Comp Time Instead of Overtime? A New Bill May Change the Law

Comp Time Instead of Overtime? A New Bill May Change the Law

Do you have employees who work overtime? Would they be interested in being given comp time instead? I recently read an article written by Isaac O’Bannon and Gail Perry on the CPA Practice Advisor website discussing the U.S. House of Representatives passing a bill that would allow employees to take comp time instead of being paid overtime. The Working Families Flexibility Act would allow employers to offer paid time off instead of overtime if they work more than 40 hours in the workweek. If passed by the Senate and signed into law, it will be interesting to see how it affects overtime in states with more stringent laws (for instance, anything over 8 hours a day is subject to overtime pay in CA). I would assume that if this law goes into effect, that any overtime worked would be able to be converted to comp time, even if not over 40 hours has been worked. Currently, if working overtime, the employee is paid 1.5 times their hourly wage. This law would allow the hours to be banked at 1.5 times the overtime hours worked to be used at a future date. When used, they would reduce their hours to work that week but be paid as if they worked their full schedule. For instance, if someone worked 4 hours of overtime, compensation is paid as if they worked 6. Instead of getting the extra money in their paycheck, they could bank those hours to use in the future. When they take the 6 hours off of their schedule (assuming they work 40 hours), they would actually only work 34...
How to Leverage Your Small Business for Financial Success

How to Leverage Your Small Business for Financial Success

Is financial success for your small business a dream of yours? Paul Sydlansky wrote an article on how to make your dream come true. Whether your company is large or small, read here to find out how to leverage your business for you financial success. Small-business owners have great tools to secure their futures: SEP IRAs, Solo-401(k)s and Simple IRAs. Here’s how to put them to work. Owning your own small business is a popular notion in the United States. With more than 28 million small businesses in the U.S. representing over 50% of the working population in this country, it’s perhaps safe to assume that it’s a proven paradigm in our culture that will only continue to increase over time. And while many small businesses have found their stride and are thriving, there are still a staggering number of Americans who aren’t doing enough to secure their financial futures. According to the U.S. Census Bureau, the average savings of a 50-year-old is only $42,797. And over 80% of people between the ages of 30 and 54 don’t believe they will have enough money put away for retirement. As a small-business owner, you have a tremendous opportunity to not only turn a dream into a reality and create jobs for others, but you also have the ability to set yourself up for financial success. It’s not enough just to be profitable. You also should be saving money toward your future. Whether you’re a small-business of one or of nearly 500 employees, here’s how to leverage your small business for your financial success. Put Yourself First Let’s face it. As...
IRS Offers Tips to Prepare for Hurricanes, Floods and Other Natural Disasters

IRS Offers Tips to Prepare for Hurricanes, Floods and Other Natural Disasters

Now that Hurricane Preparedness week has started and the upcoming Atlantic hurricane season begins June 1st, the IRS has published some advice on their website to those who may be affected by these storms along with other types of natural disasters. The IRS wants to help taxpayers as much as possible and is offering a toll-free hotline to those in federally declared disaster areas. Don’t Forget to Update Emergency Plans Because a disaster can strike any time, be sure to review emergency plans annually. Personal and business situations change over time, as do preparedness needs. When employers hire new employees or when a company or organization changes functions, they should update plans accordingly and inform employees of the changes. Make plans ahead of time and be sure to practice them. Create Electronic Copies of Key Documents Taxpayers can help themselves by keeping a duplicate set of key documents including bank statements, tax returns, identifications and insurance policies in a safe place such as a waterproof container and away from the original set. Doing so is easier now that many financial institutions provide statements and documents electronically, and financial information is available on the Internet. Even if the original documents are provided only on paper, these can be scanned into an electronic format. This way, taxpayers can download them to a storage device such as an external hard drive or USB flash drive, or burn them to a CD or DVD. Document Valuables It’s a good idea to photograph or videotape the contents of any home, especially items of higher value. Documenting these items ahead of time will make it...
7 Steps to Planning a Successful Not-For-Profit Audit

7 Steps to Planning a Successful Not-For-Profit Audit

Are you a not-for-profit organization preparing for your annual audit? Tim McCutcheon wrote these 7 steps so you can prepared. Year-end financial statement audits serve a valuable purpose in helping maintain the financial integrity of not-for-profit organizations so they can successfully complete their missions. These audits can be more effective and less challenging with a little bit of preparation and planning on the part of the not-for-profit management and finance team. This preparation starts with your accounting system, because everything you do on a monthly basis will pay dividends as you gear up for your year-end close and the audit. Chances are your accounting system is very good for everyday things, such as processing customer/donor billings, receiving payments, paying bills, and making payroll. And you probably do other things every month in the normal course of your monthly closing cycle, such as review and reconcile various accounts. Having these processes in place provides a good start in preparation for your year-end audit. Here are a few more ideas to help your year-end audit go smoothly: Analyze, review, and reconcile significant balance sheet accounts. Use a roll-forward schedule to capture all the account activity. You and your auditor can agree as to the exact form and layout of the schedules to ensure they serve the dual purposes of the year-end close worksheet and audit schedule: Beginning balance + additions – reductions +/- adjustments = Ending balance Completing the schedule ensures that the account balances roll forward from the prior year end to the current year end, which provides assurance that the income statement effects of the changes have been properly...
How to Write Off Hobby Expenses

How to Write Off Hobby Expenses

In the last post, we discussed the factors used to determine if the activity in which you are engaged is a hobby or a business. To read that post, click  http://affordablebookkeepingandpayroll.com/hobby-really-business/. Today we’re going to discuss how to take deductions on your tax return if it’s deemed the activity is truly a hobby and not a business. If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. If you earn income from your hobby, it must be reported on your tax return, but it can be offset by expenses incurred.  Here are tax tips you need to know about hobby deductions: Allowable Hobby Deductions.  Within certain limits, you can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity. Limits on Hobby Expenses.  Generally, you can only deduct your hobby expenses up to the amount of hobby income. If your hobby expenses are more than your hobby income, you have a loss from the activity. You can’t deduct the loss from your other income. How to Deduct Hobby Expenses.  You must itemize deductions on your tax return in order to deduct hobby expenses. Your expenses may fall into three types of deductions, and special rules apply to each type. Deductions that a taxpayer may claim for certain personal expenses, such as home mortgage interest and taxes, may...
Is Your Hobby Really a Business?

Is Your Hobby Really a Business?

Many people have begun a hobby for fun, but it has turned into a business. I have helped several clients who started out using their product or service for family and friends and demand from others grew. So how do you know if your hobby is really a business? The IRS has guidelines that determine if what you are doing is for fun or is really a business that needs a schedule C to be filed with your tax return. In making the distinction between a hobby or business activity, take into account all facts and circumstances with respect to the activity. No one factor alone is decisive. The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby: Whether you carry on the activity in a businesslike manner. Whether the time and effort you put into the activity indicate you intend to make it profitable. Whether you depend on income from the activity for your livelihood. Whether your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business). Whether you change your methods of operation in an attempt to improve profitability. Whether you or your advisors have the knowledge needed to carry on the activity as a successful business. Whether you were successful in making a profit in similar activities in the past. Whether the activity makes a profit in some years and how much profit it makes. Whether you can expect to make a future profit from the appreciation of the assets used in...
IRAs and Tax-Efficient Charitable Giving: What You Need to Know

IRAs and Tax-Efficient Charitable Giving: What You Need to Know

If you’re someone who enjoys giving to charities, this information could be of use to you. In an article by David Randolph, he offers some helpful tips for charitable IRA owners and how that could benefit them tax-wise. A review of strategies to maximize the tax benefits from charitable giving should be a fundamental part of year-end tax planning for taxpayers and their advisors. For wealthier taxpayers, this might mean complex strategies that work in tandem with estate planning. For others, it might simply mean accelerating deductions to the current year if tax rates are constant or decreasing, but possibly deferring deductions if tax rates are increasing. In either case, there are additional factors for taxpayers who have Individual Retirement Accounts (IRA) to consider now that uncertainty over the use of IRAs for charitable giving has been eliminated following passage of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). IRA Qualified Charitable Distributions The PATH Act made permanent the provision allowing qualified charitable distributions (QCDs) from IRAs (IRC Section 408(d)(8)). A QCD allows taxpayers who have reached age 70½ to annually exclude from gross income up to $100,000 of distributions made directly from the taxpayer’s IRA to a public operating charity. This provides taxpayers who own IRAs the opportunity to reduce Adjusted Gross Income (AGI), effectively realizing the tax benefit of a charitable contribution deduction without concern over annual AGI limitations. QCDs can also be used to satisfy the required minimum distribution (RMD) rules for the year made and thus might be particularly appealing to taxpayers who do not need the RMD for living expenses. For...
Financial Spring Cleaning: What To Keep & What To Toss After Tax Day (Cont.)

Financial Spring Cleaning: What To Keep & What To Toss After Tax Day (Cont.)

In the last blog, we shared information on the statute of limitations and how long financial documents should be retained. To read this information, see (http://bit.ly/2pBkL6z). Today’s blog shares details on what paperwork may need special attention, and what can safely be destroyed. Occasionally, you’ll have documentation to support transactions that will be reported on future tax returns. Records that may need special attention include: Consider retaining your IRA records – including Roth contributions – until you withdraw all of the money from your account. If you buy capital assets like stocks, bonds, or real estate, you’ll want to keep records which support basis (typically your purchase price plus any adjustments) for as long as you own the property plus three years. If you claim depreciation, amortization, or depletion deductions for certain assets including land or real estate, you’ll want to keep related records for as long as you own the underlying property plus three years. If you claim special tax deductions and tax credits, you may need to keep your records longer than normal (for example, if you file a claim for a loss from worthless securities or bad debt deduction, you should keep those records for seven years). If you claim any other special tax benefits, a good rule of thumb is to keep your records for as long as the tax benefit runs plus three years. To save space (and quite possibly, your sanity), you can scan your records and store them electronically. The IRS has accepted scanned receipts since 1997, a policy that was memorialized by Rev. Proc. 97–22 (downloads as a pdf). Your scanned...
Financial Spring Cleaning: What To Keep & What To Toss After Tax Day

Financial Spring Cleaning: What To Keep & What To Toss After Tax Day

Do you worry about what tax paperwork you should save and which ones are okay to throw away? In an article on Forbes.com, Kelly Phillips writes some very specific and informative tips in order to help out taxpayers like you who question which financial paperwork is most important to keep. When it comes to taxes, many taxpayers are hesitant to throw away even the tiniest scrap of paper. It’s true that the Internal Revenue Service (IRS) wants you to hang onto your important tax records. But that doesn’t mean that you have to keep your tax records forever. The general rule is that you should hold onto your tax returns and supporting documentation until the statute of limitations runs for filing your tax returns or filing for your tax refund. Supporting documentation for your tax returns includes not only your forms W-2 and 1099 but also bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return. When it comes to figuring out the statute of limitations, here’s what you need to know: If you file a correct and timely tax return, the statute of limitations is generally three years after the date of filing or the due date of your tax return, whichever is later (*but see the note below). Remember that you file your tax return after the tax year ends: for example, the statute of limitations for a timely filed 2016 tax return begins to run on April 18, 2017. Keep those records until at least...
With IRS, Ask Forgiveness Not Permission

With IRS, Ask Forgiveness Not Permission

In an article on Forbes.com, Robert W. Wood writes how on the old proverb “it’s better to ask for forgiveness than to ask for permission” can be used when dealing with the IRS. It isn’t a crazy concept. After all, do you want to call the IRS? Doing so is usually an exercise in frustration. In person office visits are likely to be too. Besides, you generally cannot rely on any tax advice IRS employees dish out. That makes the process of soliciting and getting answers to your tax questions, well, questionable. What about more formal inquiries to the IRS, where you can rely on their guidance? That is worth examining, too. Sometimes, asking in advance may not be as sensible as you might think. Consider Yahoo. In 2015, Yahoo CEO Marissa Mayer announced a tax savvy spinoff plan for Yahoo’s remaining 384 million shares in Alibaba. At the time, the shares were worth $23 billion. Yahoo asked the IRS nicely for permission. Eventually, the IRS revealed that it would not issue a private letter ruling, an advance blessing from the IRS. Plainly, the fact that the IRS will not rule did not prove that the deal would be taxable. But if you ask for a ruling you can’t get, the IRS certainly knows about your plans! There is quite a chilling effect if you ask for a ruling and do not get it. If you go ahead with the deal, it could be asking for trouble. In Yahoo’s case, there was talk that maybe it would rely on a tax opinion instead of a private letter ruling. Rulings...

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