Planning for taxes makes good financial sense. When you take the time to plan, you know you are doing what you can to minimize your tax burden.

Everyday financial decisions and transactions can affect your taxes more than you may realize. This 2016 Tax Planning Guide explains how taxes fit into your financial picture and suggests strategies that can help lower your federal income-tax liability. The Guide includes helpful explanations of important individual and business tax provisions along with examples of how the rules work.

As you read the Guide, please keep in mind that everyone’s tax situation is different. Before implementing any of the strategies discussed here, you will want to secure professional advice.

2016 Tax Planning Guide

New Due Dates

Forms W-2 and W-3

The due date for filing 2016 Forms W-2, W-2AS, W-2CM, W-2GU, W-2VI, W-3 and W-3SS with the SSA is now January 31, 2017, whether you file using paper forms or electronically.

General Instructions for Forms W-2 and W-3 

1099-MISC

Public Law 114-113, Division Q, section 201, requires Form 1099-MISC to be filed on or before January 31, 2017, when you are reporting nonemployee compensation payments in box 7. Otherwise, file by February 28, 2017, if you file on paper, or by March 31, 2017, if you file electronically. The due dates for furnishing payee statements remain the same.

Exceptions to reporting.

New exceptions to reporting were added by P.L. 114-14 (compensation for disability or survivor’s benefits for public safety officers) and P.L. 114-113 (compensation for wrongful incarceration).

See Instructions for Form 1099-MISC

Press release from the Michigan Department of Treasury

In an effort to combat potential income tax fraud The Michigan Department of Treasury is cautioning taxpayers of fraudulent phone calls being made demanding taxpayers pay an immediate amount of money or face actions from the department. Calls are being received from a legitimate Grand Rapids-area Treasury phone number, which has apparently been cloned by the scammers. Victims are told they owe money to the Department of Treasury and if not paid promptly through a pre-loaded debit card or wire transfer the caller will face arrest, legal action or suspension of business.

Please be advised The Department of Treasury will not:

• Demand immediate payment without first mailing you a letter
• Require you to pay your taxes a certain way (for instance require you pay over the phone with a prepaid debit card)
• Threaten to call the police or other law enforcement agencies to arrest you for not paying
• Ask for a PIN, passwords, access codes to your bank accounts, or credit or debit card numbers over the phone.

If you receive a phone call from someone claiming to be from the Michigan Department of Treasury, but you suspect he/she is not a Treasury employee…

• If you don’t owe taxes, or have no reason to think that you do, do not give out any information. Hang up immediately.
• If you believe you may owe taxes or that the Department of Treasury may need to legitimately contact you, please record the employee’s names, call back number and caller ID  available then call the Department of Treasury at (517) 636-5265 to determine if the caller is a Treasury employee with a legitimate need to contact you.

Please use caution and NEVER provide personal information unless you are sure the situation is legitimate.

It can sometimes be difficult to know whether a particular worker should be classified as an independent contractor or an employee for tax purposes, yet this can be a costly issue for both you and them.

 Is your worker an employee?

Although there is no set definition of the term “employee,” the IRS has common-law rules regarding the matter.  A worker is generally considered an employee if the company has the right to control and direct them regarding the job they must do and how they must do it.  It’s also typical for an employee to be provided tools by their employer.

If your worker is an employee, the company must:

• Withhold income and payroll taxes from the employee’s paycheck,
• Pay the employer’s share of FICA taxes and Federal Unemployment Tax (FUTA),
• Provide the employee with any fringe benefits it provides to other employees, and
• Issue the employee a W-2 at the end of the year.

Is your worker an independent contractor?

According to the IRS, a worker is an independent contractor if the “payer has the right to control or direct only the result of the work and not what will be done and how it will be done”. .  It can be very expensive for a person to be classified as an independent contractor, as payroll taxes generally total 15.3% of gross income plus any other expenses, such as purchasing health insurance on the open market.

If your worker is an independent contractor, the company must:

• Issue the contractor a 1099-MISC at year end.

Misclassification

There are some protections in place for companies that misclassify workers who would normally be considered employees and instead treat them as independent contractors, but these protections from employer tax liabilities are only applicable if you have a “reasonable basis” for not treating these workers as employees, if all similarly situated workers are also treated as independent contractors, and if all federal returns are consistent with this treatment.

Author: Lannon Unick, Staff Accountant

I can easily look back and remember my interview with Brickley DeLong. I tried my best to smile the right way and hoped my palms were not sweaty as I shook hand after hand, names and faces blurring together.  The sharp spike of excitement when they made me an offer—I’d been working towards this moment for years and it seemed like my hard work was about to pay off.

In reality, the hard work was only just beginning.

Next week, I will have been here six months. I want to offer five words of wisdom for those starting, or looking to start their career in public accounting.

1. Take notes.
   I cannot stress this enough.  Take notes… of everything, all of the time.  Don’t walk into a meeting, a training, or an informal “I want to go over X with you for just a moment” without having a binder, a note pad, post-its, or anything.  The early days will be a blur of training sessions, new computer systems, new co-workers, and new rules (both official and unwritten); and, unless you have a proper system in place for taking and referencing your notes on a subject, you’ll be stuck asking the same questions over and over again while you try to explain to a boss or a supervisor that you’re not normally this much of an idiot.
2. Try to see the bigger picture.
   When you’re starting, you’ll probably be handed lots of little pieces of things to do.  This is to give you the ability to easy into your work, allow you to apply you studies to the real work, and to minimize too much confusion. In the middle of this, it’s very easy to only focus on the form or the documents directly in front of you as you struggle to remember that one class three years ago that discussed the finer points of a Schedule D.  However, you will be doing yourself a favor if you take a moment to step back and consider where this tiny piece of the financial puzzle fits into the bigger picture.  How does this item affect the overall tax form?  Why is this particular item tested in this particular audit?  If you allow the work in front of you to help you develop a more complete vision of all the moving parts involved in your specialty, it will help you predict next steps, identify potential problems, and make learning the next step of the process that much easier.  And along those lines . .  .
3. Take your time.
   Your first weeks or months on the job you are allowed, or even encouraged, to work a little slower, just to make sure you understand what’s in front of you.  Learn how to do it correctly, push yourself for accuracy instead of time.
4. Get to know your co-workers.
   These are the people down in the trenches with you.  Make friends, eat lunch with people, and get to know who to go to for help. Keep snacks in your desk and be willing to listen when the people around you are offering advice or bits of wisdom on easier or better ways to do the work or interact with a particular client.
5. Remember to breathe.
   No, seriously.  Work is whirling around in your head and making you absolutely crazy?  Feel like you’re teetering on the edge of a nervous meltdown?  Stand up from your desk and go walk around the parking lot or find a quiet corner and put your head between your knees.  Take off your suit jacket and run up and down the stairs a few times.  It’s better to step away from your work for five whole minutes of “you” time than to sit staring at the computer screen while your mind races, your eyes cross, and absolutely zero work gets done.

These are just five of my takeaways. Public accounting is truly both a challenging and a rewarding field. For more information about working at Brickley DeLong, please visit our career pages.

Author: Ed Elsner, CPA, CFE

The ACFE (Association of Certified Fraud Examiners) has recently released its bi-annual study on occupational fraud.  This report includes case studies covering over $6.3 billion in fraud losses. Six billion is a very large dollar amount; however, it is small in comparison to the total worldwide fraud, which is $3.7 trillion annually.

A few key statistics:

• 23% of fraud cases result in fraud of over $1,000,000
• The median loss in if the cases was $150,000
• The median duration of a detected fraud was 18 months

Read the summary of the report.

Download the full report.

For more information on occupational fraud, please contact Ed Elsner at (231) 726-5848 or eelsner@brickleydelong.com.

Michigan legislature recently passed changes to the statute affecting the Essential Services Assessment (ESA). Most importantly, the deadline for eligible taxpayers that failed to file, or filed an incomplete form 5278 with their local assessor to claim the Eligible Manufacturing Personal Property (EMPP) exemption for 2016 has been extended to Tuesday, May 31, 2016.

Forms must be completely filled out and received by the local assessor by the May 31, 2016 deadline. Postmarks by the due date will not be accepted.

No changes to due dates for future filing periods have been made, but this is a second chance for many taxpayers to take advantage of the savings of the new ESA.

To read the full announcement, click here.

Author: Donny Baird

Learn more about our manufacturing services.

To all prospective CPA examinees: You can pass the CPA exam!

Everyone’s experience with the CPA exam is going to be different; and, it’s important to keep in mind, that what works for some, may not work for others.  I was no Elijah Watt Sells Award candidate (not even close, actually), but I did pass all of the exams on my first try. I want to point out some things about studying for and taking the exam that I believe apply to every candidate, and some things that applied to me personally.

For all candidate

• Keep a positive attitude.
  According to the AICPA, about 25,000 people pass their fourth exam section each year. You can be one of them.
• Put in the time.
  Studying is never fun… but it needs to be done. Were you really going to do something productive otherwise? Get back to studying!
• Take the exam as soon as you are eligible.
  Right out of school, the information is still fresh. It would be counterproductive to forget what you learned in school and have to relearn it while studying.  Ideally, your study time should be reviewing the material.
• Stick to a schedule.
  You should have the days you are going to take the exams and the time you plan on studying planned out ahead of time. Having a schedule keeps you committed and focused on your goal.

What worked for me

• Ease into the first exam.
  I studied for about three and a half months for the first exam. For the rest, I studied 2 months. This format worked well for me to avoid burnout. The first exam, I did not have to study as intensely. I knew once I actually took my first exam, the 18-month clock would be ticking for me to get the other three finished.

• Start with the easiest.
  Start with the exam you believe you are most capable of passing. That way, if you do fail your first exam, the 18-month clock isn’t running. It is also important to remember the whole examination process is more of a marathon than a sprint.

• The most expensive study material is not always the best.
  Just because it may cost the most, doesn’t mean it’s the most effective. Success on the exams is a function of the time and effort you put into studying, not the review materials you use.

• Study efficiently.
  For my first exam (FAR), I watched all of the video lectures and read all of my textbooks in depth.  I also took all the pretests and practiced all the simulation problems for every chapter. However, I noticed I was becoming easily distracted during the lectures. I wasn’t actually getting as much out of them as I should have.  For my fourth exam, I didn’t watch any of the video lectures or do any of the simulation practice problems. Instead, I spent a lot more time focusing on the multiple choice questions, which I found to be much more effective at drilling the concepts into my brain. Find what works for you. Don’t trick yourself into thinking that just because you have your study materials in front of you that you’re being productive or efficient with your time.

If I had to do it over:

• Study the topics most likely to be tested.
  I seemed to think that if a certain subject was part of my review materials, I needed to understand it 100%. Thinking back on taking the exams, I probably spent lots of hours studying topics that I was never tested on. I could have spent that time better understanding the more commonly tested areas.

If you’re considering starting the CPA examination process yourself, know that it is a manageable process.  Have confidence, come up with a plan that works for you, and get started. Taking the first steps are the hardest, but once you do, it’ll be over before you know it.

Author: Bryan Jacques

It’s March, and it is likely that you have filed your tax returns already, or you are preparing to have them done. Many of our clients ask us how long they should keep copies of their returns or supporting documents.

Personal records to keep:

One year

• While it’s important to keep year-end mutual fund and IRA contribution statements forever, you don’t have to save monthly and quarterly statements once the year-end statement has arrived.

Three years

• Credit Card Statements
• Medical Bills (in case of insurance disputes)
• Utility Records
• Expired Insurance Policies

Six Years

• Supporting Documents For Tax Returns
• Accident Reports and Claims
• Medical Bills (if tax-related)
• Property Records / Improvement Receipts
• Sales Receipts
• Wage Garnishments
• Other Tax-Related Bills

Forever

• CPA Audit Reports
• Legal Records
• Important Correspondence
• Income Tax Returns
• Income Tax Payment Checks
• Investment Trade Confirmations
• Retirement and Pension Records

For more information on what tax papers (or other important documents) to keep, please contact our offices or visit our Record Retention Policy page on our website.

The IRS issued an alert to payroll and HR professionals to be aware of phishing e-mails in which fraudsters pose as company executives and ask for confidential employee information, such as W-2s or employee’s Social Security Numbers, date of birth, and salary information.

The information being stolen can be used to produce fraudulent returns or to steal an employee’s tax refund.

According to the alert, these “spoofing” e-mails will contain the actual name of the company’s CEO and may request a list of employees and their personal information, including SSNs.

A few of the instances reported contained the following statements in the e-mails:

• Kindly send me the individual 2015 W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review.
• Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary).
• I want you to send me the list of W-2 copy of employees wage and tax statement for 2015, I need them in PDF file type, you can send it as an attachment. Kindly prepare the lists and email them to me asap.

Tax fraud is ever-increasing and ever-evolving. This is just one way that certain cyber-criminals are using to steal personal information. It is important to continuously be alert and aware of these cases to protect yourself (and your employees). To read the full alert by the IRS, click here.

Learn more about our tax services and payroll services.