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What You Need to Know About Overtime!

Posted By Kenyatta Turner, LegalShield Independent Associate, Monday, June 26, 2017
WHAT YOU NEED TO KNOW ABOUT OVERTIME

 

If your employees work more than 40 hours per 7-day workweek they may be entitled to overtime pay. New overtime rules were set to take effect late in 2016. These regulations would have expanded the number of employees eligible to receive overtime pay but they are currently tied up in federal court. It is vital that you observe the current regulations to avoid potential fines or litigation. If you have questions about state or federal overtime rules, contact your LegalShield provider law firm.

  • Current Rules - Federal overtime regulations are part of the Fair Labor Standards Act (FLSA). The FLSA entitles employees working more than 40 hours in a workweek to one and one-half times their regular pay rate. If your business has, “an annual gross volume of sales made or business done of $500,000 or more” you are required to pay overtime. All schools, hospitals, medical facilities and public agencies are required to pay overtime. Click here to determine whether FLSA applies to your business.
     
  • State Regulations - Many states set additional rules for overtime pay. California, for example, requires overtime for those who work more than 8 hours in a day and double pay for those who work more than 12 hours in a day. Other states set specific thresholds for businesses that must comply with overtime rules. Arkansas requires employers with more than 4 employees to pay overtime. Click here to view a map highlighting current state overtime laws. It is important to understand both the federal and states regulations where you do business.
     
  • Exempt Employees – There are exemptions for some executive, administrative, computer professionals and other professional service employees.

From the Department of Labor:

A. Currently, to qualify for exemption, a white-collar employee generally must:

  1. be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the "salary basis test");
  2. be paid at least a specific salary threshold, which is $455 per week (the equivalent of $23,660 annually for a full-year employee) in existing regulations (the "salary level test"); and
  3. primarily perform executive, administrative, or professional duties, as provided in the Department's regulations (the "duties test").

Certain employees are not subject to either the salary basis or salary level tests (for example, doctors, teachers, and lawyers).

  • New Rules from 2016 – Overtime exemption thresholds were set to nearly double in December of 2016; however, the new rule is currently tied up in court. There is a great deal of speculation about the fate of the new rule with many expecting a change in direction from the new administration. The U.S. House of Representatives recently passed a bill that would allow certain employers to offer comp time instead of overtime pay. The bill still must pass the Senate but it is yet another sign that changes are coming. It is important for all businesses to follow these changes carefully.  If you have any questions, contact your LegalShield provider law firm or Kenyatta Turner at 602-367-1069 or kenyattaturner@legalshieldassociate.com.

Tags:  Accounting  business owners  business resources  business risk  business services  employees  Employers  Hiring  HR  human resources  labor  legal  legal services  management  small biz  small business  small business owner  startup  tax  wage hour lawsuits  women-owned business 

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The Hot Dog Stand

Posted By George (Clint) Frederick CPA PLLC, George Frederick CPA PLLC, Friday, May 12, 2017

 

Proposed ‘Hot Dog Stand’ Regulations for Spinoffs

Browsing through the April 2017 issue of The Tax Advisor, published by the American Institute of Certified Public Accountants, Tax Division,  IRS ‘Proposed’ regulations that would impact a closely owned company caught my eye.  Two reasons: first because of the terminology, ‘Hot Dog Stand’, and second because I previously advocated a spinoff to a client.   (Reference Sec. 1.355-3, Sec. 355 (b) and Sec. 1.355-2(d).  The treasury Department in conjunction with the IRS issued proposed regulations REG-134016-15. 

By illustration assume shareholders have two active trade businesses, Company A, and the other Company B, a ‘Hot Dog Stand’ with value of $20,000,(must be a New York hot dog stand) and non-business assets (i.e. vacant land, cash, marketable securities) of two million.  The current regulations allow tax free spin-off to Company A. (Assuming certain other conditions do not deny the transaction.)  The proposed regulations would not allow the tax-free spinoff. 

The prospective date of the new regulations is generally after the date they are published.  But they would not apply to spinoffs that were in process, or had a binding agreement in place. 

If you have multiple corporations where a spin-off might be beneficial I suggest at least have a plan and a binding agreement in place. 

 

 

 

 

Tags:  finance  small business  tax 

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HOBBY OR BUSINESS

Posted By George (Clint) Frederick CPA PLLC, George Frederick CPA PLLC, Wednesday, March 15, 2017

HOBBY OR BUSINESS

The March issue of “The Tax Advisor” published by the Tax Division of the American Institute of Certified Public Accountants (AICPA) contained a number of articles on whether an activity was a hobby or a business.  Having raised horses for years we always took a deduction for our horses.  We bred horses, sold the offspring, and although we always had the intent to show a profit, rarely did we profit from our horse breeding business. All it would take was one ‘world beater’ that would put us on the map as world class horse breeders.  Although we thought we were close a few times we were never able to breed that million dollar horse.  So, these cases mentioned in “The Tax Advisor” are of interest, not only to us personally, but also to many other tax payers who may be in the equine or other non-hobby business. 

Background:  Internal Revenue Section 183-2 (b) provides relevant factors on whether an activity is engaged for profit or a hobby. No one factor is controlling but intended to be taken into account in determination of the taxpayer’s intent. These factors are:

1.     Manner in which the taxpayer carries on the activity – i.e. is it business like.

2.     Experience of the taxpayer or his advisors –

3.     Time and effort expended by the taxpayer in carrying on the activity –

4.     Expectation of appreciation in value of the assets used in the activity

5.     Success of taxpayer in carrying on other or dissimilar activities

6.     History of income or losses with respect to the activity –

7.     The amount of occasional profits ,if any, which are earned –

8.     The financial status of the taxpayer – if there is substantial other income it may be a hobby

9.     Elements of personal pleasure or recreation –

The first case cited in “The Tax Advisor’ was a Horse Breeding activity.  That is obviously what perked my interest in the article.  The taxpayer started the horse breeding activity as a hobby, but in later years turned the hobby into a business.  (Not unlike our situation) The tax court disallowed the horse breeding expenses for two years, but on appeal the Seventh Court ruled the start-up expenses were a hobby, but allowed the later years deductions.  The court stated, “…it may have been a fun business, but fun doesn’t convert a business to a hobby.”

Next was a car restoration business.  A close friend of mine does this – and since his wife prepares tax returns I would imagine it is a business for him.  In the case reported the taxpayer was a very successful patent attorney.  His passion was restoring 1955 and 1956 Plymouth cars.  The court ruled that although the activity was unsophisticated, it was businesslike, and allowed his deductions.

The car restoration business was followed by a Hair Braiding business.  The taxpayer never showed a profit.  She leased a space in a shopping mall under a long-term lease for nine years.  The tax court found she had a profit motive and had a loss primarily because of her rental contract. The court found there was no personal pleasure in operating the salon activity, “Although the taxpayer had a nostalgic fondness for hair braiding, sitting in an empty booth in a shopping mall is not as much fun as (say) riding horse.” 

In another case a wealthy taxpayer lost his deductions for his aircraft leasing business since he failed to prove that he was in the business for a profit, even though he had positive cash flow from the activity.  The reason the taxpayer did not avoid “avoidable losses’ and did not abandon unprofitable activities that would indicate a profit motive.  The taxpayer deducted over half-million in losses attributed to the activity while reporting other income of over $2 million.

Something many housewives might be engaged in is selling Amway, Avon, Mary Kay, and other products.  In this situation the taxpayer was engaged in selling Amway products.  The taxpayer had seven years of losses from being a distributor.  For these seven years the taxpayer did not seek any outside business advice and did not show that it was operating as a business.  All she had were receipts for expenditures, and no receipts for sells to customers.  The losses were not allowed. 

Whether your activity is a hobby, or you are in the business for a profit, the best advice you can get is from someone that is in the business, and be sure to check with your CPA when preparing your taxes.  

George C. Frederick CPA CFE

480 502 1617

Tags:  BUSINESS  HOBBY  TAX 

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HOW TO PROTECT YOURSELF AGAINST IDENTITY THEFT

Posted By George (Clint) Frederick CPA PLLC, George Frederick CPA PLLC, Monday, July 18, 2016

 HOW TO PROTECT YOURSELF AGAINST IDENTITY THEFT

The American Institute of Certified Public Accountants (AICCPA) this week suggested a letter to mail to all accounting firm clients with suggestions for protecting you and your family from identity theft.  The issue hits close to home since my daughter was a victim of identity theft last year.  We did not discover the theft until we tried to file her 2014 income tax return.  The Internal Revenue Service (IRS) promptly notified us that she had already filed her tax return.  What to do?  First, call the police department and report the theft.  File form 14039 (Identity Theft Affidavit) with the IRS. If you need specialized assistance, call the IRS at 800-908-4490. The IRS does not accept an electronic return when you are a victim of identity fraud.  Instead, the old-fashioned paper return is required.  My daughter has yet to receive her refund.  Per the IRS it might be as long as six months.   

The Government Accounting Office (GAO) estimates that for 2013 fraudulent tax returns obtained about $5.8 billion and affected 2.4 million US taxpayers.  That number is increasing.  In a recent seminar I attended on identity theft for professional tax practioners the moderator asked the audience how many had clients that were victims of identity theft.  The show of hands was unanimous.  All had clients that were victims.

The AICPA recommended the following safeguards:

·         Secure private personal information.  Safeguard family names and birthdays, account numbers, passwords, and especially Social Security Numbers. Carefully consider all requests to provide your Social Security number before giving it out.  Do not carry your social security card in your purse or wallet. Shred unneeded documents that contain personal information, including junk mail solicitations.

·          Monitor personal information shared on social media.  Cybercriminals methodically gather data from online sources, including commonly used identifiers such as birthdate, maiden name, pet names, hometown, significant other, and children’s information.  Be cautious with who you communicate with online and be selective before accepting electronic invitations from people you do not know or recognize.  Separate what you post publically and from what you post with your personal contacts.  Do not post personal and family data.     

·         Secure your computer.  Use current version of antivirus, malware protection, and firewalls and update these programs frequently.  Consider having this software updated automatically, as well as using separate computers for business and finances than you do for social media and personal matters. Use strong passwords and change them frequently.

·         Beware of impersonators.  Criminals use sophisticated computer technology, such as dialers and automated questions, to contact thousands of targets daily.  Do not provide personal information to callers you do not know.   Watch out if a caller requests you verify personal information. Ask questions; their telephone number, name of their supervisor, email address, mailing address, their website.  The IRS never initiates contact by telephone.  They contact you using USPS. 

·         Unsolicited emails and phishing swindles. Do not open attachments or electronic links unless you know the sender.  Internet sites should they are encrypted.  Always be aware of entering sensitive data.  Forward emails received from IRS impersonators to phishing@irs.gov  The IRS never initiates contact by email, text message, or social media channels. 

·         Monitor your personal information.  Review your bank and credit card statements often.

·         Electronic transmission of financial information.  Do not send sensitive tax or personal information via unsecured email, even information transmitted to CPAs, bankers, and/or financial advisors.  A secure portal, encrypted email or physical mailing of sensitive information is necessary. 

·         Order your free annual credit report.  Call 877-322-8228 or go to www.annualcreditreport.com to request your report and search for creditors you do not know.  Choose to use only the last four digits of your Social Security number on your report.  Consider placing a credit card freeze on your account so only approved creditors can access your file. 

Another swindle becoming quite popular is the "Grandparents scam”.  In the conference I attended, one person in the audience related her story of her parents being a victim.  A swindler called her parents, identified by name their Grandson, identified himself as their Grandson’s good friend.  The Grandparents   recognized the name of their Grandson’s friend.  The caller said they were traveling in Mexico and their Grandson is in jail and needs bail money.  "Please don’t call our parents, the friend pleads!”  The Grandparents wired $8,500 to the caller.  The person relating the story stated, "Why my parents didn’t call me I’ll never know!”  The money is lost and not recoverable.

 The reality is your personal data is already at risk everywhere.  However, following the above suggestions reduces the likelihood of becoming an identity theft victim.  The main thing however, just be cognizant and aware, think about why someone wants your information. Maybe, disclosure not necessary.  

Tags:  accounting  fraud  identity theft  IRS  tax 

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