What comes to mind when you hear the word “lean”? Is it a fit person or a certain cut of beef? What about when you hear the words “lean construction”? The lean production concept has flourished in the manufacturing industry for years, but has been severely under-utilized by contractors despite evidence that implementation will improve the entire construction process for both the contractor and the consumer. This article will highlight the potential benefits of implementing lean construction concepts and how to begin thinking and operating lean.

When put into practice, lean construction can provide the following benefits:

• Increased profit margins
• Increased customer satisfaction
• Increased work flow so crews are at their utmost efficiency
• Reduced materials and tools inventory
• Reduced costs, resulting in more competitive bids
• Improved delivery times
• Improved communication between owners, contractors, clients and workers
• Reduced number of day-to-day injuries on construction sites
• Improved productivity that can help attract highly skilled workers to your company

How does contractor start thinking and operating lean? The process begins by maximizing value to consumers, since people are more willing to pay for what they perceive has value. To maximize value, a contractor must effectively communicate and collaborate with its consumers to understand exactly what they value most, beyond conforming to the plans and specs, such as on-time delivery, no change orders, etc. Customers should feel comfortable to freely communicate all issues concerning a current project or other situations affecting their business. When a contractor understands its clients’ problems, the contractor can readily and effectively provide a solution. Naturally, these concepts should extend to all project participants. When all parties of a project are on the same page, the result is successful coordination, clarity of responsibility and reliable work flow.

The second key factor in implementing lean construction is to eliminate unnecessary waste. This means focusing on the construction process more than simply the end product. Waste, as it relates to the construction industry, can be the result of inefficient workers and/or management, inefficient company processes or inefficient material and supply chains. A large portion of this waste can be eliminated by implementing the following concepts:

• Completely understand initial conditions of a project; Preliminary planning should include past performance reviews, risk analysis and meetings with key personnel (e.g. engineers, contractors, designers)
• Identify and analyze potential problems and implement a new course of action before, during and after the project is complete
• Monitor results on all processes as the project matures to ensure efficiency
• Reduce lead times on materials and supplies by eliminating non-value-adding steps
• Restructure relationships with product suppliers to cut down lead times where possible

A great deal of waste found in the construction industry can be eliminated by proper planning before a project begins. Many of the above mentioned concepts are reliant upon the pre-planning stage. Pushing pre-planning aside because you are too busy working on other projects commonly results in mounting costs and depleting value as projects move forward.

Lean construction contests the notion that there is always a trade-off between time, cost and quality. It can provide significant improvements to individual projects, as well as operations as a whole. By taking the steps to maximize value and eliminate waste, the construction industry has the potential to increase customer satisfaction, productivity and profitability.

Contact:

Alicia Rader, CPA | Manger, Member of the Construction Services Group | 317.260.4424 | arader@greenwaltcpas.com

Tim Ayler, CPA | Partner, Team Leader of the Construction Services Group | 317.260.4401 | tayler@greenwaltcpas.com

As most of you may have heard, President Obama released his 2014 federal budget proposal earlier this month. The $3.77 trillion budget covers all areas of federal government revenue and spending, but as you might suspect, corporate and personal income tax items are one of the more prevalent points of discussion included in the budget. While it’s way too early to know which of the following aspects will ever make it into the tax code, it’s not too early to begin preliminary brainstorming and planning. Throughout the rest of 2013, you can expect to hear these tax topics discussed in the media as Congress wrestles with the best course of action to solve our national deficit problem and operate government sponsored programs effectively. Many of these ideas/topics are not new, but may get more attention than they have in the past.

Individuals:

• Capping retirement plans at $3.4 million –
• Retirement accounts could grow larger than the inflation adjusted cap, but Obama’s budget proposal would disallow future contributions into a plan once it reached the capped level.
• Capping itemized deductions at a 28% maximum rate benefit for the wealthy-
• As high income earners could face federal tax rates as high as 43.4% in 2013, this itemized deduction cap is aimed to be the single largest revenue raiser in the 2014 proposed budget.
• A mandatory 30% tax rate for individuals who earn over $1 million a year – the “Fair Share Tax”-
• This is indirectly attributable to Warren Buffett and others like him where a majority or all of their income is taxed at the preferred capital gains tax rates (currently 15%/20% for 2013)
• Permanently extending the American Opportunity Tax Credit for college education
• Increasing the estate tax from 40% to 45% and lowering the lifetime exclusion from $5 million to $3.5 million-
• The fiscal cliff act just permanently provided a 40% tax rate and inflation adjusted $5 million estate exclusion.
• Extend the home mortgage debt cancellation exclusion from income until 2015

Businesses:

• Permanently extend Section 179 fixed asset expensing to $500,000 per year with a $2 million investment limit, adjusted annually for inflation
• Permanently extending the Research and Development Tax Credit
• Institute a 10% tax credit of wages for new jobs and/or increased wages. This would apply to companies with annual revenues of $20 million or less
• Require employers with greater than 10 employees to offer qualified retirement plans
• Repeal the use of the LIFO (last-in, first-out) inventory method
• Create a tax credit for U.S. companies that insource or bring work back to the U.S. from a foreign county. Additionally, if a U.S. company outsource work/production, disallow certain expenses related to the outsourcing

While the above is not all-encompassing of the tax aspects included in the 2014 budget, it does illustrate that President Obama is still insistent upon raising taxes and limiting deductions on America’s wealthy citizens. We expect to hear and learn more as we move through spring and into summer.

Contact:

Brandon Cook, CPA | Partner, Tax Services Group | 317.260.4437 | bcook@greenwaltcpas.com

Jim Wagoner, CPA | Partner, Director of Tax Services | 317.260.4428 | jwagoner@greenwaltcpas.com

The 990 provides not-for-profit organizations with a tremendous opportunity to tell their story as the form is required to be made available to the public. While many organizations make the form available on their website, GuideStar.org publishes the last three years of the form for most organizations. Taking the time to properly understand the form’s requirements and pending changes can help your organization present itself favorably and accurately and avoid some of those tax reporting headaches down the road.

During February 2013, the IRS released changes effective for the 2012 Form 990. While these changes are not as substantial as those that occurred in 2008, the changes are still important to note as additional information may be required for your upcoming return. Highlighted below are some of the key changes to the 2012 990 and 990-EZ.

• Part VI: Filers that obtain audited financial statements will now be asked to complete Schedule D, Parts XI and XII. They will no longer be asked to complete Part XIII of Schedule D.
• Part VII: The average hours per week will now include the hours worked for related organizations.
• Part VIII: Filers may now report their share of revenue from joint ventures according to the presentation within their books/records, rather than Schedule K-1
• Part XI: Includes new lines for net unrealized gain (losses) on investments, donated services and use of facilities, investment expenses, and prior period adjustments.
• Schedule L: Transactions with interested persons now includes columns to explain the reason for a loan, grant or other assistance provided to an interested person.
• Glossary: The definition of “professional fundraising services” includes preparation of applications for grants or other assistance.

The full summary of changes is located via the IRS website. As always, please feel free to contact Greenwalt CPAs with any of your questions.

Contact:

Jeff Curiel, CPA | Manager, Audit & Other Assurance Services Group and Team Member of the Not-for-Profit Services Group | 317.260.4414 | jcuriel@greenwaltcpas.com

Amanda Meko, CPA | Partner, Director, Audit & Other Assurance Services Group and Team Leader of the Not-for-Profit Services Group | 317.260.4436 | ameko@greenwaltcpas.com

· What must I be aware of now and going forward?

· What needs to happen by July 31, 2013?

· What will the costs be —

• Of health insurance?
• In additional taxes?
• For self-insured plans?

· How will Health Care reform affect the future of group health insurance plans?

· What are my options to best position my organization —

• To be able to minimize the cost to the organization
• To minimize the cost to our employees.

WHO SHOULD ATTEND?

· Personnel who handle employee benefit matters for their organization

· Owners/managers who are responsible for overseeing and approving critical organization decisions.

· Those who are concerned about the future of health care and where it is headed.

Our doors will open at 8:00 am on May 2 for coffee and light refreshments. The session will begin at 8:30 and we plan to be finished by 10:30 am.

To register, please click here.

or call Suzanne Haskamp at 317.260.4476. When you register, you will have an opportunity to list some of the key questions you would like to have addressed.

By Tim Ayler, CPA, Partner and Shaun King, Audit Senior | Members of the Construction Services Group

As the economy slowly begins to stabilize, so too is the construction industry. In turn, more contractors will be in demand for work. To help obtain this work, contractors across the state are relying on surety bonds. A surety bond is a guarantee from a surety to a project’s owner that a general contractor will adhere to the provisions of a contract.

There are several different types of bonds and they work similar to a credit guarantee. If the contractor fails to perform according to the contract, the surety will pay the owner the damages and the contractor must then reimburse the surety for this payment.

Diamond shoppers are not the only ones looking for three C’s. Sureties also have traditionally looked at the following three C’s when deciding whether to issue a bond to a contractor:

Capital – the company must have the necessary working capital, or access to it, in order to finance the job and absorb some losses.

Capacity – the company must have the necessary skills, experience, knowledge, and equipment to perform the job

Character – the company must have a strong management team that is responsible in fulfilling obligations and contracts

While the three C’s provide a good base for obtaining bonding, sureties will be looking for more. Some of the other items that sureties look for are:

Profitability – Sureties look at the company’s gross profit percentage and net income as a percent of revenue compared to industry averages. They also make sure there is sufficient backlog gross profit to support general and administrative expenses.

Sureties will analyze job schedules on a job-by-job basis, making sure profit margins are consistent between jobs and between completed and uncompleted work. They also look for any significant profit fade on a job-by-job basis. When total gross profit percentage on a job ends up being much less (usually greater than 10%) than originally estimated, it creates concerns about management’s ability to estimate jobs. Therefore, a contractor should be careful not to be too optimistic before the job begins, but rather set realistic expectations of job profitability.

Liquidity – Some sureties look at high under billings (unbilled costs and estimated profits on open jobs) as a sign of untimely billings (unless the contract specifically does not allow billings until certain points in the job) or that costs on the job are exceeding what was estimated. If over billings (billings in excess of costs and estimated profits on open jobs) are high and there is little cash in the bank with a maxed-out line of credit, sureties may also be concerned whether there will be cash to finish the job as the early billings are being spent on other jobs.

Not all sureties look for the same things, therefore, having a good relationship with a bonding agent is important; as the agent is usually the person who will determine which surety is best suited for your company. A properly prepared financial statement goes a long way toward adding comfort to the bonding agent and surety. For any additional questions regarding sureties, please contact Tim Ayler, CPA at 317-260-4401 and tayler@greenwaltcpas.com or contact your bonding agent.

The IRS released guidance last week that it is extending the time employers who want to claim the work opportunity tax credit (WOTC) have to file Form 8850: Pre-Screening Notice and Certification Request for the Work Opportunity Credit.

Under the extension, employers who hire a member of a target group on or after January 1, 2012 up to March 31, 2013, will be considered to have timely filed Form 8850 if filed by April 29, 2013. This form is normally due 28 days after employee begins work.

The American Taxpayer Relieve Act of 2012 retroactively extended the WOTC for certain employees who began work for an employer through December 31, 2013. Before the enactment, the WOTC credit had expired on December 31, 2011.

Contact

Felicia Rupp | Senior, Tax Services Group

317-260-4431 | frupp@greenwaltcpas.com

Marie Jett, CPA | Manager, Tax Services Group

317-260-4472 | mjett@greenwaltcpas.com

With the start of March comes a change in time, warmer weather (hopefully!), and the time of year to do some spring cleaning. Annually in the state of Indiana, most business entities, including non-profits, are required to file personal property tax returns as of March 1^st. This is also a good time of year to make sure you have a handle on your organization’s property.

To exhibit good internal controls (an auditor’s favorite term) over property, your organization should at least have a capitalization policy in place, maintain a fixed asset listing (either yourself or with the help of your friendly CPA firm), ensure that fixed assets are depreciated consistently over reasonable useful lives, and assess impairment annually on any significant assets.

Capitalization policies can vary from organization to organization, and you should use what makes sense for your non-profit specifically (within reason, of course!). We typically see smaller non-profits capitalize any individual items with a cost of $500 – $1,000. Larger non-profits may wish to capitalize individual items with a cost of $1,500 – $2,000. With technology changing virtually on a daily basis, most computer equipment typically falls under an organization’s capitalization limit. Please be aware, however, that just because an item does not get capitalized and tracked on a fixed asset list doesn’t mean it shouldn’t be included in the personal property that you report on your personal property tax return.

An organization should consider doing an annual inventory of its fixed assets. Items no longer in service (i.e. the computer from 1995!) should be disposed accordingly. Maintaining an accurate fixed asset listing is not only important for financial purposes (accounting and tax), but it is also helpful for insurance purposes to identify assets lost to theft or casualty. As you start your spring cleaning, please remember that another organization may be able to use something that you cannot. Everyone has a tight budget these days!

Should the start of March find you with a need to update your fixed asset listing or to need a hand preparing your annual personal property tax return, please do not hesitate to give us a call. We look forward to warmer weather and to hearing from you soon! Happy Spring!

Contact:

Heather Phillips, CPA | Manager, Audit & Other Assurance Services and Team Member of the Not-for-Profit Services Group

317.260.4442 | hphillips@greenwaltcpas.com Amanda Meko, CPA | Partner, Director, Audit & Other Assurance Services and | Team Leader of the Not-for-Profit Services Group 317.260.4436 | ameko@greenwaltcpas.com

]]> http://www.greenwaltcpas.com/2013/03/nfp-property-taxes-and-recordkeeping-guidelines/feed/ 0 http://www.greenwaltcpas.com/2013/03/beware-of-bogus-irs-emails/ http://www.greenwaltcpas.com/2013/03/beware-of-bogus-irs-emails/#comments Thu, 07 Mar 2013 23:22:50 +0000 Admin http://www.greenwaltcpas.com/?p=2369

By Felicia Rupp and Marie Jett, CPA | Members of the Tax Services Group

The Internal Revenue Service is alerting taxpayers of potential scammers that may be trying to take advantage of you during this tax season. These scammers are using the IRS name and logo to make an email appear authentic in an attempt to get you to provide your personal information. If you think you have received one of these emails:

· Do not reply to the message

· Do not open any attachments

· Do not click on any links or enter confidential information.

Here are a few points the IRS want you to know:

1. The IRS does not initiate contact with taxpayers by email or other social media to request personal or financial information.

2. The IRS never asks for detailed personal and financial information like PIN numbers, passwords, or bank or credit card information.

3. The official IRS website is www.irs.gov. Do not be misled by sites ending in .com, .net, or .org.

4. You may contact the IRS at 1-800-829-1040 to determine if they are trying to contact you or to report any bogus correspondence.

Example of a Bogus Email:

Title/Subject of email: Your tax refund payment update

[attachment to email is: “Refund Form.html”

From: taxupdates@irs.org

After the last annual calculation of your fiscal activity we have determined that you are eligible to receive a tax refund of $929.38. Submit the tax refund request and allow us 3-5 business days in order to process it. A refund can be delayed for a number of reasons. For example, submitting invalid details which we don’t have on record or applying after the deadline.

Download, fill and submit your Tax Refund Form in order to complete the process.

Contact

Felicia Rupp | Senior, Tax Services Group

317.260.4431 | frupp@greenwaltcpas.com

Marie Jett, CPA | Manager, Tax Services Group

317.260.4472 | mjett@greenwaltcpas.com

By Stacey L. Spencer, QKA | Manager, Employee Benefit Services

Have you had to reduce your workforce during 2012? If so, there may be repercussions that affect the retirement plan you sponsor. Your plan may have experienced a partial termination.

The IRS considers a partial termination to have occurred when an employer-initiated action results in a significant decrease in plan participation. Generally, the IRS presumes a partial termination has occurred when an employer experiences a workforce reduction of 20%.

The reduction in workforce rate is determined by dividing the number of participating employees who had an employer-initiated severance during the plan year by the sum of the number of participating employees at the start of the plan year and the number of employees who became participants during the plan year. Note that the period used to determine the turnover rate can be longer than the plan year if there is a series of related severances from employment. Also, exceptions are made for employers with traditionally high turnover rate, where annual turnover exceeds 20 percent on a regular basis.

An employer-initiated severance from employment generally includes any severance from employment, other than that on account of death, disability or retirement on or after normal retirement age. Voluntary terminations can also be excluded if the employer can prove that the termination was entirely voluntary. Employees who have been terminated in connection with a transfer to a different controlled group can also be excluded from consideration if they continue to be covered by a plan that is a continuation of the plan under which they were previously covered (such as a plan spin-off). Therefore, it is important to maintain proper records as to the reasons behind terminations of employment.

A partial termination of a qualified plan can occur for reasons other than turnover. Other reasons for a partial termination could include the adoption of plan amendments that adversely affect the rights of employees to vest in benefits under the plan, plan amendments that exclude a group of employees previously covered under the plan or the reduction or cessation of future benefit accruals resulting in a potential reversion to the employer.

If a plan experiences a partial termination, all affected participants must be fully vested in their account balance as of the date of partial termination. “Affected” participants are those employees actually terminated by the employer. Typically, employer contributions are subject to a graduated vesting schedule. Upon a partial termination, however, all employer contributions and other employer contributions must be fully vested for all affected participants, regardless of the vesting schedule in the plan document.

Workforce reduction issues are challenging even without the added burden of determining if a partial termination has occurred. If your business has experienced a significant reduction in workforce, please contact us to discuss the possible ramifications to your retirement plan.

Contact:

Stacey L. Spencer, QKA

317-260-4421 | sspencer@greenwaltcpas.com