Top 5 Myths About Outsourced Accounting

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Outsourced accounting is changing the way organizations do business. Not only can it provide clarity to how costs are incurred, where revenues are earned and highlight areas for growth, it can also make organization’s stronger. However, some are reluctant to explore the option of cloud-based outsourced accounting based simply on common misconceptions. Here are the top 5 myths and the truth about outsourced accounting and its benefits.

Myth #1: Losing control of your organization
Outsourced accounting actually enhances the control you have over your procedures and accounting data. Your financial processes will be standardized and established guidelines will be followed rigorously. You will have real-time data at your disposal providing you greater control of your cash flow and other performance indicators. Time and time again, our clients t feel they are no longer alone and have gained their own personal team of experienced accountants. Outsourcing has offered our clients the ability to work collaboratively and more efficiently to establish greater control over their financial well-being.

Myth #2: Outsourcing eliminates jobs
Many organizations have limited resources and as a result they rely heavily on their employees to perform multiple functions. Often times, employees are acting in roles in which they do not have any formal training. Wearing too many hats can lead to inefficiencies. Not only does this hinder growth within the organization, but it also adds stress to the employee. Outsourcing your accounting function allows your staff to be refocused on efforts that are more suitable for their skill set. Furthermore, the organization can now direct its resources towards their mission, funding and grant writing.

Myth#3: It’s Not Secure
Besides transforming how businesses function internally and externally, the growth of cloud computing also has a consequence on outsourcing data management. By partnering with WVC RubixCloud your security can and will be improved. Security is a top priority and we have partnered with the leading software company to ensure data is protected. Furthermore, as a result of the shared access of real-time data, transactions are visible from any source with an internet connection. If a transaction has been completed and you are not sure of its nature, you can instantaneously take action.

Myth #4: Outsourcers Don’t Understand My Business
When you partner with a WVC RubixCloud, you will gain a well-rounded team of financial experts who have worked in a variety of industries both in public and private sectors.

Myth #5: Outsourcing is only viable for large organizations
No matter the size of your organization, outsourced accounting options are flexible. One of the main advantages of outsourcing is the streamlining of processes to attain business efficiencies and actionable insights. Smaller organizations can benefit tremendously from the economies of scale offered through outsourcing. Frequently, the cost is considerably lower compared to having the work completed in-house.

In conclusion, don’t fall victim to the most common myths of cloud outsourced accounting. Take the time to research the facts. Check out WVC RubixCloud at www.wvcrubixcloud.com and learn how we can be the game changer for your organization!

By: Jennifer Kinzel, CPA, CMA, MBA

ODOT Identity Confirmation Quiz

Ohio Department of Taxation

With income tax fraud and identity theft on the rise, the Ohio Department of Taxation (ODT) has implemented a new initiative to increase security measures. Ohio’s Identity Confirmation Quiz is just one of the tools the ODT is using to prevent fraudsters from receiving a refund as a result of identity theft.

Taxpayers who have filed their tax returns are selected at random to receive an identity confirmation letter instructing them to complete the quiz within 60 days. The quiz can be taken online at the Ohio Department of Taxation’s website. If selected to take the quiz, you will need the reference number from your Identity Confirmation letter, your social security number (SSN) and the amount of refund claimed on your tax return.

The quiz consists of multiple-choice questions very specific to the individual taxpayer. According to the ODT, the information used to populate the personal quiz comes from many public and commercial data sources and consists of current and historical information about the identified individual. In addition, the quiz is timed, allowing only a few minutes to be completed.

Once the quiz is complete, the taxpayer will know immediately whether or not they passed or failed.

  • If a taxpayer passed, processing of the tax return continues.
  • If a taxpayer fails, they may have the opportunity to take a second quiz. If passed the second time, processing of the tax return continues.
  • If a taxpayer fails twice, they must mail documentation to the ODT proving their identity.  Please click here for further instructions.

Please note the selection for this Identity Confirmation Quiz is a random process and should not concern a taxpayer if they receive it. This is unrelated to the size of the refund or with the taxpayer being audited. For additional information or answers to frequently asked questions, please visit the ODT’s Identity Confirmation Quiz page.

By: Jenny Furey, CPA

3 Steps To Lower Taxes For The Self-Employed

When you are self-employed, your business profits are taxed to you at federal rates as high as 39.6%. Add self-employment taxes, which in 2015 will amount to 15.3% of the first $118,500 of your net self-employment earnings plus 2.9% of any earnings over that amount. Then there’s an additional 0.9% Medicare surtax on earnings in excess of $200,000 ($250,000 if married filing jointly). At tax rates like these, it pays to take steps to reduce your tax burden.

Step One: Deduct Business Expenses

Be sure you have an organized system for recording your expenses. To be deductible, a business expense must be “ordinary” (common and accepted in your trade or business) and “necessary” (helpful and appropriate for your trade or business). Since personal expenses are generally not deductible, it’s smart to have a separate business bank account and use a separate credit card for business purchases.

Step Two: Deduct Health Insurance Premiums

self_employment1You may qualify to deduct premiums paid for medical, dental, and qualified long-term care insurance coverage for you, your spouse, and your dependents.* The coverage may include children who haven’t reached age 27 by the end of the year, even if you don’t claim them as dependents on your tax return.

Unlike health insurance premiums paid for employees, the self-employed health insurance deduction won’t save you self-employment taxes. However, it will lower your taxable income. You must meet certain requirements to qualify for the deduction.

Step Three: Deduct Retirement Plan Contributions

Funding a retirement plan can also save you significant tax dollars. Within limits, plan contributions will be tax deductible.** Several types of plans may be suitable for you as a self-employed taxpayer, including a simplified employee pension (SEP) plan, a savings incentive match plan (SIMPLE), or a solo (individual) 401(k) plan. Each plan has specific features and requirements that you will want to weigh carefully before making a choice.

* Dollar limits apply to the deduction for long-term care insurance premiums.

** Although deductible for income-tax purposes, contributions to your own retirement plan account do not reduce earnings subject to self-employment taxes.

Social Security — Are Benefits Taxable?

If you thought Uncle Sam would forget about taxes on your Social Security retirement benefits, think again. When you have other income, up to 85% of your benefit could be taxable. Your “combined income” determines whether — and how much of — your benefits will be subject to federal income tax.

SSAWhat’s Combined Income?

Your combined income comprises all the income you receive from any source, with only a few exceptions. Combined income includes wages and self-employment income; rental income; investment income, such as interest, dividends, and capital gains; income from pensions and retirement accounts (but not tax-free Roth distributions); and — here’s the kicker — even tax-exempt interest from municipal bonds. In addition, you have to add in half your Social Security benefits when you are figuring your combined income.*

The Thresholds

You won’t pay taxes on your Social Security if:

  • Your combined income is not more than $25,000 and your filing status is single or head of household
  • Your and your spouse’s combined income is not more than $32,000 and you file a joint returnUp to 50% of benefits are taxable if you have combined

Up to 50% of benefits are taxable if you have combined income between:

  • $25,000 and $34,000 (single/head of household)
  • $32,000 and $44,000 (married joint)

Up to 85% of benefits are taxable if you have combined income of more than:

  • $34,000 (single/head of household)
  • $44,000 (married joint)

And if you’re a married taxpayer filing a separate return, you’ll probably have to pay taxes on your benefits.

* You have to take certain adjustments into account in the combined income calculation.

A Tax Credit for Going Green

Thinking about installing a renewable energy system in your residence? Uncle Sam offers individual taxpayers a federal income-tax credit equal to 30% of the cost of qualified residential energy-efficient property (REEP) placed in service in 2015 or 2016.

What Systems Can Qualify?

Credit-eligible property includes:

  • Solar electric
  • Solar water heating
  • Geothermal heat pump (uses ground or ground water as a thermal energy source for heating or cooling)
  • Small wind energy (generates electricity using a wind turbine)
  • Fuel cell (generates electricity from hydrogen and oxygen through an electrochemical process)

The credit covers the cost of both the equipment and its installation, including labor and any piping or wiring necessary to connect it to your home.

The system must meet specified standards for energy efficiency. You should obtain a certification from the manufacturer that the component you are purchasing meets the relevant requirements for the REEP credit. Note that the manufacturer’s certification is different from the U.S. Department of Energy’s Energy Star label; not all products with the Energy Star label meet the credit requirements.

green tax creditWhen available, the tax credit is quite generous. For example, let’s say you spend $6,000 in 2015 on a home solar water heating system that meets all requirements for the REEP tax credit. After considering the $1,800 credit ($6,000 × 30%), the system costs you only $4,200.

Restrictions

The home you are installing the equipment in must be located in the United States and you must use it as your residence. The credit is not available for equipment used to heat a swimming pool or hot tub.

Solar, geothermal, or wind energy property can qualify for the credit whether it is installed in your principal residence or another residence. The credit for fuel cell property is limited to equipment installed in your principal residence.

As for cost, the tax law generally places no dollar limits on the credit. However, there is an exception for fuel cell property: The maximum credit is $500 for each 0.5 kilowatt of capacity.

Some states and public utilities offer incentives to encourage the purchase of energy-efficient property. Certain types of incentives may require an adjustment to your purchase price or cost for credit calculation purposes.

Start Planning for Your Child’s Future Today

Looking for ways to help your children save for the future? There are several ways to do this, which will not only give them the beginnings of a good future, but also reduce your own taxes!

Employ your child
Have some light work around your business that needs to be done? Know someone that’s looking for a little help? Think of your child! This is a win-win situation because the business gets a deduction for the wages paid and depending on the salary, your child will pay little to nothing in taxes on that income!

Family_Child4Start a Roth IRA
Roth IRAs are special because they take post-tax dollars, allow you to save and invest, and then pull the money out at some point in the future, tax-free. Any investment advisor will tell you that time is your friend and that it’s important to save early. And while this is true, there are also other advantages to starting to save early. When you start a Roth for your child, you are able to take advantage of their extremely low effective tax rates and save those post-tax dollars on which they are paying essentially nothing in tax. In the example of employing your child, doing this and starting a Roth is incredible because the wages that they are being paid are not only (essentially) tax-free when they are earned but they and all their future earnings are sheltered from tax inside of the Roth. With several decades of compound interest, this adds up the thousands upon thousands of dollars in tax savings.

Contribute to a 529 Plan
Most states now offer 529 college savings plans. This is a great college savings tool because many states allow you to deduct a portion of your contributions to these accounts from your taxable income. In addition, as long as the money is used for qualified college expenses, all the earnings are tax-free when withdrawn.

Courtney Elgin, CPA

Your 2014 Tax Return and the Affordable Care Act

The Affordable Care Act requires everyone to maintain health insurance for themselves and their family members (with a limited number of exemption)s. New for 2014, taxpayers will need to verify compliance with this mandate on their individual income tax return.

For each month of 2014, taxpayers and everyone claimed on their return must do one of the following: (1) maintain minimum essential coverage, (2) qualify for a coverage exemption, or (3) make a shared responsibility payment with their tax return. Those individuals covered by a qualified plan for the entire year need only “check a box” on the Form 1040 attesting to their coverage. A new form, 8965, is used to report an exemption from the coverage requirements. This same form and its instructions are used to calculate the shared responsibility payment.

health insuranceIndividuals who purchased health insurance coverage through the Health Insurance Marketplace will receive a Form 1095-A showing the advance payments of the premium tax credit they have received. This information will then be used to complete new Form 8962 to “true up” the actual credit they were eligible for against the amounts they received in advance. Any credits they have due will increase a tax refund; if they calculate too much credit received in advance, the difference will reduce their tax refund.

Under the coverage provisions, a taxpayer is liable for not only himself or herself, but also for any individual the taxpayer can claim as a dependent. Therefore, children must be covered under a qualified plan or the parent will be liable for the shared responsibility payment.

Senior citizens are not exempt from the coverage rules. However, Medicare Part A, Medicare Advantage, Medicaid, and TRICARE programs are qualified health insurance plans.

If your income tax return is prepared by a professional return preparer, be ready to document your health insurance coverage for the year so the return will be accurate.

By: George Monger, CPA

Ohio Governor Kasich Budget Proposal May Lead To Tax Cuts For Small Businesses

Governor Kasich’s two-year budget proposal includes income tax cuts for small businesses and individuals that would be partly offset by higher taxes on sales, tobacco, drilling and larger businesses.

The proposal eliminates income tax on all small businesses with annual gross receipts of $2 million or less at a cost of $696 million over two years. This is in line with the previous tax cuts on income reported on individual returns from limited liability companies, s-corporations, sole proprietors and other pass-through entities. In 2013, these taxpayers were able to exempt 50 percent of pass-thru income up to $250,000. In 2014, the amount is increased to 75 percent for one year only.

john-kasich

The $696 million loss in revenue would be partially replaced by an increase in the state commercial activity tax (CAT). The CAT would be raised from .26% to .32%, the first increase since its inception in 2005.

The budget would raise the state sales tax by half a cent to 6.25 cents on the dollar in addition to the county piggyback taxes. It also proposes to add tax on currently exempt services like cable, lobbying, debt collection and parking. Lucas county sales tax has already increased the sales tax by ¼ percent to 7.25 cents effective April 1, 2015.

Other tax increases include raising the tax on cigarettes by $1 to $2.25 per pack. The tax would include other tobacco related products such as e-cigarettes, chewing tobacco, and cigars. The severance tax on extraction of oil and natural gas would climb as high as 6.5 percent depending on whether the tax is applied directly to oil or gas drilled or on the processed end result.

The Governor pointed out that Ohio has regained thousands of jobs lost in the recession and the state has a current unemployment rate of 4.8 percent. He believes his budget proposal will help the unemployment rate decrease even further and create more jobs. A new budget must be approved and in place by July 1.

By: Diane Cook, Accountant

Tips For Surviving An Audit

auditOne of my clients was  randomly selected for an NRP (National Research Program) audit. According to the IRS, “the goal is to design and implement a successful strategy to collect data that will be used to measure payment, filing and reporting compliance and to deliver the data to the Business Operation Divisions to meet a wide range of needs including support for the development of strategic plans and improvements in workload identification.”  Some of you may have heard of a TCMP audit, or a taxpayer compliance measurement program audit. The NRP audit has now replaced the TCMP audit. Here are a few tips to make your life easier when going through an audit.

Do not ignore the request. Usually, you are  given 30 days to respond, so make sure to write back promptly or certain items may be disallowed or automatically corrected. Prompt response will get you started off the on the right foot.

Organize your records. As CPA’s we tell our clients the importance of keeping good records and providing support for your income and expenses. This is never more true than when going through an audit. Generally, an auditor is looking for two main things: One, that the expenses you reported really were business-related, and two, that you have actually reported all your income.

Keep receipts to support all of your expenses, i.e. supplies, repairs, payroll, maintenance, etc. and keep an accurate income record. If you have reasonable receipts to support the expenses taken you will very easily get through an audit.

Obtain the information you need for disputed items. On the flip side, if you do not have the supporting materials for your expenses, the IRS will disallow those expenses. That will leave you in a panic trying to find something to support that expense. Create either a manual or electronic folder and place receipts by category and by year into that folder. Document on that receipt the business purpose if not apparent. Make sure it is a detailed receipt that shows what the purchases were. Then all you have to do is provide that folder. That is a lot easier than trying to recreate the facts years later.

Be nice. IRS auditors are not always welcomed with open arms. Being friendly can go a long way and can sometimes mean the difference between winning and losing.

The chance of being audited is rather slim, but it does happen! If you do your part to make, the process can be less painful. Stay organized and be honest. For more on the audit process, be sure to check out IRS Publication 556.

By: Tara West, CPA, CMA

Are You Required To File Forms 1099-MISC?

The February 2 deadline to have Forms 1099 to receipts is less than a week away. As a business owner, the Internal Revenue Service (IRS) requires you to submit “information returns”, Forms 1099, in order to counteract tax evasion. With more individuals becoming self-employed each year, it’s important to review the IRS rules and requirements for issuing Forms 1099.

Form 1099-MISC for 2010 with calculator and pencil on itRequirements
Keep in mind that there are several variations of the 1099 form, but the focus of this article is Form 1099-MISC. The basic rule is if you use an unincorporated service provider and you pay them $600 or more for the year, you are required to issue them a Form 1099-MISC. For example, paying a contractor who is not incorporated to renovate your office for $1000 would require completing and submitting a form. Reporting such payments is generally only required if the recipient of the payment is not a corporation – an individual, partnership, a limited liability company treated as a partnership or sole proprietorship. Payments made to corporations in the case of medical and health care payments and in the case of legal fees paid to attorneys are exceptions to this general rule and require reporting. Payments made for personal purposes do not require issuing a Form 1099-MISC.

Deadlines
For year 2014, Form 1099 must be provided to the independent contractor no later than February 2, 2015. Filing Form 1099 by paper must be completed by March 2, 2015 to the IRS. This date is extended to March 31, 2015 if you electronically file.

Penalties
New, higher penalties introduced with the Small Business Jobs Act remain effective as of January 1, 2011. Companies intentionally disregarding the requirement to provide a correct payee statement are subject to a minimum penalty of $250 per statement, with no maximum. Filing late, but within 30 days of the deadline, incurs a first-tier penalty of $30 per 1099, with a maximum of $75,000. In contrast, filing more than 30 days late, but prior to August 1st triggers a per-form penalty of $60 up to $200,000 total, while not filing or filing after August 1st will cost you $100 per-form up to $500,000.

By: Katie Mokry, Senior Accountant