As professionals, when our clients ask us this question as it relates to helping them design a “Compensation Plan” for their businesses, we recognize the sensitivity of the topic and before we can answer them, we understand there is a fact-finding mission that must be undertaken. During this assignment, we know that the measurement of quantitative metrics will come into play, but we are also keenly aware of the fact that qualitative inputs fit into the equation and those inputs can’t be measured in a traditional manner, similar to the quantitative efforts of employees. Thus, as we go through our consulting engagement, we always have to keep in mind and be cognizant of the human emotions that may ultimately be encountered when helping to formulate this Plan. In the following sections, I would like to outline how we would go about discussing this topic with our clients, and how it can be boiled into a bonus payment plan within a professional business environment.
The Tax Cuts and Jobs Act (TCJA) made significant changes in the way an individual’s tax liability would be computed, from changing the tax rates to eliminating the deduction for dependents. Many taxpayers were surprised at the disconnect between their withholding for 2018 and their tax liabilities since Form W-4, the instructions to employers on how much to withhold from an employee’s pay for federal income taxes, hadn’t been revised to reflect those changes.
System and Organization Controls (SOC) are actually a suite of different service offerings CPAs provide in connection with either system-level controls of a service organization or entity-level controls of other organizations. SOC reports are designed to help Service Organizations build trust and confidence in their capabilities with a report by an independent CPA.
For over a decade, private equity groups have been investing capital in dental practices. Many national dentistry groups have expanded or evolved from some of the largest investments of private equity funds. Often there are a series of such investments and, because there does not yet appear to be market saturation, these types of transactions with dental practices are expected to continue for some time.
One of the latest trends in state and local corporate income tax has been the adoption of market-based sourcing for the sales of services. In 2018, new state legislation made significant changes to the New Jersey Corporation Business Tax Act, including the implementation of market-based sourcing for services beginning in 2019.
The New Jersey Corporation Business Tax Act imposes tax on domestic and foreign corporations having a taxable status in New Jersey based on the portion of net income allocable to New Jersey. In order to properly determine the net income allocable to New Jersey, corporate taxpayers doing business both within and outside New Jersey must source their revenue to the appropriate state.
Who owns that nice new car in your parking lot? Do you have an employee who seems to be living at a standard higher than his salary would permit? Hmmm, he (or she) tells you his Uncle Joe died and left him a huge inheritance, or maybe he won the lottery. You’re happy for him; such a hard worker who never takes a vacation!
This could all be as innocent as it sounds BUT it could also be a flashing warning sign of employee dishonesty.
Employee parking expenses – how much can your business deduct?
The Tax Cuts and Jobs Act (TCJA) resulted in many tax law changes. One of them was the new rule for determining the deductible portion of employee parking expenses.
Under the new Section 274(a)(4), expenses paid by employers after Dec. 31, 2017, to provide employee parking are generally no longer deductible. Also, new Section 512(a)(7), requires tax-exempt organizations to increase their unrelated business taxable income (UBTI) by the amount of employee parking expenses that are nondeductible.
Long-term, well trusted employees are an employer’s dream. In the event that an employee is dishonest, good internal controls can keep that dream from becoming a nightmare.
For medical offices, there is a significant risk that employee dishonesty will lead to the diversion of collections with a corresponding record-keeping cover up. To mitigate this risk, the person who opens the mail or collects funds should not have the ability to credit a patient’s account. Additionally deposits should be made daily and collections should be posted to patient accounts based on the date received. This allows an owner to reconcile patient funds received to deposits. Of course, an owner must regularly perform this check, and it’s never a bad idea for the employees to know that this is done.
Regular online account statement review by the owner and the owner’s monthly review of statement transactions and cancelled checks may be an especially important internal control in a small practice where there aren’t enough employees for an adequate segregation of duties. An alternative to online statement review would be for the owner to receive the unopened bank and credit card statements and review the hard copies for suspicious activity. Another effective and important control is for the owner to perform regular reviews and approval of write-offs.
If you would like assistance in establishing or reviewing the effectiveness of your internal controls, please contact us. In our next issue we will help you identify signs of potential problems resulting from employee dishonesty and suggest more ways to help you avoid them.
Article contributed by Terri Marakos, CPA
Photo by Pixabay on Pexels
Late last month, Governor Phil Murphy passed legislation calling for the gradual increase of the state’s minimum wage from $8.85 per hour as of January 1, 2019, to $15.00 per hour by January 1, 2024. The first jump in hourly minimums is set to take effect this July, when minimum wages paid by most business owners will rise to $10.00 per hour. There are a number of considerations that small business owners and employees alike must take into account with the newly-passed legislation, but we have summarized the most significant takeaways below:
Every year some of our clients go through a mad rush getting the information needed to file 1099s timely and correctly. How does one stop this madness? A Form W-9 should be obtained from the vendor BEFORE any payments are issued. W-9s can be more easily obtained while the vendor is awaiting approval, when the vendor has more incentive to cooperate than after payment has been made.