This article discusses some of the top things that you can do as a business owner in order to protect your business against fraud. From learning basic definitions to what a forensic accountant could do for you, different methods are outlined in this article. Be sure to better educate yourself in order to put your business in the best position possible in the new year!
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For 2020, the Internal Revenue Service (IRS) released a long-anticipated update to Form W-4. The document overhaul was precipitated by changes in the 2017 Tax Cuts and Jobs Act (TCJA). The goal of the redesign was to reduce complexity, support transparency, and increase accuracy of the withholding system.
The biggest change to tax withholdings is that the IRS is no longer using the allowance system on Form W-4. This is because, prior to the TCJA, withholding allowances were tied to the amount of the personal exemption. Under the TCJA, taxpayers cannot currently claim either personal or dependency exemptions.
In spite of the updates, employees who have already completed Form W-4 for their current job are not required to complete the new form. They do, however, have the option to do so. The IRS strongly encourages taxpayers to regularly check their withholdings and update them if need be. To determine if you should update your tax withholding, visit the IRS Tax Withholding Estimator.
What do employees need to know?
The new form is divided into five steps. Only Step 1 (personal information) and Step 5 (signing the form) are required. Steps 2-4 are optional but should be completed if they apply to your situation. The updated Form W-4 is designed with the goal of making taxpayers’ withholdings match their tax liabilities more frequently.
What do employers need to know?
The new Form W-4 is available now and should be used for any wages to be paid after 2019. Any employee who is first paid in 2020 must use the new Form W-4. Additionally, any current employees who wish to update their withholdings must also use the new version. If an employee fails to furnish their W-4, treat them as a single filer with no adjustments.
For a detailed FAQ on the updates to Form W-4, visit irs.gov.
The Internal Revenue Services (IRS) recently released updated optional standard mileage rates for 2020. These rates are used to calculate the deductible cost of operating an automobile for business, charitable, medical, or moving purposes. The term “automobile” includes any car, van, pickup, or panel truck. As of January 1, 2020, the standard mileage rates are as follows:
1). For business use of an automobile, the 2020 rate is 57.5 cents per mile (down 0.5 cents from the 2019 rate).
Please note that since the Tax Cuts and Jobs Act (TCJA) suspended the miscellaneous itemized deduction for unreimbursed employee business expenses from 2018 to 2025, the standard mileage rate cannot currently be used to claim a deduction for those expenses. The TCJA did, however, include an exception for members of members of the U.S. armed forces reserves, state or local government officials who are paid on a fee basis, and some performing artists.
2). Driving for medical or moving purposes may be deducted at 17 cents per mile (down 3 cents from the 2019 rate).
Please note that the TCJA suspended the moving expense deduction for individual taxpayers from 2018 to 2025. However, the tax code update did include an exception for members of the U.S. armed forces on active duty whose moves are precipitated by a military order.
3). The rate for service to a charitable organization is unchanged, set by statute at 14 cents per mile.
Please note:
Please feel free to contact us with any questions you might have about mileage rates.
By now, most employers have read up on, hired and gotten to know Millennials. Well, guess what? A whole new demographic is here: Generation Z. Whereas Millennials are generally those who came of age around the Millennium, Gen Z are typically regarded as those born just before, on or relatively soon after the year 2000.
With every new generation, there’s an element of rebellion against the attitudes, lifestyles and tastes of previous generations. But, to a large extent, the differences in generations may have more to do with the world they were raised in. For Gen Z, that means two primary formative experiences:
1. Dealing with the aftermath of the financial crisis of 2008. The psychological consequence of growing up during a financial crisis tends to be a cautious, conservative attitude toward employment matters. For example, the prospect of job security with predictable growth in income may be more appealing to Gen Z than to Millennials.
Also, Gen Z employees may be more focused on the retirement benefit programs than Millennials are. If you sponsor a retirement plan, be sure to emphasize it when describing the advantages of working for your organization. Gen Z workers who are skeptical about an impending funding crisis for Medicare and Social Security may be particularly interested in maximizing their retirement savings opportunities.
2. Growing up as “digital natives.” Gen Zers tend to have a large capacity for multitasking. They’ve lived in a digitally connected world where social media is an expectation, not a fun new toy to play around with. That means they’re more than accustomed to jumping from platform to platform and checking multiple apps for the latest data.
The downside is that multitasking Gen Zers may find it difficult to focus deeply on one task for a long period of time. So, make sure you evaluate that capacity if you’re hiring them for a job that requires a long attention span. At the same time, you may want to design job positions with a wide variety of duties to make the most of their multitasking prowess.
You might already have Gen Z employees trickling into your workforce. As time marches on, you’ll encounter many more. No bell will ring to signal that Gen Z has reached a critical mass at your organization. But staying attentive to changes in attitudes and priorities of the youngest members of your staff will make it easier for you to maintain a dynamic and productive workforce. Contact us for help cost-effectively handling hiring and performance management of all generations of employees.
© 2019
Employers grapple with many competing goals when it comes to compensation and pay raises. You probably want to reward specific employees who’ve made contributions to the organization and try to ensure your salaries are in line with what competitors are paying. But you also need to maintain a level of equity with other workers’ compensation. And, of course, you’ve got to keep payroll costs in line. It’s not easy to find a sensible balance.
Develop criteria
Money can be a sensitive subject for many people. Employees often view their salaries and raises not just as a means of providing for themselves and their families, but as an indication of how the organization values their contributions. So, the ways in which you decide on, and communicate, raises and other salary adjustments can affect employee morale and performance.
If you haven’t already, consider developing a standard set of criteria to determine pay raises and apply it to employees within each department or group. Among the benefits of having set criteria is that it reduces the perception of, and opportunity for, bias. Even a perception of partiality can dampen employee morale. Over time, it even may harm retention and performance.
And by standardizing the criteria you use to determine raises, you’re less likely to wind up with significant variations in compensation between different groups of employees. You’re no doubt familiar with the controversies regarding pay inequities between genders and other distinctions. Standardized criteria can help ensure that, as much as possible, compensation fairly reflects performance.
Focus on goals
Of course, these criteria shouldn’t prevent or inhibit you from recognizing employees who’ve met or exceeded their performance objectives. Tying raises to such goals is fine if the objectives themselves are clearly communicated, measurable and challenging — but within reach.
Goals should be both specific to an employee’s actions and tied to broader organizational goals. For instance, a goal set for a warehouse manager could be to increase the percentage of on-time deliveries.
Some organizations use raises to recognize seniority. They say experience often has some impact on the contribution an employee makes. In addition, using raises as one tool to reduce turnover often makes sense, given the expense of attracting new employees.
Other organizations maintain that longevity doesn’t automatically correlate with the value an individual brings. In addition, regularly rewarding employees’ tenure can lead to bloated salaries. Many organizations look at both longevity and performance when determining raises.
Keep searching
Naturally, all policies on raises and compensation should comply with applicable laws and regulations. This is yet one more issue to grapple with when searching for that often-elusive balance. Please contact us for assistance.
© 2019
Is your organization looking to hire new employees? Join the club. The U.S. unemployment rate hit a historic low this past April, according to a Bureau of Labor Statistics household survey. It fell to 3.6%, the lowest rate since December 1969 — that’s almost 50 years! April also marked the 14th consecutive month of the unemployment rate being at or below 4%.
With so many people employed, the competition for those out there looking for work or considering a job change is fierce. Hiring and retaining the best candidates will call for more than just competitive salaries, benefits and paid time off.
Many employers are finding that signing bonuses pay for themselves by giving them a competitive edge in winning over high-quality recruits. It’s a strategy well worth considering but, as always, you’ve got to be careful with your money.
The basics
A signing bonus is supplemental cash awarded — on top of salary and benefits — to selected new employees. Although amounts vary, signing bonuses often equal 5% to 15% of an employee’s starting salary and are based on a clear expectation of not only retention of service, but also future performance.
Signing bonuses may appear to benefit only the new employee. But, when prudently and effectively deployed, a bonus can provide your organization with a better return on its hiring investment.
For example, you may be able to hire a great employee at a relatively lower initial salary amount by winning him or her over with a one-time, immediate payout. Bonuses are also often a good solution to finding employees for difficult-to-fill positions. There’s a certain prestige that comes with receiving a hiring bonus and some candidates may leap at the opportunity.
Important details
If you plan to offer hiring bonuses, you need to think it through carefully and exercise risk management. The best way to do so is to codify the terms of any bonus in a contract.
That is, write up the details and payment plans before you cut your first bonus check. Include details such as:
Embed this language in your organization’s formal employment agreement and ask your attorney to review it before anyone signs. Having a written, concrete bonus agreement will protect your organization while motivating the employee in question to perform well.
Benefit or headache?
Signing bonuses can either provide substantial hiring benefits or inflict serious headaches. Our firm can help you identify the potential risks and advantages, as well as anticipate the tax and financial implications.
© 2019
Under federal law, there’s no mandate for an employer to offer compensated time off to mothers and fathers following the birth or adoption of a child. But a few states have mandatory paid parental leave laws on the books, and it’s a topic that still gets a fair amount of news coverage. If your organization wishes to explore the idea, here are five important questions to ask:
1. Which job categories or demographic segments of your workforce are most vital to your success? For example, you may find that the group you most rely on is composed of younger employees who are more likely to need parental leave. Or you may look at your workforce demographics and hiring trends and realize that your need for younger workers may soon increase.
2. What motivates the workers who are most vital to your success? It’s possible that the employees who are most likely to take advantage of paid parental leave would place a higher value on some other form of compensation, such as more generous paid vacations. Employee surveys can be excellent tools for ascertaining such preferences.
3. What’s the competitive landscape in your labor market? If you’re not having a turnover problem or if your competitors aren’t offering paid family leave, you may not feel compelled to consider it. Fair enough; but keep an eye on the competition so you don’t get left behind.
4. What’s your overall employment strategy and workplace culture? Many employers’ primary employment value proposition is schedule and career flexibility, as well as a “family friendly” culture. Paid family leave is a natural fit for such cultures and would likely get plenty of positive attention when you roll it out.
5. Do the numbers add up? It’s not easy, but you can estimate the additional labor costs involved in covering for those on parental leaves while also valuing the financial savings in reduced employee turnover and higher productivity levels. If you move forward with a paid parental leave policy, you’ll be able to verify and adjust these estimates after you have accumulated some history. In turn, you can then revise the policy for an optimal fit.
The Society for Human Resource Management’s 2018 Employee Benefits: The Evolution of Benefits report stated: “The prevalence of paid parental leave increased significantly between 2016 and 2018 for every type of parental leave.” Whether this trend will continue depends on the conclusions employers draw as they consider the questions above and other factors beyond their control, including the future strength of the economy and birth rate trends. Contact us for more information about performing the analyses that will help you determine whether parental leave is a good idea for your organization.
© 2019
Imagine giving your company’s retirement plan a report card. Would it earn straight A’s in preparing your participants for their golden years? Or is it more of a C student who could really use some extra help after school? Benchmarking can tell you.
Mind the basics
More than likely, you already use certain criteria to benchmark your plan’s performance using traditional measures such as:
These measures are all critical, but they’re only the beginning of the story. Add to that list helpful administrative features and functionality — including auto-enrollment and auto-escalation provisions, investment education, retirement planning, and forecasting tools. In general, the more, the better.
Don’t overlook useful data
A sometimes-overlooked plan metric is average account balance size. This matters for two reasons. First, it provides a first-pass look at whether participants are accumulating meaningful sums in their accounts. Naturally, you’ll need to look at that number in light of the age of your workforce and how long your plan has been in existence. Second, it affects recordkeeping fees — higher average account values generally translate into lower per-participant fees.
Knowing your plan asset growth rate is also helpful. Unless you have an older workforce and participants are retiring and rolling their fund balances into IRAs, look for a healthy overall asset growth rate, which incorporates both contribution rates and investment returns.
What’s a healthy rate? That’s a subjective assessment. You’ll need to examine it within the context of current financial markets. A plan with assets that shrank during the financial crisis about a decade ago could hardly be blamed for that pattern. Overall, however, you might hope to see annual asset growth of roughly 10%.
Keep participants on track
Ultimately, however, the success of a retirement plan isn’t measured by any one element, but by aggregating multiple data points to derive an “on track to retire” score. That is, how many of your plan participants have account values whose size and growth rate are sufficient to result in a realistic preretirement income replacement ratio, such as 85% or more?
It might not be possible to determine that number with precision. Such calculations at the participant level, sometimes performed by recordkeepers, involve sophisticated guesswork with respect to participants’ retirement ages and savings outside the retirement plan, as well as their income growth rates and the long-term rates of return on their investment accounts.
Ask for help
Given the importance of strong retirement benefits in hiring and retaining the best employees, it’s worth your while to regularly benchmark your plan’s performance. For better or worse, doing so isn’t as simple as 2+2. Our firm can help you choose the relevant measures, gather the data, perform the calculations and, most important, determine whether your retirement plan is really making the grade.
© 2019
Merging with, or acquiring, another company is one of the best ways to grow rapidly. You might be able to significantly boost revenue, literally overnight, by acquiring another business. In contrast, achieving a comparable rate of growth organically — by increasing sales of existing products and services or adding new product and service lines — can take years.
There are, of course, multiple factors to consider before making such a move. But your primary evaluative objective is to weigh the potential advantages against the risks.
Does it make sense?
On the plus side, an acquisition might enable your company to expand into new geographic areas and new customer segments more quickly and easily. You can do this via a horizontal acquisition (acquiring another company that’s similar to yours) or a vertical acquisition (acquiring another company along your supply chain).
There are also some potential drawbacks to completing a merger or acquisition. It’s a costly process from both financial and time-commitment perspectives. In a worst-case scenario, an ill-advised merger or acquisition could spell doom for a business that overextends itself financially or overreaches its functional capabilities.
Thus, you should determine how much the transaction will cost and how it will be financed before beginning the M&A process. Also try to get an idea of how much time you and your key managers will have to spend on M&A-related tasks in the coming months — and how this could impact your existing operations.
You’ll also want to ensure that the cultures of the two merging businesses will be compatible. Mismatched corporate cultures have been the main cause of numerous failed mergers, including some high-profile megamergers. You’ll need to plan carefully for how two divergent cultures will be blended together.
Can you reduce the risks?
The best way to reduce the risk involved in buying another business is to perform solid due diligence on your acquisition target. Your objective should be to confirm claims made by the seller about the company’s financial condition, clients, contracts, employees and management team.
The most important step in M&A due diligence is a careful examination of the company’s financial statements — specifically, the income statement, cash flow statement and balance sheet. Also scrutinize the existing client base and client contracts (if any exist) because projected future earnings and cash flow will largely hinge on these.
Finally, try to get a good feel for the knowledge, skills and experience possessed by the company’s employees and key managers. In some circumstances, you might consider offering key executives ownership shares if they’ll commit to staying with the company for a certain length of time after the merger.
Who can help?
The decision to merge with another business or acquire another company is rarely an easy one. We can help you perform the financial analyses and project the tax implications of any prospective deal to bring the idea better into focus.
© 2019
Like most business owners, you’ve probably been urged by industry experts and professional advisors to identify the most important key performance indicators (KPIs) for your company. So, just for the sake of discussion, let’s say you’ve done that. A natural question that often follows is: Now what? You know you’re supposed to keep an eye on these metrics every day but … how?
The right technology has you covered. There’s a specific type of software — commonly referred to as a “business dashboard” — that allows business owners to create customized views of all their chosen KPIs. And these applications don’t just lay out numbers like a spreadsheet. They provide an easy visual experience that allows you to keep your eyes on the prize: a cost-controlled, profitable company.
Cloud-based knowledge
Business dashboards have been around for a decade or two in various forms. But today’s solutions have the advantage of being cloud-based, meaning the data driving them is typically stored on a secure server off-site. And you can access the dashboard from anywhere at any time on an authenticated device. (You can also still run a dashboard from your company’s own servers, if you prefer.)
If you’ve never used a dashboard before, you might wonder what one looks like. The name says it all. Ideally, a dashboard is a single screen of data — like the panel of gauges in your car — that displays various KPIs in the form of pie charts, bar graphs and other graphic elements.
A few must-haves
When shopping for a product, there are a few “must-haves” to insist on. The software should:
Be wary of vendors that over-promise “otherworldly” knowledge of your industry or try to upsell you on bells and whistles. The simpler the dashboard, the better. There will always be more complex financial issues regarding your business that can’t be put into simple terms on a dashboard.
Also, the rise of artificial intelligence (AI) is causing many to question the long-term viability of business dashboards. AI gathers and shapes data so quickly, and in such massive amounts, that some experts argue that a business owner’s chosen KPIs can rapidly become outmoded.
Nonetheless, dashboard software is still widely used in many industries. Just be prepared to regularly reassess and, if necessary, update your KPIs.
Shop carefully
If you decide to invest in a business dashboard (or upgrade your current one), you’ll need to go about it carefully. We can help you set a budget and compare prices and functionalities to get an optimal return on investment.
© 2019
