MCB Accounting Blog

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.

Top Republican lawmakers have said that they expect to reach a deal with Democrats to extend the payroll tax cut before it expires at the end of February, but they offered no specifics on how they would pay for it. Republican and Democratic lawmakers have started negotiating a deal to extend unemployment benefits and a tax break for 160 million Americans beyond February.  If they fail to reach agreement, the payroll tax, which funds the Social Security retirement program, will revert to 6.2% from 4.2%, leaving workers with about $900 less in their wallets this year.

Disagreements over how to pay for the tax break hampered lawmakers' efforts to extend it until the end of this year. Democrats had proposed a surtax on millionaires. Republicans had proposed cutting salaries and benefits for federal workers as well as raising premiums on wealthier Medicare recipients.

In the end, lawmakers agreed to increase the fees the government's mortgage backers, Fannie Mae and Freddie Mac charge lenders to guarantee loans.

Click here to view the complete Fiscal Times article.

Contact an MCB Tax Adviser for your tax and accounting needs at 703.218.3600 or at info@mcb-cpa.com.

The IRS and the Treasury Department have published long-awaited temporary regulations that provide guidance to taxpayers on the treatment of expenditures incurred in selling, acquiring, producing and improving tangible assets, including rules on determining whether costs incurred are deductible repairs or capital improvements. The temporary regulations, which provide objective standards and rules intended to simplify compliance with the provisions contained in Sections 162(a) and 263(a) of the Internal Revenue Code, retain many of the provisions of the 2008 proposed regulations, and could have a significant impact on a wide array of industries, including utilities, telecommunications companies, manufacturers, retailers, real estate companies and other businesses.

The temporary regulations affect all taxpayers that acquire, produce or improve tangible property and generally are effective for expenditures made on or after January 1, 2012. They do not affect taxpayers' 2011 returns. Additional guidance is to be published to advise taxpayers how to obtain automatic consent to change to a method of accounting provided in the temporary regulations for taxable years beginning on or after January 1, 2012. The automatic consent requests may be filed with taxpayers' 2012 tax returns.

The temporary regulations clarify and expand the current standards for repairs and improvements and address a broad range of other tangible property acquisition issues, including a definition of materials and supplies and a de minimis capitalization threshold.  Also, the temporary regulations continue to allow a taxpayer to elect to capitalize certain materials and supplies.

The temporary regulations retain the proposed regulation provision that amounts paid for repairs and maintenance of tangible property are deductible if the amounts paid are not otherwise required to be capitalized. In addition, the temporary regulations make minor revisions to the rule that provides that the cost of erecting a building or making a permanent improvement to property leased by the taxpayer is a capital expenditure and is not deductible as a business expense.  They do, however, amend the rules to provide that a lessee or lessor must depreciate or amortize its leasehold improvements under the cost recovery provisions applicable to the improvements, without regard to the term of the lease.  They also remove the rules permitting amortization over the shorter of the estimated useful life or the term of the lease.

The temporary regulations include a general requirement to capitalize acquisition and production costs and a requirement to capitalize amounts paid to defend and perfect title to property.  The temporary regulations clarify how the rules apply to moving and reinstallation costs. They also retain the rule for costs incurred prior to placing equipment into service and clarify certain rules with respect to transaction costs.

The temporary regulations retain the basic framework of the 2008 proposed regulations for determining the unit of property and for determining whether there is an improvement to a unit of property.  They also include the routine maintenance safe harbor and the optional regulatory accounting method.

The temporary regulations eliminate group accounts, classified accounts and composite accounts. Instead, each multiple asset account must include, in most cases, assets that have the same depreciation method, recovery period and convention, and that are placed in service in the same tax year.

The temporary regulations were released as a notice of proposed rulemaking, offering taxpayers the opportunity to comment on the rules.  Written comments are requested by March 26, 2012, and a public hearing on the regulations is scheduled for April 4, 2012.

Click here for further guidance on the temporary regulations.

Contact an MCB Tax Adviser for your tax and accounting needs at 703.218.3600 or at info@mcb-cpa.com.

A number of new regulations affecting business activities including financial instruments, human resources, health care and retirement plans and accounting are set to take effect in 2012.  Included are new Securities and Exchange Commission regulations spawned by the sprawling Dodd-Frank financial law. Rules yet to come include some involving swaps and derivatives, an executive compensation "claw-back" provision and other regulations involving so-called "conflict minerals."  The extent of and deadlines for these forthcoming rules are uncertain.

Employers are bracing for requirements stemming from the 2010 health care overhaul. Several of these provisions go into effect in 2012.  Companies must provide a short summary of their health care benefits to all employees, showing employees' share of the cost in common medical situations. Final rules are pending  on the exact information to be included.

Companies will have to report the value of their health care plans on employees' W-2 forms.  These figures eventually could be used to determine whether companies could be fined for not providing health care of might have to pay the tax on so-called Cadillac health plans.

In addition, companies will have to pay $1 per plan participant to fund an independent research group that will study the effectiveness of medical treatments. 

New rules for employer-sponsored 401(k) retirement plans require companies to disclose in plain English how much plan administrators are charging participants.

Accounting changes involve a new standard on fair-value measurement designed to align U.S. and international practices and new rules on goodwill impairments to streamline the process used to take write-downs on assets that have lost value.

Contact an MCB Adviser for your audit, tax and accounting needs at 703.218.3600 or at info@mcb-cpa.com.