Category Archives: Business Consulting

Is It O.K. To Pay Employees “On The Side” As Contractors?

Posted on May 22, 2012 | Leave a comment

Hiring employees to do “side jobs” for your company has been a growing trend versus trying to search for someone else to perform the job from outside the company.  Some types of jobs performed by independent contractors could be cleaning, computer work, or repair & maintenance.

Example:  A receptionist who is an employee who makes extra money by cleaning offices during non-business hours as an independent contractor.

If the job the independent contractor is hired for ends up paying more than $599 in a calendar year, a 1099 Misc form will have to be issued.  The IRS pays close attention to individuals who receive a both a W-2 and 1099 form from the same company in the same year.  A possible employment tax audit for the entire business could be triggered from doing this.

If the job is performed outside of the normal employee’s work hours and the job has no relation to the regular work of that employee then it could be an exception, but be prepared to have to prove that to the IRS.  If the employee has a legitimate independent business with separate Federal ID number and works for other companies who pay the employee for that job would be the safer option.

Even though it may be easier to hire a current employee, it could open your company up to an audit risk and isn’t usually advised.   You can have the independent contractor fill out the IRS form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding) and let the IRS determine the status of the work performed.

By: Sandra Stone, Accountant

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Posted in Audit & Accounting, Business Consulting, Tax

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Does My Business Have An Ohio Sales and/or Use Tax Liability?

Posted on May 17, 2012 | Leave a comment

Most businesses are aware that their activities could result in an Ohio sales and/or use tax liability.  However, many companies struggle with determining their actual exposure to these taxes and how to apply Ohio’s sales and use tax guidelines to specific transactions.  These businesses should consider undergoing a formal sales and use tax analysis to highlight potential weaknesses in the application of these taxes and accurately determine the total exposure generated from their past and present operations.

An appropriate analysis provides the following:

  1. A thorough review of the same information and documentation that an Ohio auditor would request (readying your business for audit should one occur).
  2. As assessment of your operations/business activities to determine if your business qualifies for an exemption from sales and/or use tax (reducing your tax exposure).  Many companies are not aware of the exemptions for which they qualify.  The study would underscore applicable exemptions and identify the support needed to substantiate these exemptions.
  3. Application for Ohio sales tax amnesty if applicable.  This amnesty program is only available from May 1st, 2012 until June 15th, 2012.  This program allows you to avoid penalties and one half of the interest owed on prior unreported sales taxes.
  4. Application for Ohio use tax amnesty if applicable.  Use tax amnesty is available until May 1, 2013.  This program allows your business to report activity from January 1, 2009 and forward, avoid penalties and all of the interest owed on prior unreported use taxes.  What this means is that your potential liability will be waived from before January 1, 2009 and your business will only owe the tax incurred on purchases from January 1, 2009 and forward.
  5. Issuance of a report highlighting your business’s deficiencies, if any, and providing suggestions for ongoing best practices.

The June 15, 2012 deadline for the Ohio sales tax amnesty program of is quickly approaching.  Consequently, now is a great time for your business review its sales and use tax position.

William Vaughan Company offers an Ohio Sales and Use Tax Analysis based upon guidance provided in the Ohio Revised Code and applicable court cases.  In addition, William Vaughan Company’s analysis is conducted by professionals who have direct experience in the application and reporting process associated with Ohio’s amnesty programs.  Please contact your William Vaughan Company representative for further information regarding this opportunity.

By: Nate Bernath, CPA

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Posted in Business Consulting, Tax

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What Makes Your Company Successful?

Posted on April 12, 2012 | Leave a comment

According to the AICPA in conjunction with the CIMA (Chartered Institute of Management Accountants), it’s your people.

Rocket science, right?  Why do we need to keep wasting money doing studies like this to come to that conclusion?  The March 2012 issue of the Journal of Accountancy summarized some of the main findings of the research, and one particular quote completely took me aback:

The most critical theme to come from this research:  “Senior business leaders agree that it is understanding and unlocking the value of the human dimension that is most critical to an organization’s success.”

It goes on to say that the employees and customers will have a much greater impact on determining the future success of a business than financial markets, government, and regulators.  Again, this seems obvious to me.  The value of trained, experienced employees far exceeds their “fully loaded” cost, and the impact of those people either being unhappy or leaving is truly a large negative impact to the bottom line.   Unhappiness creates apathy and the rippling effect will influence many aspects of the business.  The list of negative effects can be endless, but here are just a few important ones:

  • Potential negative impact on peer employees and subordinates, directly or indirectly
  • Decreased productivity
  • Lack of attention to detail which results in poor work
  • Relations with customers and/or vendors can be compromised  due to the lack of attention and detail

The facts are that employees ARE the most important asset of your company, regardless of how many millions of dollars of machinery and buildings you have. Treating them as such will allow them to fulfill the strategic vision you have in mind.  People who are happy in their work go the extra mile and make the extra effort to help the Company.  They will be more productive, make for positive internal and external customer experiences, stick with the company longer and they care.

The results of this report are not something that every employer out there should not already know.  If you tell employees “you are lucky to be here—work harder and longer,”  you are (or already have) created an acrimonious environment that inherently breeds e a culture where people will never take their productivity up to the next level.

You have accountants analyzing every number imaginable related to the efficiency of the machines and labor and downtime, the list goes on.  Is anyone truly assessing the cost of your unhappy employees?  Do you even recognize it?

By: Jennifer Kinzel, CPA, CMA, CGMA

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Posted in Business Consulting, Uncategorized

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Employee Benefit Plans – Is your plan in compliance?

Posted on January 10, 2012 | Leave a comment

Large employee benefit plans are required by the Department of Labor (DOL) to have an annual audit performed to be used in filing the annual Form 5500.  A large employee benefit plan is generally defined as having 100 or more participants at the beginning of the plan year.  A small employee benefit plan is generally defined as having less than 100 participants at the beginning of the plan year and is not subject to the annual audit requirements.

The DOL also conducts its own audits of employee benefit plans as a result of an employee complaint or discrepancies on the Form 5500 report.  These audits could result in fines for inaccuracies or issues if the plan is not in compliance with the plan document.  

Common Errors                                                                                                   There are numerous errors that could be uncovered during the audit of your employee benefit plan.  However, what if you are a small plan not subject to the audit requirements?  Would the errors be identified by plan management?  As a plan sponsor of either a large or small plan, you should be aware of some common mistakes made in employee benefit plans.

Plan Compensation                                                                                                       What is the definition of plan compensation according to your plan?  This is an error that is commonly made when the definition in the plan document is not being followed.  The definition of plan compensation in some plan documents can be very complicated, and if not followed can also be costly to the plan sponsor to correct.

What types of plan compensation are paid in your company? Many times there is base pay, bonuses, overtime, vacation, fringe benefits, etc. and the definition in the plan document may include and/or exclude different types of compensation paid.  To further complicate the matter, plan compensation could have different meanings for employee deferrals, employer match contributions and profit sharing contributions.  Your plan is not in compliance and should be corrected if the proper definition of plan compensation is not being used.

Plan Eligibility                                                                                                                Have all of the employees eligible in your plan been given the opportunity to participate?  Many times plan sponsors do not properly follow their plan’s eligibility requirements.  For example, plan sponsors may assume that their plan document excludes certain types of employees, such as part-time employees, when in fact the provisions do allow for part-time employees to participate.  It is important for plan sponsors to be familiar with their plan document’s eligibility provisions, and these provisions should be regularly monitored to ensure that all eligible participants are given the opportunity to participate in the plan.  It is also important to have procedures in place to notify employees of the eligibility criteria and provide them with guidance as to how and when they may participate in the plan.   

Late Deposits                                                                                                                   Have you deposited your employee deferrals and loan payments into the plan on time?  The plan sponsor is responsible for remitting these contributions to the plan in a timely manner.  The DOL requires that for large plans these contributions be deposited on the earliest date that the employer can reasonably segregate the amount from the employer’s general assets; however, in no event can the employer deposit the amount later than the 15th business day of the following month.  This rule does NOT provide a safe harbor for depositing deferrals, but is a general guideline.   For small plans, the DOL did establish a safe harbor for employee deferrals and loan payments which allows for these deposits to be made within seven business days following the receipt or withholding by employers.  It is important to remember that plans are required to make these deposits as soon as it is administratively feasible to separate these deposits from the general assets of the company, and the DOL can always evoke penalties if they determine the deposits can be made in a timelier manner.

If a plan sponsor does not make deposits timely, the failure may be considered both an operational mistake and a prohibited transaction.  The DOL has various correction methods available that may be able to help resolve the failure.

It is important to note that strictly adhering to the guidelines of both the DOL and the plan document are pertinent in effectively monitoring your employee benefit plan.  Plan management needs to take the time to understand their plan document and should regularly review the plan operations to ensure they are compliant.

By: Kristin Metzger, CPA

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Posted in Audit & Accounting, Business Consulting

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Can your CFO really do the job?

Posted on January 9, 2012 | 1 Comment

I am certain that I have mentioned before that the majority of my consulting engagements always begin with  a common denominator.  It is typically an observation from upper management or the CEO of the Company asking me, “I am not getting my financial statements timely – how often after period end should I be seeing them?” Or, it is something akin to “I just don’t believe the numbers that I am seeing.”

I find such comments fascinating.  These comments come from the owner of the Company.  My first response is usually more of a humanistic one rather than a financial one.  If it doesn’t feel right, it generally is not.  If you hired a CFO or Controller that came with great credentials and he or she is not performing to meet your expectations, perhaps it’s time to have that all important wake-up call.  I always give the same advice: you can have the meeting, relay the expectations clearly again and hope that the individual makes the change.  But I can tell you from years of experience that it’ s not likely to happen. 

A true CFO is meant to be the right hand and even trusted advisor to the CEO.  This individual provides the support system and is known as the financial navigator who helps manage cash flow, achieve maximum return on assets, and raise capital.  Unfortunately, for small to medium size businesses, they cannot afford a true CFO with the appropriate experience to fulfill these needs.  Most of these Companies stretch the role of their Controller and accounting staff, or even look outside to have their accounting firm fill the role, as I have done many times.  If your current Controller is not fulfilling your current needs, you should consider temporarily outsourcing a  CFO to spend some time at your business.  Some of the important benefits you will receive include:

  • More accurate and timely financial information for key decision making
  • Better documentation and controls
  • Increased knowledge overall for all accounting staff
  • Increased confidence (which means less hassle) with banks and vendors
  • Fewer surprises related to cash flow
  • Increased analytical  skills and therefore, more valuable information to management

If you are the CEO or the owner of the Company and you feel as though you are not getting the information you need to move forward, you’re likely not. All companies, big and small, have sophisticated operations and complex cost and fincancial challenges.   Consider a temporary investment to help take your company to the next level.

By: Jennifer Kinzel CPA, CMA

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Record Retention: Simplifying the Clutter

Posted on July 19, 2011 | Leave a comment

Setting up and maintaining files at home can be overwhelming especially when you don’t know what to keep, how long to keep it, and where to put it.     Without a good system in place, paperwork turns into clutter and clutter just exacerbates the problem.   And even if you’ve decided to “go green”, you may still have tons of electronic documents either on your desktop, on CD’s, 3.5” diskettes, or (heaven-forbid) 5¼” disks.

So, for today’s blog:  what should you keep, and for how long should you keep it? Let’s start with the easy things – those you need to keep forever:

  • Tax Return copies
  • W-2′s from your employer
  • Birth and Death Certificates
  • Life Insurance Policies
  • Alimony, Custody, Prenuptial Agreements
  • Wills
  • Military Papers
  • Trust Agreements
  • House Records including major improvements
  • Medical Records

You don’t need to keep them in paper form, but if you do decide to scan and keep electronically, be sure you can retrieve them at a later date.  If you have 1991’s tax return on a 5¼” disk, you may have a problem.   Keep your storage media and back-up media updated with the times. 

Next, seven years is a good rule of thumb for investment statements, policies and certain important receipts:

  • 401(k)/Keogh Statements
  • Annuity Year-End Statements
  • Major Purchase Receipts
  • Year-End Brokerage Statements
  • Home & Auto Insurance Policies
  • Medical Receipts
  • Certificates of Deposit Statements
  • Schedule of K-1′s from Partnerships or S-Corporations
  • Loan Records

Electronic copies of all of the above seems easy enough, but be sure to organize them in a way that is safe and secure.  It’s a certainty that your computer will fail at some time and so backing up your computer’s hard-drive is critical.  A number of reliable online services for individuals like Carbonite or Mozy will provide peace of mind and security that is well-worth the $170 cost per year or so.

Monthly or semi-monthly bill paying is now easily done online and some of us do not even see paper copies of our invoices or credit card statements…which have made our home desks much more clutter-free.   Just do not count on them being there forever.   So our advice – unless you’re completely obsessed with tracking the use of kWh’s and texting minutes year over year, keep your utility and phone bills for one or two years.   If you pay these bills online, you should be able to see them for at least that long.

One question we hear a lot – how long should I keep my debit or credit card receipts?  The answer is easy – until your bill comes (or you see it online) and you confirm the amounts line up.  Of course there are a few exceptions:

1)   If the amount is tax deductible, throw the receipt in a paper folder or scan it to an electronic folder on your desktop labeled something like “Tax Info”.  Then, when you’re gathering information for your CPA, you can easily share what is deductible without going through your invoices or statements.  

2)   If the receipt is for a purchase that is warranted, keep the receipt for a year or two (or long if the warranty is longer). 

The receipt for your debit-card purchase of a Pizza or any meal other than one you can expense at work, doesn’t need to be kept for longer than a month.

For your warranted items’ paperwork, an expandable file folder with letters A-Z works well for receipts and manuals.  Keep Best Buy under the B’s and Sears under the S’s.  You can file by the name of the item too – like mower under the M’s but that may be confusing if you think of it as your “lawn mower” some days or your “Craftsman Lawn Mower” other days.  The receipt is from the store, and we think it’s best to file the receipt that way.   To convert paper to electronic – use the same method:  create a main folder for Receipts and sub-folders by letters of the stores. 

Record retention is not generally fun, but it can be easy.   Don’t get too overwhelmed, and ask for help if you need it. 

By: Sharon Trabbic, Chief Operating Officer

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Are you reaping all the benefits from having a home-office?

Posted on February 12, 2011 | Leave a comment

Are you one of the lucky individuals who get to work from home? Along with many numerous advantages you know that this can have, you are also eligible for certain home-office deductions. Do you know what they are?

To qualify for the home-office deduction your workspace must:

  • Not be used for personal use
  • Be used regularly and on a continuous basis
  • Be your principal place of business
  • Be a defined space used for business

What are you allowed to deduct?

You can potentially deduct 100% of expenses directly related to the home office space. You’re also allowed to deduct a percentage of indirect expenses, such as mortgage interest and property taxes.

Other deductions include: insurance premiums on the home, security system, and bills for repairs or general maintenance. And if you use an area of your home for storage (inventory, files, etc), you are eligible for the deduction. You can also depreciate the portion of the home used for business over a period of 39 years.

Equation to figuring the “home-office” portion of your residence: Then apply that percentage to each indirect cost to calculate the deduction you can claim

If you are self employed, the home office deduction, plus all your other deductable business expenses, can’t exceed your business income for the year. Any excess of expenses over income, however, can be applied in future years against self employment income.

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Posted in Business Consulting, Tax

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