Category: Blog

IRS Announces End of Unannounced Taxpayer Visits (Mostly)

3 min read

IRS Announces End of Unannounced Taxpayer VisitsYou wake up in the middle of the night. Heart racing, drenched in sweat, and breathing heavily. Thankfully, it was just a nightmare when the IRS showed up at your doorstep unannounced. Recently, however, this was the reality for some taxpayers – and not just a bad dream. The IRS just publicized a significant shift in policy, effectively ending the vast majority of surprise taxpayer visits. The change comes in an effort to create safer conditions for IRS officers as well as ease public concerns.

Who’s Knocking at My Door?

In order to understand the change in policy, you’ll need to understand the three categories of IRS employees that typically interact with taxpayers: Revenue Officers, Revenue Agents, and Special Agents.

IRS Revenue Agents are tax return auditors. They don’t typically show up unannounced.

IRS Revenue Officers, of which there are approximately 2,300, have duties that include paying visits to taxpayers to collect back taxes and tax returns not filed. They are not auditors but instead focus on collection efforts, including issuing liens and levies. Revenue Officers are the main category of IRS employees impacted by the policy change.

Special Agents deal with criminal matters and are part of one of the largest law enforcement agencies in the United States. The change in policy does not impact Special Agents.

Safety

Why the shift to (mostly) eliminating surprise visits from IRS Revenue Officers? Safety is cited as the main concern. Unannounced visits to taxpayers, whether at home or their business, can be risky. Historically, IRS Revenue Officers faced contentious and sometimes dangerous conditions during their unannounced visits.

Taxpayer Confusion

There is also a growing number of scam artists pretending to be IRS agents or officers. As a result, taxpayers are increasingly wary of unannounced visits, and this causes confusion for both the taxpayer and law enforcement.

The difficulty in distinguishing between IRS representatives and fakes has caused concern for taxpayers already on guard for scam artists. The IRS believes that maintaining trust among the public will go a long way to maintaining the legitimacy of the organization.

Appointment Letters In Lieu of Visits

In place of these previously unannounced visits, the IRS will contact taxpayers through a 725-B letter, more colloquially known as an appointment letter.

An appointment letter will facilitate scheduling in-person meetings, with the opportunity for the taxpayer to prepare any information and documentation beforehand, allowing for quicker resolution of cases. These meetings occur at a pre-determined time, date, and place.

Limited Visits Will Still Occur

The policy change does not completely eliminate unannounced visits by the IRS. In “extremely limited situations,” such as serving summonses and subpoenas and the seizure of assets, unannounced visits will still occur. To give some perspective, these types of visits will account for only a few hundred per year compared to the tens of thousands of unannounced visits under the old policy.

Conclusion

Unannounced IRS visits are (almost) a thing of the past. They will be carried out only in rare, necessary cases, with most Revenue Officer visits being pre-scheduled. This should ease taxpayer anxiety and make case resolution more efficient.

How to Identify and Avoid Cash Flow Pitfalls

4 min read

Cash Flow Pitfalls, Cash Flow problemsLooking at expenses for one’s business is essential to reduce cash flow issues. For example, it would show if there’s too much money leaving the business or what type of scenario the business might face if there’s an unexpected and large expense that guts the business’ cash position. Tracking expenses on a monthly basis is one way to determine a company’s financial health.  

Estimating sales by starting with last year’s month-by-month figures is one way to start. Looking at credit and cash sales from a business’ monthly income statements provides historical reference. Examining both fixed and variable past expenses, specifically, is a good starting point. However, it’s important when projecting future sales and reasonable increases to remember that the business could be impacted negatively by a new competitor or positively if one goes out of business.

Determining when payment will be received is a good way to project cash flow. If it’s cash, then it’s instant and no further calculation is necessary. However, if payment is conducted by invoices, credit lines, etc., businesses are encouraged to perform the Days Sales Outstanding (DSO) calculation. This calculates, on average, how long customers take to pay outstanding invoices.

DSO = (Monthly accounts receivables/Total sales) x Days in the month

This is a good way to measure how long customers actually take to pay invoices versus what terms are specified in contracts or invoices.

Another consideration is to look at fixed and variable expenses. While fixed expenses are just that, fixed, it’s important to monitor variable expenses because they can fluctuate. One example is inflation, which can increase the cost of input materials, salaries, overhead, etc. Depending on the volume of production or sales, electricity, commission, or similar costs can also vary.

Once this information is gathered, the current month’s projected cash flow can be calculated.

The formula is as follows: (Last month’s cash balance + Current month’s projected receipts) – Projected expenses.

Preventing Bad Debt from Happening Before Collections is Necessary

According to SCORE, there are many things a business can do to reduce the likelihood of customer debt default and increase cash flow. Businesses can check the creditworthiness of both individual and commercial clients before offering credit to determine the likelihood of defaulting. 

Similarly, if Net 30 is the standard timeframe to pay an invoice, offering a 5 percent discount if it’s paid within seven days is one way to encourage prompt payment. Businesses that get a deposit when signing the contract or before beginning work will generate a more consistent cash flow.

Operating Cash Flow Ratio Example

This looks at how easily a company can satisfy current liabilities from its cash flows that are produced from the business operations. If there’s negative cash from operations, a business might be relying too heavily on financing or selling assets to run its operations. If earnings are steady, but cash flow from operations is falling, this is a negative indication of a company’s health. It’s calculated as follows:

(Operating Cash Flow/Current Liabilities) = ($15 billion/$45 billion) = 0.33

Businesses with an operating cash flow ratio greater than 1 have produced more cash in an operating period than is necessary to satisfy current liabilities. Businesses that have a reading less than 1 did not produce enough cash to satisfy current liabilities. However, further investigation is required to ensure that it’s not taking some of its excess cash to reinvest in projects with the potential to create future rewards.

While there’s no way to predict future cash flow trends, making projections can help businesses compare actual results to projects and adjust their plans more efficiently.

Sources

https://www.score.org/resource/article/10-ways-improve-collections-and-cash-flow

Widow/er Social Security Benefits

5 min read

Widower Social Security BenefitsA widow or widower is eligible for a survivor’s benefit from Social Security even if they never worked – as long as the deceased spouse qualified for benefits based on his or her own income record. Also, note that surviving spouses must have been married to their most current spouse for at least the nine months prior to their passing or for 10 years if the couple was divorced.

When Can You Claim?

A widow/er may apply for benefits once she turns age 60, age 50 if she qualifies as disabled or if she is responsible for the care of a child under age 16 (or a mentally or physically disabled child aged 16 or older). However, if the widow/er applies for a surviving spouse’s benefit starting at age 60/50, that benefit will be permanently reduced from the maximum amount available if she were to wait until her own full retirement age.

What Is Full Retirement Age for the Widow/er?

For anyone born from 1945 to 1955, their full retirement age (FRA) is 66. If born between 1955 and 1959, FRA increases by two months each year from age 66 to 67. FRA is age 67 for anyone born in 1960 or later.

How Much Can You Get?

First and foremost, all Social Security beneficiaries receive the highest benefit for which they qualify. Therefore, if a surviving spouse would receive a higher benefit from her own record of earnings than that of the deceased spouse, then that’s the amount she will receive.

If the deceased was receiving Social Security disability benefits when he passed, the survivor benefit is based on the deceased’s disability benefit.

Normally, the spousal benefit equals half the benefit of the higher-earning spouse. However, the surviving spouse’s benefit equals 100 percent of what the deceased worker would have received, including any delayed retirement credits he earned by postponing benefits to age 70.

The minimum surviving spouse benefit at age 60 is 71.5 percent of the available amount. This represents a permanent loss of 28.5 percent of the benefit available at FRA. The widow/er benefit is reduced for each month shy of his or her own FRA, so the closer they get to FRA before applying, the higher the benefit. The amount freezes once they begin drawing benefits, although it will increase incrementally based on cost-of-living adjustments.

The maximum benefit a widow/er may receive is 100 percent of what the deceased spouse would receive if he was still alive. However, that amount may already be reduced. For example, if the deceased began drawing benefits at age 62 instead of waiting until FRA, then that is the maximum benefit the widow/er is eligible for. If she begins drawing early before her own FRA, that benefit will be reduced further.

Ideally, the deceased will not have started receiving Social Security before his death. In this scenario, even if he died in his 50s, his maximum benefit is what he would have received at FRA. Now it’s up to the widow/er to time her survivor benefit – she can wait until her own FRA or take a permanently reduced benefit.

Delay Strategy

One strategy a widow/er may want to consider is to begin her own benefit at age 62, even if it is less than what she would draw as a survivor. Then, she can delay drawing the survivor benefit until it grows higher – ideally, the highest benefit at her FRA.

If the widow/er does not have her own benefit from earnings or can’t live on that amount alone, she may want to withdraw income from other sources, such as retirement savings or an annuity. While that may reduce her overall net worth, it’s important to remember that the Social Security benefit continues for life, so it may be worthwhile to get the highest benefit possible. Other accounts, such as an IRA or 401(k), will stop paying out income once they are depleted.

If the widow/er has a stronger earnings record, another option is to begin drawing the survivor’s benefit early and delay taking her own benefit until FRA or age 70, to receive a higher benefit for life based on her own record. Once she applies for her own benefit, the payout will increase to a higher amount.

Seek Professional Advice

Knowing when to begin drawing a widow/ers benefit can be challenging. The best option is usually based on factors such as other income resources and even the widow’s health. If in poor health and not expected to live many years, it may be wise to begin the survivor’s benefit as soon as possible. Otherwise, it’s probably better to wait and get a higher payout for as long as she lives.

Another thing to keep in mind is that if the widow/er doesn’t know the deceased spouse’s FRA benefit at the time of death, she is not likely to find out until age 60. The Social Security shuts down the deceased’s account at death and won’t reveal the benefit until the widow/er is of qualifying age to begin receiving it. It’s always a good idea for both spouses to check (and share with each other) their accrued benefits each year so that they have accurate numbers to plan with in case one spouse passes away.

How to Write an Awesome Accounting Bio

4 min read

How to Write an Accountant Bio, How to write CPA Bio, How to write a Tax Preparer Bio, How to write a Bookkeeper bioEven though numbers are probably the biggest thing in an accountant’s wheelhouse, getting people in the door with the right words in your bio can make all the difference in the world. Here are a few tips to make sure that how you present yourself to the public via your wording is powerful, succinct, and engaging.

Make it Short and Engaging

Yes, attention spans in our world are woefully short, much like that of gnat. You have seconds to grab someone’s attention. Write your bio as if you were looking for an accountant. How would you word it? What would catch your eye? Of course, you’d start with your name and title, but what after that? Spend time thinking about this.

Don’t Use First Person

While social media is all about saying “I this” and “I that,” when it comes to bios, it’s best not to do that, use the third person as if you were talking about someone else. For instance, “John Davis is a CPA at Ernst & Young.” After that, you can launch into telling the world just how awesome you are.

Use Active Voice

And avoid passive voice. An example of this would be something like, “John’s team was involved in the overhaul of the payroll system.” For active voice, you’d write it like this:  “John’s team overhauled the payroll system.” See the difference? You’ve cut out extra words and adjusted your verb to be active. A quick way to check your writing for passive voice is to do a search in your document for an “of.” If you spot these babies, fix them right away.

Update Your Social Media Profiles

While most people use LinkedIn, many others who are looking for a job include their bios on their social media pages. In fact, you might update your bio on your LinkedIn page and then share it on Facebook, Instagram, or other platforms you use. This way, when employers are casually scrolling, you’ll appear in their feed. And if they’re looking for someone, all the better.

End Strong

The abbreviation in the marketing world is CTA, or Call to Action. You see it on nearly every digital ad as a button. But if you reimagine it in terms of the last sentence of your bio, it can leave a lasting impression and, hopefully, trigger a response. You might end your bio with a short, friendly statement, your email, and your phone number: “John is actively seeking employment, can be reached at [FILL IN INFO], and is just a ping or phone call away.” No matter what you choose to end with, it should reflect you and your personality.

If you need a little help to get started, here are two different samples:

Sally Smith is a CPA and a Senior Accountant at ABC Company, a full-service tax and bookkeeping firm in Home Town, USA.

John Jones joined ABC Company in 2000. In his current role, he is a seasoned tax preparer with a focus on international taxes. This involves staying up-to-date with current and future tax regulations for foreigners living and working in the United States and abroad, as well as state tax regulations in California and Florida.

Writing an accountant bio that will stand out from the crowd will take a bit of time, but it is well worth it. You want to present yourself in the best possible light to your audience. When you do this, you’ll get more traction and, in turn, more business.

How Businesses Can Leverage Data and Personalization for Targeted Campaigns and Growth

4 min read

Data and Personalization, Targeted CampaignsMarketing efforts today depend on collecting, analyzing, and leveraging data to make informed decisions. Therefore, business owners need to understand how to harness the power of data and personalization to create targeted campaigns that drive growth.

Importance of Data and Personalization in Modern Business

Businesses today collect loads of data, enabling them to understand their customers’ preferences, behaviors and interests. The data comes from different channels, such as a business website, emails, or social media. It is then used to identify patterns and trends to make informed marketing decisions. This yields valuable insights that help craft highly personalized and effective marketing strategies.

Data is the foundation of personalization strategies. Personalization involves tailoring customer experiences to meet individual interests, needs, and preferences. It aims to build strong customer relationships, encourage engagement, and drive revenue and growth.

Personalization takes different approaches, such as recommendations based on previous purchases, creating unique landing pages, or sending emails based on customer browsing behavior. For example, e-commerce websites recommend products based on user browsing history and search queries.

Business owners can’t afford to ignore personalization since customers today are more informed, can easily access information, have more options, and have more control over purchase decisions. Furthermore, customers are more demanding and want to be recognized as individuals, expecting to receive personalized experiences. This has rendered traditional, one-size-fits-all marketing strategies obsolete.

How Businesses Can Use Data and Personalization for Targeted Campaigns and Growth

Using a data-driven approach, a business can create campaigns that deliver the right message to the right audience at the right time by doing the following:

1. Audience segmentation

Capturing the attention of a specific audience segment leads to higher conversion rates. To do this, a business can leverage data insights to segment the target audience. This means it is possible to categorize potential customers based on demographics, interests, or browsing behavior.

2. Crafting personalized content

Once segmentation is complete, it becomes possible to create tailored campaigns that resonate with each segment’s unique preferences. Aside from addressing customers by their names, it involves delivering content that speaks directly to their needs, interests, and pain points. This could include product recommendations based on past purchases or sending targeted offers that align with customer browsing history.

3. Omnichannel personalization

Customers interact with businesses using various channels, such as a business website, social media, emails, and mobile apps. A business can integrate data and personalization efforts to ensure a seamless journey for customers, regardless of where they engage. Additionally, it is crucial to deliver consistent and personalized experiences across these channels.

4. Continuous improvement in data-driven campaigns

Data insights also help guide businesses on the most suitable content and distribution strategies. They can analyze types of content performing well and in which channels. For example, a business can conduct A/B testing to compare campaign and content variations to identify the most effective approach for each segment.  

5. Measuring and analyzing results

To establish the effectiveness of personalized campaigns, a business will need to develop clear key performance indicators (KPIs) and measurement methods. One way to measure the impact of personalization is through customer engagement. This is done by measures such as click-through rates on personalized emails, customer retention rates, customer lifetime value, customer feedback, and number of sales.

It is worth noting that to make the most out of data insights. It is helpful to invest in advanced analytics tools or collaborate with data experts.

6. Adapting to changing trends

The digital landscape is evolving constantly, with new technologies and trends emerging regularly. Businesses must stay updated on these changes and adapt their personalization strategies accordingly. Remaining flexible and open to innovation ensures that the company’s targeting efforts are relevant and effective.

Data Privacy and Security

Although personalization in modern business is crucial, it must be balanced with privacy concerns. First, a business must be transparent about the data it collects and how it will be used. In addition, businesses need to be careful with the data they collect. They must ensure data security by safeguarding data storage and using safe transmission methods, have access control limits, and regularly audit data privacy policies and practices. Customers should be allowed to opt out of data collection and personalization efforts easily.

Customer data must be well protected to ensure compliance with relevant regulations. It also helps build trust with customers. Besides, a breach of trust can severely affect a business’s reputation and growth.

2021 Vs 2022 Vs 2023 Federal Income Tax Brackets

3 min read

2020 Vs 2021 Vs 2022 Federal Income Tax Brackets

The US tax system is progressive, meaning that the more you earn the more you pay. For the years 2021-2023 there are seven different brackets for each year (2020 was the same structure as well). Which bracket you are in depends on your taxable income; however, your bracket does not equal your tax rate.

Tax brackets work so that you pay part of your income at each level bracket as you move-up in income. In other words, someone in the 32% marginal rate bracket will pay 10% on part of their income, 12% on another part, then 22% on another band of income, 24% on the next tranche and finally, 32% on everything else. In other words, moving into a higher tax bracket does NOT mean you pay higher taxes on all your income.

Below are comparative tables for the taxable years 2021 – 2023. This way you can not only see the tax brackets that apply 2023 taxable income, but the trend changes over time.

Updates to 2023 Tax Rates and Brackets

Over the 3-year period shown below, there are seven brackets with progressive rates ranging from 10% up to 37% and they are the same overall years.

Federal income tax rate brackets are indexed for inflation. The brackets are adjusted using the chained Consumer Price Index (CPI). There were no structural changes to the tax brackets in any of the periods, so the only impact are increases year-over-year due to the inflation indexing.

The inflation adjustment factor for 2023 was 7% for example, raising income thresholds applied to the tax brackets across the board.

Tax Rates and Brackets

Below are the 2021-2023 tables for personal income tax rates. Note, that the 2023 figures below are the amounts applicable to the income earned during 2023 and paid in 2024 when you file your taxes.

 

Tax Brackets & Rates

Single Taxpayers
2021 2022 2023
10% 0 – $9,950 10% 0 – $10,275 10% 0 – $11,000
12% $9,951 – $40,525 12% $10,276 – $41,775 12% $11,001 – $44,725
22% $40,526 – $86,375 22% $41,776 – $89,075 22% $44,726 – $95,375
24% $86,376 – $164,925 24% $89,076 – $170,050 24% $95,376 – $182,100
32% $164,926 – $209,425 32% $170,051 – $215,950 32% $182,101 – $231,250
35% $209,426 – $523,600 35% $215,951 – $539,900 35% $231,251 – $578,125
37% $523,601and Over 37% $539,901 and Over 37% $578,126 and Over

 

Married Filing Jointly and Surviving Spouses
2021 2022 2023
10% 0 – $19,900 10% 0 – $20,550 10% 0 – $22,000
12% $19,901 – $81,050 12% $20,551 – $83,550 12% $22,001 – $89,450
22% $81,051 – $172,750 22% $83,551 – $178,150 22% $89,451 – $190,750
24% $172,751 – $329,850 24% $178,151 – $340,100 24% $190,751 – $364,200
32% $329,851 – $418,850 32% $340,101 – $431,900 32% $364,201 – $462,500
35% $418,851 – $628,300 35% $431,901 – $647,850 35% $462,501 – $693,750
37% $628,301and Over 37% $647,851 and Over 37% $693,751 and Over

 

Married Filing Separately
2021 2022 2023
10% 0 – $9,950 10% 0 – $10,275 10% 0 – $11,000
12% $9,951 – $40,525 12% $10,276 – $41,775 12% $11,001 – $44,725
22% $40,526 – $86,375 22% $41,776 – $89,075 22% $44,726 – $95,375
24% $86,376 – $164,925 24% $89,076 – $170,050 24% $95,376 – $182,100
32% $164,926 – $209,425 32% $170,051 – $215,950 32% $182,101 – $231,250
35% $209,426 – $314,150 35% $215,951 – $323,925 35% $231,251 – $346,875
37% $314,151and Over 37% $323,926 and Over 37% $346,876 and Over

 

Heads of Housholds
2021 2022 2023
10% 0 – $14,200 10% 0 – $14,650 10% 0 – $15,700
12% $14,201 – $54,200 12% $14,651 – $55,900 12% $15,701 – $59,850
22% $54,201 – $86,350 22% $55,901 – $89,050 22% $59,851 – $95,350
24% $86,351 – $164,900 24% $89,051 – $170,050 24% $95,351 – $182,100
32% $164,901 – $209,400 32% $170,051 – $215,950 32% $182,101 – $231,250
35% $209,401 – $523,600 35% $215,951 – $539,900 35% $231,251 – $578,100
37% $523,601and Over 37% $539,901 and Over 37% $578,101 and Over

 

 

Conclusion

While the tax brackets are the same in 2023 as the prior year, the income thresholds increased 7% following hot inflation in the CPI. You can lower your marginal rate or at least reduce the amount of taxable income subject to it by optimizing itemized deductions.

IRS Ruling: Crypto Currency Staking Rewards Are Taxable When Received

3 min read

Crypto Currency Staking Rewards Are TaxableThe IRS recently issued an important ruling on the taxability of cryptocurrency staking rewards, determining that staking rewards are essentially “income” and, therefore, taxable upon receipt and not deferrable until sale or swapping. Below, we will look at the ruling in more detail and what it means for taxpayers. But first, let us revisit the concept of cryptocurrency staking as a refresher.

Crypto Staking 101: What Is Staking?

Staking, at its most basic form, is a way for holders of cryptocurrencies to earn rewards or passive income on their digital assets without needing to sell.

One way to think of staking is like a high-yield savings account. When you stake digital assets, you deposit and lock up your coins. This helps run and maintain security on different blockchains (depending on the asset staked). In return, you typically receive more of the digital asset staked. 

Rates of return on digital asset staking can be lucrative; however, staking is not without risks.

Staking risks include:

The inherent volatility of cryptocurrencies, where the rewards earned can be less than the change in the underlying digital asset price (causing an overall loss).

Minimum lock-up periods, where staked assets cannot be unstaked and sold or swapped and therefore are illiquid for a period.

Counterparty risk if operating as part of a staking pool, where rewards can be negated as a bad actor and therefore never paid out.

The staking pool or underlying digital asset can be hacked, leading to a loss of funds (remember, there is such a thing as FDIC insurance to protect depositors in the cryptocurrency realm).

Taxability of Staking Rewards

The tax treatment of buying and selling cryptocurrencies is clear. In IRS Notice 2014-21, the government declares that crypto trades should be treated as property, resulting in capital gains treatment like other property bought and sold. Staking, however, is different than trading.

To clarify, given the vague mechanisms of crypto staking, the IRS recently issued a ruling declaring that crypto staking rewards need to be included when received in a taxpayer’s gross income. This ruling formalizes the position taken by the IRS in the Jarrett case.

The argument in the Jarrett case was that the coins received as staking rewards are new property that was created and not the same as income, interest, etc. Essentially, this means the staking rewards are zero-basis assets that would be taxed when sold and not upon receipt. They made the argument that staking rewards were like the products of a baker, where each new cake, although from the same recipe, is a newly created product/asset and, therefore, taxable upon sale.

The court determined that staking rewards, due to their proof-of-stake creation mechanism, are not a new asset, but compensation for helping to maintain and provide validation of the underlying blockchain, with the staked assets used as collateral.

Conclusion

As a result, staking rewards are income when “received.” The taxable amount is the fair market value of the coins when the taxpayer receives the staking reward in an “unlocked” manner. In other words, once the taxpayer controls the staking rewards, the taxpayer is capable (regardless of exercising this capability) of selling them.

Monitoring Trade Agreements with Taiwan, Promoting Plain-Language Rules, and Expanding Recruiting and Training for Law Enforcement

3 min read

Monitoring Trade Agreements with Taiwan, Promoting Plain-Language Rules, and Expanding Recruiting and Training for Law EnforcementUnited States-Taiwan Initiative on 21st-Century Trade First Agreement Implementation Act (HR 4004) – This bipartisan bill was introduced on June 12 by Rep. Jason Smith (R-MO). The purpose of this bill is to convey approval by Congress of the June 1 trade agreement between the United States and Taiwan. The bill addresses customs administration and regulatory practice issues, as well as dictates conditions for negotiations of subsequent trade agreements. Among its provisions, the bill requires that the U.S. Trade Representative share all negotiating texts with Congress prior to being sent to Taiwan or any parties outside of the executive branch. The bill passed in the House on June 21 and in the Senate on July 18. It was signed into law by the President on Aug. 7.

Providing Accountability Through Transparency Act of 2023 (S 111) – This bill, which was signed into law on July 25, requires each agency to provide a 100-word plain language summary of each new proposed rule posted at regulations.gov. The legislation was introduced by Sen. James Lankford (R-OK) on Jan. 26; passed in the Senate on June 22; and in the House on July 17.

Securing the U.S. Organ Procurement and Transplantation Network Act (HR 2544) – This bipartisan bill was introduced by Rep. Larry Bucshon (R-IN) on April 10. It modifies operations of the Organ Procurement and Transplantation Network, which is managed by the Health Resources and Services Administration (HRSA). In the past, the network of professionals was managed by only one organization, but this new bill allows the HRSA to award multiple grants, contracts or cooperative agreements for network management. The legislation was passed in the House on July 25, in the Senate on July 27 and is currently awaiting signature by President Biden.

Strong Communities Act of 2023 (S 994) – Introduced by Sen. Gary Peters (D-MI) on March 28, this bill permits funding by the Community Oriented Policing Services (COPS) grant program to be used to train officers and recruits who agree to serve in law enforcement agencies in their local communities. The bipartisan bill passed in the Senate on July 26 and is currently under consideration in the House.

Recruit and Retain Act (S 546) – Introduced by Sen. Deb Fischer (R-NE) on Feb. 28, this bill expands the Community Oriented Policing Services (COPS) grant program to enable law enforcement agencies to use funding for recruitment activities such as career and job fairs, as well as lower application fees for things like background checks, testing and psychological evaluations. The Act passed in the Senate on July 26 and has been forwarded to the House.

 

 

Department of Veterans Affairs Office of Inspector General Training Act of 2023 (S 1096) – This Act would require new Veterans Affairs (VA) employees to undergo training on how to report misconduct, respond to requests from and cooperate with the Office of the Inspector General. The bill was introduced on March 30 by Sen. Margaret Hassan (D-NH) and was passed in the Senate on July 13. Its fate now rests in the House.

How to Reduce Common Payroll Errors

4 min read

Common Payroll ErrorsAccording to the Internal Revenue Service (IRS) and the National Federation of Independent Businesses (NFIB), almost one-third of companies see penalties due to payroll issues. Understanding a few examples, according to the NFIB, of how companies can better comply and avoid penalties is essential to smoother operations.

Underpayment of Estimated Tax by Corporations Penalty

As long as there’s a reasonable expectation of at least $500 in estimated taxes owed, corporations are required by the IRS to file. If, however, a corporation doesn’t satisfy its estimated tax payments or pays them after their quarterly submission deadline, the IRS will assess penalties. This can occur even if the IRS owes filers a refund.

The IRS recommends the easiest way to avoid the penalty is to pay the quarterly estimated taxes by the 15th day of April, June, September, and January of the following year (the following month after each quarter). If the 15th is on a weekend (Saturday or Sunday) or it’s a legal federal holiday, payment would be due on the next regular business day.

When it comes to assessing penalties for underpayment of estimated taxes, the IRS determines the penalty based on how much-estimated taxes are underpaid, the time frame of when the payment was due and underpaid, and the IRS’ current quarterly interest rates.

Based on 2023’s third-quarter data from the IRS, the federal agency charges a 7 percent penalty annually, compounded daily.

Failure to Deposit Penalty

Another payroll tax mistake businesses may make is the Failure to Deposit Penalty. The NFIB reported that nearly 50 percent of small businesses see fines on average of $850 annually because they’re late or missing payments. In order for businesses that must make employment tax deposits, it’s imperative to do so either on the IRS’ monthly or semi-weekly basis.

Required employment tax deposits cover Social Security, Medicare, and federal income taxes, along with Federal Unemployment Tax. Employers on the monthly route are required to deposit employment taxes on payments for the prior month by the 15th of the following month. For the semi-weekly route, deposits for employment taxes on payments made between Wednesdays and Fridays are to be made by the following Wednesday. For deposits done on a Saturday, Sunday, Monday, or Tuesday, employment tax deposits must be made by the following Friday.

Beginning with the due date of the employment tax deposit, the penalty is calculated by the number of calendar days the deposit is late.

Between one and five calendar days, there’s a 2 percent penalty on the unpaid deposit. Between six and 15 calendar days, the penalty increases to 5 percent of the unpaid deposit. If it’s late by more than 15 calendar days, the penalty is 10 percent of the unpaid deposit amount.

If more than 10 calendar days have passed after the first written contact from the IRS notifying the filer of failing to deposit their employment taxes or the day the business receives correspondence requiring immediate payment of employment taxes, the penalty increases to 15 percent of the unpaid deposit. It’s also subject to interest on the penalty.

While these are only two ways businesses can incur payroll-related tax penalties, it’s illustrative of how businesses need to keep on top of their federal (and state) obligations.

Sources

https://www.irs.gov/payments/failure-to-deposit-penalty

https://www.irs.gov/payments

https://www.irs.gov/businesses/small-businesses-self-employed/employment-tax-due-dates

https://www.irs.gov/faqs/estimated-tax/individuals/individuals-2

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-corporations-penalty

https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-third-quarter-of-2023

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-corporations-penalty

https://www.nfib.com/content/partner-program/money/are-you-guilty-of-committing-these-5-payroll-mistakes/  

The Ins and Outs of a Reverse Stock Split

4 min read

Reverse Stock Split, What are Reverse Stock SplitWhen a company decides to conduct a reverse stock split, also referred to as a stock consolidation, the number of shares available to investors is reduced.

In a normal (forward) stock split, a company increases its number of outstanding shares without changing their market value. For example, one share of stock valued at $200 may split into two shares, with the shares then valued at $100 each. So, with a shareholder who holds 10 shares for a total of value of $2,000, a traditional one-to-two (1:2) stock split would change his holding to 20 shares – still valued at $2,000. The difference is that the value of each stock would change from $200 to $100.

The opposite occurs with a reverse stock split; a company decreases its number of outstanding shares without changing their market value. Using the same example, a shareholder who owns 10 shares at $200 would hold only five shares after a 2:1 reverse stock split. However, the worth of each share would double in value to $400.

Why Conduct a Reverse Stock Split?

A reverse stock split often indicates that a company is in financial distress, its stock price is on a downward spiral and it wants to reverse that momentum by giving investors a higher share value. This makes individual stocks more valuable to sell. In many cases, the company’s sinking stock price puts it in danger of losing its place on a stock exchange, which would then limit the pool of possible buyers – particularly fund managers and stock brokers. In most cases, companies that conduct a reverse stock split are small, lightly traded companies as well as some exchange-traded funds.

Impact on Small, Retail Investors

Smaller investors are more likely to be negatively impacted by a reverse stock split because they are more likely to own fewer numbers or fractional shares. For example, if a company conducts a 20:1 reverse stock split, investors receive only one share for every 20 they hold. However, if a shareholder owns less than 20 shares, he will simply be paid cash for his shares and his position would dissolve. This also holds true if the investor owns an uneven multiple of the reverse split. In the scenario of a 20:1 stock split, if the investor held 110 shares, he would receive five new post-split shares and be paid in cash for the remaining 10 shares.

How Do Stocks Perform After a Reverse Split?

While the total value of a shareholder’s holding would not change after a reverse stock split, history has shown that share prices after a reverse split tend to stagnate or continue to drop. After all, the company was likely already in financial distress, and this action serves to increase the price of a failing stock. It does not usually entice new investors or motivate current ones to invest more money in the company.

Potential Advantages and Disadvantages of Reverse Splits

To remain listed on a major stock exchange such as the NYSE or Nasdaq, a company’s share price must trade at $5 or higher. The advantage of a reverse stock split is that it increases the value of shares, which may allow them to remain listed on a major exchange. This offers value to both the investor and the company, as exchanges attract far more investors whose interest can help drive up the stock price.

Another scenario in which a reverse stock split is advantageous is if a corporation is planning to spin off a portion of its business into a separate company. By conducting a reverse stock split before the spinoff, shares of the new company are assured of having a high enough stock price to be listed on a major stock exchange.

However, a reverse stock split is most often a signal that the company is failing, is worried about a pervasive decline in its stock price, and is seeking a way to artificially increase investor share prices.