MCB Accounting Blog

Workers are getting a little more help from their employers when it comes to retirement savings, but many are still falling short in building their retirement nest eggs.

Many companies suspended or slashed their matching of an employees' 401(k) contributions during the recession, but most have now restored them. The percentage of companies making matches increased from 91 percent in 2010 to 95.5 percent in 2011.

However, the average company contribution to an employee's retirement account is lower than it was before the financial crisis. The average company contributed 4.1 percent of pay in 2011, up from 3.7 percent in 2010. This is less than the peak of 4.7 percent seen in 2006.

Employers are throwing in a perk that often doesn't cost them anything: 401(k) advice. Many 401(k) plans now allow employees to talk with administrator representatives to discuss their needs and get help comparing investment options available to them. Those workers who take advantage of this advice tend to save more and be more diversified than those who don't use the service.

Despite the return of matching contributions, financial advisers and other experts say that workers still aren't saving enough. A study by T. Rowe Price reported that two thirds of investors surveyed contributed 10 percent or less of their salaries to their 401(k) plans. Nearly one third indicated they were unsure of how much they were saving.

Financial planners recommend that workers save 15 to 20 percent of their income for retirement. Workers who don't start saving until their 40s or 50s should save more. These lower saving rates mean many workers will have to delay retirement, take on part-time work in retirement, or spend significantly less during retirement.

Some advisers see the decline in company matching amounts as partly to blame. Many workers see little reason to contribute beyond what their employer matches. Some companies are trying to change this by matching a higher portion of a worker's salary, but lowering the amount matched per dollar. For example, a company could go from matching up to 5 percent of pay dollar for dollar to matching up to 10 percent of pay, but only contributing 50 cents for each dollar the employee puts in. This would increase the total contribution to 15 percent of pay from 10 percent for workers who max out their employer contribution, but the total amount contributed by the company would stay the same.

Other companies are trying to boost savings by making the process automatic. The number of plans with an automatic enrollment feature increased from 23.6 percent in 2006 to 45.9 percent in 2011. And 55.2 percent of plans had a component for automatically increasing the amount contributed by the employee, up from 31.2 percent in 2006. Such step-up programs, which typically increase the percentage an employee contributes by one or two percentage points each year, can be a way for an employee to work up to the target 15 to 20 percent savings rate.

Click here to view the complete MoneyWatch.com article.

Contact an MCB Tax Adviser at 703.218.3600 and start building a relationship with a CPA firm that strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

Matthews, Carter & Boyce (MCB), a boutique full-service accounting firm serving the Washington D.C. area since 1947, announces that three of its Principals have been named as SuperCPAs by Virginia  Business  magazine.

Virginia Business partners with the Virginia Society of Certified Public Accountants to offer this special program to highlight Virginia's top CPAs for their important contributions to their respected profession and the prosperity of the Commonwealth of Virginia. Virginia Business polled thousands of Virginia CPAs for nominations of fellow professionals that they consider the very best in 12 practice categories.

Robert "Bob" Baldassari, a recognized tax expert, was selected in the Corporate Taxation category. His clients include closely held businesses, medical practices and high-net worth individuals. Bob's expertise includes accounting and financial management, tax planning and compliance services, practice management consulting and development, personal financial and estate planning, internal accounting controls and office automation consulting.

Kathleen "Kathy" Flaherty was recognized in the Assurance Services (Auditing) category. She has extensive experience in providing auditing, accounting and consulting services to the following industries: not-for-profit entities, government audits in compliance with OMB Circular A-133, HUD properties, state agencies, residential real estate, commercial real estate and construction, governmental entities, nonsupervised mortgage lenders, manufacturers, wholesalers and retailers.

Jude Covas, recognized in the Assurance Services (Auditing) category, is Managing Principal of MCB. His industry specialties include government contractors, manufacturing companies, wholesale distributors, commercial real estate and closely held businesses. Jude provides audit & assurance services, accounting, corporate, partnership and individual taxation and business advisory services.

Bob, Jude and Kathy will be featured along with the other winners in the November issue of Virginia Business.

The MCB Difference is our long-term relationships with clients.  Our priority is to enhance the growth and success of each of our clients in every industry we serve.  We RESPECT our clients and work hard to earn your CONFIDENCE as a TRUSTED business advisor.

There is legislation pending in Congress that, if enacted, would be a boon to small business and help jumpstart the economy.  Proposed changes include extending Section 179 bonus depreciation to 100 percent and increasing it from its current $139,000 to the 2011 amount of $500,000.  Also recommended were restoring the self-employed health insurance deduction to cover employment taxes and shortening the holding period for built-in gains to ease access to capital for S corporations.

Also possible is passage of the bipartisan Startup Act 2.0, which would provide startups the tools to grow and create jobs.  Provisions include a refundable research and development tax credit for young startups less than 5 years old and with less than $5 million in annual receipts. This provision is designed to allow startups to offset payroll tax liability.  An additional provision would make permanent the exemption of capital gains taxes on the sale of startup stock held for at least five years so that investors could provide financial stability to young companies.

The Small Business Taxpayer Bill of Rights Act would lower compliance burdens for taxpayers, strengthen taxpayer protections, compensate taxpayers for IRS abuses and improve taxpayer access to the Tax Court.

Although legislation could be addressed in the months ahead, it is most likely that no action will be taken before the November elections.

Click here to view the complete Accounting Today article.

Closely held businesses are the backbone of MCB's success.   We understand the pressures you face today.  We work together with our clients as accounting, business, and tax advisers to navigate the current economic difficulties.  Contact an MCB adviser for your tax and accounting needs at info@mcb-cpa.com or 703.218.3600 to start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

A first-of-a-kind risk management study suggests that companies still have lessons to learn about minimizing damage from unforeseen events. Risks inherent to a company's business model were responsible for almost half (49%) of earnings below analyst expectations in a Standard & Poor's 500 index study of the first three months of 2012.

The key to better managing performance-driven risks and preventing earnings surprises that disappoint investors is being able to link cause and effect. Knowing why earnings fall short of expectations also makes it easier to seize growth opportunities.

The study found the following:

• About 18% of earnings surprises were weather related.
• About 33% of earnings surprises were primarily caused by operational risks such as equipment breakdown or fraud.  About 3% of these operational risks were information technology related.
• About 11% of earnings surprises were the result of one-time events such as acquisitions and legal costs.
• Market risks such as hedging errors accounted for 2.5% of earnings surprises.
• Credit risks such as customers failing to repay debts or events related to bank loans made up 3% of the earnings surprises.

Click here for the complete CGMA Magazine article.

Closely held businesses are the backbone of MCB's success.   We understand the pressures you face today.  We work together with our clients as accounting, business, and tax advisers to navigate the current economic difficulties.  Contact an MCB adviser for your tax and accounting needs at info@mcb-cpa.com or 703.218.3600 to start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

Here are seven tax-free benefits that keep cash in employees' pockets and may provide attractive deductibles for employers.

1. Frequent flyer miles.  Employees who fly on business can earn miles tax-free when they pay with a personal credit card for reimbursed corporate travel. When used as a rebate, the IRS permits employees to exclude frequent flyer benefits from taxable compensation.
2. Non-cash awards and prizes.  The IRS allows employees to exclude three types of non-cash awards from employers.  Certain employee achievement awards that are a part of a "meaningful presentation" are tax-free as long as the gift does not appear to be disguised wages. Certain prizes or awards transferred to charities are tax-exempt, as are "de minimis awards and prizes," which are not cash or cash equivalent, of nominal value and provided infrequently.
3. Cell phones. Tax-free treatment of cell phones is applicable in cases where employers provide cell phones to employees or where employers reimburse their employees for the business use of personal cell phones without burdensome recordkeeping requirements.
4. Meals and lodging on employer premises.  Meals are excludable from employee wages if they are provided on an employer's business premises and for the employer's convenience. Lodging also can be tax-free for employees if it is provided at the worksite, for the employer's convenience and is a condition of employment.
5. Commuter benefits and free parking. Employers can contribute $125 per month tax-free for public transportation, $240 per month for qualified parking or $365 per month for both public transportation and qualified parking.
6. Dependent care assistance.  Generally, an employee can exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year.  The exclusion cannot be more than the smaller of the earned income of either the employee or the employee's spouse.
7. Qualified educational assistance. Tuition or educational expenses paid by an employer for an employee under an educational assistance plan are excludable from employee wages if certain IRS requirements are met. An employee cannot receive more than $5,250 per calendar year from his or her employer.

Click here to view the complete AccountingToday.com article.

Contact an MCB Tax Adviser at 703.218.3600 and start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

Believe it or not, the federal Department of Labor (DOL) does not require that an investigator announce the scheduling of a wage & hour investigation. An investigator has sufficient latitude to initiate unannounced wage & hour investigations to directly observe normal business operations and obtain information.

The following are some strategies to prevent such an investigation:

1. Avoid unfair compensation practices.  Compensate employees consistently. If pay practices are consistent, complaints are less likely to arise, and you will be in a better position if DOL does launch a wage & hour investigation.
2. Understand the regulations. Understand the Fair Labor Standards Act (FLSA). It is the law, and failing to follow it could subject you to litigation or a DOL audit.
3. Train managers thoroughly. Managers should understand the FLSA and follow it.
4. Analyze both state and federal law.  Determine whether your state's wage & hour laws conflict with the federal law, then follow the law that is the most beneficial to the employee.
5. Pay past overtime due. If it is determined that an employee is wrongly classified as exempt, you should determine how many overtime hours the employee has worked in the past two years , then pay him or her the overtime due.  You should have the employee sign a release freeing you from further liability.
6. Follow child labor laws.  You must determine a minor's age and set his or her job duties and work schedules accordingly.  You must also file the minor's age certificate and keep it as long as the minor is employed.
7. Pay interns, unless they meet a strict test. Internship in the for-profit, private sector will most often be viewed as employment by the DOL, unless a strict test is met. Interns who qualify as employees rather than trainees must be paid at least the minimum wage and overtime for hours worked over 40 in a workweek.
8. Respond to internal complaints quickly.  If an employee files a wage & hour complaint internally, you should take it seriously.  You may be able to prevent an investigation by addressing an employee's initial internal complaint.
9. Seek compliance assistance from DOL.  Compliance tools and information are available on DOL's website.
10. Conduct a self-audit. Hire an attorney to audit your company or do it yourself before DOL initiates an investigation.  An audit can help ensure compliance. Review job descriptions to make sure they are accurate and reflect the jobs performed and the skills needed. Review actual job duties to ensure that they still fall within the administrative, executive, professional, computer, or outside sales exemptions. Make sure overtime for nonexempt employees has been properly calculated. Make sure the required posters have been hung in the appropriate places.

In addition, be sure that records are complete, accurate and unambiguous.  Pay records for every employee for each pay period should be maintained for three years.

If violations are found, you may owe back pay, face penalties and be instructed by DOL to make changes in your employment practices.

Click here to view the complete HRnewsWatch.com article.

MCB has over 35 years of hospitality accounting experience providing audit, tax, accounting, due diligence and employee benefit plan audit services.  Contact an MCB Adviser today at info@mcb-cpa.com or call 703.218.3600 to discuss your hotel accounting and tax needs or to receive a proposal for your next financial statement audit.

House and Senate negotiators finalized a deal to extend the payroll tax cut, emergency unemployment benefits and the Medicare reimbursement rate for doctors.  Although a few minor details remain to be worked out, a majority of conferees have endorsed the package.  It looked possible at one point that the plan would be derailed over a provision that would have included cuts to federal pensions.  In the end, a compromise was reached that mandates that new federal employees contribute more to their pension funds than workers already on the federal payroll.

The deal extends the payroll tax cut through 2012, with its $100 billion cost added to the deficit. The agreement also reforms the unemployment insurance program, reducing the maximum number of weeks an unemployed worker could receive benefits from 99 to 73 by the end of the year.  Those benefits are to be funded by roughly $15 billion in revenue from the sale of spectrum rights.  The third part of the deal averts a 27 percent cut in the reimbursement rate for doctors under Medicare, paid for with savings from the 2010 health care overhaul, Medicaid and Medicare.

Contact an MCB Tax Adviser at 703.218.3600 and start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have released a revised proposal that would create a single revenue recognition standard for U.S. generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS). The standard is designed to streamline accounting for revenue across industries and correct inconsistencies in existing standards and practices. The new standard would also require businesses to disclose more information about revenue. The proposal, unlike the previous exposure draft, contains a detailed section of implementation guidance.

The revisions in Proposed Accounting Standards Update (Revised), Revenue Recognition (Topic 605)--Revenue from Contracts with Customers: Revision of Exposure Draft Issued June 24, 2010, appear to address many concerns contained in comment letters and other communications. It is likely that there will not be significant changes between this draft and the final standard.

The core principle of the revised proposed standard remains the same as that of the 2010 exposure draft: An entity would recognize revenue from contracts with customers when it transfers promised goods or services to the customer.  Beyond eliminating some industry-specific rules, current U.S. GAAP will not change much under the proposed standard.

The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The proposed model would apply to all contracts to provide goods and services to customers, except leases, insurance contracts and financial instruments.

Items contained in the standard include the following: (1) guidance on how to determine when a good or service is transferred over time; (2) simplified proposals on warranties; (3) simplified guidelines for how an entity would determine a transaction price; (4) modifications to the scope of the onerous test to apply to long-term services;(5) a practical expedient that permits an entity to recognize as an expense cost of obtaining a contract if it is for one year or less; and (6) an exemption from some disclosures for nonpublic entities that apply U.S. GAAP.

For more details on the proposal, including a summary of changes from the previous exposure draft  and the identification of a five-step process for applying the model, click here for the complete Journal of Accountancy article. We will keep you posted on the status of this standard as it has not yet been enacted.

Contact an Quality Control Leader, Kathy Flaherty, for your tax and accounting needs at 703.218.3600 or at info@mcb-cpa.com.