Sherman’s selection is part of the Firm’s leadership transition process which began when Larry Greenwalt was re-elected managing partner in January 2008 for a three-year term ending December 31, 2010.

Anita Sherman said, “I am honored and humbled to be selected by my partners to provide continued leadership to maintain the firm’s tradition of outstanding client service and our reputation and selection as a Top Workplace firm.”

“Anita is an integral part of firm leadership and she knows and understands the nuances of the firm well. I have the utmost confidence in Anita and her abilities to lead Greenwalt CPAs forward,” states Larry Greenwalt.

“We owe a great deal of gratitude to Larry for all that he has done to grow the firm in expertise and size over the course of his 30 years as managing partner. We are a better CPA firm because of Larry’s leadership and vision,” stated Anita Sherman.

When Anita assumes her new role, Greenwalt CPAs will become the largest firm in Indiana to be led by a female managing partner. “This has always been a team environment, and we have a cohesive, experienced partner group and a great group of employees. I am committed to building on this positive culture,” noted Sherman. Sherman joined the firm in 1985 and became a partner in 1989. She heads up the firm’s Audit and Other Assurance Services Group, and is a senior member of the firm’s Not for Profit Services Group, Construction Services Group and Manufacturing and Distribution Services Group. She is a Past Chairman of the Indiana CPA Society (INCPAS), and in 2009, Anita was named the Outstanding CPA in Public Practice by her peers in the INCPAS. In June 2010, she received the Distinguished Alumni Award from Manchester College. She has chaired numerous committees of CPA Associates International.

“I am proud to be part of such an outstanding firm with the depth of functional and industry expertise accumulated over 65 years of service,” said Greenwalt. “We owe a debt of gratitude to founding fathers Norbert Keller and Denny Gaughan, and I look forward to continuing to assist the firm, partners, staff and clients, from a variety of perspectives. I am especially proud of the fact that we are now successfully transitioning to the fourth generation of owners and leadership, something few businesses are able to do.”

If you have been considering the upgrade of Microsoft Office to the latest version, Office 2010, here are some new features that might make the decision a little easier.

Co-Authoring: Breakthrough technology that connects team members on a single project. Allows multiple people to update and share a notebook simultaneously. Each person on the team can see who is working on the document online and start a conversation with that person in real time. And edits are highlighted, so you can see what’s been changed.

Outlook Conversation View: Get control of your e-mail. Improves the tracking and managing of related e-mails while saving valuable inbox space, letting you manage large amounts of e-mail with ease. It also hides entire conversations you don’t care about and condenses them with just a few clicks.

PowerPoint Broadcast Slide Show: Instantly broadcast presentations to clients and team members who are not in your office. Instantly broadcast your slides to a remote audience, who can view your presentation online and on any device that has a Web browser, even if they don’t have Microsoft PowerPoint® 2010.

Video Editing and Formatting: Create professional materials that set you apart. Allows you to edit videos right in PowerPoint 2010, no additional software required. You can even insert a video link from the Internet into your presentation to create rich, dynamic work but keep your file size manageable. And video controls let you pause, rewind, fast-forward, and stop audio and video content without leaving slide-show mode during your presentation.

Microsoft Excel 2010 Sparklines: Make quicker and better-informed business decisions. Sparklines are small charts in a worksheet cell that provide a clear and compact visual representation of your data. You can use them to show trends in a series of values, such as seasonal increases or your monthly expenditures, or to highlight maximum or minimum values.

Backstage View: Helps you quickly get to the commands you use the most and complete your work more efficiently. Provides a single location for essential information about your document, such as permissions and version information—and increases sharing options for print, online, and e-mail. And printing is faster and easier than ever with the new Live Preview. Now you can see your document and settings automatically before you print, without multiple clicks.

Microsoft SharePoint Workspace 2010: Keep productive on the go with a seamless offline\online experience. Allows you to work on a document offline in SharePoint Workspace, and when you connect back online, your edits are automatically synchronized so your content remains consistent and you can keep your team up-to-date instantly.

Microsoft Office Mobile 2010: Do more that just read e-mail on your phone. Office Mobile 2010 enables coworkers in different locations to share, edit, and comment on documents with their Microsoft Smartphones, without losing content or formatting, all within a familiar Office experience.

The Ribbon: All the tasks you need are right at your fingertips enhances productivity. Every application in Office 2010 now has the Ribbon. The Ribbon brings new features such as Microsoft Outlook® 2010 Quick Steps to your attention. Through the Options menu in Backstage View, you can easily create new tabs that bring together your favorite commands and groups, or customize existing tabs to fit your needs.

Be sure to check with your key software vendors to make sure any Office functionality you have with the application is compatible with Office 2010 before any major purchase. We are available to chat about Office training, your licensing options and any other questions you might have about the new version.

One of the most aggravating issues facing employers and retirement plan practitioners is the issue of lost participants. Lost participants are terminated participants whose current address is unknown and who have a vested account balance remaining in the plan.

Lost participants are problematic because the issue:

1. may increase the plan’s annual administrative expenses and fiduciary responsibility;

2. may cause the plan to be subject to the audit requirement because the number of participants exceeds the large plan threshold; and

3. may cause substantial delays in terminating a plan.

Therefore, employers need to be aware of the options available to resolve or minimize the lost participant problem.

Letter Forwarding Programs
Both the IRS and the Social Security Administration (SSA) offer a letter forwarding service. There is no direct communication between the plan sponsor and the terminated participant. Rather, the plan sponsor sends a letter with specified information to the IRS or the SSA. They will search their records using the social security number provided. If an address is located, the letter will be forwarded to the individual. The letter contains instructions as to what the recipient should do to contact the plan regarding their account balance. The drawback to these letter forwarding services is that neither the IRS nor the SSA will provide the sender any information regarding the results of its efforts. The plan sponsor will not know if the recipient could not be located. If there is a successful location, it is up to the terminated participant to communicate with the plan sponsor.

Private Locater Services
There are many private locater services that plan administrators may retain to assist in locating lost participants. The main advantages of using a private search company are speed and minimal cost. Often a search takes only a few minutes using the internet. Many practitioners have reported great success in using these services.

Finding a lost participant can be difficult and time-consuming. Yet, plan sponsors are required to make a diligent effort to locate missing participants. The longer you wait to locate someone, the harder the search may become. We suggest providing a Distribution Election Form during the exit interview process.

At the Indiana CPA Society Not-For-Profit Conference, representatives from the Charitable Gaming Division of the Indiana Gaming Commission discussed the Commission’s policy for reporting income from charitable gaming activities.

An organization that holds a fundraising event that includes gaming is required to report all revenue and expenses from such events on a Forms CG-8 and CG-21 for an annual charitable gaming license (Form CG-9 and CG-22 for a single event). Everything that the organization takes in as part of the event is considered proceeds from gaming and must be reported on these forms.

The non-gaming parts of the event, such as a meal provided during the event, should not be separated out and should be reported as revenue from a gaming event. The sale of alcohol is permitted at gaming events, but the organization should not take part in selling alcohol or collecting revenues from the sale of alcohol. This should be conducted by the venue itself or an outside contractor brought into the event.

Even when the gaming activity is a small part of the event, it makes the entire event subject to reporting as gaming revenue. For example, if an organization holds an annual dinner and silent auction (which is not gaming because there is not the element of chance to win a prize) and there is a small raffle drawing at the event, the Indiana Gaming Commission considers all of the event’s proceeds as gaming revenue. The Commission’s suggestion for avoiding this is to sell the tickets for the raffle at the silent auction, but hold the drawing on another day. The drawing of the raffle, not the selling of ticket, is what creates a gaming event.

Many organizations use the opportunity of a gaming event to solicit donations from the attendees. The representatives from the Indiana Gaming Commission suggest that to do so the organization should setup a locked box with a sign identifying it as for contributions and have attendees drop their contributions in. The box must remain locked during the event and the money in the box cannot be mixed with the gaming money, nor handled by persons conducting the gaming activity. If this is done, then the contributions from the box do not have to be reported as proceeds from a gaming event.

The Commission also requires that organizations keep a separate bank account for gaming revenue and that the money in that account never be mixed with the operating bank account of the organization. The money in the gaming account can be used to pay for almost any operating expense (except for salaries, taxes and alcohol), but should be paid directly out of the account and not run through the regular operating account.

Well, here we are in the second half of 2010 and still nothing coming from Congress on what they will do with the income tax rates that will sunset at the end of 2010. In fact, Congress is going into August recess, the effects of the sunset provisions to many taxpayers that will take place starting January 1, 2011, if no action is taken soon.

In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners and families. These tax cuts will all expire on January 1, 2011.

Personal income tax rates will rise. The top tax bracket will rise from 35% to 39.6% and the lowest tax bracket will rise from 10% to 15%. Keep in mind; these are the tax rates that most small business profits will be taxed at as well.

The table below is for married filing jointly.

(1) Starting in 2013, the health care reform package broadens the Medicare tax base for higher-income taxpayers by imposing an additional tax rate of .9% on earned income in excess of $200,000 for individuals and $250,000 for married couples filing jointly; and imposes a 3.8% ‘unearned income Medicare contribution’ tax on higher-income taxpayers.

Itemized deductions and personal exemptions will again phase out, which has the same effect as higher marginal tax rates. The ‘marriage penalty’ (narrower tax brackets for married couples) will return. The child tax credit will be cut in half from $1,000 to $500 per child. The standard deduction will no longer be doubled for married couples relative to the single level. The dependent care and adoption tax credits will also be cut.

Capital gains rates will take a hike. The capital gains tax will rise from 15 percent this year up to a maximum of 20 percent in 2011. The dividends tax will rise from 15 percent this year to 39.6 percent in 2011. Then keep in mind that these rates will rise another 3.8 percent in 2013, as discussed above.

Will the estate tax return? In 2010, there is no estate tax. For those dieing on or after January 1, 2011, there will be a 55% top estate tax rate on estates over $1 million. There is speculation that we will see a one or two-year extension of the 2009 law ($3.5 million credit, 45% rate), but a question still looming is whether the new law with be retroactive back to January 1, 2010.

Alternative Minimum Tax (AMT) trap. It is estimated that AMT will affect approximately 28 million taxpayers, up from 4 million last year. This is because Congress has failed to index the AMT exemption. Most taxpayers, along with their tax practitioners, will have to calculate their tax burden twice and pay the higher tax burden. This is a ‘mandatory maximum’ tax, not an ‘alternative minimum’ tax.

Tax Planning Suggestions. For higher income taxpayers, it is almost a certainty that rates will be higher in 2011 than 2010, so consider accelerating income into 2010 and deferring year end tax deduction opportunities into 2011, unless you anticipate you will have substantially lower taxable income in 2011. With respect to unrealized capital gains, it may be more beneficial to convert these to realized gains at a 15% rate in 2010, rather than incur higher tax rates after 2010 on these gains. We believe that the Estate Tax will resurrect in some form similar to the 2009 rules, so in redrafting current wills, we would suggest including credit shelter trust provisions in your wills if your estate is significant (what does that mean? Depends on what congress does – if they revert to only a $1 million exemption, that would be your measuring point;  if they revert to 2009 rules, then estates of $3.5 million and over should have credit shelter trust provisions). Starting in 2011, higher income taxpayers should consider converting to tax-exempt or tax-deferred investments.

Well, now you know where the tax rates stand for 2010 and where they are headed for starting in 2011. But will Congress and the President act before the end of the year to restructure the tax brackets or extend the Bush tax cuts? The Tax Services Group at Greenwalt CPAs is staying on top the latest tax law news and will provide you with relevant and timely information as it is released.

Please be sure to check out our firms’ tax seminar series for topics which may be of interest to you. It can be seen at www.greenwaltcpas.com (you will see a link for the seminar series at the top of the screen).

Change orders are a common occurrence for most contractors. Although it is common, the treatment of change orders in the accounting system is something that is not always done correctly. Sometimes change orders go without pricing even though the work is defined and costs are incurred. Once the price is negotiated it could result in the change order being treated differently for accounting purposes, so it is best to record it conservatively and correctly the first time.

Change orders can be treated several different ways for accounting purposes based on various factors. Below you will find an explanation for the common ways of recording change orders:

Unapproved change orders – and not probable to be approved – when costs are being incurred without approval and there is no basis to determine if the change order will be approved, the costs incurred should be expensed and added to the direct costs incurred on the job. In addition, the total estimated costs for that job should increase by the entire amount of costs that is estimated to be incurred to complete the change order.

Unapproved change orders – probable to be approved – when costs are being incurred without a signed change order, but past experience with the owner or contractor gives you some comfort that the approval will likely happen, then there are two options to consider:

1. It is acceptable to not record the costs incurred as expenses, but rather add the costs to an asset account until a determination of approval is gained
2. It is also acceptable to expense the costs incurred and record revenue for the same amount as the expense recorded, and therefore not increasing the gross profit. The contract amount, the total estimated costs for the job, and the costs incurred to date for the job should all be increased on the uncompleted job schedule to reflect the change order.

Approved change orders – record as an expense all of the costs incurred associated with the change order and record the full profit expected from the change order by increasing the contract amount and the total estimated costs on the contract based on expectations for the total amount of the change order. This will result in the proper underbilling or overbilling being recorded on the contract, including the change order.

The accounting treatment of recording change orders is meant to be conservative in order to not overstate revenues. If you have any specific questions or comments about the recording of change orders please do not hesitate to contact me.

In the last e-newsletter issue, we looked at the Health Care Bill and its affect on businesses. This time we are discussing the affect this legislation has on individuals and the many tax law changes this bill has brought about. Specifically we discuss the requirement that individuals have health insurance or face a penalty, tax credits to individuals, the increase in Medicare tax to wages, and the additional Medicare tax on investment income.

First, the new law contains an “individual mandate”, a requirement that U.S. citizens and legal residents have qualifying health coverage or be subject to a tax penalty. Under the new law, those without qualifying health coverage will pay a tax penalty of the greater of: (a) $695 per adult, per year, (up to a maximum of $2,085 per family), or (b) 2.5% of household income over the threshold amount of income required for income tax return filing. The penalty will be phased in according to the following schedule: $95 in 2014, $325 in 2015, and $695 in 2016 for the flat fee or 1.0% of taxable income in 2014, 2.0% of taxable income in 2015, and 2.5% of taxable income in 2016. Beginning after 2016, the penalty will be increased annually by a cost-of-living adjustment. Exemptions will be granted for financial hardship, religious objections, American Indians, those without coverage for less than three months, aliens not lawfully present in the U.S., incarcerated individuals, those for whom the lowest cost plan option exceeds 8% of household income, those with incomes below the tax filing threshold (in 2010 the threshold for taxpayers under age 65 is $9,350 for singles and $18,700 for couples), and those residing outside of the U.S.

Second, the centerpiece of the health care legislation is its provision of tax credits to low and middle income individuals and families for the purchase of health insurance. For tax years ending after 2013, the new law creates a refundable tax credit (the “premium assistance credit”) for eligible individuals and families who purchase health insurance through an Exchange. The premium assistance credit, which is refundable and payable in advance directly to the insurer, subsidizes the purchase of certain health insurance plans through an Exchange. Under the provision, an eligible individual enrolls in a plan offered through an Exchange and reports his or her income to the Exchange. Based on the information provided to the Exchange, the individual receives a premium assistance credit based on income and IRS pays the premium assistance credit amount directly to the insurance plan in which the individual is enrolled. The individual then pays to the plan in which he or she is enrolled the dollar difference between the premium assistance credit amount and the total premium charged for the plan. For employed individuals who purchase health insurance through an Exchange, the premium payments are made through payroll deductions.

The premium assistance credit will be available for individuals and families with incomes up to 400% of the federal poverty level ($43,320 for an individual or $88,200 for a family of four, using 2009 poverty level figures) that are not eligible for Medicaid, employer sponsored insurance, or other acceptable coverage. The credits will be available on a sliding scale basis. The amount of the credit will be based on the percentage of income the cost of premiums represents, rising from 2% of income for those at 100% of the federal poverty level for the family size involved to 9.5% of income for those at 400% of the federal poverty level for the family size involved.

Third, high-income taxpayers will be hit with a double whammy – a tax increase on wages and a new levy on investments. The Medicare payroll tax is the primary source of financing for Medicare’s hospital insurance trust fund, which pays hospital bills for beneficiaries who are 65 and older or disabled. Under current law, wages are subject to a 2.9% Medicare payroll tax. Workers and employers pay 1.45% each. Self-employed people pay both halves of the tax (but are allowed to deduct half of this amount for income tax purposes). Unlike the payroll tax for Social Security, which applies to earnings up to an annual ceiling ($106,800 for 2010), the Medicare tax is levied on all of a worker’s wages without limit.

Under the provisions of the new law, which takes effect in 2013, most taxpayers will continue to pay the 1.45% Medicare hospital insurance tax, but single people earning more than $200,000 and married couples earning more than $250,000 will be taxed at an additional 0.9% (2.35% in total) on the excess over those base amounts. Employers will collect the extra 0.9% on wages exceeding $200,000 just as they would withhold Medicare taxes and remit them to the IRS. Companies won’t be responsible for determining whether a worker’s combined income with his or her spouse makes them subject to the tax. Instead, some employees will have to remit additional Medicare taxes when they file income tax returns, and some will get a tax credit for amounts overpaid. Self-employed persons will pay 3.8% on earnings over the threshold. Married couples with combined incomes approaching $250,000 will have to keep tabs on both spouses’ pay to avoid an unexpected tax bill. It should also be noted that the $200,000/$250,000 thresholds are not indexed for inflation, so it is likely that more and more people will be subject to the higher taxes in coming years.

Under current law, the Medicare payroll tax only applies to wages. Beginning in 2013, a Medicare tax will, for the first time, be applied to investment income. A new 3.8% tax will be imposed on net investment income of single taxpayers with adjusted gross income (AGI) above $200,000 and joint filers with AGI over $250,000 (unindexed). Net investment income is interest, dividends, royalties, rents, gross income from a trade or business involving passive activities, and net gain from disposition of property (other than property held in a trade or business). Net investment income is reduced by allocable deductions to such income. However, the new tax won’t apply to income in tax-deferred retirement accounts such as 401(k) plans. Also, the new tax will apply only to income in excess of the $200,000/$250,000 thresholds. So if a couple earns $200,000 in wages and $100,000 in capital gains, $50,000 will be subject to the new tax. For an estate or trust, the tax is 3.8% of the lesser of: (1) undistributed net investment income or (2) the excess of AGI over the dollar amount at which the highest income tax bracket applicable to an estate or trust begins. Because the new tax on investment income won’t take effect for three years this leaves more time for Congress and IRS to tinker with it. So we can expect lots of refinements and “clarifications” between now and when the tax is actually rolled out in 2013.

Finally, there are several other tax law changes which are summarized by effective date as follows:

· Tax years beginning after December 31, 2010

• Availability of a new employee benefit cafeteria plan known as a Simple Cafeteria Plan. This plan will be subject to eased participation restrictions so that small businesses can provide tax-free benefits to their employees. The new cafeteria plans will include self-employed individuals as qualified employees.
• Over-the-counter drugs will be excluded from being reimbursed from a health reimbursement account (HRA), flexible savings accounts (FSAs), health savings account (HSA) or Archer Medical Savings Account (MSA).
• Distributions from an HSA or Archer MSA that are not used for qualified medical expenses will be subject to a 20% tax penalty

· Tax years beginning after December 31, 2012

• The itemized medical expense deduction limitation increases from 7.5% to 10% for most individuals. For individuals age 65 and older the 7.5% will remain unchanged through 2016.
• Contributions to health flexible savings accounts (FSA) will be capped at $2,500 per year and will be indexed for inflation after 2013.
• The deduction for the subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees will be eliminated.

As you can see this health care legislation has changed a number of tax laws for businesses and individuals. Our Tax Services Group is on top of these changes, so please give us a call at 317.241.2999 if you have any questions.

The recently enacted health care legislation bill requires applicable large employers (50 or more employees) to offer and contribute to their workers’ health insurance or pay a penalty. Small employers who offer health coverage may be able to receive a tax credit. Under the new law, effective for months beginning after Dec. 31, 2013, a large employer that 1) does not offer coverage for all its full-time employees, 2) offers minimum essential coverage that is unaffordable, or 3) offers minimum essential coverage that consists of a plan under which the plan’s share of the total allowed cost of benefits is less than 60%, is required to pay a penalty if any full-time employee is certified to the employer as having purchased health insurance through a state exchange with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee.

Who is subject to the employer mandate? Only an “applicable large employer,” is subject to the requirement to offer coverage. A large employer is defined as someone who employed an average of at least 50 full-time employees during the preceding calendar year. Most small businesses, since they have fewer than 50 employees, are thus exempt from the employer requirement. In counting the number of employees for purposes of determining whether an employer is an applicable large employer, a full-time employee (an employee working an average of at least 30 hours or more each week) is counted as one employee and all other employees are counted on a pro-rated basis. However, even an employer with 50 or more employees isn’t subject to the penalty for not offering coverage if the employer doesn’t have any full-time employees who are certified to the employer as having purchased health insurance through a state exchange with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee.

Penalty for employers not offering coverage. An applicable large employer who fails to offer its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an employer-sponsored plan for any month is subject to a penalty if at least one of its full-time employees is certified to the employer as having enrolled in health insurance coverage purchased through a state exchange with respect to which a premium tax credit or cost-sharing reduction is allowed or paid to the employee. The penalty for any month is an excise tax equal to the number of full-time employees over a 30- employee threshold during the applicable month (regardless of how many employees are receiving a premium tax credit or cost-sharing reduction) multiplied by one-twelfth of $2,000. For example, if an employer fails to offer minimum essential coverage and has 60 full-time employees, ten of whom receive a tax credit for the year for enrolling in a state exchange-offered plan, the employer will owe $2,000 for each employee over the 30-employee threshold, for a total penalty of $60,000 ($2,000 multiplied by 30 (60 minus 30)). This penalty is assessed on a monthly basis.

Penalty for employers that offer coverage but have at least one employee receiving a premium tax credit. An applicable large employer who offers coverage but has at least one full-time employee receiving a premium tax credit or cost-sharing reduction is subject to a penalty. The penalty is an excise tax that is imposed for each employee who receives a premium tax credit or cost-sharing reduction for health insurance purchased through a state exchange. For each full-time employee receiving a premium tax credit or cost-sharing subsidy through a state exchange for any month, the employer is required to pay an amount equal to one-twelfth of $3,000. The penalty for each employer for any month is capped at an amount equal to the number of full-time employees during the month (regardless of how many employees are receiving a premium tax credit or cost-sharing reduction) in excess of 30, multiplied by one-twelfth of $2,000. For example, if an employer offers health coverage and has 60 full-time employees, 15 of whom receive a tax credit for the year for enrolling in a state exchange-offered plan, the employer will owe a penalty of $3,000 for each employee receiving a tax credit, for a total penalty of $45,000. The maximum penalty for this employer is capped at the amount of the penalty that it would have been assessed for a failure to provide coverage, or $60,000 ($2,000 multiplied by 30 (60 minus 30)). Since the calculated penalty of $45,000 is less than the maximum amount, the employer pays the $45,000 calculated penalty. This penalty is assessed on a monthly basis.

Requirement to offer “free choice vouchers.” After 2013, employers offering minimum essential coverage through an eligible employer-sponsored plan and paying a portion of that coverage will have to provide qualified employees with a voucher whose value could be applied to purchase of a health plan through the Insurance Exchange. Qualified employees would be those employees: who do not participate in the employer’s health plan; whose required contribution for employer sponsored minimum essential coverage exceeds 8%, but does not exceed 9.8% of household income; and whose total household income does not exceed 400% of the poverty line for the family. The value of the voucher would be equal to the dollar value of the employer contribution to the employer offered health plan. Employers providing free choice vouchers will not be subject to penalties for employees that receive a voucher.

Even with these significant penalties, some large employers are already discussing the fact that they may be opting to pay the penalties. With the increasing cost of insurance, some employers feel the penalties may be cheaper than paying for the insurance. A major consideration for employers employing this philosophy is that these penalties won’t be deductible for income tax purposes.

Tax credit for small employers offering health coverage. For tax years beginning after Dec. 31, 2009, an eligible small employer will be given a tax credit for non-elective contributions to purchase health insurance for its employees. An eligible small employer generally is an employer with no more than 25 full-time equivalent employees (FTEs) employed during the employer’s tax year, and whose employees have annual full-time equivalent wages that average no more than $50,000. However, the full amount of the credit is available only to an employer with 10 or fewer FTEs and whose employees have average annual fulltime equivalent wages from the employer of less than $25,000. These wage limits will be indexed to the Consumer Price Index for Urban Consumers for years beginning in 2014.

I hope this information is helpful. Our Tax Services Group is on top of these changes, so please give us a call at 317.241.2999 if you have any questions. Watch for our next post as we discuss the effects this health care bill will have on individuals

Earlier this year, the President signed into law the 2010 HIRE Act. The act was created to try and provide employers tax incentives to hire employees. Two new laws created from this act are the payroll tax holiday and the retained worker tax credit. Effective for tax years ending after March 18, 2010, employers have been given a payroll tax holiday on the 6.2% OASDI portion of the employer’s share of Social Security Tax for the remainder of 2010 and a retained worker tax credit of up to $1,000 per retained employee.

For employers to be eligible for both the payroll tax holiday and retained worker credit, the following guidelines must be met. First, the employer must be a qualified employer, which is a private sector, a non-profit, or a public institution of higher education employer. Second, the employer must hire a qualified employee. A qualified employee is one that has been unemployed in the 60 days prior the start date. In addition, the employee is required to sign a statement, under penalty of perjury, that he/she has not been employed for more than 40 hours during that 60 day period. An employee that replaces another employee who performed the same job is not eligible for the benefits, unless the prior employee left the job voluntarily or for cause. Family members are also not eligible for the tax holiday or credit.

If an employer hired a qualified employee after February 3, 2010, that employee is eligible for the payroll tax holiday and the retained worker credit. However, only wages paid after March 18^th will apply to the calculation of the payroll tax and retained worker credit. For example, if company XYZ hires a qualified employee on February 22, 2010, the employee will qualify for the payroll tax holiday, but only the wages earned after March 18^th will quality for the 6.2% payroll tax holiday. Due to the short amount of time between March 18^th and the end of the first quarter, for employees hired in the first quarter, the employer 6.2% OASDI holiday did not apply. To claim the first quarter payroll tax holiday, the amount calculated from the first quarter will be applied to the second quarter. Form 941, which is used to claim the payroll tax holiday wages, has been revised by the IRS to include all of the payroll tax holiday changes. There are separate lines to report wages earned in the second quarter that are eligible for tax holiday and another separate line to report the applicable first quarter wages (March 18 – 31) that were eligible for the tax holiday.

An employer can choose to not take part in the payroll tax holiday. If an employer hires an employee that qualifies for the Work Opportunity Tax Credit (WOTC), the employer has the option to choose between the tax holiday and the WOTC – the employer is not allowed to use both. The decision can be made on an employee by employee basis. WOTC may be more beneficial to employers if they hire low-wage employees or hire an employee late in 2010. WOTC is harder to qualify for as the employee must be certified by a state agency as a member of a targeted group. If the employer chooses to use the WOTC for the employee instead of the payroll tax holiday, the employer can still claim the retained worker credit, assuming specific requirements are met.

The retained worker credit has a couple of additional requirements that must be met in order for an employer to qualify. First, the employer must keep the employee for 52 continuous weeks. Second, the employee’s pay in the second 26-week period must be at least 80% of the pay in the first 26-week period. The employee can be full-time or part-time, but must meet these additional requirements. The credit is calculated as the lesser of $1,000 or 6.2% of wages paid during the consecutive 52 week period. If the employee’s wage for the 52-week period is more than $16,129.03, the maximum credit allowed for that employee is $1,000. The credit is claimed on the employer’s business tax return and is taken once the 52-week requirement is met, which for a calendar year taxpayer will be the 2011 tax return. Compensation that isn’t subject to income tax withholding, such as certain fringe benefits, or wages for employees that are exempt from income tax withholding won’t quality as wages for the purposes of calculating the credit. The credit is nonrefundable, but can be carried forward to future years. Additionally, the general business credit limitations will apply. For example, the credit will not be allowed to offset alternative minimum tax (AMT).

If you are eligible to claim the payroll tax holiday or the retained worker credit, we recommend that you keep careful records on the employees hired and make sure you have proper documentation to prove the employee meets the requirements of a qualified employee. If you have any questions on whether you can use these beneficial tax savings for your company, please don’t hesitate to call us at 317-241-2999.

The Alumni Honor Award is recommended by the Alumni Association and granted upon approval by the president of the College. It is presented for: (1) outstanding personal service rendered to the College over a period of years; (2) personal accomplishment whereby the prestige of the College is enhanced; (3) distinguished service or accomplishments in any field of human endeavor, be it in business, industry, science, or a profession; and (4) unusual and singular contributions to the development of cultural or spiritual life.

“Anita Sherman is an outstanding leader of the CPA profession in Indiana and is recognized nationally as well. Having served in a variety of leadership capacities in the Indiana CPA Society, she is respected for her efforts on the INCPAS Accounting & Auditing and Ethics Committee and as a member of the Society’s Board of Directors and Executive Committee. Most recently she has served as chairman of the INCPAS Board of Directors and the results of her leadership will have a lasting impression on the Society and the profession in Indiana,” states Gary Bolinger, CAE, President & CEO of the Indiana CPA Society.

“I have known and worked with Anita for more than 24 years.  She is the consummate professional, totally dedicated to providing outstanding client service, serving the profession, where she currently serves on the AICPA Council. She’s a wonderful role model for others and balances her role in her family, as well as serving the firm as Senior Partner and Director of the Audit and Other Assurance Services Group and member of the Executive Committee,” states Larry K. Greenwalt, CPA, Managing Partner of Greenwalt CPAs.

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Greenwalt CPAs is an Indianapolis-based Business and Financial Advisory and CPA Firm with eight partners, and industry teams in the areas of Construction, Entrepreneurial Services, Employee Benefit Consulting & Administration, Professional Services Organizations, Family Owned Businesses, Manufacturing & Distribution, Not-For-Profit, Information Technology and Financial Planning. In 2009 and 2010, Greenwalt CPAs was named a Top Workplace Firm for companies with 150 or fewer employees.