Category Archives: Uncategorized

Play or Pay, Affordable Health Care

Is your business ready for play-or-pay?
If you’re a “large” employer, time is running out to prepare for the Affordable Care Act’s (ACA’s) shared responsibility provision, commonly referred to as “play-or-pay.” It’s scheduled to go into effect in 2015.Under transitional relief the IRS issued earlier this year, for 2015, large employers generally include those with at least 100 full-time employees or the equivalent, as defined by the ACA. However, the threshold is scheduled to drop to 50 beginning in 2016, and that threshold will apply beginning in 2015 for the ACA’s information-reporting provision.The play-or-pay provision imposes a penalty on large employers if just one full-time employee receives a premium tax credit. The credit is available to employees who enroll in a qualified health plan through a government-run Health Insurance Marketplace and meet certain income requirements — but only if:

  • They don’t have access to “minimum essential coverage” from their employer, or
  • The employer coverage offered is “unaffordable” or doesn’t provide “minimum value.”

The IRS has issued detailed guidance on what these terms mean and how employers can determine whether they’re a large employer and, if so, whether they’re offering sufficient coverage to avoid the risk of penalties.

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Health Care Update

Recently released IRS final regulations for the Affordable Care Act’s (ACA’s) employer shared-responsibility provision provide some short-term relief for midsize and large employers. Under the ACA, the shared-responsibility provision (commonly referred to as “play-or-pay”) applies to “large” employers — those with the equivalent of 50 or more full-time employees. Play-or-pay had been scheduled to go into effect in 2014 but last year the IRS pushed that out to 2015. Now, under the final regs, eligible midsize employers that otherwise would be considered large employers under the ACA won’t be subject to the provision until 2016. To qualify for the midsize-employer relief, an employer must:

  • Employ on average fewer than 100 full-time employees or the equivalent during 2014,
  • Maintain its workforce size and aggregate hours of service,
  • Maintain the health care coverage it offered as of Feb. 9, 2014, and
  • Certify that it meets these requirements.

The final regs also provide some relief for large employers that don’t qualify for the midsize-employer relief: In 2015, they can avoid the penalty for not offering minimum essential coverage by offering such coverage to at least 70% of their full-time employees, rather than the 95% originally scheduled. The 95% requirement will apply in 2016 and beyond. The final regs also clarify certain aspects of the play-or-pay provision. Please contact us if you’d like more information on the final play-or-pay regs or other ACA provisions.

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Reinvested Dividends, don’t forget them when calculating basis.

One of the most common mistakes investors make is forgetting to increase their basis in mutual funds to reflect reinvested dividends. Many mutual fund investors automatically reinvest dividends in additional shares of the fund. These reinvestments increase tax basis in the fund, which reduces capital gain (or increases capital loss) when the shares are sold.

If you neglect to include reinvested dividends in your basis, you’ll end up paying tax twice: first on the dividends when they’re reported to you on Form 1099-DIV, and again when you sell the shares and the reinvested dividends are included in the proceeds.

To help ensure you’re properly accounting for dividend reinvestments when you’re filing your 2013 tax return — or for other tax-smart strategies for your investments — contact us today.

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Accounting and Bookkeeping

Accounting and Bookkeeping, what type of person should I be hiring for my accounting-bookkeeping needs?

There are several parts to an accounting and bookkeeping system and one of the best ways to determine what type of accountants or bookeepers you need is to do a flow chart of how the paperwork flows through the office or business. Sit down and draw boxes and lines to show who needs to handle each part of the work.

For instance, say you have a home repair business and the accounting-bookkeeping is just now working out. Flow chart the entire system. First, probably a customer calls in with a job request. A clerical person may take an order, this could create a paper or electronic record (which is best?). A job number may be attached to this accounting and bookeeping record. The tech is then dispatched to the job and when finished, an invoice may be hand or electronically written and given to the customer. This may have the job number attached to it.

Usually, the tech will pick up a check or process a credit card (on his phone) to record the payment and give a receipt to the customer. Then he is off to the next job.

From an accounting-bookkeeping point of view, this transaction has so far involved two people, the order taker and the producer. Now some additional parts need to be added to the system. The job has to be recorded as a sale in the books. The payment has to be recorded as an increase to the cash account. If the payment was by check, someone has to take it to the bank. If parts were purchased to do the work, those have to be recorded as a purchase and then they have to be paid for.

Many transactions like this eventually must be recorded in a set of books, and financial statements and tax returns are produced.

Accounting and bookkeeping are involved in all of these steps and they may be done by one person or each job may have a separate person, depending on the size of the business. It is important to discuss the accounting and bookkeeping flow with your outside, independent CPA to set out your flow chart of tasks so that it includes a system of checks and balances. Maybe the person who took the order should log that order and another person should record the payment. This “segregates” the duties so that there is less chance that one person could pocket the money and delete the transaction all together.

Most people are honest, but setting up your system to encourage honesty and keep those tasks separate is easier if you use that flow chart to show each step in the process.

Once the system is flow charted, you will be able to determine what the skills and background need to be for each task. Often a person calls themselves a “full charge bookkeeper” when they really are a good clerk. A clerk generally takes charge of one area, like paying the bills, whereas an accountant will probably be the one to do the financial statements. Again, your CPA should be able to help you set up the skills needed for each position.

 

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