Financial Planning Is For Everyone
May 13, 2016
That’s right — even you! From buying your first home to planning for retirement, financial planning can set you on the right course. Make your planning session with your financial professional a success by deciding what you want to accomplish and preparing ahead of time.
Share Your Info
Your advisor will need to know every detail regarding your finances and your investment goals before mapping out a strategy. It is essential to bring all of your important financial data with you when meeting. This includes bank, investment, and retirement account statements; information on loans and other debts; and last year’s income-tax return.
Define Your Risk Tolerance
If you’re designing an investment plan, your financial professional will help you assess your investor type— conservative, moderate, or aggressive. Your ability to handle risk, as well as goals you’ve set for yourself, will serve as a guide for choosing investments that meet your objectives and comfort level. Exposing your portfolio to too much risk may put your savings in jeopardy, while holding too many “safe” investments may prevent you from reaching your goals.
If you’ve already chosen an investment strategy, use the time with your financial professional to review your progress toward your goals. If your investments aren’t performing the way you expected, you may want to make some changes.
Bring Your Spouse
If you’re married, both you and your spouse should attend the meeting and be prepared to discuss your goals and expectations. If you and your spouse have different objectives or risk tolerances, your advisor can help you come up with a plan that addresses your differences. Your session may be more productive if you and your spouse discuss financial issues before the meeting
It’s a Lifelong Process
You can’t simply “set and forget” your financial plan. Over time, your goals and risk tolerance may change. You’ll probably achieve some of your objectives, and new ones may take their place. Even events that are out of your control, such as market volatility and inflation, can affect your plan. Reviewing your strategy periodically with your financial professional can help you stay on track.
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Ohio BWC Annual Payroll True-Up & Ohio Unclaimed Funds Returns
May 10, 2016
Over the past few months, the Ohio Bureau of Worker’s Compensation (BWC) has been sending notices to businesses as a reminder of the new regulations which have been in affect over the past year. After the final June 2016 payroll, businesses will need to file an annual payroll true-up return. This will include all wages paid from July 1, 2015, through June 30, 2016. Businesses will be required to report the total wages paid for this period along with the deposits submitted to the Bureau of Workers’ Comp since last July and into the current year. Deposits should have been paid – some organizations elected to pay 1 payment while others decided to pay bi-monthly. Organizations should not include the amount paid for your 1st half 2015 wage report filed last July/August. Only payments made on this new payment schedule must be reported
In May, employers should receive a notice of estimated annual premiums along with their annual certificate of coverage. Letters and emails have been sent to businesses regarding the payroll true-up. Such letters provide instructions on establishing an e-account online to file the return in July. Filing can also be completed over the phone. The BWC will no longer mail paper returns. True-up returns are due August 15, which happens to be 2 weeks earlier than in previous years. When filing, if your organization owe’s money, you will pay the outstanding balance at this time. In addition, any refunds will either be applied to the following year’s installment payments or will be refunded. Employers must pay online to be eligible for the Go-Green rebate which is calculated at 1% of your premium up to $2,000.
Ohio Unclaimed Funds Returns – Due November 1, 2016
Now is also a good time to review monthly bank reconciliations for old checks which have not cleared the bank. If they are over a year old, chances are the check has been lost. Once you have checked to make sure you have not resubmitted the payment or the check has been voided, you may contact vendors or employees. A simple change of address may assist you in getting your books organized before June 30th. The sooner you start reviewing old checks and determining why they have not cleared, the easier it will be to file a negative return on June 30th.
If you have any questions, please contact William Vaughan Company.
Sandra Stone Accountant
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How to Save for A Vacation
May 03, 2016
Warm weather is here and soon it will be summertime! In a perfect world we would all have fully funded vacation accounts to pay for our annual family getaway. The reality of it is most of us are just now starting to think about our summer vacations. Here are some ways to save for your family vacation.
Use your tax refund – now: Do you usually get an IRS tax refund? If so, too much money is being withheld from your paycheck. Fill out a new W-4 and adjust your withholding so it’s close to what you will owe at the end of the year. Take the extra money you will now have in your paycheck and transfer it to a vacation savings account.
Sacrifice now for fun later: Do you have services such as satellite, cable or a cell phone plan that you no longer need or use or could easily downgrade. How about weekly movie rentals or going to the movies? Remember: You’re just trading today’s fun for the fun you’ll all have during your vacation. Just put the money you would save each month on these items into a special vacation fund.
Eat out less, save big: The typical family with kids can spend on average $239 a month on restaurant food. If you have to eat out look for restaurants that have “kids eat free” nights or restaurants who offer buy one entrée get one free. Another way is to have “Pantry Week” which is for one week out of the month, stay out of the grocery store and restaurants and eat only what you have in your pantry. The money you save could be easily diverted into your vacation fund.
Credit card rewards: In the months prior to vacation use a credit card that accumulates rewards for everything you purchase. Let the rewards pile up, then use them toward planes tickets, hotels or to even purchase gift cards for chain restaurants you’ll visit while on vacation.
Host a garage sale: A garage sale is a great way to earn extra vacation cash from items you no longer use or need. If you’re kids are old enough to help let them pick out some of their older toys to sell and set up a special kids table with a sign like “All proceeds go to the purchases of our Disneyland souvenirs”.
Keep your change: Another way to save extra cash for vacation is to throw all your spare change into a change jar. You’ll be surprised how quick that can add up when it comes time for vacation.
No matter how you save for vacation keeping your vacation fund separate from the rest of your money can help you resist the temptation to use it for other things before it is needed for vacation.
Carol Baker, Accountant
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The Tax Implications of Fringe Benefits For Shareholders
Apr 26, 2016
An S Corporation is a very popular business entity with various tax advantages for shareholders. However, for two-percent shareholders, the IRS tax regulations for specific fringe benefits may be unclear. First, it is essential to first determine who is a two-percent shareholder. This is any person who owns (directly or indirectly on any day during the tax year) more than two percent of the outstanding stock of the total combined voting power.
Certain fringe benefits normally excluded from an employee’s taxable wages are required to be included when provided to any two-percent shareholder. If these fringe benefits are not included in the shareholder’s W-2 Box 1, then they are not deductible by the corporation.
The most common fringe benefits affected by such rule are health, dental, and vision insurance premiums paid under a corporate plan or the amounts reimbursed by the S corporation for premiums paid directly by the shareholder. If a company has established an HSA account and makes contributions on behalf of employees, this fringe benefit is typically excluded from their compensation. However, for a two-percent shareholder, these must be included in compensation. These premiums are subject to federal and state withholding, but not FICA or FUTA. The two-percent shareholder must take an above the line deduction for self-employed health insurance on their 1040 for the premium amount included in Box 1 of the W-2 from the S corporation.
A two-percent shareholder is not eligible to participate in a cafeteria plan, nor can their spouse or child. If a two-percent shareholder is permitted to participate, the plan may lose its tax-qualified status thus resulting in the provided benefits becoming taxable to all participating employees. As such, employees would not be able to make pre-tax salary reduction elections to obtain any benefits offered under the plan. Typically, such benefits may include dependent care assistance, adoption assistance, portions of health insurance premiums paid by the employee and health savings account contributions.
Other taxable fringe benefits can include qualified transportation, qualified adoption assistance, contributions to a medical savings account made by the employer, and qualified moving expense reimbursements. All of the above must be included as compensation for any two-percent shareholders. These fringe benefits are subject to FICA, FUTA, federal and state withholding.
This brief overview provides a glimpse into the complexities which may be encountered as a two-percent shareholder of an S Corporation. If your organization utilizes a payroll service, make sure such information is conveyed so a proper W-2’s can be submitted. If payroll is being completed in-house and additional guidance is necessary, please contact a payroll specialist at William Vaughan Company for assistance.
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Placing an Accurate Value on a Closely Held Business
Apr 21, 2016
The business you own may make up most of your net worth. When you consider the future disposal of your interest in the business — wholly or partially — it will be essential to determine an accurate value for the business.
Disposal can take many paths. Perhaps you will plan to retire and transfer ownership to a family member or to sell all your interest to an outside party. You also may decide to sell your ownership interest to your employees through an Employee Stock Ownership Plan (ESOP). With any plan to change your ownership arrangement (including a merger, acquisition, or buy-sell agreement), you will need to establish a reliable value for your interest.
That’s important because you don’t want to sell your business for less than it is really worth. An accurate valuation lets you negotiate realistically with buyers. Misunderstandings can be avoided and time saved.
If you someday dispose of your business through a gift or it is transferred at your death, determination of a realistic and accurate value will ease the calculation of gift and estate taxes. If your death is unexpected, a valuation can be even more important. Control of many a family business has been lost because of forced asset sales to satisfy estate tax obligations. With accurate advance knowledge of the worth of your business, you may be able to use insurance or other strategies to assure that your estate will have sufficient liquidity to handle estate taxes.
No standard method exists to determine value because each business is different. But valuation professionals and the IRS typically use a group of factors when they fix the value of an operating business. These factors include the company’s:
- Nature and history
- Economic outlook
- Annual budget, sales history, and sales projections
- Financial condition and stock book value
- Capacity for earnings
- Ability to pay dividends
- Previous stock sales and block size being valued
The general economic outlook may also be a consideration, as well as the prices of stocks of similar, publicly held companies.
Usually valuation professionals examine a combination of the above factors to determine an appropriate value. A factor that may control the valuation of any size corporation may not be nearly as important when valuing another corporation whose type of business is different. When determining valuation, each closely held corporation is unique.
Any valuation report you receive should be both well documented and comprehensive, with confidential treatment for any company information. You should be able to rely on your valuation professionals for their full support if any question is raised about the valuations of your business. Their support should extend to reporting to your Board of Directors and defending their work in court or to the IRS.
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