Tax-services | RKL LLP
Posted on: January 17th, 2018

Initial Guidance for 2018 Federal Withholding Now Available

Initial Guidance for 2018 Federal Withholding Now AvailableEmployers now have initial information to proceed with 2018 withholdings. While this information will get you started on 2018 withholdings, final information will not be available until sometime in February.

On January 11, the IRS released Notice 1036, which is an early copy of its percentage method tables for 2018 income tax withholding. The IRS also published Frequently Asked Questions to provide employers with additional information on withholding this year and next. Withholding tables are designed to streamline the process for employers to take out the correct amount of income tax from an employee’s paycheck, as dictated by the Form W-4 on file. There is no action required by employees at this time.

Tax Reform Impact on Withholding

Typically issued before the calendar year end, 2018 withholding information was delayed by the enactment of the Tax Cuts and Jobs Act on December 22, 2017. The withholding information in Notice 1036 is typically included alongside additional information like wage-bracket tables in Publication 15, (Circular E), Employer’s Tax Guide. The IRS is expected to release Publication 15 sometime in February.

Timing and Deadline for New Rate Use

In the meantime, the updated withholding tables show the rates employers should use in 2018. The IRS recommends that employers begin using the 2018 tables as soon as possible, but by February 15, 2018 at the very latest. Until the 2018 tables are implemented into their payroll processing systems ahead of the February 15 deadline, employers may continue to use the 2017 withholding rates.

Supplemental wage and backup withholding for 2018

The Tax Cut and Jobs Act also changes the rates to be used for supplemental or nonregular wages, like bonuses or commissions, and backup withholding for tax years 2018 through 2025.

During this period, the backup withholding rate drops from 28 percent to 24 percent.

The law keeps the two tiers for supplemental withholding:

  • For supplemental wages over $1 million, a mandatory flat rate of 37% applies (down from 39.6% in 2017).
  • For supplemental wages up to and including $1 million, the following options are available:
    • Withhold a flat 22% (down from 25% in 2017), no other percentage is allowed
    • Combine with regular wages and apply to the withholding tables 

Revisions to Withholding Calculator and W-4s Underway

In addition to the new withholding tables, the IRS is also updating other resources and tools used by business owners and payroll processors.

The IRS expects to release an updated withholding tax calculator before the end of February. A revision of Form W-4 is also in the works, and can be used in tandem with the updated calculator by employees starting a new job or existing employees seeking to adjust their withholding in the wake of tax reform or other personal changes in 2018 and beyond. Until the new Form W-4 is issued, however, employers and employees should continue to use the 2017 version.

RKL’s team of professionals dedicated to serving the needs of small business owners is available to answer questions about the federal withholding information and changes in 2018. Contact your RKL advisor or one of our local offices to get started.

Tina Dodson, CPP, EA, of RKL’s Small Business Services Group.Contributed by Tina Dodson, CPP, EA, in RKL’s Small Business Services Group. Tina has two decades of experience helping small business owners and their management teams meet their financial reporting and individual and corporate tax return preparation needs.




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Posted on: December 21st, 2017

New Tax Law: Top-Level Impacts for Businesses and Individuals

New Tax Law: Top-Level Impacts for Businesses and IndividualsThe U.S. tax landscape will undergo significant changes, with the sweeping overhaul bill on its way to the president’s desk for signature. At RKL, our tax team has been monitoring this tax overhaul push through its various forms and stages. The new law is sizeable and complex, so we’ve assembled a quick primer on some high-level takeaways for business and individual taxpayers.

An important point about this bill is that some of its provisions are temporary, while others are permanent. Without additional legislative action, some of the tax breaks and benefits in this bill will expire in the future.

Key Individual Provisions

Reduced Tax Rates

The new law temporarily adjusts the individual income tax rates. Previously, the rates were 10, 15, 25, 28, 33, 35 and 39.6 percent. Starting in 2018, the rates will be 10, 12, 22, 24, 32, 35 and 37 percent. These rates will return to previous 2017 levels after 2025. The IRS recently announced that it will issue updated guidance next month on withholding under the new law (Notice 1036).

AMT Retained, Exemption Temporarily Increased

While the individual alternative minimum tax (AMT) remains in the new tax law, there are some alterations, including a temporary increase through 2025 of the exemption amount to $109,400 for joint filers and $70,300 for all others (excluding estates and trusts). The exemption phase-out level is also raised to subject income of $1 million and above (joint filers) and $500,000 (all other filers) to AMT. These amounts will be adjusted annually for inflation.

Standard Deduction Doubled

The law nearly doubles the standard deduction. For married taxpayers filing jointly, the standard deduction rises to $24,000; for head-of-household filers, it increases to $18,000; and for individual filers, the amount jumps to $12,000.

The standard deduction increase is intended to offset another component of the law – the elimination or reduction of many tax credits and deductions. Many taxpayers who previously itemized deductions may now fall under the standard deduction threshold.

Numerous Deductions and Credits Changed

As with the new tax rates, all changes made to individual tax credits and deductions are temporary and generally expire after 2025.

Starting in 2018, the mortgage interest deduction is reduced to mortgages of up to $750,000, from a previous $1 million level. Second home mortgage interest is still deductible, within the limit listed above, but deductions of home equity loan interest are now disallowed.

The combined deductibility of state and local income taxes, sales tax in lieu of income taxes and real estate taxes is capped at $10,000, starting in 2018. The law also disallows a 2017 deduction for the prepayment of state and local taxes attributable to taxable income earned in 2018 and beyond.

Miscellaneous itemized deductions, including professional service fees, are repealed under the tax bill. The deduction for medical expenses, however, remains and is temporarily lowered for tax years 2017 and 2018 to a threshold of 7.5 percent of adjusted gross income.

Under the new law, alimony payments are no longer deductible, nor must the recipient report such payments as income.

Child Tax Credit Doubled, Eligibility Expanded

The law temporarily doubles the child tax credit from $1,000 to $2,000 per child, with up to $1,400 of the total amount refundable. The adjusted gross income (AGI) phase-out thresholds are also raised, starting at $400,000 AGI for joint filers and $200,000 AGI for the rest. An additional $500 nonrefundable credit for dependents other than children was also introduced in the new law.

Estate, Gift Tax Exemption Doubled

While previous iterations of the tax legislation proposed a full repeal of the estate tax, the bill signed into law instead doubles the exclusion amounts for estate and gift taxes, effective January 1, 2018. This doubled exclusion sunsets after January 1, 2026.

The maximum federal estate tax is 40 percent for tax year 2017 remains in place moving forward. The estate and gift exclusion amount for married couples, however, increases from $10.98 million in 2017 to $22 million in 2018. In future years, the $22 million joint exclusion will be adjusted annually for inflation.

Individual Mandate Repealed

The tax law repeals the individual shared responsibility requirement of the Affordable Care Act by reducing penalties assessed after 2018 to $0. The IRS recently cautioned that returns submitted for tax year 2017 that do not report full-year coverage, report a shared responsibility payment or claim a coverage exemption will be rejected as incomplete and inaccurate.

Key Business Provisions

Corporate tax rate reduced, excluded from AMT

The tax law permanently reduces the corporate tax rate from 35 to 21 percent, and also excludes corporations from AMT.

Asset Purchase Tax Benefits Expanded

Under the new law, bonus depreciation doubles from 50 to 100 percent for property purchased between September 27, 2017, and January 1, 2023 (or January 1, 2024, for a small category of property). After that date, at 20 percent phase-down takes effect. Also, bonus depreciation amount is now permitted for the purchase of used property, in addition to new property.

The tax law also raises the cap on depreciation write-offs for business-use vehicles (now including passenger automobiles) purchased after December 31, 2017. The new cap schedule is: $10,000 (up from $3,160) for the first year a vehicle is used; $16,000 (up from $5,100) for the second year; $9,600 for the third year (up from $3,050); and $5,760 (up from $1,875) for each remaining year until all costs are fully recovered.

The Section 179 expensing limitations under the new law are $1 million (dollar) and $2.5 million (investment).

Favorable Treatment for Pass-Through Businesses

Generally taxed at the top individual rate, owners of so-called “pass-through” entities – partnerships, S corporations, most LLC’s, and sole proprietorships – are permitted to deduct 20 percent of qualified income, subject to variety of qualifications and limitations.

Small Business Expansion

The definition of “small business” has been expanded to include many companies with average annual gross receipts of less than $25 million, allowing these taxpayers to take advantage of several favorable tax accounting rules previously only available to taxpayers with under $10 million of gross receipts. 

One-Time Repatriation Tax

In addition to systemic changes to the taxation of multinational companies, the new law imposes a one-time reduced tax on overseas-held earnings and profits: 15.5 percent for cash and 8 percent for illiquid assets.

In addition to these top-level impacts, the new tax law alters a number of other tax policies, deductions and strategies. Over the coming weeks and months, RKL will drill down into the changes and assess the impact to various industries and segments of the business community, so be sure to sign up for our monthly e-news, follow us on LinkedIn and stay tuned to

As always, contact your RKL tax advisor or one of our local offices with any questions.

Robert M. Gratalo, CPA, MST, partner and leader of RKL’s Tax Services GroupContributed by Robert M. Gratalo, CPA, MST. Rob is a Partner and Leader of RKL’s Tax Services Group. He serves as business and tax advisors for a wide range of clients, with a focus on the manufacturing, distribution, construction and real estate development industries. Rob specializes in the taxation of privately held businesses and their owners, and he often consults on the tax impact of transactions like business sales, mergers or acquisitions.



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Posted on: December 19th, 2017

Year-End Tax Strategy: Pay Fourth Quarter Estimated State and Local Taxes Now to Lock in 2017 Deduction

Year-End Tax Strategy: Pay 4th Quarter Estimated State & Local Taxes Now to Lock in 2017 DeductionTax reform legislation is on track for passage before the end of this year, significantly transforming the U.S. tax code. One of the key aspects of the current legislation is capping the state and local income tax, sales tax in lieu of income tax and real estate tax deduction at $10,000 for 2018.

For individual taxpayers that make quarterly estimated payments of these taxes throughout the year, we highlight an opportunity to potentially lock in tax benefits in 2017 before 2018 changes take effect.

Due date for 2017 fourth quarter installment

The 2017 fourth quarter state and local estimated income taxes are not due until January 15, 2018. For taxpayers with more than $10,000 in combined state and local income and real estate taxes, paying the estimate in January means they would be ineligible for a combined deduction of amounts over $10,000.

In addition, any 2017 state and local tax liabilities paid with the 2017 tax returns in April could also be lost.

Benefits to paying now

Paying this installment before December ends will allow taxpayers to potentially deduct the full amount of taxes paid during the 2017 tax year. The anticipated 2017 state and local tax liabilities due in April can also be built into the fourth quarter estimate and paid before December ends.

This two-week difference in payment timing could keep a sizeable payment deductible, or change it into a fully non-deductible category, provided a taxpayer already exceeded the $10,000 threshold. Be sure to discuss any potential alternative minimum tax impact and any overall limitations on your itemized deductions with your tax advisor, as accelerating this deduction may not be beneficial to all.

Caution about prepaying 2018 state and local taxes

This guidance specifically focuses on the payment of 2017 fourth quarter tax estimates. The legislative language, as it stands at time of publication, disallows a deduction for the prepayment of state and local taxes due in tax years 2018 and beyond.

Ready to execute this strategy? RKL can help.

Contact your advisor or one of our local offices today to lock in this tax benefit before the end of the year.

Kevin A. Eisenhart, CPA, MBA, MST, RKL Tax PartnerContributed by Kevin A. Eisenhart, CPA, MBA, MST, Partner in RKL’s Tax Services Group. Kevin takes a strategic approach to tax planning and compliance to help his clients build value. He specializes in the taxation of corporations, S corporations and partnerships, including issues surrounding multistate taxation and consolidated return matters.



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Posted on: December 5th, 2017

4 Keys to Tax-Smart Year-End Charitable Giving

4 Keys to Tax-Smart Year-End Charitable Giving The combination of the holiday spirit and the approaching calendar year end make now a popular and busy time for charitable solicitations and donation requests. Individual taxpayers seeking to support a cause close to their hearts can not only make a positive philanthropic impact, but also receive tax benefits for their donations. Here are some helpful reminders as you look to take advantage of charitable tax benefits this year.

Research organizations before donating

Make sure the organization soliciting support is legitimate by conducting online research. A good place to start is the Internal Revenue Service’s Exempt Organizations Select Check, the Pennsylvania Bureau of Corporations and Charitable Organizations Online Database or similar sites in other states. These tools allow potential donors to verify tax-exempt status, deductibility of charitable contributions and proper registration status before giving. is another good resource that makes available copies of organizations’ tax returns and important information about the operations of the nonprofit and what percentage of donations are directed to its mission.

Properly document donations  

Different types and amounts of giving trigger different documentation requirements for tax purposes. For cash donations, most charities will send a letter to the donor confirming the donation amount and specifying whether all or part of it is considered a charitable contribution. Retain that letter with tax records to substantiate the donation. These types of letters are required for donations of $75 or more. For donations under that threshold not supported by a letter, a copy of a cancelled check will suffice.

Noncash donations under $250 (think food given to the local soup kitchen or clothes donated to Goodwill) are legitimate charitable donations, but for tax purposes a receipt or letter from the organization is required. The receipt or letter must state the date of the donation and describe the property contributed. The determination of the donation value is up to the donor, not the organization. To determine the value of donated clothing and household goods, the Goodwill Valuation Guide is a useful tool. For food and perishable goods, original purchase receipts combined with the donation confirmation letter from the charity can be used for tax substantiation purposes.

In the case of noncash donations over $250, good faith estimates are required for gifts between $250 and $5,000, and appraisals are required for gifts of $5,000 or more. The receiving charity will likely be familiar with the valuation and substantiation requirements, but it is always best to consult with a professional tax advisor before the donation is made, so correct documentation can be gained in real time instead of scrambling back to the organization later to obtain the required proof for tax filings.

Donations of stock allow taxpayers to support causes important to them without affecting personal cash flow. Generally speaking, the most tax-advantaged approach is to donate stock held for more than one year that has appreciated in value. This provides for a larger charitable contribution and avoids tax on the capital gain. For losing stock, sell it first and then donate the cash. This approach allows you to report the benefit of the capital loss and the cash value of the contribution.

Publicly traded stocks do not require a valuation at any dollar value; however, non-publicly traded stock requires a qualified appraisal if the fair market value is greater than $10,000. Stock donations are more involved than cash or tangible items, so be sure to consult a tax or financial advisor before making this type of donation.

Consider making a qualified charitable distribution from an IRA

Making a direct transfer from an IRA allows individuals age 70½ or over to avoid a tax hit on the annual required minimum distribution from their accounts and support a cause important to them. In this case, the charitable contribution must go directly to the recipient organization, not the taxpayer first. This option requires some advance planning, so individuals considering it should consult with their tax or financial advisor.

Pledge or giving commitment does not equal a charitable donation

Individual taxpayers are permitted to take a deduction only for the actual amounts paid out to charities during a calendar year. Keep in mind that commitments made in December 2017 to make a donation in January 2018 cannot be claimed on a 2017 tax return.

Year-end charitable giving can make a big difference to community benefit organizations. Through proper research and documentation, it can also provide tax benefits to the donor. Individuals seeking more information or assistance with the best practices outlined above should contact their RKL advisor or one of our local offices.

Stephanie E. Kane, CPAContributed by Stephanie E. Kane, CPA, Manager in RKL’s Tax Services Group. Her client responsibilities include serving clients in a wide variety of industries with a focus on not-for-profit entities.





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Posted on: November 15th, 2017

2017 Year-End Tax Planning Guide

With a new year on the horizon, now is a perfect time to examine your unique circumstances to uncover new opportunities to minimize income taxes. As part of our ongoing effort to help clients achieve a more secure financial position, we’re proud to provide a 2017 year-end tax planning guide.

Inside, you’ll find:

  • An overview of critical tax rates and information
  • Key tax considerations for business owners and individuals
  • Individual tax-minimizing strategies
  • Business tax planning opportunities
  • Tax-savings actions to take before the end of the year

After reviewing this guide, contact your RKL advisor before taking any actions. Our diverse expertise means we’re able to help you navigate the complex tax code, identify opportunities and execute accordingly in the context of your personal financial circumstances.

Posted on: October 23rd, 2017

PA Supreme Court NOL Ruling Changes Deduction Moving Forward, Creates Uncertainty for Past Filings

RKL’s State and Local Tax experts recap the PA Supreme Court’s ruling on the net operating losses deduction and assess the impact on corporate taxpayers. Two years ago, the Commonwealth Court sided with corporate taxpayers in Nextel Communications of the Mid-Atlantic, Inc. v. Commonwealth of Pennsylvania, declaring unconstitutional the state’s cap on deductible net operating losses (NOL). Last week, Pennsylvania’s Supreme Court unanimously upheld the lower court’s ruling.

Tax treatment of net operating losses in Pennsylvania

The Nextel case stems from Pennsylvania’s limitation of the use of NOL by corporations. Pennsylvania’s Tax Code allows corporate taxpayers to deduct losses from one year from their state corporate net taxable income over subsequent years.

As one of several states that limits the amount of NOL that businesses are allowed to carry over, Pennsylvania caps NOL at the greater of either $5 million or 30 percent of taxable income. Other examples of state NOL treatment include New Hampshire’s $10 million cap, Utah’s $1 million cap, West Virginia’s $300,000 cap, Idaho’s $100,000 cap and Delaware’s $30,000.

Ruling’s impact and potential legislative fix

Although all nine of the Supreme Court Justices agreed that the limitation or cap on NOL deductions violated the uniformity clause of the Pennsylvania Constitution, the court’s proposed remedy is the cessation of the flat dollar amount cap and the continuation of the percentage cap (which stands at 30 percent since the last update in 2015).

Ultimately, any change to the state tax code must move through the standard legislative process. With 2017-18 Fiscal Year budget negotiations still underway in the Capitol, this could be an opportune time to address the NOL issue and provide some clarity and consistency for business taxpayers.

Around the same time of the Supreme Court Nextel ruling, Pennsylvania’s House of Representatives passed HB 542, its latest version of a revenue plan for the 2017-18 state budget. The bill would remove the NOL cap on dollar amount and would increase the percentage cap to 35 percent for taxable years after December 31, 2017, rising to 40 percent one year later.

HB 542 does not, however, bar the Pennsylvania Department of Revenue (PA DOR) from issuing assessments for open years on C corporations, which benefit from the dollar cap and represent the vast majority of business entities that took advantage of the NOL deduction.

Implications of NOL ruling remain unclear

In the absence of explicit legislative or judicial prohibition on the practice and given its recent uptick in enforcement programs, concerns remain that DOR will revisit C corporations that deducted NOL under the dollar cap amount and begin to assess tax for open years using the percentage of income limitation. This type of action could result in a reduction of the NOL and an increase in the corporate net income tax for any taxpayers who availed themselves of the dollar cap.

The full impact of the Supreme Court’s ruling and the fate of HB 542 at this time is unknown, but RKL’s state and local tax team is closely monitoring this situation as it develops. Readers who have questions or wish to discuss the potential ramifications of the Nextel ruling should contact me at 717.394.5666 or


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: September 26th, 2017

Nonprofits: Don’t Overlook This Tax-Advantaged Way to Raise Funds

Nonprofits: Don’t Overlook This Tax-Advantaged Way to Raise FundsEducation-related Pennsylvania nonprofits may be eligible to apply to the PA Department of Community and Economic Development (DCED) to receive contributions from the state’s Educational Improvement Tax Credit (EITC) program. Many organizations currently reap the benefits of this tax-advantaged funding mechanism, but recent changes to the EITC program increase the availability of these credits to businesses and their owners in ways that expand potential donor pools.

What is the EITC program?

The EITC program has long promoted expanded educational opportunities for Pennsylvania students by providing tax credits to eligible businesses that contribute to approved scholarship (including pre-kindergarten) and educational improvement organizations.

Once a nonprofit is approved by DCED to accept qualified contributions, businesses can support it with charitable donations and receive tax credits to offset certain Pennsylvania business and individual tax balances.

The EITC program encompasses two types of tax credits – Education Tax Credits and Opportunity Scholarship Tax Credits. Both of these tax credits can equal 75% of the value of the contributed amount up to a maximum of $750,000 per taxable year. The credit can be increased to 90% of the contribution if the contributor agrees to a two-year commitment. The threshold is different for using the EITC program for contributions to registered pre-kindergarten scholarship organizations. In this case, the tax credit is 100% of the first $10,000 contributed and 90% on any additional amount, up to a maximum contribution of $200,000 annually.

What types of organizations qualify to participate in the EITC program?

There are three categories of organizations registered for the EITC program: Scholarship, Educational Improvement and Pre-Kindergarten Scholarship. All three categories require an organization to be a nonprofit entity that is exempt from payment of federal income tax under IRC 501(C)(3). Beyond these criteria, each category has additional requirements, as outlined below. 

Scholarship Organization:

  • Must contribute at least 80% of its annual EITC receipts to a scholarship program, qualified under the requirements of Article XVII-F of the Tax Reform Code.

Educational Improvement Organization:

  • Must contribute at least 80% of its annual EITC receipts as grants to a public school, charter school or private school for innovative educational programs. The grants can include costs incurred by these organizations to carryout innovative educational programs in conjunction with public schools.

Pre-Kindergarten Scholarship Organization:

  • Must contribute at least 80% of its annual EITC receipts to aqualified Pre-K Scholarship Program.
  • If the nonprofit serves as both a Scholarship Organization and a Pre-K Scholarship Organization, it must maintain separate funds for contributions to each category.

What’s changed with the EITC program?

In 2014, Pennsylvania amended its tax code to expand portions of the EITC in several key ways, including broadened definitions of entity types that can apply for the credit and the addition of more tax types to be offset by the credit.

The most significant adjustment is the expanded definition of a “business firm” to include a “Special Purpose Entity” (SPE). An SPE must be formed as a pass-through entity. The sole purpose of the SPE can be to receive capital from its members, apply for the tax credits and disburse funds to approved organizations. The members of the SPE can then receive EITC credits to offset their individual tax liabilities, based upon ownership percentages, which can be varied from the formal business entity.

How can my nonprofit leverage these changes for financial benefit?

Organizations can encourage SPEs to increase the funding received through the EITC program. If any potential donors are partners, shareholders, members or employees of another business firm and wish to maximize the amount of tax credits they may earn, they can pool their contributions into an SPE, which can serve as the vehicle to financially support a nonprofit and earn tax credits. Since Pennsylvania tax law does not allow individuals to use charitable contributions to offset taxable income, funding an SPE that contributes to an EITC-eligible organization allows individuals to receive a state tax credit to offset their individual PA income tax liabilities.

Nonprofits can take advantage of the boom in the craft brewing sector to find new corporate donors by incentivizing local small brewers that pay the malt beverage tax to contribute financial support via the EITC program.  


RKL’s Not-for-Profit Industry Group can help currently registered organizations maximize the EITC expansion among potential or existing donors, and help interested organizations determine EITC eligibility and register for the program. Contact Ruthann Woll, RKL Tax Principal, at 610.376.1595 for more information or assistance.

Stephanie E. Kane, CPAContributed by Stephanie E. Kane, CPA, Manager in RKL’s Tax Services Group. Her client responsibilities include serving clients in a wide variety of industries with a focus on not-for-profit entities.





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Posted on: August 15th, 2017

Key Considerations for Investors and Businesses Using Crowdfunding

Key Considerations for Investors and Businesses Using CrowdfundingKickstarter. GoFundMe. FunderHut. These are just a few of the many crowdfunding websites that have sprung up in recent years as businesses, organizations and individuals seek new ways to raise funds and find investors for personal or professional endeavors.

As online fundraising has evolved, so too have federal rules and processes aimed at regulating crowdfunding investments and protecting the investors and businesses that use them. Here are some important tax and financial considerations to keep in mind when using crowdfunding sites.

Personal online fundraising tax deductions

GoFundMe and similar small-scale fundraising pages are a variation of crowdfunding often used to solicit financial support for individuals experiencing tough times, like a medical emergency or recovering from a natural disaster.

While most personal GoFundMe pages are well-intentioned and used for a good cause, donors should be aware that these contributions are categorized as personal gifts and are not tax deductible. Donations made to GoFundMe pages linked to a nonprofit with a 501(c)(3) designation, however, are considered allowable tax deductions.

Sales of securities now permitted via crowdfunding

The federal Jumpstart Our Business Startups (JOBS) Act contained several provisions related to crowdfunding, many of which took effect in early 2016. In particular, Title III of the JOBS Act expanded access to crowdfunding to individuals and small businesses beyond the previous circle of accredited investors that met certain income or net worth thresholds.

Title III also permits small or early-stage businesses to issue or sell securities as part of its crowdfunding efforts to raise capital, as long as the business enlists the services of newly recognized type of intermediary known as a crowdfunding portal. The Financial Industry Regulatory Authority, or FINRA, maintains a list of crowdfunding portals registered with the SEC.

By creating these portals, Title III eases the filing burden on companies raising capital through crowdfunding. Now, companies are permitted to use a “Q and A” format for the required disclosures on their Form C fillings. Title III also shifts the responsibilities for fraud detection and investor education to the portals.

In addition to traditional compensation direct from the company, Title III now allows companies to offer portal funding intermediaries payment in the form of a small ownership percentage (provided the ownership rights are equivalent to those being offered).

Annual limits on company crowdfunding and individual investment

Title III permits companies to raise an aggregate $1 million over a 12-month period through the use of a registered broker-dealer or crowdfunding portal. Depending on the amount to be raised, companies seeking crowdfunding, also known as issuers, may be required to have GAAP basis financials statements either reviewed or audited by an independent CPA firm.

  • Amounts under $100,000 require presentation of internal financial statements.
  • Amounts between $100,000 and $500,000 require financial statements to be reviewed by an independent CPA firm.
  • Amounts between $500,001 and $1,000,000 require financial statements to be audited by an independent CPA firm.
    • Issuers offering more than $500,000 for the first time are given a one-time exemption from the audit requirement. Instead, these companies are permitted to have an independent CPA firm simply review their financial statements, as opposed to auditing them.

Since crowdfunding involves a unique risk, Title III also limits the amount individuals can invest in this type of offering over a 12-month period based on their annual income and net worth. According to the SEC, if an investor’s annual income or net worth is under $107,000, his investment is limited to $2,200 or five percent of the lesser of annual income or net worth, whichever is greater. Alternately, if both annual income or net worth is equal to or greater than $107,000, the investor’s limit is 10 percent of the lesser of annual income or net worth.

Companies interested in crowdfunding should reference the Title III section of the SEC’s JOBS Act resource center for full details on compliance and disclosure. RKL’s team of business advisors are available to help businesses assess the benefits of crowdfunding and adhere to all regulations. Contact one of our local offices today to get started.

D. Hunter Mink, CPA, CCIFP, manager in RKL's Audit Services GroupContributed by D. Hunter Mink, a manager in RKL’s Audit Services Group. Hunter is responsible for the planning and supervision of audit engagements for clients in various industries, including engineering, construction, manufacturing and distribution and higher education.




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Posted on: July 6th, 2017

Employers: Is Your Health and Welfare Plan Compliant with ERISA?

Employers: Is Your Health and Welfare Plan Compliant with ERISA?Providing health and welfare benefits to employees is a powerful recruitment and retention tool, but it also involves many responsibilities and requirements for the employer. Employers that offer these benefits must comply with the full range of reporting deadlines and fiduciary obligations that accompany them.

An often overlooked or misunderstood aspect of health and welfare benefit reporting is fiduciary responsibilities required by the federal Employee Retirement Income Security Act (ERISA). Missing these documentation and reporting requirements or failing to carry out these responsibilities can leave an employer at risk for liability, fine or penalty. Below, we provide an overview of just some of the fiduciary and filing requirements for health and welfare plans under ERISA.

Examples of Health and Welfare Benefit Plans Subject to ERISA

Most employers generally understand how ERISA impacts the retirement plans they offer to employees, but many are unaware that ERISA also applies to health and welfare benefit plans. Just like employer-sponsored retirement plans, ERISA sets minimum reporting and disclosure standards for health and welfare benefit plans, whether they are insured or self-insured.

Examples of health and welfare benefit plans that are subject to ERISA include, but are not limited to:

  • Medical and prescription drug plans
  • Health Reimbursement Arrangements (HRAs) and health Flexible Spending Accounts (FSAs)
  • Dental and vision plans
  • Disability plans
  • Life and accidental death and dismemberment (AD&D) plans
  • Severance pay plans

ERISA Requirements for Employer-Sponsored Health and Welfare Plans

Exceptions to ERISA are limited, so it is important to be aware of ERISA reporting and disclosure requirements. Outlined below are just some of the documentation and reporting requirements:

Plan Document and Summary Plan Description

Employers have the option of designing their benefits program so that each insurance contract or type of benefit is considered a separate plan or grouping several insurance contracts or benefits together under one plan. Regardless of plan design or size, under ERISA, each separate health and welfare benefit plan must have a Plan Document in writing. The Plan Document supplements the insurance contract(s) to meet ERISA disclosure requirements. This document must identify and describe the plan name, plan sponsor, plan administrator, benefit(s), eligibility, benefit funding and administration procedures for the plan, among other details.

ERISA also requires that employers provide a Summary Plan Description (SPD) to participants and beneficiaries that explains in plain language the plan’s basic information and features. ERISA requires the SPD to be distributed to participants automatically within 90 days of becoming covered by the plan. ERISA also requires an updated SPD to be distributed within a certain number of years based on if and when changes are made or the plan is amended.

It is important to note that insurance policies or Certificates of Insurance do not meet ERISA standards and are not permitted to be submitted in place of Plan Documents and Summary Plan Descriptions.

Annual Form 5500 and Summary Annual Report

Any health and welfare benefit plan, whether it is insured or self-insured, that covers 100 or more participants at the beginning of the plan year must file Form 5500 annually with the U.S. Department of Labor. Form 5500 is due by the last day of the seventh calendar month after the plan year end date. For plans with a calendar year end date, the form is due by July 31.

Since Form 5500 is required to be filed for each plan that meets the filing requirements, it is important for employers to have proper plan documentation identifying its plan(s), as explained above. If proper plan documentation is not in place, each insurance contract or type of benefit is considered a separate plan by default and subject to separate Form 5500 reporting.

In a previous post, we took a closer look at different types of plans and the filing and audit requirements that go along with these categorizations.

Employers should also be aware that beyond the Form 5500 requirement, self-insured medical plans (including HRA arrangements and certain FSA arrangements) have additional IRS filing requirements under the Affordable Care Act.

The Summary Annual Report (SAR) provides a narrative recap of the Form 5500. The SAR must be distributed annually to participants and beneficiaries within nine months after the end of the plan year or two months after the Form 5500 filing.

RKL’s team of small business and tax advisors is available to help employers file the required Form 5500 and prepare the Summary Annual Report or answer questions related to ERISA fiduciary responsibilities. Contact your RKL professional or one of our local offices for more information on this and other financial topics impacting employers.

Laura S. Rineer, CPAContributed by Laura S. Rineer, CPA, a supervisor in RKL’s Small Business Services Group. Laura specializes in helping small businesses from a wide variety of industries with financial statements, tax returns and related accounting and business needs. 




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Posted on: June 6th, 2017

PCORI Fee Reminder: 2016 Fee Rates for Self-Insured Plans

PCORI Fee Reminder: 2016 Fee Rates for Self-Insured PlansUnder the Affordable Care Act, employers that sponsor applicable self-insured health and welfare plans are required to pay an excise tax known as the PCORI fee by July 31 each year using Form 720. The IRS does not grant companies extensions, so it is critical for companies with applicable plans to file their PCORI fee in a timely manner.

Sharing a name with the Patient-Centered Outcomes Research Institute it helps to fund, the PCORI fee was first applied to plan years ending on or after October 1, 2012, and will be applied annually through plan years ending October 1, 2019.

Who pays the PCORI fee?

In addition to those with applicable self-insured plans, employers whose plans offer health reimbursement arrangement (HRA) and certain flexible spending account (FSA) options are also charged the PCORI fee. Here is a more detailed breakdown of eligible plans as well as situations where the PCORI does not apply.

How much is the PCORI fee?

The PCORI fee equals the average number of lives covered by the plan during 2016 multiplied by the current fee rate. For 2016 plans, the fee rate is either $2.17 or $2.26 per average covered life, depending on when the plan year ends, as outlined below:

  • $2.17 for plan years that ended on a date between January 1 and September 30, 2016
  • $2.26 for plan years that ended on a date between October 1 and December 31, 2016

Companies can calculate the average number of lives in one of three ways permitted by the IRS: the actual count method, the snapshot method or the Form 5500 method.

The RKL team is here to help companies assess PCORI eligibility, determine the best method to calculate liability and submit timely payment to the IRS. Contact one of our local offices to get started.


Laura S. Rineer, CPAContributed by Laura S. Rineer, CPA, a supervisor in RKL’s Small Business Services Group. Laura specializes in helping small businesses from a wide variety of industries with financial statements, tax returns and related accounting and business needs. 




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