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Jen Campbell-Brown
In Employee Benefit Plans, General, Industry News, News

The SECURE 2.0 Act of 2022

The SECURE 2.0 Act of 2022 (Act) was signed into law on December 29, 2022, to increase retirement savings, improve retirement rules, and lower employer costs of setting up a retirement plan. Plan amendments required by the Act generally need not be made until the end of the first plan year beginning on or after January 1, 2025; however, plans must be operated in accordance with the effective date of each new provision. Following is a summary of some of the significant provisions that may affect plan sponsors and auditors:

Autoenrollment/auto escalation: Effective for plan years beginning after December 31, 2024, new 401(k) and 403(b) plans must automatically enroll participants when they become eligible; employees may opt out of coverage. All 401(k) and 403(b) plans in effect on the date of enactment are grandfathered; small businesses with 10 or fewer employees, new businesses (i.e., those that have been in business for less than three years), church plans, and governmental plans are exempted from this provision.

Repeal and replacement of the Saver’s Credit: A new “Saver’s Match” will replace the current law nonrefundable “Saver’s Credit” for certain individuals who make contributions to employer retirement plans. The match is subject to an income-based phase out and becomes effective for tax years beginning after 2026.

Required Minimum Distributions (RMDs): The RMD age will increase in 2023 and again in 2033. Starting in 2024, Roth accounts will be exempt from the RMD rules while the participant is alive.

Catch-up contributions: The catch-up contribution limit will increase for taxable years beginning after December 31, 2024. Starting in 2024, all catch-up contributions must be Roth contributions for participants with compensation equal to or in excess of $145,000.

Changes to long-term, part-time employees: The Act modifies the measuring period for long-term, part-time employees from three years to two years and also extends the long-term, part-time employee provision to 403(b) plans that are subject to ERISA.

Student loan payments: For plan years beginning after December 31, 2023, employers may make matching contributions under a 401(k) or 403(b) plan on employees’ qualified student loan payments. Employees who receive such matching contributions are required to certify annually to the employer that such payment has been made on such loan.

Withdrawals for certain emergency expenses: The Act provides an exception from the 10% tax on certain early distributions made after 2023 that are used for emergency expenses which are unforeseeable or immediate family needs relating to personal or family emergency expense. Plan administrators generally may rely upon a participant’s self-certification; however, the IRS is authorized to issue guidance to address situations in which a plan administrator has actual knowledge to the contrary or there are employee misrepresentations.

Increased dollar threshold for mandatory distributions: For distributions after December 31, 2023, the involuntary distribution threshold will increase from $5,000 to $7,000.

Pension linked emergency savings accounts (ESA): Beginning in 2024, DC plans may include an ESA for non-highly compensated employees; accounts are part of the plan document but accounted for separately. Employers may automatically opt their employees into these accounts, and all contributions must be made on an after-tax basis.

Recovery of retirement plan overpayments: Effective immediately, retirement plan fiduciaries have the discretion to not recoup overpayments mistakenly made to retirees. Where a plan’s fiduciaries choose to recoup overpayments, collection efforts are subject to certain limitations and protections to safeguard retirees. Rollovers of the overpayments remain valid.

Compliance testing/corrections: The Act includes changes to the rules for top-heavy plan testing, expands the IRS Employee Plans Compliance Resolution System to allow more types of errors to be rectified internally through self-correction and exempt certain failures to make RMDs from the excise tax penalty, and allows for a grace period to correct, without penalty, reasonable errors in administering automatic enrollment and automatic escalation features occurring after December 31, 2023.

403(b) plans: The Act conforms the current hardship distribution rules for 401(k) plans to 403(b) plans and the long-term, part-time employee provision is extended to 403(b) plans that are subject to ERISA. In addition, 403(b) plans will now be allowed to invest in collective investment trusts (CITs). Beginning in 2023, 403(b) plans can join a multiple employer plan (MEP) or pooled employer plan (PEP).

Annual audits for groups of plans: The Act clarifies that each plan filing under a group of plans (added by the SECURE Act) is required to submit audited financial statements if it has 100 participants or more. Plans with fewer than 100 participants that are included in a group of plans are not required to submit audited financial statements.

Other: The Act amends qualified birth and adoption distribution rules, permits plans to distribute money to pay premiums for high-quality long-term care insurance products and allow withdrawals by participants who have experienced domestic abuse.

 

Source: AICPA Employee Benefit Plans Audit Quality Center. Click here to read the SECURE 2.0 Act (included as Division T on pages 2,046 to 2,404 of the Consolidated Appropriations Act, 2023).

Jen Campbell-Brown
In General, News

IRS increases mileage rate for remainder of 2022

With rising gas prices, traveling for work is becoming more and more worrisome. Thankfully, the IRS has our backs. If you or your employees travel for work, check out this update from the IRS.

“IR-2022-124, June 9, 2022

WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rate for the final 6 months of 2022. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes.

For the final 6 months of 2022, the standard mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the rate effective at the start of the year. The new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents for the remainder of 2022, up 4 cents from the rate effective at the start of 2022. These new rates become effective July 1, 2022.

The IRS provided legal guidance on the new rates in Announcement 2022-13 PDF, issued today. In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2022. The IRS normally updates the mileage rates once a year in the fall for the next calendar year. For travel from January 1 through June 30, 2022, taxpayers should use the rates set forth in Notice 2022-03 PDF.

“The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices,” said IRS Commissioner Chuck Rettig. “We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate.”

While fuel costs are a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

The 14 cents per mile rate for charitable organizations remains unchanged as it is set by statute.

Midyear increases in the optional mileage rates are rare, the last time the IRS made such an increase was in 2011.”

 

Mileage Rate Changes

 

Purpose Rates 1/1 through 6/30/2022 Rates 7/1 through 12/31/2022
Business 58.5 62.5
Medical/Moving 18 22
Charitable 14 14

Source (article and table): Internal Revenue Service. “IRS increases mileage rate for remainder of 2022.” June 9, 2022. https://www.irs.gov/newsroom/irs-increases-mileage-rate-for-remainder-of-2022

Andy DeLong
In News

IMPORTANT CHANGES TO THE CHILD TAX CREDIT (JULY 2021)

Brickley DeLong would like to make our clients aware of recent changes that were made to the child tax credit, which will benefit many taxpayers. The changes made as part of the American Rescue Plan Act that was enacted in March 2021 include:

  • The credit amount has increased for certain taxpayers
  • The credit is fully refundable (meaning you can receive it even if you don’t owe the IRS)
  • Some tax payers may receive a portion of the credit in monthly payments

The new law has also raised the age of qualifying children to 17 from 16, meaning some families will be able to take advantage of the credit longer.

For taxpayers that do not opt out of monthly payments, the IRS will pay half the credit in the form of advance monthly payments beginning July 15. Taxpayers will then claim the other half when they file their 2021 income tax return.

Though these tax changes are temporary and only apply to the 2021 tax year, they may present important cash flow and financial planning opportunities today. It is also important to note that the monthly advance of the child tax credit is a significant change. The credit is normally part of your income tax return and would reduce your tax liability. The choice to have the child tax credit advanced will affect your refund or amount due when you file your return. To avoid any surprises, please contact your Account Administrator.

Qualifications and How Much to Expect

The child tax credit and advance payments are based on several factors, including the age of your children and your income:

  • The credit for children ages 5 and younger is up to $3,600 – with up to $300 received in monthly payments.
  • The credit for children ages 6 to 17 is up to $3,000 – with up to $250 received in monthly payments.

To qualify for the child tax credit monthly payments, you (and your spouse if you file a joint tax return) must meet the following criteria:

  • Filed a 2019 or 2020 tax return and claimed the child tax credit or given the IRS your information using the non-filer tool
  • Have a main home in the U.S. for more than half the year or file a joint return with a spouse who has a main home in the U.S. for more than half the year
  • Have a qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number
  • Your income does not exceed certain limits

You can take full advantage of the credit if your income (specifically, your modified adjusted gross income) is less than $75,000 for single filers, $150,000 for married filing jointly filers, and $112,500 for head of household filers. The credit begins to phase out above those thresholds.

Higher-income families (e.g., married filing jointly couples with $400,000 or less in income or other filers with $200,000 or less in income) will generally get the same credit as prior law (generally $2,000 per qualifying child) but may also choose to receive monthly payments.

Taxpayers generally won’t need to do anything to receive any advance payments as the IRS will use the information it has on file to start issuing the payments. You may receive a letter in the mail from the IRS indicating that you will begin receiving these payments in July of 2021. Please alert your Account Administrator if you receive one of these letters.

IRS’s Child Tax Credit Update Portal

Using the IRS’s child tax credit and update portal, taxpayers can update their information to reflect any new information that might impact their child tax credit amount, such as filing status or number of children. Parents may also use the online portal to elect out of the advance payments or check on the status of payments.

The IRS also has a non-filer portal to use for certain situations.

How Brickley DeLong Can Help

With any tax law change, it’s important to revisit your full financial roadmap. We can help you determine how much credit you may be entitled to and whether advance payments are appropriate. How you choose to receive the credit (partially advanced via monthly payments or solely on your next year’s return) could have many impacts to your financial plans.

Please contact your Account Administrator today to discuss your specific situation. As always, planning ahead can help you maximize your family’s financial situation and position you for greater success.

Brickley DeLong
In General, News

Michigan – UIA Update

 

Unemployment Insurance Agency

Michigan Department of Labor and Economic Opportunity
Dear Employers:

UIA is in the process of updating benefit charges for contributing and reimbursing employers. We are taking this action in order to comply with the temporary expansion in unemployment eligibility and cost-sharing that is part of the Governor’s Executive Order 2020-76.

This notice is being sent to assure you that employers will not be charged for employees collecting benefits due to a layoff, leave of absence, temporary shutdown, or reduced work hours for the weeks ending 3/21/2020 through the end of the Executive Order (currently the week of 8/15/2020).  Benefits charges for those weeks will be charged to the Nonchargeable Benefits Account (NBA).

Due to the updating of benefit charging being incomplete, we understand discrepancies occurred in your current billing. We are resolving those discrepancies, updating all accounts with credits, and a new billing statement will be issued to you once our system updates are completed. If you already paid your 2nd quarter 2020 bill and credits are applied later, you may use the credits toward the 3rd quarter 2020 billing or you may request a refund.

To request a refund, log into your MiWAM account. Under the Account Services tab, click “Apply for Credits.”

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Patrick Mutchler
In General Articles, News

Are you managing project scope – or is it managing you?

Contractors by their nature and occupation have a need to be in control. Nearly every project includes a struggle to maintain control of costs, safety and quality.

To put it a different way, what you’re trying to manage on every job is its scope. When you can keep the project confined to its contractual parameters, the job will likely turn out fine. Unfortunately, the scope often has a funny way of expanding its reach, pushing you aside and taking over a job. The results usually aren’t very positive.

3 parts to the story

Every contractor needs to stay on top of his or her scope management procedures to prevent the job from getting out of hand. These are active and ongoing steps to monitor a project and to keep the job within reasonable limits. They should ensure that, if the scope does significantly expand, you get paid for it. Think of scope management as three parts of a story:

  1. The beginning. During the planning phase, you need to comprehensively define the scope you’ll undertake and be sure it’s clearly stated in the contract. For example, if the plans show 25 windows in a building, the contract should say that you’ll install any extra windows at a specified additional cost.This is where experience and keeping historical job data can be really beneficial. If you’ve worked on a similar project and the scope seems untenable, raise this issue with the owner and give yourself a chance to settle on reasonable guidelines for the project.
  2. The middle. As the job gets started, your scope management efforts should involve applying a systematic, consistent approach to managing the work. Financially speaking, this means continually evaluating what you’re doing to ensure it’ s within the parameters -and price-of the contract.Train your project managers to submit regular reports to you regarding job costs to determine whether overruns are imminent. Today’s mobile technology can make doing so much more efficient. Integrate job costing into your accounting system or simply download an app that enables easier field reporting.
  3. The end. Scope management is perhaps the most important at completion. When that punch list materializes, it’s all too easy to get dragged into an endless series of extra tasks.One savvy scope management rule of thumb: Identify the people responsible for closing out the job up front. Doing so will prevent new faces from joining the project at the last minute, which could slash profitability as these individuals eat up valuable time getting up to speed.

    Also, make sure your punch list is truly universal. Today’s cloud-based technology should allow everyone on the job – from the general contractor to subcontractors to inspectors and engineers – to look at the same document and update it in real time.

Additional thoughts

When many contractors first discover scope management, they immediately clamp down on even the slightest aberration to a contract. Sometimes they’re too rigid in their approach, which could rub an owner the wrong way or cause them to miss out on a profitable change order.

This brings to mind an important catch about scope management: It’s not so much about limiting the amount of work you perform on a project as it is about assessing opportunities and making the most of them.

When a prospective job revision arises, immediately call a meeting with the project manager and any other necessary parties. If it’s a nonessential change, determine whether, though potentially profitable, it drives you too far out of the scope of the contract. If it’s an essential revision, decide whether it’s far enough outside the scope to warrant additional negotiation. Having a formalized and effective change order process is essential.

On the lookout

Being in control is a badge of honor in the construction business. Don’t leave your scope management procedures to chance. Put them in writing, discuss them with your project managers and advisors, and always be on the lookout for ways to improve them. •

Larry Cooper
In Larry Cooper, News

2017 – 12/26 – Tax Cuts and Jobs Act: Key provisions affecting businesses





The recently passed Tax Cuts and Jobs Act includes a multitude of provisions that will have a major impact on businesses. For example, it creates a flat corporate rate of 21% and temporarily provides a new 20% qualified business income deduction for owners of flow-through entities (such as partnerships and S corporations) and sole proprietorships. It also enhances some breaks, but it limits or eliminates many others. The changes generally apply to tax years beginning after December 31, 2017. Contact us for more details and to discuss the impact on your business.

Michael Davis
In News

Reduce your 2017 tax bill by buying business assets


Two valuable depreciation-related tax breaks can potentially reduce your 2017 taxes if you acquire and place in service qualifying assets by the end of the tax year. Tax reform could enhance these breaks, so you’ll want to keep an eye on legislative developments as you plan your asset purchases.

Section 179 expensing

Sec. 179 expensing allows businesses to deduct up to 100% of the cost of qualifying assets (new or used) in Year 1 instead of depreciating the cost over a number of years. Sec. 179 can be used for fixed assets, such as equipment, software and real property improvements.

The Sec. 179 expensing limit for 2017 is $510,000. The break begins to phase out dollar-for-dollar for 2017 when total asset acquisitions for the tax year exceed $2.03 million. Under current law, both limits are indexed for inflation annually.

Under the initial version of the House bill, the limit on Section 179 expensing would rise to $5 million, with the phaseout threshold increasing to $20 million. These higher amounts would be adjusted for inflation, and the definition of qualifying assets would be expanded slightly. The higher limits generally would apply for 2018 through 2022.

The initial version of the Senate bill also would increase the Sec. 179 expensing limit, but only to $1 million, and would increase the phaseout threshold, but only to $2.5 million. The higher limits would be indexed for inflation and generally apply beginning in 2018. Significantly, unlike under the House bill, the higher limits would be permanent under the Senate bill. There would also be some small differences in which assets would qualify under the Senate bill vs. the House bill.  

First-year bonus depreciation
For qualified new assets (including software) that your business places in service in 2017, you can claim 50% first-year bonus depreciation. Examples of qualifying assets include computer systems, software, machinery, equipment, office furniture and qualified improvement property. Currently, bonus depreciation is scheduled to drop to 40% for 2018 and 30% for 2019 and then disappear for 2020.

The initial House bill would boost bonus depreciation to 100% for qualifying assets (which would be expanded to include certain used assets) acquired and placed in service after September 27, 2017, and before January 1, 2023 (with an additional year for certain property with a longer production period).

The initial Senate bill would allow 100% bonus depreciation for qualifying assets acquired and placed in service during the same period as under the House bill, though there would be some differences in which assets would qualify.

Year-end planning

If you’ve been thinking about buying business assets, consider doing it before year end to reduce your 2017 tax bill. If, however, you could save more taxes under tax reform legislation, for now you might want to limit your asset investments to the maximum 179 expense election currently available to you, and then consider additional investments depending on what happens with tax reform. It’s still uncertain what the final legislation will contain and whether it will be passed and signed into law this year. Contact us to discuss the best strategy for your particular situation.

© 2017

Patrick Mutchler
In News

Seasonal business? Optimize your operating cycle

Every business has some degree of ups and downs during the year. But cash flow fluctuations are much more intense for seasonal businesses. So, if your company defines itself as such, it’s important to optimize your operating cycle to anticipate and minimize shortfalls.

A high-growth example

To illustrate: Consider a manufacturer and distributor of lawn-and-garden products such as topsoil, potting soil and ground cover. Its customers are lawn-and-garden retailers, hardware stores and mass merchants.

The company’s operating cycle starts when customers place orders in the fall — nine months ahead of its peak selling season. So the business begins amassing product in the fall, but curtails operations in the winter. In late February, product accumulation continues, with most shipments going out in April.

At this point, a lot of cash has flowed out of the company to pay operating expenses, such as utilities, salaries, raw materials costs and shipping expenses. But cash doesn’t start flowing into the company until customers pay their bills around June. Then, the company counts inventory, pays remaining expenses and starts preparing for the next year. Its strategic selling window — which will determine whether the business succeeds or fails — lasts a mere eight weeks.

The power of projections

Sound familiar? Ideally, a seasonal business such as this should stockpile cash received at the end of its operating cycle, and then use those cash reserves to finance the next operating cycle. But cash reserves may not be enough — especially for high-growth companies.

So, like many seasonal businesses, you might want to apply for a line of credit to avert potential shortfalls. To increase the chances of loan approval, compile a comprehensive loan package, including historical financial statements and tax returns, as well as marketing materials and supplier affidavits (if available).

More important, draft a formal business plan that includes financial projections for next year. Some companies even project financial results for three to five years into the future. Seasonal business owners can’t rely on gut instinct. You need to develop budgets, systems, processes and procedures ahead of the peak season to effectively manage your operating cycle.

Distinctive challenges

Seasonal businesses face many distinctive challenges. Please contact our firm for assistance overcoming these obstacles and strengthening your bottom line.

© 2017