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Health Care Reform Small Employer Tax Credit - May 4, 2010

Posted by: Albert L. Christensen in Articles

Here I am an expert on cash management and I am looking for any way possible to get some cash back into my client’s hands.  After all our tag line at B2B CFO^® is  

                Cash.  We Help You Get It. ^SM

In April a local firm put on a seminar related to a new tax credit for small employers.  I was not available to attend, but my partner Manus was good enough to share the slides and notes from the seminar.

My first reaction to the health care reform bill was how in the world is anyone going to make sense of this new reform.  But here we are with various individuals giving us the guidance we need.  After checking with a couple of sources I finally had the sense to go to the IRS website.

In the end everyone who thinks they qualify will need to check with your qualified tax expert and make sure they are aware of these changes – I have little doubt they will be very aware of this change.  So, since the government is offering I think it would be a shame to miss out on the opportunity. 

Here is the information being reported on the IRS Website.

“Many small businesses and tax-exempt organizations that provide health insurance coverage to their employees now qualify for a special tax credit, according to the Internal Revenue Service.

Included in the health care reform legislation, the Patient Protection and Affordable Care Act, approved by Congress and signed by President Obama on March 23, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.

The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. In 2014, this maximum credit increases to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible employers that are tax-exempt organizations.

The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low and moderate income workers. It is generally available to employers that have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers.

The maximum credit goes to smaller employers — those with 10 or fewer FTEs — paying annual average wages of $25,000 or less.

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit.”

To determi....

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Whats Happening To Our Sui Premiums - Apr 27, 2010

Posted by: Albert L. Christensen in Articles

I have been working with a client who has had a shock in the form of increased SUI premiums due.  Here is a company with a great history of keeping employees happy and working.  But as many have encountered in this latest economic downturn, they had to face facts in 2008 and take measures to ensure the viability of their company...they laid off several employees.

What happened next is not a singular story among businesses.  In 2009, claims on State Unemployment were high for this company.  They had very limited claims on their account in the previous years ($9,000 in 2005) and were happy to be paying premiums for the purpose of taking care of employees in the event they had a downturn in business.  Here in 2010 comes the other shoe, their premiums went from .84% to 4.84%.  Not only did their premiums go up, but the taxable base went from $32,000 to $36,800.

I think shock is the only word which can describe the feelings of the business owners.  This company has had to lay off an additional 4 people this year.  Is the premium next year going to quadruple or more again?  Fortunately the state rate maxes out at 6.02%, so there is little more that can be exacted from them in the way of premiums.  Here is the issue, our state - and this is very common in most states - looks at a 4 year running history to determine the premium level for a company.  This particular company had no claims in year 1, 2, or 3.  Year 4 was the year of large layoffs.  The premium level is calculated by taking the claims for the 4 year period and dividing by the wages for the same period.  This % then is used to determine the premium level.  Washington has 40 levels.  The company I am referring to here has been moved from level 1 to level 28.  On top of this level there is an additional premium (social factor) which is assessed to all companies.  This is in order to help smooth out the costs across the whole coverage base.  So the issue here isn't just for one year to compensate for a bad year, the experience rating will stay with the company for the next 4 years until 2009 falls out of the calculation in 2014.

Since SUI is mandated and there is not opting out of the system, companies need to make sure they are looking at their experience rate, and make sure they are appropriately positioning themselves to the new reality of higher premiums.  Obviously it is going to be very important to have your trusted advisors – like B2B CFO^®  work all these issues into forecasting tools to make sure your are prepared to meet the challenges all will face in the coming years.

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Hire Act Of 2010 - Apr 14, 2010

Posted by: Albert L. Christensen in Articles

Have you heard the latest in tax incentives for businesses?  About a month ago, President Obama signed into law the HIRE Act.  This new legislation allows employers hiring for new positions or replacements, for voluntary terminations or terminations with cause, to take a 6.2% tax credit on their employer taxes in 2010.  Following the 2010 tax benefit, in 2011 the employer can take a $1000/employee credit on their tax returns for all employees still employed after a year.

 

So what are the mechanics?  From everything I have been able to garner here are some points to follow…

 

1.                  The tax incentive is for all employees hired after March 18^th – the date the bill was signed into law.  Some have suggested this law applies to all employees hired after the introduction of the tax bill – Feb 3^rd – but only applies to wages paid from the March 18^th date forward. 

2.                  The tax incentive is for all hires whether the position pays $40,000 per year or pays $100,000 per year.  The 6.2% applies to both wage rates equally.

3.                  For the hiring to qualify, the employee must fill out an affidavit (Form W-11) stating he or she have not been employed for the past 60 days, or have been part time looking for full time employment for the last 60 days.

4.                  The employee can be replacing another employee who performed the same job only if the prior employee voluntarily quit or was terminated with cause.

5.                  The tax credit generally applies to the private sector – including non-profits – but does not extend to the public sector.

6.                  Too many business people are - to say the least - skeptical about putting together a budget.  Some of the skepticism comes from past experiences where they have been beaten by management for non-performance of budgets.  Or the reporting requirements have been so demanding, the real tasks of productive employment goes out the window while they run through the hoops in order to get management off their backs.  But if the truth be known a budget can be a very valuable tool for business owners once they learn how to use the tool.  Yes budgets are a tool and should be used accordingly.  As a partner with B2B CFO^® I work with business owners to not only create a good set of goals for the year, but also determine a set of action plans which are needed in order to get the ship moving in the right direction.  What do I mean by action plans?  Let's use a common life experience to look at what I am talking about.  Here we are at the beginning of the New Year.  We all have heard for years about New Years Resolutions.  This year we determine we are going to take it serious and get ourselves into shape.  We have 20 pounds we would like to get rid of and we want to improve our cardiovascular. 

We have set a goal.  Now how do we go about making the goal happen?  We might go out and buy an elliptical exerciser, join a health club, or seek out the expertise of a trainer.   All of these are action plans.  They are things we are going to do in order to help ourselves accomplish our goal.

So according to our budget we have now set a goal to improve sales by 10%.  Great!  Now how are we going to accomplish this?  By using action plans...for example...

1.   Who are our competitors?  What are they currently doing to disrupt my client base and how can I stem this tide?  If you aren’t spending time with your customers your competitors are.

2.  Who are the customers we don't have that we would like to bring into the fold?  Once identified, who in the organization is a decision make and how do we get acquainted with them?

3.  What value are we going to communicate to potential customers?  How are we going to meet their needs?

And/or we have decided we need to improve our cost structure.  What can be done?  Well we can set action plans to...

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How To Evaluate Your Banks Strength - May 29, 2009

Posted by: Albert L. Christensen in Articles

 

The security and relative strength of your bank may be weighing heavy on your mind these days. Some questions you may have are: Is it better to be associated with a national bank rather than a local community bank? Is the strength of the institution related to the size? How can a bank's relative strength be evaluated and how do I compare my bank to the rest of the banks out there?

When these questions were posed to two different banks locally, the answer was the same from both. We need to dig into the quarterly and/or annual reports and look at some key indicators used in the banking industry. Since nobody likes long answers we will address four areas to question.

•1.      Is the bank profitable? 

• A bank may have lost money last year, but taken adequate reserves to cover non-performing loans. If this is the case, we would come to the conclusion the bank has made the difficult decision to cover its bad assets and taken the "one-time" adjustment. More and more we will find this to be the case as banks "clean up" their portfolios. But alone, this can not be considered a sign of financial weakness.

•2.        What is the bank's "Net Interest Margin" 

• We all know that banks make their money on interest from loans while they pay out interest to depositors and other funding sources. The difference between what they earn on loans and what they pay out to depositors is known as the "Net Interest Margin." According to the discussions with local bankers, a bank can not survive on a Margin of less than 3%. The two banks reviewed were at 3.38% and 5.23%. We should always remember this is a function of all sources of funding, not just from individual depositors.

•3.          What is the bank's "Total Risk-based Capital Ratio?" 

• This is an indication of the bank's capital percent of the total balance sheet. By today's standards a bank is adequately capitalized at 10%, but the industry has started wanting to see a capital base more along 12% or higher. As a note, a local bank that was seized by the Feds a few months back had a capital base of 8%. The two banks reviewed were at 12.8% and 12.24. Both banks are considered "Well" capitalized.

•4.        What is the bank's "Non-Accrual Assets" and what is the "Loss  Allowance to Non-Current Loans?" 

• Non-accrual assets are just as you would expect. These are the loans or other facilities that are delinquent and have been deemed as unlikely to collect.
• Loss Allowance to Non-Current Loans is the coverage of these non-performing assets or the % of reserves. The two banks reviewed had 104.82% and 260.37%.

Contact your local B2B CFO^® and have them give your bank a good once over. You will be glad for the peace of mind in knowing your bank is healthy.

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Testimonial - Cashco - Sep 15, 2008

Posted by: Albert L. Christensen in Testimonials

We have been very pleased with the service provided by Albert Christensen.  He has been helpful in drawing our attention to the critical financial management tools that will guide us toward the development of a more profitable company.

Lon D. Getlin
CEO

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Testimonial - Booster Juice - Sep 15, 2008

Posted by: Albert L. Christensen in Testimonials

Albert has a level head and constant professionalism about him.  He has been an asset to Booster Juice since my introduction to him and I value his ongoing input.

Jon Amack
President

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Testimonial - Maestrosoft Inc. 202 - Sep 15, 2008

Posted by: Albert L. Christensen in Testimonials

Albert brings with him a high degree of professionalism ... and has instilled in our management team a level of confidence in his abilities.  Although we've just begun our work together we feel very comfortable Albert will be able to complete our project ... with the results we expect.

Kenneth R. Kleve
COO

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The Rainmakers - Sep 15, 2008

Posted by: Albert L. Christensen in Articles

James Allen wrote, "The thoughtless, the ignorant, and the indolent, seeing only the apparent effect of things and not the things themselves, talk of luck, of fortune, and chance.  Seeing a man grow rich, they say, ‘How lucky he is!'  Observing another become intellectual, they exclaim, ‘How highly favored he is!'  And noting the saintly character and wide influence of another, they remark, ‘How chance aids him at every turn!'  They do not see the trials and failures and struggles which these men have voluntarily encountered in order to gain their experience; have no knowledge of the sacrifices they have made, of the undaunted efforts they have put forth, of the faith they have exercised, that they might overcome the apparently insurmountable, and realize the Vision of their heart.  They do not know the darkness and the heartaches; they only see the light and joy, and call it ‘luck'; do not see the long and arduous journey, but only behold the pleasant goal, and call it ‘good fortune'; do not understand the process, but only perceive the result and call it ‘chance.'"

Over the past few years, I have come to appreciate the entrepreneurial spirit which resides in my business associates and my friends.  I sometimes stand in awe of your perseverance and upbeat "can do" attitudes.  Watching the process in which your business ideas and dreams start to take shape and burst forth from the conceptual chrysalis into the living breathing world of commerce.  I understand that behind the "luck, good fortune, and chance" in your endeavors, there has been an incredible amount of work.

I applaud you for your efforts.

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Testimonial - Performance Plus Inc. - Sep 15, 2008

Posted by: Albert L. Christensen in Testimonials

I have gone through 2 different accountants before working with Albert.  The 1st said she knew Quick Books and could give me the information I needed and would handle the books.  It seems I received a lot of bills and very little accurate information.  The second guaranteed me I would be better off doing my entire payroll in house and he would handle the deposits.  Which I found out the hard way he didn't make them in a timely manner but had really good excuses to bad for me the IRS didn't like them.  Needless to say it cost me a lot of money.  Albert was able to clean up the messes get me on track and represent me with different people in a very professional manner and brings to my company a level of expertise and professionalism that this company has never had.  Bottom line I now know where I stand in all aspects of my business thanks to Albert.

Kathryn Horrocks
President/Owner

 http://www.ppemp.com/

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Testimonial - Hartleys Nw Seafood - Sep 15, 2008

Posted by: Albert L. Christensen in Testimonials

Albert has provided us with a very important level of financial expertise and a calm insite that we can always count on.  His business experience and access to others in the B2B program have made our relationship almost more consultive than fiscal.  This added benefit and his integrity have made our relationship one that we value very highly.

Phil Schmidt
CEO

http://www.hnwsf.com/

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Testimonial - Wusata - Sep 15, 2008

Posted by: Albert L. Christensen in Testimonials

Albert has done an excellent job for WUSATA. It is difficult for a small organization like ours to have all the accounting expertise we need on staff B2B CFO has provided that expertise at a reasonable cost.

Andrew Anderson
Executive Director