We believe in creating a strong working relationship with our clients to determine their specific accounting and compliance needs.

H&M a Registered PCAOB Firm

Holbrook & Manter, CPAs is proud to have become a registered firm with the Public Company Accounting Oversight Board (PCAOB).

As stated on their website: The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and the public interest by promoting informative, accurate, and independent audit reports. The PCAOB also oversees the audits of brokers and dealers, including compliance reports filed pursuant to federal securities laws, to promote investor protection.

The PCAOB is directed by the Sarbanes-Oxley Act of 2002 to establish auditing and related professional practice standards for registered public accounting firms to follow in the preparation and issuance of audit reports. The PCAOB establishes auditing and related professional practice standards for registered public accounting firms to follow in preparation and issuance of audit reports.

Holbrook & Manter, CPAs is a professional services firm specializing in family and closely held businesses. Since its origination in 1919, H&M has been dedicated to providing superior accounting, tax, audit and management consulting advice to both businesses and individuals.  Holbrook & Manter, CPAs provides cost effective, high quality technical service combined with sound personal attention. They are able to serve clients in virtually all areas of business, including those that require specialized expertise. H&M is a member of Allinial Global, an association of legally independent accounting and consulting firms who share education, marketing resources, and technical knowledge in a wide range of industries.

Accounting Basics: For-Profit vs. Not-For-Profit

By: William Bauder, CPA, CGMA, CITP, Manager of Assurance and Advisory Services 

There are many consistencies between accounting in a for-profit organization and accounting in a not-for-profit organization; however, there are some nuances as well. Let’s take a look at a few of them.

First, let’s tackle the terminology.  In the for-profit world, accountants are looking at a complete set of financial statements including a balance sheet and a P&L, or income statement, and the statement of cash flows.  In a not-for-profit’s complete set of financial statements these items are still present, however the balance sheet is now called the statement of net assets, the P&L is called the statement of changes in net assets, and the cash flow remains the same.

In the nonprofit world, we aren’t dealing with equity or retained earnings, instead there are net assets.  These are currently segregated between three possible classifications: unrestricted, temporarily restricted, or permanently restricted.   Nonprofits are also required to disclose their expenses across functional category; those being management and general, program, or fundraising.  Often times an expense can be allocated to multiple functional categories, therefore, it is quite common for management to allocate these expenses based upon some allocation method, for example payroll hours, or square footage.

While most people think that all operations of a not-for-profit are tax free, that is not necessarily the case.  Something known as unrelated business income tax could cause a non-profit to actually pay taxes.  For example, say your organization is an Association for a business trade, and you own your own building.  Say, your Association has more space than it needs, so, it rents out a portion of the building to a small business, say a coffee shop.  The Association is now earning revenues for renting space, which is not align with the exempt purpose of the information, therefore, those revenues (allowable to be offset by certain expenses) are subject to federal income tax.

This gives just a glimpse into the ways the for-profit and not-for-profit worlds differ in the ways of handling finances. For more information on the ways Holbrook & Manter can help your nonprofit achieve your mission, contact us today.

Important Summer/Fall Tax Deadlines

Many important deadlines are approaching in the third quarter. Here is a list

July 15 — If the monthly deposit rule applies, employers must deposit the tax for payments in June for Social Security, Medicare, withheld income tax, and nonpayroll withholding.

August 1 — If you have employees, a federal unemployment tax (FUTA) deposit is due if the FUTA liability through June exceeds $500.

The second quarter Form 941 (“Employer’s Quarterly Federal Tax Return”) is also due today. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until August 10 to file the return.

August 15 — If the monthly deposit rule applies, employers must deposit the tax for payments in July for Social Security, Medicare, withheld income tax, and nonpayroll withholding.

September 15 — Third quarter estimated tax payments are due for individuals, trusts, and calendar-year corporations.

  • If a five-month extension was obtained, partnerships should file their 2015 Form 1065 by this date.
  • If a six-month extension was obtained, calendar-year corporations should file their 2015 income tax returns by this date.
  • If the monthly deposit rule applies, employers must deposit the tax for payments in August for Social Security, Medicare, withheld income tax, and nonpayroll withholding.

For assistance with all of your tax needs, please contact Holbrook & Manter today. We would be happy to assist you.

New Rules for Revenue Recognition for Manufacturers

Changes are on the horizon regarding the rules used to determine when revenue from agreements with customers for goods and services is recognized for financial statement purposes.

H&M works with many manufacturing clients and it is important to us to keep you up up-to-date on important industry information. The Tax Adviser does a nice job of explaining these changes. We encourage you to visit the link below to read their write-up. Please contact us with any questions you may have. We would be happy to assist you.

 http://www.thetaxadviser.com/issues/2016/jun/evolving-revenue-recognition-issues-manufacturers.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=21Jun2016

Juggling Family Wealth Management

Preserving and managing family wealth requires addressing a number of major issues. These include saving for your children’s education and funding your own retirement. Juggling these competing demands is no trick. Rather, it requires a carefully devised and maintained family wealth management plan.

Start with the basics

First, a good estate plan can help ensure that, in the event of your death, your children will be taken care of and, if your estate is large, that they won’t lose a substantial portion of their inheritances to estate taxes. It can also guarantee that your assets will be passed along to your heirs according to your wishes.

Second, life insurance is essential. The right coverage can provide the liquidity needed to repay debts, support your children and others who depend on you financially, and pay estate taxes.

Prepare for the challenge

Most families face two long-term wealth management challenges: funding retirement and paying for college education. While both issues can be daunting, don’t sacrifice saving for your own retirement to finance your child’s education. Scholarships, grants, loans and work-study may help pay for college — but only you can fund your retirement.

Uncle Sam has provided several education incentives that are worth checking out, including tax credits and deductions for qualifying expenses and tax-advantaged savings opportunities such as 529 plans and Education Savings Accounts (ESAs). Because of income limits and phaseouts, many higher-income families won’t benefit from some of these tax breaks. But, your children (or your parents, in the case of contributing to an ESA) may be able to take advantage of them.

Give assets wisely

Giving money, investments or other assets to your children or other family members can save future income tax and be a sound estate planning strategy as well. You can currently give up to $14,000 per year per individual ($28,000 if married) without incurring gift tax or using your lifetime gift tax exemption. Depending on the number of children and grandchildren you have, and how many years you continue this gifting program, it can really add up.

By gifting assets that produce income or that you expect to appreciate, you not only remove assets from your taxable estate, but also shift income and future appreciation to people who may be in lower tax brackets.

Also consider using trusts to facilitate your gifting plan. The benefit of trusts is that they can ensure funds are used in the manner you intended and can protect the assets from your loved ones’ creditors.

Overcome the complexities

Creating a comprehensive plan for family wealth management and following through with it may not be simple — but you owe it to yourself and your family. Holbrook & Manter can help you overcome the complexities and manage your tax burden. Contact us for more information.

Brian Ravencraft’s Latest Article in Ohio’s Country Journal

H&M’s Brian Ravencraft continues to contribute a monthly article to Ohio’s Country Journal, the state’s premier agribusiness publication.

His latest article shares the top signs that agribusiness professionals should be on the look out for as indicators that it is time to consider working with an accountant.

Read his tips here:

http://ocj.com/2016/06/when-to-call-an-accountant-know-the-signs/

New Tax Scam Targets Students

By: Linda Fargo, CPA, CGMA- Tax Manager

Just because the tax deadline is a thing of the past (until next April, that is), it doesn’t mean scammers aren’t still out in full force. We have warned many times over that the IRS will not contact you via telephone to discuss any matter. U.S. Mail is their first form of contact. It is important to keep this in mind as bogus phone calls that you could receive from someone claiming to be with IRS become more specific in nature.

The IRS recently warned that scammers are calling college students to demand payment for the “Federal Student Tax.” This tax does not exist. This is a scam.  The phony IRS representative often asks the student to wire money to them immediately, and if they fail to do so, they will be reported to the police.

But students aren’t the only new targets and fresh scams to be reported to the IRS. New tactics seen recently include scammers calling saying they are seeking immediate payment for taxes owed on an iTunes gift card. Or, they solicit W-2 information from those that work in human resource and on payroll for companies. Another scam involves stating the need to verify tax return information over the phone. These new scams present the perfect opportunity to stay vigilant and remember the following in order to protect yourself and your personal information:

The IRS will never:

  • Call and demand payment over the phone.
  • State that local police or law enforcement will become involved if you don’t pay the money they claim you owe.
  • Make you use a certain method to pay for your taxes. Many times scammers claim prepaid debit cards is the way you must pay up.
  • Ask for information such as your credit card or debit number over the phone.

Being vigilant means acting quickly- should you get a call from a scammer, simply hang up the phone right away. Then report the incident to the Federal Tax Commission at www.FTC.gov.

Please contact Holbrook & Manter today for more information on how you can protect yourself from tax scams. We would be happy to assist you.

 

Energy Efficiency Home Builder Credits

By: William Bauder, CPA, CGMA, CITP

If you read Columbus Business First, you probably noticed the article on the front page of the June 10th issue describing challenges home builders are facing in today’s marketplace.  With fewer new homes being built, fewer young people buying homes choosing to rent instead, and shrinking margins, the outlook is bleak for home builders.  However, there are some tax credits available, if you know where to look.

The federal Energy Policy Act of 2005, which had previously expired at the end of 2014, was extended by the signing of the Consolidated Appropriates Act in December 2015 to retroactively extend the bill through December 31, 2016.  The law allows for a rebate up to $2,000 for builders of all new energy efficient homes, including manufactured homes, constructed in accordance with the Federal Manufactured Homes Construction and Safety Standards (FMHCSS).

To qualify, homes must be:

  • Located in the United States;
  • Construction must be substantially completed before December 31, 2016;
  • Homes must meet the energy savings requirements outlined in the statute; and
  • Homes must be acquired from the eligible contractor after December 31, 2013, and before January 1, 2017, for use as a residence.

Site-built homes will qualify for the credit if they are certified to reduce heating and cooling energy consumption by 50% relative to the International Energy Conservation Code (IECC) 2006 and meet minimum standards established by the Department of Energy.

Manufactured homes qualify for the credit if they conform to the FMHCSS and meet the energy savings requirements of site built homes.

If you would like to learn more about this tax credit and how it can help your business, or other ways to use the tax code to your benefit, give us a call, we would be happy to assist you.

Is it Time for Section 199?

The Section 199 tax deduction was first introduced with the American Jobs Creation Act of 2004. It was intended to primarily benefit America’s manufacturing industry. Indeed, sometimes the tax break is called the “manufacturers’ deduction” or the “domestic production activities deduction.” But, helpfully, eligibility for the break is broad enough to include many other types of businesses.

Among the primary requirements for the deduction is that your company regularly perform “qualified production activities.” These are generally defined as tasks related to manufacturing, producing, constructing, growing or extracting property “in significant part” within the United States. If any of that sounds familiar, it may be time for you to check out Sec. 199.

Identifying and gathering

To get started, you’ll need to identify and document your qualified production activities, and then determine how much income you’ve derived from them. Doing so will require gathering gross receipts from the lease, rental, exchange or other transfer of qualifying production property minus out-of-pocket expenses, such as materials costs. Eligible items include tangible personal property, computer software and sound recordings used in qualified production activities.

Having done all of this, you may then be able to claim a deduction equal to 9% of the lesser of either your net income derived from your qualified production activities or your entire taxable income for the year. There is, however, an important caveat: The deduction can’t exceed 50% of the W-2 wages paid to employees during the calendar year that are allocable to domestic production gross receipts.

Crunching the numbers

Let’s take a hypothetical look at the Sec. 199 deduction and how it might benefit a business. Say your company nets $800,000 in taxable income on $4 million in gross receipts in 2016, entirely from qualified production activities. Assuming your W-2 wages paid are adequately substantial, the deduction at the 9% rate will be $72,000, for a federal tax savings of over $25,000 based on a 35% rate. That would presumably be a nice cash flow boost.

Perhaps the biggest challenge of the Sec. 199 deduction, and one that many companies underestimate, is the administrative burden that may be associated with claiming it. You’ll need to meticulously track and maintain documentation for your business’s qualifying production activities.

Getting everything in order

If you’re intrigued by the Sec. 199 deduction, please call Holbrook & Manter.  Not only are the administrative requirements challenging, but the calculations involved often get complex as well. We would be happy to assist you.

H&M Nominated for “Best of Business” Award

The entire Holbrook & Manter team is proud to share that we are a finalist for a Columbus CEO Magazine 2016 “Best of Business” award.

We are nominated in the “Best Accounting Firm” category (less than 20 CPAs) this is category #22 on the ballot. We were honored to be named the winner in this category last year.

The ballot can be accessed here and voting is open through July 15, 2016.

http://www.columbusceo.com/content/topic/events/BOB/best-of-business-vote-now.html

Our team values and appreciates all the hard work each of us provides to support each other, and most importantly, our clients. We are honored to be nominated and appreciate your support.