Why Should I Start a 401(k) Plan for My Company?

Most people are familiar with the tax advantages to the participant of a 401(k) plan. There are also many benefits to an employer for implementing a 401(k) plan. Many of these are financial.

The first, and most obvious benefit to the employer, is the tax advantages which can offset some of the costs. Any Employer contributions, whether in the form of a match or a discretionary contribution, are tax deductible for the employer. In addition, if this is the first 401(k) plan for your company, you are eligible for up to $1,500 in tax credits. For the first three years of your new plan, you can take a tax credit of 50% of your startup and administrative costs, up to $500 per year.

Second, a good benefits package attracts quality employees, while encouraging longevity and loyalty. It is in every employer’s best interest to promote a positive company culture and to maintain superb employee morale. Some types of employer contributions follow a vesting schedule. This means the longer an employee stays with you, the more ownership they have in their balance. A 401(k) plan is an excellent start to an attractive benefits package.

Third, each 401(k) plan can be customized to fit the needs of the individual company. There are endless options available depending on the goals and desires of the owners. Some are looking to provide a competitive benefit package for their employees. Some are hoping to maximize savings and tax benefits for the owners while also offering a retirement package to their employees.

401(k) Plans also offer flexibility of investments and higher annual limits as opposed to saving for retirement through IRA’s.

Want more details specifically catered to your company? Contact Anne Christian, CPA at BWTP for a free analysis and proposal.

New HRA Rules for 2017

Under the Affordable Care Act, it was determined that employers were no longer allowed to use a Medical Expense Reimbursement Plan (MERP) to provide health benefits to their staff. Prior to this law, many small employers used this type of plan as an alternative to offering staff health insurance coverage.

Under the new law that was passed by Congress a few months ago, employers can again use a reimbursement plan known as a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). Employers can make tax-deductible contributions to the HRA, and the benefits are tax-free to employees. The funds may be used to pay for qualifying medical expenses for the employee and their family members, and can also be used to reimburse for health insurance premiums.

To be eligible for a QSEHRA, the employer must have less than 50 full-time equivalent employees and cannot offer group health insurance coverage to any. The HRA must be offered to all full-time, non-seasonal employees who have been employed for at least 90 days and are over the age of 25.

The new HRA rules were put into effect on January 1, 2017.

If you have any questions about the new HRA rules, please contact Rebecca Bischoff, CPA at 314.576.1350 or rbischoff@bwtpcpa.com.

Tax Benefits of Hiring Your Children

Hiring your children may be an advantageous way to shift income to a lower tax bracket. However, certain rules must be followed to ensure the IRS allows these tax savings.

The Benefits:

Tax Rates

Wages that are paid to children, as with any other wage, are tax deductible for the business. Additionally, children are generally in a lower tax bracket than you or your business. Further, if the child’s wages don’t exceed the standard deduction of $6,300, for 2016, their wages are typically tax free.

Payroll Taxes

Social Security and Medicare taxes are not required to be paid be either the child or the business so long as the child is under the age of eighteen and the business is organized as a sole proprietorship, single-member LLC, or partnership listing the child’s parents as its only members. Additionally, unemployment taxes are not required to be paid for children under the age of twenty-one, if employed by any of the above mentioned entities. However, for corporations or partnerships that consist of partners other than the child’s parents, these payroll tax savings are not applicable.

The Rules:

While there is nothing wrong with hiring your children to take advantage of the tax savings, there are certain guidelines that must be followed  to satisfy the IRS.

Children must be employees

This may seem obvious, however it should be noted that children working for the business must actually be working for the business, providing services that the business would regularly necessitate. The best strategy here is to keep a log or record of dates, hours worked, and tasks performed.

Realistic compensation

The child’s total compensation must be the same as what you would pay anyone else to do the same work. Children should be paid in the same manner as any other employee on a regular basis.

Employer requirement

Employers must treat children the same as they would any other employee with regard to required paperwork. All employees must complete the IRS Form W-4 and a Form I-9 to determine their employment eligibility.

 

If you have any additional questions, please contact Brian Reed at 314-576-1350 or at breed@bwtpcpa.com.

Tips for Internal Control for Your Business

Does your company apply the right internal controls?

Are you separating your controls by authority, custody and record keeping?

 

Below are four great, simple internal control practices you can use to minimize risk in a cost-effective manner. These practices will establish an environment of accountability and control. Effective controls wills help to identify priorities and help safeguard your resources.

The first practice is to divide responsibilities between different people, so one individual doesn’t control all aspects of a transaction.

Secondly, have one person with delegated authority who approves or authorizes transactions.

Next, limit your employees access to assets to only ones they need to complete their tasks. Safely secure equipment, cash, inventory and other resources away from employees that have the record authority to move assets in your accounting software.

Finally, review transaction records against official records to verify accuracy, appropriateness, and proper compliance. This step should be complete by the office manager or owner of the business.

By implementing these internal controls, you are helping your business minimize risk and giving your employees the necessary boundaries of responsibility they need to assist in completing their tasks.

 

For more information on this topic, please contact Travis Thomas, CPA at tthomas@bwtpcpa.com or by phone at (314) 576-1350.

Securing Your Financial Information

Are you worried about getting your identity stolen? Are you doing everything you can to make sure that your financial information is safe?

As your accountant, BWTP P.C. takes every precaution to ensure the safety of your financial information. Even the most strict security procedures cannot prevent all instances of identity theft, mainly because the majority of the vulnerability lies with you.

Here are some quick tips that will assist you in the prevention of identity theft:

Always Use Secured Networks When Accessing Financial Information

Logging into your bank account over a local coffee shop’s Wi-Fi is not recommended. These hotspots have lowered the security to make it easier to access the connection without much trouble. Consequentially, this gives the opportunity to individuals that can access your connection. Encrypted wireless networks or your mobile carrier network are recommended instead of unsecured networks.

Be Aware of Exactly What You’re Downloading

Take precautions on what information you download. Free software and files from an unknown source should be avoided. These programs and files can contain malicious software that can access your other files on your computer. This spyware, after being installed and run, can access your sensitive information and relay it to the host site. Download from trusted sources and making sure you have current anti-spyware software will help prevent these intrusions.

Do Not Fall for the Convincing Email Phishing

“Phishing” is the activity of defrauding an online account holder by posing as a legitimate company. Most of the time it is easy to spot a phony email trying to get pieces of sensitive information. Be wary of what institution the emails are coming from. Typically, no financial institution will ever ask for a PIN, password, or other sensitive information through email. Take the 30 seconds to research the sending if there is any suspicion. Also note, the IRS will always mail you a letter, they will NEVER contact you first through email or by phone.

Keep Your Passwords Secret and Make Them Strong

Do not keep your passwords stored on your computer and make sure they are strong and kept safe. If it is necessary to write the passwords down, keep them in a secure, private location. Using a combination of letters, numbers and symbols will also increase the security of your information. Avoid using easily-guessed information or details about yourself for passwords and PINs.

Be Sure to Shred

When disposing of any financial information, shredding the documents to avoid the dumpster-divers can be an easy deterrent. On top of being wary of emails and phishing, old-school dumpster-diving is still a threat today. Shred any documents that you are getting rid of to add another layer of security for your private information.

 

Please do not hesitate to call Clint Carder at (314) 576-1350 if you have any questions or concerns about the security of your financial information.