Kansas Tax Law Changes

Late night hours from the Kansas legislature has left us with new tax law in the state.  Senate Bill 30 was passed on June 5, 2017 and was vetoed by Governor Brownback the morning of June 6, 2017. The Legislature overrode the Governor’s veto on the evening of June 6th with a vote of 27-13 in the Senate and 88-31 in the House. Several provisions are effective January 1, 2017. A summary of the bill is below:

Non-Wage Business Income

· 100% repeal of the non-wage business income tax exemption, effective January 1, 2017

· Reinstatement of the federal loss carryover

Individual Income Tax Rates for 2017

· The current two-bracket system will be replaced with a three-bracket system of 2.9%, 4.9% and 5.2% beginning tax year 2017

Individual Income Tax Rates for 2018

· Low income exclusion threshold is reduced to $5,000 for married filers and $2,500 for single filers

·  Three-bracket income tax system continues with rates increasing to 3.1%, 5.25% and 5.7%

Itemized Deductions and Credits and Other Provisions

· 50% of federally deductible medical expenses, mortgage interest and property taxes paid in 2018; increased to 75% in 2019 and 100% in 2020 and thereafter.

· Dependent care tax credit will be set at 12.5%of allowable federal amount in 2018, 18.75% in 2019 and 25% in 2020

· Subtraction modification provision relating to net gains from certain livestock and Christmas tree sales is repealed in 2017

 

Check back later for in depth information.

 

Smart Plans. Big Wins. Lunch and Learn Training Sessions

  • WEDNESDAY, MARCH 8, 2017
  • 11:45AM - 1:00PM
  • 3626 SW Wanamaker Road, Topeka, KS 66614

FACT: Lunch tastes better if you're getting smarter while eating. Ok, maybe not, but it would be a good use of your time to lunch and learn about Financial Mastery for Business Decision Making Wednesday March 8. Free food. Free knowledge. What's not to like? Reserve your spot now.

 http://www.brownpapertickets.com/event/2844216

We also have sessions on June 7 and September 6, so mark your calendars now.

 

Reversal of Overtime Rules

After organizations have been gearing up for months to implement the new overtime rules by December 1st, a federal judge in Texas has put a nationwide block on the regulation.   Last week, U.S. District Judge Amos L. Mazzant, III issued a preliminary injunction stopping the new overtime salary limit less than two weeks before its intended enactment.  As this law was set to affect both governmental and private sector employees Kansas joined 20 other states in filing a lawsuit against the US Department of Labor in September.  The states’ suit is based on the legislation committing “an ever-increasing amount of State funds to [pay] State employees salaries or overtime … [which could] unilaterally deplete State resources,” per the complaint. 

Small businesses have rallied behind the National Retail Federation and National Federation of Independent Business, which have also filed suit against the increased salary threshold and, potentially, salary and overtime expense. 

Given that President-Elect Donald Trump has called the legislation “over-regulation,” it is possible that the salary thresholds for overtime pay that were set to go into effect on December 1st, may never see the light of day, at least not in their current form. 

The injunction leaves many employers in limbo, as many employers had already made preparations to implement the overtime rules by the quickly approaching original deadline.  Now, with the blocked regulations, employers have some decisions to make.  If an employer has already reclassified employees and increased salaries to meet the expected change, the employer may prefer to keep those plans in place.  However, if an employer has not yet to reclassified employees, the employer can postpone that decision while closely watching the developments as we move towards a new US Congress and president for 2017. 

Check our blog for updates as they become available.

IRS announces 2017 pension plan limits

 

The IRS has announced the 2017 pension plan limits, including the following:

·       401(k), 403(b) and most 457 plans Deferral Limit - $18,000—This remains unchanged from the 2016 limits.

·       Annual Additions Limit - $54,000—This is a $1,000 increase from the 2016 threshold.

·       Maximum Compensation Limit - $270,000—This is a $5,000 increase from the 2016 limit.

·       Catch-Up Contribution Limit - $6,000—This also remains unchanged from 2016.

·       Highly Compensated Employee - $120,000—This also remains unchanged from 2016.

·       The annual benefit under a defined benefit plan under Section 415(b)(1)(A) - $215,000.—This is an increase of $5,000 from the 2016 limit.

·       ESOP 5-Year Distribution Threshold - $1,080,000—This is a $10,000 increase from the 2016 limit.

·       ESOP Additional Year Threshold - $215,000—This is a $5,000 increase from the 2016 limit.

·       The dollar limitation under § 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased from $170,000 to $175,000.

Here is the link to the full announcement which includes additional details:

https://www.irs.gov/pub/irs-drop/n-16-62.pdf

If you have any questions about the information above, or have anything other questions related to your employee benefit plan audit, send us an email at info@btandcocpa.com or give Stacey Hammond or Dusty Wagoner a call at (785) 234-3427.

What is an Outsourced CFO?

Let’s start with the typical responsibilities of the Chief Financial Officer (CFO) - the CFO of a business is the right hand man (or woman) to the business owner, managing the finances and financial systems of the company and providing financial data to help make strategic long-term and day-to-day decisions.

Some business owners turn to CFOs to establish proper bookkeeping systems, billing and collecting processes and bill paying processes. Now, the CFO has a different role than a bookkeeper or accountant who mainly keeps track of the company’s books. While this is a MUST for any business, it is not the CFO’s job. The CFO uses that historical information from the accountant to plan for future cash needs, analyze current business financial performance so decisions and improvements can be made, and to help the business owner proactively manage the business.

Sounds great, huh? It really is! The CFO can make a huge impact on profitability and cash flow of a business. However, a lot of small businesses cannot justify making the leap and hiring a full-time CFO for their business. We’re numbers people. We get it. Typical CFO compensation ranges from $90,000 - $140,000 (not including benefits, taxes, etc.).

That’s why we have officially launched our outsourced CFO program – it’s a CFO at the right time, when you aren’t ready for full-time. Many businesses don’t have the need for a full-time CFO, but can benefit tremendously from having a financial executive on the team. If this sounds like you, give us a call (785-234-3427)! Not sure if it’s for you? Take the CFO quiz at http://www.btandcocpa.com/new-index and see how you score.

New Overtime Rules

For all employers, the new overtime rules go into effect December 1, 2016. Here is a quick video from our friends at the Department of Labor that summarizes the rules nicely through multiple examples.

https://www.youtube.com/watch?v=D84T6z9Njpg

Here is a summary form of another example that hopefully makes it easier to understand.

Employee X works a consistent 50 hour week, and they earn $40,000 per year. There are 3 options that could happen with the new overtime rule.

1.      For those hours in excess of 40 for the week, they are to be paid overtime for those hours worked at time and a half.

2.      The employer could choose not to pay overtime and raise the employee’s salary to $47,476 per year, which is the new threshold.

3.      Cut the employees hours back to 40 hours per week so that they don’t earn any overtime. Thus offloading the employees burden, giving them more free time and a new work life balance.

The old salary threshold was $23,660 per year so it has a little more than doubled. If someone works say 2200 hours per year at $40,000 per year, the employer would have to choose the best method on whether or not to raise the salary to $47,476 or pay the overtime. Here is the math on this possible scenario.

$40,000 per year / 2080 hours (40 hours per week) is $ 19.23 per hour.

Time and a half is $ 28.85 per hour. ($19.23 x 1.5)

120 extra over time hours (based on 2200 hours worked) at $ 28.85 per hour is an additional $3,462 in salary for the employee.

The employee now gets $43,462 and is under the threshold of $47,476. In this scenario, the employee is rewarded for the overtime they have worked, and the employer is compliant with the new overtime rules. Employers are going to need to be cognizant of the new rules to make sure that they are compliant and to determine what is the best option for them and their employees.

If you have any questions about the information above, or have any other questions related to you becoming our valued payroll client, send us an email at info@btandcocpa.com or give us a call at (785) 234-3427.

 

Employee Benefit Plan - NEW applicable standard

As we are in the middle of employee benefit plan auditing season, this is a reminder that ASU 2015-12 is effective for years beginning after December 15, 2015 with early adoption permitted.  The ASU will simplify employee benefit plan reporting disclosures.

The amendments in ASU 2015-12 have 3 different parts. 

For part 1, fully benefit-responsive investment contracts are measured, presented, and disclosed only at contract value and will no longer have to be measured at fair value and provide a reconciliation of fair value to contract value. A plan will continue to provide disclosures that help users understand the nature and risks of fully benefit-responsive investment contracts. 

For part 2, currently GAAP requires plans to disclose (1) individual investments that represent 5 percent or more of net assets available for benefits and (2) the net appreciation or depreciation for investments by general type. 

This ASU eliminates those requirements for both participant-directed investments and nonparticipant-directed investments. The net appreciation or depreciation in investments for the period still will be required to be presented in the aggregate, but will no longer be required to be disaggregated and disclosed by general type. 

Also in Part 2 under Topic 820, classes of assets are grouped and disclosed on the basis of nature, characteristics, and risks, and under current guidance, classes of assets are grouped and disclosed on the basis of general type. Examples of classes of assets grouped and disclosed by general type include registered investment companies, government securities, common collective trusts, pooled separate accounts, short-term securities, corporate bonds, common stocks, mortgages, and real estate. Classification by general type might be inconsistent with classification by nature, characteristics, and risks, which often results in plans grouping their investments in two different ways. 

Part II of this Update will require that investments (both participant-directed and nonparticipant-directed investments) of employee benefit plans be grouped only by general type, eliminating the need to disaggregate the investments in multiple ways.

 The final portion of part 2 relates to an investment that is measured using the net asset value (NAV) per share. If the investment uses NAV as the practical expedient in Topic 820, and that investment is in a fund that files a U.S. Department of Labor Form 5500, Annual Return/Report of Employee Benefit Plan, as a direct filing entity, then disclosure of that investment’s strategy will no longer be required. 

For Part 3, the amendments provide a practical expedient to permit plans to measure investments and investment-related accounts (for example, a liability for a pending trade with a broker) as of a month-end date that is closest to the plan’s fiscal year-end, when the fiscal period does not coincide with a month end. 

If a plan applies the practical expedient and a contribution, distribution, and/or significant event occurs between the alternative measurement date and the plan’s fiscal year-end, the plan should disclose the amount of the contribution, distribution, and/or significant event. The plan also should disclose the accounting policy election and the date used to measure investments and investment-related accounts. The amendments simplify the measurement of investments and investment related accounts while not significantly reducing the relevance of the information to users. Furthermore, the disclosures increase the transparency of the measurement date used and events that occur between the measurement date and the plan’s fiscal year-end. 

If you have any questions about the information above, or have anything other questions related to your employee benefit plan audit, send us an email at info@btandcocpa.com or give Stacey Hammond or Dusty Wagoner a call at (785) 234-3427.

Overtime Pay Threshold Increase

Some numbers just stick in your head, like phone numbers, well not so much since the advent of cell phones.  If I ever got thrown in jail, I’d stay there for a long time because I haven’t memorized a phone number since 2001.  Ok, how about pi?  We all had to know that mathematical constant to calculate a circle’s circumference in geometry class, but I’m not sure I could make it much past reciting that out to the hundredth decimal place. 

Alright, those are bad examples, but everyone has to know the threshold that makes most salary workers exempt from overtime pay, right?  I mean that number could affect your paycheck, so you knew that as a white-collar worker making less than $23,660 a year you were entitled to overtime pay, right?  Well if you could rattle that number off before, get prepared to replace that tidbit of knowledge with a new number.  Starting December 1, 2016, that threshold increases to an annual salary of $47,476.  Lots of different figures were tossed around before they settled on the figure in the Final Rule that replaces the old threshold from 2004, and it was about time for this update.  The Final Rule also has a mechanism built-in whereby that threshold will be updated every three years, rather than letting the limit sit stagnate.  This revision does not change the fact that hourly workers were and are still entitled to be paid time and a half when they work over 40 hours in a week.

So what are employers going to do with themselves to deal with this change?  They can do the Oprah, “and you get a raise….and you get a raise…and you get a raise!” to get salaries above the new threshold.  Or salaried workers can use timesheets to help track hours to ensure employers are paying overtime when appropriate.  If you are interested in learning more the changes, you can read the DOL’s press release or sign up for one of their informational webinars taking place between May 26 and June 8.

Employee Benefit Plan new applicable standards

As we head into employee benefit plan auditing season, this is a reminder that ASU 2015-7 is effective for years beginning after December 15, 2015 for public entities and for all other entities is in effect for years beginning after December 15, 2016.  The ASU will simplify employee benefit plan reporting disclosures.

The amendments in ASU 2015-07 remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient.

The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient.

If you have any questions about the information above, or have anything other questions related to your employee benefit plan audit, send us an email at info@btandcocpa.com or give Stacey Hammond or Dusty Wagoner a call at (785) 234-3427.

Wait for the Forms

If you are expecting to receive a Form 1095-A (deadline is still February 1), you should wait to file your 2015 income tax return until you receive that form.  However, it is not necessary to wait for Forms 1095-B or 1095-C in order to file.

Some taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2015 tax return. While the information on these forms may assist in preparing a return, they are not required. Individual taxpayers will generally not be affected by this extension and should file their returns as they normally would.

Like last year, taxpayers can prepare and file their returns using other information about their health insurance. You should not attach any of these forms to your tax return.