How To Choose The Right 529 Plan
Jul 23, 2015
A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. Almost every state offers a 529 plan and some even offer multiple types. 529 plans are available to everyone and have no income limitation. However, you can only contribute up to the gifting limits each year. Which plan will give you the most advantageous tax benefits? Which has the lowest cost? Which has the best performance? These are all questions you should ask when trying to choose the right 529 plan. Here are some tips to follow to ensure you get the right plan:
Understand your state’s plans and rules
Different states provide various incentives such as tax enticements, grants, and scholarships, for utilizing their plans. For example, in Pennsylvania contributions to a 529 plan can be deducted for state purposes. New Jersey offers a one-time scholarship of $1,500 to attend one of their state universities. In Ohio, the College Advantage 529 permits taxpayers to deduct contributions from their Ohio taxable income. In addition, each contributor can deduct up to $2,000 per beneficiary, per calendar year, with unlimited carry forward.
Two types of 529 plans
- Prepaid tuition plans – Allows you to buy credits for college at today’s price to be used when your child goes to college. Your money is keeping up with the cost of inflation this way. Check to see if your state offers this plan, since some do not.
- College savings plans – Allows you to contribute money into an account that is invested in mutual funds. You can start out aggressive when they are young and switch to more conservative later as they get older.
Purchase plan directly or through a broker Nearly half of 529 plans are bought through a broker, which results in extra fees to open an account and contribute. However, almost all states offers direct-sold plans with lower overall fees.
No state incentives, still get rewards You can still invest in other state plans and get the rewards of saving. For example, Vanguard offers the Vanguard 529 plan and Fidelity offers the UNIQUE College Investment plan.
Lastly, always make sure to check out the performance. Most plans have strict regulations and perform well, but you should always double check the performance and ensure that it’s invested in accordance to your risk tolerances.
By: Kelly Butler, Staff Accountant
Categories: Other Resources
Creating the Patient Encounter
Jul 22, 2015
The patient encounter has become increasingly more important to practice leaders. In fact, the patient experience has become critical to the success of many dental practices.
What is the patient encounter and how do you incorporate it into your culture? Patient encounter is influenced by all contact stages of an organization and it starts from the time a patient first makes contact with a practice and continues through various phases of the patient cycle.
People. Caring for our patients and the interactions during their care have a great impact. When everyone seizes ownership in the patient experience, each employee’s role is expanded and the practice’s culture is changed.
Process. To effectively deliver a positive patient experience, provider organizations have to have clear processes in place. These processes have to stretch into each touch point a patient has with the organization. Not only do these processes help organizations be more efficient, but safeguards a harmonious experience in all components of the practice.
Place. This goes beyond the physical location of the organization. Patient experience goes beyond interacting with patients in our offices it begins as soon as they call to schedule an appointment or when they are sitting in a crowded waiting room for extended periods of time. All of these factors significantly have an effect on a patient’s overall experience with the practice.
Improving the patient encounter by focusing on culture is arising as an essential approach leading to lasting positive outcomes. A great patient encounter to the right patient, at the right time, makes that patient feel like they are your only patient.
Categories: Healthcare & Dentistry
Outsourcing Mistakes to Avoid
Jul 20, 2015
With today’s advanced technologies, many companies are enjoying the benefits of outsourcing. Whether you’re outsourcing your accounting, human resources or IT function if an experienced firm can do it smarter and faster, why not let them do it, right?
Experience has taught us that this theory may have significant truth. However, if you do not completely understand outsourcing and what it entails, success can be hindered. Whether you are new to outsourcing or considering switching providers, it is important to avoid these outsourcing mistakes to ensure a successful outcome.
Internal disorganization. If you are looking to outsource simply because everything is in disarray, it is time to “straighten up your house” first. Using outsourcing as a quick remedy may generate other obstacles which ultimately leads to poor results. Outsourcing the accounting function provides great standardized procedures for the pieces that are being outsourced, but if part of the workflow starts or ends in your office, you must first build your internal workflow to support the outsourced process.
Focusing solely on the price. While outsourcing is generally much more efficient than in-house processing, the old adage “you get what you pay for” is applicable. You should look for cost-effectiveness combined with accuracy, not necessarily cheaper.
Inability to identify your outsourcing needs. In some situations, it is not best to outsource every function. Only those processes outside of your core competencies. For example, a nonprofit that has customized contract billing on a governmental website. Is this something you want to outsource? One wrong entry and your funds could be held up for months. Let the program manager continue to do the invoicing and your outsourcing team can record the receipt of the funds!
Eliminating company guidance. If you choose to outsource your accounting function, you have moved the functional task from your plate onto another. But don’t kid yourself into thinking that you never have to think about it again. Your company must be involved with the numbers on a daily basis. The end goal is to have a clearer picture and be able to make quality business decisions based on real-time data. Communication and collaboration are key to ensuring your objectives and goals are being achieved and this involves internal participation.
Lack of internal processes. Outlining guidelines, processes and procedures are necessary to ensure success. Internally, these procedures must be set in place. If you have major cash flow challenges or a complicated and unique system that requires day-to-day decisions about what to pay and what to hold, outsourcing may complicate your system. If your challenges are a result of poor processes or lack of transparency, having a plan in place will make your outsourcing experience efficient and painless.
Remember the goal of outsourcing is to eliminate inefficiencies and provide clarity to make better business decisions. Taking the time to prepare your organization and avoid common mistakes will make the process much smoother and less costly. Now that you have taken the time to recognize what to avoid, download our presentation on how cloud accounting services can change your business
Categories: Other Resources
Cost Segregation Study
Jul 16, 2015
A cost segregation is an engineered study which segregates property into appropriate Federal Income Tax Depreciation classifications while maximizing depreciation expense. This enables you to accelerate depreciation on components of the aforementioned real property from 39 or 27.5 years to 5, 7, or 15 years. If you have purchased, constructed, remodeled, or otherwise acquired real estate after January 1, 1986, you qualify for this service.
According to the Journal of Accountancy, “the major advantage of cost segregation is not necessarily that it will produce more depreciation deductions. Instead, due to the time value of money, the advantage of these front-loaded deductions will be quantifiably greater than had the deductions been spread over longer periods of time using slower depreciation methods.” Cost segregation studies are an excellent way to increase your tax savings and generate cash flow related to real estate assets.
An engineered-based cost segregation study is preferred by the IRS. A wide range of building components, such as electrical installations, plumbing, mechanical components, and finishes can be identified and reclassified based on an engineer’s recommendations. Substantial savings can be identified with an engineered-based study: “In general, it is the most methodical and accurate approach, relying on solid documentation and minimal estimation.” In addition, the involvement of an accountant offers significant tax law knowledge and experience.Combined, these two experts will ensure a maximum depreciation deduction benefits are realized.
The following example is provided to illustrate the benefits that can be derived from cost segregation:
A newly constructed commercial building valued at $1,000,000 would normally be depreciable over 39 years without a cost segregation study. However, an engineered study would reallocate components of this real property into accelerated lives of 5, 7, or 15 years. Let’s assume in this example that 25% of the total cost was allocated to both 5 and 7 year property, 10% was allocated to 15 year property and the remaining 65% remained allocated to 39 year property.
Without the cost segregation, estimated total allowable depreciation amounts to approximately $14,000 in year 1 and $168,000 after 7 years. In contrast, the reallocation due to cost segregation may generate total allowable depreciation of approximately $204,000 in year 1 and $428,000 after 7 years.
The increased allowable depreciation produces significant tax savings and an immediate avenue for increased cash flow. In this example, gross tax savings for year 1 amounts to $85,500. Even after 7 years, the gap in allowable deductions remains considerable with $414,000 of increased accumulated depreciation that would have been otherwise deferred to later years.
Please note that the above example is for illustrative purposes only and does not reflect present value calculations or the results of state, local, and the alternative minimum tax.
William Vaughan Company offers cost segregation studies based upon guidance provided in the Internal Revenue Code, court cases, and construction cost manuals. Furthermore, the cost segregation analysis generated by William Vaughan Company’s professional team is tailored to fully comply with the IRS Cost Segregation Audit Techniques Guide. Please contact David A. Hammack, CPA/PFS or Nathan M. Bernath, CPA at 419-891-1040 with any questions or to schedule your FREE analysis.
By: Nate Bernath, CPA
Categories: Healthcare & Dentistry
Streamlining Your Operations
Jul 15, 2015
In almost any organization, operations can be reviewed and streamlined. This was especially true in the case of an organization I met with the other day. Their controller of 30 years left and resulted in the discovery of numerous inefficiencies that had developed over a period of time. Fortunately, this organization recognizes this as an opportunity for improvements.
Some of the organization’s significant weaknesses involved the overuse of Excel spreadsheets and the under use of the software system. While this was not the worst I had ever encountered, the over utilization of Excel spreadsheets was evident. Information was keyed into an Excel spreadsheet and then key it into the software system. Not only did this waste time, but also provided the opportunity for error. Anytime you are keying information into Excel, your organization is at risk of missing a formula or keying in the information inaccurately. Clearly, this system was in dire need of greater efficiency.
Eliminating the extra steps freed up time for the new controller so he could truly be in more of an oversight and analytical role rather than data entry. We have discussed implementing automated processes which would still have an oversight step, but without the unnecessary data input. This would also create real-time data accessible to management.
Did you know 86% of all Excel spreadsheets have errors in them? This in itself should be a deterrent for incorporating such in your system. Second, more often than not, multiple versions exist – none of which may be the most recent version. Not everyone can view the same information concurrently unless the data is printed and as stated, who knows if the correct version is being examined.
Believe it or not, I am a huge advocate of Excel. However, I only believe in its implementation when error proofing type techniques are in place.
Next time you are going through your processes, think about all of the steps involved and ask yourself if it makes sense. Are you duplicating efforts? What have you done to make your system better?
Categories: Cost Accounting