New Once-Per-Year IRA Rollover Rule
Apr 22, 2014
In the aftermath of the recent tax court case, Bobrow v. Commissioner, the IRS announced it will adopt the taxcourt’s ruling and issue new Proposed Regulations that will definitively apply the 1-year IRA rollover rule on an IRA-aggregated basis going forward.
Under current ruling the Internal Revenue Code (IRC) permits an individual one rollover distribution from one IRA to another IRA within a one year period. Additionally, as provided in Proposed Treasury Regulation Section 1.408-4(b)(4)(ii), the IRS interpreted this statutory limitation as applying separately to each IRA. In other words, the IRS has taken the position over many years that an individual with multiple IRA accounts can apply the rollover rule to each IRA account without having to include the amount distributed to them within their gross income. For example, if you have four (4) IRAs, you can do four (4) rollovers for the year (1-year IRA rollover rule).
However, the U.S. Tax Court held otherwise and the IRS now intends to follow the Tax Court’s interpretation. As a result:
• Beginning January 1, 2015, you will have to include in gross income any amounts distributed from an IRA to be rolled over to another IRA, if you made an IRA-to-IRA rollover in the preceding 12 months, and
• Depending on your age and circumstances, you also may be subject to the 10% early withdrawal tax on the amount you have to include in gross income.
Please note that the above mentioned rules do not apply to transfers such as trustee to trustee transfers or “direct rollovers” wherein an IRA custodian sends the money directly to another IRA without the taxpayer taking possession. Caution is only necessary for those taxpayers considering taking a distribution then rolling those funds over to the same or another IRA within 60 days.
By: Katie Mokry, Accountant
Categories: Uncategorized
Accelerate the Adoption Rate, the Adoption of Change
Apr 21, 2014
Gary Cokins is a longtime proponent of change in the field of management accounting. His most recent blog focuses on why organizations are just not making the leap to adopt the proven value added practices of using analytics to drive the actions of the organization in tandem with the Company’s overall strategy.
We here at William Vaughan have asked that same question repeatedly, especially when it comes to product costing and budgeting. I have met with so many companies and spoken with Controllers and Cost Accountants and CEO’s about major problems the team is facing. The list of problems cannot specifically be duplicated from company to company, but in very generic format, the problems are the same:
- There is an overall lack of credibility and understanding of the financial reporting
- The team spends a great deal of time working “outside” of the systems (software) to do analysis and financial reporting (NOT management reporting) and essentially provides data that is inconsistent at best and confuses management more than anything else
- Too much time is spent looking at the wrong information
- There is a lack of meaningful financial planning. The vast majority of the time if there is planning in the form of a budget, and yes, the kind that is based on last year’s information multiplied by 3% with a few changes and NOT linked to any type of Company wide strategic plan.
Gary indicated that he believes the solution to accelerating these changes involves behavioral change management. I always use to think that if you showed the team the unequivocal benefits of making these changes, then it was a no-brainer. I was wrong, and Gary is right. I can talk until I am blue in the face about how wrong your numbers are, how misleading your spreadsheets are, and even tell you that your Company is going to go under in less than a year if you keep doing it the way you always have been. You won’t change unless you are ready.
The book “Change or Die” by Alan Deutschman is a great read if you find yourself identifying as “one of those Companies that needs to change or wants to change” but just cannot. The statistics he cites are jaw-dropping- even when faced with possible death, 9 out of 10 people DO NOT CHANGE their lifestyles or behaviors! If an individual has such a hard time making a change, how can you get an organization of people to do it? The concepts Deutschman presents make sense: there has to be great commitment, a relationship that inspires support, short-term wins to see success.
Gary is right- while technology may be an impediment for some- change management is the real issue. Time to hire an in house psychologist?
Categories: Cost Accounting
Business Development on the Green
Apr 15, 2014
Driving a dimpled ball down the fairway can be good for business — as long as you know what you’re doing. Here’s a guide to business golf that can help you build relationships and open the door for more sales. Just remember: The course probably isn’t the place where the deal is clinched.
Golf has its detractors but one thing is clear: The game is a valuable way for companies to bring in revenue. Many executives believe golf is an essential business tool. “Eighteen holes of match or medal play will teach you more about your foe than will 18 years of dealing with him across a desk.” — Sportswriter Grantland Rice
Strategic golf isn’t the same as recreational golf. Courting business on the course means keeping your business purpose in mind and focusing on your customers. You need to shift effortlessly between business and the sport.
Golf can be expensive but it’s widely viewed as a profitable investment. According to some estimates, businesses bring in more than $1,500 in business revenue for every dollar spent on strategic golfing. That may explain why the golf course outscores the hockey arena as a venue for business. (It comes in second place just below restaurants.)
But, like any other business investment, you want to maximize the return in terms of the amount of money and time spent.
To help with that goal, here are seven rules to help keep the game above par when playing with business associates:
- Assess your corporate goals. Prepare for the day as you would for any business or board meeting. Think about what you want to accomplish, whether it’s to network, lay the foundation for new business, or strengthen a customer relationship.
- Know the game. New golfers should have played at least five rounds of golf and have a few lessons before attempting to play business golf. If you score higher than average, let the rest of the group know in advance to save yourself some embarrassment.
- Stay professional and polite. As a representative of your company, show professionalism in the way you play and adhere to dress codes. If in doubt, call the club to get the policy. Never wear jeans or tee shirts. Obviously, don’t criticize how others are playing, don’t give advice unless asked, and don’t brag about your performance. In addition, don’t lose your temper, swear, or show rudeness. People who cheat at golf are often seen as likely to cheat in business.
And forget the cell phone. Many courses ban them and even if they don’t, turn yours off. A sure way to lose a sale is to have your cell phone ring or play a song just as your prospective customer is taking aim at a putt that’s going to win the round. Checking your e-mail messages on your phone? That’s probably considered rude on the course.
- Find the right mix. Put together a foursome with similar golfing abilities and temperaments. Ask if they prefer mornings or late-afternoon tee times. Introduce everyone so they feel at ease and consider providing a short advance bio of the players.
- Let the client bring up business. Tolerance levels for business chat on the course varies widely, so follow the lead of fellow players. Don’t put business ahead of relationship building. Formal business discussions will follow on another day. If the conversation turns to business, keep it light and brief.
- Don’t forget the 19th hole. After the round is over, make sure to allow time for some food, drinks and socializing. This is the time to talk business. Mix the discussions with talk about how the game went. Focus on the highlights, not the bad shots. If the game went badly, this is also a good time to smooth things over.
Remember to follow through after the round. Make a phone call or arrange a visit and, with any luck, secure a signed contract. Otherwise, you haven’t finished the game or maximized your investment.
If you really hate golf, don’t bother with it. Pretending you’re having a great time when you’re miserable probably won’t work. The time and mental investment involved in golf is too great and the return will likely be too small. There are other ways to entertain prospects that everyone will enjoy.
Categories: Uncategorized
More Than One Standard for a Job
Apr 14, 2014
I was reading an article the other day about businesses that have multiple standards for the same cost band for the same exact job. This discussion was not related to multiple costs for the same product, which I think is essential in today’s business environment, but rather, why a business might need more than one standard for the same item in a products bill of materials. The concept that a business might use more or less of one resource in the manufacturing of a part has always presented an interesting quandary in management accounting theory.
The way I see this occurring most frequently is related to the same part that can be run on different machines. A company might have the same exact part that can run on the latest, most productive, most highly efficient machine in the shop and it also can run on the slowest, least productive, oldest piece of equipment in the shop. The company has the tooling it would take to run it on either machine and the quandary facing the cost accountant is how do I cost that part. Does he or she cost the part based on always running it on the most efficient machine and then when it runs on the slower machine it does not prove to be as profitable. Or does the cost account cost the product to run on the slowest machine, then when it runs on the faster machine it is more profitable than when it runs on the slower machine. I’m sure there’s abundant management theory on how that costing analysis should be completed but my advice has always been cost the product on the machine it is most frequently scheduled to be produced on. In doing this you will be costing the product with the highest degree of reality.
This article that I was reading is actually oriented more towards the purpose for having different standards for the same job. They mentioned material and how there might be a use for more than one standard on material usage. I find that to be somewhat quizzical in that raw material usage is usually a very defined quantity with clearly defined costs.
My only thought on that process is that perhaps in the company’s inventory of raw material there is more than one type of material, with differing cost of course, that can be used to make this part. Accordingly one type of raw material will be at a somewhat greater or lesser quantity than another type of raw material simply because of the different types of material that are being used.
Irrespective of the nature of the cost system that you use, I believe every cost system somewhere has a standard cost sheet or a bill of materials that represents the normal usages and costs of the product that is being produced. The fact that there may be multiple standards for the same product with the same raw material going through the same process seems to me to be difficult to administer and must be the result of very specific needs in the company with the desire for very specific output at the time the jobs are being analyzed.
Categories: Cost Accounting
The Importance of Coming Together
Apr 11, 2014
Have you ever watched any of those home improvement competition shows where they are under a tight deadline to remodel a room, or sometimes an entire home? Well if you have, you know they often times fear they are not going to finish on time. Sometimes they are right and they must prioritize what is the most important. Other times, they keep working together and as a team they are able to get it done. The ones that do not seem to complete their task are the ones that do not get along and refuse to work together as a team. Here at William Vaughan Company, we are at the very end of tax season and like every year, I find myself saying everything is not going to get done. I just cannot imagine how it will! I am yet again, wrong! Everyone is pulling together as a team and is putting in the necessary hours to work to get everything complete, while maintaining the quality we are known for.
What is it like for you? Do you run as a team, a well-oiled machine? Or are you constantly in opposition of one another and fighting each other with little effort left to complete the task on hand? If you are trying to reconcile your cost, it requires information from various departments and people. For instance, if in your reconciliation you see that you used more material than you expected, you need to talk to the materials manager and ask them why this was the case. Maybe the machine was breaking the material, maybe the quality of the material was poor, or maybe you produced more. You cannot know the answer to the questions without talking to others and working together!
At the end of the day the goal is to keep the business running as smoothly as possible. Sometimes there are conflicts that need to be resolved. But taking the time to understand each department and their role and working together for the good of the business is crucial. Also it is vital to recognize when everything that needs to get done truly is not going to and what needs to take priority in order to get the most crucial steps complete. During this time communication is KEY!
I would be interested to hear your examples of times when you have worked together, or times when you have not. I am proud to say we are all working together here and getting everything done!
Categories: Cost Accounting