Archive for May, 2010

Health Care Credit Update

Wednesday, May 26th, 2010

Health CareThe new health care reform laws have differing impacts and timelines for employers depending upon the size of the business and the types of benefit plans they have put into place to provide health related insurances.  Since there is interaction between the HIRE Act and health care reform that presents both opportunities and pitfalls, we highly recommend that businesses consult with their CPA, insurance broker and other trusted advisers to determine the proper course of action specific to their business.

SHORT TERM OVERVIEW OF THE IMPACT ON BUSINESSES

  • 2010-2013: Small businesses (fewer than ) providing health care coverage for employees may be eligible to claim a credit equal to 35% of the contributions they make on behalf of their employees for insurance premiums.  There are rules and limitations which are outlined in the recap of IRS Notice 2010-44 below.
  • 2011: Employers must report the value of health insurance plans on W-2 forms and all employer-sponsored plans will be required to have the following amendments: (1) Eliminate lifetime and annual limits on benefits, (2) Provide first-dollar coverage for preventative care, (3) Extend eligibility for dependent coverage to employees’ unmarried children through age 26.
  • 2013: A $2,500 limitation on contributions to health FSAs and FSAs, HSAs or MSAs can no longer be used for over the counter drugs.  Penalties for using these accounts for disallowed purchases will increase from 10 to 20% on HSAs and from 15 to 20% for MSAs.

There are many other phase-in reforms that occur in the following years.  Due to the volatility of this reform, we recommend that you follow the progress at the IRS website and seek counsel from your trusted advisers in order to plan effectively.

IRS OFFERS DETAILS ON HEALTH CARE TAX CREDIT

On May 17th, 2010 the IRS issued new guidance to make it easier for small businesses to determine whether they are eligible for the new health care credit.  Notice 2010-44 provides the following information:

  1. Purpose and Background: Brief overview of the reasons for the credit.
  2. Employers Eligible for the Credit: Overview of the requirements and details on the five steps employers must take to determine eligibility.
  3. Calculating the Credit: Details on the three steps that determine the credit amount.
  4. Claiming the Credit and Effect on Estimated Tax, AMT and Deductions
  5. Transition Relief for Taxable Years Beginning in 2010
  6. Effective Date

The notice is twenty pages long and offers quite a few examples to assist the employer with making the proper determinations.  Again, we recommend that business owners consult with their CPA and other trusted advisers to ensure they are taking full advantage of the general business credit being offered.

NON PROFIT EMPLOYERS

Organizations described in section 501c that are exempt from tax under section 501a may be eligible for the credit.  Since these employers are exempt from paying corporate / business tax, there is some confusion as to how they will be able to claim and receive the credit.  In Notice 2010-44 section 45R states that, “For a tax-exempt eligible small employer, the IRS will provide further information on how to claim the credit.”  General consensus among the many advisers PCS has polled is that the credit will either be taken on the 941 payroll tax filing or may be issued in the form of a grant.  At this time, all thoughts are pure conjecture and we are awaiting final direction from the IRS.

Since eligible small employers that are not tax-exempt will be taking the credit on the business tax returns, there are not any ramifications on payroll tax reporting at this time.  However, it’s important to note the need for reporting the value of the employees health insurance on the W-2’s beginning in tax year 2011.

HELPFUL LINKS

NOTICE 2010-44

Answers to Frequently Asked Questions

IRS Announcement Offering Details on Health Care Credit

First PCS Article on Health Care Reform

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney or an HR Professional.

HIRE Act and COBRA Update

Wednesday, May 26th, 2010

Health CareThe IRS has released a number of updates over the past month including additional clarification on the HIRE Act and COBRA extension. It contains details on how to receive the credit for wages/tips paid to qualified employees after March 18th and before April 1st, 941 filing instructions and additional information on the COBRA premium assistance and extension.

Qualified employer’s social security tax credit.  Qualified employers are allowed a credit in the second quarter of 2010 for their share (6.2%) of social security tax on wages/tips paid to their qualified employees after March 18, 2010 and before April 1, 2010.  The credit will be taken on lines 12c through 12e on the 941 where the employer will enter the number of qualified employees for the period, the exempt wages/tips and compute the social security tax exemption for the period of March 19-31, 2010.  This amount will be treated as a deposit of taxes on April 1, 2010 and must not be used to adjust line 17 (Tax Liability for Quarter) or Schedule B (Report of Tax Liability for Semiweekly Schedule Depositors).

Qualified employer’s social security tax exemption.  Qualified employers are allowed an exemption for their share (6.2%) of social security tax on wages/tips paid to qualified employees after March 31, 2010 and before January 1, 2011.  The exemption is taken on lines 6a through 6d on the 941 where the employer will enter the number of qualified employees first paid exempt wages/tips in the quarter, the total number of qualified employees paid exempt wages/tips in the quarter, the exempt wages/tips paid during the quarter, and the social security tax exemption.  The tax exemption listed on line 6d will directly impact the total taxes before adjustments listed on line 6e of the 941 return.

Payroll Control Systems (PCS) has been following the updates from the IRS closely with regard to the HIRE Act.  We have the systems and procedures in place to assist our customers with receiving this credit.  If you are not a PCS customer and would like further assistance, please call 763.513.5951 or email us at info@pcspayroll.com.  If you are a current customer and have further questions, please contact your Client Account Manager directly.  To access our prior releases on the HIRE Act which include a wizard for determining new hire eligibility and the W-11 form the employee must sign, click here.

COBRA premium assistance credit extended.  The credit for COBRA premium assistance payments has been extended.  It now applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months.  Congress may take additional legislative action that extends the credit further.  Stay tuned for further updates from PCS or you can monitor the progress at the IRS website, enter keyword COBRA.

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney or an HR Professional.

What to look for in an HRIS

Tuesday, May 25th, 2010

PCS HRISTo be a practical investment choice for a small to mid-size organization, a satisfactory HRIS solution must have its HR and benefits functions highly integrated. It must be both agile and robust so it can easily keep abreast of constant change, and it must be built on a tried and true foundation that is easy to use and maintain.

Ease of use is a vitally important feature for an HRIS. The learning curve on any new software is often a challenge for people whose primary function is non-technical, such as the average HR Generalist. It is important for an investment in technology to be accepted and become part of the fabric of the HR department. There are three things to look for that will make an HRIS easier to use and more accepted by staff:

  • Wizards: Wizard-based technology makes it easy for staff to enter or import employee information and make changes or updates by following through a set of simple instructional, fill-in the blanks questions on the screen, rather than their having to learn a report writing program or call in consultants.
  • Strong HR functionality combined with flexible benefit capabilities: The system should be able to handle compensation, attendance and recruitment, and legal requirements such as FMLA and OSHA, while integrating them with benefits issues such as COBRA.
  • Role-based operation: A good HRIS solution should be able to cater to the needs of a wide range of people and functions within the organization, and should appear seamlessly tailored to their requirements. Role based administration is becoming increasingly important in the HRIS marketplace. With this feature, HR Administrators define what an individual can see in the system, allowing Managers access to the information they need about their team, while locking them out of information that is not pertinent. Role-based administration can extend further into proactive alerting, i.e. a particular manager or management level can be automatically alerted by the system that it is time to conduct a review, with those alerts being based on the specific manager’s role.

PCS Ascentis HRIS provides fully integrated HRIS and Employee and Manager self-service which is especially designed for small to mid-sized organizations. For more information click here or email info@pcspayroll.com.

Exit Strategies Help Maximize the Value of a Business – Part II

Monday, May 24th, 2010

Estate and Financial Planning:

Preparation Gives You Control Over When To Exit Your Business

By Thomas W. Lyons

Business Valuation Part IINote: This is the second in a series of three articles on preparing for the sale of a business.  It is a summary on Mr. Lyons’ popular book, Exit Strategy: Maximizing The Value Of Your Business.

In Part One of this series, we established that selling a business is the final part of the owner’s role in building it and, with some strategic planning, owners can maximize the value of their businesses, control the timing of the sale, increase the likelihood of a smooth transition, and ultimately reach their personal financial goals. 

A significant part of the preparation stage is financial and estate planning. That process begins with some retirement goals and parameters. It is important to make sure you have enough money to support the next phase of your life, and to set personal financial objectives. Meeting with a good financial planner is the first step.

Good financial planners will take an inventory of your assets, complete a risk analysis, and develop a long-term wealth accumulation strategy. They will calculate how much in liquid assets is needed to achieve long-term retirement goals, and provide a comprehensive plan to guide you. 

The big question is: What does the business need to be worth to reach your financial goals? A business valuation can help you understand how close you are to achieving your objectives. If the value, after taxes and fees, meets your retirement objectives, then it may be a good time to exit. If not, then perhaps a new sales initiative, an acquisition, or other growth strategy may be needed for the business to increase its enterprise value to reach your financial goals. 

Selling your business before it’s capable of supplying the value needed to reach those goals can lead to frustration and disappointment. Working closely with an experienced financial planner and a knowledgeable business broker can help prevent such a bad outcome. 

An experienced trusts and estate attorney is equally important in defining and achieving your financial legacy. Among other beneficial strategies, estate planning may allow you to transfer equity on a tax-advantaged basis at the time of the sale of your business. Some common estate planning vehicles include: Wills, trusts, generation-skipping trusts, GRATs, life insurance trusts, and family limited partnerships, among others.

In addition to a financial legacy, the estate planning process may include writing an ethical will. An ethical will is a supplemental, non-binding, non-legal document that you prepare yourself. It is a tradition in which a person passes on personal values, beliefs, blessings and advice to relatives of future generations. Ethical wills explain your wishes, and can convey family history, stories and memories, values, insights to life and special wisdom among other information you may wish include.

It’s important to create a close working relationship with your advisory team. To achieve the highest level of professional sales representation and receive maximum financial benefits for the seller, the team for selling a middle market business should include the following: Business broker, financial planner, trust and estate attorney, accountant (CPA), and a transaction attorney.

Quarterbacked by the business broker, your team will be critical to getting the professional representation necessary to negotiate a price that meets all your financial objectives.

It’s important to insure your CPA and the transaction attorney are experienced in mergers and acquisitions. It is appropriate to ask them about their past mergers and acquisitions experience. A good business broker can help ask the questions that will lead to a high level of professional service from your advisors.

With proper planning, business owners can control when and how to sell the business. With an effective exit strategy, an owner can sell when he or she has achieved personal financial and estate planning objectives, and assess proposals with increased discernment. In short, the seller will be in a strong negotiating position.

Being prepared with an effective exit strategy can result in a higher price for the business, minimize tax consequences, protect employees and family, and empower the seller to control retirement issues in an orderly fashion.

With financial and estate planning issues resolved, it is now time to put the business on the market. The third of this three-part series will explain the process of selling a business, including identifying potential buyers, marketing the business, and negotiating a successful closing.

Thomas W. Lyons is founder and principal partner of Faelon Business Brokers, a Minneapolis-based mergers and acquisitions advisory firm. Mr. Lyons is author of Exit Strategy: Maximizing The Value Of Your Business and conducts seminars based on the book for business owners and advisors. For 35 years, Mr. Lyons has owned, operated, bought and sold businesses; for the past 25 years, he has advised and represented owners in buying, selling and planning for business exit strategies.  He is also the host of Today’s Business Radio.com and can be heard on 830 WCCO at 11:00 a.m. on Saturdays.

More information and the book can be found at www.faelon.com.

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney or an HR Professional.

Joe’s Jottings

Monday, May 24th, 2010

Joe ReillyFirst of all, thank you to all of our customers who have helped PCS become the only payroll service in Minnesota to be rated “A+” by the Better Business Bureau!  Although we’ve worked hard to achieve that recognition, we know it takes hard work on the part of our valued customers as well!

We’re also proud of another, more recent recognition… 2010 Entrepreneur of the Year, awarded last week by the TwinWest Chamber of Commerce.  Although the recognition was given to me as President, the award really belongs to our 40 employees, both staff members as well as management!!  Their hard work and dedication allow me to represent PCS in the business community, as well as the non-profit community.  Through my involvement in fund raising, board participation, as well as volunteering, PCS can “give back.”  It’s a common goal of the PCS staff to share our good fortune with others.  I’m proud to be one of the many conduits to achieve that goal.

If you have an opportunity to talk to a member of our staff, please be sure to congratulate them…their commitment keeps PCS on the leading edge of service and quality!

We appreciate your business!

Joe Reilly

President

PCS’s Joe Reilly Wins Entrepreneur of the Year!

Sunday, May 23rd, 2010

Small Business Awards Luncheon LogoEach May, the TwinWest Chamber of Commerce honors the entrepreneurial spirit of its membership at the Small Business Awards Luncheon. This year’s event featured keynote speaker Susan K. Dunkley, Co-Founder of New Horizon Enterprises, Inc., emcee Frank Vascellero from Channel 4 News, and the presentation of TwinWest’s prestigious Entrepreneur of the Year and Emerging Entrepreneur of the Year annual awards.

The house was full for the event held at the Doubletree Hotel Minneapolis Park Place and they were treated to a great event.  The backdrop of the event was “Navigating the Deadliest Patch” which was a take on the popular Discovery Channel show, “Deadliest Catch”.   With three finalists in both categories, there were six “Captains” navigating their ships through the “Deadliest Patch” of recent economic times.

After a terrific lunch and preliminary introductions, the crowd was treated to a heart-felt keynote address from Susan Dunkley which outlined the highlights of her incredible success story as Co-Founder of New Horizon Academy.  Filled with many colourful anecdotes and some hilarious stories of the things kids do, Susan left the stage to a standing ovation of appreciation.

The fun continued with the introduction of the video, “Navigating the Deadliest Patch”.  Filmed and produced by Quarterton Productions each of the nominees were at the helm of their ship, giving serious advice with some tongue and cheek humor mixed in.

The first award for Emerging Entrepreneur of the Year went to Thomas Heller of Soulo Communications.   The other finalists were Eric Nelson, owner of Eric R. Nelson CPA LLC, and Pat Bedall, owner of Sign-A-Rama Crystal.

The tension mounted as the three finalists for Entrepreneur of the Year were asked to come to the stage for the presentation of the prestigious award.  The three finalists were Barbara Hensley, founder of Hope Chest  for Breast Cancer, Julie McDonald, owner of iVision Human Resources, and Joe Reilly, President of Payroll Control Systems.

When Joe Reilly was announced there was a loud whoop from Joe’s wife, Patti along with quite a few shouts of encouragement and, of course, the ovation from the crowd.  Joe took his full two minutes at the microphone, mostly using it to thank his staff and many friends who have helped him throughout his career.

Special thanks went out to Joe’s wife Patti and best friends, Mike and Lynn Folken, for their never ending support and encouragement throughout the years.

See more of Joe’s thoughts and feelings about winning this award in this month’s “Joe’s Jottings” (link to Joe’s Jottings) article.

Joe Reilly Wins

Joe Reilly Acceptance Speech

Joe and Patti Reilly

For more photos of the event, click here.