It's Time For Large Employers To File New ACA Forms

By Lauren Crum Email Lauren

By Lauren Crum
Email Lauren

2016 marks the first year that large employers will have to report on health coverage offered to their staff under the Employer Shared Responsibility provision of the Affordable Care Act (ACA). You are considered a large employer if you employed at least 50 full-time staff members during 2015, including full-time equivalent employees (FTEs). The ACA’s employer mandate, which fines companies who do not offer health benefits to full-time employees, only applied to companies with more than 100 employees for 2015. That means if you employed between 50 to 99 full-time employees or FTEs in 2015, you won’t face fines for not offering health benefits, but you are required to report on any coverage you did (or did not) offer by using new IRS forms.

In order for your company to complete the required forms, it’s beneficial to start gathering information now since it could be scattered across multiple systems and administrative areas. You’ll need the following information to complete the reporting:

  • Full-time employee names
  • Employee addresses
  • Health coverage offered to employee, if any
  • Employee’s share of monthly premium
  • Number of months employee was enrolled in coverage
  • Full-time employee counts by month
  • Total employee counts by month

There are two key forms that employers must complete by certain dates in order to report on health coverage provided in the previous year.

Form 1095-C  by January 31, 2016: Employers must provide a 1095-C form (Employer-Provided Health Insurance) by mail to the last known permanent address of all employees eligible for coverage in 2015, whether the employee participated in the coverage or not. This form provides details about any coverage offered to the employee, the lowest-cost premium available to them, and the months of the year when the coverage was available. The employee will then attach this form to their tax return for 2015.

Form 1094-C by February 29, 2016: Employers must file a 1094-C form (Transmittal of Employer-Provided Health Insurance) with the IRS by February 29, 2016. This is a cover letter to the IRS and includes information about the employer such as address, phone number, employer identification number, number of employees, and name of a contact person. This form also summarizes the eligible and covered employees that were sent Form 1095-C.

Preparing these forms can be a little intimidating. However, if either of these forms are filed late or are inaccurate, there is minimum penalty of $100 for each. If you are a large employer and use a payroll provider, they’re likely your best resource for assistance with your reporting. Most payroll companies now provide services that track your employee’s eligibility for health benefits and will generate the 1095-C and 1094-C forms, much like they do for your W-2s or 1099s.


How To Keep Employees Motivated During The Holidays

The holiday season is now upon us and so too is the busy season for many businesses. If you’re a business owner, there’s a good chance you’re gearing up for a couple long, hectic months. However, it’s good to keep in the mind that your employees likely have a lot going on outside of work during the holidays. They might be preparing to travel, host family and friends or attend the many social events that come up this time of year – in addition to working hard during the busy stretch at their job.

In order to get through this busy time of year, you’re going to need to get the most out of your staff. Here are a few simple gestures that can help keep them motivated this holiday season.

Give each staff member a gift

It’s the giving season so giving each staff member a gift can be a great way to show your appreciation for their work. Just be sure you have the budget and expense for the purchase properly. Providing your bookkeeper with the details of the purchase will help them properly expense it and prevent them from having to come to you and ask what was bought. If you choose to give a cash gift, you will want to make sure that you share those details with your bookkeeper as well (i.e. if it was your personal cash, you will want to get credit for the investment into the business).

Be flexible with time-off

You’re going to need all hands on deck but there will be situations when employees need time off. Sometimes a person will need to to leave early for a holiday gathering, other times they’ll need a few days off to travel.

Do your best to be accommodate these requests within reason. Having the right HR and payroll tools makes it easy for you to manage time-off requests and schedule staff members accordingly.

Throw an office party

A company-sponsored party is a great way for your staff to enjoy the holidays together. It can boost morale and let your team interact with each other in a friendly setting.

Like holiday gifts, it’s important to properly budget and expense your party. Again, notifying your bookkeeper of any purchases will prevent them from having to follow up and will also help them expense it correctly.

Be optimistic about next year

People naturally have optimistic thoughts about the coming new year. We see the fresh start as an opportunity to set goals toward self-improvement.

Share your business goals and plans for 2016 with your staff so they can feel optimistic about their work too. They’re likely setting resolutions about their career and knowing where the company is heading can help motivate them going into the new year.

What Does it Mean to "Reconcile Revenue"?

By Lauren Crum Email Lauren

By Lauren Crum
Email Lauren

As a business owner, you have a lot to juggle. And it’s likely you are constantly keeping an eye on your bank account to see how much money you have available. But how do you know if you’ve received all the funds from each day’s sales? Did the merchant processor transfer the payments that were due for that day? Were cash deposits made by your manager on time?

The easiest way to determine if you received what was expected is to enter each day’s revenue into your bookkeeping software. You should group the transactions into categories (cash received, credit card payments, and gift card sales/redemptions), so your records are organized and easy to make sense of. Then each month (or even better, each week), you should compare your expected receipts for each category to what was actually deposited in your bank account. If the amount you expected is not received within a reasonable period, you should research the difference.

At BKE, we reconcile your revenue for you. For one of our clients, BKE identified a situation where thousands of dollars were missing because their merchant processor had made an error and not transferred the funds for several days of activity.  

We identified another situation where a business’s general manager was not making cash deposits until days after the cash transactions were recorded. It turns out, he was loaning himself the money, then repaying it with future deposits. BKE found these inconsistencies because we were recording the expected receipts and comparing them to the amounts received by the bank on a timely basis.    

Reconciling revenue is a time-consuming process but really is necessary to make sure you are receiving all the funds due to your business. If you would like to learn more about how BKE can help with your bookkeeping, contact us today.

It Is Your Business, How Should You Pay Yourself?

By Lauren Crum Email Lauren

By Lauren Crum
Email Lauren

If you ask a tax advisor this question, you will probably get their favorite answer: “It depends.” They’ll tell you this because the structure of your business entity determines how income is reported for income tax, social security, and self-employment tax purposes.

Entities formed as sole proprietor LLCs take distributions from their business as cash flow allows. There are no reporting requirements for these distributions. Rather all business income and deductible expenses are reported on Schedule C. Self-employment tax is computed and paid with the filing of Schedule SE, along with Form 1040.  

Members of partnership LLCs may also take distributions from the business as cash flow allows. These distributions are not taxable income to the partner but they are reported on the Schedule K-1 as part of the reconciliation of the respective partner’s capital account. Partnership LLCs with multiple owners report taxable income on Form 1065, Partnership Return of Income. Earnings from the business will then be considered self-employment income and self-employment tax will be calculated on Schedule SE I.

If the entity is formed as a corporation or LLC and elects to be taxed as an S-Corporation, the owners of the company pay themselves compensation similar to an employee. Payroll taxes are withheld from their pay and W-2s are filed with the Social Security Administration by the business. When it comes time to file taxes, the owner reports W-2 wages on their personal tax returns. S-Corporation owners may also take distributions, which are not taxable, however reasonable compensation must be paid first.

If an entity is formed as a corporation and does not elect to be taxed as an S-Corporation, it will be taxed as a C-Corporation. Owners/shareholders providing services to a C-Corporation are compensated through wages reported on W-2s. Distributions to the shareholders are taxable dividends and the corporation is required to file a 1099-DIV with the IRS, reporting such dividends. Most closely held businesses do not opt to be taxed as a C-Corporation due to the fact that earnings are taxed twice, once as income to the corporation and again as a dividend to the shareholder.

According to Lorilei J. Roberts, CPA, MSBA, CGMA, Tax Manager at PBMares, LLP, the most tax sensitive entity for compensation purposes is the S-Corporation.

“The tax code requires payment of "reasonable compensation" for the type of work that you’re doing for the company. As a guideline, the IRS suggests basing your own compensation on what you would compensate an outside person to perform your job. In the event of an IRS audit, distributions may be reclassified as wages and payroll taxes could be assessed if the examiner determines that insufficient wages were reported based on the services the owner provided to the company. It is recommended that business owners consult their tax advisor to determine the most appropriate compensation plan for their situation,” advises Roberts.

The funding source for a business may have certain “employment” and payment requirements for business owners as well. A ROBS (Rollover Business Startup) funded business will require the investor to be a W-2 employee of the business. A self-guided investment however, may require that the investor have no part in the day-to-day operations and ONLY takes a distribution.

As you can see, there is no simple answer to the “how should I pay myself” question. BKE recommends you consult with a tax professional to determine the best the legal structure for your situation.

If you’re interested in learning more about our accounting and bookkeeping services, contact us today for a free consultation.

Should You Replace Fully Depreciated Equipment?

By Lauren Crum Email Lauren

By Lauren Crum
Email Lauren

In simple terms, depreciation is recognizing the cost of an asset over a specified period of time. Depreciation begins when the business places an asset in service. The asset ceases to be depreciable when the business has fully recovered its cost or when the taxpayer retires it from service, whichever happens first.

Once a business has fully depreciated an asset, it is not required to dispose of it. If the asset is still in working order, the company is free to keep using it, however, the business doesn't gain a tax benefit from recognizing a depreciation expense. In accounting terms, the company is getting to use the asset for "free" from that point on.

Unfortunately, older assets need more maintenance and will need to be replaced eventually. As a business owner, you should determine if the cost of maintenance and repair is worth holding onto that asset. You should also consider the possibility that purchasing a new asset could improve your efficiency and reduce labor costs. It could give you functionality that would make your business more competitive and improve your sales. Either one of these situations could improve your return on investment and offset the cost of your expenditure.  

Additionally, tax planning can help you determine if the depreciation of new equipment will save you tax dollars.

BKE will work with you and your tax preparer to ensure that the depreciation expense of your equipment is always accurately recorded in your books. We can also provide you with reports that help you make the decisions outlined above.

Why Your Inventory Count Is So Important

By Lauren Crum Email Lauren

By Lauren Crum
Email Lauren

Counting your inventory correctly is critical because it’s used to calculate one of the most important financial indicators for some types of business - Cost of Goods Sold (COGS). Specifically, the calculation of COGS is beginning inventory (what you already had) plus purchases during the period (what you bought new and added to the beginning inventory), less ending inventory (what you have left). So, you can see that if your inventory count is incorrect, your COGS won't be accurate either! In some businesses, COGS accounts for one third of the total business expenses, so it is important to have a good handle on these costs. In addition, monitoring your COGS is a good way to identify operational problems within your business.

The first step to monitoring your COGS is to create a target for COGS as a percentage of income. For restaurants, a target COGS percentage is often 30-35% of sales. If your COGS are significantly higher than your targeted percentage, you might want to look at your menu pricing. It is likely that you need to raise your prices to achieve the desired target. If your COGS is significantly lower than the estimate you had anticipated, you may want to find out  what others in your industry are seeing, review your books to make sure you are capturing all expenses appropriately and finally consider whether reducing prices would in fact increase revenue via a significant increase in overall sales.  

Once you are consistently able to meet your target, your business can be diligent in identifying meaningful changes to COGS. Increases in COGS could be due to many variables, including employee theft, incorrectly preparing product, or waste. The good news is that once you identify a problem, you can set up controls to minimize these losses. Some businesses are even able to set targets for specific categories of COGS. Using these fine tuned targets will allow you to easily and quickly find areas of concern. For instance, a restaurant might define their COGS as Food, Beverage, Paper and Liquor. Each category then holds a certain percentage of total Product COGS. When a particular category, such as paper products, consistently exceeds the expected percentage, the restaurant knows they need to pay closer attention to the use of these items or shop around for better priced paper products. Tracking liquor sales separately could even highlight when too many drinks are comped by the bartenders.

If you like, BKE can help you calculate your COGS and generate reports that help you monitor your business more closely. Just let us know if you’d like to chat.


Webinar: Accounting & Bookkeeping Essentials for Contractors

Learn the essentials of accounting & bookkeeping for your growing contractor business.

Whether you do electrical work, HVAC, plumbing, home-building, or anything else, we'll walk you through the basics of making sure your books are in good shape.

From easily tracking expenses to how to classify new employees, we've got you covered so you can focus on making your customers happy!


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  • Accounting & Bookkeeping Essentials For Your Growing Contractor Business
  • Thursday, November 12, 2015
  • 6 - 7 PM Eastern

Click here to register.