Pre-hire verification and vetting is a critical component of a company’s fight against fraud and an important investment of resources. Companies can work with a human resources consulting or fraud prevention partner, like RKL, to avoid confidentiality issues or violations and develop a thorough employment screening process. Learn more about RKL’s fraud and forensic accounting services or contact me at 717.394.5666 or bnovis@rklcpa.com.

 

Bethany A. Novis, CPA/ABV, CVA, CFE, partner in RKL’s Business Consulting Services GroupContributed by Bethany A. Novis, CPA/ABV, CVA, CFE, a partner in RKL’s Business Consulting Services Group. Bethany specializes in fraud investigation, business valuation and litigation services. In addition to being a licensed CPA accredited in business valuation, she holds designations as a Certified Valuation Analyst (CVA) and a Certified Fraud Examiner (CFE).

 

 

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Posted on: February 8th, 2017

How Gov. Wolf’s 2017-18 Budget Proposal Could Impact Taxpayers

Pennsylvania Governor Tom Wolf today proposed his 2017-18 budget. RKL’s state and local tax experts analyze the proposal and how it could impact taxpayers.Against the backdrop of a current projected $700 million shortfall and a multibillion-dollar structural deficit, Pennsylvania Governor Tom Wolf yesterday delivered his budget proposal for Fiscal Year 2017-18.

Outlining his priorities for the upcoming fiscal year, Governor Wolf steered clear of suggesting broad-based tax increases in his proposed $32.3 billion General Fund budget (1.8% higher than the current fiscal year budget). Instead, he discussed a blend of targeted taxes, cost-cutting measures and functional consolidations to remedy Pennsylvania’s worsening financial situation.

Let’s take a closer look at the main elements of Wolf’s proposal and what they mean for businesses and individual taxpayers.

Focused Spending

Governor Wolf’s main focus continues to be education spending. His budget proposal calls for an increase of $200 million in education spending, with the majority devoted to early childhood development and K-12 education. The Governor also continues to prioritize improving and expanding services for older Pennsylvanians and directing resources to combat the heroin and opioid addiction crisis that plagues the Commonwealth.

Cost Savings and Spending Reductions

Governor Wolf’s budget identifies a number of opportunities for cost savings and spending reductions that appear to have bipartisan support. The Governor’s budget identifies a proposed $2 billion in spending cuts, achieved through methods including:

  • Prioritizing agency expenditures and creating cost efficiencies;
  • Improved fiscal management;
  • Revenue enhancement;
  • Eliminating and reducing certain non-core programs;
  • Employee complement controls;
  • Consolidation and coordination of state services; and
  • Facility closures, lease management and facility downsizing.

These are just some of the ideas the Governor has proposed to achieve savings, but we will have to wait and delve deeper into the specific details of each proposal to get a true feel for just how realistic this $2 billion figure is.

Impact on business and taxpayers

In a stark contrast to his budget proposal from last year, Governor Wolf provided that he would not seek an increase in the personal income tax or any significant increase or expansion of the sales and use tax. Although there are no proposed increases to these two broad-based taxes, business and individual taxpayers should be aware of some of the Governor’s proposals that will have a direct impact on them, such as:

  • Increasing the minimum wage from $7.25 to $12 an hour;
  • Imposing a natural gas severance tax;
  • Closing “loop-holes” for insurers;
  • Reducing available tax credits;
  • Establishing uniform Net Operating Losses (NOL) provisions;
  • Eliminating tax “loop-holes” for certain sales and use tax exemptions including software and computer services, food sold to airlines, aircraft maintenance and repair; and
  • Adopting combined reporting; and
  • Reducing the corporate net income tax rate over several years to a rate of 6.49% by 2022.

Each of the items listed above require close scrutiny and raise a number of questions regarding this budget. What does the higher minimum wage mean for small business owners? How do the NOL provisions impact Pennsylvania’s ability to attract and keep businesses? How will changing the corporate net income tax system impact revenue in the short-term? These questions and more are issues we at RKL will be tracking closely as the budget process continues.

While it is important to understand what items are included in the budget address, it is equally important to be cognizant of those items excluded. The main driver behind the structural deficit is the rising cost of public pensions that Pennsylvania has been trying to resolve for a number of years. It is hard to imagine a budget that does not address such a prominent issue as pension reform.

The Governor’s address is the first move in the budget-balancing chess match that will play out over the coming months in the Capitol. RKL’s State and Local Tax Team will closely monitor state budget negotiations, just like all developments in state government, for potential impact on business and individual taxpayers. Readers with questions about the Governor’s proposal or Pennsylvania tax proposals should contact me at jskrinak@rklcpa.com.

 

Jason C. Skrinak, CPAContributed by Jason C. Skrinak, CPA, State and Local Taxes (SALT) Practice Leader for RKL’s Tax Services Group. Highly regarded throughout the region for his deep knowledge and expertise in SALT consulting, Jason has significant experience representing taxpayers before Pennsylvania’s Board of Appeals and Board of Finance and Revenue.

 

 

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