Training employees provides many benefits, to you and your people.  It increases productivity, reduces turnover, and improves job satisfaction.  Skill-based training helps your employees to do their jobs better and more independently, reducing the need for supervision.

The downside is that training is often expensive, and in an uncertain economy when everyone considers expenses very carefully training may not be high on your priority list.

In our home state of Florida, you can get help from a resource which may surprise you:  WorkSource.  This publicly funded agency offers an Employed Worker Training (EWT) program to assist businesses with training their employees.

Before beginning any training, you must first contact WorkSource to register and complete the appropriate EWT paperwork.  Any company can apply for these funds regardless of size or industry, and each proposal is evaluated individually on merit.

Funding is available to train only employees with an average hourly rate of $24 or less, and WorkSource assigns priority to cost-effective training that advances workers’ skills and offers a promotion or salary increase after completion.  Also, the training must result in an industry-recognized certification.

It’s not free.  Your company must pay for half the cost of the training.  Your half, however, includes paying your employees to attend the training and you were going to do that anyway, right?

So, if it’s time to conduct some formal training at your workplace, contact WorkSource at 904-356-5627 or www.worksourcefl.com.  It’s a win-win for you and your employees.

First some background: the AMT was created in 1969 to ensure all taxpayers pay at least a minimum amount of tax. Higher income taxpayers often claim many deductions and Congress wanted to ensure no chance existed of these high earners paying little or no income tax.

The AMT provides an alternative set of rules for calculating the tax that people at different income levels should owe. If their actual tax falls below this minimum, they’re required to pay the AMT to make up the difference.

Even though the goal was to guarantee higher income taxpayers pay a fair share of taxes, today the professionals at Patrick & Robinson CPAs often find that many of our middle-income clients are also subject to the AMT. The problem is the AMT was not indexed for inflation; so as income levels increase, more people get caught in its web.

AMT exemption amounts are based upon filing status. For 2011, those amounts were $48,450 for single and head of household filers, and $74,450 for married persons filing jointly ($37,225 each if they file separately) and qualifying widows and widowers. This year’s exemption amounts are scheduled to revert to $33,750 for singles and heads of households, and $45,000 for married filing jointly ($22,500 for each married spouse filing separately) and qualifying widows and widowers.

To determine whether you might be subject to AMT, the IRS offers an AMT Assistant for Individuals.  You’ll need a draft copy of your 1040 available to enter the figures for the Assistant to calculate.

We automatically provide this service for our clients, so if you think you’ll get caught in the AMT trap, contact Patrick & Robinson CPAs at office@CPAsite.com or 904-396-5400.

Last week we discussed audits – what they are, who needs them, and why. This week we’ll focus on the other attest services: reviews and compilations. These services cost less than an audit because they don’t involve the same level of detail—and therefore don’t provide the same level of assurance. But our team at Patrick & Robinson CPAs will quickly tell you reviews and compilations can be useful.

A Review Offers Some Limited Assurance

Less extensive than an audit, but more involved than a compilation, a review consists primarily of analytical procedures that our CPAs apply to the financial statements, and various inquiries made of a company’s management team. If our Patrick & Robinson CPAs find that financial statements or supporting information appear inconsistent or otherwise questionable, we’ll suggest performing additional procedures.

A review doesn’t require our team to study and evaluate a company’s internal controls, verify data with third parties, or physically inspect assets. Rather, a review report from Patrick & Robinson CPAs, similar to our colleague CPA firms, expresses limited assurance by stating: we’re “not aware of any material modifications” needed for the financial statements to be in conformity with the Generally Accepted Accounting Principles (GAAP). Per standard practices, our reviewed financial statements must include all required footnotes and other disclosures.

Why might you request a review? Quite frankly, it’s an affordable midpoint, providing the advantages of a CPA’s technical expertise without the work and expense of an audit.

Compilations Provide a Basic Assessment Level

In compiling financial statements for a client, CPAs, such as Patrick & Robinson CPAs, present information that’s the “representation of management” and expresses no opinion or assurance on the statements.

Compilations don’t require inquiries of management or analytical procedures. Instead, our team of tested experts relies on knowledge of accounting principles and a general understanding of the business. Banks often require compilations from an independent CPA as part of their lending covenants. The reporting basis for compiled financial statements can be accrual, cash basis, or even income tax basis.

Patrick & Robinson CPAs offers compilations in two formats: full disclosure or limited disclosure. A full disclosure compilation will contain all the financial statements of a review or audit – balance sheet, income statement, statement of cash flows and footnotes. A limited disclosure compilation can exclude the footnotes and even the statement of cash flows. 

Audit, review, full disclosure compilation or limited disclosure compilation, each has its place and function in the safe conduct of your financial interactions. The professionals at Patrick & Robinson CPAs can help you decide which tool is right for you and then apply that tool with the skill necessary to gain the answers you need. Contact us for more information: office@CPAsite.com or 904-396-5400.

]]> http://www.cpasite.com/blog/?feed=rss2&p=666 0 http://www.cpasite.com/blog/?p=661 http://www.cpasite.com/blog/?p=661#comments Wed, 25 Apr 2012 21:00:13 +0000 Adam Robinson http://www.cpasite.com/blog/?p=661 First of a two-part series

Believe or not, there are lots requests for financial audits. Not the type of audit IRS agents conduct to ensure you’re paying your taxes, but an audit of a company’s financial well-being.

Specifically in the business environment, stockholders, creditors, private investors, bonding companies, and government agencies often need assurance that a company’s financial statements accurately represent the firm’s true financial position.

Stockholders, creditors, private investors, bonding companies and government entities maintain different levels of risk tolerance, so three levels of assurance—known as attest services—are available.

Audit – Highest Level of Assurance

Audits provide the highest level of assurance. An audit is a methodical review and objective examination of the financial statements, including the verification of specific information as determined by the auditor or as established by general practice.

Included in an audit is a review of internal controls, testing of selected transactions, and communication with third parties. Based on the findings, a report is issued on whether or not the financial statements are fairly stated and free of material misstatements.

An Audit enables owners to…

• Satisfy stakeholders such as other owners, creditors, and bonding companies, as to the credibility of published information.
• Comply with banking covenants. 
• Help deter and detect material fraud and error. 
• Facilitate the purchase and sale of businesses.

Owners get the highest level of assurance because the CPA goes outside the company to obtain more information. Typically, the CPA will have written communication with:

• Customers: to check outstanding receivable balances;
• Banks: to confirm cash or debt balances and terms;
• Vendors: to verify outstanding payable balances; and
• Attorneys: to gather information on pending or threatened legal action.

The CPA will also perform physical inspections by conducting job site visits and counting inventory. Records such as contracts, cash receipts, expenses and cash disbursements, and payroll will be verified and tested on a sample basis.

Audits Are Not Just for Public Entities

All public companies are required to conduct an annual audit, but some nonpublic entities must undergo annual audits as well. Bonding companies may require audited financial statements as the size of the jobs increases. Some financial institutions require audits of nonpublic companies based on the financing amount and/or the bank’s assessment of the company’s risk.

Also, companies with absentee ownership (such as those owned by investment firms, or individuals who no longer run the business) may order audits as checks of their management teams.

Next week we’ll look at the other types of attest services: reviews and compilations. Of course, if you need financial information verified—or need to get ready for an upcoming attest service—contact the professionals at Patrick & Robinson CPAs: 904-396-9400 or Office@CPAsite.com.

The good news is: a few clicks and you’ll have some answers. The IRS recently launched its upgraded search tool, the Exempt Organizations Select Check, to help users obtain information about any tax-exempt organizations, including their federal tax status and filings, at www.IRS.gov.

Three key areas are searchable:

1. With the higher reporting standards since 2008, many organizations found they involuntarily lost their exempt status. Under law, a federal tax exemption is automatically revoked for not filing a Form 990-series return or notice for three consecutive years (known as the Auto-Revocation List). You can also see if an organization has filed a recent Form 990-N (the online version of the annual return for not-for-profits with under $25,000 in total receipts).
2. Improved search functions also enable users to look for organizations eligible to receive deductible contributions by Employer Identification Number (EIN), which wasn’t a searchable or sortable field in previous search tools. Another enhancement is a monthly database update instead of quarterly.
3. Finally organizations that automatically lost their tax exemptions can be searched by their EIN, name, city, state, ZIP Code, country, exemption type, and revocation posting date. Previously they were only grouped by state. Exempt Organizations Select Check also provides pop-up help text to assist users in understanding the significance of auto-revocation search results, including the meaning of, and distinctions between, revocation dates and revocation posting dates

For those preferring to follow the old fashioned method of investigation, you can still call the IRS (toll-free) at 1-877-829-5500 to ask any questions. You can also ask the organization directly to see their determination letter issued by the IRS stating the approval of their tax-exempt status.

If you’d like clarification on any of the search methods described above, contact Patrick & Robinson at your convenience — Office@CPAsite.com or (904) 396-5400. We’re here to help you avoid the IRS’ hammer, so be 100% sure before you donate your hard-earned cash!

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http://arlington.firstcoastnews.com/news/news/76973-customers-complain-cant-use-turbotax-prepaid-cards

When concerned with what the requirements are for maintaining records in support of a tax return, it’s a good idea to consult the entity that will want them later: the IRS.  Here are their standards:

1. If you owe additional tax and situations (2), (3), and (4) below don’t apply to you, keep records for three years.
2. If you don’t report income that you should, and it’s more than 25% of the gross income shown on your return; keep records for six years.
3. If you file a fraudulent return; keep records indefinitely.
4. If you don’t file a return; keep records indefinitely.
5. If you file a claim for credit or refund after you file your return; keep records for three years from the date you filed your original return, or two years from the date you paid the tax, whichever is later.
6. If you file a claim for a loss from worthless securities or bad debt deduction; keep records for seven years.
7. Keep all employment tax records for at least four years after the date the tax becomes due or is paid, whichever is later.

A quick side note: IRS increased enforcement may make your CPA seem less forgiving this year when it comes to proper documentation on your part. He or she is obligated to prepare your return to withstand an IRS examination, and audits overall have become more exacting.

Generally, you’ll hear that four years is a safe period to maintain records, as that would be approximately three years after the end of any timely-filed tax return—assuming the return is prepared correctly, so your CPA doesn’t need to defend you under items 2, 3 or 4!

Regarding what’s required to be kept, as long as your recordkeeping system is sufficient to prove the income and deductions reported on your tax return, it’s your discretion. Your files can be written or electronic, but must include a record of each transaction on your return and be organized and accessed relatively easily. Standards for digital records can be found on the IRS website.

If you’re required to prepare an expense report for an employer, the burden of proof shifts to the employer for what’s reimbursed, so he or she may take possession of your receipts. Several apps for smart phones are also available to keep these records and are fine as long as your files are easily recoverable if necessary.

In addition, some expense items will receive more scrutiny than others, as they’re more easily “estimated” than others. Most of these areas include provisions for standard amounts for simplicity, but even using those standards require proper accounting. Contact your CPA for clarification on these expenses and if any of the information above is confusing. As always, better to be safe than sorry when complying with IRS rules.

The VOW to Hire Heroes Act of 2011 (the Act) added two new categories to the existing qualified veteran-targeted group and made the WOTC available to certain tax-exempt employers as a credit against the employer’s share of social security tax. The Act allows employers to claim the WOTC for certified qualified veterans who begin work before January 1, 2013.

WOTC is designed to encourage employers to hire hard-to-employ individuals. The plan offers a credit generally equal to 40% (only 25% if the employee doesn’t reach a minimum employment level) of the first $6,000 of wages paid to each qualified employee on the payroll.

Employers claim the credit on their federal income tax return using IRS Form 5884. Note that wages taken as a business deduction must be reduced by the amount of credit allowed.

Targeted Groups – Under Internal Revenue Code Section 51, qualifying target groups hired prior to 2012 include:

1. Qualified IV-A recipients;
2. Qualified veterans (credit      applies to the first $12,000 of wages for these employees);
3. Qualified ex-felons;
4. Designated community residents;
5. Vocational rehabilitation      referrals;
6. Qualified summer youth (credit      only applies to the first  $3,000 of      wages for these employees)
7. Qualified food stamp recipients;
8. Qualified SSI recipients; or
9. Long-term family assistance      recipients (formerly welfare-to-work individuals; the credit is computed      very differently for this group).

Minimum Employment – Through 2011, the WOTC applied to qualified new employees working a minimum of 120 hours. The 40% credit applied to qualified employees on the payroll working 400 or more hours, while the 25% credit applied to employees working fewer than 400 hours.

Qualified employees hired in 2012 must have had aggregate periods of unemployment of at least four weeks but less than six months in the year prior to being hired, or be certified as having aggregate periods of unemployment of six months or more in the year prior to being hired, for the employer to be eligible for the credit.

The Act permits employers to claim the WOTC for veterans certified as qualified veterans and begin work before January 1, 2013. The amount of the credit depends upon a number of factors. For-profit employers may receive as much as $9,600 per qualified veteran, while qualified tax-exempt organizations are eligible for up to $6,240. The credit for qualified tax-exempt organizations may not exceed the organization’s employer Social Security tax for the period for which the credit is claimed.

Pre-screening and Certification – Before claiming the credit, employers must obtain certification that new hires are members of the targeted group. The process for certifying veterans for this credit is the same for all employers.

Normally, eligible employers must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their respective state workforce agency within 28 days of the eligible worker’s start date; but, under a special rule included in IRS Notice 2012-13, employers have until June 19, 2012, to complete and file this newly revised form for veterans hired between November 22, 2011 and May 22, 2012. The 28-day rule will apply to eligible veterans hired on or after May 22, 2012.

For more information, see Form 8850, Pre-Screening Notice and Certification Request and the instructions.

For-profit Employers – The process for claiming the WOTC for qualified veterans under the VOW to Hire Heroes Act remains the same. After the required certification is secured, for-profit employers claim the tax credit as a general business credit against their income tax.

Tax-exempt Employers – As of 2012, qualified tax-exempt organizations – those organizations described in IRC Section 501(c) and exempt from taxation under IRC Section 501(a) – may also claim the credit for qualified veterans who begin work on or after Nov. 22, 2011 and before January 1, 2013. This exemption includes churches and all other 501(c)(3), 501(c)(4) and 501(c)(6) organizations.

After the required certification is secured, tax-exempt employers claim the credit against the employer Social Security tax by separately filing Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans.

Form 5884-C should be filed after filing the related employment tax return for the employment tax period during which the credit is claimed. Note: we don’t recommend qualified tax-exempt employers reduce their required deposits in anticipation of any credit, as the forms are processed separately.

If you’d like to confirm your organization’s eligibility for these credits or clarify any of the above information, please give us a call at your convenience (904-396-5400); we’re here to help…especially if you’re hiring a hero!

If you file single, married (jointly or separately), head of household, or qualifying widow(er) and your income from employment, self-employment, or farm income is $49,078 or below you may qualify for up to $5,751 in credit. People with larger families and more household expenses will receive more credit, but every little bit helps!

The IRS offers an interactive assistant to help you determine whether you’re eligible for the tax credit, and how much credit you can hope to get. It takes roughly five minutes to find out, but you’ll be logged out if you’re inactive for five minutes, so be prepared! You’ll need to know the amounts and types of income received to determine how much credit can be yours, including from your W-2, business, alimony, interest and dividends. Then, be prepared to enter any deductions you may have, such as student loan interest, moving expenses, or self-employment tax.

The adjusted gross income (AGI) of a single person with no dependents must be below $13,660 to qualify for the credit. This amount increases to $18,740 if you’re married, filing jointly, and have no children. With just one dependent child, the maximum AGI increases significantly: $36,052 if you’re single ($41,132 for married, filing jointly). To be eligible for the maximum credit, though, you’ll need to have three or more children.

If you qualify for the EITC you probably won’t need a CPA to help you with your taxes. Instead, check out the IRS’ list of free tax preparation services. Let us know if we can help: Office@CPAsite.com or (904) 396-5400.