Tammy Moncrief and Peter Bender Elected to Yeo & Yeo Board of Directors

Tammy Moncrief, CPA, has been elected to the Yeo & Yeo CPAs & Business Consultants board of directors, and Peter J. Bender, CPA, CFP^® has been reelected to the firm’s board of directors effective January 1, 2017, announced Thomas E. Hollerback, president and CEO. They will serve two-year terms.

Tammy Moncrief, managing principal of the Auburn Hills office, is a member of the firm’s Tax Services Group. She has 29 years of public accounting experience. Her areas of expertise include business consulting, tax planning and preparation, multi-state taxation, and trust and estate planning with a strong emphasis on professional service firms, as well as the real estate, construction, healthcare, engineering, agribusiness, and wholesale sales and distribution sectors. She is vice-chair of the Michigan Association of Certified Public Accountants’ Federal Tax Task Force. In our community, Moncrief is an active volunteer for the University of Detroit Jesuit High School and is past president of the Michigan State University Detroit Area Development Council. She has held positions with the finance committee for Notre Dame Preparatory High School. She volunteers for activities and has held various committee chair positions for the Academy of the Sacred Heart.

Peter Bender is a principal and a member of the firm’s Agribusiness, Employee Benefits and Estate Planning Groups. He has 28 years of experience in auditing, and tax planning and preparation for businesses and individuals, with a concentration on agribusinesses. He also performs audits for employee benefit plans. Bender is chairman of the Michigan Association of Certified Public Accountants’ Agribusiness Task Force. He is a Certified Financial Planner™ and a member of the Financial Planning Association. In our community, Bender is chairman of the board of the Frankenmuth Credit Union and serves on the board for Wellspring Lutheran Services. He is a member and past president of the Saginaw Rotary Club, and a member of the Valley Lutheran High School Growing Campaign Cabinet and the St. Lorenz Foundation Finance Committee. He is based in the firm’s Saginaw office. Check the background of Pete Bender on FINRA’s BrokerCheck.

Yeo & Yeo’s Tax Services Group is pleased to provide updated tax calendars for your use. Please refer to Yeo & Yeo’s 2017 Tax Calendar for Businesses and 2017 Tax Calendar for Individuals and Trusts.

The revised calendars reflect a recent change whereby the IRS provided a 30-day extension of the due date for Affordable Care Act information that must be reported to covered individuals and employees, from January 31, 2017, to March 2, 2017. This includes IRS Forms 1095-B (Health Coverage) and 1095-C (Employer-provided Health Insurance Offer and Coverage).

The calendars also reflect other updates such as the due date for federal tax returns, which this year is Tuesday, April 18. The Emancipation Day holiday is being observed in Washington D.C. on Monday, April 17, so Tax Day is the following day.

Contact us to ensure you are meeting all applicable deadlines. For other helpful tools, visit the Tax Center at yeoandyeo.com.

You don’t necessarily need to have an “office” to make use of the home office deduction. While having office space in your home for exclusive business use is a great way to capture that deduction, other business use of your home, including dedicated storage space for inventory, may also qualify.

For example, if you have an eBay business, perhaps you have considered the home office deduction, but know that realistically your laptop follows you around the house and you probably make personal use of any areas where you do administrative tasks, but have you considered where you store your inventory? Do you have a separate closet, room or section of your basement where you keep inventory or items you have listed for sale, or are going to list? If that area is exclusive to your business, you may qualify for the home office deduction.

Per Internal Revenue Code section 280A(c)(2), certain storage space used within a personal residence is not disallowed from the definition of a home office expense to the extent that it is used on a regular basis to store the inventory or product samples of the taxpayer, or held for use in the taxpayer’s trade or business of selling products at retail or wholesale – but only if the dwelling unit is the sole fixed location of such trade or business.

Example 1: You have a separate shelving unit in your basement that holds boxes of inventory. This space used exclusively for your business may be included when determining your home office deduction.
Example 2: You have some clothing and purses that you have listed on eBay that are kept in your closet, interspersed with your own personal items. This would not be exclusive use and this area could not be used as part of your home office deduction calculation; however, if you were to amass several items into an area of your closet, exclusive for items you are selling, this section of the closet could qualify.

Home office deductions are limited by the amount of associated home business income—in other words, you cannot use the home office deduction to put you into a net taxable loss, but you can use it to bring your home business income to zero. There is a simplified method and a non-simplified method for calculating the deduction, and the IRS allows taxpayers to choose annually whichever method they prefer.

The simplified method is easier to work with; however, it is limited to 300 square feet of designated space and any unused portion cannot be carried forward to the next tax year.
The non-simplified method is based on the percentage of the home used for business purposes and it incorporates utilities, real estate taxes and home insurance into the computation. The record-keeping and calculations are more complex, and tracking depreciation and basis is also required, but using this method allows a taxpayer to carry forward unused portions of the deduction into a year where there is sufficient income to utilize it.

Proper planning and documentation is key to the optimum tax treatment. Please let me know if you would like me to assist you with your home office deduction or any other tax matters.

The core of any organization’s fraud prevention program is strong internal controls. Yet too many nonprofits either fail to develop controls that address common risks or, if they establish controls, neglect to enforce them. Your nonprofit must do both if it wants to help prevent occupational theft and fraud perpetrated by outsiders.

Charities at risk

According to the Association of Certified Fraud Examiners (ACFE), billing fraud, check tampering and expense reimbursement fraud are the three most common types of employee theft found in religious, charitable and social service organizations. Theft of cash or minor supplies is often a common occurrence as well. However, proper segregation of duties — for example, assigning account reconciliation and fund depositing to two different staff members or prohibiting a check writer to also be a check signer — is a relatively easy and effective method of preventing such fraud.

For all types of organizations, such controls as strong management oversight, regular audits and an engaged board or finance committee are associated with decreases in financial losses. The ACFE has found that proactive data monitoring and analysis is the most effective means of limiting the duration and cost of fraud schemes — 50% shorter and 60% smaller than organizations that do not monitor data.

Getting priorities straight

Most nonprofits have at least a rudimentary set of controls, but employees bent on fraud can usually find gaps in the fence. For example, charities tend to devote the lion’s share of their budgets to programming and can be stingy about allocating dollars to enforcing internal controls and administrative duties. This can be especially problematic when the “tone at the top” is lax and executive directors or board members indicate that preventing fraud is low on their priority list.

Nonprofit boards may also inadvertently enable fraud when they place too much trust in the key management staff and fail to challenge that person’s financial representations. Unlike for-profit companies, nonprofit boards may lack members with financial oversight experience, which means they may fail to notice important warning signs that something is amiss.

Trust is an Achilles’ heel throughout many nonprofits. Organizations often regard their staff members as family and skip such important fraud prevention measures as conducting background checks. In many cases, managers are allowed to override internal controls without recourse and volunteers are trusted to accept cash donations or keep the books without the oversight of a staff member — both very risky activities.

Send the right message

How nonprofits deal with perpetrators can also increase their fraud risk. A reputation for honesty and fiscal responsibility is any charity’s bedrock. So it is not surprising that many organizations choose to quietly fire fraud perpetrators and sweep such incidents under the rug.

Unfortunately, such actions encourage fraud by telling potential thieves that the consequences of getting caught are relatively minor or low risk. Even if an incident is hushed up, it could do more reputational damage if discovered than publicly addressing the issue head-on would. It is better, therefore, to file a police report, consult an attorney and inform major stakeholders about the incident and what you are doing to prevent it from happening again. This proactive measure sends a clear message that you are working to safeguard the organization’s assets and continue the charitable mission.

Cover all bases

Internal control policies should address both common fraud risks and those specific to your organization and constituents. Is your nonprofit exposed to fraud? Answer the questions in Yeo & Yeo’s Internal Control Checklist to find out. Contact Yeo & Yeo for more information about internal controls.

Yeo & Yeo CPAs & Business Consultants is pleased to announce Michael A. Georges, CPA, as the leader of the firm’s Nonprofit Services Group. He will lead the strategic direction and management of the firm’s state-wide Group, and oversee the Group’s business development, training and staff development.

Georges is a principal with more than 30 years of public accounting experience, and a passion for working with nonprofits. His areas of expertise include tax planning and preparation for individuals, businesses and nonprofit organizations, as well as audit services for the government, education and nonprofit sectors. He is also a member of the firm’s Tax Services Group and the Education Services Group.

“Mike serves many nonprofit clients and has an immense amount of tax, audit and consulting experience,” says David Youngstrom, principal and the firm’s Audit Service Line Leader. “He strengthens the Group with his ability to train, advise and guide the firm’s nonprofit clients in the financial aspects of running a successful nonprofit.”

Georges is a member of Michigan School Business Officials. He is based in the firm’s Ann Arbor office. In addition to his work at Yeo & Yeo, Georges serves on the board of directors of the Grosse Ile Educational Foundation and the board of directors of Child’s Hope Child Abuse Prevention Council of OutWayne.

The 21^st Century Cures Act, which was signed into law December 13 primarily to fund medical research, also included provisions that allow small employers to provide Health Reimbursement Arrangements (HRAs) to employees. This means that for tax years beginning after December 31, 2016, small employers may establish a plan to reimburse employees for out-of-pocket medical expenses and/or health insurance premiums. These reimbursements are deductible to the small employer, but generally are not taxable to employees.

A “Qualified Small Employer HRA” must meet the following requirements:

Employer must employ fewer than 50 full-time employees.
Employer may not offer a group health plan to any of its employees.
Reimbursements must be made on the same terms for all employees (though employees under age 25, part-time or seasonal, under a collective bargaining agreement or employees with fewer than 90 days of service may be excluded).
Must be funded by the employer (no salary reduction contributions).
Employees must provide proof of health insurance coverage in order to be eligible to participate.
Reimbursement plans for individuals may not exceed $4,950 per year, while plans allowing for reimbursement for all family members are capped at $10,000. This amount will be subject to annual cost-of-living adjustments. For arrangements in force for less than a 12-month period, these amounts are prorated.

In order to participate in an HRA, employers must provide notice to employees explaining the employees’ permitted benefits under the arrangement and the employees’ responsibility to maintain minimum essential healthcare coverage. Verbiage also must include information for employees applying for tax credits on any governmental health exchange. This employee notice is due 90 days before the beginning of the plan year, but due to the timing of the passage 100c of the Act, this has been extended to March 13, 2017, for this year only.

Please contact us if you would like us to assist you in determining whether a Health Reimbursement Arrangement is right for your business or organization.

Take a moment and think about all of the security features that are used to keep your organization’s network safe. Passwords and firewalls help keep the bad guys away from your vital information. But all of these security measures don’t mean a thing if someone clicks on a malware link inside an email.

As phishing attacks have grown, so too has the emphasis on Cybersecurity. In fact, according to the recent IBM X-Force Research’s 2016 cybersecurity Intelligence Index, the manufacturing sector is now one of the most frequently hacked industries, second only to healthcare. A tool that many are using to help prevent cyberattacks within their organization is security awareness training as a way to educate employees. Having knowledge of malware and phishing is as important as having proper antivirus and firewall protection.

How does security awareness training work?

A security awareness training provider will begin the training process with an email exposure check that shows which email addresses within an organization’s domain are being exposed to spear-phishing attacks on the Internet. This service looks deep into websites, Word, Excel and PDF files that are on the Internet. By performing these tests, business owners and managers can see which employees are the most susceptible to phishing emails. Training modules soon follow to teach employees what to look for.

Statistics show that it works

Security awareness training helps turn your employees into your organization’s first firewall. Through training, employees become the best defense you can have. We aggregated the numbers and the overall Phish-prone percentage dropped from an average of 15.9 percent to an amazing 1.2 percent in just 12 months. The combination of web-based training and frequently simulated phishing attacks really works.

Manufacturing is a target too

Cybersecurity continues to be a concern in the manufacturing industry. In the Verizon 2016 Data Breach Investigations Report, the manufacturing industry is listed as a top target of cyber-espionage. Cyber-espionage features external hacking threats that infiltrate victim networks seeking sensitive internal data and trade secrets. The tactics used by hackers to gain information through cyber-espionage begins with phishing and malware. For hackers, phishing is the most efficient way to get the information they want to hold for ransom.

Manufacturing companies are urged to do their research and perform the following to help mitigate cyber-attacks:

Perform an annual IT risk assessment to see where threats are coming from.
Use penetration testing to simulate threats.
Conduct vulnerability scans throughout the year and stay updated on new threats.

It’s important to remember that everyone is a target of phishing attacks. These attacks happen every day, but the good news is they can be prevented. Proper training is great a great way to prevent attacks, but equally important is having a proper backup and disaster recovery plan in place. Nothing is bullet-proof in IT, but being prepared for any circumstance can help save money and downtime in the event of a disaster.

For more information about security awareness training, contact your Yeo & Yeo advisor or Jeff McCulloch, President of Yeo & Yeo Technology, jefmcc@yeoandyeo.com or 800.607.1446.

Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2017. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

January 31

File 2016 Forms W-2, “Wage and Tax Statement,” with the Social Security Administration and provide copies to your employees.
File 2016 Forms 1099-MISC, “Miscellaneous Income,” reporting nonemployee compensation payments in Box 7 with the IRS, and provide copies to recipients.
File Form 941, “Employer’s Quarterly Federal Tax Return,” to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2016. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return. Employers that have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944,“Employer’s Annual Federal Tax Return.”
File Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” for 2016. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 10 to file the return.
File Form 945, “Annual Return of Withheld Federal Income Tax,” for 2016 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on accounts such as pensions, annuities and IRAs. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.

February 28

File 2016 Forms 1099-MISC with the IRS and provide copies to recipients. (Note that Forms 1099-MISC reporting nonemployee compensation in Box 7 must be filed by January 31, beginning with 2016 forms filed in 2017.)

March 15

If a calendar-year partnership or S corporation, file or extend your 2016 tax return. If the return isn’t extended, this is also the last day to make 2016 contributions to pension and profit-sharing plans.

Donations to qualified charities are generally fully deductible, and they may be the easiest deductible expense to time to your tax advantage. After all, you control exactly when and how much you give. To ensure your donations will be deductible on your 2016 return, you must make them by year end to qualified charities.

When’s the delivery date?

To be deductible on your 2016 return, a charitable donation must be made by Dec. 31, 2016. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean? Is it the date you, for example, write a check or make an online gift via your credit card? Or is it the date the charity actually receives the funds — or perhaps the date of the charity’s acknowledgment of your gift?

The delivery date depends in part on what you donate and how you donate it. Here are a few examples for common donations:

Check. The date you mail it.

Credit card. The date you make the charge.

Pay-by-phone account. The date the financial institution pays the amount.

Stock certificate. The date you mail the properly endorsed stock certificate to the charity.

Is the organization “qualified”?

To be deductible, a donation also must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions.

The IRS’s online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access EO Select Check at http://apps.irs.gov/app/eos. Information about organizations eligible to receive deductible contributions is updated monthly.

Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering making. But act soon — you don’t have much time left to make donations that will reduce your 2016 tax bill.

There are many ways to save for a child’s or grandchild’s education. But one has annual contribution limits, and if you don’t make a 2016 contribution by December 31, the opportunity will be lost forever. We’re talking about Coverdell Education Savings Accounts (ESAs).

How ESAs work

With an ESA, you contribute money now that the beneficiary can use later to pay qualified education expenses:

Although contributions aren’t deductible, plan assets can grow tax-deferred, and distributions used for qualified education expenses are tax-free.
You can contribute until the child reaches age 18 (except beneficiaries with special needs).
You remain in control of the account — even after the child is of legal age.
You can make rollovers to another qualifying family member.

Not just for college

One major advantage of ESAs over another popular education saving tool, the Section 529 plan, is that tax-free ESA distributions aren’t limited to college expenses; they also can fund elementary and secondary school costs. That means you can use ESA funds to pay for such qualified expenses as tutoring and private school tuition.

Another advantage is that you have more investment options. So ESAs are beneficial if you’d like to have direct control over how and where your contributions are invested.

Annual contribution limits

The annual contribution limit is $2,000 per beneficiary. However, the ability to contribute is phased out based on income.

The limit begins to phase out at a modified adjusted gross income (MAGI) of $190,000 for married filing jointly and $95,000 for other filers. No contribution can be made when MAGI hits $220,000 and $110,000, respectively.

Maximizing ESA savings

Because the annual contribution limit is low, if you want to maximize your ESA savings, it’s important to contribute every year in which you’re eligible. The contribution limit doesn’t carry over from year to year. In other words, if you don’t make a $2,000 contribution in 2016, you can’t add that $2,000 to the 2017 limit and make a $4,000 contribution next year.

However, because the contribution limit applies on a per beneficiary basis, before contributing make sure no one else has contributed to an ESA on behalf of the same beneficiary. If someone else has, you’ll need to reduce your contribution accordingly.

Would you like more information about ESAs or other tax-advantaged ways to fund your child’s — or grandchild’s — education expenses? Contact us!

Yeo & Yeo CPAs & Business Consultants is pleased to announce A.J. Licht, CPA, as the leader of the firm’s Construction Services Group. He will be responsible for the strategic direction and management of the firm’s state-wide Group, and oversee the Group’s business development, training and staff development.

Licht is a manager with six years of public accounting experience. His areas of expertise include business consulting for management, financial reporting and tax planning and preparation with an emphasis in the construction sector, review and compilation services, and accounting software consulting.

“A.J. is very active in construction associations in the Great Lakes Bay Region and he is serving an increasing number of the firm’s construction clients. He brings a renewed passion for the construction services that Yeo & Yeo provides,” says Carol Patridge, principal in the firm’s Kalamazoo office and the previous leader of the Construction Services Group. “His vision for the Group will serve our clients well.”

Licht is a member of the Associated Builders & Contractors Greater Michigan Chapter, Home Builders Association of Saginaw and the Construction Industry CPAs/Consultants Association. He is based in the firm’s Saginaw office. In addition to his work at Yeo & Yeo, Licht is treasurer of the Saginaw Township Business Association. He is a member of the Saginaw Valley Young Professionals Network and the Saginaw County Chamber of Commerce, and is a Habitat for Humanity volunteer.

Yeo & Yeo CPAs & Business Consultants is proud to sponsor the 1^st Annual Saginaw Spirit Superhero Hockey Night to benefit the CAN Council Great Lakes Bay Region. Each child that attends the game on Saturday, January 14^th will receive a superhero cape (adult capes are also available for purchase). Attendees are welcome to wear their favorite superhero costume to the game in support of the night’s theme. Special game jerseys will be auctioned after the game in support of the CAN Council.

Fundraising tickets for this event are being sold at the special price of $13 each, with $5 from each ticket to benefit the CAN Council. Tickets can be purchased at the Saginaw Spirit office, at either CAN Council office, and from a CAN Council board or staff member. Tickets may also be purchased online using the group ticket link: https://www.saginawspirit.net/groupsales/, with the username: cancouncil, password: spirit.

Promotional packages are available including sponsoring a Foster Family so they too can attend the game. If interested, please contact the CAN Council office (989) 752-7226 for more information.

During the game, the CAN Council will present Gary & Laura Shepard and their family, creators of the Freeland Light Show, with the first ever CAN Council Superhero Awards. These awards are given to individuals who are making a positive impact on the lives of children throughout the Great Lakes Bay Region. Please join us during the game on Saturday, January 14^th as we honor the Shepard Family, our 2017 CAN Council Superheroes on ice.

Yeo & Yeo is pleased to provide 2017 Tax Planning Calendars and other helpful tax planning resources.

What are the due dates for next year’s tax filings? When are the various tax payments due?

The 2017 Tax Calendar for Business and the 2017 Tax Calendar for Individuals and Trusts are valuable tools to help you plan for the deadlines.

What can you do now – before year-end – to save tax dollars?

Yeo & Yeo’s 2016 Year-end Tax Planning Checklist of action items may help you or your business save tax dollars. Please review the checklist and contact us soon if you would like help with deciding which tax-saving moves to make.

For more extensive information, visit Yeo & Yeo’s Tax Guide Online.

You may be aware of the rule that allows businesses to deduct bonuses employees have earned during a tax year if the bonuses are paid within 2½ months after the end of that year (by March 15 for a calendar-year company). But this favorable tax treatment isn’t always available.

For one thing, only accrual-basis taxpayers can take advantage of the 2½ month rule — cash-basis taxpayers must deduct bonuses in the year they’re paid, regardless of when they’re earned. Even for accrual-basis taxpayers, however, the 2½ month rule isn’t automatic. The bonuses can be deducted in the year they’re earned only if the employer’s bonus liability is fixed by the end of the year.

The all-events test

For accrual-basis taxpayers, the IRS determines when a liability (such as a bonus) has been incurred — and, therefore, is deductible — by applying the “all-events test.” Under this test, a liability is deductible when:

All events have occurred that establish the taxpayer’s liability,
The amount of the liability can be determined with reasonable accuracy, and
Economic performance has occurred.

Generally, the third requirement isn’t an issue; it’s satisfied when an employee performs the services required to earn a bonus. But the first two requirements can delay your tax deduction until the year of payment, depending on how your bonus plan is designed.

For example, many bonus plans require an employee to remain in the company’s employ on the payment date as a condition of receiving the bonus. Even if the amount of the bonus is fixed at the end of the tax year, and employees who leave the company before the payment date forfeit their bonuses, the all-events test isn’t satisfied until the payment date. Fortunately, it’s possible to accelerate deductions with a carefully designed bonus pool arrangement.

How a bonus pool works

In a 2011 ruling, the IRS said that employers may deduct bonuses in the year they’re earned — even if there’s a risk of forfeiture — as long as any forfeited bonuses are reallocated among the remaining employees in the bonus pool rather than retained by the employer. Under such a plan, an employer satisfies the all-events test because the aggregate bonus amount is fixed at the end of the year, even though amounts allocated to specific employees aren’t determined until the payment date.

Additional rules and limits apply to this strategy. To learn whether your current bonus plan allows you to take 2016 deductions for bonuses paid in early 2017, contact us. If you don’t qualify this year, we can also help you design a bonus plan for 2017 that will allow you to accelerate deductions next year.

The last month or so of the year offers accrual-basis taxpayers an opportunity to make some timely moves that might enable them to save money on their 2016 tax bill.

Record and recognize

The key to saving tax as an accrual-basis taxpayer is to properly record and recognize expenses that were incurred this year but won’t be paid until 2017. This will enable you to deduct those expenses on your 2016 federal tax return. Common examples of such expenses include:

Commissions, salaries and wages,
Payroll taxes,
Advertising,
Interest,
Utilities,
Insurance, and
Property taxes.

You can also accelerate deductions into 2016 without actually paying for the expenses in 2016 by charging them on a credit card. (This works for cash-basis taxpayers, too.) Accelerating deductible expenses into 2016 may be especially beneficial if tax rates go down for 2017, which could happen based on the outcome of the November election. Deductions save more tax when tax rates are higher.

Look at prepaid expenses

Also review all prepaid expense accounts and write off any items that have been used up before the end of the year. If you prepay insurance for a period of time beginning in 2016, you can expense the entire amount this year rather than spreading it between 2016 and 2017, as long as a proper method election is made. This is treated as a tax expense and thus won’t affect your internal financials.

Miscellaneous tax tips

Here are a few more year-end tax tips to consider:

Review your outstanding receivables and write off any receivables you can establish as uncollectible.
Pay interest on all shareholder loans to or from the company.
Update your corporate record book to record decisions and be better prepared for an audit.

Consult us for more details on how these and other year-end tax strategies may apply to your business.

Yeo & Yeo CPAs & Business Consultants is pleased to announce that Wendy Thompson, CPA, was recently honored with the most prestigious award bestowed by the firm, the Spirit of Yeo award. The Spirit of Yeo award recognizes an individual within the firm who exemplifies the attributes of the firm’s mission and core values.

Thompson is Yeo & Yeo’s training manager and was recently recognized for ten years of service to the firm. She researches and teaches all aspects of accounting, compilations, reviews, audits and nonprofit tax returns. She assists staff in nine Yeo & Yeo offices throughout Michigan with software used in these areas, and creates and updates best practices. She is a member of the firm’s Audit Services Group, the Non-Profit Services Group and the Compilation and Review team. Thompson also conducts training seminars for the Michigan Association of Certified Public Accountants (MICPA) and serves on the MICPA’s Nonprofit Task Force.

“Wendy always goes above and beyond. She is not just our trainer, she is also our go-to person with accounting questions. Her wealth of knowledge is truly incredible,” says one of her nominators. Another stated, “Wendy is a key part in the firm’s ability to provide quality work and services to our clients.”

Thompson is based in the firm’s Saginaw office. She holds a Bachelor of Science degree in accounting and Spanish from Northern Michigan University. She is a member of the Association for Talent Development.

In the award’s third year, 30 nominations were submitted by Yeo & Yeo employees. The firm’s Career Advocacy Team reviewed the submissions, and many individuals were nominated more than once.

“One of the best days of the year for me is the day I spend reading the nominations. It is awesome to read about all of the outstanding efforts these individuals in our firm have made,” said Thomas E. Hollerback, President & CEO, as he presented the award at the firm’s holiday celebration at Horizons Conference Center in Saginaw.

In the community, Thompson is a Boy Scout assistant Scoutmaster and a Girls Scout troop co-leader.

In addition to income tax, you must pay Social Security and Medicare taxes on earned income, such as salary and self-employment income. The 12.4% Social Security tax applies only up to the Social Security wage base of $118,500 for 2016. All earned income is subject to the 2.9% Medicare tax.

The taxes are split equally between the employee and the employer. But if you’re self-employed, you pay both the employee and employer portions of these taxes on your self-employment income.

Additional 0.9% Medicare tax

Another employment tax that higher-income taxpayers must be aware of is the additional 0.9% Medicare tax. It applies to FICA wages and net self-employment income exceeding $200,000 per year ($250,000 for married filing jointly and $125,000 for married filing separately).

If your wages or self-employment income varies significantly from year to year or you’re close to the threshold for triggering the additional Medicare tax, income timing strategies may help you avoid or minimize it. For example, as a self-employed taxpayer, you may have flexibility on when you purchase new equipment or invoice customers. If your self-employment income is from a part-time activity and you’re also an employee elsewhere, perhaps you can time with your employer when you receive a bonus.

Something else to consider in this situation is the withholding rules. Employers must withhold the additional Medicare tax beginning in the pay period when wages exceed $200,000 for the calendar year — without regard to an employee’s filing status or income from other sources. So your employer might not withhold the tax even though you are liable for it due to your self-employment income.

If you do owe the tax but your employer isn’t withholding it, consider filing a W-4 form to request additional income tax withholding, which can be used to cover the shortfall and avoid interest and penalties. Or you can make estimated tax payments.

Deductions for the self-employed

For the self-employed, the employer portion of employment taxes (6.2% for Social Security tax and 1.45% for Medicare tax) is deductible above the line. (No portion of the additional Medicare tax is deductible, because there’s no employer portion of that tax.)

As a self-employed taxpayer, you may benefit from other above-the-line deductions as well. You can deduct 100% of health insurance costs for yourself, your spouse and your dependents, up to your net self-employment income. You also can deduct contributions to a retirement plan and, if you’re eligible, an HSA for yourself. Above-the-line deductions are particularly valuable because they reduce your adjusted gross income (AGI) and modified AGI (MAGI), which are the triggers for certain additional taxes and the phaseouts of many tax breaks.

For more information on the ins and outs of employment taxes and tax breaks for the self-employed, please contact us.

The IRS has provided a 30-day extension of the due date for Affordable Care Act (ACA) information that must be reported to covered individuals and employees, from January 31, 2017, to March 2, 2017. This includes IRS Forms 1095-B (Health Coverage) and 1095-C (Employer-provided Health Insurance Offer and Coverage). This extension has been automatically granted, and no further extension of time to provide the Forms to covered individuals and employees will be available.

This extension does not impact the due dates for furnishing the information to the IRS, which remain February 28, 2017, if not filing electronically and March 31, 2017, if filing electronically. Because these reporting due dates were not changed, the normal rules for requesting an extension of time to file information returns, i.e., filing Form 8809, apply.

Yeo & Yeo helps simplify ACA compliance with Form 1095-C preparation services. Learn more.

If you have questions or need assistance, please contact Yeo & Yeo.

Now that Donald Trump has been elected President of the United States and Republicans have retained control of both chambers of Congress, an overhaul of the U.S. tax code next year is likely. President-elect Trump’s tax reform plan, released earlier this year, includes the following changes that would affect individuals:

Reducing the number of income tax brackets from seven to three, with rates on ordinary income of 12%, 25% and 33% (reducing rates for many taxpayers but resulting in a tax hike for certain single filers),
Aligning the 0%, 15% and 20% long-term capital gains and qualified dividends rates with the new brackets,
Eliminating the head of household filing status (which could cause rates to go up for some of these filers, who would have to file as singles),
Abolishing the net investment income tax,
Eliminating the personal exemption (but expanding child-related breaks),
More than doubling the standard deduction, to $15,000 for singles and $30,000 for married couples filing jointly,
Capping itemized deductions at $100,000 for single filers and $200,000 for joint filers,
Abolishing the alternative minimum tax, and
Abolishing the federal gift and estate tax, but disallowing the step-up in basis for estates worth more than $10 million.

The House Republicans’ plan is somewhat different. And because Republicans didn’t reach the 60 Senate members necessary to become filibuster-proof, they may need to compromise on some issues in order to get their legislation through the Senate. The bottom line is that exactly which proposals will make it into legislation and signed into law is uncertain, but major changes are just about a sure thing.

If it looks like you could be eligible for lower income tax rates next year, it may make sense to accelerate deductible expenses into 2016 (when they may be more valuable) and defer income to 2017 (when it might be subject to a lower tax rate). But if it looks like your rates could be higher next year, the opposite approach may be beneficial.

In either situation, there is some risk to these strategies, given the uncertainty as to exactly what tax law changes will be enacted. We can help you create the best year-end tax strategy based on how potential changes may affect your specific situation.

The election of Donald Trump as President of the United States could result in major tax law changes in 2017. Proposed changes spelled out in Trump’s tax reform plan released earlier this year that would affect businesses include:

Reducing the top corporate income tax rate from 35% to 15%,
Abolishing the corporate alternative minimum tax,
Allowing owners of flow-through entities to pay tax on business income at the proposed 15% corporate rate rather than their own individual income tax rate, although there seems to be ambiguity on the specifics of how this provision would work,
Eliminating the Section 199 deduction, also commonly referred to as the manufacturers’ deduction or the domestic production activities deduction, as well as most other business breaks — but, notably, not the research credit,
Allowing U.S. companies engaged in manufacturing to choose the full expensing of capital investment or the deductibility of interest paid, and
Enacting a deemed repatriation of currently deferred foreign profits at a 10% tax rate.

President-elect Trump’s tax plan is somewhat different from the House Republicans’ plan. With Republicans retaining control of both chambers of Congress, some sort of overhaul of the U.S. tax code is likely. That said, Republicans didn’t reach the 60 Senate members necessary to become filibuster-proof, which means they may need to compromise on some issues in order to get their legislation through the Senate.

So there’s still uncertainty as to which specific tax changes will ultimately make it into legislation and be signed into law.

It may make sense to accelerate deductible expenses into 2016 that might not be deductible in 2017 and to defer income to 2017, when it might be subject to a lower tax rate. But there is some risk to these strategies, given the uncertainty as to exactly what tax law changes will be enacted. Plus no single strategy is right for every business. Please contact us to develop the best year-end strategy for your business.