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Employer Essentials for Open Enrollment

Here are some tips that may help your open enrollment go smoothly.

Be Concise

Employees can be overwhelmed with information overload about options. Provide a summary in easy-to-understand language about the different types of benefits you offer. Keep it simple by answering common questions like how much it will cost per paycheck and the key features.

Engage Employees

Develop a communication strategy that will reach all of your staff. This could include presentations or an FAQ page on your company’s website that addresses common questions to keep your team in the loop.

Provide Assistance

Designate a contact person or team in your human resources department trained to answer questions and assist employees with enrollment. Keeping the process centralized reduces the chance of incorrect information circulating among your workforce.

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Negotiate a Raise

Asking for a raise can be nerve-wracking. You’ll need confidence, professionalism and an effective strategy when the time comes.

RESEARCH FIRST

Before you ask for a raise, look online to learn what the average salary is for your position and experience level in your location. It’s essential to make sure that the increase you’re asking for is within the appropriate range.
Also, know how well your company is performing. Is business booming, or struggling? Recognizing if your employer is in a financial position to increase your salary will impact how much of a boost you request.

REVIEW YOURSELF

The best way to convince your boss you deserve a raise is to bring up your specific accomplishments that helped the company achieve its goals. Demonstrate, if possible, how you add value to your team, and, if you’ve been asked to take on additional responsibilities, be sure to point that out too.

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October 2021 Client Profile

Erin is a full-time employee and tutors her neighbor’s 2nd grader in her home once a week. The neighbor generally pays Erin in cash but sometimes gives her tickets to sporting events or concerts instead of money. How much taxable income from her tutoring work does Erin need to report on her tax return?

The money Erin receives for her tutoring services is taxable income. The real question is whether the event tickets she receives are taxable. The IRS states that any payment received for services performed is taxable. This includes payments that take the form of goods instead of cash.

Erin needs to include the fair market value of the tickets she receives in her taxable income. And since Erin is considered self-employed in regard to her tutoring services, she’ll be able to deduct all of her business-related expenses, including study materials and office supplies. If Erin meets specific criteria, she may include a portion of her mortgage and utilities with the home office deduction.

Client Profile is based on a hypothetical situation. The solutions we discuss may or may not be appropriate for you.

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Financial Health Checklist For Small Business Owners

Keeping your company running smoothly can be more than a full-time job, which can leave little time to focus on your financial goals. However, decision making without considering goals and your future may be something you might regret in the future.

BUDGET MANAGEMENT

Cash-flow problems strike most small business owners. But you can avoid them by creating and managing realistic budgets—at work and home. Monitor your income, expenses, inventory, and cash, adjusting and rebalancing when required to cover your fixed costs and maintain a cash reserve.

Also, meet with your tax professional regularly to maximize your business deductions. This may include timing of income and expenses and saving for retirement in the most tax-efficient way.

RISK MANAGEMENT

Protect your business with adequate insurance coverage. Businesses have any number of risks, and having coverage can alleviate some of your stress.

Perhaps the most important risk to cover is to ensure that your family will be financially secure should the unthinkable happen. Make sure you have adequate life insurance. Also, disability insurance to help protect your personal earnings potential if you’re ill or injured and unable to work.

EYEING THE END

Even if retiring is a long way down the road, create a succession plan. Unpredictable events can hasten your exit. Identify and document who will take over the company in your absence, and, if that means selling it, determine how you’ll get paid. Work with your legal, tax and financial professionals to properly draft required documents.

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Open Enrollment Tips For Employees

Open enrollment is on the horizon, which means workers will soon navigate their benefit options for the next year. Both new and seasoned employees need to carefully review benefit offerings to ensure they take full advantage of their choices.

HEALTH INSURANCE

A lot can change in a year, and coverage that worked last year may not be a good fit anymore. Understand the differences between PPO, HMO, and high-deductible plans. It may be worthwhile to compare each option, factoring in premiums, deductibles, copays, out-of-pocket maximums and possible tax savings.

LIFE INSURANCE

Employee benefits often include free or low-cost life insurance policies. Review your needs and how you’ll want to protect your loved ones. Usually, these employer-sponsored policies are group plans, and they won’t require underwriting or medical evaluations, which can be invaluable to anyone with preexisting conditions.

DISABILITY COVERAGE

Even younger workers can become ill or injured, which is why short-term disability insurance can be a cost-effective way to protect their ability to earn an income. And since some employers may subsidize the cost for disability coverage, be sure you take advantage and secure coverage that fits your needs.

EXTRA, EXTRA

Don’t overlook other perks your employer may offer. For example, HSAs and FSAs can help you save money for health care costs, and dental and vision insurance can cover expenses not included in medical insurance.

Most of the benefits are taken out of your paycheck, pre-tax, lowering your taxable income. Enroll only for benefits you need. And remember, when you leave the job, benefits end, which is why you may need to carry a personal life or disability insurance policy. Be sure to discuss your options with your tax and financial professionals.

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September 2021 Short Bits

IRS ISSUES REFUNDS

The IRS has issued more than 2.8 million in refunds to taxpayers who paid taxes on unemployment compensation before the American Rescue Plan Act excluded $10,200 in unemployment compensation for 2020. Approximately 13 million taxpayers may be eligible for adjustments that the IRS will automatically make to avoid needing taxpayers to file amended tax returns.

FINANCIAL LITERACY

Fifty seven percent of American adults are financially literate according to a report by Standard & Poor’s. Other advanced economies had high levels of financial literacy. Canada, Germany and the United Kingdom all came in with over 65% adult literacy rates. Understanding basic financial concepts allows people to make informed financial choices about saving, spending and borrowing.

2020 CENSUS DATA

The results of the 2020 census are in. The US has over 331 million residents, with California, Texas and Florida topping the list with the most residents; while Wyoming and Vermont are the least populated. Utah and Idaho saw the largest percentage increase in their populations with 18.4% and 17.3% respectively. Texas saw the largest increase with almost four million new residents since the 2010 census. There were over 350,000 citizens in the military or working for the federal government overseas.

FOREIGN INVESTMENT

In 2018, the US Department of Commerce facilitated $20.1 billion in foreign investment into the US, which created over 22,000 jobs. The largest foreign investment came from the United Kingdom, Canada and Japan. Forty-five percent of the foreign investment went into the manufacturing industry. As of 2018, a total of $4.3 trillion has been invested in the US by other countries.

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September 2021 Questions & Answers

QUESTION:

What’s a registered agent and does my business need one?

ANSWER:

A registered agent is a person or business designated to receive official documents on behalf of a business. All companies must have a registered agent and it has to be mentioned when the company files with the Secretary of State. The registered agent could be you, as the business owner, another key employee, your corporate attorney or a hired registered agent business. Just make sure it’s someone you trust to communicate important information about your business promptly.

QUESTION:

What’s the difference between interest rates and annual percentage rates?

ANSWER:

Interest rates are the rates you are quoted when seeking a loan. For example, you might receive an interest rate of 6% when purchasing a new $20,000 car. Your interest expense will be $1,200 a year.

An annual percentage rate (APR) is a more effective rate to consider when comparing loans. The APR includes not only the interest expense on the loan but also all fees and costs in obtaining the loan. The APR is often expressed as a percentage and generally should always be equal to or greater than the interest rate.

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Employee vs Independent Contractor: What’s the Difference?

Tax rules differ for employees vs. independent contractors, so consider income taxes when you need to hire help for your business.

HIRE AN EMPLOYEE

The IRS looks at the degree of control you have over a worker’s behavior and finances, along with the type of relationship you have. For example, the IRS deems workers to be employees if you control when and how they perform the work, control how they are paid and provide them with supplies to do the job. This means you’ll need to collect and pay payroll taxes and abide by federal and state employment laws.

REMAIN INDEPENDENT

There is no magic set of rules that make a worker an employee or not. But having a worker sign an independent contractor agreement doesn’t automatically mean they’re a contractor. You’ll need to look at the totality of the relationship between you and the worker. And if you’re ever in doubt, you can submit a Form SS-8 for the IRS to determine your worker’s status.

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Cryptocurrency Basics

Cryptocurrency is an alternative form of payment and works through a technology called blockchain, a decentralized processing and recording system making it nearly impossible to counterfeit and it comes with tax reporting requirements.

REPORTING BASICS

The IRS has stepped up investigations into unreported cryptocurrency income. Your Form 1040 asks whether you transacted in cryptocurrency during the year. Answer truthfully. However, the IRS has stated that if your only crypto activity was using hard cash to purchase cryptocurrency, you can answer this question with a no.

IRS VIEWS

The IRS views cryptocurrency as property, not cash. That means crypto is more like a house than a bank account in the eyes of the IRS. So, when you exchange your digital currency for cash or other goods or services you’ll recognize a capital gain. If you held the crypto for a year or less, it’s considered a short-term capital gain which is taxed at ordinary income tax rates. If held longer than a year it will be taxed at capital gain rates. Report your cryptocurrency transactions on Form 8949 and Schedule D.

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September 2021 Client Profile

My retail store has been very successful and time consuming, so I need to hire a bookkeeper to take care of the finances. What questions should I ask candidates to ensure that I hire a competent bookkeeper?

Hiring a bookkeeper for the first time marks a milestone for a small business. In addition to ensuring the applicant has the right personality and soft skills to be successful in their role with your company, you’ll want to make sure the new hire has the technical knowledge required to do the job. When you’re interviewing or screening a potential candidate consider asking the following technical questions:

  • Do you have experience working in this particular industry?
  • What accounting software have you worked with in the past?
  • When do we send Form 1099 to vendors?
  • How often are payroll tax returns due?
  • Does the accounts payable account usually have a debit or credit balance?
  • What would you do if your bank reconciliation was off by a few dollars?

Since this person will handle the crucial details of your business, the answers to these questions will let you know if they have the accounting skills you need.

Client Profile is based on a hypothetical situation. The solutions we discuss may or may not be appropriate for you.