Suzanne Lozano Receives Women to Watch Award from MICPA

The Michigan Association of Certified Public Accountants (MICPA) named Suzanne R. Lozano, CPA, CVA, of the Saginaw office, a recipient of its 2015 Women to Watch – Established Leader Award. The MICPA’s Women’s Initiatives Task Force chose three recipients from nominees across Michigan for the Experienced Leader award, and one recipient for the Emerging Leader award.

“This award recognizes Suzanne’s contributions to the CPA profession, her leadership and her commitment to the community. She is disciplined, dedicated, respected by her staff and highly valued by her clients. She is a valued mentor, a positive role model for both men and women in the Saginaw office, and a dynamic ambassador for Yeo & Yeo in the community,” says David W. Schaeffer, managing principal of the Saginaw office.

Lozano started with Yeo & Yeo in 1999 and now serves as principal in charge of the Saginaw office’s Management Advisory Services Group. She is a member of the firm’s healthcare Services team, healthcare Reform team, and Business Valuation and Litigation Support Support team. She also serves on the firm’s Career Advocacy Team. Lozano holds accreditation as a Certified Valuation Analyst (CVA) with the National Association of Certified Valuation Analysts, specializing in business valuation and Litigation Support support.

Lozano is a member of National Association of Certified Valuators and Analysts, the MICPA Construction Task Force, Inforum – Great Lakes Bay Region, and the Leadership Saginaw Alumni Association. She is vice chair of the Mid-Michigan Children’s Museum, and treasurer of the Peace Lutheran Church and School Foundation..

The MICPA announced the winners on June 16 at the Women’s Leadership Breakfast in Plymouth, Mich., and the awards will be presented at the 2015 MICPA Awards Dinner on September 30 in West Bloomfield, Mich.

On June 26, the U.S. Supreme Court ruled that same-sex couples have a constitutional right to marry, making same-sex marriage legal in all 50 states. For federal tax purposes, same-sex married couples were already considered married, under the Court’s 2013 decision in United States v. Windsor and subsequent IRS guidance — even if their state of residence didn’t recognize their marriage.

From a tax planning perspective, the latest ruling means that, in states where same-sex marriage hadn’t been recognized, same-sex married couples no longer will need to deal with the complications of being treated as married for federal tax purposes but not married for state tax purposes. So their tax and estate planning will be simplified and they can take advantage of state-level tax benefits for married couples. But in some cases, these couples will also be subject to some tax burdens, such as the “marriage penalty.”

Same-sex married couples should review their tax planning strategies and estate plans to determine what new opportunities may be available to them and whether there are any new burdens they should plan for. Employers will need to keep a close eye on how these developments will affect their tax obligations in relation to employees who have same-sex spouses. Please contact us if you have questions.

© 2015

Women are gaining traction at public accounting firms

Yeo & Yeo CPAs & Business Consultants was named to the Accounting MOVE Project Best Public Accounting Firms for Women list, which recognizes firms by their women’s initiatives, female leadership, and driving results.

“Since 1987 when we elected our first female partner, we have recognized the importance of promoting women to leadership roles and it has only continued to grow,” said Thomas Hollerback, CEO. “Today, women comprise 71% of our senior manager group – the future leaders of our firm.”

In its sixth year, the 2015 Accounting MOVE Project reports a significant boost in the proportion of women partners and principals at the 47 CPA firms participating in the project—an average of 22%, up from 17% five years ago. The Best Public Accounting Firms for Women list was released by the Accounting & Financial Women’s Alliance (AFWA) and American Women’s Society of CPAs (AWSCPA).

Career paths are not do-it-yourself at Yeo & Yeo, thanks to maps and structures that show employees multiple proven routes to success. With the high proportion of women on partner-track in the firm, Yeo & Yeo is restructuring its mentor program to include more peer mentoring led by women principals. The firm is also amplifying its business development program to provide more mid-level training to best equip the firm’s emerging leaders.

“We are headed in the right direction, but we need to continue to create awareness, advocate and advance women in the accounting field,” said Carol Patridge, managing principal and member of Yeo & Yeo’s board of directors. “The firm’s Career Advocacy Team works to provide equal access to career development and advocacy experiences, assists women in advancing to leadership positions and promotes the successful integration of personal and professional lives.”

The 10 firms named to the Best CPA Firms for Women list demonstrate three characteristics:

• Consistent, measurable progress in advancing women.
• Proven and continually evolving programs that retain and advance women.
• Evidence that the firm’s advancement of women is intrinsic to its growth and succession goals.

The AFWA and the MOVE Project are dedicated to efforts that empower women in the industry and assist in advancing women to senior roles with equal pay. Top trends from the 2015 Accounting MOVE Project include:

• Pay equity is the topic that won’t go away. Celebrities and politicians are advocating for pay equity transparency and accountability. Firms have a chance to make pay equity a point of strength and trust.
• CPA firms are inviting millennials to join senior staff in networking and business development training, in turn making those processes more democratic.
• Firms that have gained momentum in their advancement of women use their women’s initiatives as strategic growth drivers.

“Women are a differentiating factor for firms competing intensely for new clients,” said Joanne Cleaver, president of Wilson-Taylor Associates, Inc., the content and communications firm that manages the Accounting MOVE Project. “Most employers are concerned with advancing women, and they want to do business with CPA firms that share those values.”

Our women leaders share their story

Women leaders of Yeo & Yeo will share their stories on how they balance the challenges of work-life flexibility via the firm’s website and social sites.  Visit our webpage, Our women leaders share their story to read their stories.

Follow Yeo & Yeo’s LinkedIn and Facebook pages for their advice to emerging women leaders in the accounting profession. 

Affiliated Medical Billing, an affiliate of Yeo & Yeo CPAs & Business Consultants, will host ICD-10-CM training sessions at locations throughout Michigan beginning in July 2015.

The impact of moving to the ICD-10 code set is substantial. Not only does the new code set include five times as many codes as the ICD-9 code set, but the different arrangement of codes will require more documentation, revised forms, retraining of physicians and staff, and changes to software and other information technology.

“The success or failure of ICD-10 implementation will depend on the staff’s ability to meet the transitional challenges. The more knowledgeable they are, the better the results. The practice’s revenue will depend on whether claims are processed as clean claims or denied for inappropriate diagnostic coding,” states Julia M. Lowe, Certified Professional Coder and President of Affiliated Medical Billing.

The ICD-10-CM training sessions have been designed to meet the needs of physicians, medical coders, billers and ancillary staff. Attendees can expect to learn about the background of ICD-10-CM and what is expected to happen when the change takes place in October 2015. Information will be shared regarding the new documentation requirements and guidelines, as well as seventh-digit extensions, placeholders and other pertinent information one must know in order to transition to ICD-10-CM.

Julia Lowe, CPC, President and Traci Cook, CPC will present the sessions. Lowe has over 40 years of experience in the healthcare environment. Her focus is on physician coding, billing and practice management. She frequently serves as a consultant to medical practices in regards to accounts receivable controls, billing and coding audits, fee structuring and CPT, ICD-10-CM and HCPCS training. She is available to lecture at private medical practices, colleges, hospitals and residency programs. For large groups, she is able to modify the ICD-10-CM training to meet the needs of the practice.

For additional information, visit ICD-10 CM Training or contact Kati Krueger, Marketing Manager, at 866-493-9830 .

Even though portability now allows married couples to use both spouses’ estate tax exemptions without having to make lifetime asset transfers or set up trusts, this “easier” path isn’t necessarily the better path. For couples with large estates, making lifetime asset transfers and setting up trusts can provide benefits that exemption portability doesn’t offer.

With portability, if one spouse dies and part (or all) of his or her estate tax exemption is unused at death, the estate can elect to permit the surviving spouse to use the deceased spouse’s remaining estate tax exemption. But making the portability election doesn’t protect future growth on assets from estate tax like applying the exemption to a credit shelter trust does. Also, the portability provision doesn’t apply to the GST tax exemption, and some states don’t recognize exemption portability.

Fortunately, recent IRS guidance helps clarify the reporting requirements. Furthermore, a new IRS Q&A document addresses more specific issues that may arise while completing the forms.

Keep in mind that, while some “midsize” employers (generally employers with 50-99 full-time employees or the equivalent) can qualify for an exemption from the play-or-pay provision in 2015 if they meet certain requirements, these employers still will be subject to the information reporting requirements.

Credit shelter trusts offer GST and state estate tax planning opportunities, as well as creditor and remarriage protection. If you would like to learn more about credit shelter trusts or other estate planning strategies for your unique situation, let us know.

If you don’t pay attention to the details, the tax consequences of a sale may be different from what you expect. For example, if you bought the same security at different times and prices and want to sell high-tax-basis shares to reduce gain or increase a loss to offset other gains, be sure to specifically identify which block of shares is being sold.

And when it gets close to year end, keep in mind that the trade date, not the settlement date, of publicly traded securities determines the year in which you recognize the gain or loss.

Finally, consider the transaction costs, such as broker fees. While of course such costs aren’t taxes, like taxes they can have a significant impact on your net returns, especially over time, because they also reduce the amount of money you have available to invest.

If you have questions about the potential tax impact of an investment sale you’re considering — or all of the details you should keep in mind to minimize it — please contact us.

Hiring someone in another state, for example, might create sufficient nexus to expose your company to that state’s income, sales and use, franchise, withholding, or unemployment taxes.

And the employee might be subject to double taxation if both states attempt to tax his or her income. The recent Supreme Court ruling in Comptroller of the State of Maryland v. Wynne addressed a similar issue, although in that case the taxpayers weren’t telecommuters but owners of an S corporation that earned income in other states.

The rules vary by state and also by type of tax — and become even more complicated for international telecommuters. So it’s a good idea to review the rules before you approve a cross-border telecommuting arrangement. If you’re considering hiring employees to telecommute from outside your state, we can help you assess the potential tax impact.

If you donate your vehicle, the value of your deduction can vary greatly depending on what the charity does with it. You can deduct the vehicle’s fair market value (FMV) if the charity:

• Uses the vehicle for a significant charitable purpose (such as delivering meals-on-wheels to the elderly)
• Sells the vehicle for substantially less than FMV in furtherance of a charitable purpose (such as a sale to a low-income person needing transportation)
• Makes “material improvements” to the vehicle.

But in most other circumstances, if the charity sells the vehicle, your deduction is limited to the amount of the sales proceeds.

You also must obtain proper substantiation from the charity, including a written acknowledgment that:

• Certifies whether the charity sold the vehicle or retained it for use for a charitable purpose
• Includes your name and tax identification number and the vehicle identification number
• Reports, if applicable, details concerning the sale of the vehicle within 30 days of the sale.

For more information on these and other rules that apply to vehicle donation deductions, please contact us.

One unique aspect of owning your business is the ability to hire your children. Whether doing so makes sense is more than a business decision. The answer depends a great deal on your intentions for passing the business to future generations, the child’s interest and aptitude, and feelings about how much a parent should “help” a child and how much they should “make it on their own.” However, some real benefits are available when you employ your children.

Usually, children (especially minors) are subject to lower tax rates than their parents. In this case, shifting taxable income away from the parents and to their children is an effective way to save on payroll taxes.

A practical example

Imagine that Mr. Smith, a sole proprietor, owns a construction business called Smith Builders. As a sole proprietor, all of the net income from the business is reported on his personal return and is subject to self-employment tax. At the end of the year, Smith Builders reports a profit of $80,000, which will result in a tax of $31,304 which is calculated as follows:

 

However, Mr. Smith has chosen to employ his 16-year-old son for the summer. His son earns $5,000 over the course of the summer and this is his only income. Mr. Smith’s son would not have a tax liability on the $5,000 he earned because it is less than the 2015 standard deduction of $6,300. By paying his son $5,000, Mr. Smith reduces his business’s net income from $80,000 to $75,000 and, as a result, his personal tax liability by $1,957 as calculated below.

 

As a sole proprietor, Mr. Smith is also entitled to additional savings due to not having to pay Social Security, Medicare, or FUTA taxes on the wages paid to his son. Social Security and Medicare taxes are not imposed on earnings paid for services performed by a child under the age of 18, and FUTA taxes are not imposed on earnings paid to a child under the age of 21.

Note: The payroll tax exemption only applies to unincorporated businesses and partnerships whose members consist solely of the child’s parents. The self-employment tax savings would also only apply to unincorporated businesses and partnerships. However, the income tax savings would apply to any business structure.

Consider retirement savings too

In the above example, the wages earned by the child were below the 2015 standard deduction. However, the wages paid to the child do not have to be below the standard deduction to derive tax savings. Let’s use the same facts as the above example, but with a few changes.

Mr. Smith would like to see his son begin an IRA. To help his son do this, Mr. Smith decides to keep his child as a part-time employee after the summer ends. As of December 31, Mr. Smith’s son has earned $10,000 (the amount necessary to contribute the maximum amount to an IRA). Mr. Smith will reduce his personal tax liability by $4,200 (25 percent of $10,000 plus self-employment tax savings of $1,700) and Mr. Smith’s son will not incur a tax liability as detailed below:

 

What is the Kiddie Tax?

Kiddie Tax is a tax that is applied to a child’s unearned income (investment income) in excess of $3,100. Kiddie Tax is applied to a child in the following situations:

1. The child is under the age of 18 at the end of the year or
2. The child is over the age of 18 (or a full-time student age 19-23) and his or her earned income does not exceed one-half of the child’s support.

 

Wages are earned income, so they are not subject to the Kiddie Tax.

Take advantage of the tax benefits

Many potential tax benefits are available by employing a child in the family business. First, the business owner may shift income from the parent’s higher tax rate to the child’s lower tax rate. Second, FICA and FUTA tax savings may be realized for both the child and the parent. Finally, the business owner may begin the child’s retirement savings process and save on taxes now.

Tax law is complex. Call on Yeo & Yeo to identify individualized strategies that will minimize tax liability now and in the future. Tax planning is vital for your family … and your family business.

Live technical support and add-on business services such as payroll, credit card processing and online banking will be discontinued for QuickBooks 2012 products and Point of Sale 10.0 as of May 31, 2015.

After this date, payroll tax calculations will be incorrect, you will be unable to send payroll for processing including direct deposits, and payroll subscriptions will be deactivated. Annual Support Plans will work until your current subscription runs out. (View Intuit’s Discontinuation FAQs and all the products and services affected by the service discontinuation.)

To purchase a new version of QuickBooks and avoid interruption to your service, call your Yeo & Yeo professional or a member of Yeo & Yeo’s Client Accounting Software Solutions team. The team is comprised of CPAs, Certified QuickBooks ProAdvisors and software programmers who can help with a seamless upgrade and provide additional support services to include:   

• Accounting software research, procurement and implementation
• Training and ongoing support
• Third-party integrated add-on applications
• Custom programming and reports

For assistance contact one of Yeo & Yeo’s QuickBooks professionals. We are happy to help.

As the school year draws to a close, it’s a good time to think about Coverdell Education Savings Accounts (ESAs) — especially if you have young children.

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.

Here are some other key ESA benefits:

• Although contributions aren’t deductible, plan assets can grow tax-deferred.
• You remain in control of the account — even after the child is of legal age.
• You can make rollovers to another qualifying family member.

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

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

Generally, businesses are limited to deducting 50% of allowable meal and entertainment (M&E) expenses. But certain expenses are 100% deductible, including expenses:

• For food and beverages furnished at the workplace primarily for employees,
• Treated as employee compensation,
• That are excludable from employees’ income as de minimis fringe benefits,
• For recreational or social activities for employees, such as holiday parties, or
• Paid or incurred under a reimbursement or similar arrangement in connection with the performance of services.

If your company has substantial M&E expenses, you can reduce your tax bill by separately accounting for and documenting expenses that are 100% deductible. If doing so would create an administrative burden, you may be able to use statistical sampling methods to estimate the portion of M&E expenses that are fully deductible. For more information on how to take advantage of the 100% deduction, please contact us.

Incentive stock options allow you to buy company stock in the future at a fixed price equal to or greater than the stock’s fair market value on the grant date. If the stock appreciates, you can buy shares at a price below what they’re then trading for.

ISOs must comply with many rules but receive tax-favored treatment:

• You owe no tax when ISOs are granted.
• You owe no regular income tax when you exercise ISOs.
• If you sell the stock after holding the shares at least one year from the exercise date and two years from the grant date, you pay tax on the sale at your long-term capital gains rate. You also may owe the 3.8% net investment income tax.
• If you sell the stock before long-term capital gains treatment applies, a “disqualifying disposition” occurs and any gain is taxed as compensation at ordinary-income rates.

There also might be alternative minimum tax consequences in certain situations. If you’ve received ISOs, contact us. We can help you determine when to exercise them and whether to immediately sell shares received from an exercise or to hold them.

The additional 0.9% Medicare tax applies to FICA wages and self-employment income exceeding $200,000 per year ($250,000 for married filing jointly and $125,000 for married filing separately). Unfortunately, the withholding rules have been tripping up some taxpayers, causing them to face an unexpected tax bill — plus interest and penalties — when they file their returns.

Employers must withhold the additional 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 if your wages don’t exceed $200,000, your employer won’t withhold the tax — even if you’re liable for it. This might occur because you and your spouse’s combined wages exceed the $250,000 threshold for joint filers or because you have wages from a second job or have self-employment income.

If you expect to be in the same situation in 2015, 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. If you have questions about the additional 0.9% Medicare tax, please contact us.

Yeo & Yeo CPAs has been named one of West Michigan’s 101 Best and Brightest Companies to Work For by the Michigan Business & Professional Association for the eleventh consecutive year.

The annual competition is a program of the Michigan Business & Professional Association (MBPA) and identifies organizations that display a commitment to excellence in human resources practices and employee enrichment. An independent research firm scored each company’s entry based on key measures in categories such as communications, work-life balance, employee education, diversity, recognition, retention and more. The winning companies will be honored at MBPA’s annual awards program and human resources symposium on May 7 in Grand Rapids.

“It is an honor to be recognized as one of the 101 Best and Brightest Companies to Work For,” said Carol Patridge, CPA, managing principal of Yeo & Yeo’s Kalamazoo office. “We credit the excellent work environment we’ve created to our dedicated employees. They are engaged in the work they do for our clients and committed to teamwork. They are an essential piece of our success and I am very proud of them,” says Patridge.

Mark Perry, CPA, managing principal of Yeo & Yeo’s Lansing office says, “We are especially honored to be recognized as one of the winners because it is the first time that Yeo & Yeo’s Lansing office staff participated in the program. We were compared to not only prominent companies in West Michigan, but also those throughout Eaton County and as far northeast as Isabella County.”

Yeo & Yeo offers rewarding careers for individuals who have the desire and drive to grow as leaders in the accounting profession. More than 200 employees in offices throughout Michigan take pride in the firm’s reputation for personal service, commitment to clients and community support. Yeo & Yeo has a culture of developing future leaders through its in-house training department, professional development training and formal mentoring, while sustaining a family friendly work environment. The firm also offers an award-winning CPA certification bonus program. Yeo & Yeo is a strengths-based organization where employees benefit from collaboration across offices and teams, and have access to advisors and resources that help them succeed.

The United Way of Midland County has named Yeo & Yeo among the Companies That Care for 2015. This prestigious award recognizes local organizations who demonstrate their commitment to strengthening our community through their support of United Way of Midland County.

“Companies That Care” are characterized not only by the financial commitment they and their employees make, but the impact they have through advocacy and volunteerism. Yeo & Yeo joins a select group of organizations that serve as the foundation for real change and continue the strong legacy of compassion for those in need.

On April 9, the United Way hosted the sixth annual Spirit of the Community Awards event at the Great Hall in Midland. This celebration honored community heroes and the ways in which they are coming together for impact and change.

Congratulations to the other Companies That Care:

• Aptar
  
• Ayre-Rhinehart Realtors
  
• Chemical Bank
  
• City of Midland
  
• Consumers Energy
  
• Deloitte
  
• Dow Corning Corporation
  
• Fisher Contracting
  
• Gavin & Associates LLC
  
• Ieuter Insurance Group
  
• McKay Press, Inc.
  
• Members First Credit Union
  
• Midland Daily News
  
• Midland Public Schools
  
• MidMichigan Health
  
• Northwood University
  
• RE/Max of Midland
  
• Three Rivers Corporation
  
• Trinseo (formerly Styron)
  
• Wolverine Bank
  

We at Yeo & Yeo are very grateful for our clients who have put their trust in us, and for the communities throughout Michigan in which we serve, that make our longstanding success possible. We are proud of our dedicated employees, and pleased to celebrate Yeo & Yeo’s 92nd anniversary on April 1.

Looking back, several exciting developments took place during the past year.

In 2015, Yeo & Yeo was ranked the 97th largest CPA firm in the country by Accounting Today.

• Yeo & Yeo expanded and relocated its Ann Arbor office to accommodate the firm’s growth. It is now the firm’s second largest location serving clients in Washtenaw, Wayne, Macomb and surrounding counties. The expansion gave the firm a more distinct presence in Ann Arbor.
• The firm merged with Southgate, Mich.-based Hungerford & Co., benefitting the clients of both firms through the expanded depth of services and the firms’ combined expertise. The merger extended Yeo & Yeo’s reach in the Southeast Michigan region.
• Yeo & Yeo was honored with several awards: Michigan’s Best and Brightest in Wellness Award, West Michigan’s 101 Best & Brightest Companies to Work For, Metro Detroit’s 101 Best & Brightest Companies to Work For, and the Midland County United Way’s Companies That Care.
• Crain’s Detroit Business included Yeo & Yeo in its Book of Lists, highlighting the largest accounting firms.

What began as a family owned business through three generations of the Yeo family has grown to a firm with nine offices throughout Michigan. Today, more than 200 professionals take pride in the firm’s reputation for personal service, commitment to clients and community support.

Again, we thank our clients for allowing us to be a part of their story of success.

Yeo & Yeo is pleased to announce that Eric J. Sowatsky, CPA, CGMA, has completed the Mark-to-Market Grain Accounting course administered by White Commercial Corporation. The specialty course concentrates on proper accounting procedures for grain elevators, with an emphasis on mark-to-market valuations of cash grain and futures contracts.

Sowatsky has a high-level understanding of how basis trading activities flow through a grain elevator’s financial statement, from both the merchandising perspective and the accounting perspective. Mark-to-market valuations on cash grain positions can be made in different ways, and each has a different effect on an elevator’s financial statement.

“Grain elevators use their financial statements to effectively report, manage and strengthen the financial health of the business, so it is important to be able to present the company’s financials clearly and confidently to a lender, board members and other interested parties,” says Sowatsky.

Sowatsky consults with grain elevators about basis trading, spreads and market values, as well as how to accurately value and report grain inventory and forward contracts. He emphasizes the importance of compiling financial statements on a monthly basis with proper mark-to-market entries, so clients understand not only what the numbers are, but what they mean.

Sowatsky is the leader of Yeo & Yeo’s Agribusiness Services Team, and a member of the State and Local Tax Team and healthcare Reform Team. He serves on the Michigan Agribusiness Association’s Grain Committee. His areas of expertise include collateral audit exams for lending institutions, internal control reviews, business consulting, financial reporting and tax planning issues, with an emphasis in agribusiness.

Sowatsky has more than 12 years of public accounting experience and is a senior manager in the firm’s Saginaw office. He is past president of the Great Lakes Bay Economic Club and past treasurer of Rotary Club – Saginaw Sunrise.

The IRS has provided employers with additional time to obtain the certification necessary to claim the Work Opportunity Tax Credit for 2014, which was retroactively extended by the Tax Increase Prevention Act of 2014 to cover eligible employees who began work before Jan. 1, 2015.

An employer that hired a member of a targeted group, or a tax-exempt organization that hired a qualified veteran, during 2014 will meet the requirements for the credit if a pre-screening notice to request certification is filed with the appropriate Designated Local Agency (DLA) no later than Apr. 30, 2015.

The Work Opportunity Tax Credit is available to virtually all private, for-profit employers who hire new employees from targeted groups. These groups include disabled or unemployed veterans, food stamp recipients, long-term recipients of state assistance, Supplemental Security Income recipients, ex-felons and more. Certain tax-exempt employers can receive the credit against payroll taxes for hiring qualified veterans, i.e., disabled, unemployed or food stamp recipients.

Generally the employer must complete two forms:

1. IRS Form 8850 – Pre-Screening Notice and Certification Request for the Work Opportunity Credit
2. Employment and Training Administration (ETA) Form 9061 – Individual Characteristics Form, Work Opportunity Tax Credit Applicant Information.

 

In Michigan, the Unemployment Insurance Agency is the Designated Local Agency. Submit the forms to the Designated Local Agency within 28 calendar days from the employee’s start date. As noted above, these forms can now be completed for applicable employees hired during 2014 and submitted on or before April 30, 2015.

Additional information can be found on the Michigan Department of Licensing and Regulatory Affairs website. Go to the Employment Security and Workplace Safety section, click on Unemployment Insurance Agency and then go to the Quick Link for Work Opportunity Tax Credit Program.

In early 2016, employers with 50 or more full-time or full-time equivalent employees, labeled Applicable Large Employers (ALEs) by the federal government’s Affordable Care Act, will be required for the first time to report information about their employees and health insurance coverage afforded to them in 2015.

New Forms 1095-B (Health Coverage), and 1095-C (Employer-Provided Health Insurance Offer and Coverage), will be issued similar to the traditional Forms W-2, but with considerably different information. Additional Forms 1094-B and 1094-C will be used as transmittals to the IRS for these forms. This reporting is voluntary for 2014, but the instructions for Forms 1094-C and 1095-C were not issued until early February 2015, so it seems unlikely there will be many takers.

The IRS has put the responsibility on employers to provide the information on these forms such that the IRS can verify that:

1. Individuals identified have the required minimum coverage,
2. Individuals who request premium tax credits are entitled to them, and
3. Applicable Large Employers are meeting their shared responsibility obligations under ACA.

Data required to be compiled on a monthly basis and reported annually includes the number of full and full-time equivalent employees, whether minimum essential coverage was offered to at least 70 percent of full-time employees, and the number of total employees, including part-time and ineligible full-time employees. Also reportable are names, addresses and social security numbers of the employees, covered spouses and dependents, whether or not the employee was offered affordable minimum essential coverage, and much more.

For employers with fully insured plans, regardless of the number of employees, their insurance company will prepare and furnish Forms 1095-B to report the employee’s information, including the type of coverage offered, whether or not they accepted or that no coverage was offered. Non-ALE employers – those with fewer than 50 full-time equivalent employees – that have self-insured health plans will also complete and file Form 1095-B.

ALEs will file Forms 1094-C and 1095-C for 2015 even though many of them – those with 50 to 99 full-time equivalent employees – are not required to provide health insurance coverage to employees until 2016.

• Form 1094-C will include information on whether or not the employer offered minimum essential coverage, the number of full-time employees and total employees, and more.
• Parts I and II of Form 1095-C will report for each employee what type of coverage was offered, the employee share of the lowest cost monthly premium, and any penalty safe harbor provision for the full year (or by month if less than the full year), covered individuals’ social security numbers and months of coverage.
• Part III of Form 1095-C duplicates the Form 1095-B information and will only be used by ALEs with self-insured health plans.

These four forms are the backbone of the ACA’s ability to verify coverage information for individuals claiming eligibility for premium tax credits on the Individual Health Insurance Marketplace. They also will form the basis for assessment of Employer Shared Responsibility Payments, also known as the Employer Mandate Penalties. The volume and complexity of data required to be reported is astounding and presents a massive opportunity for mistakes.

To put it in context, look at what occurred when the federal government itself issued Forms 1095-A a few months ago. During 2014, millions of individual taxpayers were able to acquire health insurance through the federal, and in some cases the state, Health Insurance Marketplace. In January 2015, the Marketplace, otherwise known as the federal government, issued Form 1095-A (Health Insurance Marketplace Statement), to those taxpayers to provide information needed to reconcile advance premium tax credits received with those allowed based on actual 2014 income information. While this seems simple enough in theory, events proved to be anything but. On February 20, 2015, the IRS announced that over 800,000 of the Forms 1095-A issued contained erroneous information and were being amended.

Employers of all size, particularly those considered ALEs, are facing a paradigm shift in information reporting and need to be prepared to meet this challenge. We urge all impacted employers to closely study the reporting requirements under these new forms and establish a process to gather the required data before it becomes a fire drill.

This reporting should not be taken lightly. Like Forms W-2, the penalty for late or inaccurate filing can be steep, up to $100 per day, per form required to be issued. The IRS has stated that it will not impose these penalties for 2015 reporting on entities that make a good faith effort to comply. Employers need to prepare to show that good faith effort.

Form 1095-C Preparation Services

Avoid significant penalties and save a considerable amount of time — let Yeo & Yeo simplify ACA compliance by providing Form 1095-C preparation services that are efficient and cost-effective.

Refer to Yeo & Yeo’s Affordable Care Act – Employer Reporting Powerpoint presentation for a summary of what is reported on each of the forms and a chart of the major reporting requirements.