Yeo & Yeo Promotes Three to Principal

Yeo & Yeo CPAs & Business Consultants is pleased to announce that Danielle A. Cary, CPA, Jacob R. Sopczynski, CPA, and Jennifer M. Watkins, CPA, have been promoted to the position of principal.

Thomas E. Hollerback, president and CEO, says, “We are proud to recognize Danielle, Jacob and Jennifer for their leadership and expertise, and for their commitment to serving our valued clients. They have excelled in providing professional services and are committed to helping Yeo & Yeo’s clients succeed.”

Danielle Cary recently transferred from the firm’s Auburn Hills office to the Ann Arbor office. She has over 17 years of experience in tax planning and preparation for individuals and businesses, and business consulting for clients in many industries. She is a key member of the firm’s Tax Services team, helping to implement firm-wide advances in tax processes and client services. She is also a member of the firm’s State and Local Tax (SALT) team and Compilation & Review teams. She serves on the Michigan Association of Certified Public Accountants’ State and Local Tax Task Force. Cary is a Certified QuickBooks ProAdvisor, assisting clients with QuickBooks software consulting and accounting system design.

Learn more about Danielle:

Danielle Cary’s Professional Bio
Danielle was featured among Yeo & Yeo’s women leaders in 2015. Read her story here.

Jacob Sopczynski provides Audit & Assurance services. He is a member of the firm’s Audit Services Team and Manufacturing Services team. He also works with many clients as a consultant and specialist in the application of data extraction techniques. He joined Yeo & Yeo in 2005 and is based in the Flint office. Sopczynski serves as the Chair of the Michigan Association of Certified Public Accountants’ Manufacturing Task Force. He is a member of Automation Alley and serves on its finance committee, Michigan Manufacturers Association, Great Lakes Bay Manufacturers Association and the Government Finance Officers Association. He is a Leadership Bay County graduate and a 1,000 Leaders Initiative alumnus.

Learn more about Jacob:

Jacob Sopczynski’s Professional Bio

Jennifer Watkins provides Audit & Assurance services with a focus on school districts and Non-Profit organizations. She leads the firm’s Education Services team. She is a member of the Michigan Department of Education’s 1022 Committee and its A-133 Referent Committee, and presents new accounting and audit rules to school district officials throughout the state. She is a member of the Association of School Business Officials, Michigan School Business Officials and several regional School Business Officials organizations. She joined the firm in 2006 and is based in the Flint office. Watkins serves on the board of directors of Zonta Club of Flint and volunteers for Genesee County Habitat for Humanity, Carriage Town Ministries and United Way of Genesee County. She is a graduate of Leadership Genesee.

Learn more about Jennifer:

Jennifer Watkins Professional Bio
Jennifer was featured among Yeo & Yeo’s women leaders in 2015. Read her story here.

Here’s a simplified way to project your estate tax exposure. Take the value of your estate, net of any debts. Also subtract any assets that will pass to charity on your death.

Then, if you’re married and your spouse is a U.S. citizen, subtract any assets you’ll pass to him or her. Those assets qualify for the marital deduction and avoid potential estate tax exposure until the surviving spouse dies. The net number represents your taxable estate.

You can transfer up to your available exemption amount at death free of federal estate taxes. So if your taxable estate is equal to or less than the estate tax exemption (for 2015, $5.43 million) reduced by any gift tax exemption you used during your life, no federal estate tax will be due when you die. But if your taxable estate exceeds this amount, it will be subject to estate tax. Many states, however, now impose estate tax at a lower threshold than the federal government does, so you’ll also need to consider the rules in your state.

If you’re not sure whether you’re at risk for the estate tax or if you’d like to learn about gift and estate planning strategies to reduce your potential liability, please contact us.

After you reach age 70½, you must take annual required minimum distributions (RMDs) from your IRAs (except Roth IRAs) and, generally, from your defined contribution plans (such as 401(k) plans). You also could be required to take RMDs if you inherited a retirement plan (including Roth IRAs).

If you don’t comply — which usually requires taking the RMD by December 31 — you can owe a penalty equal to 50% of the amount you should have withdrawn but didn’t.

So, should you withdraw more than the RMD? Taking only RMDs generally is advantageous because of tax-deferred compounding. But a larger distribution in a year your tax bracket is low may save tax.

Be sure, however, to consider the lost future tax-deferred growth and, if applicable, whether the distribution could: 1) cause Social Security payments to become taxable, 2) increase income-based Medicare premiums and prescription drug charges, or 3) affect other tax breaks with income-based limits.

Also keep in mind that, while retirement plan distributions aren’t subject to the additional 0.9% Medicare tax or 3.8% net investment income tax (NIIT), they are included in your modified adjusted gross income (MAGI). That means they could trigger or increase the NIIT, because the thresholds for that tax are based on MAGI.

For more information on RMDs or tax-savings strategies for your retirement plan distributions, please contact us.

Personal Property Tax Reform was passed in Michigan during 2014 and established a seven-year phase-in for changes to personal property taxation on eligible manufacturing personal property in Michigan. It also established a new Essential Services Assessment (ESA) which will be due August 15, 2016, for the first time.

With the arrival of 2016, we are now at the first year of the phase-in for both the Eligible Manufacturing Personal Property exemptions from Personal Property Tax and the new ESA.

Eligible manufacturers need to file Form 5278 by February 22, 2016, to claim the exemption. The form will not be mailed to taxpayers; access the form on the State of Michigan website, www.michigan.gov/esa. Form 5278 is new and significantly different from the personal property tax form for commercial taxpayers or small businesses. A qualifying manufacturer will have both PPT and ESA payments due each year through the phase-in periods.

Michigan now has three Personal Property Tax forms, and taxpayers need to file the correct version for their business:

Form 5076 – Small businesses with less than $80,000 in personal property
Form 632 – Commercial and non-qualified industrial businesses
Form 5278 – Industrial businesses with Eligible Manufacturing Personal Property

Learn more about Personal Property Tax Changes for Manufacturers on our website or contact your Yeo & Yeo professional for more details.

On December 18, 2015, President Barack Obama signed the Protecting Americans From Tax Hikes Act of 2015. The Act extends dozens of favorable tax benefits that expired at the end of 2014. Following are some of the key provisions included in the bill.

Permanent extension of the following –

R&D tax credit, with AMT turn-off and start-up provisions for taxpayers with average gross receipts of under $50 million the past three years
Earned income tax credit
Child tax credit
American Opportunity Tax Credit
Section 179 expensing at the $500,000 level, with a $2,000,000 phase-out threshold – indexed for inflation starting in 2016
Deduction of state and local sales taxes
Up to $100,000 in qualified charitable distributions from an IRA without including the distribution in income for taxpayers over 70 ½
Reduction of the S Corporation recognition period for built-in gains tax to five years
Deduction for certain expenses of teachers up to $250, indexed for inflation beginning in 2016

5-year extension of the following –

Work Opportunity Tax Credit
Bonus depreciation (50% in 2015-2017; 40% in 2018; 30% in 2019)
New Markets tax credit
Some provisions for wind and solar, with phase-outs

2-year extension of the following –

179D provisions
Exclusion from income for discharge of qualified principal residence debt
Deduction for mortgage insurance premiums
Tuition deduction
Certain energy-related credits

The bill also delays for two years –

Imposition of the “Cadillac” healthcare tax
Imposition of the 2.3% medical device excise tax

The above represent just a handful of the provisions that were part of the legislation. Please see an article in the Journal of Accountancy for a more detailed list.

A potential downside of tax-deferred saving through a traditional retirement plan is that you’ll have to pay taxes when you make withdrawals at retirement. Roth plans, on the other hand, allow tax-free distributions; the tradeoff is that contributions to these plans don’t reduce your current-year taxable income.

Unfortunately, modified adjusted gross income (MAGI)-based phaseouts may reduce or eliminate your ability to contribute:

For married taxpayers filing jointly, the 2015 phaseout range is $183,000–$193,000.
For single and head-of-household taxpayers, the 2015 phaseout range is $116,000–$131,000.

You can make a partial contribution if your MAGI falls within the applicable range, but no contribution if it exceeds the top of the range.

If the income-based phaseout prevents you from making Roth IRA contributions and you don’t already have a traditional IRA, a “back door” IRA might be right for you. How does it work? You set up a traditional account and make a nondeductible contribution to it. You then wait until the transaction clears and convert the traditional account to a Roth account. The only tax due will be on any growth in the account between the time you made the contribution and the date of conversion.

This is the question on tax-savvy Americans’ minds. Many valuable tax breaks aren’t permanent, so Congress has to pass legislation extending them to keep them in effect. Unfortunately, Congress often waits until the last minute to do so.

For example, Congress didn’t pass 2014 extenders until December 2014, making the legislation retroactive to January 1, 2014 — but not extending the breaks to 2015. So we’re again in a waiting game to see what will happen with extenders legislation. Some believe Congress will act soon, while others think we’ll be waiting until the new year.

Here are several expired breaks that may benefit you or your business if extended:

The deduction for state and local sales taxes in lieu of state and local income taxes,
Tax-free IRA distributions to charities,
Bonus depreciation,
Enhanced Section 179 expensing,
Accelerated depreciation for qualified leasehold improvement, restaurant and
retail improvement property,
The research tax credit,
The Work Opportunity tax credit, and
Various energy-related tax incentives.

Please check back with us for the latest information. Keep in mind that quick action after extenders legislation is passed may be required in order to take maximum advantage of the extended breaks.

The first step to smart timing is to project your business’s income and expenses for 2015 and 2016. With this information in hand, you can determine the best year-end timing strategy for your business.

If you expect to be in the same or lower tax bracket in 2016, consider:

Deferring income to 2016. If your business uses the cash method of accounting, you can defer billing for your products or services. Or, if you use the accrual method, you can delay shipping products or delivering services.

Accelerating deductible expenses into 2015. If you’re a cash-basis taxpayer, you may make a state estimated tax payment before December 31, so you can deduct it this year rather than next. Both cash- and accrual-basis taxpayers can charge expenses on a credit card and deduct them in the year charged, regardless of when the credit card bill is paid.

If you expect to be in a higher tax bracket in 2016, accelerating income and deferring deductible expenses may save you more tax over the two-year period (though it will increase your 2015 tax liability).

For help projecting your income and expenses or for more ideas on how you can effectively time them, please contact us.

On November 25, 2015, the United States Department of Agriculture (USDA) designated 24 Michigan counties as primary natural disaster areas due to losses and damages as a result of the many natural disasters in 2015. Farmers in the selected counties are eligible for a low-interest emergency loan through the USDA’s Farm Service Agency, should all requirements be met. Applications must be received within eight months of the date of declaration and will be examined taking into account the assessment of all qualifying losses.

Yeo & Yeo’s agribusiness advisors can help applicants with the financial reporting requirements for the loan application, and put farmers in touch with bankers who are experienced with facilitating emergency loans and working with agribusiness operations.

A statement from the USDA, the declaration and a complete list of all counties that have been designated primary natural disaster areas can be found here.

If you’re saving for college, consider a Section 529 plan. Although contributions aren’t deductible for federal purposes, plan assets can grow tax-deferred. (Some states do offer tax incentives for contributing.)

Distributions used to pay qualified expenses (such as tuition, mandatory fees, books, equipment, supplies and, generally, room and board) are income-tax-free for federal purposes and typically for state purposes as well, thus making the tax deferral a permanent savings.

529 plans offer other benefits as well:

They usually offer high contribution limits, and there are no income limits for contributing.
There’s generally no beneficiary age limit for contributions or distributions.
You can control the account, even after the child is of legal age.
You can make tax-free rollovers to another qualifying family member.

Finally, 529 plans provide estate planning benefits: A special break for 529 plans allows you to front-load five years’ worth of annual gift tax exclusions and make up to a $70,000 contribution (or $140,000 if you split the gift with your spouse).

The biggest downside may be that your investment options — and when you can change them — are limited. Please contact us for more information on 529 plans and other tax-smart strategies for funding education expenses.

From the Thanksgiving kick-off of the holiday season through December 31, many businesses find themselves short-staffed as employees take time off to spend with family and friends. But if you limit how many vacation days employees can roll over to the new year, you might find your workplace to be nearly a ghost town as employees scramble to use their time off rather than lose it.

A paid time off (PTO) contribution arrangement may be the solution. It allows employees with unused vacation hours to elect to convert them to retirement plan contributions. If the plan has a 401(k) feature, it can treat these amounts as a pretax benefit, similar to normal employee deferrals. Alternatively, the plan can treat the amounts as employer profit sharing, converting the excess PTO amounts to employer contributions.

A PTO contribution arrangement can be a better option than increasing the number of days employees can roll over. Why? Larger rollover limits can result in employees building up large balances that create a significant liability on your books.

To offer a PTO contribution arrangement, you simply need to amend your plan. However, you must still follow the plan document’s eligibility, vesting, rollover, distribution and loan terms, and additional rules apply.

To learn more about PTO contribution arrangements, including their tax implications, please contact us.

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. But before you donate, it’s critical to make sure the charity you’re considering is indeed a qualified charity — that it’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.

Also, with the 2016 presidential election heating up, it’s important to remember that political donations aren’t tax-deductible.

Of course, additional rules affect your charitable deductions, so please contact us if you have questions about whether a donation you’re planning will be fully deductible. We can also provide ideas for maximizing the tax benefits of your charitable giving.

Employers must implement a number of 2016 payroll tax changes to accurately process payroll. Provided below is a list of scheduled changes that will affect employers beginning next year.

Social Security Wage Base. The 2016 wage base will be $118,500. The employee and employer match will be 6.2%. The maximum deduction will be $7,347 ($118,500 x 6.2%).
Medicare Tax. As in prior years, there is no limit to the wages subject to the Medicare Tax; therefore, all covered wages are still subject to the 1.45% tax. Wages paid in excess of $200,000 will be subject to an extra 0.9% Medicare tax that will be withheld only from employees’ wages.
Health Flexible Spending Arrangements. The dollar limitation on voluntary employee salary reductions for contributions to a health flexible spending arrangement (FSA) is $2,550.
Medical Savings Accounts. A high-deductible health plan is a plan with an annual deductible of $2,250-$3,350 for individual coverage and $4,450-$6,700 for family coverage.
IRA Contribution Limits. The 2015 contribution limit for Simple IRAs is $12,500. The catch-up contribution for those age 50 or older by December 31, 2015, is $3,000.
401(k), 403(b) and 457 Contribution Limits. The contribution limit for these plans’ employee deferrals is $18,000. The catch-up contribution for those age 50 or older by December 31, 2015, is $6,000.
2016 Federal Standard Mileage Rates: The 2016 mileage rates have not yet been released. Continue to visit yeoandyeo.com for updates.
Dependent Care Limits. The maximum exclusion from gross income under a dependent care program is $7,500 for an individual or a married couple filing jointly.

For more information, view our 2016 Payroll Planning Brief, which includes a list of items to consider before December 31, 2015.

QuickBooks Desktop 2016 is now available for purchase or download. Many new and minor improvements to the program’s interface and features were implemented with this new release.

The key features of QuickBooks 2016 are easily tailored to your industry.

“Bill Tracker” provides a dedicated dashboard to view data for purchase orders and bills.
Instant view of the money-out in “Bill Tracker” without having to run reports.
Bulk clear is now available to delete or void multiple transactions.
New reporting features that allow for advance filtering such as, “This year to last month.”
Easy access to data such as business growth and top customers on the homepage.
Single step improvements that allow for easy form management.
Simplified reminders all accessible from one window.
Other industry-specific upgrades to improve efficiency for general business, contractors, manufacturing, Non-Profit, professional services and retail.

In order to access the new features of QuickBooks 2016 and have the most updated interface, an upgrade is needed. If you have not upgraded by May 31, 2016, QuickBooks 2013 add-ons will be discontinued and no longer supported.

Yeo & Yeo has the ability to order QuickBooks 2016 at a discounted price for clients. If you are interested in upgrading to or purchasing the newest version of the software, or if you would like more information to determine if the program is the right fit for your company, please contact your Yeo & Yeo professional and we will align you with a QuickBooks ProAdvisor to assist you.

Learn more about QuickBooks and the Yeo & Yeo Client Accounting Software Solutions Team.

Starting in 2016, applicable large employers (ALEs) under the Affordable Care Act (ACA) will have to file Forms 1094-C and 1095-C to provide information to the IRS and plan participants regarding their healthcare benefits for the previous year. Both the forms and their instructions are now available for ALEs to study and begin preparations for required filings. In addition, organizations that expect to file Forms 1094 and 1095 electronically can peruse two final IRS publications setting out specifications for using the new ACA Information Returns system.

Keep in mind that ALEs are employers with 50 or more full-time employees or the equivalent. And even ALEs exempt from the ACA’s shared-responsibility (or “play or pay”) provision for 2015 (that is, ALEs with 50 to 99 full-timers or the equivalent who meet certain eligibility requirements) are still subject to the information reporting requirements in relation to their 2015 healthcare benefits.

If your company is considered an ALE, please contact us for assistance in navigating the ACA’s complex requirements for avoiding penalties and properly reporting benefits. If you’re not an ALE, we can still help you understand how the ACA affects your small business and determine whether you qualify for a tax credit for providing coverage.

Yeo & Yeo CPAs & Business Consultants is pleased to announce that Eric J. Sowatsky, CPA, CGMA, and Tara L. Stensrud, CPA, have achieved the National Social Security Advisor certification from the National Social Security Association LLC in Cincinnati.

The certification allows Sowatsky and Stensrud to counsel clients on the best way to claim Social Security benefits in order to optimize lifetime Social Security income.

Sowatsky specializes internal control reviews, business consulting, financial reporting and tax planning issues, with an emphasis in agribusiness. He is the leader of Yeo & Yeo’s Agribusiness Services Group, and a member of the firm’s State and Local Tax Group and healthcare Reform Group. Sowatsky has 11 years of public accounting experience and is a senior manager in the firm’s Saginaw office.

Stensrud provides accounting, tax planning and preparation, and business consulting services. She has nine years of public accounting experience and is a senior manager in the firm’s Alma office. She is a member of the firm’s Manufacturing Services Group, Tax Services Group, and Client Accounting Software Solutions Group. She is accredited as an Advanced Certified QuickBooks ProAdvisor.

The NSSA program includes one day of training and prepares professional advisors for the myriad of questions that their clients are asking. Also, with this training, advisors can guide their clients through the many Social Security options that are available. NSSA advisors are uniquely qualified to help the growing numbers of Baby Boomers.

The National Social Security Advisor program was created by CPA Marc Kiner and Jim Blair, a 35-year veteran of the Social Security Association. With 10,000 Baby Boomers turning 65 each day in the United States, Kiner and Blair believe that advisors must be educated regarding Social Security. There are 72 million Baby Boomers nationwide. Boomers are people born between 1946 and 1964.

“For more and more people, Social Security is going to provide an important part of their retirement income,” said Blair. “NSSA advisors are passionate about helping retirees optimize their benefits over the rest of their lives.”

For more information about Yeo & Yeo CPAs, go to www.yeoandyeo.com or call Eric Sowatsky at (989) 793-9830 or email erisow@yeoandyeo.com, or call Tara Stensrud at (989) 463-6108 or email tarste@yeoandyeo.com.

For more information about the NSSA certification program, go to www.nationalsocialsecurityassociation.com.

Medical expenses that aren’t reimbursable by insurance or paid through a tax-advantaged account (such as a Health Savings Account or Flexible Spending Account) may be deductible — but generally only to the extent that they exceed 10% of your adjusted gross income.

Taxpayers age 65 and older can enjoy a 7.5% floor through 2016. The floor for alternative minimum tax purposes, however, is 10% for all taxpayers.

By “bunching” nonurgent medical procedures and other controllable expenses into alternating years, you may increase your ability to exceed the applicable floor. Controllable expenses might include prescription drugs, eyeglasses and contact lenses, hearing aids, dental work, and elective surgery.

If it’s looking like you’re close to exceeding the floor in 2015, consider accelerating controllable expenses into this year. But if you’re far from exceeding it, to the extent possible (without harming your or your family’s health), you might want to put off medical expenses until next year, in case you have enough expenses in 2016 to exceed the floor.

For more information on how to bunch deductions or exactly what expenses are deductible, please contact us.

Yeo & Yeo CPAs & Business Consultants received the Association of Fundraising Professionals – Mid-Michigan Chapter’s Outstanding Corporation Award. The award recognizes outstanding commitment through financial support and through encouragement and motivation of others to take leadership roles toward philanthropy and community involvement.

On November 2, 2015, at a luncheon in Freeland, Michigan, the Mid-Michigan Chapter honored local individuals, foundations and businesses by presenting awards as part of National Philanthropy Day.

“We are proud to be recognized for the efforts of all our employees and their dedication to supporting the communities in which they live and work. Commitment to community service has been a long-standing part of Yeo & Yeo’s culture as evidenced by our employees’ investment of time, talent and resources in our communities,” says Suzanne Lozano, principal in the firm’s Saginaw office. Yeo & Yeo employees serve in leadership roles and volunteer in more than 200 cultural, business, civic and community endeavors in the Great Lakes Bay Region and throughout Michigan.

The Mid-Michigan Chapter of the Association of Fundraising Professionals works with the national organization to advance philanthropy through advocacy, research, education and certification programs.

Contributing to a traditional employer-sponsored defined contribution plan, such as a 401(k), 403(b) or 457 plan, offers many benefits:

Contributions are pretax, reducing your modified adjusted gross income (MAGI), which can also help you reduce or avoid exposure to the 3.8% net investment income tax.
Plan assets can grow tax-deferred — meaning you pay no income tax until you take distributions.
Your employer may match some or all of your contributions pretax.

For 2015, you can contribute up to $18,000. If your current contribution rate will leave you short of the limit, consider increasing your contribution rate through the end of the year. Because of tax-deferred compounding, boosting contributions sooner rather than later can have a significant impact on the size of your nest egg at retirement.

If you’ll be age 50 or older by December 31, you can also make “catch-up” contributions (up to $6,000 for 2015). So if you didn’t contribute much when you were younger, this may allow you to partially make up for lost time. Even if you did make significant contributions before age 50, catch-up contributions can still be beneficial, allowing you to further leverage the power of tax-deferred compounding.

Have questions about how much to contribute? Contact us. We’d be pleased to discuss the tax and retirement-saving considerations with you.

In 2014, Governor Snyder signed legislation increasing the Michigan minimum wage rate in stages.

The first increase took effect on September 1, 2014, increasing the hourly minimum rate to $8.15 per hour.
On January 1, 2016, the minimum wage increases to $8.50 an hour;
On January 1, 2017, to $8.90 an hour; and
On January 1, 2018, to $9.25 an hour.

Beginning in 2019, the rate will be adjusted annually for inflation, up to a maximum of 3.5 percent per year.

Note that the rate increases are effective for wages earned on or after the indicated date, and not the actual wage payment date.

On January 1, 2016, tipped employee hourly wage rates will also increase to $3.23 an hour. The State of Michigan has a reduced rate available for minors age 16 to 17; however, since it is below the federal minimum wage of $7.25 per hour, that rate takes precedence. A training wage of $7.25 per hour may be paid to employees 16-19 years of age for the first 90 days of their employment.

The full rate schedule is available on the Michigan Department of Licensing and Regulatory Affairs website.

Contact your Yeo & Yeo payroll professional for assistance.