Archive for January, 2011
Angela N. Crawford, CPA and Amanda Meko, CPA | Team Members of the Not-for-Profit Services Group
While compensation is usually considered a private matter, in the not-for-profit world, the Form 990 makes compensation of top officials open to public inspection.
Compensation for individuals is reported in Part VII of Form 990. The individuals to be listed include current officers and directors regardless of compensation amount, current key employees making at least $150,000, and the top five highest compensated employees making over $100,000. Other thresholds exist for payments made to individuals who formerly held these positions.
Anita Sherman, CPA | Managing Partner
As you may know, I assumed the role of Managing Partner of Greenwalt CPAs on January 1, 2011. While it is a humbling experience to be following the firm’s modern day founder and leader for the past 30 of the firm’s 60+ year history, I am excited about our future. We have a great group of 8 partners, using their diverse and unique expertise to provide advice to each firm client. Our mission is to be relevant to each client and help them identify and achieve their goals. We have an amazing group of talented and helpful staff that support and assist in delivering our services. It is our goal to continue to grow the firm and we appreciate the loyalty of each and every client and the many referrals received over the years. You have my pledge that we will continue to earn your business and referrals. If you ever have any suggestions for me, please contact me directly.
by Marie Jett, CPA, Tax Manager
There are a few options that employers have available to them in order to account for vehicles used in business. The following methods and policies describe the options available to an employer.
Reimburse employees
For vehicles owned or leased by the employee, the employer can reimburse the employee for miles used for business purposes, which for 2011 is 51 cents per mile. Under this method, employees submit a mileage expense report detailing the miles driven, location driven to, date, and business purpose. Once expense report is submitted, employer will reimburse employee. As long as mileage reimbursement rate doesn’t exceed the IRS allowance (51 cents), the reimbursement is exempt from employee’s wages.
Employer-provided vehicles
The reporting methods available to a business vary depending on the personal use allowed by the employer. The first reporting method is used for simplified recordkeeping on the employee’s part. There are two policies an employer can establish and these policies state when and how much an employee can use the vehicle for personal use.
The first policy an employer can adopt will only allow the employee to use the car for de minimis, or minimal, personal use. This policy requires a written statement stating the vehicle cannot be used for personal use, unless it’s de minims in nature, to the employees and also requires the vehicle to be kept on the employer’s premises during nonbusiness hours. Under this policy, nothing is required to be added to the employee’s wages.
A second policy states that for personal purposes, the car can only be used for de minimis or commuting purposes. This policy also requires a written statement which must be provided to employees. For this policy to be applicable, the employee must be required to commute to and/or from work in the vehicle for a bona fide noncompensatory business reason – i.e. the employer requires the employee to commute to/from work in the vehicle. The employee cannot be an officer, director, or owner of a greater than 1% interest. Under this method, the employer will account for the commuting miles by including an additional $1.50 per one-way commute on the employee’s W-2.
For both of the policies listed above, the employer must reasonably believe the vehicle is not being used for any personal use beyond de minimis or commuting purposes, depending on the policy used. Also, both policies will require supporting evidence that policies are being adhered to and requirements met should the IRS audit the business. To help substantiate that requirements are met, a mileage log should be kept by the employee showing miles driven, location driven to, date, business purpose and total miles for the year. Should the employee not adhere to the policies above or the requirements cannot be substantiated, the employee will need to include the personal use as taxable income.
The second method an employer can adopt is to have the employee to keep record of the personal and business use of the automobile. If business use cannot be substantiated, the use will be considered personal and taxed to the employee. At the end of the year, the business miles and personal miles are determined and a percentage of business to personal mileage is calculated. The personal mileage percentage is then multiplied times the fair market value of the vehicle to get the personal usage value, which is taxed to the employee on his/her W-2 with the appropriate taxes being withheld.
A third method would require no mileage substantiation by the employer or the employee. Under this method 100% of the value is included as taxable income to the employee, included on the employee’s W-2 and taxes withheld.
Personal miles
Personal miles will include commuting miles. Commuting miles would be miles driven from the employee’s residence to the established place of business or employment. These miles are considered nondeductible personal miles. If the employee makes a business related stop before or after reaching the place of employment, these miles could be deductible. For deductibility in certain instances, see chart below.
|
Home to office |
Nondeductible |
|
Office to business related stops |
Deductible |
|
Home to 1st business related stop |
Nondeductible |
|
1st business stop to 2nd business stop |
Deductible |
|
2nd business stop to home |
Nondeductible |
If, home to office is 20 miles, and employee drives from home to 1st business stop to 2nd business stop to home, which is 30 miles, then the 10 miles in excess of commuting miles are Deductible.
The rules above do not apply to certain vehicles in certain instances. For example, these rules do not apply to a qualified nonpersonal use vehicle. An example of a qualified nonpersonal use vehicle is a delivery truck with seating for just the driver or the driver and a folding jump seat. Another example of a qualified nonpersonal use vehicle is any vehicle designed to carry cargo with a loaded gross vehicle weight greater than 14,000 pounds.
by Larry K. Greenwalt, Chairman of the Board
It has been my honor to serve as Managing Partner of Greenwalt CPAs during the past 30 years, and it is my distinct pleasure to now hand off this duty to Anita Sherman, whom the Partners unanimously elected as the next managing partner more than 14 months ago. Leadership identification, growth and development are an integral part of our strategic planning processes, and I believe that focus has been an important driver for the growth of the firm. In January 2008, I was re-elected Managing Partner for a three year term ending December 31, 2010, which gave us sufficient time to plan and transition responsibilities in an orderly manner. Our goal was to effect a smooth transition that would hardly be noticeable, either internally or externally. We made the announcement of Anita’s election to Managing Partner in September 2010.
A Solo 401(k) plan, also called a self-employed 401(k), an individual 401(k), or a Uni-K, works the same as the traditional 401(k) plans offered by larger companies. A Solo 401(k) allows sole proprietors or solely owned corporations with no other employees to save for retirement both as an employer and an employee, often enabling owners to contribute more than would otherwise be possible under an individual retirement plan. Spouses may also contribute under a Solo 401(k) if he or she earns income from the business.
This plan is funded with two sources of contributions. The first source is a salary deferral contribution that can be as much as $16,500. The second source is a discretionary profit sharing contribution that can be as much as 25% of compensation or 20% of self-employment income. These combined sources are limited to 100% of compensation up to $49,000. If the owner is at least age 50, he or she can contribute an additional $5,500 catch-up contribution outside these limits.
BJ Lippert, CPA and Rex Miller, CPA | Team Members of the Manufacturing & Distribution Services Group
Current economic indicators show that the United States is emerging from the recession. Can you feel it? Has your company rebounded and returned to its pre-recession sales and profitability levels? Do you have stores of excess cash and nowhere to spend it? If so, congratulations. Write some checks to your employees as thanks for their hard work and dedication and ignore the rest of this article. But, if your company, like most other U.S. businesses, continues to struggle financially and is looking for creative ways to incentivize key employees.