Do You Need to File a Gift or Estate Tax Return?
Gift taxes
Generally, a federal gift tax return (Form 709) is required if you:
- Make gifts to or for someone during the year (with certain exceptions: for example, gifts to U.S. citizen spouses are excluded) that exceed the annual gift tax exclusion (currently $14,000),
- Make gifts of future interests, even if they are less than the annual exclusion amount, or
- Split gifts with your spouse, regardless of amount.
The return is due by April 15 of the year after you make the gift, but the deadline may be extended to October 15. Being required to file a form does not necessarily mean you owe gift tax. You will owe tax only if you have already exhausted your lifetime gift and estate tax exemption (currently $5.49 million for 2017).
In some cases, it is a good idea to file a gift tax return even if you are not required to do so. For example, suppose you give $10,000 worth of closely held stock toeach of 10 family members, for a total of $100,000. Each gift is within the annual exclusion amount, so you do not file a gift tax return. However, 10 years later, the IRS determines that the value of each gift was actually $20,000 and assesses penalties for failure to file a gift tax return (plus taxes, penalties and interest if you have exhausted your lifetime exemption).
Had you filed a properly completed gift tax return at the time you made the gifts, it would have triggered the three-year limitations period for auditing your return. Without a return, there is no time limit on how long the IRS can wait to challenge the valuation of your gifts.
Estate taxes
If required, a federal estate tax return (Form 706) is due nine months after the date of death. Executors can seek an extension of the filing deadline, an extension of the time to pay, or both, by filing Form 4768. Keep in mind that the form provides for an automatic six-month extension of the filing deadline, but that extending the time to pay (up to one year at a time) is at the IRS’s discretion. Executors can file additional requests to extend the filing deadline “for cause” or to obtain additional one-year extensions of time to pay.
Generally, Form 706 is required only if the deceased’s gross estate plus adjusted taxable gifts exceed the exemption. A return is required even if there is no estate tax liability after taking all applicable deductions and credits.
Even if an estate tax return is not required, executors may need to file one to preserve a surviving spouse’s portability election. Portability allows a surviving spouse to take advantage of a deceased spouse’s unused estate tax exemption amount, but it is not automatic. To take advantage of portability, the deceased’s executor must make an election on a timely filed estate tax return that computes the unused exemption amount.
Preparing an estate tax return can be a time-consuming, costly undertaking, so executors should analyze the relative costs and benefits of a portability election. Generally, filing an estate tax return is advisable only if there is a reasonable probability that the surviving spouse will exhaust his or her own exemption amount.
Handle with care
Determining whether a gift or estate tax return is necessary or desirable can be complicated. When in doubt, consult your estate tax advisor to discuss your options.
© 2016
Yeo & Yeo’s Amy Buben, a Certified Fraud Examiner, recently spoke to members of the Great Lakes Bay Manufacturers Association about Fraud and internal controls. She described the different types of fraud that occur in businesses and why internal controls are important to help combat fraud risks. She shared examples of fraud that she has encountered as well as current data about the leading fraud schemes and various fraud detection methods, by the size of the organization.
Amy spoke about how to decrease fraud risk by increasing internal controls and the warning signs to watch for that signal possible fraudulent activity.
Download Amy Buben’s Powerpoint presentation.
For more information on internal controls, read The Four Cornerstones of Internal Controls by Christopher Sheridan, CPA and Yeo & Yeo’s Internal Control Checklist.
Some trendsetting manufacturers have successfully integrated social media into their marketing campaigns to drive traffic to their websites, build brand loyalty and attract new talent. Here’s how.
Stand out
The first questions to ask before jumping on the social media bandwagon are:
- What differentiates your company?
- What will customers and prospective employees react to?
- What do you hope to accomplish?
The answers will guide your company’s social media strategy. Posts should focus on what makes your company special, be relevant on a personal level and encourage people to act in a way that accomplishes your goals.
For example, a small consumer products manufacturer uses social media to boast about its “Made in America” competitive edge. It creates compelling posts about making quality products that are “safe for families to use.” So far, the manufacturer has more than 10,000 Facebook friends, including many employees who were recently hired. Its posts also include hyperlinks that drive traffic to the company’s website.
Another manufacturer wants to position itself as a leader in technology. It uses videos and Twitter-casts to demonstrate its latest product innovations, research efforts and equipment upgrades. It encourages customers to chat with service reps through links on LinkedIn and Twitter.
Examples of other issues that manufacturers promote through social media include green manufacturing practices, involvement in Project Lead the Way programs, safe and flexible work environments, and employee participation in charitable events.
Keep it simple
Creating social media content isn’t that hard to do. Most business-to-business social media posts consist of just a picture and a couple of sentences — possibly less if your company connects directly with consumers. A clever infographic or a short video may take more time to create than text, but it can be very effective at grabbing people’s attention.
There’s no rule for how often companies should post new content. But anyone who is active on social media knows that there is a limit to how many times you can post without becoming a nuisance. You want customers to remember your company, but sometimes, less is more.
Remain active
Social media requires ongoing attention. In addition to creating new posts, you’ll need to continuously watch for inappropriate comments and block social media “trolls” looking to cause mischief. You can also contact your financial advisors about how to measure click-through rates and evaluate the return on investment from your social media activities, so you can adjust your strategy as needed.
© 2016
Yeo & Yeo is excited to announce that in summer 2017 we will unveil our inaugural Accounting Summer Leadership Program.
The program offers undergraduate accounting students the opportunity to experience a day in the life of a Certified Public Accountant (CPA) and learn about the unique culture of our firm.
Yeo & Yeo strongly believes that nurturing and mentoring our professionals from day one of their career will help them achieve their career goals and aspirations. We provide our professionals with mentorship, career advocacy, and skill development through a variety of programs – now including a Summer Student Leadership Program. The firm’s Career Advocacy Team empowered our group of young professionals to create an informative and enjoyable summer program that will benefit college students majoring in accounting.
As a young professional at Yeo & Yeo, I feel honored to be a pioneer with this program. We have made it our top priority to construct a program that will provide up-and-coming accounting students with exposure to the opportunities in public accounting and give them an inside view of the culture of our firm. Not only do we want to offer students a perspective on the life of an accountant, but we also wish to build relationships and help them develop to prepare for post-graduation.
Over the course of the two-day program we have organized activities and events that will engage and challenge the students. The first day of the program will be fun-filled with dinner and entertainment to provide time for the students to meet key members of our team including partners, and professionals from our offices throughout Michigan.
On the second day, students will have the opportunity to shadow our professionals in their day-to-day work environment, hear career testimonials, and perform a client case study. The students will also have the chance to participate in an interview panel which will allow them to polish their interviewing skills.
To be considered for the Summer Leadership Program, you must have at least one year of college experience and have a demonstrated interest in a career in public accounting. We ask that you submit a current resume and cover letter that addresses your interest in the program by May 5, 2017.
Apply to Yeo & Yeo’s 2017 Summer Leadership Program today.
It’s not uncommon for adult children to help support their aging parents. If you’re in this position, you might qualify for the adult-dependent exemption. It allows eligible taxpayers to deduct up to $4,050 for each adult dependent claimed on their 2016 tax return.
Basic qualifications
For you to qualify for the adult-dependent exemption, in most cases your parent must have less gross income for the tax year than the exemption amount. (Exceptions may apply if your parent is permanently and totally disabled.) Generally Social Security is excluded, but payments from dividends, interest and retirement plans are included.
In addition, you must have contributed more than 50% of your parent’s financial support. If you shared caregiving duties with a sibling and your combined support exceeded 50%, the exemption can be claimed even though no one individually provided more than 50%. However, only one of you can claim the exemption.
Factors to consider
Even though Social Security payments can usually be excluded from the adult dependent’s income, they can still affect your ability to qualify. Why? If your parent is using Social Security money to pay for medicine or other expenses, you may find that you aren’t meeting the 50% test.
Don’t forget about your home. If your parent lives with you, the amount of support you claim under the 50% test can include the fair market rental value of part of your residence. If the parent lives elsewhere — in his or her own residence or in an assisted-living facility or nursing home — any amount of financial support you contribute to that housing expense counts toward the 50% test.
Easing the financial burden
Sometimes caregivers fall just short of qualifying for the exemption. Should this happen, you may still be able to claim an itemized deduction for the medical expenses that you pay for the parent. To receive a tax benefit, the combined medical expenses paid for you, your dependents and your parent must exceed 10% of your adjusted gross income.
The adult-dependent exemption is just one tax break that you may be able to employ to ease the financial burden of caring for an elderly parent. Contact us for more information on qualifying for this break or others.
© 2017
Investment interest — interest on debt used to buy assets held for investment, such as margin debt used to buy securities — generally is deductible for both regular tax and alternative minimum tax purposes. But special rules apply that can make this itemized deduction less beneficial than you might think.
Limits on the deduction
First, you can’t deduct interest you incurred to produce tax-exempt income. For example, if you borrow money to invest in municipal bonds, which are exempt from federal income tax, you can’t deduct the interest.
Second, and perhaps more significant, your investment interest deduction is limited to your net investment income, which, for the purposes of this deduction, generally includes taxable interest, nonqualified dividends and net short-term capital gains, reduced by other investment expenses. In other words, long-term capital gains and qualified dividends aren’t included.
However, any disallowed interest is carried forward. You can then deduct the disallowed interest in a later year if you have excess net investment income.
Changing the tax treatment
You may elect to treat net long-term capital gains or qualified dividends as investment income in order to deduct more of your investment interest. But if you do, that portion of the long-term capital gain or dividend will be taxed at ordinary-income rates.
If you’re wondering whether you can claim the investment interest expense deduction on your 2016 return, please contact us. We can run the numbers to calculate your potential deduction or to determine whether you could benefit from treating gains or dividends differently to maximize your deduction.
© 2017
Last year you may have made significant gifts to your children, grandchildren or other heirs as part of your estate planning strategy. Or perhaps you just wanted to provide loved ones with some helpful financial support. Regardless of the reason for making a gift, it’s important to know under what circumstances you’re required to file a gift tax return.
Some transfers require a return even if you don’t owe tax. And sometimes it’s desirable to file a return even if it isn’t required.
When filing is required
Generally, you’ll need to file a gift tax return for 2016 if, during the tax year, you made gifts:
- That exceeded the $14,000-per-recipient gift tax annual exclusion (other than to your U.S. citizen spouse),
- That exceeded the $148,000 annual exclusion for gifts to a noncitizen spouse,
- That you wish to split with your spouse to take advantage of your combined $28,000 annual exclusions,
- To a Section 529 college savings plan for your child, grandchild or other loved one and wish to accelerate up to five years’ worth of annual exclusions ($70,000) into 2016,
- Of future interests — such as remainder interests in a trust — regardless of the amount, or
- Of jointly held or community property.
When filing isn’t required
No return is required if your gifts for the year consist solely of annual exclusion gifts, present interest gifts to a U.S. citizen spouse, qualifying educational or medical expenses paid directly to a school or healthcare provider, and political or charitable contributions.
If you transferred hard-to-value property, such as artwork or interests in a family-owned business, consider filing a gift tax return even if you’re not required to. Adequate disclosure of the transfer in a return triggers the statute of limitations, generally preventing the IRS from challenging your valuation more than three years after you file.
Meeting the deadline
The gift tax return deadline is the same as the income tax filing deadline. For 2016 returns, it’s April 18, 2017 (or October 16 if you file for an extension). If you owe gift tax, the payment deadline is also April 18, regardless of whether you file for an extension.
Have questions about gift tax and the filing requirements? Contact us to learn more.
© 2017
Rather than keeping track of the actual cost of operating a vehicle, employees and self-employed taxpayers can use a standard mileage rate to compute their deduction related to using a vehicle for business. But you might also be able to deduct miles driven for other purposes, including medical, moving and charitable purposes.
What are the deduction rates?
The rates vary depending on the purpose and the year:
- Business: 54 cents (2016), 53.5 cents (2017)
- Medical: 19 cents (2016), 17 cents (2017)
- Moving: 19 cents (2016), 17 cents (2017)
- Charitable: 14 cents (2016 and 2017)
The business standard mileage rate is considerably higher than the medical, moving and charitable rates because the business rate contains a depreciation component. No depreciation is allowed for the medical, moving or charitable use of a vehicle.
In addition to deductions based on the standard mileage rate, you may deduct related parking fees and tolls.
What other limits apply?
The rules surrounding the various mileage deductions are complex. Some are subject to floors and some require you to meet specific tests in order to qualify.
For example, miles driven for health-care-related purposes are deductible as part of the medical expense deduction. But medical expenses generally are deductible only to the extent they exceed 10% of your adjusted gross income. (For 2016, the deduction threshold is 7.5% for qualifying seniors.)
And while miles driven related to moving can be deductible, the move must be work-related. In addition, among other requirements, the distance from your old residence to the new job must be at least 50 miles more than the distance from your old residence to your old job.
Other considerations
There are also substantiation requirements, which include tracking miles driven. And, in some cases, you might be better off deducting actual expenses rather than using the mileage rates.
So contact us to help ensure you deduct all the mileage you’re entitled to on your 2016 tax return — but not more. You don’t want to risk back taxes and penalties later.
And if you drove potentially eligible miles in 2016 but can’t deduct them because you didn’t track them, start tracking your miles now so you can potentially take advantage of the deduction when you file your 2017 return next year.
© 2017
The Section 199 deduction is intended to encourage domestic manufacturing. In fact, it’s often referred to as the “manufacturers’ deduction.” But this potentially valuable tax break can be used by many other types of businesses besides manufacturing companies.
Sec. 199 deduction 101
The Sec. 199 deduction, also called the “domestic production activities deduction,” is 9% of the lesser of qualified production activities income or taxable income. The deduction is also limited to 50% of W-2 wages paid by the taxpayer that are allocable to domestic production gross receipts.
Yes, the deduction is available to traditional manufacturers. But businesses engaged in activities such as construction, engineering, architecture, computer software production and agricultural processing also may be eligible.
The deduction isn’t allowed in determining net self-employment earnings and generally can’t reduce net income below zero. But it can be used against the alternative minimum tax.
How income is calculated
To determine a company’s Sec. 199 deduction, its qualified production activities income must be calculated. This is the amount of domestic production gross receipts (DPGR) exceeding the cost of goods sold and other expenses allocable to that DPGR. Most companies will need to allocate receipts between those that qualify as DPGR and those that don’t — unless less than 5% of receipts aren’t attributable to DPGR.
DPGR can come from a number of activities, including the construction of real property in the United States, as well as engineering or architectural services performed stateside to construct real property. It also can result from the lease, rental, licensing or sale of qualifying production property, such as:
- Tangible personal property (for example, machinery and office equipment),
- Computer software, and
- Master copies of sound recordings.
The property must have been manufactured, produced, grown or extracted in whole or “significantly” within the United States. While each situation is assessed on its merits, the IRS has said that, if the labor and overhead incurred in the United States accounted for at least 20% of the total cost of goods sold, the activity typically qualifies.
Contact us to learn whether this potentially powerful deduction could reduce your business’s tax liability when you file your 2016 return.
© 2017
With immigration laws and illegal aliens becoming a political and media headline lately, it is important for agricultural employers to know what is available to them to gain access to foreign labor.
The H-2A temporary agricultural labor certification program has become an increasingly popular option for U.S. employers to fill temporary or seasonal agricultural labor needs. Statistics released by the Office of Foreign Labor report that 8,801 applications were received in 2016 – a 16.4% increase over 2015 – with 165,741 total positions certified, an 18.5% increase when compared to 2015. Currently 85 countries are eligible to participate in the H-2A program.
What is the H-2A temporary agricultural labor certification program?
The program is a means for U.S. agricultural employers who anticipate a shortage in domestic workers to employ nonimmigrant foreign workers. Generally the certification is in force for a 10-month term or less. Potential employers are required to demonstrate that there are not a sufficient number of domestic workers who are able, willing, qualified, and available to work. It further requires the employer to agree that employing aliens will not adversely impact the wages or working conditions of similarly employed domestic workers. Employers who fill their labor needs with foreign labor are required to continue to engage in the recruitment of U.S. labor.
Other considerations for employers who wish to apply for temporary foreign labor under the H-2A regulations include providing specific conditions that would be available to the labor. These include, but are not limited to, housing, meals, transportation, tools, and workers’ compensation.
If an employer is certified under H-2A, precise records must be maintained and payroll taxes and forms must be considered. An employer is required to maintain records for each foreign employee for hours worked, hours offered but the worker refused to work, when an employee has terminated, and the reason for the termination. Each pay period, the employer must provide a wage statement to the employee reporting hours worked, hours refused and the basis for the pay. The basis for the pay should be broken down by crop and detail if it was based on hours worked, per piece, per task, etc.
In addition, employers are required to notify U.S. Citizenship and Immigration Services within two workdays if the foreign employee:
- fails to report to work within five workdays of the employment start date;
- leaves without notice and fails to report to work for five consecutive workdays without consent of the employer;
- is terminated before completing the H-2A labor services they were hired to perform; or
- completes the services they were hired to perform more than 30 days earlier than the date specified on the H-2A application.
How do you report the foreign labor for payroll taxes and forms?
Compensation paid to workers employed under an H-2A visa are exempt from Social Security and Medicare taxes. Also, any compensation paid for services performed in connection with the H-2A are not considered wages for federal income tax withholding; no mandatory withholding is required for the employer, but backup withholding may apply. If the employer and employee agree, the employer can voluntarily withhold federal income taxes. If the employer chooses to do this, they are required to remit the taxes and report the withholding on Form 943 and Form W-2, similar to any other employee.
Wages paid to an employee covered by the H-2A visa in excess of $600 are required to be reported on Form W-2; compensation will be reported in box 1, and boxes 3 and 5 will remain blank. If voluntary federal withholding was utilized, then the withholding would be reported in box 2. The wages paid will not be reported on Form 943. If an employee covered under H-2A anticipates owing federal income taxes, but does not participate in voluntary withholding, the employee may be subject to estimated tax payments.
The H-2A temporary agricultural labor certification program may be the right fit or your agribusiness. Contact your Yeo & Yeo professional for assistance.
Yeo & Yeo CPAs & Business Consultants, a leading Michigan accounting firm, is pleased to announce that Michael T. Tribble, CPA, received the National Association of Home Builders’ (NAHB) Society of Honored Associates award.
“Mike’s tireless commitment to the NAHB is greatly appreciated by many staff and volunteer leaders. He has been an influential and effective participant in a number of budget, financial and audit matters,” says Eileen Ramage, CPA, CAE, Chief Financial Officer of NAHB.
Tribble was inducted in January at the NAHB International Builders Show in Orlando, Florida. He was nominated by both the Home Builders Association of Saginaw and the Home Builders Association of Michigan. The award is given annually to four associate members nationally. Tribble received the award for his years of dedication – most recently he devoted innumerable hours to working with NAHB staff in the development of an updated system of cost allocation, and provided guidance with the association’s 2017 budget. Tribble also worked with NAHB staff to produce a video for NAHB members featuring the Internal Revenue Service Form 990 nonprofit tax return, highlighting the parts of the form that are most important for NAHB members.
Tribble has been committed to the construction industry throughout his career at Yeo & Yeo. He serves on the NAHB board of directors and is chair of its audit committee. He also serves the Michigan Association of Home Builders as a director, chair of its investment and audit committees, and past chair of its Associates Council. He is past president of the Home Builders Association of Saginaw and a member of the Construction Industry CPAs/Consultants Association.
Tribble is a Principal in Yeo & Yeo’s Saginaw office and a member of the firm’s Tax Services and Construction Services Groups.
Operating reserves are not a luxury—they are a necessity for financially savvy nonprofits. Organizations without adequate operating reserves leave themselves vulnerable to the financial instability and damaged reputation that interruptions in incoming revenue might bring.
A recent report from the Nonprofit Finance Fund, a community development financial institution, indicates that operating without an adequate financial cushion is fairly widespread among nonprofits. The Fund’s 2015 State of the Nonprofit Sector Survey results showed that 53% of nonprofits responding had less than three months’ cash on hand and 12% had less than 30 days’ cash in reserve.
What reserves are—and are not
Operating reserves can be defined as the portion of unrestricted net assets that nonprofits designate for use in emergencies or to sustain financial operations in the unanticipated event of significant unbudgeted increases in operating expenses or losses in operating revenues. Reserves should be liquid or easily converted to cash, so the organization is not forced to sell long-term investments, take out a loan or pursue other undesirable alternatives to quickly generate funds.
Also remember that cash on hand is not the same thing as operating reserves. Cash can be restricted for specific purposes while operating reserves must be available to be spent on current operations.
Operating reserves also should not be confused with donor-restricted endowments. Only the income from these endowments is available to be spent (based on the donor’s wishes), with the principal portion held in perpetuity and, thus, unavailable for daily operations.
Why you need reserves
Remember the last recession? The years following the financial crisis of 2008 were challenging for many nonprofits, with plummeting revenues that led to painful cuts in staffing and programs—despite, at times, an increased demand for services. Some nonprofits shut down altogether. When a turbulent economy reduces revenues to a trickle, operating reserves can help organizations survive.
Healthy reserves also will allow your organization to seize opportunities that require a cash outlay (for example, purchasing a building), set aside funds for long-term goals and plans, and cover unexpected expenses after a natural disaster or other emergency. Reserves also can prove valuable when you need to augment your staff and deliver services under federal contracts that will not provide payment for 30 to 60 days.
How much to set aside as reserves
The Nonprofit Operating Reserves Initiative Workgroup, an all-volunteer group of nonprofit leaders, financial management consultants and others, suggests nonprofits consider several issues when setting a dollar goal for their reserves:
- Are your revenue sources subject to large, unexpected, negative fluctuations?
- Are your resources subject to sudden increases in demand?
- Are your income and expenses subject to significant day-to-day fluctuations?
- Have your planning and budgeting processes been historically accurate in forecasting financial results?
- Are adequate backup funding resources likely to be available?
- Is the governing body trying to expand the organization?
The Workgroup advises organizations to maintain a minimum reserve level of 25% of the annual expense budget, enough to cover three months’ expenditures.
Others suggest that a sensible target might be the average gap between revenues and expenses. Under this guideline, organizations with more volatile revenue or spending would require greater operating reserves. Financial advisors typically say the ideal amount for most nonprofits is six months of cash expenditures. Ultimately, the right amount for your organization will depend on its particular circumstances—no single standard applies to all.
A critical layer of protection
Operating reserves add another layer of essential insurance when you run into revenue shortfalls that could threaten your sustainability. Building reserves greatly improves your organization’s odds of continued existence.
© 2016
The New Year brings changes in payroll requirements employers must meet to avoid costly penalties. A new Form I-9 – Employment Eligibility Verification was released November 14, 2016, by the U.S. Citizenship and Immigration Service. Employers are required to complete the new Form I-9 for all employees hired after January 22, 2017. Forms that were completed for employees hired before January 22, 2017, are still in compliance. The original Form I-9 was established in 1986 to document verification of the identity and employment authorization of all new employees, both citizens and noncitizens.
The new, fillable Form I-9 is available online at www.uscis.gov/i-9. The form contains pop-up information icons and error-checking capabilities to help capture more accurate information. The new, online version will not allow mandatory fields to be left blank. It also offers an online service for answering questions with an “Ask Emma” Q & A feature.
The form is not an electronically submittable form and must still be printed, physically signed and dated by the employee and employer and retained. Both the employer and the employee must complete their respective sections of Form I-9 and, in most cases, the employer must keep the form until the latter of three years from the date of hire or one year after the date employment ended.
Penalties for employers who commit immigration-related offenses increased significantly in 2016. They range from $216 to $2,156 per individual. Avoid the penalties by correctly completing and retaining the new Form I-9 and supporting documentation.
Yeo & Yeo’s Tax Services Group has been alerted that a new email phishing scam is occurring, disguised as an alert from tax professionals like Yeo & Yeo.
The bogus emails are designed to look like they are coming from the tax professionals’ firm. The emails offer a direct link to a Tax Organizer, or
they state that a document is available to download from a portal. The email includes the recipient’s name and states that a Tax Organizer is available
or has been completed, and encourages the recipient to click on a link to an “Individual Tax Organizer – Signed.pdf.” Do not click on these malicious .PDF links.
Legitimate notices from tax professionals will direct the recipient through secure program logins and will not contain links.
Please
be alert to any such suspicious emails and, if in doubt, contact Yeo & Yeo or the purported sender directly.
Kicking off February 1, organizations around the country will support American Heart Month, and Yeo & Yeo is joining in by being casual for a cause.
Firm employees will dress in red shirts and wear jeans on Fridays throughout February. The Michigan accounting firm is proud to support the cause by
promoting and providing opportunities for firm-wide support to unite in life-saving awareness-to-action movements.
Yeo & Yeo has consistently been named one of Michigan’s Best and Brightest Companies in Wellness since 2014, an initiative that recognizes and celebrates quality and excellence in worksite health. The program highlights companies that promote a culture of wellness.
“We are committed to the health and wellness of our employees, and our goal is to help them be empowered to make real changes in their health and lifestyle behaviors,” said Thomas E. Hollerback, president and CEO of Yeo & Yeo.
Yeo & Yeo supports the wellness of its employees by providing an AED for every office and encouraging life-saving training. The Michigan accounting firm offers a gold level healthcare plan, relieving its employees of a large portion of premiums. In addition to keeping healthcare costs low, the firm has a high percentage of participation in its wellness plan which includes a further healthcare premium reduction incentive. Another initiative is the firm’s Fitbit Fitness Program. Monthly, themed challenges for individuals and teams, along with prizes and friendly competition, have resulted in a high level of involvement. The firm also provides free flu shots for all employees who elect to participate.
Please join Yeo & Yeo in recognizing American Heart Month.
Yeo & Yeo’s Construction Services group is proud to share the announcement of the Home Builders Association of Saginaw’s partnership with the Greater Michigan Construction Academy to offer Building & Construction Training in Saginaw.
The Homes Builders Association of Saginaw is proud to announce its partnership with the Greater Michigan Construction Academy to offer General Building & Construction Training in Saginaw.
Classes begin February 9th at the GMCA training facility located at: 2775 Shattuck Rd., Saginaw, MI
General Building & Construction will give the basic knowledge and principles of carpentry, masonry, concrete finishing, electrical work, HVAC, and plumbing. Students will become skilled in different phases of a project from start to finish. Once completing this course, the trainee will be able to interpret construction drawings; perform quality concrete and brickwork, frame walls, ceilings, and floors of a structure, and install the proper wiring and piping for electrical and plumbing systems. Training will also include interior and exterior finishing. The General Building & Construction program has a focus in residential construction. Presentations will be given by local home builders to share their knowledge and expertise and give insight and support to students.
“The Greater Michigan Construction Academy is excited to bring a residential building program to the Saginaw area. By partnering with the HBA we are able to reach a group of individuals who are looking to go into home building. The need for skilled labor in both commercial and residential building trades is still on the rise, and we are proud to be able to offer both in the Great Lakes Bay Region.” – Stephanie Davis, Vice President of GMCA.
Founded in 1955, The Home Builders Association of Saginaw is a professional organization providing progressive and responsive contributions to the building industry and our community. In addition to housing issues, the association seeks to protect the environment and to provide education and a better quality of life for all citizens.
“Quality and professionalism is a strength of HBA members. If we can mentor and assist students in building trades classes such as the General Building & Construction offered by GMCA, we can provide dialogue with students to support their career endeavors. The home building industry is in need of highly skilled and trained professionals. The community needs talented workers; the future of home building lays in the generations to follow.” – Michelle Revette, Executive Officer of the Home Builders Association of Saginaw.
The Home Builders Association of Saginaw (HBAS) is also proud to announce that funding can be provided for students taking this course. With the announcement of a grant, given through the National Association of Home Builders (NAHB), HBAS has the opportunity to sponsor several students entering this course, says Michelle Revette of the grant, “Our goal is to provide $10,000.00 in tuition assistance for students that want to become a part of the skilled trade workforce – building our communities. We take great pride in the hard work our members present and we are very excited to include and mentor the future builders of Saginaw County”.
You may contact 989-793-1120 if you would like to know more about this program and sponsorship for funding.
Yeo & Yeo CPAs & Business Consultants is releasing the results of the 2017 Leading Edge Alliance (LEA Global) National Manufacturing Outlook Survey.
With more than 250 participants, this survey report contains the expectations and opinions of manufacturing executives in more than 20 states across the country producing a wide variety of products including industrial/machining, transportation/automotive, construction, food and beverage, and other products.
Results from the survey include:
- 74% of small manufacturers and 69% of large manufacturers expect revenue to grow in 2017.
- Manufacturers are more optimistic about their local/regional economies than the national or global economies.
- The top priority for manufacturers in 2017 is “cutting operations costs;” however, high-growth manufacturing respondents are more focused on “research and development,” with 12% of high-growth respondents reinvesting more than 10% of annual revenue.
- Labor continues to be a challenge for manufacturers with 67% of respondents expecting labor costs to “increase” and an additional 7% expecting labor costs to “increase significantly” in 2017.
- Appropriate cost allocation and accurate and timely data will become required capabilities for successful businesses in the industry.
- More manufacturers will be considering both sales and mergers in 2017 as well as strategic acquisitions.
U.S. manufacturing industry headwinds are significant and include both internal issues, such as high inventory-to-sales ratios, the cost of technology, and labor shortages, as well as external issues like the price of raw materials and strength of the dollar.
Strategic manufacturers should have ongoing conversations with all of their advisors, including their accounting and tax provider, as to how to overcome these challenges and achieve their business goals.
“We can offer a range of solutions to manufacturers, from tax credits and entity structuring, to technology advancements and implementing operational assessments that are important for making sound business decisions,” said Yeo & Yeo Principal and Manufacturing Services Group Leader Amy Buben . “We help manufacturers align the critical operations of their companies: finance, people, processes and technology.”
Read the entire survey report, 2017 National Manufacturing Outlook and Insights – Strategies to Overcome the Headwinds, for in-depth information about the challenges the respondents face, the key strategies that the best-run manufacturers believe will be most effective, and the outlook for 2017.
The domestic production activities deduction, also known as “DPAD” or “Section 199 deduction,” is meant to encourage domestic production. This potentially valuable tax break can be used by many types of businesses, from manufacturing to farming.
Understanding the acronyms
Before trying to calculate the DPAD, it helps to understand the acronyms involved. One important factor is qualified production activities income (QPAI), which is the amount of domestic production gross receipts (DPGR) exceeding the cost of goods sold and other expenses allocable to that DPGR. Most businesses will need to allocate receipts between those that qualify as DPGR and those that do not unless less than 5 percent of receipts are not attributable to DPGR.
Farmers qualify for DPAD as producers of crops and from the sale of raised breeding, dairy or draft livestock. Apart from farming, DPGR can come from a number of activities, including the construction of real property within the United States. It also can result from the lease, rental, licensing or sale of other qualifying production property, such as machinery, office equipment or computer software. The main rule regarding any property is that it must have been manufactured, produced, grown or extracted in whole or “significantly” within the United States. While each situation is assessed on its merits, the IRS has said that, if the labor and overhead incurred in the United States accounted for at least 20 percent of the total cost of goods sold, the activity typically qualifies.
What are the limitations? The DPAD is limited to 50 percent of Form W-2 wages paid to employees and allocable to DPGR. Unfortunately, many farmers do not pay W-2 wages which disqualifies them from deducting at least 50 percent of W-2 wages under DPAD. You may be able to avoid this rule by making legitimate wage payments to family members including spouses and children over the age of 18. In addition, your farming operation may be financially stable enough to hire employees to complete tasks instead of hiring on a contract labor basis. In order to maximize your DPAD, you should ensure that 50 percent of W-2 wages reach at least 9 percent of the farm’s QPAI.
Simplifying the calculations
Although determining what costs are allocable to DPGR can get complicated, some smaller businesses can simplify their calculations. Under the Small Business Simplified Overall Method, costs are allocated between DPGR and non-DPGR based on relative gross receipts. This is the most common approach used by farmers
The Simplified Deduction Method, another method for calculating QPAI, can be used by most businesses whose assets are no more than $10 million, or whose average gross receipts do not exceed $100 million. This approach is similar to the Small Business Simplified Overall Method in that most expenses are allocated between DPGR and non-DPGR based on gross receipts. The allocation is not used for the cost of goods sold.
If your business can claim the DPAD, you may be able to deduct 9 percent from the lesser of your QPAI or taxable income. As such, it could boost your cash flow. Please contact a member of Yeo & Yeo’s Agribusiness Services Group for help with determining whether and how the deduction could work for you.
© 2015
Why do so many businesses continuously struggle to make ends meet, while others appear to thrive year after year? Why do some business owners seem to have an unlimited amount of time to take family vacations and play active roles in their communities, while others work an excessive amount of hours and are seemingly chained to their business?
One of the main differentiators between the good and the exceptional is the amount of focus and attention that the business owner gives to the big picture. It is easier, more comfortable, and often more fun to spend a majority of your time working in your business (managing and doing), as opposed to spending time working on your business (leading, creating value, holding others accountable and communicating the vision). However, the truly successful entrepreneur understands that big-picture thinking is what drives business growth and overall success.
Four Critical Factors
We all know there are many keys to success. I have worked with hundreds of business owners during my career, and have seen many successes and a few failures along the way. It is these experiences that led me to recognize four critical factors that can help take you from being a good entrepreneur to becoming an exceptional leader and business owner.
1. Know the value of your business and the drivers that affect value.
2. Focus on key performance indicators that can drive significant change throughout your organization.
3. Understand how your business and personal life support each other.
4. Create a clear vision of the future with specific, measurable objectives.
Know Your Value
Sure, everyone wants to know the value of their business if they’re looking to sell or transfer shares, or are involved in Litigation Support . However, a business valuation is a useful tool to make important decisions about the future such as estate planning, succession planning, determining life insurance needs and even looking for ways to increase value. Additionally, knowing the value of your business or, more importantly, understanding the drivers that create and sustain value, should be a key factor in your decision-making and how you manage the business. Always strive to create value for your business, and make decisions based on whether or not value is being created or damaged.
An annual review of your business value allows you the ability to track your performance in terms of estimated change in value, not just on revenue. The process of preparing a business valuation takes into account where you’ve been, where you are today, and where you appear to be heading. The main reason we are in business is to create wealth. A business valuation takes into account the entire operation and provides you the opportunity to see how your decisions affect business value.
If you’re looking to exit your business, value becomes even more critical. It has been said that you should begin planning your exit when you start your business. By understanding value drivers, and raising the value of your business, you make it more marketable. As an added bonus, many of the things that make the business more marketable also help prepare you for unforeseen events. By creating a sound business structure, employing efficient processes and growing internal talent, you are in the best position to handle whatever the future has to bring.
Know Your Numbers
I am not suggesting that you become an accounting expert. That may not play to your personal strengths and probably is not the reason you became an entrepreneur and business owner. Although it would serve you well to have a working knowledge of financial statements, it is more important that you have a thorough understanding of the key performance indicators (KPI) that drive the decision-making and day-to-day success of the business. This way, you can focus on your business while the accounting professionals take care of the details.
We continually measure things in our businesses. For many, the process of measuring data becomes an exercise in futility—we are not effectively using the results to reach strategic goals. When used correctly, the right measurements can become a vital part of the company’s strategy. The key to driving change and improving culture within the organization is to define the strategic initiatives, develop KPI to measure the progress, and create action items that lead toward achieving the desired objectives.
KPIs can provide an immediate snapshot of the overall performance of your business. Depending upon the stated objectives and the urgency of the situation, certain KPIs may be reported daily or weekly, while others may require monthly or quarterly reviews.
An added benefit of creating KPIs is that the mere act of measurement and communicating the results promotes an atmosphere of learning within the organization. The more your team understands about the key success factors of the business, the more likely they are to develop creative and efficient ways to meet the objectives.
Know Your Wealth
In most instances, your business represents your largest personal asset. However, it does not represent your entire portfolio, nor does it encompass all of your personal goals and objectives. Knowing your total net worth is important. The main reason: It is very easy to put this on the back burner as you spend time growing the business. The process of preparing a personal balance sheet forces you to take a close look at your personal financial situation and be aware of where you are on the road to where you want to be. Your personal wealth is about something of greater importance than just the business. It is about your family, your security, and your legacy. You should take a financial snapshot of where you stand at least once per year.
For many business owners, it’s easy to get so caught up in the responsibility and daily minutiae of running a successful business that they forget, or put off, the bigger picture. From a practical standpoint, you should take the time and effort to get your estate and trust documents in order, assure that you have adequate insurance in case of a catastrophe, and build for retirement apart from the business. As it relates to the business, your goal should be to maximize value by building an organization that can thrive without you. This will allow you the freedom to spend as much or as little time in the business as you desire, while creating the opportunity to pursue other interests.
The measurement and accumulation of personal wealth is important in that it provides more opportunity to pursue your dreams and provides security for your family. Success can be defined in a variety of ways, financial or otherwise, and it is important to remember that net worth does not equal self-worth. Ultimately, we all have personal goals and dreams outside of our business. It is important to keep these in the forefront and not allow them to get deferred while you work only on the business.
Know Your Future
Know your future, or at least have a vividly clear picture of what it would look like if your plans succeed. With a clear vision, decision-making becomes substantially easier, as you can focus on the important and not be sidetracked as much by the urgent or the interesting. It allows you to stay focused on the prize. Dreaming is a big part of running a business. As those dreams become a vision, the vision becomes a strategic plan. So . . . what’s your plan? What are your three to five major company initiatives that will have the greatest positive impact on the business and its value? You, and the key members of your management team, should be able to quickly identify them.
Operationally, that could mean improving cycle times, eliminating waste, or improving on-time delivery. Financially, it may mean preparing budgets, reducing outstanding debt, or reducing accounts receivable days. For marketing, maybe it’s brand awareness, digital presence, or introducing a new product or service. Or, maybe it’s R&D, customer satisfaction, inventory turns . . . you name it. Whatever will have the greatest impact on the business, it is important that you can clearly visualize the end result and assign responsibilities and accountabilities to assure that you get there.
In most cases, it’s not that the business owner doesn’t understand the importance of focusing on the big picture, it’s just that other important initiatives come up—pushing the process to the back burner. And before you know it, another year has passed, and nothing has changed.
You own your business. No one cares about the business as much as you do. No one can do this job for you. Don’t think that you have to do it alone. Securing the services of a trusted advisor could become very beneficial in the process. They will bring an outside set of eyes and experiences to the company, keep you on track, and help ensure that big-picture strategy remains a priority.
However you get there, I am confident that a sharper focus on the big picture will provide greater company value, a more engaged workforce, and more security for you and your family.