How Many Hours in Your Workweek?

August 4th, 2015


© Iqoncept | Dreamstime.com - Work Clock Word Time To Get Working On Job Career Photo Americans are hard workers, according to one article, with employees averaging 34.4 hours per week. This average includes part-timers.

When considering only full-time employees, the average is 47 hours per week. In comparison, those in the Netherlands average only 26.6 hours per week. What’s more, U.S. workers have less vacation time — about 15 days off, compared with 28 days off in many European countries.

But it seems that there’s no pleasing some workers when it comes to hours. Some want more hours, some want fewer. Examples:

  • Employees at some companies want more hours.
  • Some part-timers want to be full time. There are 6.6 million part-timers today, many of whom would choose to have full-time jobs.
  • Some Seattle workers benefiting from the higher minimum wage of $15 per hour asked that their hours be reduced so that their income won’t cause them to lose government benefits.

What does this mean for employers (especially small business owners)?  You have to do what you have to do (what works best for your company).

Factors in setting workers hours for some businesses include increased minimum wage rates and exposure to the employer obligation under the Affordable Care Act.

Of course, whatever hours you set for employees, as the business owner, you’re likely to work considerably more.



Small Businesses as Government Cops

July 30th, 2015


© Andreypopov | Dreamstime.com - Businesswoman Scrutinizing Bills With Magnifying Glass PhotoWe’ve already seen private citizens standing guard in front of military recruiting stations in the wake of the Chattanooga attack on July 16 because the government hasn’t agreed to provide additional security for these facilities. This is a voluntary action on the part of concerned citizens.

Now, however, the Treasury is making some small business owners their cops because it can’t figure out how not to issue refund checks to identity thieves. Here’s the story so far:

You probably heard that the IRS had been hacked through its “Get Transcript” program, exposing the personal information of 100,000 taxpayers. This made news a couple of months ago. The hacking raised concerns about the potential for bogus refund claims (as if there weren’t already bogus refund claims).

As one way to stem this fraudulent tide, the Treasury now requires check-cashing services in Miami-Dade and Broward counties, Florida (places with numerous identity thefts), to take certain steps when cashing a refund check over $1,000:

  • Obtain a photocopy of the customer’s identification
  • Take a digital photo of the customer at the time the check is cashed
  • Find out the customer’s phone number
  • Get the customer’s thumbprint (this is Florida law)

Presumably the Treasury intends to use the information to go after these fraudsters, if they can find them. But in the meantime, it means that these check-cashing companies, which are primarily small businesses, have additional tasks to do in conducting business; they can’t charge for this additional work. Should this program prove successful, the Treasury undoubtedly will roll it out to other parts of the country where incidents of identity theft are high.

This isn’t the first instance of the government imposing enforcement duties on businesses. There is a long-standing requirement that businesses receiving payment in cash of more than $10,000 must report it to the IRS. The government suspects that drug dealers and money launderers use cash, and want this information to help identify these people.

So the government needs our help (we, the small businesses).

What other burdens will the government impose on us?



Any Chance of Regulatory Relief?

July 28th, 2015


© Beawolf78 | Dreamstime.com - Folders Stack Photo

We all know the burden that government-mandated paperwork and red tape puts on small businesses. (If you don’t, just check out the 10,000 Commandments; Annual Snapshot of the Federal Regulatory State.)

Some proposals in Congress could ameliorate this regulatory burden.

The Small Business Paperwork Relief Act of 2015 (S. 86) would suspend finds for first-time paperwork violations. The measure would apply to “small business concerns,” which are firms meeting the definition under the Small Business Act. The Act provides that  “a small-business concern [is a business], including but not limited to enterprises that are engaged in the business of production of food and fiber, ranching and raising of livestock, agriculture, and all other farming and agricultural related industries, shall be deemed to be one which is independently owned and operated …” and that has annual gross receipts of no more than $750,000. The relief could be extended to other small businesses.

The Small Business Regulatory Flexibility Improvements Act of 2015 (S.426) and (H.R. 527) would require federal agencies to modify their rule-making procedures. In effect, the bill would impose some favorable changes to Regulatory Flexibility Act of 1980 (RFA) and the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), previous legislation that was supposed to provide regulatory relief to small businesses. The measure passed the House on February 5, 2015, and is awaiting action in the Senate.

The Small Business Tax Compliance Relief Act of 2015 would make some changes to the administration of tax laws. According to the NFIB, which supports the measure, “Small businesses annually spend between 1.7 billion and 1.8 billion hours on tax compliance and $15 billion to $16 billion on compliance costs.”

On July 22nd, the Senate Small Business Committee held a hearing on solutions to relieve the tax burdens for America’s small businesses. Witnesses include small business owners, the tax counsel of the NFIB, a CPA, and a law professor.

The AICPA, which has more than 400,000 members, supports the bill.

The Small Business Regulatory Sunset Act of 2015 (S. 846) would require federal agencies to review regulations periodically (at least every 9 years) and to publish rules and compliance guidelines on the agencies’ websites.

What to do?

Small businesses lack the well-funded lobbyists to push their agenda in Congress. It’s up to small business owners to communicate with their representatives and advocate for needed change.

To monitor small business-related legislative developments, go to GovTrack.



Hiring Practices: Does Age Really Matter?

July 23rd, 2015


http://www.dreamstime.com/royalty-free-stock-images-business-team-large-group-people-standing-line-image50538709The law prohibits job discrimination based on age, but we may harbor some preferences that influence our actions.

A recent U.S.A. Today article pointed to a study on the cognitive abilities of those at an executive level ranging in age from 20 to 74. Interestingly, the study indicated that seniors possessed “several key cognitive skills in greater abundance than their younger counterparts, including verbal ability and experience-based knowledge.”  As a senior, I’m delighted with the findings.

As a business owner, what does it mean?

While legal bars to age discrimination are clear, personal biases may affect hiring and promotion decisions (perhaps on a subconscious level).

In my opinion, assumptions about age or youth are bad for business. They can lead to poor decisions.  For example, an assumption that an older person will be unable to perform as well as a younger one has two flaws:

  1. it may be wrong, and
  2. it may keep you from hiring a capable individual.

Similarly, a belief that a younger person is incapable of managing senior staffers is equally wrong … for the right person. It comes down to the particular individual you’re considering for a position.

Does this person have what it takes regardless of age?

Don’t assume based on age!



Writing Off Certain Costs the Easy Way

July 21st, 2015


© Kitzcorner | Dreamstime.com - Desk Office Business Financial Accounting Calculate, Graph Analy PhotoBusiness owners know that just about every expense translates into a tax write-off. But the when and how for a particular expense can be confusing.

An immediate deduction is allowed for the cost of materials and supplies, but what about items that don’t fit in this category? Usually, the cost of any item with a life of more than one year must be capitalized and recovered through depreciation (or first-year expensing if applicable).

However, under regulations issued in 2013, small businesses may rely on some simplified options to write off their costs. Unfortunately, the rules for these simplified options aren’t so simple.

The IRS recently released a Fact Sheet on the tangible property regulations to help, but it only goes so far. I’ll try to simplify where I can.

De minimis safe harbor election

You can elect to apply a de minimis safe harbor to amounts paid to acquire or produce tangible property to the extent such amounts are deducted by you for financial accounting purposes or in keeping your books and records.

If you have an applicable financial statement (AFS), such as an SEC filing (which no small business that I know of has), you may use this safe harbor to deduct amounts paid for tangible property up to $5,000 per invoice or item. If, as is the case for small businesses, you don’t have an AFS, you may use the safe harbor to deduct amounts up to $500 per item or invoice

An annual election is not a change in method of accounting, so no special IRS form is required. However, you must still make the election by attaching a statement titled “Section 1.263(a)-1(f) de minimis safe harbor election” to the timely filed original federal tax return including extensions for the taxable year in which the de minimis amounts are paid.

Materials and supplies

Basic rules for deducting materials and supplies, which are tangible, non-inventory property used and consumed in your operations, are unchanged. However, the regulations provide some additional write-off options.

If you want to use these options, you may need to file for a change in accounting method.

Get help

As I said at the outset, the rules are very complicated and this isn’t a do-it-yourself activity.

You can find some clarity on your own in the IRS’s FAQs on these regulations, including the simplified options. Then discuss your business activities with your CPA to determine whether any of these options should be used and what steps you need to take to do so.


Concierge Services for Your Staff Saves You Money?

July 16th, 2015


© Carballo | Dreamstime.com - Businesswoman PhotoWe all have chores and errands in our personal lives. Thinking about them, arranging them, and doing them often take time away from our business day.

It’s well known that many large tech companies, such as Google and Facebook, help employees handle their personal chores (oil changes, dry cleaning, house cleaning). This helps employees with their work-life balance, and enables them to concentrate more on work (fewer distractions). And it’s a feature that attracts talented Millennials as employees. According to a survey last year, only 3% of all businesses — large and small — offer concierge services.

Small businesses can provide help to employees without breaking their budget. The usual way is for the company to pay for the concierge services (a business that makes the arrangements for employees’ needs) and for the employees to pay for the cost of the services they use. For example, a concierge service may arrange to pick up and drop off an employee’s car for an oil change; the employee pays for the oil change. However, companies can pick up the full tab (something a small business likely can’t afford).

It’s estimated that large companies offering concierge services pay $3 to $8 per month per employee. Whatever help you can offer is a valued employee benefit and makes you appear more like a large company than a small business.

Small cash payments

If you don’t engage an outside concierge service provider, you can help employees find their own concierge service provider (it may be called a “residential concierge”) by increasing their pay by a certain amount (e.g., $10 per week). (It’s unlikely that an individual paying concierge services will command the same low price as a major corporation.) The additional pay for the concierge services can, for example, be provided on a debit card that is refreshed monthly.

From a tax perspective, the added pay is taxable compensation. It’s reported on the employee’s W-2 and is subject to payroll taxes.

Referrals

It’s time consuming for employees to track down information about the personal services they need and it’s no secret that many spend work time online or on the phone searching for this information. As a no-cost (to your employees) benefit, prepare a list of resources that employees can tap into if and when needed.

While it may take some time to create (and routinely monitor for changes, additions, etc.), the investment can pay off in employee loyalty; it will reduce time spent at work by employees searching for this information.

Consider finding listings for:

  • Daycare options in the area
  • Housecleaning services
  • In-home care for parents (e.g., Visiting Nurses)
  • Pet care, including dog walking

Don’t have time to collect the information? Ask your staff to collaborate by sharing their favorite services and gather the information in some form that’s accessible to your staff.

Find concierge services

If you decide to provide a service for your staff, look locally. However, here are some big concierge services to check out:

Final thought

While it’s not the usual profitability strategy, helping employees with their work-life balance will surely result in greater employee loyalty and increased productivity. In my view this translates into a better bottom line.


Higher Penalties for IRS Information Return Failures

July 14th, 2015


© Mrchan | Dreamstime.com - Tax Form Financial Concept Photo“We can lick gravity, but sometimes the paperwork is overwhelming,” said Wernher von Braun (father of the U.S. space program). That’s how small business owners feel; they innovate and make things and service customers. But their paperwork is time consuming and, if wrong, subject to penalty. And the penalty related to tax paperwork is going up.

The recent Trade Act (the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (P.L. 114-26) and the Trade Preferences Extension Act of 2015 (P.L. 114-27)), which was signed into law on June 29, 2015, raised the penalties for late or incorrect information returns. These information returns apply to such forms as W-2s, 1099s, and the new form (Form 1095-B) related to health insurance coverage that’s mandated for 2016 (reporting 2015 minimum essential coverage).

Penalties for 2015 failures are high. The penalties in 2016 and beyond are going to be higher. Here are the highlights:

  • The penalty for a failure to file correct information returns and to provide statements to payees (e.g., employees) increases from $100 (the current penalty) to $250 (the penalty starting in 2016). The maximum penalty for all failures during a calendar year is capped at $1.5 million currently; this goes up to $3 million in 2016.
  • If the failure is corrected within 30 days of the required due date, the penalty is only $30 now, but will be $50 starting next year. The maximum penalty for all failures during a calendar year is capped at $250,000 currently; this will double to $500,000 in 2016.

There is a small business exception. Businesses with average annual gross receipts for the three prior years of $5 million or less are subject to lower penalties, but these limits are also increasing:

  • The maximum penalty that is $1.5 million ($3 million in 2016) for large businesses but for small businesses is $500,000 now will be $1 million in 2016.
  • The maximum penalty for failure to correct that is $250,000 ($500,000 in 2016) for large businesses but $75,000 for small businesses will become $175,000 in 2016.

Escaping the penalty. Do the best you can, work with knowledgeable people (e.g., use outside payroll providers to handle W-2s and other paperwork for employees), and stay abreast of new paperwork requirements. But even if you do all this, you may still mess up. Fortunately, there’s no penalty for minor errors or failures or if you can show that any failure is due to reasonable cause.

You can also request relief under the IRS’s first-time abatement (FTA) penalty waiver program. To qualify, you must have done things right in the past three years and are otherwise in compliance with all filings and payment requirements.


Reimbursing Employees for their Health Insurance May Trigger Penalties

July 9th, 2015


© <a href="http://www.dreamstime.com/zimmytws_info#res2965056">Zimmytws</a> | <a href="http://www.dreamstime.com/#res2965056">Dreamstime.com</a> - <a href="http://www.dreamstime.com/stock-photo-aca-cash-affordable-care-act-insurance-papers-image48030463#res2965056">ACA Cash Photo</a>Small employers who are not required by the Affordable Care Act (ACA) to provide health coverage to their employees nonetheless seek to do so for important reasons: they want their staff to be healthy, they need to be competitive with larger firms when it comes to talent.

For years, one of the ways small business owners have been able to do this is to reimburse employees for their personal health insurance premiums. Under ACA, many of these employees can now obtain subsidized coverage by purchasing a policy through a government exchange and claiming the premium tax credit. Reimbursement arrangements may no longer be possible.

IRS penalty

The IRS said that a reimbursement arrangement is a health plan that doesn’t meet ACA requirements. As such, it results in a $100 per-employee, per-day penalty if the employer reimburses more than one employee. Last February,  the IRS provided temporary relief, saying it would not impose the penalty for reimbursements prior to July 1, 2015. That deadline has now arrived, and employers that continue reimbursement arrangements potentially face penalties. NFIB estimates that 14% of small employers are in this category.

What to do?

Increase salary

Employers are not barred from increasing workers’ paychecks so they can afford to buy health coverage on their own. The only warning: employers cannot require employees to use raises to pay for health coverage. Care must be used when small employers exempt from the employer mandate under ACA drop coverage and increase pay to avoid the link that could trigger the penalty. (NFIB reports that 6% of small businesses dropped coverage in 2013 and 2014.)

Support legislation

The Small Business Healthcare Relief Act (H.R. 2911 and S. 1697) would effectively allow small businesses to make reimbursements. More specifically, the bill would permit small businesses to use pre-tax dollars to assist employees in the purchase of health insurance through the individual market.

Bottom line

Tread carefully in your business practices when it comes to health coverage because good intentions may trigger severe tax penalties. And support legislation that’s favorable to small businesses.


Overtime Rules: Get Ready for a Big Change

July 7th, 2015


© <a href="http://www.dreamstime.com/rido_info#res2965056">Rido</a> | <a href="http://www.dreamstime.com/#res2965056">Dreamstime.com</a> - <a href="http://www.dreamstime.com/stock-photo-man-working-till-late-tired-businessman-studying-office-image46379646#res2965056">Man Working Till Late Photo</a>Under the federal Fair Labor Standards Act (FLSA), employees who work more than 40 hours in a workweek and who are not exempt from overtime pay rules must receive overtime pay at a rate of not less than one and one-half times the regular rate (“time and a half”). There is no overtime pay required for work on Saturdays, Sundays, or holidays unless overtime is worked on these days.

How to figure overtime

Overtime is based on a workweek, which is a fixed and regularly recurring period of 168 hours (seven consecutive 24-hour periods). The workweek does not have to mirror the calendar week; it can begin on any day and at any hour of the day. The DOL says that averaging hours over two or more weeks is not permitted.

An employer can’t give comp time (time off at a later time) to avoid the overtime pay requirement if the comp time matches the overtime. This effectively denies the additional pay that a worker would receive for the overtime. However, if the comp time matches what would equate to overtime, then it is permissible.

Reminder: The U.S. Supreme Court ruled unanimously last year that a company doesn’t have to count the time that workers wait in line to leave the premises as work time. That case involved Amazon workers who had to go through security checkpoints when leaving the warehouse to make sure they weren’t carrying stolen goods.

What’s ahead

Overtime pay rules don’t apply to “exempt employees.” These are workers earning a salary over a set amount. Currently, this amount is $23,660 ($455 per week). This salary threshold was set in 2004.

Under a proposed rule posted on June 30, 2015, the threshold would increase to $50,440 ($970 per week) starting in 2016. It would also create a mechanism for automatically updating the salary level to keep pace with inflation. The change proposed by the DOL in response to a Presidential directive issued last year is expected to affect about five million workers.

You can submit comments on the proposed rule by following the instructions here. The deadline for comments is July 30 (30 days from the issuance of the proposed rule).

Impact of the proposed change

As in the case of proposed increases in the federal minimum wage, there are differences of opinion on what the impact of the proposed change in the overtime pay rule would be for small businesses. The National Retail Federation expressed opposition to the rule, suggesting it would lead retailers to use more part-time workers instead of giving overtime to its full-time staffers. The National Restaurant Association, after the President’s directive but before the issuance of the proposed change, expressed concern that the change could hurt rather than help workers. It’s certain that debate will continue.

What is also certain is the need for small businesses to factor this change into their budgets and operating plans. Undoubtedly, the change in overtime pay rules is going to cost small businesses more.

Conclusion

DOL Fact Sheets provide answers to various questions on overtime rules. If you have a question that you can’t find an answer to, check with an employment law attorney.


Entrepreneurs Who Made the Revolution

July 2nd, 2015


© <a href="http://www.dreamstime.com/larryhw_info#res2965056">Larryhw</a> | <a href="http://www.dreamstime.com/#res2965056">Dreamstime.com</a> - <a href="http://www.dreamstime.com/royalty-free-stock-images-july-4th-1776-united-states-bill-rights-image36187959#res2965056">July 4th, 1776 - United States Bill Of Rights Photo</a>

It’s been 239 years since a group of men in Philadelphia signed the Declaration of Independence and started a revolution.

Most of these 56 men were small business owners, lawyers, doctors, and farmers, and 13 were plantation owners.

These men risked it all:

“We mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.”

Here’s a list from the National Archives of the signers and their occupations to remind us that our businesses, our jobs, and our lives can be on the line when freedom is at stake.

Signers Occupation
John Adams Lawyer
Samuel Adams Merchant
Josiah Bartlett Physician
Charles Carroll Merchant, plantation owner
Samuel Chase Lawyer
Abraham Clark Lawyer, surveyor
George Clymer Merchant
William Ellery Lawyer, merchant
William Floyd Land speculator
Benjamin Franklin Scientist, printer
Elbridge Gerry Merchant
Button Gwinnett Merchant, plantation owner
Lyman Hall Physician, minister
John Hancock Merchant
Benjamin Harrison Plantation owner, farmer
John Hart Land owner
Joseph Hewes Merchant
Thomas Heyward Jr. Lawyer, plantation owner
William Hooper Lawyer
Stephen Hopkins Merchant
Francis Hopkinson Lawyer, musician
Samuel Huntington Lawyer
Thomas Jefferson Lawyer, plantation owner, scientist
Francis Lightfoot Lee Plantation owner
Richard Henry Lee Plantation owner, merchant
Francis Lewis Merchant
Philip Livingston Merchant
Thomas Lynch Jr. Lawyer
Arthur Middleton Plantation owner
Lewis Morris Plantation owner
Robert Morris Merchant, land surveyor
John Morton Farmer
Thomas Nelson Jr. Merchant, plantation owner
William Paca Lawyer, plantation owner
Robert Treat Paine Lawyer, scientist
John Penn Lawyer
George Read Lawyer
Caesar Rodney Plantation owner, military officer
George Ross Lawyer
Dr. Benjamin Rush Physician
Edward Rutledge Lawyer, plantation owner
Roger Sherman Lawyer
James Smith Lawyer
Richard Stockton Lawyer
Thomas Stone Lawyer
George Taylor Merchant
Matthew Thornton Physician
George Walton Lawyer
John Witherspoon Minister
Oliver Wolcott Lawyer
George Wythe Lawyer

 


Happy 4th to all!