Category Archives for "Tax Strategies"

Consider new overtime rules

New Overtime Pay RUles

Fair Labor Standards Act (FLSA) reclassifies managerial positions and pay rules

Isaac O’Bannon in CPA Practice Advisor (cited below) recently discussed five steps small office / home-based (SOHO) business owners about  these new overtime pay rules.

Overtime Pay Rules

The Department of Labor’s Fair Labor Standards Act (or FLSA) affects classification of many workers in SOHO businesses. This is the first revision in guidelines since 2004.

The pay threshold for “white-collar” positions (generally considered executive, administrative, or professional), where no overtime is paid, has been raised to $47,892 (cited in Dex Media below) from the earlier $23, 660 (or $455 per week) originally set in 1975.  This payroll threshold change from salaried to hourly workers (overtime exempt versus nonexempt employees) will have a broad impact on annual budgets, job classifications, and workflow planning from an owner/operator perspective in many industries.

These new guidelines will impact SOHO service businesses with erratic or seasonal labor demands more than larger enterprises. This article, citing sources at the payroll giant, ADP, suggests several areas small business owners should consider in planning their future financial course.

  • What is your business compensation structure? How do you classify employees?  The article mentions the increasing use of remote workers as problematic since these employees typically earn less than on-site workers and experience less supervision. What classifications are critical for your business operation. Many businesses have found tremendous cost savings in outsourcing portions of their operation. A suggestion, common on telecommuting platforms, is an attendance tracking system that both tracks and can control hours up to the largest amount per pay period.
  • Another consideration is a regular review of payroll as a company cost.  Federal and state tax requirements could amplify a bad labor allocation decision. Matching the labor demand and required level of ability against a changing workflow now deserves more carefully evaluation.  HRDrive (cited below) suggests that employers who must begin tracking hours “due to the higher threshold… will need new labor management systems, primarily for timekeeping” resulting in “significant administrative burdens.”  Total cost of operating
    your company (total cost of ownership or TCO) could redefine the job
    descriptions and hiring practices based on a percentage of revenue.
  • Pay equity is always an important issue. The article suggests a role-based model in your workplace to apply guidance. Job roles might better show what jobs are real and where in the workflow they actually occur.  This model not only offers a fair way to assign hours and compensation but conforms, in a greater context, with other big-picture business considerations like security.  Most computerized business systems have adopted a role-based model to assign and control security access.
  • There is a  need for proactively controlling business costs and expenses. This topic more than not dominates SOHO business planning.  Key performance measure tracking short and long-term costs are at the heart of every successful SOHO business.

Your business checklist should include a review of your payroll record keeping and reporting systems especially in you use an in-house system. Dex (cited below) suggests checking all relevant minimum wages laws at both the federal and state levels. Notify your employees of any changes in job descriptions or classifications. Strategize any salary and bonus agreements as well as incentive plans. Prepare now for the implementation deadline scheduled for December 1, 2016.

SOHO Tax Tip Takeaways

New Overtime Pay Rule: 5 Steps to Take – Dex Media

Why new overtime rules will raise payroll costs for employers of all sizes – HR Drive

IRS Tax Debt Collection In 7 Steps

This entry is part 2 of 2 in the series Tax Representation

IRS Tax Debt Collection

How does the Internal Revenue Service collect a tax debt? They usually follow seven separate steps, but it doesn’t begin until the IRS has made a tax “assessment.”  The Service must send you notification that there is an outstanding balance due. This surprise announcement of “tax debt” typically comes as IRS Form CP2000 or CP2501. This first step is critical in marking the start of the “collection process”.  If you receive a letter from the IRS or either of these forms shown below, it might be a good time to seek outside help from an experienced tax practitioner before you talk to any IRS representative.  Continue reading

Your 2015 Tax Filing Extension

IRS tax formsRequesting a tax filing extension is relatively easy if you cannot complete your individual income tax return on by April 18, 2016. You have until April 19 to file a tax return if you live in Maine or Massachusetts.

You need, however, to understand the IRS rules and regulations. The following information will demystify the way the tax filing rules work and provide key points specifically about filing an extension for 2015.

Using IRS Form 4868

A request to extend the April 2016 filing deadline is free and will be automatically granted for six months or until October 17, 2016, if you submit your request for a filing extension before the original filing due date. You can submit your application online or by mail.  The reference to instructions for IRS Form 4868 below provides Post Office address information. If you are a US citizen or resident out of the country on April 18, 2016, you have an additional two extra months to file your return and pay any outstanding tax due.

Continue reading

1 2 3 16